-----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, CNJsJMRl++7rJ5PjW7YY4snwDWjlCqPdOk3m8luJETr4bET/Y+b5Gw3EULtaZ6Mj 3sU/k1YZqOX9pWuD0tSTCw== 0000950134-98-009556.txt : 19981211 0000950134-98-009556.hdr.sgml : 19981211 ACCESSION NUMBER: 0000950134-98-009556 CONFORMED SUBMISSION TYPE: S-4/A PUBLIC DOCUMENT COUNT: 13 FILED AS OF DATE: 19981210 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHANCELLOR MEDIA CORP OF LOS ANGELES CENTRAL INDEX KEY: 0001043102 STANDARD INDUSTRIAL CLASSIFICATION: RADIO BROADCASTING STATIONS [4832] IRS NUMBER: 752451687 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4/A SEC ACT: SEC FILE NUMBER: 333-66971 FILM NUMBER: 98766718 BUSINESS ADDRESS: STREET 1: 433 EAST LAS COLINAS BLVD STREET 2: STE 1130 CITY: IRVING STATE: TX ZIP: 75039 BUSINESS PHONE: 9728699020 MAIL ADDRESS: STREET 1: 433 E LAS COLINAS STREET 2: STE 1130 CITY: IRVING STATE: TX ZIP: 75039 FORMER COMPANY: FORMER CONFORMED NAME: EVERGREEN MEDIA CORP OF LOS ANGELES DATE OF NAME CHANGE: 19970728 FILER: COMPANY DATA: COMPANY CONFORMED NAME: KATZ MEDIA CORP CENTRAL INDEX KEY: 0000864363 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-ADVERTISING AGENCIES [7311] IRS NUMBER: 133779266 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4/A SEC ACT: SEC FILE NUMBER: 333-66971-01 FILM NUMBER: 98766719 BUSINESS ADDRESS: STREET 1: 125 WEST 55TH ST CITY: NEW YORK STATE: NY ZIP: 10019 BUSINESS PHONE: 2124246000 MAIL ADDRESS: STREET 1: 125 WEST 55TH ST CITY: NEW YORK STATE: NY ZIP: 10019 FORMER COMPANY: FORMER CONFORMED NAME: KATZ CORP /DE DATE OF NAME CHANGE: 19940531 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MARTIN MEDIA CENTRAL INDEX KEY: 0000880109 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 770058488 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4/A SEC ACT: SEC FILE NUMBER: 333-66971-02 FILM NUMBER: 98766720 BUSINESS ADDRESS: STREET 1: 300 CRESCENT COURT STREET 2: SUITE 600 CITY: DALLAS STATE: TX ZIP: 75201 BUSINESS PHONE: 2149228700 MAIL ADDRESS: STREET 1: 300 CRESCENT COURT STREET 2: SUITE 600 CITY: DALLAS STATE: TX ZIP: 75201 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHANCELLOR MEDIA 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: S-4/A SEC ACT: SEC FILE NUMBER: 333-66971-03 FILM NUMBER: 98766721 BUSINESS ADDRESS: STREET 1: 433 E LAS COLINAS BLVD STREET 2: SUITE 1130 CITY: IRVING STATE: TX ZIP: 75039 BUSINESS PHONE: 9728699020 MAIL ADDRESS: STREET 1: 433 E LAS COLINAS BLVD STREET 2: SUITE 1130 CITY: IRVING STATE: TX ZIP: 75039 FORMER COMPANY: FORMER CONFORMED NAME: CHANCELLOR BROADCASTING LICENSEE CO DATE OF NAME CHANGE: 19940622 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NEVADA OUTDOOR SYSTEMS INC CENTRAL INDEX KEY: 0001006764 STANDARD INDUSTRIAL CLASSIFICATION: [] FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4/A SEC ACT: SEC FILE NUMBER: 333-66971-04 FILM NUMBER: 98766722 BUSINESS ADDRESS: STREET 1: 1818 SOUTH EASTERN CITY: LAS VEGAS STATE: NV ZIP: 89104 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NATIONAL PAYROLL CO INC CENTRAL INDEX KEY: 0001037467 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-ADVERTISING AGENCIES [7311] IRS NUMBER: 133744365 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4/A SEC ACT: SEC FILE NUMBER: 333-66971-05 FILM NUMBER: 98766723 BUSINESS ADDRESS: STREET 1: 125 WEST 55TH ST CITY: NEW YORK STATE: NY ZIP: 10019 BUSINESS PHONE: 2124246000 MAIL ADDRESS: STREET 1: 125 WEST 55TH STREET CITY: NEW YORK STATE: NY ZIP: 10019 FILER: COMPANY DATA: COMPANY CONFORMED NAME: KATZ CABLE CORP CENTRAL INDEX KEY: 0001037468 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-ADVERTISING AGENCIES [7311] IRS NUMBER: 133814104 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4/A SEC ACT: SEC FILE NUMBER: 333-66971-06 FILM NUMBER: 98766724 BUSINESS ADDRESS: STREET 1: 125 WEST 55TH STREET CITY: NEW YORK STATE: NY ZIP: 10019 BUSINESS PHONE: 2124246000 MAIL ADDRESS: STREET 1: 125 WEST 55TH STREET CITY: NEW YORK STATE: NY ZIP: 10019 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SELTEL INC CENTRAL INDEX KEY: 0001037469 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-ADVERTISING AGENCIES [7311] IRS NUMBER: 060963166 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4/A SEC ACT: SEC FILE NUMBER: 333-66971-07 FILM NUMBER: 98766725 BUSINESS ADDRESS: STREET 1: 125 WEST 55TH STREET CITY: NEW YORK STATE: NY ZIP: 10019 BUSINESS PHONE: 2124246000 MAIL ADDRESS: STREET 1: 125 WEST 55TH STREET CITY: NEW YORK STATE: NY ZIP: 10019 FILER: COMPANY DATA: COMPANY CONFORMED NAME: EASTMAN RADIO SALES INC CENTRAL INDEX KEY: 0001037470 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-ADVERTISING AGENCIES [7311] IRS NUMBER: 133581073 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4/A SEC ACT: SEC FILE NUMBER: 333-66971-08 FILM NUMBER: 98766726 BUSINESS ADDRESS: STREET 1: 125 WEST 55TH ST CITY: NEW YORK STATE: NY ZIP: 10019 BUSINESS PHONE: 2124246000 MAIL ADDRESS: STREET 1: 125 WEST 55TH STREET CITY: NEW YORK STATE: NY ZIP: 10019 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHRISTAL RADIO SALES INC CENTRAL INDEX KEY: 0001037471 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-ADVERTISING AGENCIES [7311] IRS NUMBER: 132618663 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4/A SEC ACT: SEC FILE NUMBER: 333-66971-09 FILM NUMBER: 98766727 BUSINESS ADDRESS: STREET 1: 125 WEST 55TH ST CITY: NEW YORK STATE: NY ZIP: 10019 BUSINESS PHONE: 2124246000 MAIL ADDRESS: STREET 1: 125 WEST 55TH STREET CITY: NEW YORK STATE: NY ZIP: 10019 FILER: COMPANY DATA: COMPANY CONFORMED NAME: KATZ MILLENNIUM MARKETING INC CENTRAL INDEX KEY: 0001037473 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-ADVERTISING AGENCIES [7311] IRS NUMBER: 133894491 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4/A SEC ACT: SEC FILE NUMBER: 333-66971-10 FILM NUMBER: 98766728 BUSINESS ADDRESS: STREET 1: 125 WEST 55TH STREET CITY: NEW YORK STATE: NY ZIP: 10019 BUSINESS PHONE: 2124246000 MAIL ADDRESS: STREET 1: 125 WEST 55TH STREET CITY: NEW YORK STATE: NY ZIP: 10019 FILER: COMPANY DATA: COMPANY CONFORMED NAME: KATZ COMMUNICATIONS INC CENTRAL INDEX KEY: 0001037474 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-ADVERTISING AGENCIES [7311] IRS NUMBER: 133744365 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4/A SEC ACT: SEC FILE NUMBER: 333-66971-11 FILM NUMBER: 98766729 BUSINESS ADDRESS: STREET 1: 125 WEST 55TH STREET CITY: NEW YORK STATE: NY ZIP: 10019 BUSINESS PHONE: 2124246000 MAIL ADDRESS: STREET 1: 125 WEST 55TH STREET CITY: NEW YORK STATE: NY ZIP: 10019 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHANCELLOR MEDIA CORP OF MIAMI CENTRAL INDEX KEY: 0001046706 STANDARD INDUSTRIAL CLASSIFICATION: RADIO BROADCASTING STATIONS [4832] IRS NUMBER: 043216285 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4/A SEC ACT: SEC FILE NUMBER: 333-66971-12 FILM NUMBER: 98766730 BUSINESS ADDRESS: STREET 1: 433 E LAS COLINAS BLVD STREET 2: SUITE 1130 CITY: IRVING STATE: TX ZIP: 75039 BUSINESS PHONE: 9728699020 MAIL ADDRESS: STREET 1: 439 E COLINAS BLVD STREET 2: SUITE 1130 CITY: IRVING STATE: TX ZIP: 75039 FORMER COMPANY: FORMER CONFORMED NAME: EVERGREEN MEDIA CORP OF MIAMI DATE OF NAME CHANGE: 19970924 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHANCELLOR MEDIA CORP OF MICHIGAN CENTRAL INDEX KEY: 0001046707 STANDARD INDUSTRIAL CLASSIFICATION: RADIO BROADCASTING STATIONS [4832] IRS NUMBER: 752666017 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4/A SEC ACT: SEC FILE NUMBER: 333-66971-13 FILM NUMBER: 98766731 BUSINESS ADDRESS: STREET 1: 433 E LAS COLINAS BLVD STREET 2: SUITE 1130 CITY: IRVING STATE: TX ZIP: 75039 BUSINESS PHONE: 9728699020 MAIL ADDRESS: STREET 1: 439 E COLINAS BLVD STREET 2: SUITE 1130 CITY: IRVING STATE: TX ZIP: 75039 FORMER COMPANY: FORMER CONFORMED NAME: EVERGREEN MEDIA CORP OF MICHIGAN DATE OF NAME CHANGE: 19970924 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHANCELLOR MEDIA CORP OF NEW YORK CENTRAL INDEX KEY: 0001046710 STANDARD INDUSTRIAL CLASSIFICATION: RADIO BROADCASTING STATIONS [4832] IRS NUMBER: 541475267 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4/A SEC ACT: SEC FILE NUMBER: 333-66971-14 FILM NUMBER: 98766732 BUSINESS ADDRESS: STREET 1: 433 E LAS COLINAS BLVD STREET 2: SUITE 1130 CITY: IRVING STATE: TX ZIP: 75039 BUSINESS PHONE: 9728699020 MAIL ADDRESS: STREET 1: 439 E COLINAS BLVD STREET 2: SUITE 1130 CITY: IRVING STATE: TX ZIP: 75039 FORMER COMPANY: FORMER CONFORMED NAME: EVERGREEN MEDIA CORP OF NEW YORK DATE OF NAME CHANGE: 19970924 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BROADCAST ARCHITECTURE INC CENTRAL INDEX KEY: 0001046715 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 043096275 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4/A SEC ACT: SEC FILE NUMBER: 333-66971-15 FILM NUMBER: 98766733 BUSINESS ADDRESS: STREET 1: 433 E LAS COLINAS BLVD STREET 2: STE 1130 CITY: IRVING STATE: TX ZIP: 75039 BUSINESS PHONE: 9728699020 MAIL ADDRESS: STREET 1: 433 E LAS COLINAS BLVD STREET 2: STE 1130 CITY: IRVING STATE: TX ZIP: 75039 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHANCELLOR MEDIA CORP OF ST LOUIS CENTRAL INDEX KEY: 0001046717 STANDARD INDUSTRIAL CLASSIFICATION: RADIO BROADCASTING STATIONS [4832] IRS NUMBER: 752449637 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4/A SEC ACT: SEC FILE NUMBER: 333-66971-16 FILM NUMBER: 98766734 BUSINESS ADDRESS: STREET 1: 433 E LAS COLINAS BLVD STREET 2: SUITE 1130 CITY: IRVING STATE: TX ZIP: 75039 BUSINESS PHONE: 9728699020 MAIL ADDRESS: STREET 1: 439 E COLINAS BLVD STREET 2: SUITE 1130 CITY: IRVING STATE: TX ZIP: 75039 FORMER COMPANY: FORMER CONFORMED NAME: EVERGREEN MEDIA CORP OF ST LOUIS DATE OF NAME CHANGE: 19970924 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHANCELLOR MEDIA CORP OF THE CAPITAL CITY CENTRAL INDEX KEY: 0001046720 STANDARD INDUSTRIAL CLASSIFICATION: RADIO BROADCASTING STATIONS [4832] IRS NUMBER: 752647157 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4/A SEC ACT: SEC FILE NUMBER: 333-66971-17 FILM NUMBER: 98766735 BUSINESS ADDRESS: STREET 1: 433 E LAS COLINAS BLVD STREET 2: STE 1130 CITY: IRVING STATE: TX ZIP: 75039 BUSINESS PHONE: 9728699020 MAIL ADDRESS: STREET 1: 433 E LAS COLINAS BLVD STREET 2: STE 1130 CITY: IRVING STATE: TX ZIP: 75039 FORMER COMPANY: FORMER CONFORMED NAME: EVERGREEN MEDIA CORP OF THE CAPITAL CITY DATE OF NAME CHANGE: 19970924 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHANCELLOR MEDIA CORP OF CHARLOTTE CENTRAL INDEX KEY: 0001046721 STANDARD INDUSTRIAL CLASSIFICATION: RADIO BROADCASTING STATIONS [4832] IRS NUMBER: 621364794 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4/A SEC ACT: SEC FILE NUMBER: 333-66971-18 FILM NUMBER: 98766736 BUSINESS ADDRESS: STREET 1: 433 E LAS COLINAS BLVD STREET 2: STE 1130 CITY: IRVING STATE: TX ZIP: 75039 BUSINESS PHONE: 9728699020 MAIL ADDRESS: STREET 1: 433 E LAS COLINAS BLVD STREET 2: STE 1130 CITY: IRVING STATE: TX ZIP: 75039 FORMER COMPANY: FORMER CONFORMED NAME: EVERGREEN MEDIA CORP OF THE CHARLOTTE DATE OF NAME CHANGE: 19970924 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHANCELLOR MEDIA CORP OF THE LONE STAR STATE CENTRAL INDEX KEY: 0001046724 STANDARD INDUSTRIAL CLASSIFICATION: RADIO BROADCASTING STATIONS [4832] IRS NUMBER: 990248292 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4/A SEC ACT: SEC FILE NUMBER: 333-66971-19 FILM NUMBER: 98766737 BUSINESS ADDRESS: STREET 1: 433 E LAS COLINAS BLVD STREET 2: STE 1130 CITY: IRVING STATE: TX ZIP: 75039 BUSINESS PHONE: 9728699020 MAIL ADDRESS: STREET 1: 433 E LAS COLINAS BLVD STREET 2: STE 1130 CITY: IRVING STATE: TX ZIP: 75039 FORMER COMPANY: FORMER CONFORMED NAME: EVERGREEN MEDIA CORP OF CHICAGO FM DATE OF NAME CHANGE: 19970924 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHANCELLOR MEDIA/TREFOIL COMMUNICATIONS INC CENTRAL INDEX KEY: 0001046735 STANDARD INDUSTRIAL CLASSIFICATION: RADIO BROADCASTING STATIONS [4832] IRS NUMBER: 953278846 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4/A SEC ACT: SEC FILE NUMBER: 333-66971-20 FILM NUMBER: 98766738 BUSINESS ADDRESS: STREET 1: 433 E LAS COLINAS BLVD STREET 2: STE 1130 CITY: IRVING STATE: TX ZIP: 75039 BUSINESS PHONE: 9728699020 MAIL ADDRESS: STREET 1: 433 E LAS COLINAS BLVD STREET 2: STE 1130 CITY: IRVING STATE: TX ZIP: 75039 FORMER COMPANY: FORMER CONFORMED NAME: TREFOIL COMMUNICATIONS INC DATE OF NAME CHANGE: 19970924 FILER: COMPANY DATA: COMPANY CONFORMED NAME: RADIO 100 LLC CENTRAL INDEX KEY: 0001046737 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4/A SEC ACT: SEC FILE NUMBER: 333-66971-21 FILM NUMBER: 98766739 BUSINESS ADDRESS: STREET 1: 433 E LAS COLINAS BLVD STREET 2: STE 1130 CITY: IRVING STATE: TX ZIP: 75039 BUSINESS PHONE: 9728699020 MAIL ADDRESS: STREET 1: 433 E LAS COLINAS BLVD STREET 2: STE 1130 CITY: IRVING STATE: TX ZIP: 75039 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHANCELLOR MEDIA/KCMG INC CENTRAL INDEX KEY: 0001046738 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 133930133 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4/A SEC ACT: SEC FILE NUMBER: 333-66971-22 FILM NUMBER: 98766740 BUSINESS ADDRESS: STREET 1: 433 E LAS COLINAS BLVD STREET 2: STE 1130 CITY: IRVING STATE: TX ZIP: 75039 BUSINESS PHONE: 9728699020 MAIL ADDRESS: STREET 1: 433 E LAS COLINAS BLVD STREET 2: STE 1130 CITY: IRVING STATE: TX ZIP: 75039 FORMER COMPANY: FORMER CONFORMED NAME: CHANCELLOR MEDIA/KIBB INC DATE OF NAME CHANGE: 19980203 FORMER COMPANY: FORMER CONFORMED NAME: KIBB INC DATE OF NAME CHANGE: 19970924 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHANCELLOR MEDIA/SHAMROCK BROADCASTING INC CENTRAL INDEX KEY: 0001046744 STANDARD INDUSTRIAL CLASSIFICATION: RADIO BROADCASTING STATIONS [4832] IRS NUMBER: 954068583 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4/A SEC ACT: SEC FILE NUMBER: 333-66971-23 FILM NUMBER: 98766741 BUSINESS ADDRESS: STREET 1: 433 E LAS COLINAS BLVD STREET 2: STE 1130 CITY: IRVING STATE: TX ZIP: 75039 BUSINESS PHONE: 9728699020 MAIL ADDRESS: STREET 1: 433 E LAS COLINAS BLVD STREET 2: STE 1130 CITY: IRVING STATE: TX ZIP: 75039 FORMER COMPANY: FORMER CONFORMED NAME: SHAMROCK BROADCASTING INC DATE OF NAME CHANGE: 19970924 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHANCELLOR MEDIA/SHAMROCK BROADCASTING OF TEXAS CENTRAL INDEX KEY: 0001046746 STANDARD INDUSTRIAL CLASSIFICATION: RADIO BROADCASTING STATIONS [4832] IRS NUMBER: 710527506 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4/A SEC ACT: SEC FILE NUMBER: 333-66971-24 FILM NUMBER: 98766742 BUSINESS ADDRESS: STREET 1: 433 E LAS COLINAS BLVD STREET 2: STE 1130 CITY: IRVING STATE: TX ZIP: 75039 BUSINESS PHONE: 9728699020 MAIL ADDRESS: STREET 1: 433 E LAS COLINAS BLVD STREET 2: STE 1130 CITY: IRVING STATE: TX ZIP: 75039 FORMER COMPANY: FORMER CONFORMED NAME: SHAMROCK BROADCASTING OF TEXAS INC DATE OF NAME CHANGE: 19970924 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHANCELLOR/SHAMROCK BROADCASTING LICENSES DENVER CENTRAL INDEX KEY: 0001046747 STANDARD INDUSTRIAL CLASSIFICATION: RADIO BROADCASTING STATIONS [4832] IRS NUMBER: 752688376 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4/A SEC ACT: SEC FILE NUMBER: 333-66971-25 FILM NUMBER: 98766743 BUSINESS ADDRESS: STREET 1: 433 E LAS COLINAS BLVD STREET 2: STE 1130 CITY: IRVING STATE: TX ZIP: 75039 BUSINESS PHONE: 9728699020 MAIL ADDRESS: STREET 1: 433 E LAS COLINAS BLVD STREET 2: STE 1130 CITY: IRVING STATE: TX ZIP: 75039 FORMER COMPANY: FORMER CONFORMED NAME: SHAMROCK BROADCASTING LICENSES OF DENVER INC DATE OF NAME CHANGE: 19970924 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHANCELLOR MEDIA/SHAMROCK RADIO LICENSES INC CENTRAL INDEX KEY: 0001046748 STANDARD INDUSTRIAL CLASSIFICATION: RADIO BROADCASTING STATIONS [4832] IRS NUMBER: 954501833 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4/A SEC ACT: SEC FILE NUMBER: 333-66971-26 FILM NUMBER: 98766744 BUSINESS ADDRESS: STREET 1: 433 E LAS COLINAS BLVD STREET 2: STE 1130 CITY: IRVING STATE: TX ZIP: 75039 BUSINESS PHONE: 9728699020 MAIL ADDRESS: STREET 1: 433 E LAS COLINAS BLVD STREET 2: STE 1130 CITY: IRVING STATE: TX ZIP: 75039 FORMER COMPANY: FORMER CONFORMED NAME: SHAMROCK RADIO LICENSES INC DATE OF NAME CHANGE: 19970924 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WAXQ LICENSE CORP CENTRAL INDEX KEY: 0001046763 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4/A SEC ACT: SEC FILE NUMBER: 333-66971-27 FILM NUMBER: 98766745 BUSINESS ADDRESS: STREET 1: 433 E LAS COLINAS BLVD STREET 2: SUITE 1130 CITY: IRVING STATE: TX ZIP: 75039 BUSINESS PHONE: 9728699020 MAIL ADDRESS: STREET 1: 433 E LAS COLINAS BLVD STREET 2: SUITE 1130 CITY: IRVING STATE: TX ZIP: 75039 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WIOQ LICENSE CORP CENTRAL INDEX KEY: 0001046769 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 752666021 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4/A SEC ACT: SEC FILE NUMBER: 333-66971-28 FILM NUMBER: 98766746 BUSINESS ADDRESS: STREET 1: 433 E LAS COLINAS BLVD STREET 2: STE 1130 CITY: IRVING STATE: TX ZIP: 75039 BUSINESS PHONE: 9728699020 MAIL ADDRESS: STREET 1: 433 E LAS COLINAS BLVD STREET 2: STE 1130 CITY: IRVING STATE: TX ZIP: 75039 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WEDR LICENSE CORP CENTRAL INDEX KEY: 0001046771 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 043216278 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4/A SEC ACT: SEC FILE NUMBER: 333-66971-29 FILM NUMBER: 98766747 BUSINESS ADDRESS: STREET 1: 433 E LAS COLINAS BLVD STREET 2: SUITE 1130 CITY: IRVING STATE: TX ZIP: 75039 BUSINESS PHONE: 9728699020 MAIL ADDRESS: STREET 1: 433 E LAS COLINAS BLVD STREET 2: SUITE 1130 CITY: IRVING STATE: TX ZIP: 75039 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WLTW LICENSE CORP CENTRAL INDEX KEY: 0001046781 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4/A SEC ACT: SEC FILE NUMBER: 333-66971-30 FILM NUMBER: 98766748 BUSINESS ADDRESS: STREET 1: 433 E LAS COLINAS BLVD STREET 2: STE 1130 CITY: IRVING STATE: TX ZIP: 75039 BUSINESS PHONE: 9728699020 MAIL ADDRESS: STREET 1: 433 E LAS COLINAS BLVD STREET 2: STE 1130 CITY: IRVING STATE: TX ZIP: 75039 FILER: COMPANY DATA: COMPANY CONFORMED NAME: KZPS/KDGE LICENSE CORP CENTRAL INDEX KEY: 0001046783 STANDARD INDUSTRIAL CLASSIFICATION: RADIO BROADCASTING STATIONS [4832] IRS NUMBER: 752449662 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4/A SEC ACT: SEC FILE NUMBER: 333-66971-31 FILM NUMBER: 98766749 BUSINESS ADDRESS: STREET 1: 433 E LAS COLINAS BLVD STREET 2: STE 1130 CITY: IRVING STATE: TX ZIP: 75039 BUSINESS PHONE: 9728699020 MAIL ADDRESS: STREET 1: 433 E LAS COLINAS BLVD STREET 2: STE 1130 CITY: IRVING STATE: TX ZIP: 75039 FORMER COMPANY: FORMER CONFORMED NAME: WLUP FM LICENSE CORP DATE OF NAME CHANGE: 19970924 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHANCELLOR MEDIA CORP OF DADE COUNTY CENTRAL INDEX KEY: 0001046792 STANDARD INDUSTRIAL CLASSIFICATION: RADIO BROADCASTING STATIONS [4832] STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4/A SEC ACT: SEC FILE NUMBER: 333-66971-32 FILM NUMBER: 98766750 BUSINESS ADDRESS: STREET 1: 433 E. LAS COLINAS BLVD., STREET 2: SUITE 1130 CITY: IRVING STATE: TX ZIP: 75039 BUSINESS PHONE: 9728699020 FORMER COMPANY: FORMER CONFORMED NAME: EVERGREEN MEDIA CORP OF DADE COUNTY DATE OF NAME CHANGE: 19970924 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHANCELLOR MEDIA CORP OF WASHINGTON DC CENTRAL INDEX KEY: 0001046796 STANDARD INDUSTRIAL CLASSIFICATION: RADIO BROADCASTING STATIONS [4832] IRS NUMBER: 75243561 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4/A SEC ACT: SEC FILE NUMBER: 333-66971-33 FILM NUMBER: 98766751 BUSINESS ADDRESS: STREET 1: 433 E LAS COLINAS BLVD STREET 2: SUITE 1130 CITY: IRVING STATE: TX ZIP: 75039 BUSINESS PHONE: 9728699020 MAIL ADDRESS: STREET 1: 433 E LAS COLINAS BLVD STREET 2: SUITE 1130 CITY: IRVING STATE: TX ZIP: 75039 FORMER COMPANY: FORMER CONFORMED NAME: EVERGREEN MEDIA CORP OF WASHINGTON D C DATE OF NAME CHANGE: 19970924 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHANCELLOR MEDIA CORP OF HOUSTON CENTRAL INDEX KEY: 0001046803 STANDARD INDUSTRIAL CLASSIFICATION: RADIO BROADCASTING STATIONS [4832] STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4/A SEC ACT: SEC FILE NUMBER: 333-66971-34 FILM NUMBER: 98766752 BUSINESS ADDRESS: STREET 1: 433 E. LAS COLINAS BLVD., STREET 2: SUITE 1130 CITY: IRVING STATE: TX ZIP: 75039 BUSINESS PHONE: 9728699020 FORMER COMPANY: FORMER CONFORMED NAME: EVERGREEN MEDIA CORP OF HOUSTON DATE OF NAME CHANGE: 19970924 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHANCELLOR MEDIA OF HOUSTON LP CENTRAL INDEX KEY: 0001046806 STANDARD INDUSTRIAL CLASSIFICATION: RADIO BROADCASTING STATIONS [4832] IRS NUMBER: 752486577 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4/A SEC ACT: SEC FILE NUMBER: 333-66971-35 FILM NUMBER: 98766753 BUSINESS ADDRESS: STREET 1: 433 E LAS COLINAS BLVD STREET 2: SUITE 1130 CITY: IRVING STATE: TX ZIP: 75039 BUSINESS PHONE: 9728699020 MAIL ADDRESS: STREET 1: 433 E LAS COLINAS BLVD STREET 2: SUITE 1130 CITY: IRVING STATE: TX ZIP: 75039 FORMER COMPANY: FORMER CONFORMED NAME: EVERGREEN MEDIA OF HOUSTON LIMITED PARTNERSHIP DATE OF NAME CHANGE: 19970924 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHANCELLOR MEDIA CORP OF ILLINOIS CENTRAL INDEX KEY: 0001046809 STANDARD INDUSTRIAL CLASSIFICATION: RADIO BROADCASTING STATIONS [4832] STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4/A SEC ACT: SEC FILE NUMBER: 333-66971-36 FILM NUMBER: 98766754 BUSINESS ADDRESS: STREET 1: 433 E. LAS COLINAS BLVD., STREET 2: SUITE 1130 CITY: IRVING STATE: TX ZIP: 75039 BUSINESS PHONE: 9728699020 FORMER COMPANY: FORMER CONFORMED NAME: EVERGREEN MEDIA CORP OF ILLINOIS DATE OF NAME CHANGE: 19970924 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHANCELLOR MEDIA CORP OF THE KEYSTONE STATE CENTRAL INDEX KEY: 0001046810 STANDARD INDUSTRIAL CLASSIFICATION: RADIO BROADCASTING STATIONS [4832] STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4/A SEC ACT: SEC FILE NUMBER: 333-66971-37 FILM NUMBER: 98766755 BUSINESS ADDRESS: STREET 1: 433 E. LAS COLINAS BLVD., STREET 2: SUITE 1130 CITY: IRVING STATE: TX ZIP: 75039 BUSINESS PHONE: 9728699020 FORMER COMPANY: FORMER CONFORMED NAME: EVERGREEN MEDIA CORP OF KEYSTONE STATE DATE OF NAME CHANGE: 19970924 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WTOP LICENSE LTD PARTNERSHIP CENTRAL INDEX KEY: 0001046811 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 752528718 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4/A SEC ACT: SEC FILE NUMBER: 333-66971-38 FILM NUMBER: 98766756 BUSINESS ADDRESS: STREET 1: 433 E LAS COLINAS BLVD SUITE 1130 CITY: IRVING STATE: TX ZIP: 75039 BUSINESS PHONE: 9728699020 MAIL ADDRESS: STREET 1: 433 E LAS COLINAS BLVD SUITE 1130 CITY: IRVING STATE: TX ZIP: 75039 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHANCELLOR MEDIA CORP OF MASSACHUSETTS CENTRAL INDEX KEY: 0001046814 STANDARD INDUSTRIAL CLASSIFICATION: RADIO BROADCASTING STATIONS [4832] STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4/A SEC ACT: SEC FILE NUMBER: 333-66971-39 FILM NUMBER: 98766757 BUSINESS ADDRESS: STREET 1: 433 E. LAS COLINAS BLVD., STREET 2: SUITE 1130 CITY: IRVING STATE: TX ZIP: 75039 BUSINESS PHONE: 9728699020 FORMER COMPANY: FORMER CONFORMED NAME: EVERGREEN MEDIA CORP OF MASSACHESETTS DATE OF NAME CHANGE: 19970924 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WVCG LICENSE CORP CENTRAL INDEX KEY: 0001046815 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 752449668 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4/A SEC ACT: SEC FILE NUMBER: 333-66971-40 FILM NUMBER: 98766758 BUSINESS ADDRESS: STREET 1: 433 E LAS COLINAS BLVD SUITE 1130 CITY: IRVING STATE: TX ZIP: 75039 BUSINESS PHONE: 9728699020 MAIL ADDRESS: STREET 1: 433 E LAS COLINAS BLVD SUITE 1130 CITY: IRVING STATE: TX ZIP: 75039 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHANCELLOR MEDIA/RIVERSIDE BROADCASTING CO INC CENTRAL INDEX KEY: 0001046821 STANDARD INDUSTRIAL CLASSIFICATION: RADIO BROADCASTING STATIONS [4832] IRS NUMBER: 132688382 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4/A SEC ACT: SEC FILE NUMBER: 333-66971-41 FILM NUMBER: 98766759 BUSINESS ADDRESS: STREET 1: 433 E LAS COLINAS BLVD STREET 2: STE 1130 CITY: IRVING STATE: TX ZIP: 75039 BUSINESS PHONE: 9728699020 MAIL ADDRESS: STREET 1: 433 E LAS COLINAS BLVD STREET 2: STE 1130 CITY: IRVING STATE: TX ZIP: 75039 FORMER COMPANY: FORMER CONFORMED NAME: RIVERSIDE BROADCASTING CO INC DATE OF NAME CHANGE: 19970924 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHANCELLOR MEDIA/WAXQ INC CENTRAL INDEX KEY: 0001046827 STANDARD INDUSTRIAL CLASSIFICATION: RADIO BROADCASTING STATIONS [4832] IRS NUMBER: 133387794 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4/A SEC ACT: SEC FILE NUMBER: 333-66971-42 FILM NUMBER: 98766760 BUSINESS ADDRESS: STREET 1: 433 E LAS COLINAS BLVD STREET 2: STE 1130 CITY: IRVING STATE: TX ZIP: 75039 BUSINESS PHONE: 9728699020 MAIL ADDRESS: STREET 1: 433 E LAS COLINAS BLVD STREET 2: STE 1130 CITY: IRVING STATE: TX ZIP: 75039 FORMER COMPANY: FORMER CONFORMED NAME: WAXQ INC DATE OF NAME CHANGE: 19970924 FILER: COMPANY DATA: COMPANY CONFORMED NAME: KIOI LICENSE CORP CENTRAL INDEX KEY: 0001046836 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 752449654 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4/A SEC ACT: SEC FILE NUMBER: 333-66971-43 FILM NUMBER: 98766761 BUSINESS ADDRESS: STREET 1: 433 E LAS COLINAS BLVD STREET 2: STE 1130 CITY: IRVING STATE: TX ZIP: 75039 BUSINESS PHONE: 9728699020 MAIL ADDRESS: STREET 1: 433 E LAS COLINAS BLVD STREET 2: STE 1130 CITY: IRVING STATE: TX ZIP: 75039 FILER: COMPANY DATA: COMPANY CONFORMED NAME: KLOL LICENSE LTD PARTNERSHIP CENTRAL INDEX KEY: 0001046839 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 752486580 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4/A SEC ACT: SEC FILE NUMBER: 333-66971-44 FILM NUMBER: 98766762 BUSINESS ADDRESS: STREET 1: 433 E LAS COLINAS BLVD STREET 2: STE 1130 CITY: IRVING STATE: TX ZIP: 75039 BUSINESS PHONE: 9728699020 MAIL ADDRESS: STREET 1: 433 E LAS COLINAS BLVD STREET 2: STE 1130 CITY: IRVING STATE: TX ZIP: 75039 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMCAST RADIO SALES INC CENTRAL INDEX KEY: 0001049582 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 133406436 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4/A SEC ACT: SEC FILE NUMBER: 333-66971-45 FILM NUMBER: 98766763 BUSINESS ADDRESS: STREET 1: 125 WEST 55TH ST CITY: NEW YORK STATE: NY ZIP: 10019 BUSINESS PHONE: 2124246000 MAIL ADDRESS: STREET 1: 125 WEST 55TH ST CITY: NEW YORK STATE: NY ZIP: 10019 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMFM RADIO NETWORKS INC CENTRAL INDEX KEY: 0001073022 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 522100851 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4/A SEC ACT: SEC FILE NUMBER: 333-66971-46 FILM NUMBER: 98766764 BUSINESS ADDRESS: STREET 1: 300 CRESCENT COURT, SUITE 600 CITY: DALLAS STATE: TX ZIP: 75201 BUSINESS PHONE: 2149228700 MAIL ADDRESS: STREET 1: 300 CRESCENT COURT SUITE 600 CITY: DALLAS STATE: TX ZIP: 75201 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WESTERN POSTER SERVICE INC CENTRAL INDEX KEY: 0001073023 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 522100851 STATE OF INCORPORATION: TX FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4/A SEC ACT: SEC FILE NUMBER: 333-66971-47 FILM NUMBER: 98766765 BUSINESS ADDRESS: STREET 1: 300 CRESCENT COURT, SUITE 600 CITY: DALLAS STATE: TX ZIP: 75201 BUSINESS PHONE: 2149228700 MAIL ADDRESS: STREET 1: 300 CRESCENT COURT SUITE 600 CITY: DALLAS STATE: TX ZIP: 75201 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHANCELLOR MEDIA MARTIN CORP CENTRAL INDEX KEY: 0001073024 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 522100851 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4/A SEC ACT: SEC FILE NUMBER: 333-66971-48 FILM NUMBER: 98766766 BUSINESS ADDRESS: STREET 1: 300 CRESCENT COURT, SUITE 600 CITY: DALLAS STATE: TX ZIP: 75201 BUSINESS PHONE: 2149228700 MAIL ADDRESS: STREET 1: 300 CRESCENT COURT SUITE 600 CITY: DALLAS STATE: TX ZIP: 75201 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHANCELLOR MEDIA AIR SERVICES CORP CENTRAL INDEX KEY: 0001073025 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 522100851 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4/A SEC ACT: SEC FILE NUMBER: 333-66971-49 FILM NUMBER: 98766767 BUSINESS ADDRESS: STREET 1: 300 CRESCENT COURT, SUITE 600 CITY: DALLAS STATE: TX ZIP: 75201 BUSINESS PHONE: 2149228700 MAIL ADDRESS: STREET 1: 300 CRESCENT COURT SUITE 600 CITY: DALLAS STATE: TX ZIP: 75201 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DOWLING CO INC CENTRAL INDEX KEY: 0001073026 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 540787845 STATE OF INCORPORATION: VA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4/A SEC ACT: SEC FILE NUMBER: 333-66971-50 FILM NUMBER: 98766768 BUSINESS ADDRESS: STREET 1: 300 CRESCENT COURT STREET 2: SUITE 600 CITY: DALLAS STATE: TX ZIP: 75201 BUSINESS PHONE: 2149228700 MAIL ADDRESS: STREET 1: 300 CRESCENT COURT STREET 2: SUITE 600 CITY: DALLAS STATE: TX ZIP: 75201 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHANCELLOR MEDIA NEVADA SIGN CORP CENTRAL INDEX KEY: 0001073027 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 752788530 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4/A SEC ACT: SEC FILE NUMBER: 333-66971-51 FILM NUMBER: 98766769 BUSINESS ADDRESS: STREET 1: 300 CRESCENT COURT STREET 2: SUITE 600 CITY: DALLAS STATE: TX ZIP: 75201 BUSINESS PHONE: 2149228700 MAIL ADDRESS: STREET 1: 300 CRESCENT COURT STREET 2: SUITE 600 CITY: DALLAS STATE: TX ZIP: 75201 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHANCELLOR MEDIA WHITECO OUTDOOR CORP CENTRAL INDEX KEY: 0001073028 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 752783296 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4/A SEC ACT: SEC FILE NUMBER: 333-66971-52 FILM NUMBER: 98766770 BUSINESS ADDRESS: STREET 1: 300 CRESCENT COURT STREET 2: SUITE 600 CITY: DALLAS STATE: TX ZIP: 75201 BUSINESS PHONE: 2149228700 MAIL ADDRESS: STREET 1: 300 CRESCENT COURT STREET 2: SUITE 600 CITY: DALLAS STATE: TX ZIP: 75201 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHANCELLOR MERGER CORP CENTRAL INDEX KEY: 0001073029 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 752783296 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4/A SEC ACT: SEC FILE NUMBER: 333-66971-53 FILM NUMBER: 98766771 BUSINESS ADDRESS: STREET 1: 300 CRESCENT COURT STREET 2: SUITE 600 CITY: DALLAS STATE: TX ZIP: 75201 BUSINESS PHONE: 2149228700 MAIL ADDRESS: STREET 1: 300 CRESCENT COURT STREET 2: SUITE 600 CITY: DALLAS STATE: TX ZIP: 75201 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MARTIN & MACFARLANE INC CENTRAL INDEX KEY: 0001073030 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 952743749 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4/A SEC ACT: SEC FILE NUMBER: 333-66971-54 FILM NUMBER: 98766772 BUSINESS ADDRESS: STREET 1: 300 CRESCENT COURT STREET 2: SUITE 600 CITY: DALLAS STATE: TX ZIP: 75201 BUSINESS PHONE: 2149228700 MAIL ADDRESS: STREET 1: 300 CRESCENT COURT STREET 2: SUITE 600 CITY: DALLAS STATE: TX ZIP: 75201 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MW SIGN CORP CENTRAL INDEX KEY: 0001073031 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 954334859 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4/A SEC ACT: SEC FILE NUMBER: 333-66971-55 FILM NUMBER: 98766773 BUSINESS ADDRESS: STREET 1: 300 CRESCENT COURT STREET 2: SUITE 600 CITY: DALLAS STATE: TX ZIP: 75201 BUSINESS PHONE: 2149228700 MAIL ADDRESS: STREET 1: 300 CRESCENT COURT STREET 2: SUITE 600 CITY: DALLAS STATE: TX ZIP: 75201 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHANCELLOR MEDIA CORP OF CALIFORNIA CENTRAL INDEX KEY: 0001073035 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 592312787 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4/A SEC ACT: SEC FILE NUMBER: 333-66971-56 FILM NUMBER: 98766774 BUSINESS ADDRESS: STREET 1: 300 CRESCENT COURT SUITE 600 CITY: DALLAS STATE: TX ZIP: 75201 BUSINESS PHONE: 2149228700 MAIL ADDRESS: STREET 1: 300 CRESCENT COURT SUITE 600 CITY: DALLAS STATE: TX ZIP: 75201 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHANCELLOR MEDIA ILLINOIS LICENSE CORP CENTRAL INDEX KEY: 0001073036 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 752528716 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4/A SEC ACT: SEC FILE NUMBER: 333-66971-57 FILM NUMBER: 98766775 BUSINESS ADDRESS: STREET 1: 300 CRESCENT COURT SUITE 600 CITY: DALLAS STATE: TX ZIP: 75201 BUSINESS PHONE: 2149228700 MAIL ADDRESS: STREET 1: 300 CRESCENT COURT SUITE 600 CITY: DALLAS STATE: TX ZIP: 75201 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHANCELLOR MEDIA PENNSYLVANIA LICENSE CORP CENTRAL INDEX KEY: 0001073037 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 043221375 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4/A SEC ACT: SEC FILE NUMBER: 333-66971-58 FILM NUMBER: 98766776 BUSINESS ADDRESS: STREET 1: 300 CRESCENT COURT SUITE 600 CITY: DALLAS STATE: TX ZIP: 75201 BUSINESS PHONE: 2149228700 MAIL ADDRESS: STREET 1: 300 CRESCENT COURT SUITE 600 CITY: DALLAS STATE: TX ZIP: 75201 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHANCELLOR MEDIA RADIO LICENSES LLC CENTRAL INDEX KEY: 0001073038 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 752779589 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4/A SEC ACT: SEC FILE NUMBER: 333-66971-59 FILM NUMBER: 98766777 BUSINESS ADDRESS: STREET 1: 300 CRESCENT COURT SUITE 600 CITY: DALLAS STATE: TX ZIP: 75201 BUSINESS PHONE: 2149228700 MAIL ADDRESS: STREET 1: 300 CRESCENT COURT SUITE 600 CITY: DALLAS STATE: TX ZIP: 75201 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHANCELLOR MEDIA D C LICENSE CORP CENTRAL INDEX KEY: 0001073040 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 752647158 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4/A SEC ACT: SEC FILE NUMBER: 333-66971-60 FILM NUMBER: 98766778 BUSINESS ADDRESS: STREET 1: 300 CRESCENT CT STREET 2: STE 600 CITY: DALLAS STATE: TX ZIP: 75201 BUSINESS PHONE: 2149228700 MAIL ADDRESS: STREET 1: 300 CRESCENT COURT STREET 2: STE 600 CITY: DALLAS STATE: TX ZIP: 75201 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHANCELLOR MEDIA SHAMROCK RADIO LICENSES LLC CENTRAL INDEX KEY: 0001073041 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 752779594 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4/A SEC ACT: SEC FILE NUMBER: 333-66971-61 FILM NUMBER: 98766779 BUSINESS ADDRESS: STREET 1: 300 CRESCENT CT STREET 2: STE 600 CITY: DALLAS STATE: TX ZIP: 75201 BUSINESS PHONE: 2149228700 MAIL ADDRESS: STREET 1: 300 CRESCENT COURT STREET 2: STE 600 CITY: DALLAS STATE: TX ZIP: 75201 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHANCELLOR MEDIA OUTDOOR CORP CENTRAL INDEX KEY: 0001073042 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 752779605 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4/A SEC ACT: SEC FILE NUMBER: 333-66971-62 FILM NUMBER: 98766780 BUSINESS ADDRESS: STREET 1: 300 CRESCENT CT STREET 2: STE 600 CITY: DALLAS STATE: TX ZIP: 75201 BUSINESS PHONE: 2149228700 MAIL ADDRESS: STREET 1: 300 CRESCENT COURT STREET 2: STE 600 CITY: DALLAS STATE: TX ZIP: 75201 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHANCELLOR MEDIA MW SIGN CORP CENTRAL INDEX KEY: 0001073043 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 752779602 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4/A SEC ACT: SEC FILE NUMBER: 333-66971-63 FILM NUMBER: 98766781 BUSINESS ADDRESS: STREET 1: 300 CRESCENT CT STREET 2: STE 600 CITY: DALLAS STATE: TX ZIP: 75201 BUSINESS PHONE: 2149228700 MAIL ADDRESS: STREET 1: 300 CRESCENT COURT STREET 2: STE 600 CITY: DALLAS STATE: TX ZIP: 75201 S-4/A 1 AMENDMENT NO. 1 TO FORM S-4 1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 10, 1998 REGISTRATION NO. 333-66971 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 --------------------- AMENDMENT NO. 1 TO FORM S-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 --------------------- CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND THE GUARANTORS NAMED IN THE ATTACHED TABLE OF CO-REGISTRANTS (Exact name of Co-Registrants as specified in their charters) --------------------- DELAWARE 4832 75-2451687 (State or other jurisdiction (Primary Standard Industrial (IRS Employer of incorporation or organization) Classification Code Number) Identification Number)
--------------------- (FOR CO-REGISTRANTS, PLEASE SEE "TABLE OF CO-REGISTRANTS" ON THE FOLLOWING PAGE) JEFFREY A. MARCUS PRESIDENT AND CHIEF FINANCIAL OFFICER 300 CRESCENT COURT, SUITE 600 300 CRESCENT COURT, SUITE 600 DALLAS, TEXAS 75201 DALLAS, TEXAS 75201 (214) 922-8700 (214) 922-8700 (Address, including zip code, and telephone number, (Name, address, including zip code, telephone including area code, of Co-Registrant's principal executive offices) number, including area code, of agent for service)
--------------------- Copies To: MICHAEL A. SASLAW, ESQ. RICHARD A. B. GLEINER, ESQ. WEIL, GOTSHAL & MANGES LLP SENIOR VICE PRESIDENT AND 100 CRESCENT COURT, SUITE 1300 GENERAL COUNSEL DALLAS, TEXAS 75201 CHANCELLOR MEDIA CORPORATION (214) 746-7700 OF LOS ANGELES 300 CRESCENT COURT, SUITE 600 DALLAS, TEXAS 75201 (214) 746-7700
--------------------- APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after the effective date of this Registration Statement. If the securities being registered on this form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box. [ ] If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] - ------------------ If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] - ------------------ CALCULATION OF REGISTRATION FEE - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
PROPOSED PROPOSED AMOUNT MAXIMUM OFFERING MAXIMUM AMOUNT OF TITLE OF SHARES TO BE PRICE PER AGGREGATE REGISTRATION TO BE REGISTERED REGISTERED NOTE OFFERING PRICE(1) FEE(2) - ---------------------------------------------------------------------------------------------------------------------- 9% Senior Subordinated Notes Due 2008.............................. $750,000,000 100% $750,000,000 $208,500.00 - ---------------------------------------------------------------------------------------------------------------------- Guarantees of the 9% Senior Subordinated Notes due 2008(3).... -- -- -- -- - ---------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------
(1) Estimated solely for the purpose of calculating the registration fee. (2) The registration fee was previously paid in connection with the original filing. (3) The 9% Subordinated Notes due 2008 are guaranteed by the Co-Registrants on a senior subordinated basis. No separate consideration will be paid in respect of the guarantees. THE CO-REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE CO-REGISTRANTS SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(a), MAY DETERMINE. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 TABLE OF CO-REGISTRANTS
STATE OR OTHER JURISDICTION OF PRIMARY STANDARD IRS INCORPORATION INDUSTRIAL EMPLOYER OR CLASSIFICATION IDENTIFICATION NAME FORMATION CODE NUMBER NUMBER ---- -------------- ---------------- -------------- Chancellor Media Corporation of the Lone Star State...... Delaware 4832 99-0248294 KZPS/KDGE License Corp. ................................. Delaware 4832 75-2449662 Chancellor Media Corporation of California............... Delaware 4832 59-2312787 KIOI License Corp. ...................................... Delaware 4832 75-2449654 Chancellor Media Corporation of Illinois................. Delaware 4832 75-2490925 Chancellor Media Illinois License Corp. ................. Delaware 4832 75-2528716 Chancellor Media Corporation of Dade County.............. Delaware 4832 59-2312792 WVCG License Corp. ...................................... Delaware 4832 75-2449668 Chancellor Media Corporation of Massachusetts............ Delaware 4832 04-3216274 Chancellor Media Pennsylvania License Corp. ............. Delaware 4832 04-3221375 Chancellor Media Corporation of Miami.................... Delaware 4832 04-3216285 WEDR License Corp. ...................................... Delaware 4832 04-3216278 Chancellor Media Corporation of Houston Limited Partnership............................................ Delaware 4832 75-2486577 Chancellor Media Corporation of Houston.................. Delaware 4832 75-2486583 Chancellor Media Corporation of the Keystone State....... Delaware 4832 04-3221374 Chancellor Media Corporation of New York................. Delaware 4832 54-1475267 Chancellor Media Corporation of Charlotte................ Delaware 4832 62-1364794 WIOQ License Corp. ...................................... Delaware 4832 36-3906002 Chancellor Media Corporation of Washington, D.C. ........ Delaware 4832 75-2432561 Chancellor Media Corporation of St. Louis................ Delaware 4832 75-2449637 Chancellor Media Corporation of Michigan................. Delaware 4832 75-2666017 Chancellor Media/WAXQ Inc. .............................. Delaware 4832 13-3387794 WAXQ License Corp. ...................................... Delaware 4832 75-2788524 Chancellor Media/KCMG Inc. .............................. Delaware 4832 13-3930133 Chancellor Media/Riverside Broadcasting Co., Inc. ....... Delaware 4832 13-2688382 WLTW License Corp. ...................................... Delaware 4832 75-2788528 Chancellor Media Corporation of the Capital City......... Delaware 4832 75-2647157 Chancellor Media D.C. License Corp. ..................... Delaware 4832 75-2647158 Chancellor Media Licensee Company........................ Delaware 4832 75-2544625 Chancellor Media/Trefoil Communications, Inc. ........... Delaware 4832 95-3278846 Chancellor Media/Shamrock Broadcasting, Inc. ............ Delaware 4832 95-4068583 Chancellor Media/Shamrock Radio Licenses, Inc. .......... Delaware 4832 95-4501833 Chancellor Media/Shamrock Broadcasting Licenses of Denver, Inc. .......................................... Delaware 4832 75-2688376 Chancellor Media/Shamrock Broadcasting of Texas, Inc. ... Texas 4832 71-0527506 Chancellor Media/Shamrock Radio Licenses, LLC............ Delaware 4832 75-2779594 Chancellor Media Outdoor Corporation..................... Delaware 7319 75-2779605 Chancellor Media Nevada Sign Corporation................. Delaware 7319 75-2788530 Chancellor Media MW Sign Corporation..................... Delaware 7319 75-2779602 Chancellor Media Martin Corporation...................... Delaware 7319 75-2779598 Western Poster Service, Inc. ............................ Texas 7319 75-2084318 The AMFM Radio Networks, Inc. ........................... Delaware 4832 52-2100851 Chancellor Media Air Services Corporation................ Delaware 7319 75-2771440
3 TABLE OF CO-REGISTRANTS -- (CONTINUED)
STATE OR OTHER JURISDICTION OF PRIMARY STANDARD IRS INCORPORATION INDUSTRIAL EMPLOYER OR CLASSIFICATION IDENTIFICATION NAME FORMATION CODE NUMBER NUMBER ---- -------------- ---------------- -------------- Chancellor Media Whiteco Outdoor Corporation............. Delaware 7319 75-2783296 Chancellor Merger Corp. ................................. Delaware 7319 75-2771441 Broadcast Architecture, Inc. ............................ Massachusetts 4832 04-3096275 Martin Media............................................. California 7319 77-0058488 Dowling Company Incorporated............................. Virginia 7319 54-0787845 Nevada Outdoor Systems, Inc. ............................ Nevada 7319 88-0267411 MW Sign Corp. ........................................... California 7319 95-4334859 Martin & MacFarlane, Inc. ............................... California 7319 95-2743749 Katz Media Corporation................................... Delaware 7319 13-3779266 Katz Communications, Inc. ............................... Delaware 7319 13-0904500 Katz Millennium Marketing, Inc. ......................... Delaware 7319 13-3894491 Amcast Radio Sales, Inc. ................................ Delaware 7319 13-3406436 Christal Radio Sales, Inc. .............................. Delaware 7319 13-2618663 Eastman Radio Sales, Inc. ............................... Delaware 7319 13-3581043 Seltel Inc. ............................................. Delaware 7319 06-0963166 Katz Cable Corporation................................... Delaware 7319 13-3814104 The National Payroll Company, Inc. ...................... Delaware 7319 13-3744365 Chancellor Media Radio Licenses, LLC..................... Delaware 4832 75-2779589 KLOL License Limited Partnership......................... Delaware 4832 75-2486580 WTOP License Limited Partnership......................... Delaware 4832 75-2528718 Radio 100, L.L.C. ....................................... Delaware 4832 75-2759570
4 PROSPECTUS OFFER TO EXCHANGE ALL OUTSTANDING 9% SENIOR SUBORDINATED NOTES DUE 2008 FOR 9% SENIOR SUBORDINATED NOTES DUE 2008 OF CHANCELLOR MEDIA CORPORATION OF LOS ANGELES We hereby offer, upon the terms and conditions described in this Prospectus, to exchange all of our outstanding 9% Senior Subordinated Notes due 2008 ("Old Notes") for our registered 9% Senior Subordinated Notes due 2008 ("New Notes"). The Old Notes and New Notes are sometimes collectively referred to as the "Notes." The Old Notes were issued on September 25, 1998 and, as of the date of this Prospectus, an aggregate principal amount of $750.0 million is outstanding. The terms of the New Notes are identical to the terms of the Old Notes except that the New Notes are registered under the Securities Act of 1933, as amended, and will not contain any legends restricting their transfer. INFORMATION ABOUT THE NOTES: - The Notes will mature on October 1, 2008. - ----------------------------------------------------- * PLEASE CONSIDER THE FOLLOWING: - We will pay interest on the Notes semi-annually on April 1 and October 1 of each year beginning April 1, 1999, at the - You should carefully review the Risk Factors rate of 9% per annum. beginning on page 13 of this Prospectus. - We have the option to redeem all or a portion of the Notes - Our offer to exchange Old Notes for New Notes on or after October 1, 2003 at certain rates set forth on will be open until 5:00 p.m., New York City page 101 of this Prospectus. time, on January 9, 1999, unless we extend the offer. - We also have the option to redeem up to 25% of the original aggregate principal amount of the Notes on or prior to - You should also carefully review the procedures October 1, 2000 with the net cash proceeds from a public for tendering the Old Notes beginning on page 94 equity offering. of this Prospectus. - The Notes are unsecured obligations and are of equal ranking - If you fail to tender your Old Notes, you will in right of payment to our other outstanding senior continue to hold unregistered securities and subordinated notes. The Notes are subordinated to our senior your ability to transfer them could be adversely indebtedness. Please be advised that, as of September 30, affected. 1998, we had $1.3 billion of senior indebtedness and $1.0 billion of indebtedness of equal ranking in right of - No public market currently exists for the Notes. payment to the Notes. We do not intend to list the New Notes on any securities exchange and, therefore, no active - The Notes are fully and unconditionally guaranteed on an public market is anticipated. unsecured senior subordinated basis by all of our direct and indirect subsidiaries on the date the Old Notes were - ----------------------------------------------------- issued (the "Guarantors").
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. ------------------------------ THE DATE OF THIS PROSPECTUS IS DECEMBER 10, 1998 5 WHERE YOU CAN FIND MORE INFORMATION We, together with Chancellor Media Corporation ("Chancellor Media"), our indirect parent corporation, file annual, quarterly and special reports, proxy statements and other information with the Securities and Exchange Commission (the "SEC"). You may read and copy any reports, statements and other information we file at the SEC's public reference rooms in Washington, D.C., New York, New York, and Chicago, Illinois. Please call 1-800-SEC-0330 for further information on the public reference rooms. Our filings are also available to the public from commercial document retrieval services and at the web site maintained by the SEC at http://www.sec.gov. We, together with the Guarantors, have filed a Registration Statement on Form S-4 to register with the SEC the New Notes to be issued in exchange for the Old Notes. This Prospectus is part of that Registration Statement. As allowed by the SEC's rules, this Prospectus does not contain all of the information you can find in the Registration Statement or the exhibits to the Registration Statement. WE HAVE NOT AUTHORIZED ANYONE TO GIVE YOU ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS ABOUT THE TRANSACTIONS WE DISCUSS IN THIS PROSPECTUS OTHER THAN THOSE CONTAINED HEREIN OR IN THE DOCUMENTS WE INCORPORATE HEREIN BY REFERENCE. IF YOU ARE GIVEN ANY INFORMATION OR REPRESENTATIONS ABOUT THESE MATTERS THAT IS NOT DISCUSSED OR INCORPORATED IN THIS PROSPECTUS, YOU MUST NOT RELY ON THAT INFORMATION. THIS PROSPECTUS IS NOT AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY SECURITIES ANYWHERE OR TO ANYONE WHERE OR TO WHOM WE ARE NOT PERMITTED TO OFFER OR SELL SECURITIES UNDER APPLICABLE LAW. THE DELIVERY OF THIS PROSPECTUS OFFERED HEREBY DOES NOT, UNDER ANY CIRCUMSTANCES, MEAN THAT THERE HAS NOT BEEN A CHANGE IN OUR AFFAIRS SINCE THE DATE HEREOF. IT ALSO DOES NOT MEAN THAT THE INFORMATION IN THIS PROSPECTUS OR IN THE DOCUMENTS WE INCORPORATE HEREIN BY REFERENCE IS CORRECT AFTER THIS DATE. CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS This Prospectus contains certain forward-looking statements about our financial condition, results of operations and business. These statements may be made expressly in this document, or may be "incorporated by reference" to other documents we have filed with the SEC. You can find many of these statements by looking for words such as "believes," "expects," "anticipates," "estimates," or similar expressions used in this Prospectus or incorporated herein. These forward-looking statements are subject to numerous assumptions, risks and uncertainties. Factors which may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by us in those statements include, among others, the following: - - our ability to pay interest and principal on a very large amount of debt; - - the competitive nature of the radio broadcasting, outdoor advertising and media representation businesses; - - our ability to successfully integrate our completed and pending acquisitions; (i) 6 - - our ability to successfully compete in our new business platforms, including outdoor advertising and media representation; - - changes in governmental regulation of radio broadcasting by the Federal Communications Commission (the "FCC"); - - increased antitrust scrutiny of the broadcasting industry by the Antitrust Division of the Department of Justice (the "DOJ") and the Federal Trade Commission (the "FTC"), including limitations on future acquisition opportunities and possible radio divestiture requirements; and - - increased competition from new technologies, including satellite radio programming and the Internet. Because such statements are subject to risks and uncertainties, actual results may differ materially from those expressed or implied by the forward-looking statements. You are cautioned not to place undue reliance on such statements, which speak only as of the date of this Prospectus or, in the case of documents incorporated by reference, the date of such document. We do not undertake any responsibility to release publicly any revisions to these forward-looking statements to take into account events or circumstances that occur after the date of this Prospectus. Additionally, we don't undertake any responsibility to update you on the occurrence of any unanticipated events which may cause actual results to differ from those expressed or implied by the forward-looking statements contained or incorporated by reference in this Prospectus. (ii) 7 PROSPECTUS SUMMARY This brief summary highlights selected information from the Prospectus. It does not contain all of the information that is important to you. We urge you to carefully read and review the entire Prospectus and the other documents to which it refers to fully understand the terms of the New Notes and the exchange offer. Chancellor Media Corporation of Los Angeles is sometimes referred to herein as "CMCLA" and, together with its subsidiaries as the "Company." THE COMPANY CHANCELLOR MEDIA CORPORATION OF LOS ANGELES 300 Crescent Court, Suite 600 Dallas, Texas 75201 (214) 922-8700 The Company, an indirect wholly-owned subsidiary of Chancellor Media, is a diversified multi-media company that (i) owns and/or operates a radio station portfolio consisting of 118 radio stations (including 13 stations currently operated under time brokerage agreements) in 22 of the largest U.S. markets and Puerto Rico, (ii) provides national media sales representation through Katz Media Group, Inc., a wholly-owned subsidiary, and (iii) has a significant and growing outdoor (billboard) advertising presence. After completing all of our announced transactions, we will own or operate 123 radio stations in 25 markets and over 37,000 outdoor advertising displays in 37 states. On a pro forma basis, after giving effect to the transactions described in the "Pro Forma Financial Information" beginning on page P-1, we would have had net revenue of $1.1 billion and broadcast cash flow of $512.8 million for the nine months ended September 30, 1998. Also, our pro forma broadcast cash flow margin for the same period would have been 46%, and approximately 65% of pro forma net revenue for the period would have been generated in "superduopoly" markets (markets in which we own four or five FM stations). Furthermore, we would have generated approximately 75% of our net revenue from radio operations, approximately 11% from our media representation operations and approximately 14% from our outdoor advertising operations. BUSINESS STRATEGY Our strategy is to create a leading multi-media company with an overlapping presence in radio and outdoor advertising markets. To this end, we have built a diversified portfolio of media assets which allows us to present more options and greater value to our advertising clients. We believe that the multi-media platform creates significant growth opportunities through cross-selling, cross-promotion and cross-savings in markets where our radio and advertising operations overlap. Radio Broadcast Strategy. The business strategy of our radio group is to assemble and operate radio station clusters in order to maximize the broadcast cash flow generated in each market. We believe that radio station clusters attract increased revenues in a particular market by delivering larger combined audiences to advertisers and by engaging in joint marketing and promotional activities. 1 8 Media Representation Strategy. The business strategy of our media representation business is to create a leading national representation firm serving all types of electronic media. We believe we can continue to generate revenue and cash flow growth in the media representation business by expanding our market share and improving our national sales effort. Outdoor Advertising Strategy. The business strategy of our outdoor advertising group is to create and develop one of the leading outdoor advertising companies in the country through acquisitions that complement our existing outdoor and radio markets. We will focus on strengthening our operating results by increasing market penetration, maximizing rates and occupancy levels in each of our markets and capitalizing on technological advancements to improve quality and reduce costs. RECENT DEVELOPMENTS Completed Transactions. Since January 1, 1997, we have completed a number of transactions. Through these various transactions, we have: - - added 72 radio stations to our portfolio; - - acquired a full service media representation firm; and - - entered into the outdoor advertising business by acquiring over 37,000 billboards. Pending Transactions. We also currently have a number of significant pending transactions. - - On February 20, 1998, we entered into an agreement with Capstar Broadcasting Corporation to acquire certain of its stations through a series of purchases and exchanges over a period of three years. - - On April 8, 1998, we entered into an agreement to acquire Petry Media Corporation, a leading independent television representation firm. We are currently negotiating with the DOJ about their antitrust review of this transaction. Accordingly, we cannot be sure the transaction will be completed on its terms or at all. - - On August 11, 1998, we entered into agreements to acquire four FM and two AM stations in Cleveland. We recently began operating one of the FM stations in Cleveland under a time brokerage agreement. - - On August 20, 1998, we entered into an agreement to sell WMVP-AM in Chicago to ABC, Inc. ABC recently began operating WMVP-AM under a time brokerage agreement. - - On September 3, 1998, we entered into an agreement to acquire Pegasus Broadcasting of San Juan, L.L.C., a television broadcasting company which owns a television station in Puerto Rico. 2 9 - - On September 15, 1998, we entered into an agreement to acquire KKFR-FM and KFYI-AM in Phoenix from The Broadcast Group, Inc. We recently began operating KKFR-FM and KFYI-AM under a time brokerage agreement. For a more detailed explanation of the terms of the foregoing pending transactions, we advise you to review "Business -- Recent Developments -- Pending Transactions of CMCLA," beginning on page 42. Pending Transactions of Chancellor Media Corporation. Chancellor Media, our indirect parent corporation, has also recently entered into some significant transactions. - - On July 7, 1998, Chancellor Media entered into an agreement by which the ultimate parent corporation of LIN Television Corporation will merge into Chancellor Media. Upon consummation of the merger, it is expected that LIN will own or operate 12 television stations in eight markets in the United States. - - On August 26, 1998, Chancellor Media and Capstar Broadcasting Corporation entered into an agreement to merge in a stock-for-stock transaction that will create the nation's largest radio broadcasting entity. For a more detailed explanation of the terms of the foregoing pending transactions of Chancellor Media, we advise you to review "Business -- Recent Developments -- Pending Transactions of Chancellor Media," beginning on page 43. 3 10 THE EXCHANGE OFFER SECURITIES TO BE EXCHANGED... On September 25, 1998, we issued $750.0 million aggregate principal amount of Old Notes to the initial purchaser (the "Original Offering") in a transaction exempt from the registration requirements of the Securities Act of 1933, as amended (the "Securities Act"). The terms of the New Notes and the Old Notes are substantially identical in all material respects, except that the New Notes will be freely transferable by the holders thereof except as otherwise provided herein. See "Description of New Notes." THE EXCHANGE OFFER........... $1,000 principal amount of New Notes in exchange for each $1,000 principal amount of Old Notes. As of the date hereof, Old Notes representing $750.0 million aggregate principal amount are outstanding. Based on interpretations by the staff of the SEC, as set forth in no-action letters issued to certain third parties unrelated to us, we, together with the Guarantors believe that New Notes issued pursuant to the exchange offer in exchange for Old Notes may be offered for resale, resold or otherwise transferred by holders thereof (other than any holder which is an "affiliate" of the Company or the Guarantors within the meaning of Rule 405 promulgated under the Securities Act, or a broker-dealer who purchased Old Notes directly from us to resell pursuant to Rule 144A or any other available exemption promulgated under the Securities Act), without compliance with the registration and prospectus delivery requirements of the Securities Act, provided that such New Notes are acquired in the ordinary course of such holders' business and such holders have no arrangement with any person to engage in a distribution of New Notes. However, the SEC has not considered the exchange offer in the context of a no-action letter and we cannot be sure that the staff of the SEC would make a similar determination with respect to the exchange offer as in such other circumstances. Furthermore, each holder, other than a broker-dealer, must acknowledge that it is not engaged in, and does not intend to engage in, a distribution of such New Notes and has no arrangement or understanding to participate in a distribution of New Notes. Each broker-dealer that receives New Notes for its own account pursuant to the exchange offer must acknowledge that it will comply with the prospectus delivery requirements of the Securities Act in connec- 4 11 tion with any resale of such New Notes. Broker-dealers who acquired Old Notes directly from us and not as a result of market-making activities or other trading activities may not rely on the staff's interpretations discussed above or participate in the exchange offer and must comply with the prospectus delivery requirements of the Securities Act in order to resell the Old Notes. REGISTRATION RIGHTS AGREEMENT.................. We sold the Old Notes on September 25, 1998, in a private placement in reliance on Section 4(2) of the Securities Act. The Old Notes were immediately resold by the initial purchaser in reliance on Rule 144A promulgated under the Securities Act. In connection with the sale, we, together with the Guarantors, entered into a Registration Rights Agreement with the initial purchaser (the "Registration Rights Agreement") requiring us to make the exchange offer. The Registration Rights Agreement further provides that we, together with the Guarantors, must use our reasonable best efforts to (i) cause the Registration Statement with respect to the exchange offer to be declared effective within 180 days of the date on which we issued the Old Notes and (ii) consummate the exchange offer on or before the 225th business day following the date on which we issued the Old Notes. See "The Exchange Offer -- Purpose and Effect." EXPIRATION DATE.............. The exchange offer will expire at 5:00 p.m., New York City time, January 9, 1999 or such later date and time to which it is extended. WITHDRAWAL................... The tender of the Old Notes pursuant to the exchange offer may be withdrawn at any time prior to 5:00 p.m., New York City time, on January 9, 1999, or such later date and time to which we extend the offer. Any Old Notes not accepted for exchange for any reason will be returned without expense to the tendering holder thereof as soon as practicable after the expiration or termination of the exchange offer. INTEREST ON THE NEW NOTES AND THE OLD NOTES.............. Interest on the New Notes will accrue from the date of the original issuance of the Old Notes or from the date of the last periodic payment of interest on the Old Notes, whichever is later. No additional interest will be paid on Old Notes tendered and accepted for exchange. 5 12 CONDITIONS TO THE EXCHANGE OFFER...................... The exchange offer is subject to certain customary conditions, certain of which may be waived by us. See "The Exchange Offer -- Certain Conditions to Exchange Offer." PROCEDURES FOR TENDERING OLD NOTES...................... Each holder of the Old Notes wishing to accept the exchange offer must complete, sign and date the letter of transmittal, or a copy thereof, in accordance with the instructions contained herein and therein, and mail or otherwise deliver the letter of transmittal, or the copy, together with the Old Notes and any other required documentation, to the exchange agent at the address set forth herein. Persons holding the Old Notes through the Depository Trust Company ("DTC") and wishing to accept the exchange offer must do so pursuant to the DTC's Automated Tender Offer Program, by which each tendering participant will agree to be bound by the letter of transmittal. By executing or agreeing to be bound by the letter of transmittal, each holder will represent to us and the Guarantors that, among other things, (i) the New Notes acquired pursuant to the exchange offer are being obtained in the ordinary course of business of the person receiving such New Notes, whether or not such person is the registered holder of the Old Notes, (ii) the holder is not engaging in and does not intend to engage in a distribution of such New Notes, (iii) the holder does not have an arrangement or understanding with any person to participate in the distribution of such New Notes, and (iv) the holder is not an "affiliate," as defined under Rule 405 promulgated under the Securities Act, of the Company or the Guarantors. Pursuant to the Registration Rights Agreement if (i) we determine that we are not permitted to effect the exchange offer as contemplated hereby because of any change in applicable law or SEC policy, or (ii) any holder of Transfer Restricted Securities (as defined on page 91) notifies us prior to the 20th day following consummation of the exchange offer (a) that it is prohibited by law or SEC policy from participating in the exchange offer, (b) that it may not resell the New Notes acquired by it in the exchange offer to the public without delivering a prospectus and that this Prospectus is not appropriate or available for such resales or (c) that it is a broker-dealer and owns Old Notes acquired directly from us or an affiliate of ours, we are 6 13 required to file a "shelf" registration statement for a continuous offering pursuant to Rule 415 under the Securities Act in respect of the Old Notes. We will accept for exchange any and all Old Notes which are properly tendered (and not withdrawn) in the exchange offer prior to 5:00 p.m., New York City time, on January 9, 1999. The New Notes issued pursuant to the exchange offer will be delivered promptly following the expiration date. See "The Exchange Offer -- Terms of the Exchange Offer." EXCHANGE AGENT............... The Bank of New York is serving as Exchange Agent (the "Exchange Agent") in connection with the exchange offer. FEDERAL INCOME TAX CONSIDERATIONS............. The exchange of Old Notes for New Notes pursuant to the exchange offer should not constitute a sale or an exchange for federal income tax purposes. See "Certain Federal Income Tax Considerations." EFFECT OF NOT TENDERING...... Old Notes that are not tendered or that are tendered but not accepted will, following the completion of the exchange offer, continue to be subject to the existing restrictions upon transfer thereof. We will have no further obligation to provide for the registration under the Securities Act of such Old Notes. 7 14 THE NEW NOTES Issuer....................... Chancellor Media Corporation of Los Angeles. Securities Offered........... $750.0 million aggregate principal amount of 9% Senior Subordinated Notes due 2008. Maturity Date................ October 1, 2008. Interest..................... The New Notes will bear interest at a rate of 9% per annum. Interest on the New Notes will accrue from the date of issuance and will be payable semi-annually on each April 1 and October 1, commencing April 1, 1999. Sinking Fund................. None. Optional Redemption.......... The New Notes will be redeemable, in whole or in part, at our option on or after October 1, 2003 at the redemption prices set forth herein, plus accrued and unpaid interest to the date of redemption. In addition, on or prior to October 1, 2000, we may, at our option, redeem the New Notes, in part, with the net cash proceeds of one or more Public Equity Offerings (as defined on page 126), at the redemption price set forth herein, plus accrued and unpaid interest, if any, to the date of redemption; provided, however, that after any such redemption the aggregate principal amount of New Notes outstanding must equal at least 75% of the aggregate principal amount of Old Notes originally issued on September 25, 1998. See "Description of New Notes -- Optional Redemption." Change of Control............ If a Change of Control (as defined on page 119) occurs, (i) we will have the option, at any time on or prior to October 1, 2000, to redeem the New Notes in whole but not in part at a redemption price equal to 100% of the principal amount thereof plus the Applicable Premium, plus accrued and unpaid interest, if any, to the date of redemption, and (ii) if we do not so redeem the Exchange Notes or if such Change of Control occurs after October 1, 2000, we will be required to offer to repurchase all outstanding New Notes at a price equal to 101% of their principal amount, plus accrued and unpaid interest, if any, to the date of repurchase. There can be no assurance that we will have sufficient funds to purchase all the New Notes in the event of a Change of Control or that we would be able to obtain financing for such purpose on favorable terms, if at all. In addition, our senior loan agreement restricts our ability to repurchase the New Notes, including pursuant to a Change of Control Offer (as defined on page 102). The 8 15 senior loan agreement also contains certain other provisions relating to a change of control of the Company. These provisions are generally broader than the Change of Control provisions of the indenture governing the Notes (the "Indenture"). Consequently, certain events that may give rise to a change of control under the senior loan agreement may not give rise to a Change of Control under the Indenture. See "Risk Factors -- Change of Control," "Description of New Notes -- Change of Control" and "Description of Certain Indebtedness -- Senior Credit Facility -- Events of Default." Guarantees................... The New Notes will be fully and unconditionally guaranteed (the "Guarantees") on a senior subordinated basis by the Guarantors. The obligation of the Guarantors with respect to the Guarantees will be subordinated in right of payment, to the same extent as the obligations of the Company in respect of the New Notes are subordinated to all existing and future senior indebtedness, to all existing and future Guarantor senior indebtedness (which includes the guarantee by the Guarantors of the Company's borrowings under the senior loan agreement), and will be of equal ranking in right of payment to the Guarantors' guarantees of our other senior subordinated notes. See "Description of New Notes -- Guarantees." Offers to Purchase........... In the event of certain asset sales, we will be required to offer to repurchase the New Notes (to the extent of any net proceeds remaining following our offer to purchase our other senior subordinated notes) at a price equal to 100% of their principal amount, plus accrued and unpaid interest, if any, to the date of repurchase. See "Description of New Notes -- Certain Covenants -- Limitation on Asset Sales." Ranking...................... The New Notes will be our general unsecured obligations and will be of equal ranking in right of payment to our other senior subordinated notes and will be subordinated in right of payment to all existing and future senior indebtedness. As of September 30, 1998, on a pro forma basis after giving effect to the transactions described in the "Pro Forma Financial Information" beginning on page P-1, approximately $3.1 billion of senior indebtedness (represented by borrowings under the senior loan agreement and the 8% Senior Notes (as defined on page 45)) would have been outstanding and approximately $1.0 billion of debt of equal ranking in right of payment to the New Notes would have been 9 16 outstanding. See "Description of New Notes -- Subordination." Restrictive Covenants........ The Indenture will impose certain limitations on our ability and the ability of our subsidiaries to, among other things, incur additional indebtedness, incur liens, pay dividends or make certain other restricted payments, consummate certain asset sales, enter into certain transactions with affiliates, engage in certain asset swaps, incur indebtedness that is subordinate in right of payment to any senior indebtedness and senior in right of payment to the New Notes, impose restrictions on the ability of a subsidiary to pay dividends or make certain payments to us, enter into sale and leaseback transactions, conduct business other than the ownership and operation of radio broadcast stations, merge or consolidate with any other person or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of our assets. See "Description of New Notes -- Certain Covenants." Use of Proceeds.............. The Company will not receive any cash proceeds from the issuance of the New Notes pursuant to this Prospectus. RISK FACTORS We urge you to carefully review the Risk Factors beginning on page 13 for a discussion of factors you should consider before exchanging your Old Notes for New Notes. 10 17 SUMMARY PRO FORMA FINANCIAL INFORMATION We have summarized below the unaudited combined pro forma financial information of the Company for the year ended December 31, 1997 and for the nine months ended September 30, 1998. The information should be read in conjunction with the unaudited pro forma condensed financial statements included on Pages P-1 through P-26 of this Prospectus and in conjunction with our historical financial statements and related notes included on Pages F-1 through F-139 of this Prospectus. You should be aware that this pro forma information may not be indicative of what actual results will be in the future or would have been for the periods presented.
YEAR ENDED NINE MONTHS ENDED DECEMBER 31, 1997 SEPTEMBER 30, 1998 -------------------------------------- -------------------------------------- COMPANY AS COMPANY AS ADJUSTED FOR ADJUSTED FOR THE THE COMPANY COMPLETED COMPANY COMPANY COMPLETED COMPANY HISTORICAL TRANSACTIONS PRO FORMA HISTORICAL TRANSACTIONS PRO FORMA ---------- ------------ ---------- ---------- ------------ ---------- (IN THOUSANDS EXCEPT MARGIN DATA) OPERATING DATA: Net revenues....................... $582,078 $1,227,083 $1,308,652 $ 899,096 $1,059,774 $1,103,242 Operating expenses excluding depreciation and amortization.... 316,248 688,503 733,677 491,924 571,272 590,454 Operating income (loss)............ 58,406 18,833 (5,735) 10,865 5,979 (13,192) Interest expense, net.............. 83,095 327,008 375,440 135,709 236,668 273,332 Net loss........................... (18,844) (187,203) (230,179) (123,227) (131,291) (165,249) Preferred stock dividends.......... 12,901 -- -- 17,601 -- -- Net loss attributable to common stock............................ (31,745) (187,203) (230,179) (140,828) (131,291) (165,249) OTHER DATA: Broadcast cash flow(1)............. $265,830 $ 538,580 $ 574,975 $ 407,172 $ 488,502 $ 512,788 Broadcast cash flow margin......... 46% 44% 44% 45% 46% 46% EBITDA(1).......................... $244,388 $ 495,588 $ 531,502 $ 381,984 $ 457,339 $ 481,625 Ratio of earnings to fixed charges(2)....................... -- -- -- -- -- --
NINE MONTHS ENDED SEPTEMBER 30, 1998 ----------------------------------------- COMPANY AS ADJUSTED FOR THE COMPANY COMPLETED COMPANY HISTORICAL TRANSACTIONS PRO FORMA ---------- ------------ ---------- (IN THOUSANDS EXCEPT MARGIN DATA) BALANCE SHEET DATA (END OF PERIOD): Working capital............................................. $ 199,325 $ 223,546 $ 234,423 Intangible assets, net...................................... 4,916,533 5,889,764 6,768,514 Total assets................................................ 5,905,378 7,037,617 7,789,523 Long-term debt.............................................. 3,018,000 4,145,280 4,844,407 Stockholder's equity........................................ 2,336,772 2,336,772 2,346,365
- ------------------------- (1) Broadcast cash flow consists of operating income excluding depreciation, amortization, corporate general and administrative expense, and other non-cash and non-recurring 11 18 charges. EBITDA consists of operating income before depreciation and amortization, and other non-cash and non-recurring charges. Although broadcast cash flow and EBITDA are not calculated in accordance with generally accepted accounting principles, the Company believes that broadcast cash flow and EBITDA are widely used as a measure of operating performance. Nevertheless, these measures should not be considered in isolation or as a substitute for operating income, cash flows from operating activities or any other measure for determining the Company's operating performance or liquidity that is calculated in accordance with generally accepted accounting principles. Broadcast cash flow and EBITDA do not take into account the Company's debt service requirements and other commitments and, accordingly, broadcast cash flow and EBITDA are not necessarily indicative of amounts that may be available for reinvestment in the Company's business or other discretionary uses. Not all companies calculate broadcast cash flow and EBITDA in the same fashion and therefore the information presented may not be comparable to other similarly titled information of other companies. (2) For purposes of this calculation, "earnings" consist of income (loss) before income taxes and fixed charges. "Fixed charges" consist of interest, amortization of debt issuance costs and the component of rental expense believed by management to be representative of the interest factor thereon. Earnings were insufficient to cover fixed charges by $6,692 and $91,518 for the year ended December 31, 1997 and the nine months ended September 30, 1998, respectively. On a pro forma basis after giving effect to the Completed Transactions (as defined on page 41), financing transactions undertaken by the Company and Chancellor Radio Broadcasting Company ("CRBC") during 1997 and the 1998 Financing Transactions (as defined on page 45), earnings were insufficient to cover fixed charges by $290,821 and $202,406 for the year ended December 31, 1997 and the nine months ended September 30, 1998, respectively. On a pro forma basis after giving effect to the transactions described in "Pro Forma Financial Information" beginning on page P-1, earnings were insufficient to cover fixed charges by $362,464 and $259,114 for the year ended December 31, 1997 and the nine months ended September 30, 1998, respectively. 12 19 RISK FACTORS In addition to the other information set forth in this Prospectus, you should carefully consider the following information about our business before exchanging your Old Notes for New Notes. SUBSTANTIAL INDEBTEDNESS OF THE COMPANY We have a large amount of consolidated indebtedness when compared to the equity of our stockholders. We are subject to the terms of a senior loan agreement and various indentures relating to our outstanding senior subordinated notes. The terms of the senior loan agreement and the various indentures limit, but do not prohibit, the incurrence of additional indebtedness by us. Please be aware of the following: - - As of September 30, 1998, we had outstanding long-term indebtedness of approximately $3.0 billion, an accumulated deficit of $317.5 million and stockholder's equity of $2.3 billion. - - As of September 30, 1998, on a pro forma basis after giving effect to the transactions described in the "Pro Forma Financial Information" beginning on page P-1, we would have had outstanding long-term debt of approximately $4.8 billion, an accumulated deficit of $307.9 million and stockholder's equity of $2.3 billion. See "Pro Forma Financial Information" and "Capitalization." - - In addition to the long-term indebtedness referred to above, we expect to finance the acquisition of Petry Media Corporation (the "Petry Acquisition") and the acquisition of Pegasus Broadcasting of San Juan, L.L.C. (the "Pegasus Acquisition") through the incurrence of up to approximately $199.1 million in additional long-term indebtedness. Such a large amount of indebtedness could have negative consequences for us, including without limitation, the following: - - our ability to obtain financing in the future could be limited; - - much of our cash flow will be dedicated to interest obligations and unavailable for other purposes; - - the high level of indebtedness limits our flexibility to deal with changing economic, business and competitive conditions; - - some of our borrowings are at variable rates of interest which makes us vulnerable to increases in interest rates; and - - certain of our agreements have many restrictive operating and financial covenants with which we must comply. Our failure to comply with the covenants could be an event of default and could accelerate our payment obligations and, in some cases, could affect other obligations with cross-default or cross-acceleration provisions. Our ability to satisfy our payment obligations will depend, in large part, on our performance. Our performance will ultimately be affected by general economic and business factors, many of which will be outside of our control. We believe that our cash 13 20 flow combined with borrowings under our senior credit facility will be enough to meet our expenses and interest obligations. However, if we cannot satisfy our payment obligations, we will be forced to find alternative sources of funds by selling assets, restructuring, refinancing debt or seeking additional equity capital. There can be no assurance that any of these alternative sources would be available on satisfactory terms or at all. RESTRICTIONS IMPOSED ON THE COMPANY BY AGREEMENTS GOVERNING DEBT INSTRUMENTS Our senior loan agreement and the various indentures relating to our outstanding senior subordinated notes contain certain covenants that restrict (or will restrict), among other things, our ability to incur additional debt, incur liens, pay dividends or make certain types of payments, sell certain assets, enter into certain transactions with affiliates, enter into sale and leaseback transactions, conduct businesses other than the ownership and operation of radio and television broadcast stations and businesses related thereto, merge or consolidate with any other person or dispose of all or substantially all of our assets. Also, our senior loan agreement requires us to maintain certain financial ratios and satisfy financial condition tests. Our ability to comply with the ratios and the tests will be affected by events outside of our control and there can be no assurance that we will meet those tests. A breach of any of the covenants or failure to meet the tests could result in an event of default which would allow the lenders to declare all amounts outstanding immediately due and payable. In the case of our senior loan agreement, if we were unable to pay the amounts due, the lenders could, subject to compliance with applicable FCC rules, proceed against the collateral securing the indebtedness. If the amounts outstanding under the loan agreement were accelerated, there can be no assurance that our assets would be sufficient to repay the amount in full. HISTORY OF NET LOSSES AND INSUFFICIENCY OF EARNINGS TO COVER FIXED CHARGES In the past, we have experienced net losses as a result of significant interest charges, non-recurring expenses and amortization charges relating to acquisitions. Our net loss attributable to common stock for the years ended December 31, 1995, 1996 and 1997 and the nine months ended September 30, 1998 was $5.9 million, $16.2 million, $31.7 million and $123.2 million, respectively. On a pro forma basis, after giving effect to the transactions described in "Pro Forma Financial Information" beginning on Page P-1, the net loss attributable to common stock for the year ended December 31, 1997 and the nine months ended September 30, 1998 would have been $230.1 million and $165.2 million, respectively. Since acquisitions are a central focus of our operating strategy, we expect the charges and expenses to have a negative impact on our results. DIFFICULTY OF INTEGRATING ACQUISITIONS AND ENTERING NEW LINES OF BUSINESS We have recently acquired or are in the process of acquiring a number of entities in various lines of business. Consequently, management's focus will be on integrating many 14 21 new acquisitions, learning new industries and conducting its operations on a much larger scale. For the immediate future, management's focus will be on the following: - - Outdoor Advertising. Through our recent acquisitions of Martin Media and the Outdoor Advertising division of Whiteco Industries, Inc. (the "Whiteco Acquisition"), we have entered into billboard and other outdoor advertising. Although management believes this new business is complementary to the broadcasting business, management will be operating a business not previously undertaken by it as well as integrating new employees. - - Media Representation. Through our recent acquisition of Katz Media Group, Inc., we have entered into the media representation business, and if we complete the Petry Acquisition, we will expand this line of business. Although management has experience in this line of business at the local level, it must focus on operating the business and managing personnel on a national level. - - New National Radio Network. Through The AMFM Radio Networks, we are operating a new national radio network. Some of our stations have syndicated programs created locally in the past, but we have never undertaken a radio network at a national level. Management will focus on competing with other established state and national radio networks in this regard. We intend to continue to consider strategic acquisitions to expand or complement our current businesses. The need for management to focus on acquisitions and the integration of new businesses could divert the attention of management from other general business concerns. We cannot be sure that management will be successful in integrating acquisitions or new lines of business with its existing businesses. Our acquisition strategy involves other risks, including without limitation, increasing our debt payment obligations and the potential loss of valuable employees. The availability of additional financing cannot be assured and, depending on the terms of the potential acquisitions, may be restricted by the terms of our senior loan agreement and the various indentures relating to our outstanding senior subordinated notes. There can be no assurance that any future acquisitions will not have a material adverse effect on our financial condition and results of operations. COMPETITIVE NATURE OF RADIO BROADCASTING, OUTDOOR ADVERTISING AND MEDIA REPRESENTATION The radio broadcasting industry is very competitive. The success of each of our stations is dependent, in large part, upon its audience rating and our share of advertising revenue within each market. Our stations compete with other radio stations in each market, as well as with other media. We also compete with other companies for acquisition opportunities, and prices for stations have increased dramatically in recent periods. Some of the other broadcasting companies may have greater access to capital resources than we do. Also, if the trend towards consolidation in the radio industry continues, certain competitors may emerge with more stations and the ability to deliver larger audiences to potential advertisers. Our audience ratings and market share are and will be subject to change, and any adverse change in a particular market could have a material adverse effect on the revenue of the stations located in that market. There can be no assurance that any one of 15 22 our radio stations will be able to maintain or increase its current audience ratings or advertising market share. Each of the radio broadcasting, outdoor advertising and media representation industries are subject to competition from a variety of sources. Radio Broadcasting Competition. The radio broadcasting industry is subject to competition from new media technologies that are being developed and introduced such as the following: - - The delivery of audio programming by cable television systems, direct broadcasting satellite ("DBS") systems and other digital audio broadcasting formats to local and national audiences. - - The FCC has auctioned spectrum for a new satellite-delivered Digital Audio Radio Service ("DARS"). These actions may result in the introduction of several new satellite radio services with sound quality equivalent to compact discs. - - The introduction of In Band On Channel ("IBOC") digital radio. IBOC could provide multi-channel, multi-format digital radio services in the same band width currently occupied by traditional AM and FM radio services. Outdoor Advertising Competition. Our outdoor advertising business faces competition from various advertising companies and other media such as the following: - - radio and television advertising; - - print media; - - direct mail marketing; and - - other "out-of-home" advertising media, which includes displays in shopping malls, supermarkets, airports, sports stadia and arenas, movie theaters, and on taxis, buses, subways and other forms of public transportation. Media Representation Competition. The success of our media representation operations depends on our ability to maintain and acquire representation contracts with radio and television stations and cable systems, the inventory of time it represents and the experience of our management and personnel. We compete to gain client stations with other independent and network media representatives and direct national advertising. We then compete to sell air time to advertisers with the following: - - newspapers; - - magazines; - - outdoor advertising; - - transit advertising; - - yellow page directories; and - - point of sale advertising. POTENTIAL DELAY IN CONSUMMATION OF PENDING TRANSACTIONS DUE TO ANTITRUST REVIEW As a result of the concentration of ownership in the radio broadcast industry, the DOJ has been looking closely at acquisitions in the industry, including certain of our transactions. The consummation of each of our pending transactions is, and any of the future 16 23 transactions contemplated by us will likely be, subject to the notification filing requirements, applicable waiting periods and possible review by the DOJ or the FTC under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act"). DOJ review of certain transactions has caused, and may continue to cause, delays in anticipated closings of certain transactions and, in some cases, may result in attempts by the DOJ to enjoin such transactions or negotiate modifications to the proposed terms. Such delays, injunctions or modifications could have a negative effect on us and result in the abandonment of some otherwise attractive opportunities. The DOJ has stated publicly that it will look at some radio station acquisitions more closely when they exceed established benchmarks. However, to date, the DOJ has investigated transactions falling below the benchmarks and has cleared transactions exceeding the benchmarks. Although we do not believe that our acquisition strategy as a whole will be negatively affected in any material way by antitrust review or by additional divestitures we may have to make as a result of such review, there can be no assurance that this will be the case. We have been dealing with the DOJ on the following pending acquisition: - - Petry Acquisition. On June 3, 1998, the DOJ issued a second request for additional information under the HSR Act to which we have responded. The Company and Petry are still negotiating with the DOJ regarding this transaction and have agreed to extend the waiting period under the HSR Act pending completion of these discussions. Accordingly, at this time, we cannot be sure of the terms on which this transaction will be completed, if at all. LICENSING AND OWNERSHIP ISSUES RELATING TO FEDERAL REGULATION OF THE RADIO BROADCASTING INDUSTRY Licenses. The radio broadcasting industry is subject to extensive regulation by the FCC under the Communications Act of 1934, as amended (the "Communications Act"). Approval of the FCC is required for the issuance, renewal or transfer of radio broadcast station operating licenses, including licenses involved in many of our Pending Transactions. Our business is dependent upon its ability to hold radio broadcasting licenses from the FCC that are issued for terms of up to eight years. FCC regulation of licenses presents the following issues for us: - - There can be no assurance that any of the stations' licenses will be renewed at their expiration dates; and - - if granted, the licenses may include conditions and qualifications that could adversely affect our operations. Moreover, the laws, policies and regulations of the FCC may change significantly over time and we cannot be sure whether those changes will have a negative effect on our business. Ownership. The Communications Act and the FCC rules impose specific limits on the number of stations an entity can own in a single market. Compliance with the FCC's multiple ownership rules is expected to cause us, as well as other companies, to pass on certain acquisition opportunities we might otherwise pursue. Compliance with these rules by third parties may also have a significant impact on us as, for example, in precluding the 17 24 consummation of swap transactions that would cause such third parties to violate the multiple ownership rules. The multiple ownership rules are as follows: - - In markets with 45 or more stations, ownership is limited to eight stations, no more than five of which can be AM or FM; - - in markets with 30 to 44 stations, ownership is limited to seven stations, no more than four of which can be AM or FM; - - in markets with 15 to 29 stations, ownership is limited to six stations, no more than four of which can be AM or FM; and - - in markets with 14 or fewer stations, ownership is limited to no more than 50% of the market's total and no more than three AM or FM stations. In addition to our radio broadcast interests, the ownership interests of certain of our directors may be attributed to us. For example, three of our directors (Thomas O. Hicks, Lawrence D. Stuart, Jr. and Michael J. Levitt) are also among the directors of Capstar, an entity Chancellor Media has agreed to acquire (the "Capstar Merger"). Capstar presently owns or proposes to acquire over 355 stations serving 83 mid-sized markets throughout the United States. Because of those directors' positions on the Capstar board of directors, if any such broadcast interests overlap with our directly-held radio broadcast interests in our markets, such interests are combined with our interests in those markets when determining whether we comply with the multiple ownership rules. Also, LIN Television Corporation ("LIN Television"), the indirect operating subsidiary of Ranger Equity Holdings Corporation ("LIN") (which has agreed to merge with Chancellor Media (the "LIN Merger")), owns or operates twelve television stations in eight markets. Two of LIN's directors (Messrs. Hicks and Levitt) are also our directors and, accordingly, LIN's television broadcast interests are combined with our broadcast interests for determining our compliance with multiple ownership rules. In addition, Hicks, Muse, Tate & Furst, Incorporated ("Hicks Muse") and four of our directors (Thomas O. Hicks, Lawrence D. Stuart, Jr., Michael J. Levitt and John H. Massey) also have attributable interests in Sunrise Broadcasting, Inc. ("Sunrise"), which owns or proposes to acquire a number of television stations in several markets. Under the FCC's one-to-a-market rules, a party may not have attributable interests in more than one television station or radio stations and a television station in the same market unless a waiver is granted by the FCC. As a result of these attributable interests, our future acquisition strategy may be negatively affected. There can be no assurance that these additional attributable interests will not have a negative effect on our future acquisition strategy or on our business, financial condition and results of operations. In addition to its multiple ownership rules, the FCC has recently issued public notices suggesting that it may examine and impose limits upon the advertising revenue share acquired by one entity in a single market. It is not clear how the FCC will proceed in this area or how any policy it may adopt will interact with the review of similar issues by the DOJ or the FTC. POTENTIAL LOSS OF ADVERTISING SPACE TO REGULATION OF OUTDOOR ADVERTISING Outdoor advertising displays are subject to regulation at the federal, state and local levels. These regulations, in some cases, limit the height, size, location and operation of billboards and, in limited circumstances, regulate the content of the advertising copy displayed on the 18 25 billboards. Some governmental regulations prohibit the construction of new billboards or the replacement, relocation, enlargement or upgrading of existing structures. Some cities have adopted amortization ordinances under which, after the expiration of a certain period of time, billboards must be removed at the owner's expense and without the payment of consideration. Ordinances requiring the removal of billboards without compensation, whether through amortization or otherwise, are being challenged in various state and federal courts with conflicting results. Although we believe that our operations will not be materially affected by the amortization ordinances even if they are enforced, we cannot be sure that we will be successful in negotiating acceptable arrangements if our displays are subject to removal or amortization, and what effect, if any, such regulations may have on our operations. In addition, we are unable to predict what additional regulations may be imposed on outdoor advertising in the future. Legislation regulating the content of billboard advertisements has been introduced in Congress in the past. Changes in laws and regulations affecting outdoor advertising at any level of government could have a negative effect on our outdoor advertising business. See "-- Potential Loss of Advertisers due to Tobacco Industry Regulation" and "Business -- Government Regulation." POTENTIAL LOSS OF ADVERTISERS DUE TO TOBACCO INDUSTRY REGULATION Outdoor advertising of tobacco products is affected by federal, state and local legislation and various regulations. Local and state governments have passed ordinances or statutes to limit outdoor advertising of tobacco products. Increasing political pressure will likely lead to the passage of additional legislation and the adoption of additional regulations to limit the content and placement of outdoor advertising relating to the sale of tobacco products. In addition, it has been reported that certain cigarette manufacturers who are defendants in numerous class action suits throughout the United States have proposed out of court settlements with respect to such suits that is likely to include restrictions on billboard advertising by these and other cigarette manufacturers. We cannot determine the effect of these regulations or any legislation on our outdoor advertising business and its overall financial position at this time. A reduction in billboard advertising by the tobacco industry would cause an immediate reduction in direct revenue from tobacco advertisers and simultaneously increase the available space on the inventory of billboards in the outdoor advertising industry. This could in turn result in a lowering of rates in each of our markets or limit the ability of the industry as a whole to increase rates for some period of time. Such a development could have an adverse effect on our business. CONTROL OF THE-COMBINED COMPANY BY HICKS MUSE Prior to the LIN Merger and the Capstar Merger, Thomas O. Hicks and affiliates of Hicks Muse hold approximately 11.9% of the outstanding shares of Chancellor Media common stock. Affiliates of Hicks Muse have a controlling interest in Capstar and LIN and a large investment in Chancellor Media. Immediately following the LIN Merger and the Capstar Merger and the issuance of Chancellor Media common stock, it is expected that Mr. Hicks and affiliates of Hicks Muse will control approximately 30.5% of the outstanding shares (26.1% on a fully-diluted basis) of Chancellor Media common stock. Additionally, Messrs. Hicks, Lawrence D. Stuart, Jr., and Michael J. Levitt, each directors 19 26 of Chancellor Media, are also principals or executive officers of Hicks Muse. Accordingly, Mr. Hicks and Hicks Muse will continue to have a great deal of influence over the management policies of Chancellor Media and all matters submitted to a vote of the holders of Chancellor Media common stock. Also, the combined voting power of Mr. Hicks and Hicks Muse may have the effect of discouraging certain types of transactions involving an actual or potential change of control of Chancellor Media. POTENTIAL ADVERSE CONSEQUENCES TO HOLDERS OF THE NOTES IF A COURT FINDS A FRAUDULENT CONVEYANCE Various fraudulent conveyance laws have been passed for the protection of creditors. These laws may be applied by a court to subordinate or avoid the Notes or the Guarantees in favor of our other existing or future creditors or those of the Guarantors. If a court in a lawsuit on behalf of one of our unpaid creditors or a representative of one of our creditors were to find that, at the time we issued the Notes, we: - - intended to hinder, delay or defraud any existing or future creditor or considered insolvency with the intent to favor one or more creditors over others; or - - did not receive fair consideration or reasonably equivalent value for issuing the Notes and we, - were insolvent; - were made insolvent by issuing the Notes; - were engaged or about to engage in a business or transaction for which our remaining assets would be unreasonably small to carry on our business; or - intended to take on, or believed that we would take on, more debts than we could pay, such court could void our obligations under the Notes and void such transactions. On the other hand, in such event, claims of holders of such Notes could be subordinated to claims of our other creditors. Our obligations under the Notes are guaranteed by each of the Guarantors. If a court were to find that: - - the Guarantee was taken on by the Guarantor with the intent to hinder, delay or defraud any existing or future creditor or the Guarantor considered insolvency with the intent to favor one or more creditors over others; or - - the Guarantor did not receive fair consideration or reasonably equivalent value for issuing the Guarantee and the Guarantor, - was insolvent; - was made insolvent by issuing the Guarantee; - was engaged or about to engage in a business or transaction for which its remaining assets of the Guarantor would be unreasonably small to carry on its business; or 20 27 - intended to take on, or believed that it would take on, more debts than it could pay, the court could void or subordinate the Guarantee in favor of the Guarantor's creditors. Among other things, a legal challenge to any of the Guarantees based on fraudulent conveyance grounds may focus on the benefit, if any, realized by a Guarantor as a result our issuance of the Notes. If any Guarantee is avoided or deemed to be unenforceable, holders of the Notes would not have any claim against that Guarantor. Such holders would only be our creditors and creditors of the remaining Guarantors, if any. In such event, the claims of the holders of the Notes against such Guarantor would be subject to the prior payment of all liabilities and preferred stock claims of the Guarantor. The Guarantors cannot be sure that there would be enough assets to satisfy the claims of the holders of the Notes relating to any voided portion of a Guarantee. Based upon information currently available to us, we believe that the Notes and the Guarantees are being incurred for proper purposes and in good faith. Also, we, and each of the Guarantors: - - are solvent and will continue to be solvent after giving effect to the issuance of the Notes and the Guarantees, as the case may be; - - will have enough capital for carrying on its business after the issuance of the Notes and the Guarantees, as the case may be; and - - will be able to pay our debts. DIFFICULTY OF SATISFYING PAYMENT OBLIGATIONS UPON A CHANGE OF CONTROL If a Change of Control occurs, we may be required to make an offer to purchase all of the Notes then outstanding. We would be required to purchase the Notes at 101% of their principal amount, plus accrued interest to the date of repurchase. If a Change of Control occurs, we cannot be sure that we would have enough funds to pay for all of the Notes. If we are required to purchase the Notes, we would need to secure third-party financing if we do not have available funds to meet our purchase obligations. However, we cannot be sure that we would be able to secure such financing on favorable terms, if at all. Also, our financing arrangements may restrict our ability to repurchase the notes, including pursuant to a Change of Control Offer. Furthermore, a Change of Control will result in an event of default under the senior loan agreement and may lead to an acceleration of other senior indebtedness, if any. In such event, the subordination provisions of the Notes would require us to pay our senior loan agreement and any other senior indebtedness in full before repurchasing the Notes. In addition, a Change of Control could require us to repurchase our existing notes and Chancellor Media could be required to offer to redeem the 7% Convertible Preferred Stock of Chancellor Media (the "7% Convertible Preferred Stock") and the $3.00 Convertible Exchangeable Preferred Stock of Chancellor Media (the "$3.00 Convertible Preferred Stock"). See "Description of New Notes -- Change of Control," "-- Subordination," and "Description of Certain Indebtedness." The inability to repay senior indebtedness, if accelerated, and to purchase all of the tendered Notes or tendered existing notes, would constitute an event of default under the Indenture. 21 28 LACK OF AN ESTABLISHED MARKET FOR THE NOTES Since the Offering, there has been no public market for the Notes. We do not plan on listing the Notes on any securities exchange. The initial purchaser has told us that it plans on making a market in the Notes, but it does not have to do so, and may discontinue such activities at any time. Accordingly, we cannot determine: - - the likelihood that an active market for the Notes will develop; - - the liquidity of any such market; - - the ability of holders to sell their Notes; or - - the prices that they may obtain for their Notes if sold. Future trading prices for the Notes will depend upon many factors, including, among others, our operating results, the market for similar securities and changing interest rates. 22 29 USE OF PROCEEDS We will not receive any cash proceeds from the issuance of the New Notes. In consideration for issuing the New Notes as contemplated in this Prospectus, we will receive in exchange Old Notes in like principal amount, which will be cancelled and as such will not result in any increase in our indebtedness. CAPITALIZATION The following table sets forth the (i) actual capitalization of the Company at September 30, 1998, (ii) such pro forma capitalization as adjusted to give effect to the Completed Transactions and the 8% Senior Notes Offering and (iii) such pro forma capitalization as further adjusted to give effect to the Pending Transactions (excluding the Petry Acquisition and the Pegasus Acquisition). See "Pro Forma Financial Information" on page P-1.
COMPANY AS ADJUSTED COMPANY FOR THE COMPLETED COMPANY HISTORICAL TRANSACTIONS PRO FORMA ---------- ------------------- ---------- (DOLLARS IN THOUSANDS) Long-term debt: Senior Credit Facility(1)................... $1,268,000 $1,645,280 $2,344,407(2) 8% Senior Notes due 2008.................... -- 750,000 750,000 9 3/8% Senior Subordinated Notes due 2004... 200,000 200,000 200,000 8 3/4% Senior Subordinated Notes due 2007... 200,000 200,000 200,000 10 1/2% Senior Subordinated Notes due 2007...................................... 100,000 100,000 100,000 8 1/8% Senior Subordinated Notes due 2007... 500,000 500,000 500,000 9% Senior Subordinated Notes due 2008....... 750,000 750,000 750,000 ---------- ---------- ---------- Total long-term debt................. 3,018,000 4,145,280 4,844,407(2) Stockholder's equity: Common stock................................ 1 1 1 Additional paid-in capital.................. 2,654,273 2,654,273 2,654,273 Accumulated deficit......................... (317,502) (317,502) (307,909) ---------- ---------- ---------- Total stockholder's equity................ 2,336,772 2,336,772 2,346,365 ---------- ---------- ---------- Total capitalization................. $5,354,772 $6,482,052 $7,190,772(2) ========== ========== ==========
23 30 - ------------------------- (1) The Senior Credit Facility (as defined on page 130) currently provides for a total commitment of $2.50 billion, consisting of a $1.60 billion reducing revolving credit facility and a $900.0 million term loan facility. The Company expects to engage in negotiations with its bankers regarding the establishment of a new, expanded credit facility that would replace the Senior Credit Facility. Although there can be no assurance, the Company believes that amounts available under the Senior Credit Facility and amounts potentially available under a new, expanded credit facility will be used to finance the remaining Pending Transactions as well as future acquisitions. Other potential sources of financing for the Pending Transactions and future acquisitions include cash flow from operations, additional debt or equity financings, the sale of non-core assets or a combination of those methods. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Liquidity and Capital Resources." (2) Consistent with the presentation of the Company's pro forma financial information included elsewhere herein, the pro forma capitalization does not give effect to borrowings that the Company expects to make in order to finance the Petry Acquisition and the Pegasus Acquisition. If the pro forma capitalization is further adjusted to give effect to the Petry Acquisition and the Pegasus Acquisition, the long-term debt amount reflected above under the Senior Credit Facility would be approximately $2.5 billion, the total long-term debt would be $5.0 billion and the total capitalization would be $7.4 billion. The total cash financing required to consummate the Petry Acquisition and the Pegasus Acquisition is expected to be approximately $199.1 million. 24 31 SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA We are providing the following financial information to aid you in your analysis of the Company and an investment in the Notes. We derived this information from our audited financial statements for 1993 through 1997 and our unaudited financial statements for the nine months ended September 30, 1997 and 1998. The information is only a summary and you should read it in conjunction with our historical financial statements and related notes included on page F-1 through F-139 of this Prospectus.
NINE MONTHS ENDED YEAR ENDED DECEMBER 31, SEPTEMBER 30, ---------------------------------------------------------- ----------------------- 1993 1994 1995 1996 1997 1997 1998 -------- -------- --------- ---------- ----------- ---------- ---------- (IN THOUSANDS, EXCEPT RATIO AND MARGIN DATA) CONSOLIDATED STATEMENT OF OPERATIONS DATA: Gross revenues.......................... $106,813 $125,478 $ 186,365 $ 337,405 $ 663,804 $ 382,994 $1,015,562 Net revenues............................ 93,504 109,516 162,931 293,850 582,078 333,283 899,096 Operating expenses excluding depreciation and amortization......... 60,656 68,852 97,674 174,344 316,248 184,713 491,924 Depreciation and amortization........... 33,524 30,596 47,005 93,749 185,982 104,386 311,644 Corporate general and administrative.... 2,378 2,672 4,475 7,797 21,442 11,646 25,188 Other nonrecurring costs(1)............. 7,002 -- -- -- -- -- 59,475 -------- -------- --------- ---------- ----------- ---------- ---------- Operating income (loss)................. (10,056) 7,396 13,777 17,960 58,406 32,538 10,865 Interest expense, net................... 13,730 13,718 19,144 37,050 83,095 45,036 135,709 Other (income) expense, net(2).......... (3,037) (6,361) 291 -- (17,997) (18,380) (33,326) -------- -------- --------- ---------- ----------- ---------- ---------- Income (loss) before income taxes and extraordinary item.................... (20,749) 39 (5,658) (19,090) (6,692) 5,882 (91,518) Income tax expense (benefit)............ -- -- 192 (2,896) 7,802 5,244 (15,380) -------- -------- --------- ---------- ----------- ---------- ---------- Income (loss) before extraordinary item.................................. (20,749) 39 (5,850) (16,194) (14,494) 638 (76,138) Extraordinary loss, net of tax benefit(3)............................ -- 3,585 -- -- 4,350 4,350 47,089 -------- -------- --------- ---------- ----------- ---------- ---------- Net loss................................ (20,749) (3,546) (5,850) (16,194) (18,844) (3,712) (123,227) Preferred stock dividends(4)............ -- -- -- -- 12,901 2,779 17,601 -------- -------- --------- ---------- ----------- ---------- ---------- Net loss attributable to common stock... $(20,749) $ (3,546) $ (5,850) $ (16,194) $ (31,745) $ (6,491) $ (140,828) ======== ======== ========= ========== =========== ========== ========== CONSOLIDATED BALANCE SHEET DATA (END OF PERIOD): Working capital......................... $ 7,873 $ 15,952 $ 30,556 $ 41,421 $ 112,644 $ 123,805 $ 199,325 Intangible assets, net.................. 212,517 233,494 458,787 853,643 4,404,443 3,828,014 4,916,533 Total assets............................ 283,505 297,990 552,347 1,020,959 4,961,477 4,213,376 5,905,378 Long-term debt (including current portion)(5)........................... 152,000 174,000 201,000 358,000 2,573,000 1,857,000 3,018,000 Redeemable preferred stock.............. -- -- -- -- 331,208 338,566 -- Stockholder's equity.................... 120,968 112,353 304,577 549,411 1,480,207 1,508,666 2,336,772 OTHER FINANCIAL DATA: Broadcast cash flow(6).................. $ 32,848 $ 40,664 $ 65,257 $ 119,506 $ 265,830 $ 148,570 $ 407,172 Ratio of earnings to fixed charges(7)... -- 1.0x -- -- -- -- --
- ------------------------- (1) Consists of a non-cash charge resulting from the grant of employee stock options prior to Chancellor Media's initial public offering in 1993 and of a one-time executive severance charge related to the resignation of Scott K. Ginsburg as President and Chief Executive Officer of Chancellor Media, Chancellor Mezzanine Holdings Corporation ("CMHC") and the Company in 1998 and new employment agreements entered into with certain members of executive management. 25 32 (2) Includes gain on the dispositions of assets of $3,392, $6,991, $18,380 and $18,380 in 1993, 1994, 1997 and the nine months ended September 30, 1997, respectively. Includes a gain on the disposition of representation contracts of $29,767 and a gain from the WFLN Settlement (as defined on page 40) of $3,559 for the nine months ended September 30, 1998. (3) In connection with its debt refinancing in 1994, 1997 and the nine months ended September 30, 1997, the Company wrote off the unamortized balance of deferred debt issuance costs of $3,585, $4,350 and $4,350, respectively, as an extraordinary charge. For the nine months ended September 30, 1998, the Company recorded an extraordinary charge of $47,089 (net of a tax benefit of $25,357) consisting of premiums, estimated transaction costs and the unamortized balance of deferred debt issuance costs related to the 12% Debentures Tender Offer (as defined on page 44) and the 12 1/4% Debentures Tender Offer (as defined on page 44). (4) For the year ended December 31, 1997, represents preferred stock dividends on the 12% Preferred Stock (as defined on page 29) and the 12 1/4% Preferred Stock (as defined on page 29) for the period September 5, 1997 to December 31, 1997. For the nine months ended September 30, 1998, represents preferred stock dividends on the 12% Preferred Stock for the period from January 1, 1998 through May 13, 1998 and on the 12 1/4% Preferred Stock for the period from January 1, 1998 through July 23, 1998. Such preferred stock was issued by the Company on September 5, 1997 in exchange for the substantially identical securities of CRBC, which was merged into CMCLA. (5) The current portion of the Company's long-term debt was $10,625, $4,000, $4,000, $26,500, $0, $0 and $0 at December 31, 1993, 1994, 1995, 1996 and 1997 and September 30, 1997 and 1998, respectively. (6) Broadcast cash flow consists of operating income excluding depreciation and amortization, corporate general and administrative expense and other non-cash and non-recurring charges. Although broadcast cash flow is not calculated in accordance with generally accepted accounting principles, the Company believes that broadcast cash flow is widely used as a measure of operating performance. Nevertheless, this measure should not be considered in isolation or as a substitute for operating income, cash flows from operating activities or any other measure for determining the Company's operating performance or liquidity that is calculated in accordance with generally accepted accounting principles. Broadcast cash flow does not take into account the Company's debt service requirements and other commitments and, accordingly, broadcast cash flow is not necessarily indicative of amounts that may be available for reinvestment in the Company's business or other discretionary uses. Not all companies calculate broadcast cash flow and EBITDA in the same fashion and therefore the information presented may not be comparable to other similarly titled information of other companies. (7) For purposes of this calculation, "earnings" consist of income (loss) before income taxes and fixed charges. "Fixed charges" consist of interest, amortization of debt issuance costs and the component of rental expense believed by management to be representative of the interest factor thereon. Earnings were insufficient to cover fixed charges by $20,749, $5,658, $19,090 and $6,692 for the years ended December 31, 1993, 1995, 1996 and 1997, respectively, and by $91,518 for the nine months ended September 30, 1998. 26 33 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL The Company's results of operations from period to period have not historically been comparable because of the impact of the various acquisitions and dispositions that the Company has completed. For a description of the transactions completed by the Company during 1997 and to date in 1998, see "Business -- Recent Developments -- Transactions Completed Since January 1, 1997." In the following analysis, management discusses the Company's broadcast cash flow. The performance of a radio station group is customarily measured by its ability to generate broadcast cash flow. The two components of broadcast cash flow are gross revenues (net of agency commissions) and operating expenses (excluding depreciation and amortization, corporate general and administrative expense and non-cash and non-recurring charges). The primary source of revenues is the sale of broadcasting time for advertising. The Company's most significant operating expenses for purposes of the computation of broadcast cash flow are employee salaries and commissions, programming expenses, and advertising and promotion expenses. The Company strives to control these expenses by working closely with local station management. The Company's revenues vary throughout the year. As is typical in the radio broadcasting industry, the Company's first calendar quarter generally produces the lowest revenues, and the fourth quarter generally produces the highest revenues. Although broadcast cash flow is not calculated in accordance with generally accepted accounting principles, the Company believes that it is widely used as a measure of operating performance. Nevertheless, this measure should not be considered in isolation or as a substitute for operating income, cash flows from operating activities or any other measure for determining the Company's operating performance or liquidity that is calculated in accordance with generally accepted accounting principles. Broadcast cash flow does not take into account the Company's debt service requirements and other commitments and, accordingly, broadcast cash flow is not necessarily indicative of amounts that may be available for dividends, reinvestment in the Company's business or other discretionary uses. Not all companies calculate broadcast cash flow in the same fashion and therefore the Company's broadcast cash flow information may not be comparable to similarly titled information of other companies. NINE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30, 1997 The Company's results of operations for the nine months ended September 30, 1998 are not comparable to the results of operations for the nine months ended September 30, 1997 due to the impact of the Chancellor Merger (as defined on page 39), the Viacom Acquisition (as defined on page 37), the Katz Acquisition (as defined on page 39), the Martin Acquisition (as defined on page 41) and various other acquisitions and dispositions discussed in "Business -- Recent Developments." Net revenues for the nine months ended September 30, 1998 increased 169.8% to $899.1 million compared to $333.3 million for the nine months ended September 30, 1997. Operating expenses excluding depreciation and amortization for the nine months ended 27 34 September 30, 1998 increased 166.3% to $491.9 million compared to $184.7 million for the nine months ended September 30, 1997. Operating income excluding depreciation and amortization, corporate general and administrative expense and other non-cash and non-recurring charges (broadcast cash flow) for the nine months ended September 30, 1998 increased 174.1% to $407.2 million compared to $148.6 million for the nine months ended September 30, 1997. The increase in net revenues, operating expenses, and broadcast cash flow for the nine months ended September 30, 1998 was primarily attributable to the net impact of the Chancellor Merger, the Viacom Acquisition, the Katz Acquisition, the Martin Acquisition and the various acquisitions and dispositions discussed elsewhere herein, in addition to the overall net operational improvements realized by the Company. Depreciation and amortization for the nine months ended September 30, 1998 increased 198.5% to $311.6 million compared to $104.4 million for the nine months ended September 30, 1997. The increase is primarily due to the impact of the Chancellor Merger, the Viacom Acquisition, the Katz Acquisition and the Martin Acquisition, as well as other acquisitions completed during 1997 and to date in 1998. Corporate general and administrative expenses for the nine months ended September 30, 1998 increased 116.3% to $25.2 million compared to $11.6 million for the nine months ended September 30, 1997. The increase is due to the growth of the Company, and the related increase in properties and staff, primarily due to recent acquisitions. The executive severance charge of $59.5 million for the nine months ended September 30, 1998 represents a one-time charge incurred in connection with the resignation of Scott K. Ginsburg as President and Chief Executive Officer of the Company. As a result of the above factors, the Company realized operating income of $10.9 million for the nine months ended September 30, 1998 compared to $32.5 million of operating income for the nine months ended September 30, 1997. For the nine months ended September 30, 1998, the Company recorded a gain on disposition of representation contracts of $29.8 million related to its media representation operations. The Company entered into the media representation business with the Katz Acquisition on October 28, 1997. Interest expense, net for the nine months ended September 30, 1998 increased 201.3% to $135.7 million compared to $45.0 million for the same period in 1997. The net increase in interest expense was primarily due to (i) additional bank borrowings under the Senior Credit Facility required to finance the various acquisitions discussed elsewhere herein offset by repayment of borrowings from the net proceeds of the Company's various radio station dispositions and the 1998 Equity Offering (as defined on page 44), (ii) the assumption of CRBC's 9 3/8% Senior Subordinated Notes due 2004 (the "9 3/8% Notes") and 8 3/4% Senior Subordinated Notes due 2007 (the "8 3/4% Notes") upon consummation of the Chancellor Merger on September 5, 1997, (iii) the assumption of Katz' 10 1/2% Senior Subordinated Notes due 2007 (the "10 1/2% Notes") upon consummation of the Katz Acquisition on October 28, 1997 and (iv) the issuance of the 8 1/8% Senior Subordinated Notes due 2007 (the "8 1/8% Notes") by the Company on December 22, 1997. For the nine months ended September 30, 1997, other income of $18.4 million represents a gain on the disposition of assets related to the dispositions of WNKS-FM in Charlotte ($3.5 million), WPNT-FM in Chicago ($0.5 million), WEJM-FM in Chicago ($9.3 million), the FCC authorizations and certain transmission equipment previously used 28 35 in the operation of KYLD-FM in San Francisco ($1.7 million) and WEJM-AM in Chicago ($3.4 million). For the nine months ended September 30, 1998, other income represents a gain from the WFLN Settlement of $3.6 million. The income tax benefit for the nine months ended September 30, 1998 is comprised of current state tax expense and a deferred federal income tax benefit. Dividends on preferred stock of CMCLA were $17.6 million for the nine months ended September 30, 1998, which represent dividends on CMCLA's 12% Exchangeable Preferred Stock (the "12% Preferred Stock") for the period from January 1, 1998 through May 13, 1998 and on CMCLA's 12 1/4% Series A Senior Cumulative Exchangeable Preferred Stock (the "12 1/4% Preferred Stock") for the period from January 1, 1998 to July 23, 1998, each issued in September 1997 as part of the Chancellor Merger. On May 13, 1998, CMCLA exchanged all shares of the 12% Preferred Stock for its 12% Debentures (as defined on page 44) and on July 23, 1998, CMCLA exchanged all shares of the 12 1/4% Preferred Stock for its 12 1/4% Debentures. The 12% Debentures and 12 1/4% Debentures (as defined on page 44) were subsequently repurchased by CMCLA. For the nine months ended September 30, 1997, the Company recorded an extraordinary charge of $4.4 million (net of a tax benefit of $2.3 million) consisting of the write-off of the unamortized balance of deferred debt issuance costs related to the amendment and restatement of the Company's Senior Credit Facility on April 25, 1997. For the nine months ended September 30, 1998, the Company recorded an extraordinary charge of $47.1 million (net of a tax benefit of $25.4 million) consisting of the premiums, estimated transaction costs and the write-off of the unamortized balance of deferred debt issuance costs in connection with the 12% Debentures Tender Offer and 12 1/4% Debentures Tender Offer. Dividends on Chancellor Media's preferred stock were $19.3 million for the nine months ended September 30, 1998 compared to $5.7 million for the same period in 1997. The increase is due to dividends on the $3.00 Convertible Preferred Stock issued in June 1997 and dividends on the 7% Convertible Preferred Stock issued in September 1997 as part of the Chancellor Merger. As a result of the above factors, the Company incurred a $160.1 million net loss attributable to common stockholders for the nine months ended September 30, 1998 compared to a net loss attributable to common stockholders of $12.2 million for the nine months ended September 30, 1997. The basic and diluted loss per common share for the nine months ended September 30, 1998 was $1.17 compared to $0.14 for the nine months ended September 30, 1997. YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996 The Company's results of operations for the year ended December 31, 1997 are not comparable to the results of operations for the year ended December 31, 1996 due to the impact of the Chancellor Merger, the Viacom Acquisition, the Katz Acquisition and various other station acquisitions and dispositions discussed in "Business -- Recent Developments." Net revenues for the year ended December 31, 1997 increased 98.1% to $582.1 million compared to $293.9 million for the year ended December 31, 1996. Operating expenses excluding depreciation and amortization for 1997 increased 81.4% to $316.2 million 29 36 compared to $174.3 million in 1996. Operating income excluding depreciation and amortization, corporate general and administrative expense and other non-cash and non-recurring charges (broadcast cash flow) for 1997 increased 122.4% to $265.8 million compared to $119.5 million in 1996. The increase in net revenues, operating expenses, and broadcast cash flow was primarily attributable to the net impact of the various acquisitions and dispositions discussed elsewhere herein, in addition to the overall net operational improvements realized by the Company. Depreciation and amortization for 1997 increased 98.4% to $186.0 million compared to $93.7 million in 1996. The increase is primarily due to the impact of the various acquisitions and dispositions discussed elsewhere herein. Corporate general and administrative expenses for 1997 increased 175.0% to $21.4 million compared to $7.8 million in 1996. The increase is due to the growth of the Company, and related increase in properties and staff, primarily due to recent acquisitions. As a result of the above factors, operating income for 1997 increased 225.2% to $58.4 million compared to $18.0 million in 1996. Interest expense for 1997 increased 126.6% to $85.0 million compared to $37.5 million in 1996. The net increase in interest expense was primarily due to (i) additional bank borrowings under the Senior Credit Facility required to finance the various acquisitions discussed elsewhere herein offset by repayment of borrowings from the net proceeds of the Company's various radio station dispositions, (ii) the assumption of the 9 3/8% Notes and the 8 3/4% Notes upon consummation of the Chancellor Merger on September 5, 1997 and (iii) the assumption of the 10 1/2% Notes upon consummation of the Katz Acquisition on October 28, 1997. The Company recorded a gain on disposition of assets of $18.4 million in 1997 related to the dispositions of WNKS-FM in Charlotte ($3.5 million), WPNT-FM in Chicago ($0.5 million), WEJM-FM in Chicago ($9.3 million), WEJM-AM in Chicago ($3.4 million) and the FCC authorizations and certain transmission equipment previously used in the operation of KYLD-FM in San Francisco ($1.7 million). The provision for income tax expense of $7.8 million for the year ended December 31, 1997 is comprised of current federal and state income taxes of $6.8 million and $4.8 million, respectively, and a deferred federal income tax benefit of $3.8 million. The Company recorded an extraordinary charge of $4.4 million (net of a tax benefit of $2.3 million) in 1997, consisting of the write-off of the unamortized balance of deferred debt issuance costs related to the amendment and restatement of the Company's Senior Credit Facility on April 25, 1997. Dividends on preferred stock were $12.9 million in 1997, representing dividends on the 12 1/4% Preferred Stock and 12% Preferred Stock issued in September 1997 as part of the Chancellor Merger. As a result of the above factors, the Company incurred a $31.7 million net loss attributable to common stock in 1997 compared to a $16.2 million net loss in 1996. 30 37 YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995 The Company's results of operations for the year ended December 31, 1996 are not comparable to the results of operations for the year ended December 31, 1995 due to the impact of the Company's acquisition of Pyramid Communications, Inc. on January 17, 1996 (the "Pyramid Acquisition") and various other station acquisitions and dispositions. Net revenues for the year ended December 31, 1996 increased 80.4% to $293.9 million compared to $162.9 million for the year ended December 31, 1995. Operating expenses excluding depreciation and amortization for 1996 increased 78.5% to $174.3 million compared to $97.7 million in 1995. Operating income excluding depreciation and amortization, corporate general and administrative expense and other non-cash and non-recurring charges (broadcast cash flow) for 1996 increased 83.1% or $54.2 million to $119.5 million compared to $65.3 million in 1995. The increase in net revenues, operating expenses, and broadcast cash flow was primarily attributable to the impact of various station acquisitions and dispositions, in addition to the overall net operational improvements realized by the Company's radio stations. Depreciation and amortization for 1996 increased 99.4% to $93.7 million compared to $47.0 million in 1995. The increase represents additional depreciation and amortization expenses due to the impact of recent acquisitions, offset by decreases due to certain intangibles which became fully amortized in 1995 and 1996. Corporate general and administrative expenses for 1996 increased 74.2% to $7.8 million compared to $4.5 million in 1995. The increase is due to the growth of the Company, and related increase in properties and staff, primarily due to recent acquisitions. As a result of the above factors, operating income for 1996 increased 30.4% to $18.0 million compared to $13.8 million in 1995. Interest expense for 1996 increased 95.4% to $37.5 million compared to $19.2 million in 1995. The net increase in interest expense was primarily due to additional bank borrowings required to finance the Pyramid Acquisition as well as the other station acquisitions, offset by repayment of borrowings under the Company's prior senior credit facility from the net proceeds of the offering in October 1996 by Chancellor Media of 18,000,000 shares of its Common Stock, the net proceeds of which Chancellor Media contributed to the Company, and an overall decrease in the Company's borrowing rates. The provision for income tax expense for the year ended December 31, 1996 is comprised of current federal and state taxes of $.5 million and $1.0 million, respectively, and a deferred federal income tax benefit of $4.4 million. As a result of the above factors, the Company incurred a $16.2 million net loss attributable to common stockholders in 1996 compared to a $5.9 million net loss in 1995. LIQUIDITY AND CAPITAL RESOURCES Overview. The Company historically has generated sufficient cash flow from operations to finance its existing operational requirements and debt service requirements, and the Company anticipates that this will continue to be the case. The Company historically has used the proceeds of bank debt and private and public debt and equity offerings, 31 38 supplemented by cash flow from operations not required to fund operational requirements and debt service, to fund implementation of the Company's acquisition strategy. The total cash financing required to consummate the Pending Transactions is expected to be $919.2 million. The Company expects to receive $21.0 million in cash from the completion of the Chicago Disposition. Accordingly, the Company will require at least $898.2 million in additional financing to consummate the Pending Transactions. Although there can be no assurance, the Company expects that $355.4 million will be required to be borrowed during the first quarter of 1999 (for the Cleveland Acquisitions, as defined on page 42, and Pegasus Acquisition), $90.0 million will be required to be borrowed during the second quarter of 1999 (for the Phoenix Acquisition, as defined on page 43) and the remaining $344.3 million will be required to be borrowed for the Capstar/SFX Transaction (as defined on page 42) over the three year period in which the Capstar/SFX Stations (as defined on page 42) will be acquired. In addition, financing of $129.5 million will be required if the Petry Acquisition is consummated. Depending on the timing of the consummation of the Pending Transactions, the Company may need to obtain additional financing. The Company believes that amounts available under the Senior Credit Facility and the $250.0 million potentially available under the Additional Facility Indebtedness will be used to finance the remaining Pending Transactions as well as future acquisitions. The Senior Credit Facility currently provides for a total commitment of $2.50 billion, consisting of $1.60 billion reducing revolving credit facility and a $900.0 million term loan facility. Other potential sources of financing for the Pending Transactions and future acquisitions include cash flow from operations, additional debt or equity financings, the sale of non-core assets or a combination of those sources. In addition to debt service requirements under the Senior Credit Facility, the Company is required to pay interest on the existing senior subordinated notes. Interest payment requirements of the Company on the existing senior subordinated notes are $87.4 million per year. Interest payment requirements of the Company on the 8% Senior Notes are $60.0 million per year. Cash dividend requirements of Chancellor Media on its $3.00 Convertible Preferred Stock and its 7% Convertible Preferred Stock are $25.7 million per year. Because Chancellor Media is a holding company with no significant assets other than the common stock of CMHC, Chancellor Media will rely solely on dividends from CMHC, which in turn is expected to distribute dividends paid to it by the Company and other subsidiaries to Chancellor Media, to permit Chancellor Media to pay cash dividends on the $3.00 Convertible Preferred Stock and the 7% Convertible Preferred Stock. The Senior Credit Facility and the indentures governing the existing senior subordinated notes limit, but do not prohibit, the Company from paying such dividends to CMHC. RECENTLY-ISSUED ACCOUNTING PRINCIPLES In June 1997, the Financial Accounting Standards Board issued SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information. This Statement establishes standards for reporting information about operating segments in annual financial statements and requires reporting of selected information about operating segments in interim financial reports issued to stockholders. It also establishes standards for related disclosures about products and services, geographic areas and major customers. 32 39 SFAS No. 131 is effective for fiscal years beginning after December 15, 1997. Management does not anticipate that this Statement will have a significant effect on the Company's consolidated financial statements. In February 1998, the Financial Accounting Standards Board issued SFAS No. 132, Employers' Disclosure about Pensions and Other Postretirement Benefits. This Statement revises employers' disclosures about pensions and other postretirement benefit plans. It does not change the measurement or recognition of those plans. SFAS No. 132 is effective for fiscal years beginning after December 15, 1997. Management does not anticipate that this Statement will have a significant effect on the Company's consolidated financial statements. In April 1998, Accounting Standards Executive Committee ("ACSEC") issued Statement of Position ("SOP") No. 98-5, "Reporting on the Costs of Start-Up Activities" ("SOP 98-5") effective for fiscal years beginning after December 15, 1998. This SOP provides guidance on the financial reporting of start-up costs and organization costs. It requires costs of start-up activities and organization costs to be expensed as incurred. Initial application of SOP 98-5 should be reported as the cumulative effect of a change in accounting principle, as described in Accounting Principles Board (APB) Opinion No. 20, "Accounting Changes." When adopting this SOP, entities are not required to report the pro forma effects of retroactive application. Management does not believe the implementation of SOP 98-5 will have a material impact on the Company's consolidated financial statements. In June 1998, the Financial Accounting Standards Board issued SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities. This Statement establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, (collectively referred to as derivatives) and for hedging activities. SFAS No. 133 is effective for all fiscal quarters of all fiscal years beginning after June 15, 1999. Management does not anticipate that this Statement will have a material impact on the Company's consolidated financial statements. YEAR 2000 ISSUE The "Year 2000 Issue" is whether the Company's computer systems will properly recognize date sensitive information when the year changes to 2000, or "00." Systems that do not properly recognize such information could generate erroneous data or cause a system to fail. The Company has conducted a comprehensive review of its computer systems to identify the systems that could be affected by the Year 2000 Issue and has developed an implementation plan. The Company uses purchased software programs for a variety of functions, including general ledger, accounts payable and accounts receivable accounting packages. The companies providing these software programs are Year 2000 compliant, and the Company has received Year 2000 compliance certificates from these software vendors. The Company's Year 2000 implementation plan also includes ensuring that all individual work stations and other equipment with embedded chips or processors are Year 2000 compliant. The Company is in the process of reviewing various modification and replacement plans related to the recent Whiteco Acquisition and expects to complete its review by early 1999. Costs associated with ensuring that the Company's existing systems are Year 2000 compliant and replacing certain existing systems are currently expected to be approximately $5.1 million, of which $0.3 million has been incurred to date. These cost estimates are subject to change based on further analysis, and any change in 33 40 such costs may be material. The Company believes that the Year 2000 Issue will not pose significant operational problems for the Company's computer systems and, therefore, will not have a material impact on the operations of the Company. In addition, the Company reviews the computer systems of companies it intends to acquire in order to assess whether such systems are Year 2000 compliant. To the extent such systems are not Year 2000 compliant, the Company will develop an implementation plan to ensure such systems are Year 2000 compliant or will convert such systems to the Company's computer systems which are Year 2000 compliant. There is no guarantee that the systems of companies to be acquired by the Company in the future will be timely converted and would not have an adverse effect on the operations of the Company. The ability of third parties with whom the Company transacts business to adequately address their Year 2000 issues is outside of the Company's control. Therefore, there can be no assurance that the failure of such third parties to adequately address their Year 2000 issues will not have a material adverse effect on the Company's business, financial condition, cash flows and results of operations. The Company expects to develop contingency plans intended to mitigate any possible disruption in business that may result from certain of the Company's systems or the systems of third parties that are not Year 2000 compliant. 34 41 BUSINESS The Company, an indirect wholly owned subsidiary of Chancellor Media, is a diversified multi-media company that (i) owns and/or operates Chancellor Radio Group ("CRG") which consists of 118 radio stations (including 13 stations currently operated under time brokerage agreements) in 22 of the largest U.S. markets and Puerto Rico, (ii) provides national media sales representation ("Media Representation") through Katz Media Group, Inc. ("Katz"), a wholly owned subsidiary and (iii) has a significant and growing outdoor advertising presence through Chancellor Outdoor Group ("COG"). Chancellor Media will also have a meaningful presence in the television broadcasting sector through its recently announced acquisition of LIN and an expanded presence in mid-sized markets through its pending acquisition of Capstar. See "-- Recent Developments" and "-- Pending Transactions of Chancellor Media." CHANCELLOR RADIO GROUP The Company's current radio station portfolio (including 13 stations currently operated under time brokerage agreements) consists of 118 stations (89 FM and 29 AM), including a total of 15 markets in which the Company owns four or five FM stations ("superduopolies"). The Company owns superduopolies in 11 of the nation's 15 largest radio markets -- Los Angeles, New York, Chicago, San Francisco, Dallas/Ft. Worth, Philadelphia, Washington, D.C., Houston, Detroit, Denver and Minneapolis-St. Paul and in four other large markets -- Phoenix, Pittsburgh, Orlando and Puerto Rico. Upon consummation of the Pending Transactions, the Company will own 123 stations (92 FM and 31 AM) and will increase its number of superduopolies to 16 with the addition of four FM and two AM stations in Cleveland. As a complement to its radio broadcasting operations, the Company formed a national radio network, The AMFM Radio Networks, which began broadcasting advertising over the Company's portfolio of stations and stations owned by Capstar in January 1998. Management believes that The AMFM Radio Networks will allow the Company to further leverage this broad station base, personalities and advertising inventory by delivering a national audience of approximately 66 million listeners (including approximately 45 million listeners from the Company's portfolio of stations) to network advertisers. The AMFM Radio Networks has expanded through the acquisition of syndicated programming shows including American Top 40 with Casey Kasem, Rockline, Modern Rock Live, Reelin' in the Years and Live from the Pit. The Company's radio station portfolio is geographically diversified and employs a wide variety of programming formats, including adult contemporary, contemporary hit radio, urban, jazz, country, oldies, news/talk, rock and sports. Each of the Company's radio stations targets a specific demographic audience within a market, with the majority of the stations appealing primarily to 18 to 34 or 25 to 54 year old men and/or women, the demographic groups most sought after by advertisers. Management believes that, because of the size and diversity of its radio station portfolio, the Company is not unduly reliant on the performance of any one station or market. No single market to be served by the Company represented more than 9% of the Company's pro forma broadcast cash flow for the nine months ended September 30, 1998 (excluding the Petry Acquisition and the Pegasus Acquisition). 35 42 MEDIA REPRESENTATION The Company entered into the media representation business with the acquisition of Katz on October 28, 1997. Katz is a full-service media representation firm serving multiple types of electronic media, with leading market share in the representation of radio and television stations and cable television systems. Katz is retained on an exclusive basis by radio stations, television stations and cable television systems in over 200 designated market areas throughout the United States, including at least one radio or television station in each of the 50 largest designated market areas, to sell national spot advertising air time. If the Petry Acquisition is consummated, the Company will expand its presence in the television representation business. CHANCELLOR OUTDOOR GROUP In July 1998, the Company entered the outdoor advertising business with the acquisition of Martin Media, an outdoor advertising company with over 14,500 billboards and outdoor displays in 12 states. As a result of the consummation of the Whiteco Acquisition, the Chancellor Outdoor Group now owns and operates over 37,000 outdoor advertising display faces in 37 states and ranks among the top five outdoor companies in the United States. CONSOLIDATED COMPANY On a pro forma basis after giving effect to the transactions described in "Pro Forma Financial Information" beginning on page P-1, the Company would have had net revenue and broadcast cash flow of approximately $1.1 billion and $512.8 million, respectively, for the nine months ended September 30, 1998, its pro forma broadcast cash flow margin for such period would have been 46%, and approximately 65% of pro forma net revenue for such period would have been generated by markets in which the Company owns superduopolies. Furthermore, the Company would have generated approximately 75% of its net revenue from radio operations, approximately 11% from media representation operations and approximately 14% from outdoor advertising operations. The Petry Acquisition and the Pegasus Acquisition are excluded from the pro forma information included in this Prospectus for a number of reasons including (a) uncertainties regarding on what terms, and in some cases, whether such transaction will be consummated, (b) whether such acquisition will be consummated by the Company or another stand-alone entity formed by Chancellor Media, or (c) the availability of appropriate financial information. In the opinion of management of the Company, such information is not material to such pro forma presentations, either individually or in the aggregate. RECENT DEVELOPMENTS TRANSACTIONS COMPLETED SINCE JANUARY 1, 1997 On January 31, 1997, the Company acquired WWWW-FM and WDFN-AM in Detroit from affiliates of CRBC for $30.0 million in cash plus various other direct acquisition costs. The Company had previously provided certain sales and promotional functions to WWWW-FM and WDFN-AM under a joint sales agreement since February 14, 1996 and subsequently operated the stations under a time brokerage agreement since April 1, 1996. On January 31, 1997, the Company acquired KKSF-FM and KDFC-FM/AM in San Francisco from affiliates of the Brown Organization for $115.0 million in cash plus various other direct acquisition costs. The Company had previously been operating KKSF-FM and 36 43 KDFC-FM/AM under a time brokerage agreement since November 1, 1996. On July 21, 1997, the Company sold KDFC-FM to Bonneville International Corporation ("Bonneville") for $50.0 million in cash. The assets of KDFC-FM were classified as assets held for sale in connection with the purchase price allocation of the acquisition of KKSF-FM and KDFC-FM/AM and no gain or loss was recognized by the Company upon consummation of the sale. On April 1, 1997, the Company acquired WJLB-FM and WMXD-FM in Detroit from Secret Communications, L.P. ("Secret") for $168.0 million in cash plus various other direct acquisition costs. The Company had previously been operating WJLB-FM and WMXD-FM under time brokerage agreements since September 1, 1996. On April 3, 1997, the Company exchanged WQRS-FM in Detroit (which the Company acquired on April 3, 1997 from Secret for $32.0 million in cash plus various other direct acquisition costs), to affiliates of Greater Media Radio, Inc. ("Greater Media") in return for WWRC-AM in Washington, D.C. (now known as WTEM-AM) and $9.5 million in cash. The net purchase price to the Company of WWRC-AM was therefore $22.5 million. The Company had previously been operating WWRC-AM under a time brokerage agreement since June 17, 1996. On May 1, 1997, the Company acquired WDAS-FM/AM in Philadelphia from affiliates of Beasley FM Acquisition Corporation for $103.0 million in cash plus various other direct acquisition costs. On May 15, 1997, the Company exchanged five of its six stations in Charlotte, North Carolina (WPEG-FM, WBAV-FM/AM, WRFX-FM and WFNZ-AM) for two FM stations in Philadelphia (WIOQ-FM and WUSL-FM) owned by EZ Communications, Inc. ("EZ") in Philadelphia (the "Charlotte Exchange"), and also sold the Company's sixth radio station in Charlotte, WNKS-FM, to EZ for $10.0 million in cash and recognized a gain of $3.5 million. On May 30, 1997, the Company acquired WPNT-FM in Chicago from affiliates of Century Broadcasting Company for $75.7 million in cash (including $2.0 million for the purchase of the station's accounts receivable) plus various other direct acquisition costs. On June 19, 1997, the Company sold WPNT-FM in Chicago to Bonneville for $75.0 million in cash and recognized a gain of $0.5 million. On June 3, 1997, the Company sold WEJM-FM in Chicago to affiliates of Crawford Broadcasting for $14.8 million in cash and recognized a gain of $9.3 million. On July 2, 1997, the Company acquired WLTW-FM and WAXQ-FM in New York and WMZQ-FM, WJZW-FM, WZHF-AM and WBZS-AM in Washington, D.C. from Viacom International, Inc. ("Viacom") for approximately $612.4 million in cash including various other direct acquisition costs (the "Viacom Acquisition"). The Viacom Acquisition was financed with (i) bank borrowings under the Senior Credit Facility of $552.6 million; (ii) $53.8 million in escrow funds paid by the Company on February 19, 1997 and (iii) $6.1 million financed through working capital. In June 1997, Chancellor Media issued 5,990,000 shares of $3.00 Convertible Preferred Stock for net proceeds of $287.8 million which were contributed to the Company and used to repay borrowings under the Senior Credit Facility and subsequently were reborrowed on July 2, 1997 as part of the financing of the Viacom Acquisition. On July 7, 1997, the Company sold WJZW-FM in Washington, D.C. to affiliates of Capital Cities/ABC Radio for $68.0 million in cash. The 37 44 assets of WJZW-FM, as well as the assets of WZHF-AM and WBZS-AM, which were also sold on August 13, 1997, were accounted for as assets held for sale in connection with the purchase price allocation of the Viacom Acquisition and no gain or loss was recognized by the Company upon consummation of the sales. On July 7, 1997, the Company sold the FCC authorizations and certain transmission equipment previously used in the operation of KYLD-FM in San Francisco to Susquehanna Radio Corporation ("Susquehanna") for $44.0 million in cash and recognized a gain of $1.7 million. Simultaneously therewith, CRBC sold the call letters "KSAN-FM" (which CRBC previously used in San Francisco) to Susquehanna. On July 7, 1997, the Company and CRBC entered into a time brokerage agreement to enable the Company to operate KYLD-FM on the frequency previously assigned to KSAN-FM, and on July 7, 1997, CRBC changed the call letters of KSAN-FM to KYLD-FM. Upon the consummation of the Chancellor Merger, the Company changed the format of the new KYLD-FM to the format previously operated on the old KYLD-FM. On July 14, 1997, the Company completed the disposition of WLUP-FM in Chicago to Bonneville for net proceeds of $80.0 million which were held by a qualified intermediary pending the completion of the deferred exchange of WLUP-FM for KZPS-FM and KDGE-FM in Dallas. On October 7, 1997, the Company applied the net proceeds from the disposition of WLUP-FM of $80.0 million in cash, plus an additional $3.5 million and various other direct acquisition costs, in a deferred exchange of WLUP-FM for KZPS-FM and KDGE-FM in Dallas. The Company had previously operated KZPS-FM and KDGE-FM under time brokerage agreements effective August 1, 1997. On July 21, 1997, the Company entered into a time brokerage agreement with CRBC whereby the Company began managing certain limited functions of CRBC's stations KBGG-FM, KNEW-AM and KABL-FM in San Francisco pending the consummation of the Chancellor Merger (as defined herein), which occurred on September 5, 1997. On August 13, 1997, the Company sold WBZS-AM and WZHF-AM in Washington, D.C. (acquired as part of the Viacom Acquisition) and KDFC-AM in San Francisco to affiliates of Douglas Broadcasting ("Douglas") for $18.0 million in the form of a promissory note. The promissory note, as amended on May 1, 1998, bears interest at 7 3/4% from the closing date through February 28, 1998 and at 10.0% from March 1, 1998 through the remainder of the term of the note, with a balloon principal payment due four years after closing. At closing, Douglas posted a $1.0 million letter of credit for the benefit of the Company that will remain outstanding until all amounts due under the promissory note are paid. On August 27, 1997, the Company sold WEJM-AM in Chicago to Douglas for $7.5 million in cash and recognized a gain of $3.3 million. On September 5, 1997, pursuant to an Amended and Restated Agreement and Plan of Merger, dated as of February 19, 1997 and amended and restated on July 31, 1997 (the "Chancellor Merger Agreement"), among Chancellor Broadcasting, CRBC, Evergreen Media Corporation ("Evergreen"), Evergreen Mezzanine Holdings Corporation ("EMHC") and Evergreen Media Corporation of Los Angeles ("EMCLA"), (i) Chancellor was merged (the "Parent Merger") with and into EMHC, a direct, wholly-owned subsidiary of Evergreen, with EMHC remaining as the surviving corporation and (ii) CRBC was merged (the "Subsidiary Merger") with and into EMCLA, a direct, wholly-owned subsidiary of EMHC, with EMCLA remaining as the surviving corporation 38 45 (collectively, the "Chancellor Merger"). Upon consummation of the Parent Merger, Evergreen was renamed Chancellor Media Corporation and EMHC was renamed CMHC. Upon consummation of the Subsidiary Merger, EMCLA was renamed CMCLA. Consummation of the Chancellor Merger added 52 radio stations (36 FM and 16 AM) to the Company's portfolio of stations, including 13 stations in markets in which the Company previously operated. The total purchase price allocated to net assets acquired was approximately $2.0 billion which included (i) the conversion of each outstanding share of Chancellor Common Stock into 0.9091 shares of Chancellor Media's Common Stock, resulting in the issuance of 34,617,460 shares of Chancellor Media's Common Stock at $15.50 per share, (ii) the assumption of long-term debt of CRBC of $949.0 million which included $549.0 million of borrowings outstanding under the CRBC senior credit facility, $200.0 million of CRBC's 9 3/8% Notes and $200.0 million of CRBC's 8 3/4% Notes, (iii) the issuance of 2,117,629 shares of CMCLA's 12% Preferred Stock in exchange for CRBC's substantially identical securities with a fair value of $215.6 million including accrued and unpaid dividends of $3.8 million, (iv) the issuance of 1,000,000 shares of CMCLA's 12 1/4% Preferred Stock in exchange for CRBC's substantially identical securities with a fair value of $120.2 million including accrued and unpaid dividends of $0.8 million, (v) the issuance of 2,200,000 shares of Chancellor Media's 7% Convertible Preferred Stock in exchange for Chancellor's substantially identical securities with a fair value of $111.1 million including accrued and unpaid dividends of $1.1 million, (vi) the assumption of stock options issued to Chancellor stock option holders with a fair value of $35.0 million and (vii) estimated acquisition costs of $31.0 million. On October 28, 1997, Chancellor Media and the Company acquired Katz, a full-service media representation firm, in a tender offer transaction for a total purchase price of approximately $379.1 million which included (i) the conversion of each outstanding share of Katz Common Stock into the right to receive $11.00 in cash, resulting in total cash payments of $149.6 million, (ii) the assumption of long-term debt of Katz and its subsidiaries of $222.0 million which included $122.0 million of borrowings outstanding under the Katz senior credit facility and $100.0 million of 10 1/2% Notes of Katz Media Corporation (a subsidiary of Katz) and (iii) estimated acquisition costs of $7.5 million (the "Katz Acquisition"). On December 29, 1997, the Company acquired five radio stations from Pacific and Southern Company, Inc., a subsidiary of Gannett Co., Inc., consisting of WGCI-FM/AM in Chicago for $140.0 million, KKBQ-FM/AM in Houston for $110.0 million and KHKS-FM in Dallas for $90.0 million, for an aggregate purchase price of $340.0 million in cash plus various other direct acquisition costs. On January 30, 1998, the Company acquired KXPK-FM in Denver from Ever Green Wireless LLC (which is unrelated to the Company) for $26.0 million in cash plus various other direct acquisition costs, of which $1.7 million was previously paid by CRBC as escrow funds and are classified as other assets at December 31, 1997. The Company had previously operated KXPK-FM under a time brokerage agreement since September 1, 1997. On April 3, 1998, the Company exchanged WTOP-AM in Washington, KZLA-FM in Los Angeles and WGMS-FM in Washington plus $63.0 million in cash (including $3.0 million paid by the Company in escrow and classified as other assets at December 31, 1997) to Bonneville for WBIX-FM in New York, KLDE-FM in Houston and KBIG-FM in Los 39 46 Angeles (the "Bonneville Exchange"). The Company had previously operated KLDE-FM and KBIG-FM under time brokerage agreements since October 1, 1997 and WBIX-FM since October 10, 1997, and had sold substantially all of the broadcast time of WTOP-AM, KZLA-FM and WGMS-FM to Bonneville since October 1, 1997. On April 13, 1998, the Company and Secret entered into a settlement agreement regarding WFLN-FM in Philadelphia. Previously in August 1996, the Company and Secret had entered into an agreement under which the Company would acquire WFLN-FM from Secret for $37.8 million in cash. In April 1997, the Company entered into an agreement to sell WFLN-FM to Greater Media for $41.8 million in cash. On July 16, 1997, Secret purported to terminate the sale of WFLN-FM to the Company. The Company subsequently brought suit against Secret to enforce its rights to acquire WFLN-FM. Pursuant to a court settlement entered in August 1997 and the settlement agreement between the Company and Secret entered on April 13, 1998, (i) Secret sold WFLN-FM directly to Greater Media for $37.8 million, (ii) Greater Media deposited $4.1 million (the difference between the Company's proposed acquisition price for WFLN-FM from Secret and the Company's proposed sale price for WFLN-FM to Greater Media) with the court and (iii) the Company received $3.5 million of such amount deposited by Greater Media with the court, plus interest earned during the period which the court held such amounts (the "WFLN Settlement"), and Secret received the balance of such amounts. On May 29, 1998, as part of the Capstar/SFX Transaction, the Company exchanged WAPE-FM and WFYV-FM in Jacksonville (valued for purposes of the Capstar/SFX Transaction at $53.0 million) plus $90.3 million in cash to Capstar in return for KODA-FM in Houston (the "Houston Exchange"). Furthermore, on May 29, 1998, Capstar sold KKPN-FM in Houston (acquired by Capstar as part of Capstar's acquisition of SFX Broadcasting, Inc. ("SFX")) due to the attributable ownership of Hicks Muse in both Capstar and the Company in order to comply with the FCC's multiple ownership limits. In connection with Capstar's sale of KKPN-FM, the Company received a commission from Capstar of $1.7 million. On May 29, 1998, the Company also provided a loan (the "Capstar Loan") to Capstar in the principal amount of $150.0 million as part of the Capstar/SFX Transaction. The Capstar Loan bears interest at the rate of 12% per annum (subject to increase in certain circumstances), and is secured by a senior pledge of common stock of Capstar's direct subsidiary. A portion of the Capstar Loan will be prepaid by Capstar in connection with the Company's acquisition of, and the proceeds of such prepayment would be used by the Company as a portion of the purchase price for, each Capstar/SFX Station. Hicks Muse, which is a substantial shareholder of the Company, controls Capstar, and certain officers and directors of the Company are directors and/or executive officers of Capstar and/or Hicks Muse. On June 1, 1998, the Company acquired WWDC-FM/AM in Washington, D.C. from Capitol Broadcasting Company and its affiliates for $74.1 million in cash (including $2.1 million for the purchase of the stations' accounts receivable) plus various other direct acquisition costs, of which $4.0 million was previously paid by the Company as escrow funds and are classified as other assets at December 31, 1997 (the "Capitol Broadcasting Acquisition"). On May 1, 1998, the Company formed a new marketing group division in an effort to enhance the revenues the Company derives from its sales promotion activities. On June 1, 1998, the Company acquired Global Sales Development, Inc., a consulting firm based in 40 47 Richmond, Virginia, for $0.7 million in cash plus various other direct acquisition costs to lead its marketing efforts for this new division. On June 15, 1998, the Company's national radio network, The AMFM Radio Networks, acquired the syndicated programming shows of Global Satellite Network for $14.0 million in cash plus various other direct acquisition costs. The syndicated programming shows acquired include "Rockline", "Modern Rock Live", "Reelin' in the Years" and the concert series "Live from the Pit". On July 31, 1998, the Company acquired Martin Media and certain affiliated companies ("Martin Media"), an outdoor advertising company with over 14,500 billboards and outdoor displays in 12 states serving 23 markets, for $591.7 million in cash plus working capital of $19.4 million subject to certain adjustments and various other direct acquisition costs of approximately $10.0 million (the "Martin Acquisition"). On August 28, 1998, the Company acquired various syndicated programming shows of Casey Kasem and the related programming libraries for $7.2 million in cash and $7.0 million in the form of a note due August 2000 (the "Kasem Acquisition"). In September and November 1998, the Company acquired approximately 600 additional billboards and outdoor displays in various markets for approximately $23.1 million in cash (the "Other Outdoor Acquisitions"). On October 9, 1998, the Company acquired approximately a 22.4% non-voting equity interest in Z-Spanish Media Corporation ("Z Spanish Media") for approximately $25.0 million in cash. Z Spanish Media, which is headquartered in Sacramento, California, is the owner and operator of 22 Hispanic format radio stations in California, Texas, Arizona and Illinois. On October 23, 1998, the Company acquired Primedia Broadcast Group, Inc. and certain of its affiliates, which own and operate eight FM stations in Puerto Rico, for approximately $76.1 million in cash less working capital deficit of $1.3 million plus various other direct acquisition costs. On November 13, 1998, the Company acquired approximately 1,000 display faces from Kunz & Company for $33.3 million in cash plus various other direct acquisition costs (the "Kunz Option"). Martin had previously paid $6.0 million in cash to Kunz & Company on July 31, 1997. Martin began operating these 1,000 display faces under a management agreement effective July 31, 1997. In connection with the acquisition of the Kunz & Company display faces, Chancellor Media entered into a consent decree with the DOJ pursuant to which the Company has agreed to divest approximately 130 display faces in the near future. On December 1, 1998, the Company acquired the assets of the Outdoor Advertising division of Whiteco Industries, Inc., an outdoor advertising company with over 22,000 billboards and outdoor displays in 34 states, for $930.0 million in cash plus working capital and various other direct acquisition costs. In connection with the Whiteco Acquisition, Chancellor Media entered into a consent decree with the DOJ pursuant to which the Company has agreed to divest approximately 250 billboards in the near future. The foregoing transactions (excluding the Other Outdoor Acquisitions and the Kasem Acquisition) are collectively referred to herein as the "Completed Transactions." 41 48 PENDING TRANSACTIONS OF CMCLA On February 20, 1998, the Company entered into an agreement to acquire from Capstar KTXQ-FM and KBFB-FM in Dallas/Ft. Worth, KODA-FM, KKRW-FM and KQUE-AM in Houston, KPLN-FM and KYXY-FM in San Diego and WDRV-FM, WJJJ-FM, WXDX-FM and WDVE-FM in Pittsburgh (collectively, the "Capstar/SFX Stations") for an aggregate purchase price of approximately $637.5 million in a series of purchases and exchanges over a period of three years (the "Capstar/SFX Transaction"). The Capstar/SFX Stations were acquired by Capstar as part of Capstar's acquisition of SFX on May 29, 1998. On May 29, 1998, the Company completed the Houston Exchange and began operating the remaining ten Capstar/SFX Stations under time brokerage agreements. The purchase price for the remaining ten Capstar/SFX Stations will be approximately $494.3 million. The Company is currently assessing whether the terms of the Capstar/SFX Transaction will be modified upon the consummation of the Capstar Merger by Chancellor Media. On April 8, 1998, the Company entered into an agreement to acquire Petry Media Corporation, a leading independent television representation firm. The agreement currently provides for a purchase price of $129.5 million in cash. On June 3, 1998, the DOJ issued a second request for additional information under the HSR Act in connection with the Petry Acquisition to which the Company has responded. The Company and Petry are still negotiating with the DOJ regarding this transaction and have agreed to extend the waiting period under the HSR Act pending completion of these discussions. Accordingly, at this time, the Company cannot be sure of the terms on which this transaction will be completed, if at all. On August 11, 1998, the Company entered into agreements to acquire four FM and two AM radio stations in Cleveland for an aggregate purchase price of approximately $275.0 million in cash plus various other direct acquisition costs (the "Cleveland Acquisitions"). The Cleveland Acquisitions consist of the purchase by the Company of (i) WDOK-FM and WRMR-AM from Independent Group Limited Partnership, (ii) WZAK-FM from Zapis Communications, (iii) Zebra Broadcasting Corporation which owns WZJM-FM and WJMO-AM and (iv) Wincom Broadcasting Corporation which owns WQAL-FM. The consummation of each of the Cleveland Acquisitions (other than the Wincom Acquisition) is contingent upon the consummation of each of the other Cleveland Acquisitions (other than the Wincom Acquisition). The Company began operating WQAL-FM under a time brokerage agreement effective October 1, 1998. Although there can be no assurance, the Company expects that the Cleveland Acquisitions will be consummated in the first quarter of 1999. On August 20, 1998, the Company entered into an agreement to sell WMVP-AM in Chicago to ABC, Inc. for $21.0 million in cash (the "Chicago Disposition"). The Company entered into a time brokerage agreement to sell substantially all of the broadcast time of WMVP-AM effective September 10, 1998. Although there can be no assurance, the Company expects that the Chicago Disposition will be consummated in the fourth quarter of 1998. On September 3, 1998, the Company entered into an agreement to acquire Pegasus, a television broadcasting company which owns a television station in Puerto Rico, for approximately $69.6 million in cash. Although there can be no assurance, the Company expects that the Pegasus Acquisition will be consummated in the first quarter of 1999. In 42 49 connection with the LIN Merger, the Company may assign its rights under its agreement with Pegasus to LIN. On September 15, 1998, the Company entered into an agreement to acquire KKFR-FM and KFYI-AM in Phoenix from The Broadcast Group, Inc. for $90.0 million in cash (the "Phoenix Acquisition"). The Company began operating KKFR-FM and KFYI-AM under a time brokerage agreement effective November 5, 1998. Although there can be no assurance, the Company expects that the Phoenix Acquisition will be consummated in the second quarter of 1999. The foregoing transactions are collectively referred to herein as the "Pending Transactions." Consummation of each of the Pending Transactions discussed above is subject to various conditions, including, in certain cases, approval from the FCC and the expiration or early termination of any waiting period required under the HSR Act. Except as described above, the Company believes that such conditions will be satisfied in the ordinary course, but there can be no assurance that this will be the case. PENDING TRANSACTIONS OF CHANCELLOR MEDIA On July 7, 1998, Chancellor Media entered into an agreement whereby the ultimate parent of LIN will merge into Chancellor Media. Pursuant to this agreement, Chancellor Media will issue .0300 shares of Chancellor Media common stock for each share of LIN's common stock resulting in the issuance of approximately 17.7 million shares (comprised of approximately 16.2 million newly issued shares, the assumption of LIN phantom stock units representing approximately 0.4 million shares and the assumption of LIN options representing the right to purchase approximately 1.1 million shares). Upon consummation of the LIN Merger, it is expected that LIN will own or operate 12 television stations in eight markets in the United States. Upon consummation of the LIN Merger, LIN will be operated as a separate, stand-alone company from CMCLA. Accordingly, the assets, liabilities and results of operations of LIN will not be reflected in the consolidated financial statements of the Company. Although there can be no assurance, Chancellor Media expects that the LIN Merger will be consummated in the first quarter of 1999. On August 26, 1998, Chancellor Media and Capstar entered into an agreement to merge in a stock-for-stock transaction that will create the nation's largest radio broadcasting entity. Pursuant to this agreement, Chancellor Media will acquire Capstar in a reverse merger in which Capstar will be renamed Chancellor Media Corporation. Each share of Chancellor Media Common Stock will represent one share in the combined entity. Each share of Capstar Common Stock will represent 0.480 shares of common stock in the combined entity, subject to an upward adjustment not to exceed 0.025 shares to the extent that Capstar's 1998 cash flow from specified assets exceeds certain specified targets. Upon consummation of its pending transactions, Capstar will own and operate more than 355 radio stations serving 83 mid-sized markets nationwide. Upon consummation of the Capstar Merger, Capstar's radio stations will be operated by stand-alone companies which are separate from CMCLA and its subsidiaries. Accordingly, the assets, liabilities, and results of operations of Capstar will not be reflected in the consolidated financial statements of the Company. Although there can be no assurance, Chancellor Media expects that the Capstar Merger will be consummated in the second quarter of 1999. 43 50 1998 FINANCING TRANSACTIONS On March 13, 1998, Chancellor Media completed an offering of 21,850,000 shares of its common stock (the "1998 Equity Offering"). The net proceeds from the 1998 Equity Offering of approximately $994.6 million were contributed to the Company and were used to reduce bank borrowings under the revolving credit portion of the Senior Credit Facility and the excess proceeds were initially invested in short-term investment grade securities. The Company subsequently used the excess proceeds for general corporate purposes, including the financing of the Bonneville Exchange, the Capstar Loan and a portion of the Houston Exchange. On May 8, 1998, the Company completed a consent solicitation (the "12% Preferred Stock Consent Solicitation") to modify certain timing restrictions on its ability to exchange all shares of its 12% Preferred Stock for its 12% Subordinated Exchange Debentures due 2009 (the "12% Debentures"). Consenting holders of 12% Preferred Stock received payments of $0.05 per share of 12% Preferred Stock. On May 13, 1998, the Company exchanged the shares of 12% Preferred Stock for 12% Debentures (the "12% Exchange"). In connection with the 12% Preferred Stock Consent Solicitation and 12% Exchange, the Company incurred approximately $0.3 million in transaction costs which were recorded as deferred debt issuance costs. On June 10, 1998, the Company completed a cash tender offer (the "12% Debentures Tender Offer") for all of its 12% Debentures for an aggregate repurchase cost of $262.5 million which included (i) the principal amount of the 12% Debentures of $211.8 million, (ii) premiums on the repurchase of the 12% Debentures of $47.8 million, (iii) accrued and unpaid interest on the 12% Debentures from May 14, 1998 through June 10, 1998 of $2.0 million and (iv) estimated transaction costs of $1.0 million. In connection with the 12% Debentures Tender Offer, the Company recorded an extraordinary charge of $31.9 million (net of a tax benefit of $17.2 million) consisting of the premiums, estimated transaction costs and the write-off of the unamortized balance of deferred debt issuance costs. On July 20, 1998, the Company completed a consent solicitation (the "12 1/4% Preferred Stock Consent Solicitation") to modify certain timing restrictions on its ability to exchange all shares of its 12 1/4% Preferred Stock for its 12 1/4% Subordinated Exchange Debentures due 2008 (the "12 1/4% Debentures"). Consenting holders of 12 1/4% Preferred Stock received payments of $0.05 per share of 12 1/4% Preferred Stock. On July 23, 1998, the Company exchanged the shares of 12 1/4% Preferred Stock for 12 1/4% Debentures (the "12 1/4% Exchange"). In connection with the 12 1/4% Preferred Stock Consent Solicitation and 12 1/4% Exchange, the Company incurred approximately $0.2 million in transaction costs which were recorded as deferred debt issuance costs. On August 19, 1998, the Company completed a cash tender offer (the "12 1/4% Debentures Tender Offer") for all of its 12 1/4% Debentures for an aggregate repurchase cost of $144.5 million which included (i) the principal amount of the 12 1/4% Debentures of $119.4 million, (ii) premiums on the repurchase of the 12 1/4% Debentures of $22.7 million, (iii) accrued and unpaid interest on the 12 1/4% Debentures from August 16, 1998 through August 19, 1998 of $1.8 million and (iv) estimated transaction costs of $0.6 million. In connection with the 12 1/4% Debentures Tender Offer, the Company recorded an extraordinary charge of $15.2 million (net of a tax benefit of $8.2 million) consisting of 44 51 the premiums, estimated transaction costs and the write-off of the unamortized balance of deferred debt issuance costs. On September 30, 1998, the Company issued $750.0 million aggregate principal amount of the Old Notes for estimated net proceeds of $730.0 million. The net proceeds from the Original Offering will be used to finance a portion of the Company's Pending Transactions. Prior to consummation of the Pending Transactions, the Company used the net proceeds to temporarily reduce borrowings outstanding under the revolving credit portion of the Senior Credit Facility. On November 17, 1998, the Company issued $750.0 million aggregate principal amount of 8% Senior Notes due 2008 (the "8% Senior Notes"), net of deferred debt issuance costs of $20.0 million (the "8% Senior Notes Offering") for estimated net proceeds of $730.0 million. The net proceeds from the 8% Senior Notes Offering will be used to reduce bank borrowings under the revolving credit portion of the Senior Credit Facility and the excess proceeds will be invested in short-term investment grade securities, pending use for general corporate purposes. The foregoing transactions are referred to herein as the "1998 Financing Transactions." OTHER TRANSACTIONS On July 10, 1998, Chancellor Media entered into an agreement to acquire a 50% economic interest in Grupo Radio Centro, S.A. de C.V. ("GRC"), an owner and operator of radio stations in Mexico, for approximately $120.5 million in cash and $116.5 million in Chancellor Media Common Stock. On October 15, 1998, Chancellor Media announced that it had provided notice to GRC that it was terminating the acquisition agreement in accordance with its terms. Chancellor Media has received notice from GRC requesting arbitration under the terms of the acquisition agreement of allegations that Chancellor Media wrongfully terminated that agreement. Chancellor Media believes that it had a proper basis for terminating the agreement in accordance with its terms and intends to contest these allegations vigorously. 45 52 RADIO BROADCASTING The following table sets forth selected information with respect to the portfolio of radio stations that are owned by the Company as of November 30, 1998 or would be owned upon consummation of the Pending Transactions (subject to any divestitures required by the FCC and/or the DOJ as a condition to approving any of the Pending Transactions).
RANKING OF STATION STATION RANKING MARKET BY AUDIENCE TARGET IN TARGET MARKET(1) REVENUE(2) STATION SHARE(%)(3) STATION FORMAT DEMOGRAPHICS DEMOGRAPHICS(4) --------- ---------- ------- ----------- -------------- --------------- --------------- Los Angeles, CA..... 1 KKBT-FM 4.0 Urban Contemporary Women 18-34 4 KYSR-FM 3.1 Modern Adult Contemporary Persons 25-54 8 KBIG-FM 2.6 Adult Contemporary Persons 25-54 9 KLAC-AM 2.1 Adult Standards/Sports Persons 35-64 22 KCMG-FM(5) 3.2 Rhythmic Adult Women 25-54 4 Contemporary New York, NY........ 2 WLTW-FM 5.5 Soft Adult Contemporary Persons 25-54 2 WKTU-FM 3.9 Rhythmic Contemporary Persons 25-54 6 Hits WHTZ-FM 4.6 Contemporary Hit Radio Persons 18-34 4 WBIX-FM(6) 1.6 Hot Adult Contemporary Women 25-49 13 WAXQ-FM 1.7 Classic Rock Persons 25-54 15 Chicago, IL......... 3 WGCI-FM 8.0 Urban Contemporary Persons 18-34 1 WNUA-FM 4.3 Smooth Jazz Persons 25-54 3 WLIT-FM 3.8 Soft Adult Contemporary Persons 25-54 7 WVAZ-FM 4.9 Adult Urban Contemporary Persons 25-54 1 WRCX-FM 2.0 Jamming Oldies Women 25-54 25 WGCI-AM 1.2 Gospel Persons 25-54 23 WMVP-AM+ 0.7 Sports/Talk, Comedy Men 25-54 23 San Francisco, CA... 4 KYLD-FM 4.4 Contemporary Hits Persons 18-34 1 Radio/Dance KMEL-FM 2.9 Contemporary Hits Persons 18-34 4 KKSF-FM 3.0 Smooth Jazz Persons 25-54 4 KABL-AM 3.6 Adult Standards Persons 35-64 14 KISQ-FM 3.4 Hit Base R&B Adult Persons 25-54 2 Contemporary KIOI-FM 2.9 Adult Contemporary Women 25-54 3 KNEW-AM 0.7 Adult Contemporary Women 25-54 46 Dallas, TX.......... 5 KHKS-FM 7.7 Top 40 Women 18-34 1 KZPS-FM 4.0 Classic Rock Persons 25-54 4 KDGE-FM 2.3 Alternative Rock Persons 18-34 6 KSKY-AM N/M Southern Gospel N/M N/M Music/Religious KBFB-FM* 2.4 Soft Rock Persons 25-54 16 KTXQ-FM* 2.1 Jamming Oldies Persons 25-49 19 Philadelphia, PA.... 6 WDAS-FM 5.8 Urban Contemporary Persons 25-54 1 WUSL-FM 4.7 Urban Contemporary Women 18-34 1 WJJZ-FM 4.1 Smooth Jazz Persons 35-54 4 WIOQ-FM 4.0 Contemporary Hit Radio Persons 18-34 3 WYXR-FM 3.1 Hot Adult Contemporary Women 18-49 5 WDAS-AM 1.0 Gospel N/M N/M
46 53
RANKING OF STATION STATION RANKING MARKET BY AUDIENCE TARGET IN TARGET MARKET(1) REVENUE(2) STATION SHARE(%)(3) STATION FORMAT DEMOGRAPHICS DEMOGRAPHICS(4) --------- ---------- ------- ----------- -------------- --------------- --------------- Washington, D.C..... 7 WMZQ-FM 4.2 Country Persons 25-54 8 WASH-FM 4.0 Adult Contemporary Women 25-54 3 WBIG-FM 4.5 Oldies Persons 25-54 3 WGAY-FM 3.2 Adult Contemporary Persons 35-64 10 WTEM-AM 1.1 Sports/Talk Men 18-49 17 WWRC-AM 0.4 Talk Persons 35-64 28 WWDC-FM 3.3 Album Oriented Rock Persons 18-34 6 WWDC-AM 1.0 Music of Your Life Persons 55+ 6 Houston, TX......... 8 KKBQ-FM 3.7 Fresh Country Persons 25-54 10 KLDE-FM 4.3 Oldies Persons 25-54 5 KLOL-FM 3.5 Rock Men 18-34 3 KTRH-AM 4.1 News/Sports Men 25-54 9 KBME-AM(7) 1.8 Popular Standards Persons 35-64 16 KODA-FM 6.4 Adult Contemporary Persons 25-54 1 KKRW-FM*(8) 3.3 Classic Rock Persons 25-54 8 KQUE-AM*(8) 0.1 Classic Rock Persons 25-54 35 Atlanta, GA......... 9 WFOX-FM 4.0 Oldies Persons 25-54 10 Boston, MA.......... 10 WJMN-FM 6.9 Contemporary Hits Persons 18-34 2 Radio/Rhythmic WXKS-FM 5.6 Contemporary Hits Women 25-34 1 Radio/Top 40 WXKS-AM 2.3 Bloomberg News/Music Women 45-54 10 Memory Detroit, MI......... 11 WJLB-FM 7.1 Urban Contemporary Persons 18-34 1 WNIC-FM 8.0 Adult Contemporary Women 25-54 1 WKQI-FM 4.6 Hot Adult Contemporary Women 25-54 4 WMXD-FM 3.6 Adult Urban Contemporary Persons 25-54 8 WWWW-FM 4.0 Country Women 25-54 6 WDFN-AM 1.5 Sports Men 25-49 8 WYUR-AM 0.4 Nostalgic N/M N/M Miami/Ft. Lauderdale, FL..... 12 WEDR-FM 6.1 Urban Contemporary Persons 25-54 1 WVCG-AM N/M Brokered(9) N/M N/M Denver, CO.......... 14 KXKL-FM 4.9 Oldies Persons 25-54 5 KALC-FM 5.1 Hot Adult Contemporary Persons 18-34 1 KIMN-FM 3.5 70's Oldies Persons 25-54 11 KXPK-FM 2.9 Adult Modern Rock Persons 18-49 12 KVOD-FM 1.7 Classical Persons 25-54 20 KRRF-AM 0.8 Talk Men 25-54 18
47 54
RANKING OF STATION STATION RANKING MARKET BY AUDIENCE TARGET IN TARGET MARKET(1) REVENUE(2) STATION SHARE(%)(3) STATION FORMAT DEMOGRAPHICS DEMOGRAPHICS(4) --------- ---------- ------- ----------- -------------- --------------- --------------- Minneapolis/St. Paul, MN........... 15 KEEY-FM 6.7 Country Persons 25-54 3 KDWB-FM 7.9 Contemporary Hit Radio Persons 18-34 2 KQQL-FM 5.1 Oldies Persons 25-54 6 KTCZ-FM 4.7 Progressive Album Rock Men 25-49 2 WRQC-FM 3.2 Active Rock Men 18-34 3 KFAN-AM 2.3 Sports Men 18-49 7 KXBR-AM 0.5 Classic Country Persons 35-64 14 Phoenix, AZ......... 16 KOY-AM 3.9 Adult Standards Persons 35-64 14 KMLE-FM 5.3 Country Persons 25-54 2 KOOL-FM 4.0 Oldies Persons 25-54 6 KYOT-FM 4.3 Contemporary Jazz Persons 25-54 7 KZON-FM 3.8 Alternative Rock Persons 18-34 4 KISO-AM 0.8 Country Persons 35-54 24 KFYI-AM* 5.3 News/Talk Persons 25-54 11 KKFR-FM* 5.2 Urban Contemporary Hit Persons 18-34 3 Radio San Diego, CA....... 17 KYXY-FM* 6.3 Soft Adult Contemporary Persons 25-54 2 KPLN-FM* 2.5 Classic Rock Persons 25-54 10 Cincinnati, OH...... 19 WUBE-FM(10) 8.7 Country Persons 25-54 1 WYGY-FM(10) 2.6 Young Country Men 18-34 9 WBOB-AM 0.9 Sports/Talk Men 18-49 14 WUBE-AM N/M Sports/Talk Men 25-49 N/M Cleveland, OH....... 23 WZAK-FM* 8.7 Urban Contemporary Women 25-54 2 WDOK-FM* 6.1 Soft Adult Contemporary Women 25-54 2 WRMR-AM* 5.8 Adult Standard Men 25-54 21 WZJM-FM* 5.6 Contemporary Hits Radio Women 18-34 2 WQAL-FM* 4.5 Hot Adult Contemporary Persons 25-54 8 WJMO-AM* 2.2 Oldies Persons 25-54 12 Pittsburgh, PA...... 24 WWSW-FM 5.9 Oldies Persons 25-54 3 WWSW-AM(11) 0.4 Oldies Persons 25-54 22 WDVE-FM* 9.7 Rock Persons 25-54 1 WXDX-FM* 5.0 Alternative Rock Persons 18-34 2 WJJJ-FM* 3.0 Smooth Jazz Persons 25-54 12 WDRV-FM*(12) 3.6 Modern Hit Women 25-49 7 Orlando, FL......... 26 WJHM-FM 6.4 Urban Contemporary Persons 18-34 2 WOCL-FM 4.4 Oldies Persons 25-54 16 WXXL-FM 7.3 Contemporary Hit Radio Persons 18-34 1 WOMX-FM 7.0 Adult Contemporary Persons 25-54 1 Sacramento, CA...... 28 KFBK-AM 10.0 News/Talk Persons 25-54 1 KHYL-FM 4.1 Oldies Persons 25-54 5 KGBY-FM 4.5 Adult Contemporary Women 25-54 3 KSTE-AM 3.2 Talk Persons 25-54 14 Nassau/Suffolk (Long Island) 45 WALK-FM 5.8 Adult Contemporary Persons 25-54 1 NY(13)........... WALK-AM N/M Adult Contemporary Persons 35-64 N/M
48 55
RANKING OF STATION STATION RANKING MARKET BY AUDIENCE TARGET IN TARGET MARKET(1) REVENUE(2) STATION SHARE(%)(3) STATION FORMAT DEMOGRAPHICS DEMOGRAPHICS(4) --------- ---------- ------- ----------- -------------- --------------- --------------- Riverside/San 64 KGGI-FM 5.9 Contemporary Hit Radio Persons 18-34 1 Bernardino, CA..... KKDD-AM 0.5 Radio Disney Persons 12+ N/M Puerto Rico......... N/A WZNT-FM N/A Oldies/Classic Music Men 18-49/ Men N/A 25-54 WOYE-FM N/A Top 40 Persons 12-24/ N/A 18-34 WCOM-FM N/A Top 40 Persons 12-24/ N/A 18-34 WOQI-FM N/A Top 40 Persons 12-24/ N/A 18-34 WCTA-FM N/A Oldies/Classic Music Men 18-49/ Men N/A 25-54 WIOA-FM N/A Continuous Favorite Women 18-49/ N/A Ballads/ Today's Hits Women 25-54 WIOB-FM N/A Continuous Favorite Women 18-49/ N/A Ballads/ Today's Hits Women 25-54 WIOC-FM N/A Continuous Favorite Women 18-49/ N/A Ballads/ Today's Hits Women 25-54
- ------------------------- N/A: Not available N/M: Not meaningful + Indicates station to be disposed of in a pending transaction. * Indicates station to be acquired in a pending transaction. (1) Actual city of license may differ from metropolitan market served in certain cases. (2) Ranking of principal radio market served by the station among all U.S. radio broadcast markets by aggregate 1997 gross radio broadcasting revenue as reported by James H. Duncan, Duncan's Radio Market Guide (1998 ed.). (3) Information derived from The Arbitron Company, Summer 1998, Local Market Reports in the specified markets for listeners age 12 and over, Monday to Sunday, 6:00 a.m. to Midnight. Copyright, The Arbitron Company. (4) Information derived from The Arbitron Company, Summer 1998, Local Market Reports in the specified markets for the Target Demographics specified for listening Monday to Sunday, 6:00 a.m. to Midnight. Copyright, The Arbitron Company. (5) The station ranking in the target demographic for KCMG-FM (formerly KIBB-FM) for Summer, 1998 was changed from persons 25-54 to a target demographic of Women 25-54 effective November 19, 1997. (6) The format of WBIX-FM (formerly WNSR-FM) was changed from Modern Adult Contemporary with a target demographic of Women 25-44 to Hot Adult Contemporary with a target demographic of Women 25-49 effective January 21, 1998. The station ranking in the target demographic for WBIX-FM for Summer 1998 is based on the new target demographic of Women 25-49. (7) The format of KBME-AM (formerly KKBQ-AM) was changed from Country with a target demographic of Persons 25-54 to Popular Standards with a target demographic of Persons 35-64 effective January 15, 1998. The station ranking in the 49 56 target demographic for KBME-AM for Summer 1998 is based on the new target demographic of Persons 35-64. (8) Programming provided to KQUE-AM via simulcast of programming broadcast on KKRW-FM. (9) The Company sells airtime on WVCG-AM to third parties for broadcast of specialty programming on a variety of topics. (10) WUBE-FM and WYGY-FM are sold in combination. (11) Programming provided to WWSW-AM via simulcast of programming broadcast on WWSW-FM. (12) The format of WDRV-FM (formerly WVTY-FM) was changed from Adult Contemporary with a target demographic of Persons 25-54 to Modern Hit with a target demographic of Women 25-49 effective February 27, 1998. The station ranking in the target demographic of WDRV-FM for Summer 1998 is based on the new target demographic of Women 25-49. (13) Nassau/Suffolk (Long Island) may be considered part of the greater New York market, although it is reported separately as a matter of convention. OUTDOOR ADVERTISING The following table sets forth selected information with respect to the portfolio of outdoor displays that are owned by the Company as of December 1, 1998 (subject to divestitures required by the DOJ described below).
TOTAL DISPLAYS -------- MARTIN MEDIA: Los Angeles (North), CA..................................... 877 Washington, D.C............................................. 297 San Diego, CA............................................... 275 Pittsburgh, PA.............................................. 3,564 Cincinnati, OH.............................................. 811 Kansas City, MO............................................. 167 Riverside/San Bernardino, CA................................ 357 Hartford, CT................................................ 413 Las Vegas, NV............................................... 985 Scranton/Wilkes-Barre, PA................................... 980 Bakersfield/Visalia, CA..................................... 1,584 Lubbock, TX................................................. 677 Odessa/Midland, TX.......................................... 704 Topeka, KS.................................................. 843 Amarillo, TX................................................ 1,064 Charlottesville, VA......................................... 43 San Angelo, TX.............................................. 252 Bullhead/Laughlin, NV....................................... 355 Roanoke, VA................................................. 255
50 57
TOTAL DISPLAYS -------- Yuma, AZ.................................................... 221 Abilene, TX................................................. 432 Sharon, PA.................................................. 218 Lawrence, KS................................................ 56 ------ Total............................................. 15,430 ====== WHITECO: Central (Terre Haute, IN)................................... 1,750 Southwestern (Dallas, TX)................................... 1,701 Southeastern (Atlanta, GA).................................. 858 Providence, RI.............................................. 729 Western (St. Joseph, MO).................................... 2,855 Ohio (Columbus, OH)......................................... 1,292 Florida (Ocala, FL)......................................... 2,799 Milwaukee, WI............................................... 1,195 South Atlantic (Rocky Mt., NC).............................. 1,604 Harrisburg, PA.............................................. 1,303 Tyler, TX................................................... 1,753 Chicago, IL/Northwest, IN................................... 2,916 Evansville, IN.............................................. 1,032 Albany, NY.................................................. 682 ------ Total............................................. 22,469 ====== Grand Total....................................... 37,899+ ======
- ------------------------- + In connection with the Whiteco Acquisition and the Kunz Option, Chancellor Media and the DOJ entered into consent decrees whereby the Company has agreed to divest approximately 380 billboards in certain of the markets described in these tables. The Company expects to try to enter into swap transactions with billboards in other markets to effect such divestitures and, as a result, does not anticipate the grand total of displays to change materially at this time. COMPANY STRATEGY The Company's overall strategy is to create a leading multi-media company with a significant overlapping presence in radio and outdoor advertising markets. In this regard, the Company has built a diversified portfolio of media assets which enables the Company to deliver more options and greater value to its advertising clients. The Company believes the multi-media platform creates significant growth opportunities and synergies through cross selling, cross promotion and cost savings in markets where radio and outdoor advertising operations overlap. The Company plans on leveraging the extensive operating experience of its senior management team to continue to enhance revenue and cash flow growth. 51 58 Radio Broadcast Strategy. The CRG senior management team, led by James E. de Castro, President of CRG, has extensive experience in acquiring and operating radio station groups. The CRG business strategy is to assemble and operate radio station clusters in order to maximize the broadcast cash flow generated in each market. CRG seeks to capitalize on revenue growth and expense savings opportunities through the successful integration of station cluster groups. Management believes that radio station clusters can attract increased revenues in a market by delivering larger combined audiences to advertisers and by engaging in joint marketing and promotional activities. In addition, management expects to realize significant expense savings through the consolidation of facilities and through the economies of scale created in areas such as national representation commissions, employee benefits, insurance premiums and other operating costs. CRG also seeks to maximize station operating performance through intensive market research, innovative programming and unique marketing campaigns to establish strong listener loyalty and ensure steady long-term audience share ratings. Management believes its ratings growth in many of its markets is driven by CRG's ability to attract talented people and to continue delivering quality programming to the listeners. CRG also seeks to leverage its radio expertise and platform and enhance revenue and cash flow growth through the continued expansion of its national radio network, The AMFM Radio Networks, as well as through the development of non-traditional revenues derived from radio sales promotion activities. Media Representation Strategy. The Company's overall strategy for its media representation business is to create a leading national representation firm serving all types of electronic media. The Company believes it can continue to generate revenue and cash flow growth in the media representation business by expanding its market share and improving its national sales effort. Management will seek to increase market share by developing new clients, expanding operations in existing and new markets and acquiring representation contracts of its competitors. The Company will continue to provide the highest level of quality service to its clients by offering comprehensive advertisement, planning and placement services, as well as a broad range of value added benefits, including marketing, research, consulting and programming advisory services. The Company will also have the ability to expand its level of service to advertisers through the growth of its unwired network of radio and television stations which provides advertisers with greater flexibility and the ability to target specific demographic groups or markets. Outdoor Advertising Strategy. The Chancellor Outdoor Group is led by James A. McLaughlin, President of COG, an outdoor advertising industry veteran with over 25 years of experience. The COG strategy is to create and develop one of the top five outdoor advertising companies in the United States through the consolidation of Martin Media, acquired in July 1998, and the recent acquisition of Whiteco, and additional acquisitions that complement the Company's existing outdoor and radio markets. As a result of the recent acquisition of Whiteco, COG now ranks as one of the top five outdoor advertising companies in the United States. COG believes there are opportunities to generate significant revenue growth and cost savings through the successful integration of the combined operations of Martin Media and Whiteco. COG's strategy is to realize revenue and expense synergies through the consolidation of certain sales management, leasing management, marketing, and accounting and administra- 52 59 tive support functions. Additionally, COG will focus on strengthening its operating results by increasing market penetration, maximizing rates and occupancy levels in each of its markets and capitalizing on technological advances such as computer vinyl technology to enhance the attractiveness and flexibility of the outdoor medium while reducing costs. COG also seeks to realize incremental benefits in markets where outdoor and radio operations overlap by introducing radio advertisers to outdoor advertising which provides an additional low cost medium to advertisers with local marketing needs. Management believes its newly acquired outdoor advertising portfolio combined with the strength of its broad radio platform, national radio network and national representation business will solidify the Company's position as a leading multi-media company with the ability to effectively respond to customers needs through a variety of advertising solutions and mediums. ADVERTISING The primary source of the Company's revenues is the sale of broadcasting time for local, regional and national advertising. On a pro forma basis approximately 65% of the Company's gross radio revenues would have been generated from the sale of local advertising for the nine months ended September 30, 1998. The Company believes that radio is one of the most efficient, cost-effective means for advertisers to reach specific demographic groups. The advertising rates charged by the Company's radio stations are based primarily on (i) a station's ability to attract audiences in the demographic groups targeted by its advertisers (as measured principally by quarterly Arbitron rating surveys that quantify the number of listeners tuned to the station at various times) and (ii) the supply of and demand for radio advertising time. Advertising rates generally are the highest during morning and evening drive-time hours. Depending on the format of a particular station, there are predetermined numbers of advertisements that are broadcast each hour. The Company determines the number of advertisements broadcast hourly that can maximize available revenue dollars without jeopardizing listening levels. Although the number of advertisements broadcast during a given time period may vary, the total number of advertisements broadcast on a particular station generally does not vary significantly from year to year. A station's sales staff generates most of its local and regional advertising sales. To generate national advertising sales, the Company engages an advertising representative for each of its stations that specializes in national sales and is compensated on a commission-only basis. Most advertising contracts are short-term and generally run only for a few weeks. The Company's Katz media representation operations generate revenues primarily through contractual commissions realized through the sale of national spot advertising air time. National spot advertising air time is commercial air time sold to advertisers on behalf of radio and television stations and cable systems located outside the local markets of those stations and systems. Katz represents its media clients pursuant to media representation contracts. Media representation contracts typically have terms of up to ten years in initial length. In connection with the substantial consolidation that has occurred in the broadcast industry in recent years and the concomitant development of large client station groups, the frequency of representation contract "buyouts" has increased. These buyouts occur because station groups have tended to negotiate exclusive, long-term representation contracts with a single media representation firm covering all of the station group's 53 60 stations, including stations acquired after the date of the initial representation contract. In the event that one of the station group's stations is sold to an owner represented by a different firm, representation contracts are frequently bought out by the successor representation firm. Katz generally amortizes the cost of acquiring new representation contracts associated with a buyout over the expected benefit period, and also generally recognizes a gain on disposition of representation contracts associated with a buyout of an existing client's contract. The Company's outdoor advertising business generates revenues by contracting with advertising agencies for the display of the advertising campaigns of their clients. The Company pays commissions to the agencies for contracts procured through those agencies. The advertising rates are based on a particular display's exposure or number of "impressions" delivered. The number of "impressions" delivered by a display is determined by considering a number of factors such as proximity to other displays, the speed and viewing angle of approaching traffic, the national average of adults riding in vehicles and whether the display is illuminated. COMPETITION The radio broadcasting industry is a highly competitive business. The success of each of the Company's stations is dependent, to a significant degree, upon its audience ratings and share of the overall advertising revenue within its market. The Company's radio stations compete for listeners and advertising revenues directly with other radio stations, as well as with other media, within their respective markets. Radio stations compete for listeners primarily on the basis of program content and by hiring on-air talent that appeals to a particular demographic group. By building a strong listener base comprised of a specific demographic group in each of its markets, the Company is able to attract advertisers who seek to reach those listeners. Other media, including broadcast television, cable television, newspapers, magazines, direct mail coupons and billboard advertising also compete with the Company's stations for advertising revenues. The Company also competes with other broadcasting operators for acquisition opportunities, and prices for radio stations in major markets have increased significantly in recent periods. To the extent that the rapid pace of consolidation in the radio broadcasting industry continues, certain competitors may emerge with larger portfolios of major market radio stations, greater ability to deliver large audiences to advertisers and more access to capital resources than does the Company. The audience ratings and market share for the Company are and will be subject to change and any adverse change in a particular market could have a material and adverse effect on the revenue of its stations located in that market. There can be no assurance that any one of the Company's stations will be able to maintain or increase its current audience ratings or advertising revenue market share. The radio broadcasting industry is also subject to competition from new media technologies that are being developed or introduced, such as the delivery of audio programming by cable television systems, DBS systems, streaming and other audio systems that use the Internet for delivery and other digital audio broadcasting and narrowcasting formats to local and national audiences. In addition, the FCC has auctioned spectrum for a new satellite-delivered DARS. These actions may result in the introduction of several new national or regional satellite radio services with sound quality equivalent to compact discs. Another possible competitor to traditional radio is IBOC digital radio. IBOC could provide multi-channel, multi-format digital radio services in the same band width currently 54 61 occupied by traditional AM and FM radio services. The Company cannot predict at this time the effect, if any, that any such new technologies may have on the radio broadcasting industry. The success of the Company's Katz media representation operations depends on Katz' ability to maintain and acquire representation contracts with radio and television stations and cable systems, the inventory of time Katz represents and the experience of Katz' executive management and sales personnel. The media representation business is highly competitive, both in terms of competition to gain client stations and to sell air time to advertisers. Katz competes not only with other independent and network media representatives but also with direct national advertising. Katz also competes on behalf of its clients for advertising dollars with other media such as newspapers and magazines, outdoor advertising, transit advertising, direct response advertising, yellow page directories and point of sale advertising. The Company's outdoor advertising business also faces competition from a variety of sources, including other outdoor advertising companies and other media such as radio, television, print media and direct mail marketing. Additionally, the Company must also compete with other "out-of-home" advertising media, which includes advertising displays in shopping malls, supermarkets, airports, sports stadiums and arenas, movie theaters, and on taxis, buses, subways and other public transportation. Because the Company's outdoor advertising is a new endeavor for the Company and its management and due to the fact that many of the Company's competitors in the outdoor advertising business are larger and have more experience and resources in the business, there can be no assurance that the Company will be able to compete successfully within the outdoor advertising industry. REGULATION OF RADIO AND OUTDOOR ADVERTISING RADIO BROADCASTING Introduction. The radio broadcasting industry is subject to extensive and changing regulation over, among other things, program content, technical operations and business and employment practices. The ownership, operation and sale of radio broadcast stations (including those licensed to the Company) are subject to the jurisdiction of the FCC, which acts under authority granted by the Communications Act. The Communications Act prohibits the assignment or transfer of control of an FCC license without the prior consent of the FCC. In determining whether to grant requests for consent to such assignments or transfers, and in determining whether to grant or renew a radio broadcast license, the FCC considers a number of factors pertaining to the licensee (and proposed licensee), including: limitations on alien ownership and the common ownership of television broadcast, radio broadcast and daily newspaper properties, the "character" of the licensee (and proposed licensee) and those persons or entities that have "attributable" interests, and compliance with the Anti-Drug Abuse Act of 1988. Among other things, the FCC assigns frequency bands for radio broadcasting; determines the particular frequencies, locations and operating power of radio broadcast stations; issues, renews, revokes and modifies radio broadcast station licenses; regulates equipment used by radio broadcast stations; adopts and implements regulations and policies that directly or indirectly affect the ownership, operation, program content and employment and business practices of radio broadcast stations; and has the power to impose penalties for violations of its rules and the Communications Act. 55 62 The following is a brief summary of certain provisions of the Communications Act and specific FCC rules and policies. Reference should be made to the Communications Act, FCC rules, and the public notices and rulings of the FCC for further information concerning the nature and extent of federal regulation of radio broadcast stations. Failure to observe these or other FCC rules and policies may result in the imposition of various sanctions, including admonishment, monetary forfeitures, the grant of "short" (less than the maximum eight-year term) renewal terms or, for particularly egregious violations, the denial of a license renewal application, the revocation of FCC licenses, or the denial of FCC consent to acquire additional broadcast properties. License Renewal. Radio broadcast licenses are granted for maximum terms of up to eight years. They may be renewed through an application to the FCC, and, in certain instances, licensees are entitled to renewal expectancies. During certain periods when a renewal application is pending, competing applicants may file for the radio frequency being used by the renewal applicant, although the FCC is prohibited from considering such competing applications if the existing license has satisfied certain obligations. Petitions to deny license renewals can be filed by interested parties, including members of the public. The FCC is required to hold hearings on a renewal application in certain circumstances. The following table sets forth the date of acquisition by the Company of the radio stations that are actually owned by the Company as of November 30, 1998 or would be owned upon consummation of the Pending Transactions (subject to any divestitures required by the FCC and/or the DOJ as a condition to approving any of the Pending Transactions), the frequency of each such station, and the date of expiration of such station's main FCC broadcast license:
DATE OF EXPIRATION DATE STATION MARKET(1) ACQUISITION FREQUENCY OF FCC LICENSE ------- --------- ----------- --------- --------------- KKBT-FM................ Los Angeles, CA 5/89 92.3 MHz 12/05 KYSR-FM................ Los Angeles, CA 9/97 98.7 MHz 12/05 KBIG-FM................ Los Angeles, CA 4/98 104.3 MHz 12/05 KLAC-AM................ Los Angeles, CA 9/97 570 kHz 12/05 KCMG-FM................ Los Angeles, CA 9/97 100.3 MHz 12/05 WLTW-FM................ New York, NY 7/97 106.7 MHz 6/06 WKTU-FM................ New York, NY 5/95 103.5 MHz 6/06 WHTZ-FM................ New York, NY 9/97 100.3 MHz 6/06 WBIX-FM................ New York, NY 4/98 105.1 MHz 6/06 WAXQ-FM................ New York, NY 7/97 104.3 MHz 6/06 WGCI-FM................ Chicago, IL 12/97 107.5 MHz 12/04 WNUA-FM................ Chicago, IL 1/96 95.5 MHz 12/04 WLIT-FM................ Chicago, IL 9/97 93.9 MHz 12/04 WVAZ-FM................ Chicago, IL 5/95 102.7 MHz 12/04 WRCX-FM................ Chicago, IL 12/93 103.5 MHz 12/04 WGCI-AM................ Chicago, IL 12/97 1390 kHz 12/04 WMVP-AM+............... Chicago, IL 5/84 1000 kHz 12/04 KYLD-FM................ San Francisco, CA 9/97 94.9 MHz 12/05 KMEL-FM................ San Francisco, CA 11/92 106.1 MHz 12/05 KKSF-FM................ San Francisco, CA 1/97 103.7 MHz 12/05 KABL-AM................ San Francisco, CA 9/97 960 kHz 12/05 KISQ-FM................ San Francisco, CA 9/97 98.1 MHz 12/97*
56 63
DATE OF EXPIRATION DATE STATION MARKET(1) ACQUISITION FREQUENCY OF FCC LICENSE ------- --------- ----------- --------- --------------- KIOI-FM................ San Francisco, CA 4/94 101.3 MHz 12/05 KNEW-AM................ San Francisco, CA 9/97 910 kHz 12/05 KHKS-FM................ Dallas, TX 12/97 106.1 MHz 8/05 KZPS-FM................ Dallas, TX 10/97 92.5 MHz 8/05 KDGE-FM................ Dallas, TX 10/97 94.5 MHz 8/05 KSKY-AM................ Dallas, TX 5/95 660 kHz 8/05 KBFB-FMS............... Dallas, TX Pending 97.9 MHz 8/05 KTXQ-FMS............... Dallas, TX Pending 102.1 MHz 8/05 WDAS-FM................ Philadelphia, PA 5/97 105.3 MHz 8/06 WUSL-FM................ Philadelphia, PA 5/97 98.9 MHz 8/06 WJJZ-FM................ Philadelphia, PA 1/96 106.1 MHz 8/06 WIOQ-FM................ Philadelphia, PA 5/97 102.1 MHz 8/06 WYXR-FM................ Philadelphia, PA 1/96 104.5 MHz 8/98* WDAS-AM................ Philadelphia, PA 5/97 1480 kHz 8/06 WMZQ-FM................ Washington, D.C. 7/97 98.7 MHz 10/03 WASH-FM................ Washington, D.C. 11/92 97.1 MHz 10/03 WBIG-FM................ Washington, D.C. 9/97 100.3 MHz 10/03 WGAY-FM................ Washington, D.C. 11/96 99.5 MHz 10/03 WTEM-AM(2)............. Washington, D.C. 4/97 980 kHz(2) 10/03 WWRC-AM(2)............. Washington, D.C. 9/97 570 kHz(2) 10/03 WWDC-FM................ Washington, D.C. 6/98 101.1 MHz 10/03 WWDC-AM................ Washington, D.C. 6/98 1260 kHz 10/03 KKBQ-FM................ Houston, TX 12/97 92.9 MHz 8/05 KLDE-FM................ Houston, TX 4/98 94.5 MHz 8/05 KLOL-FM................ Houston, TX 6/93 101.1 MHz 8/97* KTRH-AM................ Houston, TX 6/93 740 kHz 8/05 KBME-AM................ Houston, TX 12/97 790 kHz 8/05 KODA-FM................ Houston, TX Pending 99.1 MHz 8/05 KKRW-FMS............... Houston, TX Pending 93.7 MHz 8/05 KQUE-AMS............... Houston, TX Pending 1230 kHz 8/05 WFOX-FM................ Atlanta, GA 9/97 97.1 MHz 4/04 WJMN-FM................ Boston, MA 1/96 94.5 MHz 4/06 WXKS-FM................ Boston, MA 1/96 107.9 MHz 4/06 WXKS-AM................ Boston, MA 1/96 1430 kHz 4/06 WJLB-FM................ Detroit, MI 4/97 97.9 MHz 10/04 WNIC-FM................ Detroit, MI 5/95 100.3 MHz 10/04 WKQI-FM................ Detroit, MI 5/95 95.5 MHz 10/04 WMXD-FM................ Detroit, MI 4/97 92.3 MHz 10/04 WWWW-FM................ Detroit, MI 1/97 106.7 MHz 10/04 WDFN-AM................ Detroit, MI 1/97 1130 kHz 10/04 WYUR-AM................ Detroit, MI 5/95 1310 kHz 10/04 WEDR-FM................ Miami/Ft. Lauderdale, FL 10/96 99.1 MHz 2/04 WVCG-AM................ Miami/Ft. Lauderdale, FL 7/83 1080 kHz 2/04 KXKL-FM................ Denver, CO 9/97 105.1 MHz 4/05 KALC-FM................ Denver, CO 9/97 105.9 MHz 4/05
57 64
DATE OF EXPIRATION DATE STATION MARKET(1) ACQUISITION FREQUENCY OF FCC LICENSE ------- --------- ----------- --------- --------------- KIMN-FM................ Denver, CO 9/97 100.3 MHz 4/05 KXPK-FM................ Denver, CO 1/98 96.5 MHz 4/05 KVOD-FM................ Denver, CO 9/97 92.5 MHz 4/05 KRRF-AM................ Denver, CO 9/97 1280 kHz 4/05 KEEY-FM................ Minneapolis/St. Paul, MN 9/97 102.1 MHz 4/05 KDWB-FM................ Minneapolis/St. Paul, MN 9/97 101.3 MHz 4/05 KQQL-FM................ Minneapolis/St. Paul, MN 9/97 107.9 MHz 4/05 KTCZ-FM................ Minneapolis/St. Paul, MN 9/97 97.1 MHz 4/05 WRQC-FM................ Minneapolis/St. Paul, MN 9/97 100.3 MHz 4/05 KFAN-AM................ Minneapolis/St. Paul, MN 9/97 1130 kHz 4/05 KXBR-AM................ Minneapolis/St. Paul, MN 9/97 690 kHz 4/05 KOY-AM................. Phoenix, AZ 9/97 550 kHz 10/05 KMLE-FM................ Phoenix, AZ 9/97 107.9 MHz 10/05 KOOL-FM................ Phoenix, AZ 9/97 94.5 MHz 10/05 KYOT-FM................ Phoenix, AZ 9/97 95.5 MHz 10/05 KZON-FM................ Phoenix, AZ 9/97 101.5 MHz 10/05 KISO-AM................ Phoenix, AZ 9/97 1230 kHz 10/05 KFYI-AMS............... Phoenix, AZ Pending 910 kHz 10/05 KKFR-FMS............... Phoenix, AZ Pending 92.3 MHz 10/05 KYXY-FMS............... San Diego, CA Pending 96.5 MHz 12/05 KPLN-FMS............... San Diego, CA Pending 103.7 MHz 12/97* WUBE-FM................ Cincinnati, OH 9/97 105.1 MHz 10/04 WYGY-FM................ Cincinnati, OH 9/97 96.5 MHz 10/04 WBOB-AM................ Cincinnati, OH 9/97 1160 kHz 8/04 WUBE-AM................ Cincinnati, OH 9/97 1230 kHz 10/04 WZAK-FMS............... Cleveland, OH Pending 93.1 MHz 10/04 WDOK-FMS............... Cleveland, OH Pending 102.1 MHz 10/04 WRMR-AMS............... Cleveland, OH Pending 850 kHz 10/04 WZJM-FMS............... Cleveland, OH Pending 92.3 MHz 10/04 WQAL-FMS............... Cleveland, OH Pending 104.1 MHz 10/04 WJMO-AMS............... Cleveland, OH Pending 1490 kHz 10/04 WWSW-FM................ Pittsburgh, PA 9/97 94.5 MHz 8/06 WWSW-AM................ Pittsburgh, PA 9/97 970 kHz 8/98* WDVE-FMS............... Pittsburgh, PA Pending 102.5 MHz 8/98* WXDX-FMS............... Pittsburgh, PA Pending 105.9 MHz 8/98* WJJJ-FMS............... Pittsburgh, PA Pending 104.7 MHz 8/98* WDRV-FMS............... Pittsburgh, PA Pending 96.1 MHz 8/06 WJHM-FM................ Orlando, FL 9/97 101.9 MHz 2/04 WOCL-FM................ Orlando, FL 9/97 105.9 MHz 2/04 WXXL-FM................ Orlando, FL 9/97 106.7 MHz 2/04 WOMX-FM................ Orlando, FL 9/97 105.1 MHz 2/04 KFBK-AM................ Sacramento, CA 9/97 1530 kHz 12/05 KHYL-FM................ Sacramento, CA 9/97 101.1 MHz 12/05 KGBY-FM................ Sacramento, CA 9/97 92.5 MHz 12/05 KSTE-AM................ Sacramento, CA 9/97 650 kHz 12/05
58 65
DATE OF EXPIRATION DATE STATION MARKET(1) ACQUISITION FREQUENCY OF FCC LICENSE ------- --------- ----------- --------- --------------- WALK-FM................ Nassau/Suffolk (Long Island), NY 9/97 97.5 MHz 6/98* WALK-AM................ Nassau/Suffolk (Long Island), NY 9/97 1370 kHz 6/06 KGGI-FM................ Riverside/San Bernardino, CA 9/97 99.1 MHz 12/05 KKDD-AM................ Riverside/San Bernardino, CA 9/97 1290 kHz 12/05 WZNT-FM................ Puerto Rico 10/98 93.7 MHz 2/04 WOYE-FM................ Puerto Rico 10/98 94.1 MHz 2/04 WCOM-FM................ Puerto Rico 10/98 94.7 MHz 2/04 WOQI-FM................ Puerto Rico 10/98 93.3 MHz 2/04 WCTA-FM................ Puerto Rico 10/98 95.1 MHz 2/04 WIOA-FM................ Puerto Rico 10/98 99.9 MHz 2/04 WIOB-FM................ Puerto Rico 10/98 97.5 MHz 2/04 WIOC-FM................ Puerto Rico 10/98 105.1 MHz 2/04
- ------------------------- * Indicates pending renewal application. + Indicates station to be disposed of in a pending transaction. S Indicates station to be acquired in a pending transaction. (1) Actual city of license may differ from metropolitan market served in certain cases. (2) On March 9, 1998, the Company exchanged the call signs and formats of WWRC-AM and WTEM-AM such that beginning on such date the call sign and format of WWRC-AM were used on the 570 kHz frequency and the call sign and format of WTEM-AM were used on the 980 kHz frequency. Ownership Matters. Under the Communications Act, a broadcast license may not be granted to or held by any corporation that has more than one-fifth of its capital stock owned or voted by aliens or their representatives, by foreign governments or their representatives, or by non-U.S. corporations. Under the Communications Act, a broadcast license also may not be granted to or held by any corporation that is controlled, directly or indirectly, by any other corporation more than one-fourth of whose capital stock is owned or voted by aliens or their representatives, by foreign governments or their representatives, or by non-U.S. corporations, if the FCC finds that the public interest will be served by the refusal or revocation of such license. The Company has been advised that the FCC staff has interpreted this provision of the Communications Act to require an affirmative public interest finding before a broadcast license may be granted to or held by any such corporation and that the FCC has made such an affirmative finding only in limited circumstances. These restrictions apply in modified form to other forms of business organizations, including partnerships. The Company, therefore may be restricted from having more than one-fourth of its stock owned or voted by aliens, foreign governments or non-U.S. corporations. The respective Certificates of Incorporation of Chancellor Media and CMCLA contain prohibitions on alien ownership and control that are intended to facilitate compliance with the provisions of the Communications Act applicable to alien ownership. The Company believes that in light of current levels of alien ownership of the Company's capital stock, the foregoing restrictions are not likely to have a material impact on Chancellor Media or CMCLA. The Communications Act and FCC rules also generally prohibit the common ownership, operation or control of a radio broadcast station and a television broadcast station serving 59 66 the same local market, and of a radio broadcast station and a daily newspaper serving the same local market. Under these "cross-ownership" rules, absent waivers, the Company would not be permitted to acquire any daily newspaper or television broadcast station (other than low-power television) in a local market where it then owned any radio broadcast station. In October 1996, the Commission issued a Notice of Inquiry to explore possible changes in the newspaper/broadcast cross-ownership waiver policy with respect to newspaper/radio combinations, including the possibility of adopting a waiver policy based on market size or on the number of independently owned media in a market. In connection with the LIN Merger, the Capstar Merger and the Pegasus Acquisition, Chancellor Media and the Company have requested or will request certain waivers of the cross-ownership and one-to-a-market rules. The Company expects that the FCC will grant such waivers in due course, however there can be no assurance that this will be the result. The Communications Act places the following limits on the numbers of stations in the same market that can be under common ownership: in markets with 45 or more stations, ownership is limited to eight stations, no more than five of which can be in the same service (AM and FM each being a separate service); in markets with 30-44 stations, ownership is limited to seven stations, no more than four of which can be in the same service; in markets with 15-29 stations, ownership is limited to six stations, no more than four of which can be in the same service; and in markets with 14 or fewer stations, ownership is limited to no more than 50% of the market's total with no more than three stations in the same service. Recently, the FCC has adopted a practice of including in the public notices of certain applications a separate notice stating that the FCC intends to conduct an analysis of the degree of market concentration that would result from a grant of those applications, and inviting public comment on the issue of such concentration and its effect on competition and diversity in the broadcast markets affected. The FCC has not formally adopted changes to its rules regarding assignments of radio licenses or limits on radio station ownership that reflect the factors to be used in such an analysis of market concentration. Informally, the FCC has stated that it intends to invite such comment when its preliminary analysis of an application reveals that, following consummation of the assignment in question, fifty percent or more of the radio advertising revenue generated in the market would be concentrated in stations licensed to a single licensee, or seventy percent or more of the revenue would be concentrated in the combined stations of any two licensees in that market. The FCC has not thus far issued any decisions with respect to assignment applications regarding which it has included such requests for comment, and it is not certain what actions the FCC might take with regard to such applications, what specific factors the FCC would rely on in taking such actions, or whether such action by the FCC would withstand judicial review under the Communications Act or other applicable laws. The FCC has included such a request with its public notice of the Company's pending applications for the Cleveland Acquisitions. Because of these multiple ownership rules and the cross-interest policy described below, a purchaser of the Common Stock of Chancellor Media or CMCLA who acquires an attributable interest in the Company may violate the FCC's rules if it also has an "attributable" interest in other television or radio stations, or in daily newspapers, depending on the number and location of those radio or television stations or daily newspapers. Such a purchaser also may be restricted in the companies in which it may invest, to the extent that those investments give rise to an attributable interest. If an attributable stockholder of the Company violates 60 67 any of these ownership rules, the Company may be unable to obtain from the FCC one or more authorizations needed to conduct its radio station business and may be unable to obtain FCC consents for certain future acquisitions. The FCC generally applies its television/radio/newspaper cross-ownership rules, and its broadcast multiple ownership rules, by considering the "attributable," or cognizable, interests held by a person or entity. A person or entity can have an interest in a radio station, television station or daily newspaper by being an officer, director, partner or stockholder of a company that owns that station or newspaper. Whether that interest is cognizable under the FCC's ownership rules is determined by the FCC's attribution rules. If an interest is attributable, the FCC treats the person or entity who holds that interest as the "owner" of the radio station, television station or daily newspaper in question, and therefore subject to the FCC's ownership rules. In the case of corporations, the interest of officers, directors and persons or entities that directly or indirectly have the right to vote 5% or more of the corporation's voting stock (or 10% or more of such stock in the case of insurance companies, investment companies, bank trust departments and certain other "passive investors" that hold such stock for investment purposes only) are generally attributed with ownership of whatever radio stations, television stations, and daily newspapers the corporation owns. Likewise, the interest of an officer or a director of a corporate parent (as well as the corporate parent) is generally attributed with ownership of whatever the subsidiary owns. In the case of a partnership, the interest of a general partner is attributable, as is the interest of any limited partner who is "materially involved" in the media-related activities of the partnership. Debt instruments, non-voting stock, options and warrants for voting stock that have not yet been exercised, limited partnership interests where the limited partner is not "materially involved" in the media-related activities of the partnership, and minority voting stock interests in corporations where there is a single holder of more than 50% of the outstanding voting stock, generally do not subject their holders to attribution. In addition to the Company's radio broadcast interests, the ownership interests of certain of the Company's directors may be attributed to the Company. For example, three of the Company's directors (Thomas O. Hicks, Lawrence D. Stuart, Jr. and Michael J. Levitt) are also among the directors of Capstar, an entity Chancellor Media has agreed to acquire. Capstar presently owns or proposes to acquire over 355 radio stations serving 83 mid-sized markets throughout the United States. Because of those directors' positions on the Capstar board of directors, if any such broadcast interests overlap with the Company's directly-held radio broadcast interests in the Company's markets, such interests are combined with the Company's interests in those markets when determining compliance with the multiple ownership rules. Also, LIN Television, the indirect operating subsidiary of LIN (which has agreed to merge with Chancellor Media), owns or operates twelve television stations. Two of LIN's directors (Messrs. Hicks and Levitt) are also the Company's directors and, accordingly, LIN's television broadcast interests are combined with the Company's broadcast interests for determining the Company's compliance with multiple ownership rules. In addition, Hicks Muse and four of the Company's directors (Thomas O. Hicks, Lawrence D. Stuart, Jr., Michael J. Levitt and John H. Massey) also have attributable interests in Sunrise, which owns or proposes to acquire a number of television stations in several markets. Under the FCC's one-to-a-market rules, a party may not have attributable interests in more than one television station or radio stations and a television station in the 61 68 same market unless a waiver is granted by the FCC. As a result of these attributable interests, the Company's acquisition strategy may be adversely affected. There can be no assurance that these attributable interests will not have a material adverse effect on the Company's future acquisition strategy or on the business, financial condition and results of operations of the Company. The FCC has issued a Notice of Proposed Rulemaking (the "NPRM") that contemplates tightening attribution standards where parties have multiple nonattributable interests in and relationships with stations that would be prohibited by the FCC's cross-interest rules, if the interests/relationships were attributable. The NPRM contemplates that this change in attribution will apply only to persons holding debt or equity interests that exceed certain benchmarks. In addition, the FCC has a "cross-interest" policy that under certain circumstances could prohibit a person or entity with an attributable interest in a broadcast station or daily newspaper from having a "meaningful" non-attributable interest in another broadcast station or daily newspaper in the same local market. Among other things, "meaningful" interests could include significant equity interests (including non-voting stock, voting stock, and limited partnership interests) and significant employment positions. This policy may limit the permissible investments that an equity investor in the Company may make or hold. If the FCC determines that a stockholder of the Company has violated this cross-interest policy, the Company may be unable to obtain from the FCC one or more authorizations needed to conduct its radio station business and may be unable to obtain FCC consents for certain future acquisitions. Programming and Operation. The Communications Act requires broadcasters to serve the "public interest." The FCC has gradually relaxed or eliminated many of the more formalized procedures it had developed in the past to promote the broadcast of certain types of programming responsive to the needs of a station's community of license. A licensee continues to be required, however, to present programming that is responsive to community problems, needs and interests and to maintain certain records demonstrating such responsiveness. Complaints from listeners concerning a station's programming often will be considered by the FCC when it evaluates the licensee's renewal application, but such complaints may be filed and considered at any time. Stations also must follow various FCC rules that regulate, among other things, political advertising, sponsorship identification, and technical operations (including limits on radio frequency radiation). In addition, licensees must develop and implement programs designed to promote equal employment opportunities. The broadcast of obscene and indecent material and the advertisement of contests and lotteries are regulated by FCC rules, as well as by state and other federal laws. Time Brokerage Agreements. In recent years, a number of radio stations, including certain of the Company's stations, have entered into what commonly are referred to as "Time Brokerage Agreements," or "TBAs" (these agreements also are known as "Local Marketing Agreements," or "LMAs"). These agreements may take various forms. Separately-owned and licensed stations may agree to function cooperatively in terms of programming, advertising sales, and other matters, subject to the licensee of each station maintaining independent control over the programming and other operations of its own station and compliance with the requirements of antitrust laws. One typical type of TBA is a programming agreement between two separately-owned radio stations that serve a 62 69 common service area, whereby the licensee of one station programs substantial portions of the broadcast day on the other licensee's station (subject to ultimate editorial and other controls being exercised by the latter licensee), and sells advertising time during those program segments. The FCC staff has held that such agreements do not violate the Communications Act as long as the licensee of the station that is being substantially programmed by another entity maintains complete responsibility for, and control over, operations of its broadcast station and otherwise ensures compliance with applicable FCC rules and policies. The Phoenix Acquisition and the Cleveland Acquisitions agreements provide that certain stations being acquired will be operated pursuant to TBAs following termination of the waiting period under the HSR Act. A station that brokers more than 15% of the broadcast time, on a weekly basis, on another station in the same market will be considered to have an attributable ownership interest in the brokered station for purposes of the FCC's ownership rules, discussed above. As a result, a broadcast station may not enter into a TBA that allows it to program more than 15% of the broadcast time, on a weekly basis, of another local station that it could not own under the FCC's local multiple ownership rules. FCC rules also prohibit a broadcast licensee from simulcasting more than 25% of its programming on another station in the same broadcast service (i.e., AM-AM or FM-FM) where the two stations serve substantially the same geographic area, whether the licensee owns the stations or owns and programs the other through a TBA arrangement. Proposed Changes. The FCC is considering various proposals to modify its broadcast "attribution" rules. Among the proposals are (i) raising the basic benchmark for attributing ownership from 5% to 10% of the licensee's voting stock, (ii) raising the attribution benchmark for certain institutional investors from 10% to 20%, (iii) limiting the applicability of the single majority shareholder rule (discussed above) to treat as attributable large stock interests coupled with other debt or securities and (iv) treating non-voting stock as attributable in certain circumstances. The FCC is also considering changes to its multiple ownership rules to encourage minority ownership of radio and television broadcast stations. The FCC has under consideration, and may in the future consider and adopt, new laws, regulations and policies regarding a wide variety of matters that could, directly or indirectly, affect the operation, ownership and financial performance of the Company's radio broadcast stations, result in the loss of audience share and advertising revenues for the Company's radio broadcast stations, and affect the ability of the Company to acquire additional radio broadcast stations or finance such acquisitions. Such matters include: changes to the license renewal process; the FCC's equal employment opportunity rules and other matters relating to minority and female involvement in the broadcasting industry; proposals to change rules relating to political broadcasting; technical and frequency allocation matters; AM stereo broadcasting; proposals to permit expanded use of FM translator stations; proposals to restrict or prohibit the advertising of beer, wine and other alcoholic beverages on radio; changes in the FCC's cross-interest, multiple ownership and cross-ownership policies; changes to broadcast technical requirements; proposals to allow telephone companies to deliver audio and video programming to the home through existing phone lines; proposals to limit the tax deductibility of advertising expenses by advertisers; proposals to auction to the highest bidder the right to use the radio broadcast spectrum, instead of granting FCC licenses and subsequent license renewals; and proposals to reinstate the "Fairness Doctrine" which requires a station to present coverage of opposing 63 70 views in certain circumstances. It is also possible that Congress may enact additional legislation that could have a material impact on the operation, ownership and financial performance of the Company's radio stations. The FCC has taken initial steps to authorize the use of a new technology, DARS, to deliver audio programming by satellite. See "-- Competition." The FCC is also considering various proposals for terrestrial DARS. DARS may provide a medium for the delivery of multiple new audio programming formats to local and national audiences. It is not known at this time whether this technology also may be used in the future by existing radio broadcast stations either on existing or alternate broadcasting frequencies. The Company cannot predict what other matters might be considered in the future, nor can it judge in advance what impact, if any, the implementation of any of these proposals or changes might have on its business. Federal Antitrust Laws. The FTC and the DOJ evaluate transactions requiring a pre-acquisition filing under the HSR Act to determine whether those transactions should be challenged under the federal antitrust laws. These agencies (particularly the DOJ) recently have been increasingly active in their review of radio station acquisitions where an operator proposes to acquire new stations in its existing markets. As part of its increased scrutiny of radio station acquisitions, the DOJ has stated publicly that it believes that TBAs and other similar agreements customarily entered into in connection with radio station transfers prior to the expiration of the waiting period under the HSR Act could violate the HSR Act. Since then, the DOJ has stated publicly that it will apply its new policy prohibiting TBAs in connection with purchase agreements until the expiration or termination of the HSR waiting period on a prospective basis. The DOJ has stated publicly that it has established certain revenue and audience share concentration benchmarks with respect to radio station acquisitions, above which a transaction may receive additional antitrust scrutiny. However, to date, the DOJ has also investigated transactions that do not meet or exceed these benchmarks, and has cleared transactions that do exceed these benchmarks. Although the Company does not believe that its acquisition strategy as a whole will be adversely affected in any material respect by antitrust review (including review under the HSR Act) or by additional divestitures that the Company may have to make as a result of antitrust review, there can be no assurance that this will be the case. The Company is currently in discussions with the DOJ relating to the Petry Acquisition. There can be no assurance that the Company will be able to consummate the Petry Acquisition in accordance with its terms or at all. OUTDOOR ADVERTISING The outdoor advertising industry is subject to governmental regulation at the federal, state and local level. Federal law, principally the Highway Beautification Act of 1965, encourages states, by the threat of withholding 10% of the federal appropriations for the construction and improvement of highways within such states, to implement legislation to prohibit billboards located within 660 feet of, or visible from, interstate and primary highways except in commercial or industrial areas where off-site signage is permitted provided it meets spacing and size restrictions. All of the states have implemented regulations at least as restrictive as the Highway Beautification Act, including the prohibition on the construction of new billboards adjacent to federally-aided highways and the removal at the owner's expense and without any compensation of any illegal signs on 64 71 such highways. The Highway Beautification Act, and the various state statutes implementing it, require the payment of just compensation whenever governmental authorities require legally erected and maintained billboards to be removed from areas adjacent to federally-aided highways. The states and local jurisdictions have, in some cases, passed additional and more restrictive regulations which limit the construction, repair, upgrading, height, size, location and/or operation of outdoor advertising structures. Such regulations, often in the form of municipal building, sign or zoning ordinances, specify minimum standards for the height, size and location of billboards. In some cases, the construction of new billboards or relocation of existing billboards is prohibited. Some jurisdictions also have restricted the ability to enlarge or upgrade existing billboards, such as converting from wood to steel or from nonilluminated to illuminated structures, and/or restrict the reconstruction or repair of billboards which are substantially destroyed as a result of storms or other causes. From time to time, governmental authorities order the removal of billboards by the exercise of eminent domain. Thus far, the Company believes it has been able to obtain satisfactory compensation for any of its structures removed at the direction of governmental authorities, although there is no assurance that it will be able to continue to do so in the future. Amortization of billboards has also been adopted in varying forms in certain jurisdictions. In theory, amortization permits the billboard owner to operate its billboard as a non-conforming use for a specified period of time until it has recouped its investment, after which it must remove or otherwise conform its billboard to the applicable regulations at its own cost without any compensation. Amortization and other regulations requiring the removal of billboards without compensation have been subject to vigorous litigation in the state and federal courts and cases have reached differing conclusions as to the constitutionality of these regulations. Several municipalities in the Company's markets currently have amortization ordinances or regulations. Ordinances requiring the removal of a billboard without compensation, whether through amortization or otherwise, are being challenged in various state and federal courts with conflicting results. In some cities, amortization ordinances or regulations are not being enforced or have been held unconstitutional. However, no assurance can be given as to the effect on the Company of the enforcement of existing laws or regulations, or of new laws and regulations that may be adopted in the future. In recent years, there have been efforts to restrict billboard advertising of certain products, including tobacco and alcohol. Congress has passed no legislation at the federal level except legislation requiring health hazard warnings similar to those on cigarette packages and print advertisements. In 1996, the Food and Drug Administration promulgated rules which, among other things, would limit certain types of outdoor advertising by tobacco companies. While certain of these regulations have been declared invalid by a lower court ruling, appeals are likely and there can be no assurance that further developments resulting in a validation or implementation of these or similar regulations will not occur. Outdoor advertising of tobacco products also may be affected by city or state regulations. For example, in 1995, the Court of Appeals for the Fourth Circuit upheld the validity of a Baltimore city ordinance restricting the placement of outdoor advertisements of cigarettes and alcohol in publicly visible locations, such as billboards, signboards and sides of buildings. Subsequently, the United States Supreme Court declined to review an appeal of the case. Restrictions similar to the Baltimore ordinance are also being contemplated or introduced in other states or municipalities around the country, including New Jersey, New 65 72 York City and Los Angeles. There can be no assurance that additional local or state governments will not enact similar ordinances or statutes to limit outdoor advertising of tobacco in the future in markets in which the Company operates. Certain states in which the Company operates have historically prohibited the outdoor advertising of distilled spirits. In California, transit shelter advertising posters are maintained on public rights of way, and most of the contracts prohibit tobacco and/or alcohol advertising. San Francisco has adopted an ordinance banning all tobacco and alcohol advertising on public property, but has "grandfathered" existing sales contracts through 2002. For each of the past three years, the California legislature has considered proposed legislation which would ban, or substantially limit, all outdoor advertising of tobacco. While that legislation has not been passed, the proponents have publicly stated they will continue to attempt to have such proposal enacted. It is uncertain whether additional legislation of this type will be enacted on the national level or in any of the markets in which the Company operates. It also recently has been reported that certain cigarette manufacturers who are defendants in numerous class action suits throughout the United States have reached agreement with Attorneys General of various states for an out of court settlement with respect to such suits that would, among other things, prohibit outdoor advertising by the tobacco industry. The settlement is subject to various conditions including approval and implementing legislation by the United States Congress. There can be no assurance as to the effect of this settlement agreement and potential legislation on the Company's business and on its net revenues and financial position. A reduction in billboard advertising by the tobacco industry would cause an immediate reduction in the Company's direct revenue from such advertisers and would simultaneously increase the available space on the existing inventory of billboards in the outdoor advertising industry. This could in turn result in a lowering of outdoor advertising rates in each of the Company's outdoor advertising markets or limit the ability of industry participants to increase rates for some period of time. Any such consequence could have a material adverse effect on the Company. To date, regulations in the Company's markets have not materially adversely affected its operations. However, the outdoor advertising industry is heavily regulated and at various times and in various markets can be expected to be subject to varying degrees of regulatory pressure affecting the operation of advertising displays. Accordingly, although the Company's experience to date is that the regulatory environment can be managed, no assurance can be given that existing or future laws or regulations will not materially adversely affect the Company. See "Risk Factors -- Regulation of Outdoor Advertising." EMPLOYEES The Company has approximately 5,200 full-time employees and approximately 850 part-time employees. Certain of the Company's employees in New York, Los Angeles, Chicago, San Francisco, Washington, D.C., Philadelphia, Detroit, Pittsburgh and Cincinnati (approximately 360 employees) are represented by unions. The Company believes that it has good relations with its employees and these unions. The Company employs several high-profile on-air personalities who have large, loyal audiences in their respective markets. The Company believes that its relationships with its on-air talent are valuable, and it generally enters into employment agreements with these individuals. 66 73 PROPERTIES The Company's corporate headquarters is in Dallas, Texas. The types of properties required to support each of the Company's existing or to be acquired radio stations include offices, studios, transmitter sites and antenna sites. A radio station's studio is generally housed with its office in a downtown or business district. A station's transmitter sites and antenna sites generally are located in a manner that provides maximum market coverage. The studios and offices of the Company's radio stations and its corporate headquarters are located in leased or owned facilities. The terms of these leases expire generally in one to ten years. The Company either owns or leases its transmitter and antenna sites. These leases have expiration dates that range generally from one to eight years. The Company does not anticipate any difficulties in renewing those leases that expire within the next several years or in leasing other space, if required. Katz operates out of approximately 54 separate locations throughout the United States. Martin Media operates out of approximately 19 separate locations throughout the United States. No one property is material to the Company's overall operations. The Company believes that its properties are in good condition and suitable for its operations. The Company owns substantially all of the equipment used in its radio broadcasting business. LEGAL PROCEEDINGS In July 1998, a stockholder derivative action was commenced in the Delaware Court of Chancery by a stockholder purporting to act on behalf of Chancellor Media. The defendants in the case include Hicks Muse, LIN and certain of Chancellor Media's directors. The plaintiff alleges that, among other things, (1) Hicks Muse allegedly caused the Company to pay too high of a price for LIN because Hicks Muse had allegedly paid too high of a price for LIN when affiliates of Hicks Muse acquired it in March 1998, and (2) the transaction therefore constitutes a breach of fiduciary duty and a waste of corporate assets by Hicks Muse (which is alleged to control Chancellor Media) and the directors of Chancellor Media named as defendants. The plaintiff seeks to enjoin consummation or rescission of the transaction, compensatory damages, an order requiring that the directors named as defendants "carry out their fiduciary duties," and attorneys' fees and other costs. Although not final, plaintiff, defendants and Chancellor Media have tentatively agreed to settle the Chancellor/LIN Stockholder Lawsuit. Such settlement is subject to a number of conditions, including, but not limited to, preparing and finalizing definitive documentation and approval by the court. Pursuant to this settlement, (1) Hicks Muse and its affiliates agreed to vote all shares of Chancellor Media common stock that they control in favor of and opposed to the approval and adoption of the merger agreement in the same percentage as the other stockholders of Chancellor Media vote at the special meeting of stockholders called for that purpose, and (2) legal fees and documented expenses will be paid to plaintiff's counsel. In connection with settlement discussions, Chancellor Media and LIN provided counsel for the plaintiff an opportunity to review and comment on the disclosure in the joint proxy statement/prospectus relating to the LIN Merger. There can be no assurance that a settlement of the Chancellor/LIN Stockholder Lawsuit can be reached on these terms or any other terms. 67 74 In September 1998, a stockholder class action complaint was filed in the Delaware Court of Chancery by a stockholder purporting to act individually and on behalf of all other persons (other than defendants) who own securities of Chancellor Media and are similarly situated. The defendants in the case are named as Chancellor Media, Hicks Muse, Thomas O. Hicks, Jeffrey A. Marcus, James E. de Castro, Eric C. Neuman, Lawrence D. Stuart, Jr., Steven Dinetz, Thomas J. Hodson, Perry Lewis, John H. Massey and Vernon E. Jordan, Jr. The plaintiff alleges breach of fiduciary duties, gross mismanagement, gross negligence or recklessness, and other matters relating to the defendants' actions in connection with the proposed Capstar Merger. The plaintiff seeks to certify the complaint as a class action, enjoin consummation of the Capstar Merger, order defendants to account to plaintiff and other alleged class members for damages, and award attorneys' fees and other costs. The Company believes that the lawsuit is without merit and intends to vigorously defend the action. The Company is also involved in various other claims and lawsuits which are generally incidental to its business. The Company is vigorously contesting all such matters and believes that their ultimate resolution will not have a material adverse effect on its consolidated financial position or results of operations. 68 75 MANAGEMENT AND BOARD OF DIRECTORS The directors and executive officers of Chancellor Media, CMHC and the Company are:
NAME AGE POSITION ---- --- -------- Thomas O. Hicks........................... 52 Chairman of the Board and Director Jeffrey A. Marcus......................... 51 President, Chief Executive Officer and Director James E. de Castro........................ 45 President of Chancellor Radio Group and Director Matthew E. Devine......................... 49 Senior Vice President and Chief Financial Officer Eric C. Neuman............................ 52 Senior Vice President -- Strategic Development James A. McLaughlin....................... 48 President of Chancellor Outdoor Group Kenneth J. O'Keefe........................ 43 Executive Vice President -- Operations Thomas P. McMillin........................ 37 Senior Vice President Richard A. B. Gleiner..................... 45 Senior Vice President and General Counsel Thomas J. Hodson.......................... 54 Director Perry J. Lewis............................ 59 Director John H. Massey............................ 57 Director Lawrence D. Stuart, Jr.................... 52 Director Steven Dinetz............................. 51 Director Vernon E. Jordan, Jr...................... 62 Director J. Otis Winters........................... 65 Director Michael J. Levitt......................... 39 Director
THOMAS O. HICKS Mr. Hicks was elected Chairman of the Board and a director of Chancellor Media, CMHC and the Company upon the consummation of the Chancellor Merger. He had been Chairman and a director of Chancellor and CRBC prior to the Chancellor Merger, since April 1996. Mr. Hicks is Chairman of the Board and Chief Executive Officer of Hicks Muse, a private investment firm located in Dallas, St. Louis, New York, Mexico City and London specializing in strategic investments, leveraged acquisitions and recapitalizations. From 1984 to May 1989, Mr. Hicks was Co-Chairman of the Board and Co-Chief Executive Officer of Hicks & Haas, Incorporated, a Dallas based private investment firm. Mr. Hicks serves as a director of Capstar, Sybron International Corporation, Inc., Cooperative Computing, Inc., International Home Foods, Triton Energy, D.A.C. Vision Inc. and Olympus Real Estate Corporation. JEFFREY A. MARCUS Mr. Marcus became the President and Chief Executive Officer of Chancellor Media, CMHC and the Company on June 1, 1998, and Mr. Marcus became a director of Chancellor Media, CMHC and the Company upon consummation of the Chancellor Merger. Prior to the Chancellor Merger, Mr. Marcus served as a director of Chancellor and CRBC. Prior to joining the Company on June 1, 1998, Mr. Marcus served as the Chairman and Chief Executive Officer of Marcus Cable Properties, Inc. and Marcus Cable 69 76 Company, L.L.C. (collectively "Marcus Cable"), the ninth largest cable television multiple system operator (MSO) in the United States, which Mr. Marcus formed in 1990. Mr. Marcus continues to serve as Chairman of Marcus Cable and as a director of Marcus Cable Properties, Inc. Until November 1988, Mr. Marcus served as Chairman and Chief Executive Officer of WestMarc Communications, Inc., an MSO formed through the merger in 1987 of Marcus Communications, Inc. and Western TeleCommunications, Inc. Mr. Marcus has more than 29 years experience in the cable television business. Mr. Marcus is a co-owner of the Texas Rangers Baseball Club and serves as a director of Brinker International, Inc. and a director or trustee of several charitable and civic organizations. JAMES E. DE CASTRO Mr. de Castro served as Chief Operating Officer of Chancellor Media, CMHC and the Company from September 22, 1997 to August 19, 1998, and on August 19, 1998, Mr. de Castro was named President of Chancellor Radio Group. From September 5, 1997 to September 22, 1997, Mr. de Castro served as Co-Chief Operating Officer of Chancellor Media, CMHC and the Company. Mr. de Castro was elected Co-Chief Operating Officer and a director of Chancellor Media, CMHC and the Company upon the consummation of the Chancellor Merger. Mr. de Castro was previously President of Evergreen since 1993 and Chief Operating Officer and a director of Evergreen since 1989. From 1987 to 1988, Mr. de Castro held various positions with H&G Communications, Inc. and predecessor entities. From 1981 to 1989, Mr. de Castro was general manager of radio stations WLUP-FM and WLUP-AM (now known as WMVP-AM) in Chicago, and from 1989 to 1992, Mr. de Castro was general manager of radio station KKBT-FM in Los Angeles. MATTHEW E. DEVINE Mr. Devine became Senior Vice President and Chief Financial Officer of Chancellor Media, CMHC and the Company upon consummation of the Chancellor Merger. Prior thereto, Mr. Devine had been an Executive Vice President of Evergreen since 1993, Chief Financial Officer, Treasurer and Secretary of Evergreen since 1988 and a director of Evergreen from 1989 through the Chancellor Merger. ERIC C. NEUMAN Mr. Neuman became a Senior Vice President -- Strategic Development of Chancellor Media and the Company on July 1, 1998. From September 5, 1997 to May 19, 1998, Mr. Neuman served as a director of Chancellor Media, CMHC and the Company. Mr. Neuman became a director of Chancellor Media, CMHC and the Company upon consummation of the Chancellor Merger. Mr. Neuman previously served as a director of Chancellor and CRBC since April 1996. From May 1993 to July 1, 1998, Mr. Neuman had been an officer of Hicks Muse and was most recently serving as Senior Vice President. From 1985 to 1993, Mr. Neuman was a Managing General Partner of Communications Partners, Ltd., a private investment firm specializing in media and communications businesses. Mr. Neuman currently serves as a director of Capstar. JAMES A. MCLAUGHLIN Mr. McLaughlin became the President of Chancellor Outdoor Group effective on August 18, 1998. Mr. Laughlin most recently served as Chief Executive Officer of 70 77 privately-held Triumph Outdoor Holdings, LLC. Prior to forming Triumph, Mr. McLaughlin served as President and Chief Executive Officer of POA Acquisition Corporation, the successor to Peterson Outdoor Advertising. Prior to joining POA, Mr. McLaughlin was the Managing Partner of Turner Outdoor Advertising which was purchased from Ted Turner in 1983. Mr. McLaughlin began his outdoor advertising career in 1974 with Creative Displays, holding various management positions as the company grew to become the fourth largest outdoor advertising company in the United States. KENNETH J. O'KEEFE Mr. O'Keefe became an Executive Vice President of Chancellor Media, CMHC and the Company upon the consummation of the Chancellor Merger. Mr. O'Keefe had been an Executive Vice President of Evergreen since February of 1996 and served as a director of Evergreen from May of 1996 until the consummation of the Chancellor Merger. Prior to joining Evergreen in 1996, Mr. O'Keefe was a director, Chief Financial Officer and Executive Vice President of Pyramid Communications, Inc. from March 1994 until Evergreen's acquisition of Pyramid Communications, Inc. on January 17, 1996. Mr. O'Keefe served in various capacities with Pyramid Communications, Inc. or predecessor entities during the five-year period prior to his joining Evergreen in 1996. THOMAS P. MCMILLIN Mr. McMillin became a Senior Vice President of Chancellor Media, CMHC and the Company on October 1, 1998. Mr. McMillin previously served as Executive Vice President and Chief Financial Officer of Marcus Cable. Mr. McMillin joined Marcus Cable in 1994 as Vice President -- Finance & Development. Mr. McMillin continues to serve as a director of Marcus Cable Properties, Inc. Prior to joining Marcus Cable, Mr. McMillin served for three years as Vice President -- Corporate Development for Crown Media, Inc., then a cable television subsidiary of Hallmark Cards. From 1987 to 1992, Mr. McMillin served in various financial and corporate development positions, including Vice President Finance & Acquisitions, with Cencom Cable Associates, Inc. From 1983 to 1987, Mr. McMillin was a member of the audit practice of Arthur Andersen & Co. RICHARD A. B. GLEINER Mr. Gleiner became a Senior Vice President and General Counsel of Chancellor Media, CMHC and the Company on October 1, 1998. Mr. Gleiner has most recently served as Senior Vice President, Secretary and General Counsel of Marcus Cable, with responsibility for overseeing all of the legal affairs of Marcus Cable. Mr. Gleiner continues to serve as a director of Marcus Cable Properties, Inc. Prior to joining Marcus Cable in 1994, Mr. Gleiner had been of counsel to Dow, Lohnes & Albertson, New York, New York from 1988 to 1991, primary outside counsel to Marcus Cable. THOMAS J. HODSON Mr. Hodson became a director of Chancellor Media, CMHC and the Company upon consummation of the Chancellor Merger. Mr. Hodson had previously served as a director of Evergreen since 1992. Mr. Hodson is President of TJH Capital, Inc., a private investment company. He had been the President and a director of Columbia Falls Aluminum Company from January 1994 to March 1998. He had been a Vice President of Stephens, Inc. from 1986 through 1993. 71 78 PERRY J. LEWIS Mr. Lewis became a director of Chancellor Media, CMHC and the Company upon consummation of the Chancellor Merger. Mr. Lewis had previously served as a director of Evergreen since Evergreen acquired Broadcasting Partners, Inc. ("BPI") in 1995. Mr. Lewis was the Chairman of BPI from its inception in 1988 until its merger with Evergreen, and was Chief Executive Officer of BPI from 1993 to 1995. Mr. Lewis is a founder of Morgan, Lewis, Githens & Ahn, an investment banking and leveraged buyout firm which was established in 1982. Mr. Lewis serves as director of Aon Corporation, ITI Technologies, Inc., Gradall Industries, Inc. and Stuart Entertainment, Inc. JOHN H. MASSEY Mr. Massey became a director of Chancellor Media, CMHC and the Company upon consummation of the Chancellor Merger. Prior to the Chancellor Merger, Mr. Massey served as a director of Chancellor and CRBC. Until August 2, 1996, Mr. Massey served as the Chairman of the Board and Chief Executive Officer of Life Partners Group, Inc., an insurance holding company, having assumed those offices in October 1994. Prior to joining Life Partners, he served, since 1992, as the Chairman of the Board of, and currently serves as a director of, FSW Holdings, Inc. Since 1986, Mr. Massey has served as a director of Gulf-California Broadcast Company. From 1986 to 1992, he also was President of Gulf-California Broadcast Company. From 1976 to 1986, Mr. Massey was President of Gulf Broadcast Company. Mr. Massey currently serves as a director of Central Texas Bankshare Holdings, Inc., Colorado Investment Holdings, Inc., Hill Bancshares Holdings, Inc., Bank of The Southwest of Dallas, Texas, Columbus State Bank, Columbine JDS Systems, Inc., The Paragon Group, Inc., the Brazos Fund Group Inc. and Sunrise Television Group, Inc. LAWRENCE D. STUART, JR. Mr. Stuart became a director of Chancellor Media, CMHC and the Company upon consummation of the Chancellor Merger. Mr. Stuart previously served as a director of Chancellor and CRBC since January 1997. Since October 1995, Mr. Stuart has served as a Managing Director and Principal of Hicks Muse. Prior to joining Hicks Muse, from 1990 to 1995 he served as the managing partner of the Dallas office of the law firm Weil, Gotshal & Manges LLP. Mr. Stuart serves as a director of Capstar. STEVEN DINETZ Mr. Dinetz was elected Co-Chief Operating Officer and a director of Chancellor Media, CMHC and the Company upon the consummation of the Chancellor Merger. As of September 22, 1997, Mr. Dinetz no longer serves as Co-Chief Operating Officer of Chancellor Media, CMHC and the Company, but continues to serve as a director for each such entity. Prior to consummation of the Chancellor Merger, Mr. Dinetz served as President, Chief Executive Officer and a director of Chancellor and CRBC since their formation and prior thereto was the President and Chief Executive Officer and a director of Chancellor Communications, a predecessor entity of Chancellor. VERNON E. JORDAN, JR. Mr. Jordan became a director of Chancellor Media, CMHC and the Company on October 14, 1997. Mr. Jordan currently serves as a senior partner in the Washington, D.C. 72 79 office of the law firm of Akin, Gump, Strauss, Hauer & Feld, L.L.P. Mr. Jordan serves as a director of American Express Company, Bankers Trust Company, Bankers Trust Corporation, Dow Jones & Company, Inc., the Ford Foundation, Howard University, J.C. Penney Company, Inc., Revlon Group, Revlon, Inc., Ryder System, Inc., Sara Lee Corporation, Union Carbide Corporation, Xerox Corporation, LBJ Foundation, National Academy Foundation and the Roy Wilkins Foundation. J. OTIS WINTERS Mr. Winters became a director of Chancellor Media, CMHC and the Company on May 19, 1998. Mr. Winters currently serves as the non-executive Chairman for The PWS Group (formerly Pate, Winters & Stone, Inc.). Mr. Winters was Co-founder, President and director of Avanti Energy Corporation. Mr. Winters also served as Executive Vice President and a member of the board of directors of the First National Bank and Trust Company of Tulsa. Mr. Winters was Executive Vice President and a member of the board of directors of The Williams Companies, where he served as Chairman of two major subsidiaries and was responsible for the corporate administrative department. Mr. Winters also serves as a director and Chairman of the audit and compensation committee of AMX Corporation, director and Chairman of the audit committee for Arena Brands, Inc., director and Chairman of the finance and audit committees for Dynegy, Inc. (formerly NGC Corporation), director for OmniAmerica, Inc. and director and Chairman of the executive committee for Walden Residential Properties, Inc. MICHAEL J. LEVITT Michael J. Levitt became a director of Chancellor Media, CMHC and the Company on May 19, 1998. Mr. Levitt is a Managing Director and Principal of Hicks Muse. Before joining Hicks Muse, Mr. Levitt was a Managing Director and Deputy Head of Investment Banking with Smith Barney Inc. from 1993 through 1995. From 1986 through 1993, Mr. Levitt was with Morgan Stanley & Co. Incorporated, most recently as a Managing Director responsible for the New York-based Financial Entrepreneurs Group. Mr. Levitt also serves as a director of LIN Television Corporation, Capstar, STC Broadcasting, Inc., Atrium Companies, Inc. and International Home Foods, Inc. COMPENSATION OF DIRECTORS Directors who are also officers of Chancellor Media, CMHC and the Company receive no additional compensation for their services as directors. Effective following the Chancellor Merger, directors of Chancellor Media, CMHC and the Company who are not officers receive (i) a fee of $36,000 per annum, (ii) a $1,000 fee for attendance at meetings or, if applicable, a $500 fee for attendance at meetings by telephone and (iii) a $2,000 fee for service as chairman of a board committee, a $1,000 fee for attendance at committee meetings or, if applicable, a $500 fee for attendance at committee meetings by telephone. Directors of Chancellor Media, CMHC and the Company are also reimbursed for travel expenses and other out-of-pocket costs incurred in connection with such meetings. Additionally, all non-employee directors of Chancellor Media, CMHC and the Company in office on the day of Chancellor Media's annual stockholders meeting are entitled to an award of options to purchase 25,000 shares of Common Stock at an exercise price equal to the fair market value of such shares on the date of grant. 73 80 COMPENSATION OF EXECUTIVE OFFICERS Summary Compensation. The following table sets forth all compensation, including bonuses, stock option awards and other payments, paid or accrued by the Company for the three fiscal years ending December 31, 1997, to the Company's Chief Executive Officer and each of the Company's other executive officers serving in such capacity at the end of the last completed fiscal year whose total annual salary and bonus exceeded $100,000 during the fiscal year ended December 31, 1997. SUMMARY COMPENSATION TABLE(1)
ANNUAL COMPENSATION LONG TERM ---------------------------------------- COMPENSATION OTHER ------------ SECURITIES NAME AND ANNUAL RESTRICTED UNDERLYING LTIP PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(2) STOCK AWARDS OPTIONS PAYOUTS ------------------ ---- -------- ---------- --------------- ------------ ---------- ------- Scott K. Ginsburg........... 1997 $850,000 $3,615,000 -- -- 500,000 -- Former President 1996 750,000 956,000 -- -- 375,000 -- and Chief 1995 650,000 -- -- -- -- Executive Officer James E. de Castro.......... 1997 $825,000 $2,581,000 -- -- 425,000 -- Chief Operating 1996 750,000 704,000 -- -- 75,000 -- Officer 1995 650,000 125,000 -- -- 300,000 -- Matthew E. Devine........... 1997 $375,000 $1,205,000 -- -- 262,500 -- Senior Vice 1996 300,000 352,000 -- -- 37,500 -- President, 1995 275,000 63,000 -- -- 150,000 -- Chief Financial Officer and Secretary Kenneth J. O'Keefe.......... 1997 $320,000 $1,205,000 -- -- -- -- Executive Vice 1996 210,000(4) 210,000 -- -- 300,000 -- President- 1995 -- -- -- -- -- -- Operations NAME AND ALL OTHER PRINCIPAL POSITION COMPENSATION(3) ------------------ --------------- Scott K. Ginsburg........... $9,101 Former President 9,776 and Chief 7,663 Executive Officer James E. de Castro.......... 2,630 Chief Operating 2,455 Officer 2,455 Matthew E. Devine........... -- Senior Vice -- President, -- Chief Financial Officer and Secretary Kenneth J. O'Keefe.......... -- Executive Vice -- President- -- Operations
- ------------------------- (1) No information is set forth herein regarding Steven Dinetz, who served as the Company's Co-Chief Operating Officer from September 5, 1997 through September 22, 1997, as amounts paid by the Company to Mr. Dinetz during 1997 for total annual salary and bonus did not exceed $100,000. On September 22, 1997, as part of the Chancellor Merger, Mr. Dinetz resigned from his position as Co-Chief Operating Officer of the Company, but retained his position as a director of the Company. Upon Mr. Dinetz' resignation, the Company accelerated the exercisability of all of Mr. Dinetz' stock options previously granted by Chancellor Broadcasting Company. In February 1998, the Company made certain additional cash payments to Mr. Dinetz. Both the acceleration of the exercisability of the stock options and the cash payment were part of Mr. Dinetz' severance package which he elected to receive after a change in job responsibilities directly related to the Chancellor Merger. (2) The aggregate annual amount of perquisites and other personal benefits, securities or property does not exceed $50,000 or 10% of the total of the annual salary and bonus for the named officer. (3) Represents payments of term life insurance policies. (4) Represents compensation for the period beginning March 1, 1996, when Mr. O'Keefe joined the Company. 74 81 Option Grants in Last Fiscal Year. The following table sets forth information regarding options to purchase Common Stock granted by the Company to its Chief Executive Officer and the other executive officers named in the Summary Compensation Table during the 1997 fiscal year. OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS ---------------------------------------- NUMBER OF SECURITIES % OF TOTAL GRANT DATE VALUE UNDERLYING OPTIONS -------------------------- OPTIONS GRANTED TO EXERCISE OR GRANT DATE GRANTED EMPLOYEES IN BASE PRICE EXPIRATION PRESENT VALUE NAME (#)(1)(2) FISCAL YEAR ($/SHARE)(2) DATE $(3) ---- ---------- ------------ ------------ ---------- ------------- Scott K. Ginsburg....... 500,000 8.0% $23.25 9/5/07 $6,155,000 James E. de Castro...... 425,000 6.8% 23.25 9/5/07 5,231,750 Matthew E. Devine....... 262,500 4.2% 23.25 9/5/07 3,231,375 Kenneth J. O'Keefe...... -- -- -- -- --
- ------------------------- (1) Represents options to purchase shares of Common Stock granted under the Company's 1995 Stock Option Plan for Executive Officers and Key Employees (the "1995 Stock Option Plan"). The options awarded to Mr. Ginsburg, Mr. de Castro and Mr. Devine during the last fiscal year are exercisable in whole or part beginning on September 5, 1997, and expire on September 5, 2007. The options may expire earlier upon the occurrence of certain merger or consolidation transactions involving the Company. The Company is not required to issue and deliver any certificate for shares of Common Stock purchased upon exercise of the option or any portion thereof prior to fulfillment of certain conditions, including the completion of registration or qualification of such shares of Common Stock under federal or state securities laws and the payment to the Company of all amounts required to be withheld upon exercise of the options under any federal, state or local tax law. The holder of an option has no rights or privileges of a stockholder in respect of any shares of Common Stock purchasable upon exercise of the options unless and until certificates representing such shares shall have been issued by the Company to such holder. Once exercisable, the options are exercisable by the holder or, upon the death of such holder, by his personal representatives or by any person empowered to do so under such holder's will or under the applicable laws of descent and distribution. The options are not transferable except by will or by the applicable laws of descent and distribution or pursuant to a QDRO. (2) Represents the estimated fair value of Common Stock on September 5, 1997, the date of grant, as adjusted for the two-for-one stock split of the Company's Common Stock effected in the form of a stock dividend, paid on January 12, 1998. (3) The present value of each grant is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions: dividend yield of 0% for all years; expected volatility of 41.88%; risk-free interest rate of 5.38%, and expected life of seven years. 75 82 AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND YEAR-END VALUES The following table sets forth information concerning option exercises in the year ended December 31, 1997 by the Company's Chief Executive Officer and the other executive officers named in the Summary Compensation Table, and the value of each such executive officer's unexercised options at December 31, 1997.
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS SHARES AT FISCAL YEAR-END(#) AT FISCAL YEAR-END($)(1) ACQUIRED ON VALUE --------------------------- --------------------------- EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE ----------- ----------- ----------- ------------- ----------- ------------- Scott K. Ginsburg....... -- -- 500,000 375,000 7,034,000 9,873,000 James E. de Castro...... 300,000 6,979,000 1,220,000 375,000 34,830,250 9,873,000 Matthew E. Devine....... -- -- 562,500 187,500 14,082,000 4,936,500 Kenneth J. O'Keefe...... -- -- -- 300,000 -- 7,992,000
- ------------------------- (1) Based upon a per share price for Common Stock of $37.31. This price represents the closing price for the Common Stock on the Nasdaq National Market System on December 31, 1997, as adjusted for the two-for-one stock split of the Company's Common Stock, effected in the form of a stock dividend, paid on January 12, 1998. EMPLOYMENT AGREEMENTS GINSBURG EMPLOYMENT AGREEMENT Prior to April 14, 1998, Scott K. Ginsburg served as the President and Chief Executive Officer of Chancellor Media, CMHC and CMCLA. On September 4, 1997, the Company entered into a new employment agreement (the "Ginsburg Employment Agreement") with Mr. Ginsburg, to be effective on the closing date of the Chancellor Merger. The Ginsburg Employment Agreement, which had a term that extends through September 5, 2002, provided for an initial annual base salary of $1,000,000 for the first year of the employment agreement, to be increased each year by a percentage equal to the percentage change in the consumer price index during the preceding year. In addition, the Ginsburg Employment Agreement provided for an annual bonus based upon the financial performance of the Company in relation to certain annual performance targets which are defined in the Ginsburg Employment Agreement. The Ginsburg Employment Agreement provided that, on the closing date of the Chancellor Merger and on each of the first four anniversaries thereof on which Mr. Ginsburg remained employed by the Company, Mr. Ginsburg would be granted options to purchase 200,000 shares of Common Stock. If Mr. Ginsburg's employment was terminated without "cause" (as defined in the Ginsburg Employment Agreement) or if Mr. Ginsburg terminated his employment for "good reason" (as defined in the Ginsburg Employment Agreement) prior to the fifth annual anniversary of the consummation of the Chancellor Merger, Mr. Ginsburg would receive on such termination date a number of options equal to 1,000,000 minus the number of options previously granted to Mr. Ginsburg pursuant to the preceding sentence prior to such date. In addition, in recognition of Mr. Ginsburg's rights under his prior employment agreement, the Company granted Mr. Ginsburg an option to acquire an additional 300,000 shares of Common Stock on the closing date of the Chancellor Merger. The Ginsburg Employment Agreement provided that all options granted pursuant to the Ginsburg Employment Agreement would be exercisable for ten years from the date of grant of the option (notwithstanding any termination of employment), at a price per share equal to the 76 83 market price for Common Stock at the close of trading on the day immediately preceding the date of the grant. The Ginsburg Employment Agreement provided that, in the event of termination of Mr. Ginsburg's employment by the Company without "cause" or by Mr. Ginsburg with "good reason," the Company would make a one-time cash payment to Mr. Ginsburg in a gross amount such that the net payments retained by Mr. Ginsburg shall equal $20,000,000. The Ginsburg Employment Agreement further provided that, in the event of termination of Mr. Ginsburg's employment by reason of expiration or non-renewal of the Ginsburg Employment Agreement, the Company would make a one-time cash payment to Mr. Ginsburg equal to two times the amount of his annual base salary for the contract year in which his employment terminates. The Ginsburg Employment Agreement provided that Mr. Ginsburg would have registration rights with respect to all Common Stock acquired by Mr. Ginsburg at any time which rights were no less favorable to Mr. Ginsburg as the registration rights held by Hicks Muse and its affiliates with respect to the common stock of Chancellor immediately prior to the consummation of the Chancellor Merger. Under the Ginsburg Employment Agreement, the Company also agreed to make to Mr. Ginsburg a ten-year unsecured loan in the amount of $3,500,000 bearing interest at a fixed rate equal to the applicable Federal long-term rate in effect on the date on which the loan is made. The terms of the loan require Mr. Ginsburg to repay principal of the loan in five equal annual installments, commencing on the sixth anniversary of the date on which the loan is made. As of April 15, 1998, Mr. Ginsburg has borrowed $3,500,000 under the loan. On April 14, 1998, Mr. Ginsburg resigned as President and Chief Executive Officer of Chancellor Media, CMHC and CMCLA, and on April 20, 1998, Mr. Ginsburg resigned as director of Chancellor Media, CMHC and CMCLA and from all appointments and positions with their respective subsidiaries. On April 20, 1998 (the "Agreement Date"), the Company entered into a separation and consulting agreement (the "Ginsburg Separation and Consulting Agreement") with Mr. Ginsburg. The Ginsburg Separation and Consulting Agreement, provides for (a) a lump sum severance payment of $20,000,000 net of applicable employee withholding taxes, which is the same amount Mr. Ginsburg would have been entitled to under the Ginsburg Employment Agreement based upon a termination of his employment by him for "good reason" or by the Company "without cause," and (b) a grant to Mr. Ginsburg of stock options to acquire 800,000 shares of Common Stock of Chancellor Media, subject to the approval of Chancellor Media's stockholders (at the 1998 annual meeting of stockholders) of a 1998 Chancellor Media Corporation Employee Stock Option Plan, which is the same number of stock options to which Mr. Ginsburg would have been entitled based upon a termination of his employment by him for "good reason" or by the Company "without cause," except that the Ginsburg Separation and Consulting Agreement provides that the exercise price for such stock options is $23.25 per share and shall become exercisable as follows: (i) options for 266,666 shares shall be exercisable beginning on the Agreement Date for a period of seven years thereafter, (ii) options for 266,667 shares shall be exercisable beginning one year from the Agreement Date for a period of six years thereafter, and (iii) options for 266,667 shares shall be exercisable beginning two years from the Agreement Date for a period of five years thereafter. Previously granted stock options were unaffected by the Ginsburg Separation and Consulting Agreement. The Ginsburg Separation and Consulting Agreement also provides that Chancellor Media, CMHC and CMCLA shall retain Mr. Ginsburg as a consultant through April 13, 2003, Mr. Ginsburg to be compensated for such consulting services in an amount equal to $2,500,000 for each full year of consulting 77 84 services. The Ginsburg Separation and Consulting Agreement further provides for three-year non-solicitation and non-hire covenants by Mr. Ginsburg, as well as other mutual releases and other provisions typically found in an employment termination agreement, but does not provide for a noncompetition agreement from Mr. Ginsburg. DE CASTRO EMPLOYMENT AGREEMENT Effective as of April 17, 1998, Chancellor Media and the Company entered into a new employment agreement (the "de Castro Employment Agreement") with Mr. de Castro. The de Castro Employment Agreement, which has a term that extends through April 17, 2003, provides for an initial annual base salary of $900,000 for the first year of the employment agreement, to be increased each year by a percentage equal to the percentage change in the consumer price index during the preceding year. In addition, the de Castro Employment Agreement provides for an annual bonus based upon a percentage of the amount by which the Company exceeds an annual performance target which is defined in the de Castro Employment Agreement. The de Castro Employment Agreement provides that, on the effective date thereof and on each of the first four anniversaries thereof on which Mr. de Castro remains employed by the Company, Mr. de Castro shall be granted options to purchase 160,000 shares of Common Stock. If Mr. de Castro's employment is terminated without "cause" (as defined in the de Castro Employment Agreement) or if Mr. de Castro terminates his employment for "good reason" (as defined in the de Castro Employment Agreement) prior to the fifth annual anniversary of the effective date of the de Castro Employment Agreement, Mr. de Castro will receive on such termination date a number of options equal to 800,000 minus the number of options previously granted to Mr. de Castro pursuant to the preceding sentence prior to such date. The de Castro Employment Agreement provides (i) for a signing bonus in the gross amount of $1,000,000, (ii) that the Company shall make a one-time cash payment to Mr. de Castro in the gross amount of $5,000,000 less applicable employee withholding taxes and (iii) that the Company shall grant to Mr. de Castro stock options to purchase 800,000 shares of Chancellor Media Common Stock at a price of $42.125. All options granted pursuant to the de Castro Employment Agreement will be exercisable for ten years from the date of grant of the option (notwithstanding any termination of employment). The annual option grant shall be at a price per share equal to the market price for Common Stock at the close of trading on the day immediately preceding the date of the grant. The de Castro Employment Agreement provides that, in the event of termination of Mr. de Castro's employment by the Company without "cause" or by Mr. de Castro with "good reason," the Company shall make a one-time cash payment to Mr. de Castro in a gross amount such that the net payments retained by Mr. de Castro shall equal $5,000,000 less applicable employee withholding taxes. The de Castro Employment Agreement further provides that, in the event of termination of Mr. de Castro's employment by Mr. de Castro for other than "good reason," in exchange for Mr. de Castro's agreement not to induce any employee of any radio station owned by the Company to terminate such employment or to become employed by any other radio station, the Company shall continue to pay Mr. de Castro his applicable base salary through the fifth anniversary of the effective date of the de Castro Employment Agreement. In such event, the Company also has the right, in exchange for the payment at the end of each calendar year through December 31, 2002, of an annual amount equal to the product of Mr. de Castro's average bonus multiplied by the fraction of each such calendar year which precedes the fifth anniversary of the effective date of the de Castro Employment Agreement, to require that Mr. de Castro not be 78 85 employed by or perform activities on behalf of or have ownership interest in any radio broadcasting station serving the same market as any radio station owned by the Company. The de Castro Employment Agreement further provides that if Mr. de Castro's employment is terminated by reason of expiration or non-renewal of the de Castro Employment Agreement, the Company shall make a one-time cash payment to Mr. de Castro equal to two times the amount of his annual base salary for the contract year in which such employment terminates. The de Castro Employment Agreement provides that if the Company provides employment related benefits in an aggregate amount greater than or on more favorable terms as are granted to any other senior executives (except for benefits and Employment Inducements (as defined therein) provided to the Chief Executive Officer), Mr. de Castro would be provided such benefits in substantially comparable amount and/or under substantially comparable terms, on an aggregate basis. DEVINE EMPLOYMENT AGREEMENT In May 1998, the Company entered into a new employment agreement (the "Devine Employment Agreement") with Mr. Devine. The Devine Employment Agreement, which has a term that extends through April 17, 2003, provides for an initial annual base salary of $500,000 for the first year of the employment agreement, to be increased each year by $25,000. In addition, the Devine Employment Agreement provides for an annual bonus based upon a percentage of the amount by which the Company exceeds an annual performance target which is defined in the Devine Employment Agreement. The Devine Employment Agreement provides that, on the effective date thereof and on each of the first four anniversaries thereof on which Mr. Devine remains employed by the Company, Mr. Devine shall be granted options to purchase 120,000 shares of Common Stock. If Mr. Devine's employment is terminated without "cause" (as defined in the Devine Employment Agreement) or if Mr. Devine terminates his employment for "good reason" (as defined in the Devine Employment Agreement) prior to the fifth annual anniversary of the effective date of the Devine Employment Agreement, Mr. Devine will receive on such termination date a number of options equal to 600,000 minus the number of options previously granted to Mr. Devine pursuant to the preceding sentence prior to such date. In addition, the Devine Employment Agreement provides (a) for a signing bonus in the gross amount of $1,000,000, (b) that the Company shall make a one-time cash payment to Mr. Devine of $2,000,000 less applicable employee withholding taxes and (c) that the Company shall grant to Mr. Devine stock options to purchase 600,000 shares of Chancellor Media Common Stock at a price of $42.125 per share. The Devine Employment Agreement provides that all options granted pursuant to the Devine Employment Agreement will be exercisable for ten years from the date of grant of the option (notwithstanding any termination of employment). The annual option grant shall be at a price per share equal to the market price for Common Stock at the close of trading on the day immediately preceding the date of the grant. The Devine Employment Agreement provides that, in the event of termination of Mr. Devine's employment by the Company without "cause" or by Mr. Devine with "good reason," the Company shall make a one-time cash payment to Mr. Devine in a gross amount such that the net payments retained by Mr. Devine shall equal $2,000,000 less applicable employee withholding taxes. The Devine Employment Agreement further provides that, in the event of termination of Mr. Devine's employment by Mr. Devine for other than "good reason," in exchange for Mr. Devine's agreement not to induce any employee of any radio station owned by the Company to terminate such employment or to become employed by any other radio 79 86 station, the Company shall continue to pay Mr. Devine his applicable base salary through the earlier of the fifth anniversary of the effective date of the Devine Employment Agreement or the second anniversary of the termination of employment (the "Cessation Date"). In such event, the Company also has the right, in exchange for the payment at the end of each calendar year through the year which includes the Cessation Date of an annual amount equal to the product of Mr. Devine's average bonus multiplied by the fraction of each such calendar year which precedes the Cessation Date, to require that Mr. Devine not be employed by or perform activities on behalf of or have an ownership interest in any radio broadcasting station serving the same market as any radio station owned by the Company. The Devine Employment Agreement further provides that if Mr. Devine's employment is terminated by reason of expiration or non-renewal of the Devine Employment Agreement, the Company shall make a one-time cash payment to Mr. Devine equal to two times the amount of his annual base salary for the contract year in which such employment terminates. The Devine Employment Agreement provides that if the Company provides employment related benefits in an aggregate amount greater than or on more favorable terms as are granted to any other senior executives (except for benefits and Employment Inducements (as defined therein) provided to the Chief Executive Officer or Chief Operating Officer), Mr. Devine would be provided such benefits in substantially comparable amount and/or substantially comparable terms, on an aggregate basis. O'KEEFE EMPLOYMENT AGREEMENT In February of 1996, the Company entered into an employment agreement (the "O'Keefe Employment Agreement") with Mr. O'Keefe that has a term through February 28, 1999 and provides for an annual base salary beginning at $300,000 in 1996 and increasing incrementally to $350,000 in 1998. The O'Keefe Employment Agreement provides for Mr. O'Keefe to receive an annual incentive bonus based upon a percentage of the amount by which the Company exceeds certain annual performance targets as defined in the agreement. The agreement also provides that Mr. O'Keefe is eligible for certain options to purchase Common Stock. Pursuant to the agreement, Mr. O'Keefe was awarded options to purchase 300,000 shares of Common Stock. The stock options vest and become exercisable subject to Mr. O'Keefe's continued employment by the Company through February 28, 1999. However, Mr. O'Keefe may be eligible to exercise the options on a pro rata basis in the event he is terminated prior to February 28, 1999 upon certain events specified in his employment agreement, including Mr. O'Keefe's death or disability, a change in control of the Company, termination without cause and a material breach of the employment agreement by the Company leading to the resignation of Mr. O'Keefe. The agreement terminates upon the death of Mr. O'Keefe and may be terminated by the Company upon the disability of Mr. O'Keefe or for or without "cause" (as defined in the agreement). During the term of the agreement, Mr. O'Keefe is prohibited from engaging in certain activities competitive with the business of the Company. However, with the approval of the Company, Mr. O'Keefe may engage in activities not directly competitive with the business of the Company as long as such activities do not materially interfere with Mr. O'Keefe's employment obligations. On March 1, 1997, Evergreen and Mr. O'Keefe amended the O'Keefe Employment Agreement in order to make certain provisions of the O'Keefe Employment Agreement comparable to those contained in Mr. de Castro's and Mr. Devine's former employment agreement. 80 87 On September 4, 1997, the Company amended its employment agreement (the "O'Keefe Amendment") with Mr. O'Keefe. As a result of the O'Keefe Amendment, the O'Keefe Employment Agreement is to expire as of December 31, 1997, and the O'Keefe Amendment is effective on January 1, 1998. The O'Keefe Amendment, which has a term through December 31, 2000, provides for an initial annual base salary of $500,000 for the first year of the employment agreement, to be increased each year by $25,000. In addition, the O'Keefe Amendment provides for an annual bonus based upon the financial performance of the Company in relation to certain annual performance targets which are defined in the O'Keefe Amendment. The O'Keefe Amendment provides that, on January 1, 1998 and 1999, assuming that Mr. O'Keefe remains employed by the Company on such dates, Mr. O'Keefe shall be granted options to purchase 100,000 shares of Common Stock. Furthermore, with respect to the option to purchase 300,000 shares of Common Stock granted under the O'Keefe Employment Agreement, (i) all such options will become exercisable on February 28, 1999 if Mr. O'Keefe remains employed by the Company on such date, (ii) if Mr. O'Keefe's employment is terminated as a result of Mr. O'Keefe's death or disability or resignation by Mr. O'Keefe following a material breach of the O'Keefe Amendment by the Company, a prorated portion of such options will become exercisable and (iii) if Mr. O'Keefe's employment is terminated without "cause" (as defined in the O'Keefe Amendment) or there is a "change of control" (as defined in the O'Keefe Amendment), all such options shall become exercisable. The O'Keefe Amendment provides that all options described in the O'Keefe Amendment will be exercisable for seven years from the date of grant of the option, and that all options granted pursuant to the O'Keefe Amendment will be granted at a price per share equal to the market price for Common Stock on the date of the grant. The O'Keefe Amendment provides that, in the event of termination of Mr. O'Keefe's employment by the Company without "cause," the Company shall pay Mr. O'Keefe his base salary and a prorated annual bonus and provide health and life insurance coverage until the earlier of the expiration of the term of the O'Keefe Amendment or the date on which Mr. O'Keefe becomes employed in a position providing similar compensation. MARCUS EMPLOYMENT AGREEMENT The Company entered into an employment agreement (the "Marcus Employment Agreement") with Jeffrey A. Marcus which is effective as of June 1, 1998. The Marcus Employment Agreement, which has a term that extends through May 31, 2003, provides for an initial annual base salary of $1,125,000 for the first year of the employment agreement, to be increased each year by a percentage equal to the percentage change in the consumer price index during the preceding year. The Marcus Employment Agreement provides for a one-time execution bonus in the gross amount of $1,000,000. In addition, the Marcus Employment Agreement provides for an annual bonus in an amount to be determined by the Compensation Committee in its reasonable discretion; provided, however, the annual bonus shall in no event be less than $2,000,000 nor greater than $4,000,000. The Marcus Employment Agreement provides that, on the effective date thereof and on each of the four anniversaries thereof on which Mr. Marcus remains employed by the Company, Mr. Marcus shall be granted options to purchase 200,000 shares of Common Stock. If Mr. Marcus' employment is terminated without "cause" (as defined in the Marcus Employment Agreement) or if Mr. Marcus terminates his employment for "good reason" (as defined in the Marcus Employment Agreement) prior to the fourth annual anniversary of the effective date of the Marcus Employment 81 88 Agreement, Mr. Marcus will receive on such termination date a number of options equal to 1,000,000 minus the number of options previously granted to Mr. Marcus pursuant to the preceding sentence prior to such date. The Marcus Employment Agreement provides that all options granted pursuant to the Marcus Employment Agreement will be exercisable for ten years from the date of grant of such options (notwithstanding any termination of employment), at a price per share equal to the market price for Common Stock at the close of trading on the day immediately preceding the date of the grant. Under the Marcus Employment Agreement, Mr. Marcus shall also be granted options to purchase 1,250,000 shares of Common Stock, one-half of which will vest on the date of the grant and one-half of which will vest on the 18th month anniversary of the date of the grant, with each option exercisable for ten years from the date of grant of such options (notwithstanding any termination of employment), at a price of $42.125 per share. The Marcus Employment Agreement provides that, in the event of termination of Mr. Marcus's employment by the Company without "cause" or by Mr. Marcus with "good reason," the Company shall make a one-time cash payment to Mr. Marcus in a gross amount such that the net payments retained by Mr. Marcus (after payment by the Company of excise taxes imposed by Section 4999 of the Internal Revenue Code of 1986, as amended, with respect to such payment, to the extent applicable) shall equal $6,250,000. The Marcus Employment Agreement further provides that, in the event of termination of Mr. Marcus's employment by Mr. Marcus for other than "good reason," in exchange for Mr. Marcus's agreement not to induce any employee of any radio station owned by the Company to terminate such employment or to become employed by any other radio station, the Company shall continue to pay Mr. Marcus his applicable base salary through the fifth anniversary of the effective date thereof. In such event, the Company also has the right, in exchange for the payment at the end of each calendar year until each calendar year ending December 31, 2003, of an annual amount equal to the product of Mr. Marcus's average bonus multiplied by the fraction of each such calendar year which precedes the fifth anniversary of the effective date of the Marcus Employment Agreement, to require that Mr. Marcus not be employed by or perform activities on behalf of or have ownership interest in any radio or television broadcasting station serving the same market as any radio station owned by the Company, or in connection with any business enterprise that is directly or indirectly engaged in any of the business activities in which any business owned by the Company has significant involvement, subject to certain exceptions. The Marcus Employment Agreement further provides that if Mr. Marcus's employment is terminated by reason of expiration or non-renewal of the Marcus Employment Agreement, the Company shall make a one-time cash payment to Mr. Marcus equal to two times the amount of his annual base salary for the contract year in which such employment terminates. The Marcus Employment Agreement also provides that Mr. Marcus shall be entitled to receive personal security services, to be paid for by the Company, and certain other customary benefits and perquisites. MCLAUGHLIN EMPLOYMENT AGREEMENT On August 18, 1998, the Company entered into an employment agreement with Mr. McLaughlin (the "McLaughlin Employment Agreement"), that has a term that extends through August 18, 2003, and provides for an annual base salary of $500,000 for the first year of the employment agreement, to be increased each year by a percentage equal to the percentage change in the consumer price index during the preceding year. The 82 89 McLaughlin Employment Agreement provides for Mr. McLaughlin to receive an annual bonus as determined by the Compensation Committee, based upon the recommendation of the Chief Executive Officer. The McLaughlin Employment Agreement also provides that on the agreement date and on each of the first four anniversaries thereof on which Mr. McLaughlin remains employed by the Company, Mr. McLaughlin shall be granted options to purchase 60,000 shares of Common Stock of the Company. If Mr. McLaughlin's employment is terminated without "cause" (as defined in the McLaughlin Employment Agreement) or if Mr. McLaughlin terminates his employment for "good reason" (as defined in the McLaughlin Employment Agreement) prior to the fifth anniversary of the effective date of the McLaughlin Employment Agreement, Mr. McLaughlin will receive on such termination date a number of options equal to 300,000 minus the number of options previously granted to Mr. McLaughlin pursuant to the preceding sentence prior to such date. In addition, as an execution bonus, the Company will grant to Mr. McLaughlin options to purchase 300,000 shares of Common Stock of the Company at a price of $48.375 per share 25% of which shall vest on the effective date thereof and 25% of which will vest on each of the three anniversaries of the date of grant. The Company also paid to Mr. McLaughlin a one-time execution bonus in the gross amount of $1,000,000. The McLaughlin Employment Agreement provides that all options granted pursuant to the McLaughlin Employment Agreement will be exercisable for ten years from the date of grant of the option (notwithstanding any termination of employment). The annual option grant shall be at a price per share equal to the market price for Common Stock at the close of trading on the day immediately preceding the date of the grant. The McLaughlin Employment Agreement provides that, in the event of termination of Mr. McLaughlin's employment by the Company without "cause" or by Mr. McLaughlin with "good reason," the Company shall make a one-time cash payment to Mr. McLaughlin in a gross amount such that the net payments retained by Mr. McLaughlin (after payment by the Company of any excise taxes imposed by Section 4999 of the Internal Revenue Code of 1986, as amended, with respect to such payment) shall equal $1,000,000. The McLaughlin Employment Agreement further provides that, in the event of termination of Mr. McLaughlin's employment by Mr. McLaughlin for other than "good reason," in exchange for Mr. McLaughlin's agreement not to induce any employee of any media company owned by the Company to terminate such employment or to become employed by any other media company, the Company shall continue to pay Mr. McLaughlin his applicable base salary though the earlier of the fifth anniversary of the effective date thereof or the second anniversary of the termination of employment (the "Cessation Date"). In such event, the Company also has the right, in exchange for the payment at the end of each calendar year through the year which includes the Cessation Date of an annual amount equal to the product of Mr. McLaughlin's average bonus multiplied by the fraction of each such calendar year which precedes the Cessation Date, to require that Mr. McLaughlin not be employed by or perform activities on behalf of or have an ownership interest in any media company serving the same market as any media company owned by the Company. NEUMAN EMPLOYMENT AGREEMENT On June 1, 1998, the Company entered into an employment agreement with Mr. Neuman, to be effective July 1, 1998 (the "Neuman Employment Agreement"), that has a term that extends through July 1, 2003, and provides for an annual base salary of $500,000 for the first year of the employment agreement, to be increased each year by $25,000. The 83 90 Neuman Employment Agreement provides for Mr. Neuman to receive an annual bonus as determined by the Compensation Committee, based upon the recommendation of the Chief Executive Officer; provided, however, that the bonus shall in no event be less than $500,000 nor greater than $1,500,000. The Neuman Employment Agreement provides that on the agreement date and on each of the first four anniversaries of the effective date thereof on which Mr. Neuman remains employed by the Company, Mr. Neuman shall be granted options to purchase 100,000 shares of Common Stock of the Company. If Mr. Neuman's employment is terminated without "cause" (as defined in the Neuman Employment Agreement) or if Mr. Neuman terminates his employment for "good reason" (as defined in the Neuman Employment Agreement) prior to the fifth anniversary of the effective date of the Neuman Employment Agreement, Mr. Neuman will receive on such termination date a number of options equal to 500,000 minus the number of options previously granted to Mr. Neuman pursuant to the preceding sentence prior to such date. In addition, as an execution bonus, the Company will grant to Mr. Neuman options to purchase 300,000 shares of Common Stock of the Company at a price of $42.3125 per share. The Neuman Employment Agreement provides that all options granted pursuant to the Neuman Employment Agreement will be exercisable for ten years from the date of grant of the option (notwithstanding any termination of employment). The annual option grant shall be at a price per share equal to the market price for Common Stock at the close of trading on the day immediately preceding the date of the grant. The Neuman Employment Agreement provides that, in the event of termination of Mr. Neuman's employment by the Company without "cause" or by Mr. Neuman with "good reason," the Company shall make a one-time cash payment to Mr. Neuman in a gross amount such that the net payments retained by Mr. Neuman (after payment by the Company of any excise taxes imposed by Section 4999 of the Internal Revenue Code of 1986, as amended, with respect to such payment) shall equal $2,000,000. The Neuman Employment Agreement further provides that, in the event of termination of Mr. Neuman's employment by Mr. Neuman for other than "good reason," in exchange for Mr. Neuman's agreement not to induce any employee of any media company owned by the Company to terminate such employment or to become employed by any other media company, the Company shall continue to pay Mr. Neuman his applicable base salary through the earlier of the fifth anniversary of the effective date thereof or the second anniversary of the termination of employment (the "Cessation Date"). In such event, the Company also has the right, in exchange for the payment at the end of each calendar year through the year which includes the Cessation Date of an annual amount equal to the product of Mr. Neuman's average bonus multiplied by the fraction of each such calendar year which precedes the Cessation Date, to require that Mr. Neuman not be employed by or perform activities on behalf of or have an ownership interest in any media company serving the same market as any media company owned by the Company. The Neuman Employment Agreement further provides that if Mr. Neuman's employment is terminated by reason of expiration or non-renewal of the Neuman Employment Agreement, the Company shall make a one-time cash payment to Mr. Neuman equal to two times the amount of his annual base salary for the contract year in which such employment terminates. The Neuman Employment Agreement provides that if the Company provides employment related benefits in an aggregate amount greater than or on more favorable terms as are granted to any other senior executives (except for benefits and Employment Inducements (as defined therein) provided to the Chief Executive Officer or Chief Operating Officer), Mr. Neuman would 84 91 be provided such benefits in a substantially comparable amount and/or under substantially comparable terms, on an aggregate basis. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION DECISIONS The members of the compensation committee of Chancellor Media, CMHC and the Company are Messrs. Hicks, Massey, Jordan, Marcus and Lewis. Mr. Hicks serves as chairman of the compensation committee, and also serves as the Chairman of the Board of Chancellor Media, CMHC and the Company. Messrs. Massey and Marcus previously served on the compensation committee of Chancellor, and Mr. Lewis previously served on the compensation committee of Evergreen. 85 92 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table lists information concerning the beneficial ownership of the Common Stock of Chancellor Media on November 30, 1998 by (i) each director and executive officer of Chancellor Media and their affiliates on November 30, 1998, (ii) all directors and executive officers as a group and (iii) each person known to the Company to own beneficially more than 5% of the Common Stock of Chancellor Media. As of November 30, 1998, 1,000 shares of the common stock of CMCLA are held beneficially and of record by CMHC, and 40 shares are held beneficially and of record by a wholly-owned subsidiary of CMHC. As of November 30, 1998, all of the common stock of CMHC is held beneficially and of record by Chancellor Media Corporation.
NAME OF STOCKHOLDER SHARES PERCENT(1) - ------------------- ---------- ---------- Hicks Muse Parties(2)........................ 16,944,371 11.9% c/o Hicks, Muse, Tate & Furst Incorporated 200 Crescent Court, Suite 1600 Dallas, Texas 75201 Putnam Investments, Inc.(3).................. 16,956,556 11.9% One Post Office Square Boston, Massachusetts 02109 Janus Capital Corporation(4)................. 14,507,490 10.2% 100 Fillmore Street Denver, Colorado 80206-4923 Thomas O. Hicks.............................. 16,944,371(5) 11.9% Jeffrey A. Marcus............................ 1,018,402(6) * James E. de Castro........................... 2,405,000(7) 1.7% Matthew E. Devine............................ 1,470,000(8) 1.0% Eric C. Neuman............................... 406,356(9) * James A. McLaughlin.......................... 75,000(10) * Kenneth J. O'Keefe........................... 104,000(11) * Thomas P. McMillin........................... 54,500(12) * Richard A. B. Gleiner........................ 40,500(13) * Thomas J. Hodson............................. 37,500(14) * Perry J. Lewis............................... 140,715(15) * Lawrence D. Stuart, Jr....................... 11,292 * John H. Massey............................... 53,524(16) * Steven Dinetz................................ 1,443,954(17) * Vernon E. Jordan, Jr......................... 12,500(18) * J. Otis Winters.............................. -- * Michael J. Levitt............................ -- * All directors and executive officers as a group (17 persons)......................... 24,217,614(19) 16.2%
- ------------------------- * Less than one percent (1%). 86 93 (1) Assumes that 142,724,983 shares of Chancellor Media Common Stock were issued and outstanding as of November 30, 1998. (2) Consists of 1,278,969 shares owned of record by Thomas O. Hicks, 346,736 shares owned of record by Mr. Hicks as trustee for certain trusts of which his children are beneficiaries and 20,816 shares owned of record by Mr. Hicks as co-trustee of a trust for the benefit of unrelated parties. Also includes 15,297,850 shares owned of record by three limited partnerships of which the ultimate general partners are entities controlled by Mr. Hicks or Hicks Muse. Mr. Hicks is the controlling stockholder of Hicks Muse and serves as Chairman of the Board, Chief Executive Officer and Secretary of Hicks Muse. Accordingly, Mr. Hicks may be deemed to be the beneficial owner of all or a portion of the stock owned of record by such limited partnerships. John R. Muse, Charles W. Tate, Jack D. Furst, Lawrence D. Stuart, Jr., Michael J. Levitt, David B. Deniger and Dan H. Blanks are officers, directors and minority stockholders of Hicks Muse and as such may be deemed to share with Mr. Hicks the power to vote or dispose of shares held by such partnerships. Messrs. Hicks, Muse, Tate, Furst, Stuart, Levitt, Deniger and Blanks disclaim the existence of a group and each of them disclaims beneficial ownership of shares not owned of record by him. (3) Based solely upon information contained in such person's filing on September 18, 1998 of Schedule 13G under the Exchange Act. (4) Includes 7,747,315 shares owned by Janus Fund, an investment company registered under the Investment Company Act of 1940, as amended. Based solely upon information contained in such person's filing on September 10, 1998 of Schedule 13G under the Exchange Act. (5) Consists of 1,278,969 shares owned of record by Mr. Hicks, 346,736 shares owned of record by Mr. Hicks as trustee for certain trusts of which his children are beneficiaries and 20,816 shares owned of record by Mr. Hicks as co-trustee of a trust for the benefit of unrelated parties. Also includes 15,297,850 shares owned of record by three limited partnerships of which the ultimate general partners are entities controlled by Mr. Hicks and Hicks Muse. Mr. Hicks is the controlling stockholder of Hicks Muse and serves as Chairman of the Board, Chief Executive Officer and Secretary of Hicks Muse. Accordingly, Mr. Hicks may be deemed to be the beneficial owner of all or a portion of the stock owned of record by such limited partnerships. Mr. Hicks disclaims beneficial ownership of shares not owned of record by him. (6) Includes options that are exercisable within 60 days of the date hereof to purchase 849,242 shares, 825,000 of which are subject to options to be granted pursuant to the Marcus Employment Agreement. (7) Consists of options that are exercisable within 60 days of the date hereof to purchase 2,405,000 shares, 960,000 of which are subject to options to be granted pursuant to the de Castro Employment Agreement. (8) Consists of options that are exercisable within 60 days of the date hereof to purchase 1,470,000 shares, 720,000 of which are subject to options to be granted pursuant to the Devine Employment Agreement. (9) Includes options that are exercisable within 60 days of the date hereof to purchase 400,000 shares to be granted pursuant to the Newman Employment Agreement. 87 94 (10) Consists of options that are exercisable within 60 days of the date hereof to purchase 75,000 shares to be granted pursuant to the McLaughlin Employment Agreement. (11) Includes options that are exercisable within 60 days of the date hereof to purchase 100,000 shares. (12) Includes options that are exercisable within 60 days of the date hereof to purchase 50,000 shares. (13) Includes options that are exercisable within 60 days of the date hereof to purchase 37,500 shares. (14) Consists of options that are exercisable within 60 days of the date hereof to purchase 37,500 shares. (15) Includes options that are exercisable within 60 days of the date hereof to purchase 37,500 shares. (16) Consists of options that are exercisable within 60 days of the date hereof to purchase 36,742 shares and 16,782 shares held by Mr. Massey's wife as her separate property. (17) Includes (i) options that are exercisable within 60 days of the date hereof to purchase 1,310,956 shares, (ii) 1,090 shares held by an individual retirement account for the benefit of Mr. Dinetz and (iii) 1,000 shares held by Mr. Dinetz' daughter. Mr. Dinetz disclaims beneficial ownership of the shares of Chancellor Media Common Stock that are not owned by him of record. (18) Consists of options that are exercisable within 60 days of the date hereof to purchase 12,500 shares. (19) Includes options to purchase 6,821,940 shares. 88 95 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The Company is subject to a financial monitoring and oversight agreement, dated April 1, 1996, as amended on September 4, 1997 (the "Financial Monitoring and Oversight Agreement"), with Hicks, Muse & Co. Partners, L.P. ("Hicks Muse Partners"), an affiliate of Hicks Muse. Pursuant to the Financial Monitoring and Oversight Agreement, the Company pays to Hicks Muse Partners an annual fee of not less than $1.0 million, subject to increase or decrease (but not below $1.0 million), based upon changes in the Consumer Price Index. Hicks Muse Partners is also entitled to reimbursement for any out-of-pocket expenses incurred in connection with rendering services under the Financial Monitoring and Oversight Agreement. The Financial Monitoring and Oversight Agreement provides that the agreement will terminate at such time as Thomas O. Hicks and his affiliates collectively cease to beneficially own at least two-thirds of the number of shares of Common Stock beneficially owned by them, collectively, at the effective time of the Chancellor Merger. The Company and Chancellor paid Hicks Muse Partners a total of $0.7 million in 1997 pursuant to the Financial Monitoring and Oversight Agreement of which $0.3 million was paid by the Company following the Chancellor Merger and which is included in corporate general and administrative expense in the accompanying consolidated statement of operations. In connection with the consummation of the Chancellor Merger, a Financial Advisory Agreement among Chancellor, CRBC and HM2/Management Partners, L.P. ("HM2/Management"), an affiliate of Hicks Muse, was terminated. In consideration thereof, in lieu of any payments required to be made under the Financial Advisory Agreement in respect of the transactions contemplated by the Chancellor Merger, HM2/Management was paid a fee of $10.0 million in cash upon consummation of the Chancellor Merger which was accounted for as a direct acquisition cost. As part of the termination of the Financial Advisory Agreement, the Company paid Hicks Muse Partners $1.5 million for financial advisory services in connection with the Katz Acquisition which was accounted for as a direct acquisition cost. Upon the consummation of the Capstar Merger, the Company will become subject to a Financial Advisory Agreement pursuant to which Hicks Muse will be entitled to be financial advisor on certain transactions of the Company and its subsidiaries as follows: (a) on any acquisition, disposition or exchange transaction (an "M&A Transaction") for which the Company or any such subsidiaries retain any Financial Advisor (as hereinafter defined), Hicks Muse shall be entitled to serve as a co-financial advisor on such transaction and shall have the right to mutually agree with the Company's indirect parent upon the selection of any such Financial Advisor or Financial Advisors so retained and, unless mutually agreed to otherwise by Hicks Muse and the Company's indirect parent, Hicks Muse would be entitled to receive a "market fee" for its services in connection therewith of no less than 50% of the aggregate fees paid to all such advisors (including Hicks Muse), (b) on any M&A Transaction of the Company or any of its subsidiaries for which a Financial Advisor is not retained by the Company or any of its subsidiaries but has a transaction value in excess of $500 million, Hicks Muse would be the exclusive financial advisor of the Company and its subsidiaries and receive a "market fee" for its services in connection therewith, and (c) on any underwriting, loan syndication, equity placement or other financing transaction (a "Financing Transaction") in which the Company or any of its subsidiaries retain one or more Financial Advisors, Hicks Muse would have the right to mutually agree with the Company's parent on the selection of each 89 96 such Financial Advisor in connection with such Financing Transaction. "Financial Advisor" shall mean any investment bank, commercial bank, underwriter, arranging or syndication agent or other person or entity that provides investment banking, underwriting, financial advice, valuation or other similar services with respect to any M&A Transaction or Financing Transaction; provided, however, that a Financial Advisor shall not include ordinary business brokers. Vernon E. Jordan, Jr., a director of the Company, also serves on the board of directors of Bankers Trust Company and Bankers Trust Corporation. BT Alex. Brown Incorporated is an affiliate of Bankers Trust Company and Bankers Trust Corporation and is serving as an Initial Purchaser of the Notes in this Offering and will receive a customary underwriting discount in connection therewith. See "Private Placement." In addition, affiliates of Bankers Trust Company and Bankers Trust Corporation have in the past provided a variety of commercial banking, investment banking and financial advisory services to the Company, and expect to continue to provide such services to the Company in the future. Chancellor Media is subject to that certain Amended and Restated Stockholders Agreement, dated as of February 14, 1996, as amended on September 4, 1997 (the "Chancellor Stockholders Agreement"), among Chancellor and certain holders of the Common Stock held by former stockholders of Chancellor, which provides for certain registration rights for the shares of Common Stock held by such holders. The Chancellor Stockholders Agreement relates to shares of Common Stock held by certain affiliates of Hicks Muse. As part of the Chancellor Merger, the Company has made certain cash payments and accelerated the vesting of certain stock options previously granted by Chancellor to Steven Dinetz, a director of the Company. For a description of these transactions, see "Executive Compensation -- Compensation of Executive Officers." The Company has entered into an agreement relating to the Capstar/SFX Transaction and Chancellor Media has entered into an agreement relating to the Capstar Merger, each with Capstar, which is affiliated with the Company. In addition, Chancellor Media has entered into an agreement relating to the LIN Merger. Affiliates of Hicks Muse have a controlling interest in Capstar and LIN and a substantial investment in Chancellor Media. For a description of these transactions, see "Business -- Recent Developments." Certain radio stations owned by Capstar have engaged Katz to sell national spot advertising air time, and such stations pay customary commissions to Katz for such services. Additionally, Capstar's radio stations are affiliated with the AMFM Radio Networks and receive a portion of advertising revenues generated by the network. 90 97 THE EXCHANGE OFFER PURPOSE AND EFFECT The Old Notes were sold by the Company on September 25, 1998. In connection with that placement, the Company entered into the Registration Rights Agreement, which requires that the Company file the Registration Statement under the Securities Act with respect to the New Notes and, upon the effectiveness of that Registration Statement, offer to the holders of the Old Notes the opportunity to exchange their Old Notes for a like principal amount of New Notes, which will be issued without a restrictive legend and which generally may be reoffered and resold by the holder without registration under the Securities Act. The Registration Rights Agreement further provides that the Company must use its reasonable best efforts to (i) cause the Registration Statement with respect to the exchange offer to be declared effective within 180 days of the date on which the Company issued the Old Notes and (ii) consummate the exchange offer on or before the 225th day following the date on which the Company issued the Old Notes. Except as provided below, upon the completion of the exchange offer, the Company's obligations with respect to the registration of the Old Notes and the New Notes will terminate. A copy of the Registration Rights Agreement has been filed as an exhibit to the Registration Statement, of which this Prospectus is a part, and the summary herein of the material provisions thereof does not purport to be complete and is qualified in its entirety by reference thereto. As a result of the timely filing and the effectiveness of the Registration Statement, certain liquidated damages provided for in the Registration Rights Agreement will not become payable by the Company. Following the completion of the exchange offer (except as set forth in the paragraph immediately below), holders of Old Notes not tendered will not have any further registration rights and those Old Notes will continue to be subject to certain restrictions on transfer. Accordingly, the liquidity of the market for the Old Notes could be adversely affected upon consummation of the exchange offer. In order to participate in the exchange offer, a holder must represent to the Company and the Guarantors, among other things, that (i) the New Notes acquired pursuant to the exchange offer are being obtained in the ordinary course of business of the holder, (ii) the holder is not engaging in and does not intend to engage in a distribution of the New Notes, (iii) the holder does not have an arrangement or understanding with any person to participate in the distribution of the New Notes and (iv) the holder is not an "affiliate," as defined under Rule 405 promulgated under the Securities Act, of the Company and the Guarantors. Pursuant to the Registration Rights Agreement if (i) the Company determines that it is not permitted to effect the exchange offer as contemplated hereby because of any change in applicable law or Commission policy, or (ii) any Holder of Transfer Restricted Securities notifies the Company prior to the 20th day following consummation of the exchange offer (a) that it is prohibited by law or SEC policy from participating in the exchange offer, (b) that it may not resell the New Notes acquired by it in the exchange offer to the public without delivering a prospectus and that this Prospectus is not appropriate or available for such resales or (c) that it is a broker-dealer and owns Old Notes acquired directly from the Company or an affiliate of the Company, the Company is required to file a "shelf" registration statement for a continuous offering pursuant to Rule 415 under the Securities Act in respect of the Old Notes. For purposes of the foregoing, "Transfer Restricted Securities" means each Old Note until (i) the date on which such Note has been exchanged by a person other than a broker-dealer for a New 91 98 Note in the exchange offer, (ii) following the exchange by a broker-dealer in the Exchange Offer of an Old Note for a New Note, the date on which such New Note is sold to a purchaser who receives from such broker-dealer on or prior to the date of such sale a copy of this Prospectus, (iii) the date on which such Old Note has been electively registered under the Securities Act and disposed of in accordance with such "shelf" registration statement or (iv) the date on which such Old Note is distributed to the public pursuant to Rule 144 under the Act or may be distributed to the public pursuant to Rule 144(k) under the Act. Other than as set forth in this paragraph, no holder will have the right to participate in the "shelf" registration statement nor otherwise require that the Company register such holder's shares of Old Notes under the Securities Act. See "-- Procedures for Tendering." Based on an interpretation by the SEC's staff set forth in no-action letters issued to third parties unrelated to the Company and the Guarantors, the Company believes that, with the exceptions set forth below, New Notes issued pursuant to the exchange offer in exchange for Old Notes may be offered for resale, resold and otherwise transferred by holders thereof (other than any holder which is an "affiliate" of the Company or the Guarantors within the meaning of Rule 405 promulgated under the Securities Act, or a broker-dealer who purchased Old Notes directly from us to resell pursuant to Rule 144A or any other available exemption promulgated under the Securities Act) without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that the New Notes are acquired in the ordinary course of business of the holder and the holder does not have an arrangement or understanding with any person to participate in the distribution of such New Notes. Any holder who tenders in the exchange offer for the purpose of participating in a distribution of the New Notes cannot rely on this interpretation by the SEC's staff and must comply with the registration and prospectus delivery requirements of the Securities Act in connection with a secondary resale transaction. Each broker-dealer that receives New Notes for its own account in exchange for Old Notes, where such Old Notes were acquired by such broker-dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such New Notes. See "Plan of Distribution." Broker-dealers who acquired Old Notes directly from us and not as a result of market-making activities or other trading activities may not rely on the staff's interpretations discussed above or participate in the exchange offer and must comply with the prospectus delivery requirements of the Securities Act in order to sell the Old Notes. CONSEQUENCES OF FAILURE TO EXCHANGE Following the completion of the exchange offer (except as set forth in the second paragraph under "-- Purpose and Effect" above), holders of Old Notes not tendered will not have any further registration rights and those Old Notes will continue to be subject to certain restrictions on transfer. Accordingly, the liquidity of the market for a holder's Old Notes could be adversely affected upon completion of the exchange offer if the holder does not participate in the exchange offer. TERMS OF THE EXCHANGE OFFER Upon the terms and subject to the conditions set forth in this Prospectus and in the letter of transmittal, the Company will accept any and all Old Notes validly tendered and not withdrawn prior to 5:00 p.m., New York City time, on January 9, 1999, or such date and 92 99 time to which we extend the offer. The Company will issue $1,000 principal amount of New Notes in exchange for each $1,000 principal amount of outstanding Old Notes accepted in the exchange offer. Holders may tender some or all of their Old Notes pursuant to the exchange offer. However, Old Notes may be tendered only in integral multiples of $1,000 in principal amount. The form and terms of the New Notes are substantially the same as the form and terms of the Old Notes except that the New Notes have been registered under the Securities Act and will not bear legends restricting their transfer. The New Notes will evidence the same debt as the Old Notes and will be issued pursuant to, and entitled to the benefits of, the Indenture pursuant to which the Old Notes were issued. As of November 1, 1998, Old Notes representing $750.0 million aggregate principal amount were outstanding and there was one registered holder, a nominee of the DTC. This Prospectus, together with the letter of transmittal, is being sent to such registered holder and to others believed to have beneficial interests in the Old Notes. The Company intends to conduct the exchange offer in accordance with the applicable requirements of the Exchange Act and the rules and regulations of the SEC promulgated thereunder. The Company shall be deemed to have accepted validly tendered Old Notes when, as, and if the Company has given oral or written notice thereof to the Exchange Agent. The Exchange Agent will act as agent for the tendering holders for the purpose of receiving the New Notes from the Company. If any tendered Old Notes are not accepted for exchange because of an invalid tender, the occurrence of certain other events set forth herein or otherwise, certificates for any such unaccepted Old Notes will be returned, without expense, to the tendering holder thereof as promptly as practicable after January 9, 1998, unless the exchange offer is extended. Holders who tender Old Notes in the exchange offer will not be required to pay brokerage commissions or fees or, subject to the instructions in the letter of transmittal, transfer taxes with respect to the exchange of Old Notes pursuant to the exchange offer. The Company will pay all charges and expenses, other than certain applicable taxes, in connection with the exchange offer. See "-- Fees and Expenses." EXPIRATION DATE; EXTENSIONS; AMENDMENTS The expiration date shall be 5:00 p.m., New York City time, on January , 1999, unless the Company, in its sole discretion, extends the exchange offer, in which case the expiration date shall mean the latest date and time to which the exchange offer is extended. In order to extend the exchange offer, the Company will notify the Exchange Agent and each registered holder of any extension by oral or written notice prior to 9:00 a.m., New York City time, on the next business day after the previously scheduled expiration date. The Company reserves the right, in its sole discretion, (i) to delay accepting any Old Notes, to extend the exchange offer or, if any of the conditions set forth under "-- Conditions to Exchange Offer" shall not have been satisfied, to terminate the exchange offer, by giving oral or written notice of such delay, extension or termination to the Exchange Agent, or (ii) to amend the terms of the exchange offer in any manner. In the event that the Company makes a material or fundamental change to the terms of the exchange offer, the Company will file a post-effective amendment to the Registration Statement. 93 100 PROCEDURES FOR TENDERING Only a holder of Old Notes may tender the Old Notes in the exchange offer. Except as set forth under "-- Book Entry Transfer," to tender in the exchange offer a holder must complete, sign, and date the Letter of Transmittal, or a copy thereof, have the signatures thereon guaranteed if required by the Letter of Transmittal, and mail or otherwise deliver the Letter of Transmittal or copy to the Exchange Agent prior to the expiration date. In addition, (i) certificates for such Old Notes must be received by the Exchange Agent along with the Letter of Transmittal prior to the expiration date, (ii) a timely confirmation of a book-entry transfer (a "Book-Entry Confirmation") of such Old Notes, if that procedure is available, into the Exchange Agent's account at DTC (the "Book-Entry Transfer Facility") pursuant to the procedure for book-entry transfer described below, must be received by the Exchange Agent prior to the expiration date or (iii) the holder must comply with the guaranteed delivery procedures described below. To be tendered effectively, the letter of transmittal and other required documents must be received by the Exchange Agent at the address set forth under "-- Exchange Agent" prior to the expiration date. The tender by a holder that is not withdrawn before the expiration date will constitute an agreement between that holder and the Company in accordance with the terms and subject to the conditions set forth herein and in the letter of transmittal. THE METHOD OF DELIVERY OF OLD NOTES AND THE LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK OF THE HOLDER. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE AN OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE. NO LETTER OF TRANSMITTAL OR OLD NOTES SHOULD BE SENT TO THE COMPANY. HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST COMPANIES OR NOMINEES TO EFFECT THESE TRANSACTIONS FOR SUCH HOLDERS. Any beneficial owner whose Old Notes are registered in the name of a broker, dealer, commercial bank, trust company, or other nominee and who wishes to tender should contact the registered holder promptly and instruct the registered holder to tender on the beneficial owner's behalf. If the beneficial owner wishes to tender on the owner's own behalf, the owner must, prior to completing and executing the letter of transmittal and delivering the owner's Old Notes, either make appropriate arrangements to register ownership of the Old Notes in the beneficial owner's name or obtain a properly completed bond power from the registered holder. The transfer of registered ownership may take considerable time. Signatures on a letter of transmittal or a notice of withdrawal, as the case may be, must be guaranteed by an Eligible Institution (as defined) unless Old Notes tendered pursuant thereto are tendered (i) by a registered holder who has not completed the box entitled "Special Registration Instruction" or "Special Delivery Instructions" on the letter of transmittal or (ii) for the account of an Eligible Institution. If signatures on a letter of transmittal or a notice of withdrawal, as the case may be, are required to be guaranteed, the guarantee must be by any eligible guarantor institution that is a member of or participant in the Securities Transfer Agents Medallion Program, the New York Stock Exchange Medallion Signature Program or an "eligible guarantor institution" within the meaning of Rule 17Ad-15 under the Exchange Act (an "Eligible Institution"). 94 101 If the letter of transmittal is signed by a person other than the registered holder of any Old Notes listed therein, the Old Notes must be endorsed or accompanied by a properly completed bond power, signed by the registered holder as that registered holder's name appears on the Old Notes. If the letter of transmittal or any Old Notes or bond powers are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations, or others acting in a fiduciary or representative capacity, such persons should so indicate when signing, and evidence satisfactory to the Company of their authority to so act must be submitted with the letter of transmittal unless waived by the Company. All questions as to the validity, form, eligibility (including time of receipt), acceptance, and withdrawal of tendered Old Notes will be determined by the Company in its sole discretion, which determination will be final and binding. The Company reserves the absolute right to reject any and all Old Notes not properly tendered or any Old Notes the Company's acceptance of which would, in the opinion of counsel for the Company, be unlawful. The Company also reserves the right to waive any defects, irregularities or conditions of tender as to particular Old Notes. The Company's interpretation of the terms and conditions of the exchange offer (including the instructions in the letter of transmittal) will be final and binding on all parties. Unless waived, any defects or irregularities in connection with tenders of Old Notes must be cured within such time as the Company shall determine. Although the Company intends to notify holders of defects or irregularities with respect to tenders of Old Notes, neither the Company, the Exchange Agent, nor any other person shall incur any liability for failure to give such notification. Tenders of Old Notes will not be deemed to have been made until such defects or irregularities have been cured or waived. Any Old Notes received by the Exchange Agent that are not properly tendered and as to which the defects or irregularities have not been cured or waived will be returned by the Exchange Agent to the tendering holders, unless otherwise provided in the letter of transmittal, as soon as practicable following January 9, 1999, unless the exchange offer is extended. In addition, the Company reserves the right in its sole discretion to purchase or make offers for any Old Notes that remain outstanding after the expiration date or, as set forth under "-- Conditions to the exchange offer," to terminate the exchange offer and, to the extent permitted by applicable law, purchase Old Notes in the open market, in privately negotiated transactions, or otherwise. The terms of any such purchases or offers could differ from the terms of the exchange offer. By tendering, each holder will represent to the Company and the Guarantors that, among other things, (i) the New Notes acquired pursuant to the exchange offer are being obtained in the ordinary course of business of the person receiving such New Notes, whether or not such person is the registered holder, (ii) the holder is not engaging in and does not intend to engage in a distribution of such New Notes, (iii) the holder does not have an arrangement or understanding with any person to participate in the distribution of such New Notes and (iv) the holder is not an "affiliate," as defined under Rule 405 of the Securities Act, of the Company and the Guarantors. In all cases, issuance of New Notes for Old Notes that are accepted for exchange pursuant to the exchange offer will be made only after timely receipt by the Exchange Agent of certificates for such Old Notes or a timely Book-Entry Confirmation of such Old Notes into the Exchange Agent's account at the Book-Entry Transfer Facility, a properly 95 102 completed and duly executed letter of transmittal (or, with respect to the DTC and its participants, electronic instructions in which the tendering holder acknowledges its receipt of and agreement to be bound by the letter of transmittal), and all other required documents. If any tendered Old Notes are not accepted for any reason set forth in the terms and conditions of the exchange offer or if Old Notes are submitted for a greater principal amount than the holder desires to exchange, such unaccepted or non-exchanged Old Notes will be returned without expense to the tendering Holder thereof (or, in the case of Old Notes tendered by book-entry transfer into the Exchange Agent's account at the Book-Entry Transfer Facility pursuant to the book-entry transfer procedures described below, such nonexchanged Old Notes will be credited to an account maintained with such Book-Entry Transfer Facility) as promptly as practicable after the expiration or termination of the exchange offer. Each broker-dealer that receives New Notes for its own account in exchange for Old Notes, where such Old Notes were acquired by such broker-dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such New Notes. See "Plan of Distribution." BOOK-ENTRY TRANSFER The Exchange Agent will make a request to establish an account with respect to the Old Notes at the Book-Entry Transfer Facility for purposes of the exchange offer within two business days after the date of this Prospectus, and any financial institution that is a participant in the Book-Entry Transfer Facility's systems may make book-entry delivery of Old Notes being tendered by causing the Book-Entry Transfer Facility to transfer such Old Notes into the Exchange Agent's account at the Book-Entry Transfer Facility in accordance with such Book-Entry Transfer Facility's procedures for transfer. However, although delivery of Old Notes may be effected through book-entry transfer at the Book- Entry Transfer Facility, the letter of transmittal or copy thereof, with any required signature guarantees and any other required documents, must, in any case other than as set forth in the following paragraph, be transmitted to and received by the Exchange Agent at the address set forth under "-- Exchange Agent" on or prior to the expiration date or the guaranteed delivery procedures described below must be complied with. DTC's Automated Tender Offer Program ("ATOP") is the only method of processing exchange offers through DTC. To accept the exchange offer through ATOP, participants in DTC must send electronic instructions to DTC through DTC's communication system in lieu of sending a signed, hard copy letter of transmittal. DTC is obligated to communicate those electronic instructions to the Exchange Agent. To tender Old Notes through ATOP, the electronic instructions sent to DTC and transmitted by DTC to the Exchange Agent must contain the character by which the participant acknowledges its receipt of and agrees to be bound by the letter of transmittal. GUARANTEED DELIVERY PROCEDURES If a registered holder of the Old Notes desires to tender such Old Notes and the Old Notes are not immediately available, or time will not permit such holder's Old Notes or other required documents to reach the Exchange Agent before the expiration date, or the procedure for book-entry transfer cannot be completed on a timely basis, a tender may be effected if (i) the tender is made through an Eligible Institution, (ii) prior to the expiration date, the Exchange Agent receives from such Eligible Institution a properly 96 103 completed and duly executed letter of transmittal (or a facsimile thereof) and notice of guaranteed delivery, substantially in the form provided by the Company (by telegram, telex, facsimile transmission, mail or hand delivery), setting forth the name and address of the holder of Old Notes and the amount of Old Notes tendered, stating that the tender is being made thereby and guaranteeing that within three New York Stock Exchange, Inc. ("NYSE") trading days after the date of execution of the notice of guaranteed delivery, the certificates for all physically tendered Old Notes, in proper form for transfer, or a Book-Entry Confirmation, as the case may be, will be deposited by the Eligible Institution with the Exchange Agent and (iii) the certificates for all physically tendered Old Notes, in proper form for transfer, or a Book-Entry Confirmation, as the case may be, are received by the Exchange Agent within three NYSE trading days after the date of execution of the notice of guaranteed delivery. WITHDRAWAL RIGHTS Tenders of Old Notes may be withdrawn at any time prior to 5:00 p.m., New York City time, on the expiration date. For a withdrawal of a tender of Old Notes to be effective, a written or (for DTC participants) electronic ATOP transmission notice of withdrawal must be received by the Exchange Agent at its address set forth under "-- Exchange Agent" prior to 5:00 p.m., New York City time, on the expiration date. Any such notice of withdrawal must (i) specify the name of the person having deposited the Old Notes to be withdrawn (the "Depositor"), (ii) identify the Old Notes to be withdrawn (including the certificate number or numbers and principal amount of such Old Notes), (iii) be signed by the holder in the same manner as the original signature on the letter of transmittal by which such Old Notes were tendered (including any required signature guarantees) or be accompanied by documents of transfer sufficient to have the Trustee register the transfer of such Old Notes into the name of the person withdrawing the tender, and (iv) specify the name in which any such Old Notes are to be registered, if different from that of the Depositor. All questions as to the validity, form, and eligibility (including time of receipt) of such notices will be determined by the Company, whose determination shall be final and binding on all parties. Any Old Notes so withdrawn will be deemed not to have been validly tendered for exchange for purposes of the exchange offer. Any Old Notes which have been tendered for exchange but which are not exchanged for any reason will be returned to the holder thereof without cost to such holder as soon as practicable after withdrawal, rejection of tender, or termination of the exchange offer. Properly withdrawn Old Notes may be retendered by following one of the procedures under "-- Procedures for Tendering" at any time on or prior to the expiration date. CONDITIONS TO THE EXCHANGE OFFER Notwithstanding any other provision of the exchange offer, the Company shall not be required to accept for exchange, or to issue New Notes in exchange for, any Old Notes and may terminate or amend the exchange offer if at any time before the acceptance of such Old Notes for exchange or the exchange of the New Notes for such Old Notes, the Company determines that the exchange offer violates applicable law, any applicable interpretation of the staff of the Commission or any order of any governmental agency or court of competent jurisdiction. 97 104 The foregoing conditions are for the sole benefit of the Company and may be asserted by the Company regardless of the circumstances giving rise to any such condition or may be waived by the Company in whole or in part at any time and from time to time in its sole discretion. The failure by the Company at any time to exercise any of the foregoing rights shall not be deemed a waiver of any such right and each such right shall be deemed an ongoing right which may be asserted at any time and from time to time. In addition, the Company will not accept for exchange any Old Notes tendered, and no New Notes will be issued in exchange for any such Old Notes, if at such time any stop order shall be threatened or in effect with respect to the Registration Statement of which this Prospectus constitutes a part or the qualification of the Indenture under the Trust Indenture Act of 1939, as amended. In any such event the Company is required to use every reasonable effort to obtain the withdrawal of any stop order at the earliest possible time. EXCHANGE AGENT All executed letters of transmittal should be directed to the Exchange Agent. The Bank of New York has been appointed as Exchange Agent for the exchange offer. Questions, requests for assistance and requests for additional copies of this Prospectus or of the letter of transmittal should be directed to the Exchange Agent addressed as follows: THE BANK OF NEW YORK By Registered or Certified Mail: By Hand or Overnight Delivery: The Bank of New York The Bank of New York 101 Barclay Street 101 Barclay Street Floor 7-E Corporate Trust Services Window New York, New York 10286 Ground Level Attention: Chris Brown New York, New York 10286 Attention: Chris Brown
By Facsimile: (Eligible Institutions Only) (212) 815-6339 For Information or Confirmation by Telephone: (212) 815-4997 Originals of all documents sent by facsimile should be sent promptly by registered or certified mail, by hand or by overnight delivery service. FEES AND EXPENSES The Company will not make any payments to brokers, dealers or others soliciting acceptances of the exchange offer. The principal solicitation is being made by mail; however, additional solicitations may be made in person or by telephone by officers and employees of the Company. 98 105 The estimated cash expenses to be incurred in connection with the exchange offer will be paid by the Company and are estimated in the aggregate to be $700,000, which includes fees and expenses of the Exchange Agent, accounting, legal, printing, and related fees and expenses. TRANSFER TAXES Holders who tender their Old Notes for exchange will not be obligated to pay any transfer taxes in connection therewith, except that holders who instruct the Company to register New Notes in the name of, or request that Old Notes not tendered or not accepted in the exchange offer be returned to, a person other than the registered tendering holder will be responsible for the payment of any applicable transfer tax thereon. 99 106 DESCRIPTION OF NEW NOTES The New Notes will be issued under an indenture, to be dated as of September 30, 1998 (the "Indenture"), by and among the Company, the Guarantors named therein and The Bank of New York, as trustee (the "Trustee"). A copy of the Indenture may be obtained from the Company upon written request. The following summary of all of the provisions of the Indenture considered by the Company to be material to a prospective investor in the Notes does not purport to be complete and is subject to, and is qualified in its entirety by reference to, the Trust Indenture Act of 1939, as amended (the "TIA"), and to all of the provisions of the Indenture, including the definitions of certain terms therein, and those terms made a part of the Indenture by reference to the TIA as in effect on the date of the Indenture. The definitions of certain terms used in the following summary are set forth below under "-- Certain Definitions." The Trustee also serves as the Transfer Agent and Registrar for the Common Stock of Chancellor Media and for all of the preferred stock of Chancellor Media and the Company. In addition, the Trustee serves as trustee under the Indenture, dated June 16, 1997, governing Chancellor Media's 6% Convertible Subordinated Exchange Debentures due 2012. Finally, the Trustee serves as a lender and as a co-syndication agent under the Senior Credit Facility. The Notes will be unsecured obligations of the Company and will rank pari passu in right of payment to the 9 3/8% Notes, the 8 3/4% Notes, the 10 1/2% Notes and the 8 1/8% Notes, and will be subordinated in right of payment to all Senior Debt of the Company. The Notes will be guaranteed on a senior subordinated basis by the Guarantors. The New Notes will be issued in fully registered form only, without coupons, in denominations of $1,000 and integral multiples thereof. Initially, the Trustee will act as paying agent and registrar for the New Notes. The New Notes may be presented for registration or transfer and exchange at the offices of the registrar, which initially will be the Trustee's principal corporate trust office. The Company may change any paying agent and registrar without notice to the holders. The Company will pay principal (and premium, if any) on the New Notes at the Trustee's principal corporate trust office in New York, New York. At the Company's option, such amounts may be paid at the Trustee's principal corporate trust office or by check mailed to the registered address of the holders. PRINCIPAL, MATURITY AND INTEREST The Notes are limited to $750,000,000 aggregate principal amount and will mature on October 1, 2008. Interest on the Notes will accrue at the rate of 9% per annum and will be payable semiannually on each April 1 and October 1, commencing on April 1, 1999, to the persons who are registered holders at the close of business on March 15 and September 15 immediately preceding the applicable interest payment date. Interest on the Notes will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from the Issue Date. Interest will be computed on the basis of a 360-day year comprised of twelve 30-day months. 100 107 OPTIONAL REDEMPTION The Notes will be redeemable, at the Company's option, in whole at any time or in part from time to time, on and after October 1, 2003, at the following redemption prices (expressed as percentages of the principal amount) if redeemed during the twelve-month period commencing on October 1 of the years set forth below, plus, in each case, accrued and unpaid interest thereon to the date of redemption:
YEAR PERCENTAGE ---- ---------- 2003........................................................ 106.50% 2004........................................................ 105.50% 2005........................................................ 104.50% 2006........................................................ 103.50% 2007........................................................ 102.00% 2008........................................................ 100.00%
In addition, on or prior to October 1, 2000, the Company may, at its option, use the net cash proceeds of one or more Public Equity Offerings (as defined) to redeem the Notes, in part, at a redemption price equal to 109% of the principal amount thereof plus accrued and unpaid interest thereon to the date of redemption; provided, however, that after any such redemption the aggregate principal amount of the Notes outstanding must equal at least 75% of the aggregate principal amount of the Notes originally issued in the Offering. In order to effect a redemption with proceeds of a Public Equity Offering, the Company shall send the redemption notice in the manner specified in the Indenture not later than 30 days after the consummation of such Public Equity Offering and effect such redemption not later than 90 days after the consummation of such Public Equity Offering. In addition, at any time on or prior to October 1, 2000, the Notes may also be redeemed as a whole at the option of the Company upon the occurrence of a Change of Control (as defined below), upon not less than 30 nor more than 60 days prior notice (but in no event more than 90 days after the occurrence of such Change of Control) mailed by first-class mail to each holder's registered address, at a redemption price equal to 100% of the principal amount thereof plus the Applicable Premium (as defined below) as of, and accrued and unpaid interest, if any, to, the date of redemption (the "Redemption Date") (subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date in respect of then outstanding Notes). "Applicable Premium" means, with respect to a Note at any Redemption Date, the greater of (i) 1.0% of the principal amount of such Note and (ii) (a) the present value of all remaining required interest and principal payments due on such Note and all premium payments relating thereto assuming a redemption date of October 1, 2003, computed using a discount rate equal to the Treasury Rate (as defined below) plus 100 basis points minus (b) the then outstanding principal amount of such Note minus (c) accrued interest paid on the redemption date. "Treasury Rate" means the yield to maturity at the time of computation of United States Treasury securities with a constant maturity (as compiled and published in the most recent Federal Reserve Statistical Release H.15 (519) ("Statistical Release") which has become publicly available at least two business days prior to the Redemption Date (or, if such Statistical Release is no longer published, any publicly available source or similar market 101 108 data)) most nearly equal to the period from the Redemption Date to October 1, 2003; provided, however, that if the period from the Redemption Date to October 1, 2003 is not equal to the constant maturity of a United States Treasury security for which a weekly average yield is given, the Treasury Rate shall be obtained by linear interpolation (calculated to the nearest one-twelfth of a year) from the weekly average yields of United States Treasury securities for which such yields are given, except that if the period from the Redemption Date to October 1, 2003 is less than one year, the weekly average yield on actually traded United States Treasury securities adjusted to a constant maturity of one year shall be used. Selection. In the case of any partial redemption, selection of the Notes for redemption will be made by the Trustee on a pro rata basis, by lot or by such other method as the Trustee in its sole discretion shall deem to be fair and appropriate, although no Note of $1,000 in original principal amount or less will be redeemed in part. If any Note is to be redeemed in part only, the notice of redemption relating to such Note shall state the portion of the principal amount thereof to be redeemed. A new Note in principal amount equal to the unredeemed portion thereof will be issued in the name of the holder thereof upon cancellation of the original Note. The Senior Credit Facility restricts the Company's ability to optionally redeem the Notes. CHANGE OF CONTROL The Indenture will provide that upon the occurrence of a Change of Control, each holder may have the right to require that the Company repurchase all or a portion of such holder's Notes pursuant to the offer described below (the "Change of Control Offer"), at a purchase price equal to 101% of the principal amount thereof plus accrued interest, if any, to the date of repurchase. The Indenture will provide that, prior to the mailing of the notice referred to below, but in any event within 30 days following the date on which a Change of Control occurs, the Company covenants to (i) repay in full all Indebtedness under the Senior Credit Facility (and terminate all commitments thereunder) or offer to repay in full all such Indebtedness (and terminate all such commitments) and to repay the Indebtedness owed to (and terminate the commitments of) each lender which has accepted such offer or (ii) obtain the requisite consents under the Senior Credit Facility to permit the repurchase of the Notes as provided below. The Company will first comply with the covenant in the preceding sentence before it will be required to repurchase Notes pursuant to the provisions described below; provided that the Company's failure to comply with the covenant described in the preceding sentence shall constitute an Event of Default described under clause (iii) under "-- Events of Default." Within 30 days following the date upon which a Change of Control occurs, the Company must send, by first class mail, a notice to each holder, with a copy to the Trustee, which notice shall govern the terms of the Change of Control Offer. Such notice will state, among other things, the purchase date, which must be no earlier than 30 days nor later than 45 days from the date such notice is mailed, other than as may be required by law (the "Change of Control Payment Date"). Upon compliance by the Company with the covenant described in the immediately preceding paragraph, the Company's failure to make a Change of Control Offer in accordance with this "Change of Control" covenant, and, upon the making of a Change of Control Offer, the failure of the Company to pay, on 102 109 or before the Change of Control Payment Date, the purchase price for the Notes validly tendered pursuant to the Change of Control Offer, shall constitute an Event of Default described under clauses (iii) and (ii), respectively, under "-- Events of Default." Holders electing to have a Note purchased pursuant to a Change of Control Offer will be required to surrender the Note, properly endorsed for transfer together with such other customary documents as the Company may reasonably request, to the paying agent at the address specified in the notice prior to the close of business on the business day prior to the Change of Control Payment Date. The Company will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with the purchase of Notes pursuant to a Change of Control Offer. This "Change of Control" covenant will not apply in the event of (i) certain transactions with Permitted Holders (as defined below) and (ii) changes in a majority of the Board of Directors of Chancellor Media, CMHC or the Company so long as a majority of each such Board of Directors continues to consist of Continuing Directors (as defined below). In addition, this covenant is not intended to afford holders of the Notes protection in the event of certain highly leveraged transactions, reorganizations, restructurings, mergers and other similar transactions that might adversely affect the holders of the Notes but would not constitute a Change of Control. However, the Indenture will contain limitations on the ability of the Company to incur additional Indebtedness and to engage in certain mergers, consolidations and sales of assets, whether or not a Change of Control is involved. See "-- Certain Covenants -- Limitation on Incurrence of Additional Indebtedness," "-- Certain Covenants -- Limitation on Asset Sales," "-- Certain Covenants -- Limitation on Asset Swaps" and "-- Certain Covenants -- Merger, Consolidation and Sale of Assets." If a Change of Control were to occur, there can be no assurance that the Company would have sufficient funds to pay the purchase price for all Notes that the Company might be required to purchase. In the event that the Company were required to purchase Notes pursuant to a Change of Control Offer, the Company expects that it would need to seek third-party financing to the extent it does not have available funds to meet its purchase obligations. However, there can be no assurance that the Company would be able to obtain such financing on favorable terms, if at all. In addition, the Senior Credit Facility restricts the Company's ability to repurchase the Notes, including pursuant to a Change of Control Offer. See "Description of Certain Indebtedness -- Senior Credit Facility." With respect to the sale of assets, the phrase "all or substantially all" as used in the Indenture varies according to the facts and circumstances of the subject transaction, has no clearly established meaning under relevant law and is subject to judicial interpretation. Accordingly, in certain circumstances there may be a degree of uncertainty in ascertaining whether a particular transaction would involve a disposition of "all or substantially all" of the assets of a person and therefore it may be unclear whether a Change of Control has occurred and whether the Notes are subject to a Change of Control Offer. Without the consent of each holder of the Notes affected thereby, after the mailing of the notice of the Change of Control Offer, no amendment to the Indenture may, directly or indirectly, affect the Company's obligation to purchase the Notes or amend, modify or change the obligation of the Company to consummate a Change of Control Offer or waive any default in the performance thereof or modify any of the provisions or definitions with 103 110 respect to any such offer. In addition, the Trustee may not waive the right of any holder of the Notes to require the repurchase of his or her Notes upon a Change of Control. SUBORDINATION The payment of all Obligations on the Notes will be subordinated and junior in right of payment to the prior payment in full in cash or Cash Equivalents (or such payment duly provided for to the satisfaction of the holders of Senior Debt) of all Obligations on Senior Debt. Upon any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities, to creditors upon any liquidation, dissolution, winding up, reorganization, assignment for the benefit of creditors or marshalling of assets of the Company or in a bankruptcy, reorganization, insolvency, receivership or other similar proceeding relating to the Company or its property, whether voluntary or involuntary, all Obligations due or to become due upon all Senior Debt will first be paid in full in cash or Cash Equivalents (or such payment duly provided for to the satisfaction of the holders of Senior Debt) before any payment or distribution of any kind or character is made on account of any Obligations on the Notes, or for the acquisition of any of the Notes for cash or property or otherwise. If any default occurs and is continuing in the payment when due, whether at maturity, upon any redemption, by declaration or otherwise, of any principal of, or interest on, or any other amounts owing with respect to any Senior Debt, no payment of any kind or character (except (i) in Qualified Capital Stock issued by the Company to pay interest on the Notes or issued in exchange for the Notes, (ii) in securities substantially identical to the Notes issued by the Company in payment of interest accrued thereon or (iii) in securities issued by the Company which are subordinated to the Senior Debt at least to the same extent as the Notes and having a Weighted Average Life to Maturity at least equal to the remaining Weighted Average Life to Maturity of the Notes (the issuance of such subordinated securities to be consented to by the holders of at least a majority of the outstanding amount of Senior Debt consisting of each class of Designated Senior Debt then outstanding, which subordinated securities will be issued in exchange for outstanding Notes or to pay interest accrued on outstanding Notes)), will be made by the Company or any other Person on behalf of the Company with respect to any Obligations on the Notes or to acquire any of the Notes for cash or property or otherwise. In addition, if any other event of default occurs and is continuing (or if such an event of default would occur upon any payment with respect to the Notes or would arise upon the passage of time as a result of such payment) with respect to any Designated Senior Debt (as such event of default is defined in the instrument creating or evidencing such Designated Senior Debt) and such event of default permits the holders of such Designated Senior Debt then outstanding to accelerate the maturity thereof and if the Representative for the respective issue of Designated Senior Debt gives written notice of the event of default to the Trustee (a "Default Notice"), then, unless and until all such events of default have been cured or waived or have ceased to exist or the Company and the Trustee receive notice from the Representative for the respective issue of Designated Senior Debt terminating the Blockage Period (as defined below), during the 180 days after the delivery of such Default Notice (the "Blockage Period"), neither the Company nor any other Person on behalf of the Company will make any payment of any kind or character (except (i) in Qualified Capital Stock issued by the Company to pay interest on the Notes or issued in exchange for the Notes, (ii) in securities substantially identical to the Notes issued by the Company in payment of interest accrued thereon or (iii) in securities issued by the Company which are subordinated to the Senior Debt at least to the 104 111 same extent as the Notes and having a Weighted Average Life to Maturity at least equal to the remaining Weighted Average Life to Maturity of the Notes (the issuance of such subordinated securities to be consented to by the holders of at least a majority of the outstanding amount of Senior Debt consisting of each class of Designated Senior Debt then outstanding, which subordinated securities will be issued in exchange for outstanding Notes or to pay interest accrued on outstanding Notes)) with respect to any Obligations on the Notes or to acquire any of the Notes for cash or property or otherwise. Notwithstanding anything herein to the contrary, in no event will a Blockage Period extend beyond 180 days from the date the payment on the Notes was due and only one such Blockage Period may be commenced within any 360 consecutive days. No event of default which existed or was continuing on the date of the commencement of any Blockage Period with respect to the Designated Senior Debt initiating such Blockage Period shall be, or be made, the basis for commencement of a second Blockage Period by the Representative of such Designated Senior Debt whether or not within a period of 360 consecutive days, unless such event of default has been cured or waived for a period of not less than 90 consecutive days (it being acknowledged that any subsequent action, or any breach of any financial covenants for a period commencing after the date of commencement of such Blockage Period that, in either case, would give rise to an event of default pursuant to any provision under which an event of default previously existed or was continuing, shall constitute a new event of default for this purpose). By reason of such subordination, in the event of the insolvency of the Company, creditors of the Company who are not holders of Senior Debt, including the holders of the Notes, may recover less, ratably, than holders of Senior Debt. CERTAIN COVENANTS The Indenture contains, among others, the following covenants. Limitation on Incurrence of Additional Indebtedness. The Indenture will provide that neither the Company nor any of its Subsidiaries will, directly or indirectly, create, incur, assume, guarantee, acquire or become liable for, contingently or otherwise (collectively "incur"), any Indebtedness other than Permitted Indebtedness. Notwithstanding the foregoing limitations, the Company or any Subsidiary may incur Indebtedness if on the date of the incurrence of such Indebtedness, after giving effect to the incurrence of such Indebtedness and the receipt and application of the proceeds thereof, the Company's Leverage Ratio is less than 7.0 to 1. Limitation on Restricted Payments. The Indenture will provide that neither the Company nor any of its Subsidiaries will, directly or indirectly, (a) declare or pay any dividend or make any distribution (other than dividends or distributions payable in Qualified Capital Stock of the Company) on shares of the Company's Capital Stock, (b) purchase, redeem or otherwise acquire or retire for value any Capital Stock of the Company or any warrants, rights or options to acquire shares of any class of such Capital Stock, other than the exchange of such Capital Stock or any warrants, rights or options to acquire shares of any class of such Capital Stock for Qualified Capital Stock or warrants, rights or options to acquire Qualified Capital Stock, (c) make any principal payment on, purchase, defease, redeem, prepay, decrease or otherwise acquire or retire for value, prior to any scheduled final maturity, scheduled repayment or scheduled sinking fund payment, any Indebtedness of the Company or its Subsidiaries that is subordinate or junior in right of payment to the Notes, or (d) make any Investment (other than Permitted Investments) (each of the 105 112 foregoing prohibited actions set forth in clauses (a), (b), (c) and (d) being referred to as a "Restricted Payment"), if, at the time of such Restricted Payment or immediately after giving effect thereto, (i) a Default or an Event of Default has occurred and is continuing, (ii) the Company is not able to incur at least $1.00 of additional Indebtedness (other than Permitted Indebtedness) in compliance with the "Limitation on Incurrence of Additional Indebtedness" covenant, or (iii) the aggregate amount of Restricted Payments made by the Company on or after the Merger Date, together with the aggregate amount of Restricted Payments made by CRBC subsequent to the 9 3/8% Notes Issue Date and through September 4, 1997 (the amount expended for such purposes, if other than in cash, being the fair market value of such property as determined by the respective Board of Directors in good faith) exceeds the sum of: (A) (x)100% of the aggregate Consolidated EBITDA of CRBC from the 9 3/8% Notes Issue Date through September 4, 1997, plus 100% of the aggregate Consolidated EBITDA of the Company from and after the Merger Date (or, in the event that either such Consolidated EBITDA shall be a deficit, minus 100% of such deficit), to the most recent date for which financial information is available to the Company, taken as one accounting period, less (y) 1.4 times Consolidated Interest Expense for the same entities and for the same periods, plus (B) 100% of the aggregate net proceeds, including the fair market value of property other than cash as determined by the Board of Directors in good faith, received by the Company from any Person (other than a Subsidiary of the Company) from the issuance and sale on or subsequent to the Merger Date of Qualified Capital Stock of the Company, plus 100% of the aggregate net proceeds, including the fair market value of property other than cash as previously determined by the board of directors of CRBC in good faith, previously received by CRBC from any Person (other than a Subsidiary of CRBC) from the issuance and sale on or subsequent to the 9 3/8% Notes Issue Date of Qualified Capital Stock of CRBC (excluding any net proceeds from issuances and sales financed directly or indirectly using funds borrowed from the Company or any Subsidiary of the Company or from CRBC or any Subsidiary of CRBC, respectively, 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 Company or CRBC, respectively, upon such conversion or exchange), plus (C) without duplication of any amount included in clause (iii)(B) above, 100% of the aggregate net proceeds, including the fair market value of property other than cash (valued as provided in clause (iii)(B) above), received by the Company as a capital contribution on or subsequent to the Merger Date, plus 100% of the aggregate net proceeds, including the fair market value of property other than cash (valued as provided in clause (iii)(B) above), previously received by CRBC as a capital contribution on or subsequent to the 9 3/8% Notes Issue Date (excluding the net proceeds from one or more Public Equity Offerings by Chancellor Media or CMHC to the extent used to redeem the Notes on or after the date of the Indenture). Notwithstanding the foregoing, these provisions do not prohibit: (1) the payment of any dividend or the making of any distribution within 60 days after the date of its declaration if the dividend or distribution would have been permitted on the date of declaration; (2) the acquisition of Capital Stock or warrants, options or other rights to acquire Capital Stock either (i) solely in exchange for shares of Qualified Capital Stock or warrants, options or other rights to acquire Qualified Capital Stock, or (ii) through the application of the net proceeds of a substantially concurrent sale for cash (other than to a Subsidiary of the 106 113 Company) of shares of Qualified Capital Stock or warrants, options or other rights to acquire Qualified Capital Stock; (3) the acquisition of Indebtedness of the Company that is subordinate or junior in right of payment to the Notes, either (i) solely in exchange for shares of Qualified Capital Stock (or warrants, options or other rights to acquire Qualified Capital Stock) or for Indebtedness of the Company which is subordinate or junior in right of payment to the Notes, at least to the extent that the Indebtedness being acquired is subordinated to the Notes and has a Weighted Average Life to Maturity no less than that of the Indebtedness being acquired or (ii) through the application of the net proceeds of a substantially concurrent sale for cash (other than to a Subsidiary of the Company) of shares of Qualified Capital Stock (or warrants, options or other rights to acquire Qualified Capital Stock) or Indebtedness of the Company which is subordinate or junior in right of payment to the Notes, at least to the extent that the Indebtedness being acquired is subordinated to the Notes and has a Weighted Average Life to Maturity no less than that of the Indebtedness being refinanced; (4) payments by CRBC to fund the operating expenses of Chancellor Broadcasting from the 9 3/8% Notes Issue Date through September 4, 1997 and by the Company to fund the operating expenses of CMHC from and after the Merger Date, in each case in an amount not to exceed $500,000 per annum; (5) payments by CRBC to Chancellor Broadcasting from the 9 3/8% Notes Issue Date through September 4, 1997 and by the Company to CMHC from and after the Merger Date, respectively, in each case to make payments pursuant to (a) the Financial Monitoring and Oversight Agreements or (b) the Tax Sharing Agreement; (6) payments by (a) CRBC to repurchase or to enable Chancellor Broadcasting to repurchase Capital Stock or other securities of Chancellor Broadcasting from employees of Chancellor Broadcasting or CRBC in each case, from the 9 3/8% Notes Issue Date through September 4, 1997, and (b) by the Company to repurchase or to enable CMHC to repurchase Capital Stock or other securities of CMHC from employees of CMHC or the Company, in each case, after the Merger Date, in an aggregate amount not to exceed $5,000,000; (7) payments by CRBC to Chancellor Broadcasting from the 9 3/8% Notes Issue Date through September 4, 1997, or by the Company to CMHC from and after the Merger Date, in each case, to enable Chancellor Broadcasting or CMHC, respectively, to redeem or repurchase stock purchase or similar rights in an aggregate amount not to exceed $500,000; (8) payments, not to exceed $100,000 in the aggregate, by CRBC to Chancellor Broadcasting from the 9 3/8% Notes Issue Date through September 4, 1997, together with payments by the Company to CMHC after the Merger Date, in each case, to enable Chancellor Broadcasting or CMHC, respectively, to make cash payments to holders of its Capital Stock in lieu of the issuance of fractional shares of its Capital Stock; (9) payments made pursuant to any merger, consolidation or sale of assets effected in accordance with the "Merger, Consolidation and Sale of Assets" covenant; provided, however, that no such payment may be made pursuant to this clause and (9) unless, after giving effect to such transaction (and the incurrence of any Indebtedness in connection therewith and the use of the proceeds thereof), the Company would be able to incur $1.00 of additional Indebtedness (other than Permitted Indebtedness) in compliance with the "Limitation on Incurrence of Additional Indebtedness" covenant such that after incurring that $1.00 of additional Indebtedness, the Leverage Ratio would be less than 5.5 to 1; provided, however, that in the case of clauses (5)(a), (6), (7), (8) and (9), no Default or Event of Default shall have occurred or be continuing at the time of such payment or as a result thereof. In determining the aggregate amount of Restricted Payments made by the Company on or subsequent to the Merger Date and the aggregate amount of Restricted 107 114 Payments made by CRBC subsequent to the 9 3/8% Notes Issue Date and through September 4, 1997, amounts expended pursuant to clauses (1), (2), (3) (but only to the extent that Indebtedness is acquired in exchange for, or with the net proceeds from, the issuance of Qualified Capital Stock or warrants, options or other rights to acquire Qualified Capital Stock), (5)(a), (6), (7), (8) and (9) (including any amounts previously expended by CRBC pursuant to clauses (1), (2) (3) (but only to the extent that Indebtedness is acquired in exchange for, or with the net proceeds from, the issuance of Qualified Capital Stock or warrants, options or other rights to acquire Qualified Capital Stock), (5)(a), (6), (7), (8) and (9) under the 'Limitation on Restricted Payments' section of the 9 3/8% Indenture) shall be included in such calculation. Limitation on Asset Sales. The Indenture will provide that neither the Company nor any of its Subsidiaries will consummate an Asset Sale unless (i) the Company or the applicable Subsidiary, as the case may be, receives consideration at the time of such Asset Sale at least equal to the fair market value of the assets sold or otherwise disposed of (as determined in good faith by management of the Company or, if such Asset Sale involves consideration in excess of $2,500,000 by the Board of Directors, as evidenced by a board resolution), (ii) at least 75% of the consideration received by the Company or the Subsidiary, as the case may be, from such Asset Sale is cash or Cash Equivalents (other than in the case where the Company is exchanging all or substantially all the assets of one or more broadcast businesses operated by the Company (including by way of the transfer of capital stock) for all or substantially all the assets (including by way of the transfer of capital stock) constituting one or more broadcast businesses operated by another Person, in which event the foregoing requirement with respect to the receipt of cash or Cash Equivalents shall not apply) and is received at the time of such disposition and (iii) upon the consummation of an Asset Sale, the Company applies, or causes such Subsidiary to apply, such Net Cash Proceeds within 180 days of receipt thereof either (A) to repay the principal of any Senior Debt (and, to the extent such Senior Debt relates to principal under a revolving credit or similar facility, to obtain a corresponding reduction in the commitments thereunder), (B) to reinvest, or to be contractually committed to reinvest pursuant to a binding agreement, in Productive Assets and, in the latter case, to have so reinvested within 360 days of the date of receipt of such Net Cash Proceeds, or (C) to purchase Notes (pro rata among the holders of Notes tendered to the Company for purchase, based upon the aggregate principal amount of the Notes so tendered) tendered to the Company for purchase at a price equal to 100% of the principal amount thereof, plus accrued interest thereon to the date of purchase, pursuant to an offer to purchase made by the Company as set forth below (a "Net Proceeds Offer"); provided, however, that, prior to making any Net Proceeds Offer, the Company shall, to the extent required pursuant to the 9 3/8% Indenture as in effect on the Issue Date, offer to use such Net Proceeds to repurchase and use all or a portion of such Net Proceeds to repurchase 9 3/8% Notes and then, to the extent required pursuant to the 8 3/4% Indenture as in effect on the Issue Date, offer to use the remaining Net Proceeds to repurchase 8 3/4% Notes and then, to the extent required pursuant to the 10 1/2% Indenture as in effect on the Issue Date, offer to use the remaining Net Proceeds to repurchase 10 1/2% Notes, and then, to the extent required pursuant to the 8 1/8% Indenture as in effect on the Issue Date, offer to use the remaining Net Proceeds to repurchase 8 1/8% Notes; in which event the Company shall be required to use only the Net Proceeds remaining after such repurchases to make the Net Proceeds Offer contemplated by this covenant, provided further, that if at any time any non-cash consideration received by the Company or any Subsidiary of the Company, 108 115 as the case may be, in connection with any Asset Sale is converted into or sold or otherwise disposed of for cash, then such conversion or disposition shall be deemed to constitute an Asset Sale hereunder and the Net Cash Proceeds thereof shall be applied in accordance with clause (iii) above; provided, further that the Company may defer making a Net Proceeds Offer until the aggregate Net Cash Proceeds from Asset Sales (taking into account any Net Cash Proceeds used to repurchase 9 3/8% Notes, 8 3/4% Notes, 10 1/2% Notes and 8 1/8% Notes pursuant to the second immediately preceding proviso) to be applied equals or exceeds $5,000,000. Subject to the deferral right set forth in the final proviso of the preceding paragraph, each notice of a Net Proceeds Offer will be mailed, by first class mail, to holders of Notes as shown on the applicable register of holders of Notes not more than 180 days after the relevant Asset Sale or, in the event the Company or a Subsidiary has entered into a binding agreement as provided in (B) above, within 180 days following the termination of such agreement but in no event later than 360 days after the relevant Asset Sale. Such notice will specify, among other things, the purchase date (which will be no earlier than 30 days nor later than 45 days from the date such notice is mailed, except as otherwise required by law) and will otherwise comply with the procedures set forth in the Indenture. Upon receiving notice of the Net Proceeds Offer, holders of Notes may elect to tender their Notes in whole or in part in integral multiples of $1,000. To the extent holders properly tender Notes in an amount exceeding the Net Proceeds Offer, subject to the limitations set forth in the immediately preceding paragraph, the Company shall select the Notes to be repurchased on a pro rata basis (based upon the aggregate principal amount of Notes tendered). To the extent that the aggregate principal amount of Notes tendered pursuant to any Net Proceeds Offer is less than the amount of Net Cash Proceeds subject to such Net Proceeds Offer, the Company may use any remaining portion of such Net Cash Proceeds not required to fund the repurchase of tendered Notes for any purposes otherwise permitted by the Indenture. Upon the consummation of any Net Proceeds Offer, the amount of Net Cash Proceeds subject to any future Net Proceeds Offer from the Asset Sales giving rise to such Net Cash Proceeds shall be deemed to be zero. The Company will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with the repurchase of Notes pursuant to a Net Proceeds Offer. Limitation on Asset Swaps. The Indenture will provide that the Company will not, and will not permit any Subsidiary to, engage in any Asset Swaps, unless: (i) at the time of entering into the agreement to swap assets and immediately after giving effect to the proposed Asset Swap, no Default or Event of Default shall have occurred and be continuing or would occur as a consequence thereof; (ii) the Company would, after giving pro forma effect to the proposed Asset Swap, have been permitted to incur at least $1.00 of additional Indebtedness (other than Permitted Indebtedness) in compliance with the "Limitation on Incurrence of Additional Indebtedness" covenant; (iii) the respective fair market values of the assets being purchased and sold by the Company or any of its Subsidiaries (as determined in good faith by the management of the Company or, if such Asset Swap includes consideration in excess of $2,500,000, by the Board of Directors, as evidenced by a board resolution) are substantially the same at the time of entering into the agreement to swap assets; and (iv) at the time of the consummation of the proposed Asset Swap, the percentage of any decline in the fair market value (determined as aforesaid) of 109 116 the asset or assets being acquired by the Company and its Subsidiaries shall not be significantly greater than the percentage of any decline in the fair market value (determined as aforesaid) of the assets being disposed of by the Company, calculated from the time the agreement to swap assets was entered into; provided, however, that this covenant shall not apply to any of the transactions of the Company and its subsidiaries pending as of the date of this Prospectus. Limitations on Transactions with Affiliates. The Indenture will provide that neither the Company nor any of its Subsidiaries will, directly or indirectly, enter into or permit to exist any transaction (including, without limitation, the purchase, sale, lease or exchange of any property or the rendering of any service) with or for the benefit of any of its Affiliates (other than transactions between the Company and a Wholly-Owned Subsidiary of the Company or among Wholly-Owned Subsidiaries of the Company) (an "Affiliate Transaction"), other than Affiliate Transactions on terms that are no less favorable than those that might reasonably have been obtained in a comparable transaction on an arm's-length basis from a person that is not an Affiliate; provided, however, that for a transaction or series of related transactions involving value of $1,000,000 or more, such determination will be made in good faith by a majority of members of the Board of Directors of the Company and by a majority of the disinterested members of the Board of Directors of the Company, if any; provided, further, that for a transaction or series of related transactions involving value of $5,000,000 or more, the Board of Directors of the Company has received an opinion from a nationally recognized investment banking firm that such Affiliate Transaction is fair, from a financial point of view, to the Company or such Subsidiary. The foregoing restrictions will not apply to reasonable and customary directors' fees, indemnification and similar arrangements and payments thereunder, or to any obligations of the Company under the Financial Monitoring and Oversight Agreements, the Tax Sharing Agreement or any employment agreement with any officer of the Company (provided that each amendment of any of the foregoing agreements shall be subject to the limitations of this covenant). Limitation on Dividend and Other Payment Restrictions Affecting Subsidiaries. The Indenture will provide that neither the Company nor any of its Subsidiaries will, directly or indirectly, create or otherwise cause or permit to exist or become effective any encumbrance or restriction on the ability of any Subsidiary to (a) pay dividends or make any other distributions on its Capital Stock; (b) make loans or advances or pay any Indebtedness or other obligation owed to the Company or any of its Subsidiaries; or (c) transfer any of its property or assets to the Company, except for such encumbrances or restrictions existing under or by reason of: (1) applicable law, (2) the Indenture, (3) customary non-assignment provisions of any lease governing a leasehold interest of the Company or any Subsidiary, (4) any instrument governing Acquired Indebtedness, which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person, or the property or assets of the Person, so acquired, (5) agreements permitted under the 9 3/8% Indenture, the 8 3/4% Indenture, the 10 1/2% Indenture and the 8 1/8% Indenture existing on the Issue Date (including the Credit Agreement and Senior Credit Facility, as applicable), as such agreements are from time to time in effect; provided, however, that any amendments or modifications of such agreements which affect the encumbrances or restrictions of the types subject to this covenant shall not result in such encumbrances or restrictions being less favorable to the Company in any material respect, as determined in good faith by the Board of Directors of the Company, than the 110 117 provisions as in effect before giving effect to the respective amendment or modification, (6) an agreement effecting a refinancing, replacement or substitution of Indebtedness issued, assumed or incurred pursuant to an agreement referred to in clause (2), (4) or (5) above or any other agreement evidencing Indebtedness permitted under the Indenture; provided, however, that the provisions relating to such encumbrance or restriction contained in any such refinancing, replacement or substitution agreement or any such other agreement are not less favorable to the Company in all material respects as determined in good faith by the Board of Directors of the Company than the provisions relating to such encumbrance or restriction contained in agreements referred to in such clause (2), (4) or (5), or (7) restrictions on the transfer of assets subject to any Lien permitted under the Indenture imposed by the holder of such Lien. Prohibition on Incurrence of Senior Subordinated Debt. The Indenture will prohibit the Company from incurring or suffering to exist Indebtedness that is senior in right of payment to the Notes and is expressly subordinate in right of payment to any other Indebtedness of the Company. Limitation on Preferred Stock of Subsidiaries. The Indenture will provide that the Company will not permit any of its Subsidiaries to issue any Preferred Stock (other than to the Company or to a Wholly-Owned Subsidiary of the Company) or permit any Person (other than the Company or a Wholly-Owned Subsidiary of the Company) to own any Preferred Stock of a Subsidiary (other than Acquired Preferred Stock; provided that at the time the issuer of such Acquired Preferred Stock becomes a Subsidiary of the Company or merges with the Company or any of its Subsidiaries, and after giving effect to such transaction, the Company shall be able to incur $1.00 of additional Indebtedness (other than Permitted Indebtedness) in compliance with the "Limitation on Incurrence of Additional Indebtedness" covenant). Limitation on Liens. The Indenture will provide that neither the Company nor any of its Subsidiaries will create, incur, assume or suffer to exist any Liens upon any of their respective assets, except for (a) Permitted Liens, (b) Liens to secure Senior Debt or guarantees thereof permitted under the Indenture, (c) Liens permitted under the 9 3/8% Indenture, the 8 3/4% Indenture, the 10 1/2% Indenture and the 8 1/8% Indenture existing on the Issue Date, (d) Liens in favor of the Trustee, (e) Liens to secure Guarantor Senior Debt permitted under the Indenture, and (f) any Lien to secure the replacement, refunding, extension or renewal, in whole or in part, of any Indebtedness described in the foregoing clauses; provided that, to the extent any such clause limits the amount secured or the asset subject to such Liens, no extension or renewal will increase the assets subject to such Liens or the amount secured thereby beyond the assets or amounts set forth in such clauses. Limitation on Sale and Leaseback Transactions. The Indenture will provide that neither the Company nor any of its Subsidiaries will enter into any Sale and Leaseback Transaction, except that the Company or any Subsidiary may enter into a Sale and Leaseback Transaction if, immediately prior thereto, and after giving effect to such Sale and Leaseback Transaction (the Indebtedness thereunder being equivalent to the Attributable Value thereof) the Company could incur at least $1.00 of additional Indebtedness (other than Permitted Indebtedness) in compliance with the "Limitation on Incurrence of Additional Indebtedness" covenant. 111 118 Guarantees of Certain Indebtedness. The Indenture will provide that the Company will not permit any of its Subsidiaries, directly or indirectly, to incur, guarantee or secure through the granting of Liens, the payment of any Indebtedness under the Senior Credit Facility or any refunding or refinancing thereof, in each case, unless such Subsidiary, the Company and the Trustee execute and deliver a supplemental indenture pursuant to which such Subsidiary becomes a Guarantor of the Notes and which evidences such Subsidiary's Guarantee of the Notes, such Guarantee to be a senior subordinated unsecured obligation of such Subsidiary. Neither the Company nor any such Guarantor shall be required to make a notation on the Notes or its Guarantee to reflect any such subsequent Guarantee. Nothing in this covenant shall be construed to permit any Subsidiary of the Company to incur Indebtedness otherwise prohibited by the "Limitation of Incurrence of Additional Indebtedness" covenant. Limitation on Line of Business. The Indenture will provide that for so long as any Notes are outstanding, the Company and its Subsidiaries will engage solely in the ownership and operation of broadcast businesses or businesses related thereto, including, without limitation, media representation, sale of advertising and such other activities as are incidental or similar or related thereto. Merger, Consolidation and Sale of Assets. The Indenture will provide that the Company may not, in a single transaction or a series of related transactions, consolidate with or merge with or into, or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its assets to, another Person or adopt a plan of liquidation unless (i) either (A) the Company is the survivor of such merger or consolidation or (B) the surviving or transferee Person is a corporation, partnership or trust organized and existing under the laws of the United States, any state thereof or the District of Columbia and such surviving or transferee Person expressly assumes by supplemental indenture all of the obligations of the Company under the Notes and the Indenture; (ii) immediately after giving effect to such transaction and the use of proceeds therefrom (on a pro forma basis, including any Indebtedness incurred or anticipated to be incurred in connection with such transaction), the Company or the surviving or transferee Person is able to incur $1.00 of additional Indebtedness (other than Permitted Indebtedness) in compliance with the "Limitation on Incurrence of Additional Indebtedness" covenant; (iii) immediately after giving effect to such transaction (including any Indebtedness incurred or anticipated to be incurred in connection with the transaction) no Default or Event of Default has occurred and is continuing; and (iv) the Company has delivered to the Trustee an Officers' Certificate and Opinion of Counsel, each stating that such consolidation, merger or transfer complies with the Indenture, that the surviving Person agrees by supplemental indenture to be bound thereby, and that all conditions precedent in the Indenture relating to such transaction have been satisfied. For purposes of the foregoing, the transfer (by lease, assignment, sale or otherwise, in a single transaction or series of related transactions) of all or substantially all of the properties and assets of one or more Subsidiaries, the Capital Stock of which constitutes all or substantially all of the properties and assets of the Company, will be deemed to be the transfer of all or substantially all of the properties and assets of the Company. GUARANTEES Each Guarantor will fully and unconditionally guarantee, jointly and severally, to each holder and the Trustee, subject to subordination provisions substantially the same as those 112 119 described above, the full and prompt payment of principal of and interest on the Notes, and of all other obligations under the Indenture. The Indebtedness evidenced by each Guarantee (including the payment of principal of, premium, if any, and interest on the Notes) is subordinated to Guarantor Senior Debt (defined with respect to the Indebtedness of a Guarantor in the same manner as Senior Debt is defined with respect to the Company) on the same terms as the Notes are subordinated to Senior Debt and will rank pari passu to the Guarantor's guarantees of the 9 3/8% Notes, the 8 3/4% Notes, the 10 1/2% Notes and the 8 1/8% Notes. See "-- Subordination." In addition, the Guarantors have substantial additional Guarantor Senior Debt (relating to guarantees of the borrowings under the Senior Credit Facility). The obligations of each Guarantor are limited to the maximum amount as will, after giving effect to all other contingent and fixed liabilities of such Guarantor (including, without limitation, any guarantees under the Senior Credit Facility) and after giving effect to any collections from or payments made by or on behalf of any other Guarantor in respect of the obligations of such other Guarantor under its Guarantee or pursuant to its contribution obligations under the Indenture, result in the obligations of the Guarantor under the Guarantee not constituting a fraudulent conveyance or fraudulent transfer under federal or state law. Each Guarantor that makes a payment or distribution under a Guarantee are entitled to a contribution from each other Guarantor in a pro rata amount based on the Adjusted Net Assets of each Guarantor. Each Guarantor may consolidate with or merge into or sell its assets to the Company or to another Guarantor without limitation. Each Guarantor may consolidate with or merge into or sell all or substantially all its assets to a corporation, partnership or trust other than the Company or another Guarantor (whether or not affiliated with the Guarantor). Upon the sale or disposition of a Guarantor (or all or substantially all of its assets) to a Person (whether or not an Affiliate of such Guarantor) which is not a Subsidiary of the Company, which is otherwise in compliance with the Indenture, such Guarantor shall be deemed released from all its obligations under the Indenture and its Guarantee and such Guarantee shall terminate; provided, however, that any such termination shall occur only to the extent that all obligations of such Guarantor under the Credit Agreement or the Senior Credit Facility, as applicable, and all of its guarantees of, and under all of its pledges of assets or other security interests which secure, Indebtedness of the Company shall also terminate upon such release, sale or transfer; provided, further, that the consideration received by the Company in connection with such sale or other disposition shall be applied in accordance with the covenant. See "-- Certain Covenants -- Limitation on Asset Sales." EVENTS OF DEFAULT The following events will be defined in the Indenture as "Events of Default": (i) the failure to pay interest on the Notes when the same becomes due and payable and the Default continues for a period of 30 days (whether or not such payment is prohibited by the subordination provisions of the Indenture); (ii) the failure to pay the principal on any Notes, when such principal becomes due and payable, at maturity, upon redemption or otherwise (whether or not such payment is prohibited by the subordination provisions of the Indenture); (iii) a default in the observance or performance of any other covenant or agreement contained in the Notes or the Indenture which default continues for a period of 30 days after the Company receives written notice thereof specifying the default from the 113 120 Trustee or holders of at least 25% in aggregate principal amount of outstanding Notes; (iv) the failure to pay at the final stated maturity (giving effect to any extensions thereof) the principal amount of any Indebtedness of the Company or any Subsidiary of the Company, or the acceleration of the final stated maturity of any such Indebtedness, if the aggregate principal amount of such Indebtedness, together with the aggregate principal amount of any other such Indebtedness in default for failure to pay principal at the final stated maturity (giving effect to any extensions thereof) or which has been accelerated, aggregates $5,000,000 or more at any time, in each case after a 10-day period during which such default shall not have been cured or such acceleration rescinded; (v) one or more judgments in an aggregate amount in excess of $5,000,000 (which are not covered by insurance as to which the insurer has not disclaimed coverage) being rendered against the Company or any of its Significant Subsidiaries and such judgments remain undischarged or unstayed for a period of 60 days after such judgment or judgments become final and non- appealable; and (vi) certain events of bankruptcy, insolvency or reorganization affecting the Company or any of its Significant Subsidiaries. Upon the happening of any Event of Default specified in the Indenture, the Trustee may, and the Trustee upon the request of holders of 25% in principal amount of the Notes shall, or the holders of at least 25% in principal amount of outstanding Notes may, declare the principal of and accrued but unpaid interest, if any, on all the Notes to be due and payable by notice in writing to the Company and the Trustee specifying the respective Event of Default and that it is a "notice of acceleration" (the "Acceleration Notice"), and the same (i) shall become immediately due and payable or (ii) if there are any amounts outstanding under the Credit Agreement or the Senior Credit Facility, as applicable, will become due and payable upon the first to occur of an acceleration under the Credit Agreement or the Senior Credit Facility, as applicable, or five Business Days after receipt by the Company and the Representative under the Credit Agreement or the Senior Credit Facility, as applicable of such Acceleration Notice (unless all Events of Default specified in such Acceleration Notice have been cured or waived). If an Event of Default with respect to bankruptcy proceedings relating to the Company occurs and is continuing, then such amount will ipso facto become and be immediately due and payable without any declaration or other act on the part of the Trustee or any holder of the Notes. The Indenture will provide that, at any time after a declaration of acceleration with respect to the Notes as described in the preceding paragraph, the holders of a majority in principal amount of the Notes then outstanding (by notice to the Trustee) may rescind and cancel such declaration and its consequences if (i) the rescission would not conflict with any judgment or decree of a court of competent jurisdiction, (ii) all existing Events of Default have been cured or waived except nonpayment of principal or interest on the Notes that has become due solely by such declaration of acceleration, (iii) to the extent the payment of such interest is lawful, interest (at the same rate specified in the Notes) on overdue installments of interest and overdue payments of principal which has become due otherwise than by such declaration of acceleration, has been paid, (iv) the Company has paid the Trustee its reasonable compensation and reimbursed the Trustee for its expenses, disbursements and advances and (v) in the event of the cure or waiver of a Default or Event of Default of the type described in clause (vi) of the description of Events of Default in the first paragraph above, the Trustee has received an Officers' Certificate and an Opinion of Counsel that such Default or Event of Default has been cured or waived. The holders of a majority in principal amount of the Notes may waive any existing Default 114 121 or Event of Default under the Indenture, and its consequences, except a default in the payment of the principal of or interest on any Notes. The Company is required to deliver to the Trustee, within 120 days after the end of the Company's fiscal year, a certificate indicating whether the signing officers know of any Default or Event of Default that occurred during the previous year and whether the Company has complied with its obligations under the Indenture. In addition, the Company will be required to notify the Trustee of the occurrence and continuation of any Default or Event of Default within five business days after the Company becomes aware of the same. Subject to the provisions of the Indenture relating to the duties of the Trustee in case an Event of Default thereunder should occur and be continuing, the Trustee will be under no obligation to exercise any of the rights or powers under the Indenture at the request or direction of any of the holders of the Notes unless such holders have offered to the Trustee reasonable indemnity or security against any loss, liability or expense. Subject to such provision for security or indemnification and certain limitations contained in the Indenture, the holders of a majority in principal amount of the outstanding Notes have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on the Trustee. SATISFACTION AND DISCHARGE OF INDENTURE; DEFEASANCE The Company may terminate its obligations under the Indenture at any time, and the obligations of the Guarantors with respect thereto shall terminate, by delivering all outstanding Notes to the Trustee for cancellation and paying all sums payable by it thereunder. The Company, at its option, (i) will be discharged from any and all obligations with respect to the Notes, and each Guarantor will be discharged from any and all obligations with respect to its Guarantee (except for certain obligations of the Company to register the transfer or exchange of such Notes, replace stolen, lost or mutilated Notes, maintain paying agencies and hold moneys for payment in trust) or (ii) need not comply with certain of the restrictive covenants with respect to the Indenture, if the Company deposits with the Trustee, in trust, U.S. Legal Tender or U.S. Government Obligations or a combination thereof which, through the payment of interest thereon and principal in respect thereof in accordance with their terms, will be sufficient to pay all the principal of and interest on the Notes on the dates such payments are due in accordance with the terms of such Notes as well as the Trustee's fees and expenses. To exercise either such option, the Company is required to deliver to the Trustee (A) an Opinion of Counsel or a private letter ruling issued to the Company by the IRS to the effect that the holders of the Notes will not recognize income, gain or loss for federal income tax purposes as a result of the deposit and related defeasance and will be subject to federal income tax on the same amount and in the same manner and at the same times as would have been the case if such option had not been exercised and, in the case of an Opinion of Counsel furnished in connection with a Discharge pursuant to clause (i) above, accompanied by a private letter ruling issued to the Company by the IRS to such effect, (B) subject to certain qualifications, an Opinion of Counsel to the effect that funds so deposited will not be subject to avoidance under applicable Bankruptcy Law, and (C) an Officers' Certificate and an Opinion of Counsel to the effect that the Company has complied with all conditions precedent to the defeasance. Notwithstanding the foregoing, the Opinion of Counsel required by clause (A) above need not be delivered if all Notes not therefore delivered to the Trustee for cancellation (i) have become due and payable, (ii) will 115 122 become due and payable on the maturity date within one year, or (iii) are to be called for redemption within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption by the Trustee in the name, and at the expense, of the Company. REPORTS TO HOLDERS The Company will file with the Trustee and provide to the holders of the Notes, within 15 days after it files them with the Commission, copies of the annual reports and of the information, documents and other reports (or copies of such portions of any of the foregoing as the Commission may by rules and regulations prescribe) which the Company files with the Commission pursuant to Section 13 or 15(d) of the Exchange Act. In the event the Company is no longer required to furnish such reports to its securityholders pursuant to the Exchange Act, the Company will cause its consolidated financial statements, comparable to those which would have been required to appear in annual or quarterly reports, to be delivered to the holders of the Notes. MODIFICATION OF THE INDENTURE From time to time, the Company and the Trustee, together, without the consent of the holders of the Notes, may amend or supplement the Indenture for certain specified purposes, including curing ambiguities, defects or inconsistencies. Other modifications and amendments of the Indenture may be made with the consent of the holders of a majority in principal amount of the then outstanding Notes, except that, without the consent of each holder of the Notes affected thereby, no amendment may, directly or indirectly: (i) reduce the amount of Notes whose holders must consent to an amendment; (ii) reduce the rate of or change the time for payment of interest, including defaulted interest, on any Notes; (iii) reduce the principal of or change the fixed maturity of any Notes, or change the date on which any Notes may be subject to redemption or repurchase, or reduce the redemption or repurchase price therefor; (iv) make any Notes payable in money other than that stated in the Notes; (v) make any change in provisions of the Indenture protecting the right of each holder of an Exchange Note to receive payment of principal of and interest on such Exchange Note on or after the due date thereof or to bring suit to enforce such payment or permitting holders of a majority in principal amount of the Notes to waive Defaults or Events of Default; or (vi) after the Company's obligation to purchase the Notes arises under the Indenture, amend, modify or change the obligation of the Company to make or consummate a Change of Control Offer or a Net Proceeds Offer or waive any default in the performance thereof or modify any of the provisions or definitions with respect to any such offers. CERTAIN DEFINITIONS Set forth below is a summary of certain of the defined terms used in the Indenture. Reference is made to the Indenture for the full definition of all such terms, as well as any other terms used herein for which no definition is provided. "8 1/8% Notes" means the $500 million aggregate principal amount of 8 1/8% Senior Subordinated Notes due 2007 of the Company, used pursuant to an indenture dated as of December 22, 1997, as the same may be modified or amended from time to time and future refinancings thereof. 116 123 "8 3/4% Notes" means the $200.0 million aggregate principal amount of 8 3/4% Senior Subordinated Notes due 2007 of the Company, issued pursuant to an indenture, dated as of June 24, 1997, as amended, as the same may be modified or amended from time to time and future refinancings thereof. "9 3/8% Notes" means the $200.0 million aggregate principal amount of 9 3/8% Senior Subordinated Notes due 2004 of the Company, issued pursuant to an indenture, dated as of February 14, 1996, as amended, as the same may be modified or amended from time to time and future refinancings thereof. "9 3/8% Notes Issue Date" means February 14, 1996. "10 1/2% Notes" means the $100.0 million aggregate principal amount of 10 1/2% Senior Subordinated Notes due 2007 of the Company, issued pursuant to an amended and restated indenture, dated as of December 19, 1996 and amended and restated as of October 28, 1997, as amended, as the same may be modified or amended from time to time and future refinancings thereof. "Acquired Indebtedness" means Indebtedness of a Person or any of its Subsidiaries existing at the time such Person becomes a Subsidiary of the Company or at the time it merges or consolidates with the Company or any of its Subsidiaries or assumed in connection with the acquisition of assets from such Person and not incurred by such Person in connection with, or in anticipation or contemplation of, such Person becoming a Subsidiary of the Company or such acquisition, merger or consolidation. "Acquired Preferred Stock" means Preferred Stock of any Person at the time such Person becomes a Subsidiary of the Company or at the time it merges or consolidates with the Company or any of its Subsidiaries and not issued by such Person in connection with, or in anticipation or contemplation of, such acquisition, merger or consolidation. "Adjusted Net Assets" of a Guarantor at any date shall mean the lesser of the amount by which (x) the fair value of the property of such Guarantor exceeds the total amount of liabilities, including, without limitation, contingent liabilities (after giving effect to all other fixed and contingent liabilities incurred or assumed on such date), but excluding liabilities under the Guarantee of such Guarantor at such date, and (y) the present fair salable value of the assets of such Guarantor at such date exceeds the amount that will be required to pay the probable liability of such Guarantor on its debts (after giving effect to all other fixed and contingent liabilities incurred or assumed on such date and after giving effect to any collection from any Subsidiary of such Guarantor in respect of the obligations of such Subsidiary under the Guarantee), excluding debt in respect of the Guarantee, as they become absolute and matured. "Affiliate" of any Person means any other Person who, directly or indirectly, through one or more intermediaries, controls, or is controlled by, or is under common control with, such Person. The term "control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise. "Asset Acquisition" means (i) an Investment by the Company or any Subsidiary of the Company in any other Person pursuant to which such Person shall become a Subsidiary of the Company or shall be consolidated or merged with the Company or any Subsidiary of the Company or (ii) the acquisition by the Company or any Subsidiary of the Company of assets of any Person comprising a division or line of business of such Person. 117 124 "Asset Sale" means any direct or indirect sale, issuance, conveyance, transfer, lease (other than operating leases entered into in the ordinary course of business), assignment or other transfer for value by the Company or any of its Subsidiaries (excluding any Sale and Leaseback Transaction or any pledge of assets or stock by the Company or any of its Subsidiaries) to any Person other than the Company or a Wholly-Owned Subsidiary of the Company of (i) any Capital Stock of any Subsidiary of the Company or (ii) any other property or assets of the Company or any Subsidiary of the Company other than in the ordinary course of business; provided, however, that for purposes of the "Limitation on Asset Sales" covenant, Asset Sales shall not include (a) a transaction or series of related transactions for which the Company or its Subsidiaries receive aggregate consideration of less than $500,000, (b) transactions permitted under the "Limitation on Asset Swaps" covenant, (c) transactions permitted under the "Merger, Consolidation and Sale of Assets" covenant or (d) any Contract Buy Out. "Asset Swap" means the execution of a definitive agreement, subject only to FCC approval and other customary closing conditions, that the Company in good faith believes will be satisfied, for a substantially concurrent purchase and sale, or exchange, of Productive Assets between the Company or any of its Subsidiaries and another Person or group of affiliated Persons; provided that any amendment to or waiver of any closing condition which individually or in the aggregate is material to the Asset Swap shall be deemed to be a new Asset Swap. "Attributable Value" in respect of a sale and leaseback arrangement of any property means, as at the time of determination, the greater of (i) the fair market value of the property subject to such arrangement (as determined in good faith by the Board of Directors of the Company) or (ii) the present value (discounted at the interest rate borne by the Notes, compounded annually) of the total obligations of the lessee for rental payments during the remaining term of the lease included in such arrangement. "Capitalized Lease Obligation" means, as to any Person, the obligation of such Person to pay rent or other amounts under a lease to which such Person is a party that is required to be classified and accounted for as a capital lease obligation under GAAP and, for purposes of this definition, the amount of such obligation at any date shall be the capitalized amount of such obligation at such date, determined in accordance with GAAP. "Capital Stock" means (i) with respect to any Person that is a corporation, any and all shares, interests, participations or other equivalents (however designated) of capital stock, including each class of common stock and Preferred Stock of such Person and (ii) with respect to any Person that is not a corporation, any and all partnership or other equity interests of such Person. "Cash Equivalents" means (i) marketable direct obligations issued by, or unconditionally guaranteed by, the United States Government or issued by any agency thereof and backed by the full faith and credit of the United States, in each case maturing within one year from the date of acquisition thereof; (ii) marketable direct obligations issued by any state of the United States of America or any political subdivision of any such state or any public instrumentality thereof maturing within one year from the date of acquisition thereof and, at the time of acquisition, having one of the two highest ratings obtainable from either Standard & Poor's Corporation or Moody's Investors Service, Inc.; (iii) commercial paper maturing no more than one year from the date of creation thereof and, at the time of acquisition, having a rating of at least A-1 from Standard & Poor's Corporation or at least 118 125 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 Broadcasting" means Chancellor Broadcasting Company, a Delaware corporation that was merged with and into Evergreen Mezzanine Holdings Corporation, a Delaware corporation, on the Merger Date. "Chancellor Media" means Chancellor Media Corporation, a Delaware corporation formerly known as Evergreen Media 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 Company to any Person or group of related Persons for purposes of Section 13(d) of the Exchange Act (a "Group") (whether or not otherwise in compliance with the provisions of the Indenture), other than to Hicks Muse or any of its Affiliates, officers and directors (the "Permitted Holders"); or (ii) a majority of the Board of Directors of Chancellor Media, CMHC or the Company shall consist of Persons who are not Continuing Directors; or (iii) the acquisition by any Person or Group (other than the Permitted Holders) of the power, directly or indirectly, to vote or direct the voting of securities having more than 50% of the ordinary voting power for the election of directors of Chancellor Media, CMHC or the Company. "CMHC" means Chancellor Mezzanine Holdings Corporation, a Delaware corporation formerly known as Evergreen Mezzanine Holdings Corporation, and its successors. "Commodity Agreement" means any commodity futures contract, commodity option or other similar agreement or arrangement entered into by the Company or any of its Subsidiaries designed to protect the Company or any of its Subsidiaries against fluctuations in the price of commodities actually used in the ordinary course of business of the Company and its Subsidiaries. "Consolidated EBITDA" means, with respect to any Person, for any period, the sum (without duplication) of (i) Consolidated Net Income and (ii) to the extent Consolidated Net Income has been reduced thereby, (A) all income taxes of such Person and its Subsidiaries paid or accrued in accordance with GAAP for such period (other than income taxes attributable to extraordinary or nonrecurring gains or losses), (B) Consolidated Interest Expense and (C) Consolidated Non-Cash Charges, all as determined on a consolidated basis for such Person and its Subsidiaries in conformity with GAAP. "Consolidated Interest Expense" means, with respect to any Person for any period, without duplication, the sum of (i) the interest expense of such Person and its Subsidiaries for such period as determined on a consolidated basis in accordance with GAAP, including, without limitation, (a) any amortization of debt discount, (b) the net cost under Interest Swap Obligations (including any amortization of discounts), (c) the interest portion of any 119 126 deferred payment obligation, (d) all commissions, discounts and other fees and charges owed with respect to letters of credit, bankers' acceptance financing or similar facilities, and (e) all accrued interest and (ii) the interest component of Capitalized Lease Obligations paid or accrued by such person and its Subsidiaries during such period as determined on a consolidated basis in accordance with GAAP. "Consolidated Net Income" of any Person means, for any period, the aggregate net income (or loss) of such Person and its Subsidiaries for such period on a consolidated basis, determined in accordance with GAAP; provided that there shall be excluded therefrom, without duplication, (a) gains and losses from Asset Sales (without regard to the $500,000 limitation set forth in the definition thereof) or abandonments or reserves relating thereto and the related tax effects, (b) items classified as extraordinary or nonrecurring gains and losses, and the related tax effects according to GAAP, (c) the net income (or loss) of any Person acquired in a pooling of interests transaction accrued prior to the date it becomes a Subsidiary of such first referred to Person or is merged or consolidated with it or any of its Subsidiaries, (d) the net income of any Subsidiary to the extent that the declaration of dividends or similar distributions by that Subsidiary of that income is restricted by contract, operation of law or otherwise and (e) the net income of any Person, other than a Subsidiary, except to the extent of the lesser of (x) dividends or distributions paid to such first referred to Person or its Subsidiary by such Person and (y) the net income of such Person (but in no event less than zero), and the net loss of such Person shall be included only to the extent of the aggregate Investment of the first referred to Person or a consolidated Subsidiary of such Person. "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 Media, CMHC or the Company on the date of the Indenture, (ii) was nominated for election or elected to the Board of Directors of Chancellor Media, CMHC or the Company with the affirmative vote of a majority of the Continuing Directors who were members of such Board of Directors at the time of such nomination or election, or (iii) is a representative of a Permitted Holder. "Contract Buy Out" means the involuntary disposition or termination (including, without limitation, pursuant to a buy out) of a contract between a media representation company and a client station. "CRBC" means Chancellor Radio Broadcasting Company, a Delaware corporation that was merged with and into CMCLA on the Merger Date. "Credit Agreement" means the Credit Agreement, dated on or about February 14, 1996, among Chancellor Broadcasting, CRBC, the lenders thereto and Bankers Trust Company as managing agent, as such agreement may be amended (including any amendment and restatement thereof), supplemented or otherwise modified from time to time, including any agreement extending the maturity of, refinancing, replacing or otherwise restructuring (including by way of adding Subsidiaries of CRBC as additional borrowers or guarantors thereunder) all or any portion of the Indebtedness under such agreement or any successor 120 127 or replacement agreement and whether by the same or any other agent, lender or group of lenders. "Currency Agreement" means any foreign exchange contract, currency swap agreement or other similar agreement or arrangement designed to protect the Company or any of its Subsidiaries against fluctuations in currency values. "Default" means an event or condition the occurrence of which is, or with the lapse of time or the giving of notice or both would be, an Event of Default. "Designated Guarantor Senior Debt" means (i) Indebtedness guaranteed by a Guarantor under or in respect of the Senior Credit Facility and (ii) any other Indebtedness constituting Guarantor Senior Debt which, at the time of determination, has an aggregate principal amount of at least $25,000,000 and is specifically designated in the instrument evidencing such Guarantor Senior Debt as "Designated Guarantor Senior Debt" by the Guarantor. "Designated Senior Debt" means (i) Indebtedness under or in respect of the Senior Credit Facility and (ii) any other Indebtedness constituting Senior Debt which, at the time of determination, has an aggregate principal amount of at least $25,000,000 and is specifically designated in the instrument evidencing such Senior Debt as "Designated Senior Debt" by the Company. "Disqualified Capital Stock" means any Capital Stock which, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable), or upon the happening of any event, matures (excluding any maturity as the result of an optional redemption by the issuer thereof) or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable at the sole option of the holder thereof (except, in each case, upon the occurrence of a Change of Control), in whole or in part, on or prior to the final maturity date of the Notes. "Exchange Act" means the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission promulgated thereunder. "Financial Monitoring and Oversight Agreements" means the Financial Monitoring and Oversight Agreement among Hicks, Muse & Co. Partners, L.P., CRBC and Chancellor Broadcasting, as in effect on the 9 3/8% Notes Issue Date, and the Financial Advisory Agreement among HM2/Management Partners, L.P., CRBC and Chancellor Broadcasting, as in effect on the 9 3/8% Notes Issue Date, or as each is amended in connection with the merger of Chancellor Broadcasting, CRBC, Chancellor Media, CMHC and the Company on the Merger Date. "GAAP" means generally accepted accounting principles as in effect in the United States of America as of the Issue Date. "Guarantors" mean (i) initially, all of the Company's subsidiaries on the Issue Date except Katz International Limited, Katz Television Sales Limited, Katz Radio Sales Limited and National Cable Communications, L.P. and (ii) each of the Company's Subsidiaries that, subsequent to the Issue Date, executes a supplemental indenture in which such Subsidiary agrees to be bound by the terms of the Indenture as a Guarantor; provided that any Person constituting a Guarantor as described above shall cease to constitute a Guarantor when its respective Guarantee is released in accordance with the terms thereof. 121 128 "Guarantor Senior Debt" means any Indebtedness of a Guarantor (including any interest accruing subsequent to the filing of a petition of bankruptcy at the rate provided for in the documentation with respect thereto, whether or not such interest is an allowed claim under applicable law), whether outstanding on the Issue Date or thereafter created, incurred or assumed, unless, in the case of any particular Indebtedness, the instrument creating or evidencing the same or pursuant to which the same is outstanding expressly provides that such Indebtedness shall not be senior in right of payment to the Guarantees. Without limiting the generality of the foregoing, "Guarantor Senior Debt" shall also include the principal of, premium, if any, interest (including any interest accruing subsequent to the filing of a petition of bankruptcy at the rate provided for in the documentation with respect thereto, whether or not such interest is an allowed claim under applicable law) on, and all other amounts owing in respect of, and all monetary obligations of every nature under, (x) the Senior Credit Facility, including, without limitation, obligations to pay principal and interest, reimbursement obligations under letters of credit, fees, expenses and indemnities, and (y) all Interest Swap Obligations. Notwithstanding the foregoing, "Guarantor Senior Debt" shall not include any of the following amounts (whether or not constituting Indebtedness as defined in this Indenture): (i) any Indebtedness of a Guarantor to a Subsidiary of such Guarantor; (ii) Indebtedness and other amounts owing to trade creditors incurred in connection with obtaining goods, materials or services; (iii) Indebtedness represented by Disqualified Capital Stock; (iv) any liability for federal, state, local or other taxes owed or owing by a Guarantor; (v) any Indebtedness which is, by its express terms, subordinated in right of payment to any other Indebtedness of such Guarantor; and (vi) guarantees of each of the 9 3/8% Notes, the 8 3/4% Notes, the 10 1/2% Notes and the 8 1/8% Notes. "Hicks Muse" means Hicks, Muse, Tate & Furst Incorporated. "Indebtedness" means with respect to any Person, without duplication, any liability of such Person (i) for borrowed money, (ii) evidenced by bonds, debentures, notes or other similar instruments, (iii) constituting Capitalized Lease Obligations, (iv) incurred or assumed as the deferred purchase price of property, or pursuant to conditional sale obligations and title retention agreements (but excluding trade accounts payable arising in the ordinary course of business), (v) for the reimbursement of any obligor on any letter of credit, banker's acceptance or similar credit transaction, (vi) for Indebtedness of others guaranteed by such Person, (vii) for Interest Swap Obligations, Commodity Agreements and Currency Agreements and (viii) for Indebtedness of any other Person of the type referred to in clauses (i) through (vii) which are secured by any Lien on any property or asset of such first referred to Person, the amount of such Indebtedness being deemed to be the lesser of the value of such property or asset or the amount of the Indebtedness so secured. The amount of Indebtedness of any Person at any date shall be the outstanding principal amount of all unconditional obligations described above, as such amount would be reflected on a balance sheet prepared in accordance with GAAP, and the maximum liability at such date of such Person for any contingent obligations described above. "Interest Swap Obligations" means the obligations of any Person under any interest rate protection agreement, interest rate future, interest rate option, interest rate swap, interest rate cap or other interest rate hedge or arrangement. "Investment" means (i) any transfer or delivery of cash, stock or other property of value in exchange for Indebtedness, stock or other security or ownership interest in any Person by 122 129 way of loan, advance, capital contribution, guarantee or otherwise and (ii) an investment deemed to have been made by the Company at the time any entity which was a Subsidiary of the Company ceases to be such a Subsidiary in an amount equal to the value of the loans and advances made, and any remaining ownership interest in, such entity immediately following such entity ceasing to be a Subsidiary of the Company. The amount of any non-cash Investment shall be the fair market value of such Investment, as determined conclusively in good faith by management of the Company unless the fair market value of such Investment exceeds $1.0 million, in which case the fair market value shall be determined conclusively in good faith by the Board of Directors of the Company at the time such Investment is made. "Issue Date" means the date of original issuance of the Original Notes. "Leverage Ratio" shall mean, as to any Person, the ratio of (i) the sum of the aggregate outstanding amount of Indebtedness of such Person and its Subsidiaries as of the date of calculation on a consolidated basis in accordance with GAAP to (ii) the Consolidated EBITDA of such Person for the four full fiscal quarters (the "Four Quarter Period") ending on or prior to the date of determination. For purposes of this definition, the aggregate outstanding principal amount of Indebtedness of the Person and its Subsidiaries for which such calculation is made shall be determined on a pro forma basis as if the Indebtedness giving rise to the need to perform such calculation had been incurred and the proceeds therefrom had been applied, and all other transactions in respect of which such Indebtedness is being incurred had occurred, on the last day of the Four Quarter Period. In addition to the foregoing, for purposes of this definition, "Consolidated EBITDA" shall be calculated on a pro forma basis after giving effect to (i) the incurrence of the Indebtedness of such Person and its Subsidiaries (and the application of the proceeds therefrom) giving rise to the need to make such calculation and any incurrence (and the application of the proceeds therefrom) or repayment of other Indebtedness, other than the incurrence or repayment of Indebtedness pursuant to working capital facilities, at any time subsequent to the beginning of the Four Quarter Period and on or prior to the date of determination, as if such incurrence (and the application of the proceeds thereof), or the repayment, as the case may be, occurred on the first day of the Four Quarter Period and (ii) any Asset Sales or Asset Acquisitions (including, without limitation, any Asset Acquisition giving rise to the need to make such calculation as a result of such Person or one of its Subsidiaries (including any Person who becomes a Subsidiary as a result of such Asset Acquisition) incurring, assuming or otherwise becoming liable for Indebtedness) at any time on or subsequent to the first day of the Four Quarter Period and on or prior to the date of determination, as if such Asset Sale or Asset Acquisition (including the incurrence, assumption or liability for any such Indebtedness and also including any Consolidated EBITDA associated with such Asset Acquisition) occurred on the first day of the Four Quarter Period. Furthermore, in calculating "Consolidated Interest Expense" for purposes of the calculation of "Consolidated EBITDA," (i) interest on Indebtedness determined on a fluctuating basis as of the date of determination (including Indebtedness actually incurred on the date of the transaction giving rise to the need to calculate the Leverage Ratio) and which will continue to be so determined thereafter shall be deemed to have accrued at a fixed rate per annum equal to the rate of interest on such Indebtedness as in effect on the date of determination and (ii) notwithstanding (i) above, interest determined on a fluctuating basis, to the extent such interest is covered by Interest Swap Obligations, shall be deemed 123 130 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). "Merger Date" means September 5, 1997. "Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds in the form of cash or Cash Equivalents (including payments in respect of deferred payment obligations when received in the form of cash or Cash Equivalents) received by the Company or any of its Subsidiaries from such Asset Sale net of (i) reasonable out-of-pocket expenses and fees relating to such Asset Sale (including, without limitation, legal, accounting and investment banking fees and sales commissions, recording fees, title insurance premiums, appraisers fees and costs reasonably incurred in preparation of any asset or property for sale), (ii) taxes paid or reasonably estimated to be payable (calculated based on the combined state, federal and foreign statutory tax rates applicable to the Company or the Subsidiary engaged in such Asset Sale) and (iii) repayment of Indebtedness secured by assets subject to such Asset Sale; provided that if the instrument or agreement governing such Asset Sale requires the transferor to maintain a portion of the purchase price in escrow (whether as a reserve for adjustment of the purchase price or otherwise) or to indemnify the transferee for specified liabilities in a maximum specified amount, the portion of the cash or Cash Equivalents that is actually placed in escrow or segregated and set aside by the transferor for such indemnification obligation shall not be deemed to be Net Cash Proceeds until the escrow terminates or the transferor ceases to segregate and set aside such funds, in whole or in part, and then only to the extent of the proceeds released from escrow to the transferor or that are no longer segregated and set aside by the transferor. "Obligations" means all obligations for principal, premium, interest, penalties, fees, indemnifications, reimbursements, damages and other liabilities payable under the documentation governing, or otherwise relating to, any Indebtedness. "Permitted Indebtedness" means, without duplication, (i) the Notes; (ii) the Guarantees; (iii) Indebtedness of the Company incurred pursuant to the Credit Agreement in an aggregate principal amount at any time outstanding not to exceed the sum of the aggregate commitments pursuant to the Credit Agreement as initially in effect on the 9 3/8% Notes Issue Date; (iv) the 9 3/8% Notes, the 8 3/4% Notes, the 10 1/2% Notes and the 8 1/8% Notes and Guarantees thereof; (v) Interest Swap Obligations; provided that such Interest Swap Obligations are entered into to protect the Company from fluctuations in interest rates of its Indebtedness; (vi) additional Indebtedness of the Company or any of its Subsidiaries not to exceed $10,000,000 in principal amount outstanding at any time (which amount may, but need not, be incurred under the Senior Credit Facility); (vii) Refinancing Indebtedness; (viii) Indebtedness owed by the Company to any Wholly-Owned Subsidiary or by any Subsidiary to the Company or any Wholly-Owned Subsidiary of the Company; and (ix) guarantees by Subsidiaries of any Indebtedness permitted to be incurred pursuant to the Indenture. "Permitted Investments" means (i) Investments by the Company or any Subsidiary to acquire the stock or assets of any Person (or Indebtedness of such Person acquired in connection with a transaction in which such Person becomes a Subsidiary of the 124 131 Company) engaged in the broadcast business or businesses reasonably related thereto, including, without limitation, media representation, sale of advertising and such other activities as are incidental or similar or related thereto; provided that if any such Investment or series of related Investments involves an Investment by the Company in excess of $5,000,000, the Company is able, at the time of such Investment and immediately after giving effect thereto, to incur at least $1.00 of additional Indebtedness (other than Permitted Indebtedness) in compliance with the "Limitation on Incurrence of Additional Indebtedness" covenant, (ii) Investments received by the Company or its Subsidiaries as consideration for a sale of assets, including an Asset Sale effected in compliance with the "Limitation on Asset Sales" covenant, (iii) Investments by the Company or any Wholly-Owned Subsidiary of the Company in any Wholly-Owned Subsidiary of the Company (whether existing on the Issue Date or created thereafter) or any Person that after such Investments, and as a result thereof, becomes a Wholly-Owned Subsidiary of the Company and Investments in the Company by any Wholly-Owned Subsidiary of the Company, (iv) cash and Cash Equivalents, (v) Investments in securities of trade creditors, wholesalers or customers received pursuant to any plan of reorganization or similar arrangement and (vi) additional Investments in an aggregate amount not to exceed $2,500,000 at any time outstanding. "Permitted Liens" means (i) Liens for taxes, assessments and governmental charges to the extent not required to be paid under the Indenture, (ii) statutory Liens of landlords and carriers, warehousemen, mechanics, suppliers, materialmen, repairmen or other like Liens to the extent not required to be paid under the Indenture, (iii) pledges or deposits to secure lease obligations or nondelinquent obligations under workers' compensation, unemployment insurance or similar legislation, (iv) Liens to secure the performance of public statutory obligations that are not delinquent, performance bonds or other obligations of a like nature (other than for borrowed money), in each case incurred in the ordinary course of business, (v) easements, rights-of-way, restrictions, minor defects or irregularities in title and other similar charges or encumbrances incurred in the ordinary course of business not interfering in any material respect with the business of the Company or its Subsidiaries, (vi) Liens upon specific items of inventory or other goods and proceeds of any Person securing such Person's obligations in respect of letters of credit or bankers' acceptances issued or created for the account of such Person to facilitate the purchase, shipment or storage of such inventory or other goods in the ordinary course of business, (vii) judgment and attachment Liens not giving rise to an Event of Default, (viii) leases or subleases granted to others in the ordinary course of business consistent with past practice not interfering in any material respect with the business of the Company or its Subsidiaries, (ix) any interest or title of a lessor in the property subject to any lease, whether characterized as capitalized or operating other than any such interest or title resulting from or arising out of a default by the Company or its Subsidiaries of its obligations under such lease and (x) Liens arising from filing UCC financing statements for precautionary purposes in connection with true leases of personal property that are otherwise permitted under the Indenture and under which the Company or any of its Subsidiaries is a lessee. "Person" means an individual, partnership, corporation, limited liability company, unincorporated organization, trust or joint venture, or a governmental agency or political subdivision thereof. 125 132 "Preferred Stock" of any Person means any Capital Stock of such Person that has preferential rights to any other Capital Stock of such Person with respect to dividends or redemptions or upon liquidation. "Productive Assets" means assets of a kind used or usable by the Company and its Subsidiaries in broadcast businesses or businesses reasonably related thereto, including, without limitation, media representation, sale of advertising and such other activities as are incidental or similar or related thereto, and specifically includes assets acquired through Asset Acquisitions. "Public Equity Offering" means an underwritten, fully registered public offering of Capital Stock (other than Disqualified Capital Stock) of the Company, Chancellor Media, CMHC or upon the consummation of the Capstar Merger, Capstar Broadcasting Corporation, or any of their respective successors, pursuant to an effective registration statement filed with the Commission in accordance with the Securities Act, the gross proceeds of which are at least $150 million; provided, however, that in the case of a Public Equity Offering by Chancellor Media, CMHC or upon the consummation of the Capstar Merger, Capstar Broadcasting Corporation, or any of their respective successors, the issuer of the public equity must contribute to the capital of the Company an amount sufficient to redeem the 9 3/8% Notes, 8 3/4% Notes, 10 1/2% Notes, 8 1/8% Notes and Notes, if any, called for redemption in accordance with the terms thereof. "Qualified Capital Stock" means any Capital Stock that is not Disqualified Capital Stock. "Refinancing Indebtedness" means any refinancing by the Company of Indebtedness of the Company or any of its Subsidiaries incurred in accordance with the "Limitation on Incurrence of Additional Indebtedness" covenant (other than pursuant to clause (iii) or (iv) of the definition of Permitted Indebtedness) that does not (i) result in an increase in the aggregate principal amount of Indebtedness (such principal amount to include, for purposes of this definition, any premiums, penalties or accrued interest paid with the proceeds of the Refinancing Indebtedness) of such Person or (ii) create Indebtedness with (A) a Weighted Average Life to Maturity that is less than the Weighted Average Life to Maturity of the Indebtedness being refinanced or (B) a final maturity earlier than the final maturity of the Indebtedness being refinanced. "Representative" means the indenture trustee or other trustee, agent or representative in respect of any Designated Senior Debt; provided that if, and for so long as, any Designated Senior Debt lacks such a representative, then the Representative for such Designated Senior Debt shall at all times constitute the holders of a majority in outstanding principal amount of such Designated Senior Debt. "Sale and Leaseback Transaction" means any direct or indirect arrangement with any Person or to which any such Person is a party, providing for the leasing to the Company or a Subsidiary of any property, whether owned by the Company or any Subsidiary at the Issue Date or later acquired, which has been or is to be sold or transferred by the Company or such Subsidiary to such Person or to any other Person from whom funds have been or are to be advanced by such Person on the security of such property. "Securities Act" means the Securities Act of 1933, as amended, and the rules and regulations of the Commission promulgated thereunder. "Senior Credit Facility" means the Second Amended and Restated Loan Agreement, dated April 25, 1997, as amended from time to time, among the Company, the lenders 126 133 from time to time named party thereto, Toronto Dominion (Texas), Inc., Bankers Trust Company, The Bank of New York, NationsBank of Texas, N.A. and Union Bank of California, as managing agents, Toronto Dominion Securities (USA), Inc., as arranging agent, and Toronto Dominion (Texas), Inc., as administrative agent for the lenders, together with the related documents thereto (including, without limitation, any guarantee agreements, stock pledge agreements and other 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 Company as additional borrowers or guarantors thereunder) all or any portion of the Indebtedness under such agreement or any successor or replacement agreement and whether by the same or any other agent, lender or group of lenders. "Senior Debt" means any Indebtedness of the Company (including any interest accruing subsequent to the filing of a petition of bankruptcy at the rate provided for in the documentation with respect thereto, whether or not such interest is an allowed claim under applicable law), whether outstanding on the Issue Date or thereafter created, incurred or assumed, unless, in the case of any particular Indebtedness, the instrument creating or evidencing the same or pursuant to which the same is outstanding expressly provides that such Indebtedness shall not be senior in right of payment to the Notes. Without limiting the generality of the foregoing, "Senior Debt" shall also include the principal of, premium, if any, interest (including any interest accruing subsequent to the filing of a petition of bankruptcy at the rate provided for in the documentation with respect thereto, whether or not such interest is an allowed claim under applicable law) on, and all other amounts owing in respect of, and all monetary obligations of every nature under, (x) the Senior Credit Facility, including, without limitation, obligations to pay principal and interest, reimbursement obligations under letters of credit, fees, expenses and indemnities, and (y) all Interest Swap Obligations. Notwithstanding the foregoing, Senior Debt shall not include any of the following amounts (whether or not constituting Indebtedness as defined in the Indenture): (i) any Indebtedness of the Company to a Subsidiary of the Company, (ii) Indebtedness and other amounts owing to trade creditors incurred in connection with obtaining goods, materials or services, (iii) Indebtedness represented by Disqualified Capital Stock, (iv) any liability for federal, state, local or other taxes owed or owing by the Company, (v) any Indebtedness which is, by its express terms, subordinated in right of payment to any other Indebtedness of the Company, including the 9 3/8% Notes, the 8 3/8% Notes, the 10 1/2% Notes and the 8 1/8% Notes. "Significant Subsidiary" means for any Person each Subsidiary of such Person which (i) for the most recent fiscal year of such Person accounted for more than 5% of the consolidated net income of such Person or (ii) as at the end of such fiscal year, was the owner of more than 5% of the consolidated assets of such Person. "Subsidiary," with respect to any Person, means (i) any corporation of which the outstanding Capital Stock having at least a majority of the votes entitled to be cast in the election of directors under ordinary circumstances shall at the time be owned, directly or indirectly, by such Person or (ii) any other Person of which at least a majority of the voting interest under ordinary circumstances is at the time, directly or indirectly, owned by such Person. Notwithstanding anything in the Indenture to the contrary, all references to the Company and its consolidated Subsidiaries or to financial information prepared on a consolidated basis in accordance with GAAP shall be deemed to include the Company and 127 134 its Subsidiaries as to which financial statements are prepared on a combined basis in accordance with GAAP and to financial information prepared on such a combined basis. Notwithstanding anything in the Indenture to the contrary, an Unrestricted Subsidiary shall not be deemed to be a Subsidiary for purposes of the Indenture. "Tax Sharing Agreement" means the Tax Sharing Agreement between CRBC and Chancellor Broadcasting, as in effect on the 9 3/8% Notes Issue Date. "Unrestricted Subsidiary" means a Subsidiary of the Company created after the 9 3/8% Notes Issue Date and so designated by a resolution adopted by the Board of Directors of the Company, provided that (a) neither the Company nor any of its other Subsidiaries (other than Unrestricted Subsidiaries) (1) provides any credit support for any Indebtedness of such Subsidiary (including any undertaking, agreement or instrument evidencing such Indebtedness) or (2) is directly or indirectly liable for any Indebtedness of such Subsidiary, (b) the creditors with respect to Indebtedness for borrowed money of such Subsidiary, having a principal amount in excess of $5,000,000, have agreed in writing that they have no recourse, direct or indirect, to the Company or any other Subsidiary of the Company (other than Unrestricted Subsidiaries), including, without limitation, recourse with respect to the payment of principal of or interest on any Indebtedness of such Subsidiary and (c) at the time of designation of such Subsidiary such Subsidiary has no property or assets (other than de minimis assets resulting from the initial capitalization of such Subsidiary). Any such designation by the Board of Directors of the Company shall be evidenced to the Trustee by the filing with the Trustee of a certified copy of the resolution of the Company's Board of Directors giving effect to such designation and an Officers' Certificate certifying that such designation complied with the foregoing conditions. Until otherwise designated by the Board of Directors of the Company, National Cable Communications, L.P., a Delaware limited partnership, shall be an Unrestricted Subsidiary. "Weighted Average Life to Maturity" means, when applied to any Indebtedness at any date, the number of years obtained by dividing (a) the then outstanding aggregate principal amount of such Indebtedness into (b) the total of the product obtained by multiplying (i) the amount of each then remaining installment, sinking fund, serial maturity or other required payment of principal, including payment at final maturity, in respect thereof, by (ii) the number of years (calculated to the nearest one-twelfth) which will elapse between such date and the making of such payment. BOOK-ENTRY; DELIVERY AND FORM Except as set forth below, the New Notes initially will be represented by one or more permanent global certificates in definitive, fully registered form (the "Global Certificate"). The Global Certificate will be deposited with, or on behalf of, DTC and registered in the name of a nominee of DTC. The Global Certificate. The Company expects that pursuant to procedures established by DTC (i) upon the issuance of the Global Certificate, DTC or its custodian will credit, on its internal system, the aggregate principal amount of New Notes of the individual beneficial interests represented by such global securities to the respective accounts of persons who have accounts with such depositary and (ii) ownership of beneficial interests in the Global Certificate will be shown on, and the transfer of such ownership will be effected only through, records maintained by DTC or its nominee (with respect to interests 128 135 of participants) and the records of participants (with respect to interests of persons other than participants). Ownership of beneficial interests in the Global Certificate will be limited to persons who have accounts with DTC ("participants") or persons who hold interests through participants. So long as DTC, or its nominee, is the registered owner or holder of the New Notes, DTC or such nominee, as the case may be, will be considered the sole owner or holder of the New Notes represented by such Global Certificate for all purposes. No beneficial owner of an interest in the Global Certificate will be able to transfer that interest except in accordance with DTC's procedures, in addition to those procedures provided for in the Indenture. Payments of the principal of, premium, if any, and interest on the Global Certificate will be made to DTC or its nominee, as the case may be, as the registered owner thereof. None of the Company, the Trustee nor the Paying Agent and Registrar will have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests in the Global Certificate or for maintaining, supervising or reviewing any records relating to such beneficial ownership interest. The Company expects that DTC, or its nominee, upon receipt of any payment of principal, premium, if any, and interest in respect of the Global Certificate, will credit participants' accounts with payments in amounts proportionate to their respective beneficial interests in the principal amount of the Global Certificate as shown on the records of DTC or its nominee. The Company also expects that payments by participants to owners of beneficial interests in the Global Certificate held through such participants will be governed by standing instructions and customary practice, as is now the case with securities held for the accounts of customers registered in the names of nominees for such customers. Such payments will be the responsibility of such participants. Transfers between participants in DTC will be effected in the ordinary way in accordance with DTC rules and will be settled in clearinghouse funds. If a holder requires physical delivery of a Certificated Security for any reason, including to sell New Notes to persons in states that require physical delivery of the Certificate, or to pledge such securities, such holder must transfer its interest in the Global Certificate, in accordance with the normal procedures of DTC and with the procedures set forth in the Indenture. DTC has advised the Company that it will take any action permitted to be taken by a holder of New Notes (including the presentation of New Notes for exchange as described below) only at the direction of one or more participants to whose account the DTC interests in the Global Certificate are credited and only in respect of such New Notes as to which such participant or participants has or have given such direction. DTC has advised the Company as follows: DTC is a limited purpose trust company organized under the laws of the State of New York, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the Uniform Commercial Code and a "Clearing Agency" registered pursuant to the provisions of Section 17A of the Exchange Act. DTC was created to hold securities for its participants and facilitate the clearance and settlement of securities transactions between participants through electronic book-entry changes in accounts of its participants, thereby eliminating the need for physical movement of certificates. Participants include securities brokers and dealers, banks, trust companies and clearing corporations and certain other organizations. Indirect access to the DTC system is available to others such as banks, brokers, dealers and trust 129 136 companies that clear through or maintain a custodial relationship with a participant, either directly or indirectly ("indirect participants"). Although DTC has agreed to the foregoing procedures in order to facilitate transfers of interests in the Global Certificate among participants of DTC, it is under no obligation to perform such procedures, and such procedures may be discontinued at any time. Neither the Company nor the Trustee will have any obligations under the rules and procedures governing their operations. Certificated Securities. If DTC is at any time unwilling or unable to continue as a depositary for the Global Certificate and a successor depositary is not appointed by the Company within 90 days, Certificated Securities will be issued in exchange for the Global Certificate. DESCRIPTION OF CERTAIN INDEBTEDNESS SENIOR CREDIT FACILITY On April 25, 1997, the Company closed its Second Amended and Restated Loan Agreement (as amended from time to time, the "Senior Credit Facility") with TD Securities (USA) Inc. as arranging agent, The Bank of New York and Bankers Trust Company, as co-syndication agents, NationsBank of Texas, N.A. and Union Bank of California, as co-documentation agents, Toronto Dominion (Texas), Inc., as administrative agent (the "Administrative Agent"), and the financial institutions party thereto (the "Lenders"). The Senior Credit Facility initially provided for a maximum commitment of $1.75 billion, and upon consummation of the Chancellor Merger, the aggregate commitment under the Senior Credit Facility was increased to $2.50 billion. Loans under the Senior Credit Facility consist of (i) a $900.0 million term loan facility (the "Term Loan Facility") and (ii) a $1.60 billion revolving loan facility (the "Revolving Loan Facility" and, collectively with the Term Loan Facility, the "Loans"). The following description of certain provisions of the Senior Credit Facility does not purport to be complete and is qualified in its entirety by reference to the full text of the Senior Credit Facility, a copy of which is available from the Company on request. TERM LOAN FACILITY The Term Loan Facility matures on June 30, 2005. The Term Loan Facility requires scheduled annual reductions of the principal balance of the Term Loan Facility outstanding on June 30, 2000, payable quarterly in equal quarterly amounts, commencing on September 30, 2000 in the following percentages: (i) from 9/30/00 through and including 6/30/01, 15.00%; (ii) from 9/30/01 through and including 6/30/02, 20.00%; (iii) from 9/30/02 through and including 6/30/03, 20.00%; (iv) from 9/30/03 through and including 6/30/04, 20.00%; and (v) from 9/30/04 through and including 6/30/05, 25.00%. Mandatory or optional prepayments made by the Company against the Term Loan Facility will not affect the reduction percentages set forth above. REVOLVING LOAN FACILITY The Revolving Loan Facility matures on June 30, 2005. The Revolving Loan Facility requires scheduled annual reductions of the Revolving Loan Commitment (as defined in 130 137 the Senior Credit Facility) as of June 30, 2000, payable quarterly in equal quarterly amounts, commencing on September 30, 2000 in the following percentages: (i) from 9/30/00 through and including 6/30/01, 15.00%; (ii) from 9/30/01 through and including 6/30/02, 20.00%; (iii) from 9/30/02 through and including 6/30/03, 20.00%; (iv) from 9/30/03 through and including 6/30/04, 20.00%; and (v) from 9/30/04 through and including 6/30/05, 25.00%. Voluntary reductions of the Revolving Loan Commitment made by the Company shall not affect the reduction percentages set forth above. ADDITIONAL FACILITY INDEBTEDNESS The Company has the ability to incur additional indebtedness ("Additional Facility Indebtedness") in a principal amount not to exceed $250.0 million from one or more of the Lenders or any other institution acceptable to the Administrative Agent that agrees to extend such credit, provided that certain conditions under the Senior Credit Facility are complied with. As of the date hereof, the Company has not requested, and no Lender has issued, any commitment to extend such Additional Facility Indebtedness to the Company. INTEREST RATE The Loans bear interest at a rate equal to, at the Company's option, (i) the Prime Rate (as defined in the Senior Credit Facility) in effect from time to time plus the Applicable Margin (as defined) (a "Prime Rate Loan") or (ii) the Eurodollar Rate (as defined in the Senior Credit Facility) as determined by the Administrative Agent for the respective interest period plus the Applicable Margin (a "Eurodollar Loan"). The Applicable Margin is calculated based on the Company's Total Leverage Ratio (as defined in the Senior Credit Facility) according to the table set forth below:
PRIME RATE EURODOLLAR RATE APPLICABLE APPLICABLE TOTAL LEVERAGE RATIO MARGIN MARGIN -------------------- ----------------- ----------------- Greater than 6.75................................. 1.625% 2.625% Greater than 6.50 but less than or equal to 6.75............................................ 1.375% 2.375% Greater than 6.00 but less than or equal to 6.50............................................ 1.125% 2.125% Greater than 5.50 but less than or equal to 6.00............................................ 0.750% 1.750% Greater than 5.00 but less than or equal to 5.50............................................ 0.375% 1.375% Greater than 4.50 but less than or equal to 5.00............................................ 0.250% 1.250% Greater than 4.00 but less than or equal to 4.50............................................ 0.125% 1.125% Less than or equal to 4.00........................ 0.000% 1.000%
FEES The Company is required to pay commitment fees on the aggregate unused amount of the Available Revolving Loan Commitment (as defined in the Senior Credit Facility) based on the Total Leverage Ratio for the most recent fiscal quarter end. If the Total Leverage Ratio is greater than or equal to 5.50, the corresponding commitment fee is 0.375%; if the Total Leverage Ratio is less than 5.50, the corresponding commitment fee is 0.250%. The Administrative Agent will also receive such other customary fees as have been separately agreed upon with the Company. The Company also is required to pay fees for outstanding letters of credit drawn under the Senior Credit Facility at a rate per annum on the amount of the Letter of Credit Obligations (as defined in the Senior Credit Facility) equal to the 131 138 Applicable Margin for Eurodollar Loans plus an issuing bank fee of $2,000 for issuing, amending or renewing any letter of credit. SECURITY AND GUARANTEES The Senior Credit Facility is secured by (i) a pledge of all capital stock owned by CMCLA and its subsidiaries, (ii) a pledge of all capital stock of CMCLA, (iii) a non-recourse pledge of all capital stock of CMHC owned by Chancellor Media, (iv) a pledge of all debt and equity securities of persons engaged in any Non-Core Business (as defined in the Senior Credit Facility) purchased by the Company, (v) a collateral assignment of all partnership interests held by the subsidiaries of CMCLA, (vi) a collateral assignment of all trust interests held by the subsidiaries of CMCLA, (vii) a collateral assignment of all limited liability company interests held by CMCLA, (viii) a downstream guarantee provided by CMHC and its wholly owned subsidiary and (ix) upstream guarantees provided by the subsidiaries of CMCLA. COVENANTS The Senior Credit Facility contains customary restrictive covenants, which, among other things and with certain exceptions, limit the ability of the Company to incur additional indebtedness and liens in connection therewith, enter into certain transactions with affiliates, pay dividends, consolidate, merge or effect certain asset sales, issue additional stock, effect an asset swap, make acquisitions and make capital expenditures and enter new lines of business. Under the Senior Credit Facility, the Company is required to maintain specified financial ratios, based on its Senior Leverage Ratio and Total Leverage Ratio (in each case, as defined in the Senior Credit Facility), for specified periods of time. Under the Senior Credit Facility, the Company must not exceed the following ratios during the following periods of time:
PERIOD ENDING SENIOR LEVERAGE RATIO TOTAL LEVERAGE RATIO ------------- --------------------- -------------------- 1/1/98 through 12/31/99................... 6.00 to 1.00 7.00 to 1.00 1/1/00 through 12/31/00................... 5.50 to 1.00 6.00 to 1.00 1/1/01 through 12/31/01................... 3.75 to 1.00 5.25 to 1.00 1/1/02 and thereafter..................... 3.50 to 1.00 5.25 to 1.00
Under the Senior Credit Facility, the Company may not, as of the end of any fiscal quarter, allow its ratio of the sum of Operating Cash Flow plus the Available Revolving Commitment (in each case, as defined in the Senior Credit Facility) during the last fiscal four-quarter period to Pro Forma Fixed Changes (as defined in the Senior Credit Facility) for the four-quarter period beginning on the day following that fiscal quarter end, to be less than 1.05 to 1.00. Under the Senior Credit Facility, the Company also is required to comply with certain other financial tests, such as a specified ratio of Operating Cash Flow to Cash Interest Expense (as each such term is defined in the Senior Credit Facility). 132 139 USE OF PROCEEDS The Senior Credit Facility requires that the Net Proceeds from any Permitted Asset Sale (in each case, as defined in the Senior Credit Facility) be applied, at the Company's election, to the Term Loan Facility or the Revolving Loan Facility or any combination thereof. In the alternative, the Company may elect to make an acquisition with the Net Proceeds, so long as the Company has entered into a contract for such acquisition within 12 months from the date of such Permitted Asset Sale and has concluded the purchase with 18 months from the date of such Permitted Asset Sale. In addition, 50% of Net Proceeds from any Subordinated Indebtedness issued by the Company, other than the assumption or refinancing of the 9 3/8% Notes and the 8 3/4% Notes, may be applied, at the Company's election, to the Term Loan Facility or the Revolving Loan Facility or any combination thereof. To the extent that the Company elects to apply any amounts described in this paragraph to the Revolving Loan Facility, the commitments under such facility will not be permanently reduced and will be available for subsequent borrowing by the Company. EVENTS OF DEFAULT The Senior Credit Facility contains customary events of default, including (i) the default in the payment of any interest, reimbursement amounts with respect to letters of credit, or fees or other amounts payable to the Lenders (other than principal) when due which is not cured within five days from the date that such payment was due, (ii) the default in the payment of any principal amount when due, (iii) the default in the performance or observance of certain representations, warranties, covenants and agreements contained in the Senior Credit Facility, (iv) a Senior Credit Facility Change of Control (as defined below), (v) the entry of an order for relief, winding-up or liquidation under Title 11 of the United States Code or similar federal or state laws against Chancellor Media, CMHC or the Company, (vi) the voluntary commencement by the Company of bankruptcy proceedings under Title 11 of the United States Code or similar federal or state laws, or the commencement of involuntary bankruptcy proceedings against the Company, which are not diligently contested or which continue undismissed for a period of 45 consecutive days, (vii) the entry of a judgment against the Company which, individually or when aggregated with other such judgments, exceeds $10 million, (viii) the failure to satisfy certain minimum employee benefit funding standards, (ix) the acceleration of the maturity of (a) Subordinated Indebtedness of the Company or (b) any other indebtedness of the Company in an aggregate principal amount exceeding $3 million, (x) any event which would permit the acceleration of such subordinated indebtedness or such other indebtedness which has not been cured or waived in writing within any applicable cure period, (xi) any event which does not permit acceleration of such Subordinated Indebtedness or such other indebtedness but requires the Company to purchase or acquire such Subordinated Indebtedness or such other indebtedness, (xii) any material default under any Interest Hedge Agreement (as defined in the Senior Credit Facility) with a notional principal amount of $6 million or more, (xii) the issuance by the FCC of a revocation order based on alleged alien ownership of the Company, (xiii) the final, non-appealable termination or revocation of any material FCC license or failure to renew any such license, (xiv) the failure of any security document or note under the Senior Credit Facility to be in effect, or (xv) the breach by CMHC of the guarantee or stock pledge made by it pursuant to the Senior Credit Facility. 133 140 A "Senior Credit Facility Change of Control" will be deemed to have occurred under the Senior Credit Facility if (i) any Person (as defined in the Senior Credit Facility), other than Scott K. Ginsburg, Matthew Devine, Kenneth J. O'Keefe, James de Castro and Hicks Muse and its affiliates, shall individually or collectively control more than 51% on a fully diluted basis of the voting power of Chancellor Media or (ii) CMHC shall, directly or indirectly, cease to own all of the issued and outstanding common stock of CMCLA. 9 3/8% NOTES The 9 3/8% Notes mature on October 1, 2004. Interest on the 9 3/8% Notes accrues at the rate of 9 3/8% per annum and is payable semiannually. The 9 3/8% Notes are unsecured obligations of the Company, ranking subordinate in right of payment to all Senior Debt (as defined in the indenture governing the 9 3/8% Notes (the "9 3/8% Indenture")) of the Company and pari passu with the 8 3/4% Notes and the 10 1/2% Notes, and will rank pari passu with the New Notes. Substantially all of the Company's subsidiaries fully and unconditionally guarantee the full and prompt payment of principal of all interest on the 9 3/8% Notes, and of all other obligations under the 9 3/8% Indenture. The indebtedness evidenced by each such guarantee is subordinated to each Guarantor's Senior Debt on the same terms as the 9 3/8% Notes are subordinated to the Company's Senior Debt. The 9 3/8% Notes are redeemable, at the Company's option, in whole at any time or in part from time to time, on and after February 1, 2000, at the following redemption prices (expressed as percentages of the principal amount) if redeemed during the twelve month period commencing on February 1 of the year set forth below, plus, in each case, accrued and unpaid interest thereon to the date of redemption:
YEAR PERCENTAGE ---- ---------- 2000........................................................ 104.688% 2001........................................................ 103.125 2002........................................................ 101.563 2003 and thereafter......................................... 100.000
In addition, on or prior to January 31, 1999, the Company may redeem the 9 3/8% Notes with the net cash proceeds of one or more Public Equity Offerings (as defined in the 9 3/8% Indenture) at a redemption price of 108.203% or 107.031% of the principal amount thereof, plus, in each case, accrued and unpaid interest to the redemption date, during the respective 12-month periods commencing on February 1, 1997 and 1998; provided, however, that after any such redemption at least 75% of the aggregate principal amount of the 9 3/8% Notes originally issued must be outstanding. The Company's ability to optionally redeem the 9 3/8% Notes are subject to restrictions contained in the Senior Credit Facility, which limits the amount of debt subordinate to the indebtedness under the Senior Credit Facility that may be redeemed by the Company. Under the 9 3/8% Indenture, in the event of a change of control (as defined in the 9 3/8% Indenture) of the Company, each holder of 9 3/8% Notes will have the right to require the Company to repurchase, in whole or in part, such holder's 9 3/8% Notes at a purchase price equal to 101% of their principal amount, plus accrued and unpaid interest, if any to the date of repurchase. 134 141 The 9 3/8% Indenture contains certain restrictive covenants which, among other things, impose limitations (subject to certain exceptions) on the Company with respect to (i) the payment of dividends or other distributions on capital stock and the purchase, redemption or retirement for value of shares of capital stock as any warrants, options or other rights for shares of capital stock; (ii) the incurrence of additional indebtedness; (iii) the incurrence of subsidiary indebtedness; (iv) the repayment of redemption of subordinated indebtedness other than in accordance with its scheduled repayment; (v) sales of assets by the Company; (vi) asset swaps; (vii) transactions with stockholders and affiliates; (viii) the restriction of certain payments by subsidiaries to their respective parents; (ix) the creation of liens on the assets of the Company or its subsidiaries; (x) the incurrence of indebtedness senior to the 9 3/8% Notes and subordinate to other indebtedness of the Company; (xi) investments by the Company or its subsidiaries; (xii) the issuance of preferred stock by any of the Company's subsidiaries; (xiii) sales and leasebacks by the Company or its subsidiaries; (xiv) the guarantee of indebtedness; (xv) the conduct of business other than the ownership and operation of radio broadcast stations and businesses reasonably related thereto; and (xvi) the merger or sale of all or substantially all the assets of the Company. Upon the happening of certain events of default specified in the 9 3/8% Indenture, the trustee for the 9 3/8% Notes may, and the trustee upon the request of holders of 25% in principal amount then outstanding of the 9 3/8% Notes shall, or the holders of at least 25% in principal amount of outstanding 9 3/8% Notes may, declare the principal amount then outstanding of and accrued but unpaid interest, if any, on all of such 9 3/8% Notes to be due and payable. Upon the happening of certain other events of default specified in the 9 3/8% Notes Indenture, the unpaid principal of and accrued but unpaid interest on all outstanding 9 3/8% Notes will automatically become due and payable without any action by the trustee or the holders of the 9 3/8% Notes. The Company may terminate its obligations under the 9 3/8% Indenture at any time, and the obligations of the Guarantors with respect thereto shall terminate, by delivering all outstanding 9 3/8% Notes of the appropriate series to the appropriate trustee for cancellation and paying all sums payable by it thereunder. The Company, at its option, (i) will be discharged from any and all obligations with respect to the 9 3/8% Notes delivered, and the guarantor will be discharged from any and all obligations with respect to its guarantee of such 9 3/8% Notes, (except for certain obligations of the Company to register the transfer or exchange of such 9 3/8% Notes, replace stolen, lost or mutilated 9 3/8% Notes, maintain paying agencies and hold moneys for payment in trust) or (ii) need not comply with certain of the restrictive covenants with respect to the 9 3/8% Indenture, in each case, if the Company, in addition to satisfying certain other obligations, deposits with the appropriate trustee, in trust, U.S. legal tender or U.S. Government Obligations (in each case, as defined in the 9 3/8% Indenture) or a combination thereof which, through the payment of interest thereon and principal in respect thereof in accordance with their terms, will be sufficient to pay all the principal of and interest on 9 3/8% Notes to be defeased on the dates such payments are due in accordance with the terms of 9 3/8% Notes as well as the trustee's fees and expenses. 8 3/4% NOTES The 8 3/4% Notes mature on June 15, 2007. Interest on the 8 3/4% Notes accrues at the rate of 8 3/4% per annum and is payable semiannually. The 8 3/4% Notes are unsecured obligations of the Company, ranking subordinate in right of payment to all Senior Debt (as defined in 135 142 the indenture governing the 8 3/4% Notes (the "8 3/4% Indenture")) of the Company and pari passu with the 9 3/8% Notes and the 10 1/2% Notes, and will rank pari passu with the Notes. Substantially all of the Company's subsidiaries fully and unconditionally guarantee the full and prompt payment of principal of all interest on the 8 3/4% Notes, and of all other obligations under the 8 3/4% Indenture. The indebtedness evidenced by each such guarantee is subordinated to each Guarantor's Senior Debt on the same terms as the 8 3/4% Notes are subordinated to the Company's Senior Debt. The 8 3/4% Notes are redeemable, at the Company's option, in whole at any time or in part from time to time, on and after June 15, 2002, at the following redemption prices (expressed as percentages of the principal amount) if redeemed during the twelve month period commencing on June 15 of the year set forth below, plus, in each case, accrued and unpaid interest thereon to the date of redemption:
YEAR PERCENTAGE ---- ---------- 2002........................................................ 104.375% 2003........................................................ 102.917 2004........................................................ 101.458 2005 and thereafter......................................... 100.000
In addition, on or prior to June 15, 2000, the Company may redeem the 8 3/4% Notes with the net cash proceeds of one or more Public Equity Offerings (as defined in the 8 3/4% Indenture) at a redemption price of 108.75% of the principal amount thereof, plus accrued and unpaid interest to the redemption date; provided, however, that after any such redemption at least 75% of the aggregate principal amount of the 8 3/4% Notes originally issued must be outstanding. The Company's ability to optionally redeem the 8 3/4% Notes are subject to restrictions contained in the Senior Credit Facility, which limits the amount of debt subordinate to the indebtedness under the Senior Credit Facility that may be redeemed by the Company. Under the 8 3/4% Indenture, in the event of a change of control (as defined in the 8 3/4% Indenture) of the Company, each holder of 8 3/4% Notes will have the right to require the Company to repurchase, in whole or in part, such holder's 8 3/4% Notes at a purchase price equal to 101% of their principal amount, plus accrued and unpaid interest, if any to the date of repurchase. The 8 3/4% Indenture contains certain restrictive covenants which, among other things, impose limitations (subject to certain exceptions) on the Company with respect to (i) the payment of dividends or other distributions on capital stock and the purchase, redemption or retirement for value of shares of capital stock as any warrants, options or other rights for shares of capital stock; (ii) the incurrence of additional indebtedness; (iii) the incurrence of subsidiary indebtedness; (iv) the repayment or redemption of subordinated indebtedness other than in accordance with its scheduled repayment; (v) sales of assets by the Company; (vi) asset swaps; (vii) transactions with stockholders and affiliates; (viii) the restriction of certain payments by subsidiaries to their respective parents; (ix) the creation of liens on the assets of the Company or its subsidiaries; (x) the incurrence of indebtedness senior to the 8 3/4% Notes and subordinate to other indebtedness of the Company; (xi) investments by the Company or its subsidiaries; (xii) the issuance of preferred stock by any of the Company's subsidiaries; (xiii) sales and leasebacks by the Company or its subsidiaries; (xiv) the guarantee of indebtedness; (xv) the conduct of 136 143 business other than the ownership and operation of radio broadcast stations and businesses reasonably related thereto; and (xvi) the merger or sale of all or substantially all the assets of the Company. Upon the happening of certain events of default specified in the 8 3/4% Indenture, the trustee for the 8 3/4% Notes may, and the trustee upon the request of holders of 25% in principal amount then outstanding of the 8 3/4% Notes shall, or the holders of at least 25% in principal amount of outstanding 8 3/4% Notes may, declare the principal amount then outstanding of and accrued but unpaid interest, if any, on all of such 8 3/4% Notes to be due and payable. Upon the happening of certain other events of default specified in the 8 3/4% Indenture, the unpaid principal of and accrued but unpaid interest on all outstanding 8 3/4% Notes will automatically become due and payable without any action by the trustee or the holders of the 8 3/4% Notes. The Company may terminate its obligations under the 8 3/4% Indenture at any time, and the obligations of the Guarantors with respect thereto shall terminate, by delivering all outstanding 8 3/4% Notes of the appropriate series to the appropriate trustee for cancellation and paying all sums payable by it thereunder. The Company, at its option, (i) will be discharged from any and all obligations with respect to the 8 3/4% Notes delivered, and the guarantor will be discharged from any and all obligations with respect to its guarantee of such 8 3/4% Notes, (except for certain obligations of the Company to register the transfer or exchange of such 8 3/4% Notes, replace stolen, lost or mutilated 8 3/4% Notes, maintain paying agencies and hold moneys for payment in trust) or (ii) need not comply with certain of the restrictive covenants with respect to the 8 3/4% Indenture, in each case, if the Company, in addition to satisfying certain other obligations, deposits with the appropriate trustee, in trust, U.S. legal tender or U.S. Government Obligations (in each case, as defined in the 8 3/4% Indenture) or a combination thereof which, through the payment of interest thereon and principal in respect thereof in accordance with their terms, will be sufficient to pay all the principal of and interest on 8 3/4% Notes to be defeased on the dates such payments are due in accordance with the terms of 8 3/4% Notes as well as the trustee's fees and expenses. 10 1/2% NOTES The 10 1/2% Notes mature on January 15, 2007. Interest on the 10 1/2% Notes accrues at the rate of 10 1/2% per annum and is payable semiannually. The 10 1/2% Notes are unsecured obligations of the Company, ranking subordinate in right of payment to all Senior Debt (as defined in the indenture governing the 10 1/2% Notes (the "10 1/2% Indenture")) of the Company and pari passu with the 9 3/8% Notes and the 8 3/4% Notes, and will rank pari passu with the Notes. Substantially all of the Company's subsidiaries fully and unconditionally guarantee the full and prompt payment of principal of all interest on the 10 1/2% Notes, and of all other obligations under the 10 1/2% Indenture. The indebtedness evidenced by each such guarantee is subordinated to each Guarantor's Senior Debt on the same terms as the 10 1/2% Notes are subordinated to the Company's Senior Debt. Except as described in the immediately following paragraph, the 10 1/2% Notes may not be redeemed at the option of the Company prior to January 15, 2002. During the twelve month period beginning January 15 of the years indicated below, the 10 1/2% Notes are redeemable at the option of the Company, in whole or in part, on at least 30 but not more than 60 days' notice to each holder of 10 1/2% Notes to be redeemed, at the redemption prices (expressed as percentages of the principal amount) set forth below, plus any 137 144 accrued and unpaid interest and Liquidated Damages (as defined in the 10 1/2% Indenture), if any, to the applicable date of redemption.
YEAR PERCENTAGE ---- ---------- 2002........................................................ 105.250% 2003........................................................ 103.938 2004........................................................ 102.625 2005........................................................ 101.313 2006 and thereafter......................................... 100.000
In addition, on or prior to January 15, 2000, the Company may redeem the 10 1/2% Notes with the net cash proceeds of one or more offerings of Equity Interests (as defined in the 10 1/2% Indenture) at a redemption price of 109.5% of the principal amount thereof, plus accrued and unpaid interest to the redemption date; provided, however, that after any such redemption at least 65% of the aggregate principal amount of the 10 1/2% Notes originally issued must be outstanding. The Company's ability to optionally redeem the 10 1/2% Notes are subject to restrictions contained in the Senior Credit Facility, which limits the amount of debt subordinate to the indebtedness under the Senior Credit Facility that may be redeemed by the Company. Under the 10 1/2% Indenture, in the event of a change of control (as defined in the 10 1/2% Indenture) of the Company, the Company shall be obligated to make an offer to repurchase all outstanding 10 1/2% Notes at a purchase price equal to 101% of their principal amount, plus accrued and unpaid interest, if any to the date of repurchase. The 10 1/2% Indenture contains certain restrictive covenants which, among other things, impose limitations (subject to certain exceptions) on the Company with respect to (i) the payment of dividends or other distributions on capital stock and the purchase, redemption or retirement for value of shares of capital stock as any warrants, options or other rights for shares of capital stock; (ii) the incurrence of additional indebtedness; (iii) the incurrence of subsidiary indebtedness; (iv) the repayment or redemption of subordinated indebtedness other than in accordance with its scheduled repayment; (v) sales of assets by the Company; (vi) asset swaps; (vii) transactions with stockholders and affiliates; (viii) the restriction of certain payments by subsidiaries to their respective parents; (ix) the creation of liens on the assets of the Company or its subsidiaries; (x) the incurrence of indebtedness senior to the 10 1/2% Notes and subordinate to other indebtedness of the Company; (xi) investments by the Company or its subsidiaries; (xii) the issuance of preferred stock by any of the Company's subsidiaries; (xiii) sales and leasebacks by the Company or its subsidiaries; (xiv) the guarantee of indebtedness; (xv) the conduct of business other than the ownership and operation of broadcast businesses or businesses related thereto, including media representation and sale of advertising; and (xvi) the merger or sale of all or substantially all the assets of the Company. Upon the happening of certain events of default specified in the 10 1/2% Indenture, the trustee for the 10 1/2% Notes may, and the trustee upon the request of holders of 25% in principal amount then outstanding of the 10 1/2% Notes shall, or the holders of at least 25% in principal amount of outstanding 10 1/2% Notes may, declare the principal amount then outstanding of and accrued but unpaid interest, if any, on all of such 10 1/2% Notes to be due and payable. Upon the happening of certain other events of default specified in the 10 1/2% Indenture, the unpaid principal of and accrued but unpaid interest on all outstanding 10 1/2% Notes will 138 145 automatically become due and payable without any action by the trustee or the holders of the 10 1/2% Notes. The Company may terminate its obligations under the 10 1/2% Indenture at any time, and the obligations of the Guarantors with respect thereto shall terminate, by delivering all outstanding 10 1/2% Notes of the appropriate series to the appropriate trustee for cancellation and paying all sums payable by it thereunder. The Company, at its option, (i) will be discharged from any and all obligations with respect to the 10 1/2% Notes delivered, and the guarantor will be discharged from any and all obligations with respect to its guarantee of such 10 1/2% Notes, (except for certain obligations of the Company to register the transfer or exchange of such 10 1/2% Notes, replace stolen, lost or mutilated 10 1/2% Notes, maintain paying agencies and hold moneys for payment in trust) or (ii) need not comply with certain of the restrictive covenants with respect to the 10 1/2% Indenture, in each case, if the Company, in addition to satisfying certain other obligations, deposits with the appropriate trustee, in trust, U.S. cash or Government Securities (as defined in the 10 1/2% Indenture) or a combination thereof which, through the payment of interest thereon and principal in respect thereof in accordance with their terms, will be sufficient to pay all the principal of and interest on 10 1/2% Notes to be defeased on the dates such payments are due in accordance with the terms of 10 1/2% Notes as well as the trustee's fees and expenses. 8 1/8% NOTES The 8 1/8% Notes mature on December 15, 2007. Interest on the 8 1/8% Notes accrues at the rate of 8 1/8% per annum and is payable semiannually. The 8 1/8% Notes are unsecured obligations of the Company, ranking subordinate in right of payment to all Senior Debt (as defined in the indenture governing the 8 1/8% Notes (the "8 1/8% Indenture")) of the Company and pari passu with the 9 3/8% Notes, the 10 1/2% Notes and the 8 3/4% Notes. Substantially all of the Company's subsidiaries fully and unconditionally guarantee the full and prompt payment of principal of all interest on the 8 1/8% Notes, and of all other obligations under the 8 1/8% Indenture. The indebtedness evidenced by each such guarantee is subordinated to each Guarantor's Senior Debt on the same terms as the 8 1/8% Notes are subordinated to the Company's Senior Debt. The 8 1/8% Notes are redeemable, at the Company's option, in whole at any time or in part from time to time, on and after December 15, 2002, at the following redemption prices (expressed as percentages of the principal amount) if redeemed during the twelve month period commencing on December 15 of the year set forth below, plus, in each case, accrued and unpaid interest thereon to the date of redemption:
YEAR PERCENTAGE - ---- ---------- 2002........................................................ 104.063% 2003........................................................ 102.708 2004........................................................ 101.354 2005 and thereafter......................................... 100.000
In addition, on or prior to December 15, 2000, the Company may redeem the 8 1/8% Notes with the net cash proceeds of one or more Public Equity Offerings (as defined in the 8 1/8% Indenture) at a redemption price of 108.125% of the principal amount thereof, plus accrued and unpaid interest to the redemption date; provided, however, that after any such 139 146 redemption at least 75% of the aggregate principal amount of the 8 1/8% Notes originally issued must be outstanding. The Company's ability to optionally redeem the 8 1/8% Notes are subject to restrictions contained in the Senior Credit Facility, which limits the amount of debt subordinate to the indebtedness under the Senior Credit Facility that may be redeemed by the Company. Under the 8 1/8% Indenture, in the event of a change of control (as defined in the 8 1/8% Indenture) of the Company, (i) the Company will have the option, at any time on or prior to December 15, 2000, to redeem the 8 1/8% Notes, in whole but not in part, at a redemption price equal to 100% of the principal amount thereof plus the Applicable Premium (as defined in the 8 1/8% Indenture), together with accrued and unpaid interest, if any, to the date of redemption, and (ii) if the Company does not so redeem the 8 1/8% Notes or if such change of control occurs after December 15, 2000, each holder of 8 1/8% Notes will have the right to require the Company to repurchase, in whole or in part, such holder's 8 1/8% Notes at a purchase price equal to 101% of their principal amount, plus accrued and unpaid interest, if any, to the date of repurchase. The 8 1/8% Indenture contains certain restrictive covenants which, among other things, impose limitations (subject to certain exceptions) on the Company with respect to (i) the payment of dividends or other distributions on capital stock and the purchase, redemption or retirement for value of shares of capital stock as any warrants, options or other rights for shares of capital stock; (ii) the incurrence of additional indebtedness; (iii) the incurrence of subsidiary indebtedness; (iv) the repayment or redemption of subordinated indebtedness other than in accordance with its scheduled repayment; (v) sales of assets by the Company; (vi) asset swaps; (vii) transactions with stockholders and affiliates; (viii) the restriction of certain payments by subsidiaries to their respective parents; (ix) the creation of liens on the assets of the Company or its subsidiaries; (x) the incurrence of indebtedness senior to the 8 1/8% Notes and subordinate to other indebtedness of the Company; (xi) investments by the Company or its subsidiaries; (xii) the issuance of preferred stock by any of the Company's subsidiaries; (xiii) sales and leasebacks by the Company or its subsidiaries; (xiv) the guarantee of indebtedness; (xv) the conduct of business other than the ownership and operation of broadcast businesses or businesses reasonably related thereto; and (xvi) the merger or sale of all or substantially all the assets of the Company. Upon the happening of certain events of default specified in the 8 1/8% Indenture, the trustee for the 8 1/8% Notes may, and the trustee upon the request of holders of 25% in principal amount then outstanding of the 8 1/8% Notes shall, or the holders of at least 25% in principal amount of outstanding 8 1/8% Notes may, declare the principal amount then outstanding of and accrued but unpaid interest, if any, on all of such 8 1/8% Notes to be due and payable. Upon the happening of certain other events of default specified in the 8 1/8% Indenture, the unpaid principal of and accrued but unpaid interest on all outstanding 8 1/8% Notes will automatically become due and payable without any action by the trustee or the holders of the 8 1/8% Notes. The Company may terminate its obligations under the 8 1/8% Indenture at any time, and the obligations of the guarantors with respect thereto shall terminate, by delivering all outstanding 8 1/8% Notes of the appropriate series to the appropriate trustee for cancellation and paying all sums payable by it thereunder. The Company, at its option, (i) will be discharged from any and all obligations with respect to the 8 1/8% Notes delivered, and the guarantor will be discharged from any and all obligations with respect to its guarantee of such 8 1/8% Notes, (except for certain obligations of the Company to register the transfer or 140 147 exchange of such 8 1/8% Notes, replace stolen, lost or mutilated 8 1/8% Notes, maintain paying agencies and hold moneys for payment in trust) or (ii) need not comply with certain of the restrictive covenants with respect to the 8 1/8% Indenture, in each case, if the Company, in addition to satisfying certain other obligations, deposits with the appropriate trustee, in trust, U.S. legal tender or U.S. Government Obligations (in each case, as defined in the 8 1/8% Indenture) or a combination thereof which, through the payment of interest thereon and principal in respect thereof in accordance with their terms, will be sufficient to pay all the principal of and interest on 8 1/8% Notes to be defeased on the dates such payments are due in accordance with the terms of 8 1/8% Notes as well as the trustee's fees and expenses. 8% SENIOR NOTES The 8% Senior Notes mature on November 1, 2008. Interest on the 8% Senior Notes accrues at the rate of 8% per annum and is payable semiannually. The 8% Senior Notes are senior unsecured obligations of the Company, ranking equal in right of payment to the Company's existing and future Senior Debt, including borrowings under the Senior Credit Facility, and rank senior in right of payment to all of the Company's existing and future subordinated debt. Substantially all of the Company's subsidiaries fully and unconditionally guarantee the full and prompt payment of principal of and interest on the 8% Senior Notes, and of all other obligations under the indenture governing the 8% Senior Notes (the "8% Indenture"). The indebtedness evidenced by each such guarantee ranks equal in right of payment to the Guarantor's guarantees of the Senior Credit Facility and senior in right of payment to the Guarantor's guarantees of the 9 3/8% Notes, the 8 3/4% Notes, the 10 1/2% Notes, the 8 1/8% Notes and the 9% Notes. The 8% Senior Notes are redeemable, at the Company's option, in whole at any time or in part from time to time, upon not less than 30 nor more than 60 days prior notice to each holder, at a redemption price equal to 100% of the principal amount thereof plus the Applicable Premium (as defined in the 8% Indenture) as of, and accrued and unpaid interest, if any, to, the date of redemption. In addition, on or prior to November 1, 2001, the Company may redeem the 8% Senior Notes with the net cash proceeds of one or more Public Equity Offerings (as defined in the 8% Indenture) at a redemption price of 108% of the principal amount thereof, plus accrued and unpaid interest to the redemption date; provided, however, that after any such redemption at least 75% of the aggregate principal amount of the 8% Senior Notes originally issued must be outstanding. Under the 8% Indenture, in the event of a Change of Control (as defined in the 8% Indenture) of the Company, each holder of 8% Senior Notes may have the right to require the Company to repurchase, in whole or in part, such holder's 8% Senior Notes at a purchase price equal to 101% of their principal amount, plus accrued and unpaid interest, if any, to the date of repurchase. The 8% Indenture contains certain restrictive covenants which, among other things, impose limitations (subject to certain exceptions) on the Company with respect to (i) the payment of dividends or other distributions on capital stock and the purchase, redemption or retirement for value of shares of capital stock or any warrants, options or other rights for shares of capital stock; (ii) the incurrence of additional indebtedness; (iii) the incurrence 141 148 of subsidiary indebtedness; (iv) the repayment or redemption of subordinated indebtedness other than in accordance with its scheduled repayment; (v) sales of assets by the Company; (vi) asset swaps; (vii) transactions with stockholders and affiliates; (viii) the restriction of certain payments by subsidiaries to their respective parents; (ix) the creation of liens on the assets of the Company or its subsidiaries; (x) investments by the Company or its subsidiaries; (xi) the issuance of preferred stock by any of the Company's subsidiaries; (xii) sales and leasebacks by the Company or its subsidiaries; (xiii) the guarantee of indebtedness; (xiv) the conduct of business other than the ownership and operation of broadcast businesses or businesses reasonably related thereto; and (xv) the merger or sale of all or substantially all the assets of the Company. Upon the happening of certain events of default specified in the 8% Indenture, the trustee for the 8% Senior Notes may, and the trustee upon the request of holders of 25% in principal amount then outstanding of the 8% Senior Notes shall, or the holders of at least 25% in principal amount of outstanding 8% Senior Notes may, declare the principal amount then outstanding of and accrued but unpaid interest, if any, on all of such 8% Senior Notes to be due and payable. Upon the happening of certain other events of default specified in the 8% Indenture, the unpaid principal of and accrued but unpaid interest on all outstanding 8% Senior Notes will automatically become due and payable without any action by the trustee or the holders of the 8% Senior Notes. The Company may terminate its obligations under the 8% Indenture at any time, and the obligations of the Guarantors with respect thereto shall terminate, by delivering all outstanding 8% Senior Notes to the trustee for cancellation and paying all sums payable by it thereunder. The Company, at its option, (i) will be discharged from any and all obligations with respect to the 8% Senior Notes delivered, and the Guarantor will be discharged from any and all obligations with respect to its Guarantee of such 8% Senior Notes, (except for certain obligations of the Company to register the transfer or exchange of such 8% Senior Notes, replace stolen, lost or mutilated 8% Senior Notes, maintain paying agencies and hold moneys for payment in trust) or (ii) need not comply with certain of the restrictive covenants with respect to the 8% Indenture, in each case, if the Company, in addition to satisfying certain other obligations, deposits with the appropriate trustee, in trust, U.S. legal tender or U.S. Government Obligations (in each case, as defined in the 8% Indenture) or a combination thereof which, through the payment of interest thereon and principal in respect thereof in accordance with their terms, will be sufficient to pay all the principal of and interest on the 8% Senior Notes on the dates such payments are due in accordance with the terms of 8% Senior Notes as well as the trustee's fees and expenses. 6% EXCHANGE DEBENTURES For a description of the 6% Convertible Subordinated Exchange Debentures due 2012 issuable by Chancellor Media from time to time upon exchange of the $3.00 Convertible Preferred Stock, see "Description of Capital Stock -- Chancellor Media -- $3.00 Convertible Exchangeable Preferred Stock -- Exchange." 142 149 DESCRIPTION OF CAPITAL STOCK CHANCELLOR MEDIA COMMON STOCK Chancellor Media's authorized common stock consists of 200,000,000 shares of Common Stock, par value $0.01 per share (the "Common Stock"), approximately 142,724,983 of which were issued and outstanding as of November 30, 1998 and 75,000,000 shares of Class A Common Stock, par value $0.01 per share (the "Class A Common Stock"), none of which were issued and outstanding as of November 30, 1998. The shares of Common Stock currently outstanding are validly issued, fully paid and nonassessable. It is not contemplated that any shares of Class A Common Stock will be issued at any time. The Amended and Restated Certificate of Incorporation of Chancellor Media (the "Chancellor Media Certificate") provides that the issuance of any shares of Class A Common Stock will require the unanimous affirmative vote of the Board of Directors of Chancellor Media. Dividends Holders of shares of Common Stock and Class A Common Stock are entitled to receive such dividends as may be declared by the Board of Directors of Chancellor Media out of funds legally available for such purpose. The Senior Credit Facility and the certificates of designation governing the $3.00 Convertible Preferred Stock and the 7% Convertible Preferred Stock each directly restrict, and the 9 3/8% Indenture, the 8 3/4% Indenture, the 10 1/2% Indenture, 8 1/8% Indenture each indirectly restrict, and, assuming completion of the Offering, the Notes Indenture will indirectly restrict, Chancellor Media's ability to pay cash dividends on the Common Stock and Class A Common Stock. Chancellor Media has not declared or paid any dividends on the Common Stock and Class A Common Stock in the past, and it is not anticipated that Chancellor Media will pay any cash dividends on the Common Stock and Class A Common Stock in the foreseeable future. Voting Rights Holders of shares of Common Stock and Class A Common Stock, each voting as a separate class, shall be entitled to vote on all matters submitted to a vote of the stockholders, except as otherwise provided by law. Each share of Common Stock and Class A Common Stock is entitled to one vote per share. Holders of Common Stock and Class A Common Stock are not entitled to cumulative votes in the election of directors. Under Delaware law, the affirmative vote of the holders of a majority of the outstanding shares of any class of capital stock of Chancellor Media is required to approve any amendment to the Chancellor Media Certificate that would increase or decrease the aggregate number of authorized shares of any class, increase or decrease the par value of the shares of any class, or modify or change the powers, preferences or special rights of the shares of any class so as to affect such class adversely. 143 150 Liquidation Rights Upon liquidation, dissolution, or winding-up of Chancellor Media, the holders of Common Stock and Class A Common Stock are entitled to share ratably in all assets available for distribution after payment in full of creditors and the holders of preferred stock of Chancellor Media. Transfer Agent The Bank of New York serves as the Transfer Agent and Registrar for the Common Stock. Alien Ownership The Chancellor Media Certificate restricts the ownership and voting of Chancellor Media's capital stock, including its Common Stock, in accordance with the Communications Act and the rules of the FCC, to prohibit ownership of more than 25% of Chancellor Media's outstanding capital stock (or control of more than 25% of the voting power it represents) by or for the account of aliens, foreign governments, or non-U.S. corporations or corporations otherwise subject to control by such persons or entities. The Chancellor Media Certificate also prohibits any transfer of Chancellor Media's capital stock that would cause Chancellor Media to violate this prohibition. In addition, the Chancellor Media Certificate authorizes the Board of Directors of Chancellor Media to adopt such provisions as its deems necessary to enforce these prohibitions. Other Provisions The holders of Common Stock and Class A Common Stock are not entitled to preemptive or similar rights. The shares of Common Stock are not subject to redemption or a sinking fund. No single shareholder of Chancellor Media holds more than 50.0% of the combined voting power of Chancellor Media. See "Risk Factors -- Control of the Company." As a result, a holder of an "attributable" interest in Chancellor Media may violate the FCC's multiple ownership rules or cross interest rules if such holder also has an "attributable" interest (or, in some cases, a "meaningful" nonattributable interest) in other television or radio stations, or in daily newspapers, depending on the number and location of those radio or television stations or daily newspapers. Such a stockholder may also be restricted in the companies in which such stockholder may invest. See "Business -- Federal Regulation of Radio Broadcasting Industry -- Ownership Matters." $3.00 CONVERTIBLE EXCHANGEABLE PREFERRED STOCK Dividends Holders of $3.00 Convertible Preferred Stock are entitled to receive, when, as and if declared by the Board of Directors out of legally available funds, cash dividends at an annual rate of $3.00 per share, payable quarterly in arrears on March 15, June 15, September 15 and December 15 of each year (each a "Dividend Payment Date"), beginning September 15, 1997. Dividends will accrue and be cumulative from the most recent date to which dividends have been paid or, if none have been paid, from the date of first issuance of the $3.00 Convertible Preferred Stock and will be payable to holders of record on the March 1, June 1, September 1 and December 1 immediately preceding the 144 151 relevant Dividend Payment Date. No interest, or sum of money in lieu of interest, will be payable in respect of any accrued and unpaid dividends. The $3.00 Convertible Preferred Stock has priority as to dividends over the Common Stock and any other series or class of the Company's stock that ranks junior to the $3.00 Convertible Preferred Stock as to dividends. Notwithstanding the foregoing, the $3.00 Convertible Preferred Stock shall rank junior as to dividends and rights upon a liquidation, dissolution or winding-up of the Company to any and all classes or series of capital stock (other than Common Stock) of the Company, whether currently issued or issued in the future, that does not by its terms expressly provide that it ranks on a parity with or junior to the $3.00 Convertible Preferred Stock as to dividends and rights upon a liquidation, dissolution or winding-up of the Company. Liquidation Rights Upon liquidation, dissolution or winding-up of Chancellor Media, subject to the payment in full, or until provision has been made for the payment in full, of all claims of creditors of Chancellor Media, holders of $3.00 Convertible Preferred Stock are entitled to receive the liquidation preference of $50.00 per share, plus an amount equal to any accrued and unpaid dividends, whether or not declared, to the payment date, before any payment or distribution is made to the holders of Common Stock or any other series or class of stock hereafter issued that ranks junior as to liquidation rights to the $3.00 Convertible Preferred Stock. Voting Rights The holders of $3.00 Convertible Preferred Stock have no voting rights except as described below or as required by law. In exercising any voting rights, each outstanding share of $3.00 Convertible Preferred Stock will be entitled to one vote, although shares held by Chancellor Media or any entity controlled by Chancellor Media will have no voting rights. Whenever dividends on the $3.00 Convertible Preferred Stock are in arrears in an aggregate amount equal to at least six quarterly dividends (whether or not consecutive), the size of Chancellor Media's board of directors will be increased by two, and the holders of $3.00 Convertible Preferred Stock, will be entitled to elect two additional directors to the Board of Directors at, subject to certain limitations, any annual meeting of stockholders at which directors are to be elected held during the period when the dividends remain in arrears or, under certain circumstances, at a special meeting of stockholders. These voting rights will terminate when all dividends in arrears and for the current quarterly period have been paid in full or declared and set apart for payment. The term of office of the additional directors so elected will terminate immediately upon that payment or provision for payment. Under Delaware law, holders of the $3.00 Convertible Preferred Stock will be entitled to vote as a class upon a proposed amendment to the Chancellor Media Certificate, whether or not entitled to vote thereon by the Chancellor Media Certificate, if the amendment would increase or decrease the aggregate number of authorized shares of such class, increase or decrease the par value of the shares of such class, or alter or change the powers, preferences, or special rights of the shares of such class so as to affect them adversely. 145 152 Optional Redemption The $3.00 Convertible Preferred Stock may not be redeemed prior to June 16, 1999. Thereafter, the $3.00 Convertible Preferred Stock may be redeemed by Chancellor Media, at its option, in whole or in part at any time, if redeemed during the 12-month period beginning June 15 of any year specified below (June 16 in the case of 1999) at the following redemption prices (expressed as percentages of the liquidation preference thereof):
YEAR PERCENTAGE ---- ---------- 1999........................................................ 104.80% 2000........................................................ 104.20 2001........................................................ 103.60 2002........................................................ 103.00 2003........................................................ 102.40 2004........................................................ 101.80 2005........................................................ 101.20 2006........................................................ 100.60 2007 and thereafter......................................... 100.00
plus in each case accrued and unpaid dividends, whether or not declared, to the redemption date. The foregoing is subject to the proviso that on or prior to June 15, 2000 the $3.00 Convertible Preferred Stock may not be redeemed at the option of Chancellor Media unless the closing price of Chancellor Media's Common Stock has equalled or exceeded 150% of the conversion price at such time for at least 20 out of any 30 consecutive trading days ending within 15 days before the notice of redemption is first mailed. Conversion Rights Each holder of $3.00 Convertible Preferred Stock will have the right at any time at the holder's option to convert any and all shares of $3.00 Convertible Preferred Stock into Common Stock at a conversion price (subject to adjustment as described below) of $50.00 per share of underlying Common Stock (equivalent to a conversion rate of 1.00 share of Common Stock per share of $3.00 Convertible Preferred Stock). If the $3.00 Convertible Preferred Stock is called for redemption, the conversion right will terminate at the close of business on the redemption date fixed by the Board of Directors. Change of Control. If there occurs a Change of Control (as defined in the certificate of designation for the $3.00 Convertible Preferred Stock) with respect to Chancellor Media, then shares of the $3.00 Convertible Preferred Stock may be converted, at the option of the holder thereof at any time from the date of such Change of Control until the expiration of 45 days after the date of a note by the Company to all holders of the $3.00 Convertible Preferred Stock of the occurrence of the Change of Control, into the number of shares of Common Stock determined by dividing (i) the redemption price for the $3.00 Convertible Preferred Stock (see "-- Optional Redemption") in effect on the date of the Change of Control by (ii) the adjusted conversion price. 146 153 Exchange Shares of $3.00 Convertible Preferred Stock will be exchangeable at the option of Chancellor Media, in whole but not in part, on any March 15, June 15, September 15 or December 15, commencing September 15, 2000, through the issuance of Chancellor Media's 6% Subordinated Exchange Debentures due 2012 (the "6% Exchange Debentures") in redemption of and in exchange for shares of $3.00 Convertible Preferred Stock, provided certain conditions are met. Holders of the $3.00 Convertible Preferred Stock will be entitled to receive 6% Exchange Debentures at the rate of $50.00 principal amount of 6% Exchange Debentures for each share of $3.00 Convertible Preferred Stock. 7% CONVERTIBLE PREFERRED STOCK Dividends Holders of 7% Convertible Preferred Stock are entitled to receive, when, as and if declared by the Board of Directors of Chancellor Media out of legally available funds, cash dividends at an annual rate equal to 7% of the liquidation preference per share, payable quarterly. The 7% Convertible Preferred Stock has priority as to dividends over the Common Stock and Class A Common Stock of Chancellor Media and any other series or class of Chancellor Media's stock that ranks junior to the 7% Convertible Preferred Stock as to dividends (the "Junior Dividend Stock"). Notwithstanding the foregoing, the 7% Convertible Preferred Stock shall rank junior as to dividends, redemption payments and rights upon a liquidation, dissolution or winding-up of Chancellor Media to any and all classes or series of capital stock (other than common stock) of Chancellor Media, issued in the future, that does not by its terms expressly provide that it ranks on a parity with or junior to the 7% Convertible Preferred Stock as to dividends and rights upon a liquidation, dissolution or winding-up of Chancellor Media. No dividend (other than dividends payable solely in common stock, any Junior Dividend Stock or warrants or other rights to acquire such common stock or Junior Dividend Stock) may be paid or declared and set apart for payment on, and no purchase, redemption or other acquisition shall be made by Chancellor Media of, the Common Stock of Chancellor Media or Junior Dividend Stock unless all accrued and unpaid dividends on the 7% Convertible Preferred Stock, including the full dividend for the then-current quarterly dividend period, shall have been paid or declared and set apart for payment without interest. Except as provided below, Chancellor Media may not pay dividends on any class or series of stock issued in the future having parity with the 7% Convertible Preferred Stock as to dividends ("Parity Dividend Stock") unless it has paid or declared and set apart for payment or contemporaneously pays or declares and sets apart for payment all accrued and unpaid dividends for all prior dividend payment periods on the 7% Convertible Preferred Stock. In addition, except as provided below, Chancellor Media may not pay dividends on the 7% Convertible Preferred Stock unless it has paid or declared and set apart for payment or contemporaneously pays or declares and sets apart for payment all accrued and unpaid dividends for all prior dividend payment periods on the Parity Dividend Stock. Whenever all accrued dividends in respect of prior dividend payment periods are not paid in full on 7% Convertible Preferred Stock and on any Parity Dividend Stock, all dividends declared on the 7% Convertible Preferred Stock and the Parity Dividend Stock will be 147 154 declared and made pro rata so that the amount of dividends declared on the 7% Convertible Preferred Stock and the Parity Dividend Stock will bear the same ratio that accrued and unpaid dividends in respect of prior dividend payment periods on the 7% Convertible Preferred Stock and the Parity Dividend Stock bear to each other. The $3.00 Convertible Preferred Stock constitutes "Parity Dividend Stock" for purposes of the 7% Convertible Preferred Stock. Chancellor Media may not purchase any shares of the 7% Convertible Preferred Stock or any Parity Dividend Stock (except for consideration payable in common stock or Junior Dividend Stock) or redeem fewer than all the shares of the 7% Convertible Preferred Stock and Parity Dividend Stock then outstanding if Chancellor Media has failed to pay any accrued dividend on the 7% Convertible Preferred Stock or on any Parity Dividend Stock on a stated payment date. Notwithstanding the foregoing, in such event, Chancellor Media may purchase or redeem fewer than all the shares of the 7% Convertible Preferred Stock and Parity Dividend Stock if such repurchase or redemption is made pro rata so that the amounts purchased or redeemed bear to each other the same ratio that the required redemption payments on the shares of the 7% Convertible Preferred Stock and any Parity Dividend Stock then outstanding bear to each other. If Chancellor Media issues any series or class of stock that ranks senior as to dividends to the 7% Convertible Preferred Stock ("Senior Dividend Stock") and fails to pay or declare and set apart for payment accrued and unpaid dividends on any Senior Dividend Stock (except to the extent allowed by the terms of the Senior Dividend Stock), Chancellor Media may not pay or declare and set apart for payment any dividend on the 7% Convertible Preferred Stock unless and until all accrued and unpaid dividends on the Senior Dividend Stock, including the full dividends for the then current dividend period, have been paid or declared and set apart for payment without interest. Liquidation Rights In the case of the voluntary or involuntary liquidation, dissolution or winding up of Chancellor Media, subject to the payment in full, or until provision has been made for the payment in full, of all claims of creditors of Chancellor Media, holders of 7% Convertible Preferred Stock are entitled to receive the liquidation preference of the 7% Convertible Preferred Stock, plus an amount equal to any accrued and unpaid dividends, whether or not declared, to the payment date, before any payment or distribution is made to the holders of common stock or any other series or class of stock issued in the future that ranks junior as to liquidation rights to the 7% Convertible Preferred Stock ("Junior Liquidation Stock"). Holders of 7% Convertible Preferred Stock will not be entitled to receive the liquidation preference of their shares until the liquidation preference of any other series or class of stock that ranks senior as to liquidation rights to the 7% Convertible Preferred Stock ("Senior Liquidation Stock"), if any, and any creditors of Chancellor Media have been paid in full. The holders of 7% Convertible Preferred Stock and any series or class of stock that ranks on a parity as to liquidation rights with the 7% Convertible Preferred Stock ("Parity Liquidation Stock") are entitled to share ratably, in accordance with the respective preferential amounts payable on their stock, in any distribution (after payment of the liquidation preference on any Senior Liquidation Stock) that is not sufficient to pay in full the aggregate liquidation preference on both the 7% Convertible Preferred Stock and on any Parity Liquidation Stock. The $3.00 Convertible 148 155 Preferred Stock constitutes "Parity Liquidation Stock" for purposes of the 7% Convertible Preferred Stock. Voting Rights The holders of 7% Convertible Preferred Stock have no voting rights except as described below or as required by law. Whenever dividends on the 7% Convertible Preferred Stock are in arrears in aggregate amount equal to at least six quarterly dividends (whether or not consecutive), the size of Chancellor Media's Board of Directors will be increased by two, and the holders of 7% Convertible Preferred Stock, voting separately as a class together with holders of any Parity Dividend Stock of Chancellor Media then having voting rights, will be entitled to elect two additional directors to the Board of Directors of Chancellor Media at, subject to certain limitations, any annual meeting of stockholders at which directors are to be elected held during the period when the dividends remain in arrears or, under certain circumstances, at a special meeting of stockholders. These voting rights will terminate when all dividends in arrears and for the current quarterly period have been paid in full or declared and set apart for payment. The term of office of the additional directors so elected will terminate immediately upon that payment or provision for payment. In addition, so long as any 7% Convertible Preferred Stock is outstanding, Chancellor Media may not, without the affirmative vote or consent of the holders of at least 66 2/3% of all outstanding shares of 7% Convertible Preferred Stock and outstanding Parity Dividend Stock, voting as a single class (i) amend, alter or repeal (by merger or otherwise) any provision of the certificate of designation for the 7% Convertible Preferred Stock, the Chancellor Media Certificate or the bylaws of Chancellor Media so as to affect adversely the relative rights, preferences, qualifications, limitations of restrictions of the 7% Convertible Preferred Stock or (ii) effect any reclassification of the 7% Convertible Preferred Stock. Change of Control The certificate of designation for the 7% Convertible Preferred Stock provides that, upon the occurrence of a change of control (as defined in such certificate of designation), each holder will have the right to require that Chancellor Media purchase all or a portion of such holder's 7% Convertible Preferred Stock in cash at a purchase price equal to 101% of the liquidation preference thereof, plus, without duplication, all accumulated and unpaid dividends per share to the date of repurchase. If the repurchase of the 7% Preferred Stock would violate or constitute a default under the Senior Credit Facility or other indebtedness of Chancellor Media, then, pursuant to the certificate of designation for the 7% Convertible Preferred Stock, Chancellor Media will either (A) repay in full all such indebtedness or (B) obtain the requisite consents, if any, under such indebtedness required to permit the repurchase of the 7% Convertible Preferred Stock. Redemption at Option of Chancellor Media The 7% Convertible Preferred Stock may not be redeemed prior to January 19, 2000. Thereafter, the 7% Convertible Preferred Stock may be redeemed by Chancellor Media, at its option (subject to contractual and other restrictions with respect thereto, including limitations under the Senior Credit Facility, the 9 3/8% Indenture, the 8 3/4% Indenture, the 149 156 10 1/2% Indenture, and, assuming completion of the Offering, the Indenture, and to the legal availability of funds therefor), in whole or in part at any time, if redeemed during the 12-month period beginning January 15 (January 19 in the case of 2000), of any year specified below at the following redemption prices (expressed as percentages of the liquidation preference thereof):
YEAR DIVIDEND ---- -------- 2000........................................................ 104.90% 2001........................................................ 104.20 2002........................................................ 103.50 2003........................................................ 102.80 2004........................................................ 102.10 2005........................................................ 101.40 2006........................................................ 100.70 2007 and thereafter......................................... 100.00
plus in each case accrued and unpaid dividends, whether or not declared, to the redemption date. Conversion Rights Each holder of 7% Convertible Preferred Stock will have the right, at the holder's option, to convert any or all shares of 7% Convertible Preferred Stock into Common Stock at any time at a conversion price (subject to adjustment) of $36.19 per share of underlying Common Stock. If the 7% Convertible Preferred Stock is called for redemption, the conversion right, with respect to the called shares of 7% Convertible Preferred Stock, will terminate at the close of business on the redemption date fixed by the Board of Directors of Chancellor Media. CMCLA The authorized capital stock of CMCLA as of November 30, 1998 consists of 1,040 shares of common stock, par value $.01 per share, 1,000 of which are owned of record and beneficially by CMHC and 40 of which are owned of record and beneficially by a subsidiary of CMHC, and 10,000,000 shares of preferred stock, par value $.01 per share, none of which shares are issued and outstanding. 150 157 CERTAIN FEDERAL INCOME TAX CONSIDERATIONS The following is a discussion of the material federal income tax considerations relevant to the exchange of Old Notes for New Notes. The discussion is based upon the Internal Revenue Code of 1986, as amended, Treasury regulations, Internal Revenue Service rulings and pronouncements, and judicial decisions now in effect, all of which are subject to change at any time by legislative, judicial or administrative action. Any such changes may be applied retroactively in a manner that could adversely affect a holder of the New Notes. The description does not consider the effect of any applicable foreign, state, local or other tax laws or estate or gift tax considerations. EACH HOLDER SHOULD CONSULT HIS OWN TAX ADVISOR AS TO THE PARTICULAR TAX CONSEQUENCES TO IT OF EXCHANGING OLD NOTES FOR NEW NOTES, INCLUDING THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL OR FOREIGN TAX LAWS. EXCHANGE OF OLD NOTES FOR NEW NOTES The exchange of Old Notes for New Notes pursuant to the exchange offer should not constitute a sale or an exchange for federal income tax purposes. The holder will have a basis for the New Notes equal to the basis of the Old Notes and the holder's holding period for the New Notes will include the period during which the Old Notes were held. Accordingly, such exchange should have no federal income tax consequences to holders of Old Notes. PLAN OF DISTRIBUTION Each broker-dealer that receives New Notes for its own account in exchange for Old Notes pursuant to the exchange offer, where such Old Notes were acquired by such broker-dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such New Notes. This Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of New Notes received in exchange for Old Notes where such Old Notes were acquired as a result of market-making activities or other trading activities. The Company has agreed that, for a period of 180 days after the consummation of the exchange offer, it will make this Prospectus, as amended or supplemented, available to any broker-dealer for use in connection with any such resale. In addition, until March 9, 1999, all dealers effecting transactions in the New Notes may be required to deliver a Prospectus. The Company and the Guarantors will not receive any proceeds from any sale of New Notes by broker-dealers. New Notes received by broker-dealers for their own account pursuant to the exchange offer may be sold from time to time in one or more transactions in the over-the-counter market, in negotiated transactions, through the writing of options on the New Notes or a combination of such methods of resale, at market prices prevailing at the time of resale, at prices related to such prevailing market prices or negotiated prices. Any such resale may be made directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any such broker-dealer or the purchasers of any such New Notes. Any broker-dealer that resells New Notes that were received by it for its own account pursuant to the exchange offer and any broker or dealer that participates in a distribution of such New Notes may be deemed 151 158 to be an "underwriter" within the meaning of the Securities Act, and any profit on any such resale of New Notes and any commissions or concessions received by any such persons may be deemed to be underwriting compensation under the Securities Act. The Letter of Transmittal states that by acknowledging that it will deliver and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. For a period of 180 days after the Registration Statement is declared effective, the Company will promptly send additional copies of this Prospectus and any amendment or supplement to this Prospectus to any broker-dealer that requests such documents in the Letter of Transmittal or otherwise. The Company has agreed to pay all expenses incident to the Exchange Offer (including the expenses of one counsel for the holders of the Notes) other than commissions or concessions of any broker-dealers and will indemnify holders of the Old Notes (including any broker-dealers) against certain liabilities, including certain liabilities under the Securities Act. LEGAL MATTERS The validity of the New Notes offered hereby will be passed upon for the Company by Weil, Gotshal & Manges LLP, Dallas, Texas and New York, New York. EXPERTS The consolidated financial statements of Chancellor Media Corporation of Los Angeles and Subsidiaries as of December 31, 1997 and for the year then ended included in this Registration Statement, have been included herein in reliance on the report of PricewaterhouseCoopers LLP, independent accountants, given on the authority of that firm as experts in accounting and auditing. The consolidated financial statements of Chancellor Media Corporation of Los Angeles and subsidiaries, the combined financial statements of WMZQ Inc. and Viacom Broadcasting East Inc., the combined financial statements of Riverside Broadcasting Co., Inc. and WAXQ Inc., the financial statements of WLIT Inc., the combined financial statements of KYSR Inc. and KIBB Inc. and the financial statements of WDAS-AM/FM (station owned and operated by Beasley FM Acquisition Corp.), included herein have been audited by KPMG Peat Marwick LLP, independent certified public accountants, to the extent and for the periods indicated in their reports thereon. Such financial statements have been included herein in reliance upon the reports of KPMG Peat Marwick LLP included herein and upon the authority of said firm as experts in accounting and auditing. The consolidated financial statements of Chancellor Radio Broadcasting Company and Subsidiaries as of December 31, 1996 and 1995 and for each of the three years in the period ended December 31, 1996 included in this Registration Statement, have been included herein in reliance on the report of PricewaterhouseCoopers LLP, independent accountants, given on the authority of that firm as experts in accounting and auditing. 152 159 The combined financial statements of Colfax Communications, Inc. Radio Group as of December 31, 1996, 1995, and 1994 and for each of the three years in the period ended December 31, 1996, included in this Prospectus, have been audited by Arthur Andersen LLP, independent public accountants, as indicated in their report with respect thereto, and are included herein in reliance upon the authority of said firm as experts in giving said report. The financial statements of the Outdoor Advertising Division of Whiteco Industries, Inc. included in this Registration Statement have been audited by BDO Seidman, LLP, independent certified public accountants, to the extent and for the periods set forth in their report appearing elsewhere in the Registration Statement, and are included in reliance upon such reports given upon the authority of said firm as experts in auditing and accounting. 153 160 CHANCELLOR MEDIA CORPORATION OF LOS ANGELES PRO FORMA FINANCIAL INFORMATION The unaudited pro forma condensed combined financial statements of Chancellor Media Corporation of Los Angeles ("CMCLA" and, together with its subsidiaries, the "Company") are presented using the purchase method of accounting for all acquisitions and reflect the combination of consolidated historical financial data of the Company and each of the companies acquired in the transactions completed by the Company during 1997 and 1998 and the elimination of the consolidated historical data of the stations disposed in the transactions completed by the Company during 1997 and 1998 (the "Completed Transactions"). The unaudited pro forma condensed combined balance sheet data at September 30, 1998 presents adjustments for the Completed Transactions, the offering of $750,000,000 aggregate principal amount of 8% Senior Notes due 2008 which was completed on November 17, 1998 (the "8% Senior Notes Offering")and the Pending Transactions (excluding the Petry Acquisition and the Pegasus Acquisition), as if each such transaction had occurred at September 30, 1998. The unaudited pro forma condensed combined statement of operations data for the twelve months ended December 31, 1997 and the nine months ended September 30, 1998 presents adjustments for the Completed Transactions, financing transactions undertaken by the Company and CRBC during 1997, the 1998 Financing Transactions and the Pending Transactions (excluding the Petry Acquisition and the Pegasus Acquisition), as if each such transaction occurred on January 1, 1997. The Petry Acquisition, the Pegasus Acquisition, the Kasem Acquisition and the Other Outdoor Acquisitions are excluded from the pro forma information included in this Offering Memorandum for a number of reasons including: (a) uncertainties regarding on what terms, and in some areas, whether such transactions will be consummated, (b) whether such acquisition will be consummated by the Company or another stand-alone entity formed by Chancellor Media, or (c) the availability of appropriate financial information. In the opinion of management of the Company, such information is not material to such pro forma presentations, either individually or in the aggregate. The purchase method of accounting has been used in the preparation of the unaudited pro forma condensed combined financial statements. Under this method of accounting, the aggregate purchase price is allocated to assets acquired and liabilities assumed based on their estimated fair values. For purposes of the unaudited pro forma condensed combined financial statements, the purchase prices of the assets acquired in the Completed Transactions have been allocated based primarily on information furnished by management of the acquired or to be acquired assets. The final allocation of the respective purchase prices of the assets acquired in the Completed Transactions are determined a reasonable time after consummation of such transactions and are based on a complete evaluation of the assets acquired and liabilities assumed. Accordingly, the information presented herein may differ from the final purchase price allocation; however, such allocations are not expected to differ materially from the preliminary amounts. In the opinion of the Company's management, all adjustments have been made that are necessary to present fairly the pro forma data. The unaudited pro forma condensed combined financial statements should be read in conjunction with the respective financial statements and related notes thereto of the Company which have previously been reported. The unaudited pro forma condensed combined financial statements are presented for illustrative purposes only and are not necessarily indicative of the results of operations or financial position that would have been achieved had the transactions reflected therein been consummated as of the dates indicated, or of the results of operations or financial positions for any future periods or dates. P-1 161 CHANCELLOR MEDIA CORPORATION OF LOS ANGELES UNAUDITED PRO FORMA BALANCE SHEET AT SEPTEMBER 30, 1998 (IN THOUSANDS)
PRO FORMA COMPANY PRO FORMA ADJUSTMENTS AS ADJUSTED ADJUSTMENTS COMPANY FOR THE FOR THE FOR THE HISTORICAL COMPLETED COMPLETED PENDING COMPANY AT 9/30/98 TRANSACTIONS TRANSACTIONS TRANSACTIONS(3) PRO FORMA ---------- ------------ ------------ --------------- ---------- ASSETS: Current assets.................................... $ 376,797 $ 29,180(1) $ 405,977 $ 11,006 $ 416,983 Note receivable from affiliate.................... 150,000 -- 150,000 (150,000) -- Property and equipment, net....................... 299,906 88,664(1) 388,570 12,150 400,720 Intangible assets, net............................ 4,916,533 973,231(1) 5,889,764 878,750 6,768,514 Other assets...................................... 162,142 27,164(1) 203,306 203,306 (6,000)(1) 20,000(2) ---------- ---------- ---------- --------- ---------- Total assets.............................. $5,905,378 $1,132,239 $7,037,617 $ 751,906 $7,789,523 ========== ========== ========== ========= ========== LIABILITIES AND STOCKHOLDER'S EQUITY: LIABILITIES: Current liabilities............................... $ 177,472 $ 4,959(1) $ 182,431 $ 129 $ 182,560 Long-term debt.................................... 3,018,000 1,107,280(1) 4,145,280 699,127 4,844,407 750,000(2) (730,000)(2) Deferred tax liabilities.......................... 312,731 312,731 42,223 354,954 Other liabilities................................. 60,403 60,403 834 61,237 ---------- ---------- ---------- --------- ---------- Total liabilities......................... 3,568,606 1,132,239 4,700,845 742,313 5,443,158 STOCKHOLDER'S EQUITY: Common stock...................................... 1 -- 1 -- 1 Additional paid in capital........................ 2,654,273 -- 2,654,273 -- 2,654,273 Accumulated deficit............................... (317,502) -- (317,502) 9,593 (307,909) ---------- ---------- ---------- --------- ---------- Total stockholder's equity................ 2,336,772 -- 2,336,772 9,593 2,346,365 ---------- ---------- ---------- --------- ---------- Total liabilities and stockholder's equity.................................. $5,905,378 $1,132,239 $7,037,617 $ 751,906 $7,789,523 ========== ========== ========== ========= ==========
See accompanying notes to Unaudited Pro Forma Condensed Combined Financial Statements P-2 162 CHANCELLOR MEDIA CORPORATION OF LOS ANGELES UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1997 (IN THOUSANDS)
PRO FORMA ADJUSTMENTS COMPANY AS COMPLETED FOR THE ADJUSTED FOR PENDING COMPANY TRANSACTIONS COMPLETED COMPLETED TRANSACTIONS YEAR ENDED DECEMBER 31, 1997 HISTORICAL HISTORICAL(4) TRANSACTIONS TRANSACTIONS HISTORICAL(16) ---------------------------- ---------- ------------- ------------ ------------ -------------- Gross revenues...................................... $663,804 $732,122 $ (17,651)(5) $1,377,432 $ 92,994 (843)(6) Less: agency commissions............................ (81,726) (68,623) -- (150,349) (11,425) -------- -------- --------- ---------- -------- Net revenues........................................ 582,078 663,499 (18,494) 1,227,083 81,569 Operating expenses excluding depreciation and amortization...................................... 316,248 386,650 (14,395)(5) 688,503 45,174 Depreciation and amortization....................... 185,982 74,227 (2,677)(5) 457,714 7,829 200,182(7) -- Corporate general and administrative................ 21,442 23,392 (1,842)(9) 42,992 481 Merger expense...................................... -- 6,124 (6,124)(10) -- -- Restructuring charge................................ -- 15,958 -- 15,958 -- Stock option compensation........................... -- 3,083 -- 3,083 -- Profit participation fee............................ -- 2,322 (2,322)(11) -- -------- -------- --------- ---------- -------- Operating income (loss)............................. 58,406 151,743 (191,316) 18,833 28,085 Interest expense.................................... 85,017 88,372 (579)(5) 329,683 724 156,873(12) Interest income..................................... (1,922) (753) -- (2,675) (513) Gain on disposition of assets....................... (18,380) -- -- (18,380) -- Other (income) expense.............................. 383 (242) 885(13) 1,026 (1,357) -------- -------- --------- ---------- -------- Income (loss) before income taxes................... (6,692) 64,366 (348,495) (290,821) 29,231 Income tax expense (benefit)........................ 7,802 18,700 (130,120)(14) (103,618) 1,825 -------- -------- --------- ---------- -------- Net income (loss)................................... (14,494) 45,666 (218,375) (187,203) 27,406 Preferred stock dividends........................... 12,901 27,321 (40,222)(15) -- -- -------- -------- --------- ---------- -------- Income (loss) attributable to common stock.......... $(27,395) $ 18,345 $(178,153) $ (187,203) $ 27,406 ======== ======== ========= ========== ======== Broadcast cash flow............................... $265,830 $276,849 $ (4,099) $ 538,580 $ 36,395 ======== ======== ========= ========== ======== PRO FORMA ADJUSTMENTS FOR THE PENDING COMPANY YEAR ENDED DECEMBER 31, 1997 TRANSACTIONS PRO FORMA ---------------------------- ------------ ---------- Gross revenues...................................... $ -- $1,470,426 Less: agency commissions............................ -- (161,774) --------- ---------- Net revenues........................................ -- 1,308,652 Operating expenses excluding depreciation and amortization...................................... -- 733,677 Depreciation and amortization....................... 52,653(17) 518,196 -- Corporate general and administrative................ -- 43,473 Merger expense...................................... -- -- Restructuring charge................................ -- 15,958 Stock option compensation........................... -- 3,083 Profit participation fee............................ -- --------- ---------- Operating income (loss)............................. (52,653) (5,735) Interest expense.................................... 48,221(18) 378,628 -- Interest income..................................... -- (3,188) Gain on disposition of assets....................... -- (18,380) Other (income) expense.............................. -- (331) --------- ---------- Income (loss) before income taxes................... (100,874) (362,464) Income tax expense (benefit)........................ (30,492)(19) (132,285) --------- ---------- Net income (loss)................................... (70,382) (230,179) Preferred stock dividends........................... -- -- --------- ---------- Income (loss) attributable to common stock.......... $ (70,382) $ (230,179) ========= ========== Broadcast cash flow............................... $ -- $ 574,975 ========= ==========
See accompanying notes to Unaudited Pro Forma Condensed Combined Financial Statements P-3 163 CHANCELLOR MEDIA CORPORATION OF LOS ANGELES UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 (IN THOUSANDS)
PRO FORMA PRO FORMA ADJUSTMENTS COMPANY AS ADJUSTMENTS COMPLETED FOR THE ADJUSTED FOR PENDING FOR THE COMPANY TRANSACTIONS COMPLETED COMPLETED TRANSACTIONS PENDING NINE MONTHS ENDED SEPTEMBER 30, 1998 HISTORICAL HISTORICAL(4) TRANSACTIONS TRANSACTIONS HISTORICAL(16) TRANSACTIONS - ------------------------------------ ---------- ------------- ------------ ------------ -------------- ------------ Gross revenues..................... $1,015,562 $177,971 $ -- $1,193,533 $49,769 $ -- Less: agency commissions........... (116,466) (17,293) -- (133,759) (6,301) -- ---------- -------- --------- ---------- ------- -------- Net revenues....................... 899,096 160,678 -- 1,059,774 43,468 -- Operating expenses excluding depreciation and amortization.... 491,924 79,348 -- 571,272 19,182 -- Depreciation and amortization...... 311,644 26,887 53,354(7) 391,885 3,054 40,403(17) Corporate general and administrative................... 25,188 6,545 (570)(8) 31,163 -- Executive severance charge......... 59,475 -- -- 59,475 -- -- Profit participation fee........... -- 1,756 (1,756)(11) -- ---------- -------- --------- ---------- ------- -------- Operating income (loss)............ 10,865 46,142 (51,028) 5,979 21,232 (40,403) Interest expense................... 145,992 12,896 88,374(12) 247,262 435 36,274(18) Interest income.................... (10,283) (311) -- (10,594) (45) -- Gain on disposition of representation contracts......... (29,767) -- -- (29,767) -- -- Other (income) expense............. (3,559) 4,615 428(13) 1,484 873 -- ---------- -------- --------- ---------- ------- -------- Income (loss) before income taxes... (91,518) 28,942 (139,830) (202,406) 19,969 (76,677) Income tax expense (benefit)....... (15,380) -- (55,735)(14) (71,115) 1,271 (24,021)(19) ---------- -------- --------- ---------- ------- -------- Net income (loss).................. (76,138) 28,942 (84,095) (131,291) 18,698 (52,656) Preferred stock dividends.......... 17,601 -- (17,601)(15) -- -- -- ---------- -------- --------- ---------- ------- -------- Income (loss) attributable to common stock............................ $ (93,739) $ 28,942 $ (66,494) $ (131,291) $18,698 $(52,656) ========== ======== ========= ========== ======= ======== Broadcast cash flow.............. $ 407,172 $ 81,330 $ -- $ 488,502 $24,286 $ -- ========== ======== ========= ========== ======= ======== COMPANY NINE MONTHS ENDED SEPTEMBER 30, 1998 PRO FORMA - ------------------------------------ ---------- Gross revenues..................... $1,243,302 Less: agency commissions........... (140,060) ---------- Net revenues....................... 1,103,242 Operating expenses excluding depreciation and amortization.... 590,454 Depreciation and amortization...... 435,342 Corporate general and administrative................... 31,163 Executive severance charge......... 59,475 Profit participation fee........... -- ---------- Operating income (loss)............ (13,192) Interest expense................... 283,971 Interest income.................... (10,639) Gain on disposition of representation contracts......... (29,767) Other (income) expense............. 2,357 ---------- Income (loss) before income taxes... (259,114) Income tax expense (benefit)....... (93,865) ---------- Net income (loss).................. (165,249) Preferred stock dividends.......... -- ---------- Income (loss) attributable to common stock............................ $ (165,249) ========== Broadcast cash flow.............. $ 512,788 ==========
See accompanying notes to Unaudited Pro Forma Condensed Combined Financial Statements P-4 164 ADJUSTMENTS TO UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET RELATED TO THE COMPLETED TRANSACTIONS (1) Reflects the Completed Transactions that were completed after September 30, 1998 as follows:
PURCHASE PRICE ALLOCATION FINANCING ------------------------------------------------------------------------ ----------------------- PROPERTY AND INTANGIBLE DECREASE INCREASE IN COMPLETED PURCHASE CURRENT EQUIPMENT, ASSETS, OTHER CURRENT IN OTHER LONG-TERM TRANSACTIONS PRICE ASSETS NET(A) NET(B) ASSETS LIABILITIES ASSETS DEBT ------------ ---------- ------- ------------ ---------- ------- ----------- --------- ----------- Z Spanish Acquisition(c)..... $ 25,000 $ -- $ -- $ -- $25,000 $ -- $ -- $ 25,000 Primedia Acquisition(d)...... 74,770 -- 4,323 70,447 -- -- -- 74,770 Kunz Option(e)............... 39,289 -- 9,822 29,467 -- -- 6,000 33,289 Whiteco Acquisition(f)....... 974,221 29,180 74,519 873,317 2,164 (4,959) -- 974,221 ---------- ------- ------- -------- ------- ------- ------ ---------- $1,113,280 $29,180 $88,664 $973,231 $27,164 $(4,959) $6,000 $1,107,280 ========== ======= ======= ======== ======= ======= ====== ==========
- --------------- (a) The Company has assumed that the historical balances of net property and equipment acquired approximate fair value for the preliminary allocation of the purchase price. Such amounts are based on information provided by management of the respective companies acquired in the Completed Transactions. (b) The Company, on a preliminary basis, has allocated the intangible assets of the radio acquisitions to broadcast licenses with an estimated average life of 15 years and has allocated the intangible assets of the outdoor acquisitions to goodwill and customer contract value with estimated average lives of 40 years and five years, respectively. The amounts allocated to net intangible assets are preliminary and are based upon historical information from prior radio and outdoor acquisitions. (c) On October 9, 1998, the Company acquired approximately a 22.4% non-voting equity interest in Z-Spanish Media Corporation ("Z Spanish Media") for $25,000 in cash (the "Z Spanish Acquisition"). Z Spanish Media, which is headquartered in Sacramento, California, is the owner and operator of 22 Hispanic format radio stations in California, Texas, Arizona and Illinois. (d) On October 23, 1998, the Company acquired Primedia Broadcast Group, Inc. ("Primedia") and certain of its affiliates, which own and operate eight FM stations in Puerto Rico, for approximately $76,050 in cash less working capital deficit of $1,280 plus various other direct acquisition costs (the "Primedia Acquisition"). (e) On November 13, 1998, the Company acquired approximately 1,000 display faces from Kunz & Company for $33,289 in cash plus various other direct acquisition costs (the "Kunz Option"). Martin had previously paid $6,000 in cash to Kunz & Company on July 31, 1997. Martin began operating these 1,000 display faces under a management agreement effective July 31, 1997. (f) On December 1, 1998, the Company acquired the assets of the Outdoor Advertising division of Whiteco Industries, Inc., an outdoor advertising company with over 22,000 billboards and outdoor displays in 34 states, for $930,000 in cash plus working capital of $24,221 subject to certain adjustments and various other direct acquisition costs of approximately $20,000. (2) Reflects the proceeds of approximately $730,000 received on November 17, 1998 from the issuance of $750,000 of 8% Senior Notes due 2008 (the "8% Senior Notes"), net of deferred debt issuance costs of $20,000 (the "8% Senior Notes Offering"). The net proceeds from the 8% Senior Notes Offering will be used to reduce bank borrowings under the revolving credit portion of the Senior Credit Facility and the excess proceeds will be invested in short-term investment grade securities. P-5 165 ADJUSTMENTS TO UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET RELATED TO THE PENDING TRANSACTIONS (3) Reflects the Pending Transactions as follows:
PURCHASE PRICE ALLOCATION ------------------------------------------------------------- PURCHASE/ PROPERTY AND INTANGIBLE (SALES) CURRENT EQUIPMENT, ASSETS, CURRENT PENDING TRANSACTIONS PRICE ASSETS NET(a) NET(b) LIABILITIES -------------------- --------- ------- ------------ ---------- ----------- Capstar/SFX Acquisition(e)....... $494,250 $ -- $10,415 $483,835 $ -- Cleveland Acquisitions(f)........ 285,877 11,006 2,114 309,547 (129) Chicago Disposition(g)........... (21,000) -- (2,167) (2,844) -- Phoenix Acquisition(h)........... 90,000 -- 1,788 88,212 -- -------- ------- ------- -------- ----- Total...................... $849,127 $11,006 $12,150 $878,750 $(129) ======== ======= ======= ======== ===== FINANCING ------------------------- PURCHASE PRICE ALLOCATION DECREASE INCREASE ------------------------------------------ IN NOTES (DECREASE) DEFERRED RECEIVABLE IN TAX OTHER ACCUMULATED FROM LONG-TERM PENDING TRANSACTIONS LIABILITIES(c) LIABILITIES DEFICIT(d) AFFILIATE DEBT -------------------- -------------- ----------- ----------- ---------- ------------ Capstar/SFX Acquisition(e)....... $ -- $ -- $ -- $150,000 $344,250 Cleveland Acquisitions(f)........ (35,827) (834) -- -- 285,877 Chicago Disposition(g)........... (6,396) -- (9,593) -- (21,000) Phoenix Acquisition(h)........... -- -- -- -- 90,000 -------- ----- ------- -------- -------- Total...................... $(42,223) $(834) $(9,593) $150,000 $699,127 ======== ===== ======= ======== ========
- --------------- (a) The Company has assumed that historical balances of net property and equipment to be acquired approximate fair value for the preliminary allocation of the purchase price. Such amounts are based primarily on information provided by management of the respective companies to be acquired in the Pending Transactions. (b) The Company, on a preliminary basis, has allocated the intangible assets of the radio acquisitions to broadcast licenses with an estimated average life of 15 years. The amounts allocated to net intangible assets are preliminary and are based upon historical information from prior radio acquisitions. (c) Reflects the tax effect upon consummation of the transaction. (d) Reflects the gain on sale, net of tax, upon consummation of the transaction. (e) On February 20, 1998, the Company entered into an agreement to acquire from Capstar KTXQ-FM and KBFB-FM in Dallas/Ft. Worth, KODA-FM, KKRW-FM and KQUE-FM in Houston, KPLN-FM and KYXY-FM in San Diego and WDRV-FM, WJJJ-FM, WXDX-FM and WDVE-FM in Pittsburgh (collectively, the "Capstar/SFX Stations") for an aggregate purchase price of approximately $637,500 in a series of purchases and exchanges over a period of three years (the "Capstar/SFX Transaction"). The Capstar/SFX Stations were acquired by Capstar as part of Capstar's acquisition of SFX on May 29, 1998. On May 29, 1998, the Company completed the Houston Exchange (as defined) and began operating the remaining ten Capstar/SFX Stations under time brokerage agreements. The Company also provided a loan to Capstar in the principal amount of $150,000 (the "Capstar Loan") as part of the Capstar/SFX Transaction. A portion of the Capstar Loan will be prepaid by Capstar in connection with the Company's acquisition of, and the proceeds of such prepayment would be used by the Company as a portion of the purchase price for, each Capstar/SFX Station. The purchase price for the remaining ten Capstar/SFX Stations will be approximately $494,250. The Company is currently assessing whether the terms of the Capstar/SFX Transaction will be modified upon the consummation of the Capstar Merger by Chancellor Media. (f) On August 11, 1998, the Company entered into an agreement to acquire four FM and two AM radio stations in Cleveland for an aggregate purchase price of approximately $275,000 in cash plus working capital of $10,877 plus various other direct acquisition costs (the "Cleveland Acquisitions"). The Cleveland Acquisitions consist of the purchase by the Company of (i) WDOK-FM and WRMR-AM from Independent Group Limited Partnership, (ii) WZAK-FM from Zapis Communications, (iii) Zebra Broadcasting Corporation which owns WZJM-FM and WJMO-AM and (iv) Wincom Broadcasting Corporation which owns WQAL-FM (the "Wincom Acquisition"). The Company began operating WQAL-FM under a time brokerage agreement effective October 1, 1998. The consummation of each of the Cleveland Acquisitions (other than the Wincom Acquisition) is contingent upon the consummation of each of the other Cleveland Acquisitions (other than the Wincom Acquisition). The Company began operating WQAL-FM under a time brokerage agreement effective October 1, 1998. P-6 166 (g) On August 20, 1998, the Company entered into an agreement to sell WMVP-AM in Chicago to ABC, Inc. for $21,000 in cash (the "Chicago Disposition"). The Company entered into a time brokerage agreement to sell substantially all of the broadcast time of WMVP-AM effective September 10, 1998. (h) On September 15, 1998, the Company entered into an agreement to acquire KKFR-FM and KFYI-AM in Phoenix from The Broadcast Group, Inc. for $90,000 in cash plus various other direct acquisition costs (the "Phoenix Acquisition"). The Company began operating KKFR-FM and KFYI-AM under a time brokerage agreement effective November 5, 1998. P-7 167 ADJUSTMENTS TO UNAUDITED CONDENSED COMBINED STATEMENTS OF OPERATIONS RELATED TO THE COMPLETED TRANSACTIONS (4) The detail of the historical financial data of the companies acquired or disposed of in the Completed Transactions for the year ended December 31, 1997 and for the nine months ended September 30, 1998 has been obtained from the historical financial statements of the respective companies and is summarized below:
ACQUISITIONS ------------------------------------------------------------------------------------------------------------ CRBC AS EVERGREEN ADJUSTED FOR WUSL-FM VIACOM COMPLETED KDGE-FM KATZ WDAS-FM/AM WIOQ-FM ACQUISITION CRBC KZPS-FM ACQUISITION GANNETT YEAR ENDED HISTORICAL HISTORICAL HISTORICAL TRANSACTIONS HISTORICAL HISTORICAL HISTORICAL DECEMBER 31, 1997 1/1 - 5/1(a) 1/1 - 5/15(b) 1/1 - 7/2(c) 1/1 - 9/5(d) 1/1 - 7/31(e) 1/1 - 10/28(f) 1/1 - 12/29(g) - ----------------- ------------ ------------- ------------ ------------ ------------- -------------- -------------- Gross revenues....... $5,028 $7,088 $38,972 $241,481 $7,616 $144,886 $61,057 Less: agency commissions......... (680) (829) (5,470) (30,754) (929) -- (8,052) ------ ------ ------- -------- ------ -------- ------- Net revenues......... 4,348 6,259 33,502 210,727 6,687 144,886 53,005 Operating expenses excluding depreciation and amortization........ 2,533 3,649 14,936 119,328 5,293 109,341 26,303 Depreciation and amortization........ 875 -- 2,279 30,505 280 141 1,736 Corporate general and administrative...... 172 141 682 7,226 -- 8,105 Merger expense....... -- -- -- 6,124 -- -- -- Restructuring charge.............. -- -- -- -- -- 15,958 -- Stock option compensation........ -- -- -- 3,083 -- -- -- Profit participation fee................. -- -- -- -- -- -- -- ------ ------ ------- -------- ------ -------- ------- Operating income (loss).............. 768 2,469 15,605 44,461 1,114 11,341 24,966 Interest expense..... 19 990 -- 49,812 -- 18,310 -- Interest income...... (21) -- -- (218) -- (170) -- Other (income) expense............. 884 -- -- (584) 12 -- (375) ------ ------ ------- -------- ------ -------- ------- Income (loss) before income taxes........ (114) 1,479 15,605 (4,549) 1,102 (6,799) 25,341 Income tax expense (benefit)........... -- -- 5,892 1,180 -- 1,912 10,127 ------ ------ ------- -------- ------ -------- ------- Net income (loss).... (114) 1,479 9,713 (5,729) 1,102 (8,711) 15,214 Preferred stock dividends........... -- -- -- 27,321 -- -- -- ------ ------ ------- -------- ------ -------- ------- Income (loss) attributable to common stock........ $ (114) $1,479 $ 9,713 $(33,050) $1,102 $ (8,711) $15,214 ====== ====== ======= ======== ====== ======== ======= Broadcast cash flow................ $1,815 $2,610 $18,566 $ 91,399 $1,394 $ 35,545 $26,702 ====== ====== ======= ======== ====== ======== ======= ACQUISITIONS -------------------------------------------------------------------------------------------------- MARTIN AS ADJUSTED FOR KBIG-FM COMPLETED PRIMEDIA KXPK-FM KLDE-FM MARTIN ACQUISITION YEAR ENDED HISTORICAL WBIX-FM KODA-FM WWDC-FM/AM TRANSACTIONS HISTORICAL DECEMBER 31, 1997 1/1 - 8/31(h) 1/1 - 10/10(i) 1/1 - 12/31(j) 1/1 - 12/31(k) 1/1 - 12/31(l) 1/1 - 12/31(m) - ----------------- ------------- -------------- -------------- -------------- -------------- -------------- Gross revenues....... $3,460 $33,125 $20,869 $11,416 $84,882 $15,732 Less: agency commissions......... (458) (4,636) (2,889) (1,430) (8,983) (3,482) ------ ------- ------- ------- ------- ------- Net revenues......... 3,002 28,489 17,980 9,986 75,899 12,250 Operating expenses excluding depreciation and amortization........ 2,816 18,277 7,535 5,597 38,836 7,986 Depreciation and amortization........ 198 -- 1,848 90 25,326 2,916 Corporate general and administrative...... 1,080 -- Merger expense....... -- -- -- -- -- -- Restructuring charge.............. -- -- -- -- -- -- Stock option compensation........ -- -- -- -- -- -- Profit participation fee................. -- -- -- -- -- -- ------ ------- ------- ------- ------- ------- Operating income (loss).............. (12) 10,212 8,597 4,299 10,657 1,348 Interest expense..... -- -- -- 123 17,013 2,102 Interest income...... -- -- -- (36) (293) (25) Other (income) expense............. (81) -- -- (98) 1,767 66 ------ ------- ------- ------- ------- ------- Income (loss) before income taxes........ 69 10,212 8,597 4,310 (7,830) (795) Income tax expense (benefit)........... -- -- -- -- -- (53) ------ ------- ------- ------- ------- ------- Net income (loss).... 69 10,212 8,597 4,310 (7,830) (742) Preferred stock dividends........... -- -- -- -- -- -- ------ ------- ------- ------- ------- ------- Income (loss) attributable to common stock........ $ 69 $10,212 $ 8,597 $ 4,310 $(7,830) $ (742) ====== ======= ======= ======= ======= ======= Broadcast cash flow................ $ 186 $10,212 $10,445 $ 4,389 $37,063 $ 4,264 ====== ======= ======= ======= ======= ======= WHITECO ACQUISITION YEAR ENDED HISTORICAL DECEMBER 31, 1997 1/1-12/31(n) - ----------------- -------------- Gross revenues....... $126,801 Less: agency commissions......... (8,703) -------- Net revenues......... 118,098 Operating expenses excluding depreciation and amortization........ 63,984 Depreciation and amortization........ 11,525 Corporate general and administrative...... 6,074 Merger expense....... -- Restructuring charge.............. -- Stock option compensation........ -- Profit participation fee................. 2,322 -------- Operating income (loss).............. 34,193 Interest expense..... 4 Interest income...... -- Other (income) expense............. (1,833) -------- Income (loss) before income taxes........ 36,022 Income tax expense (benefit)........... -- -------- Net income (loss).... 36,022 Preferred stock dividends........... -- -------- Income (loss) attributable to common stock........ $ 36,022 ======== Broadcast cash flow................ $ 54,114 ========
P-8 168
DISPOSITIONS -------------------------------------------------------------------------------------------- WPEG-FM SAN WBAV-FM/AM FRANCISCO WRFX-FM WPNT-FM FREQUENCY WFNZ-FM WNKS-FM HISTORICAL WEJM-FM/AM WJZW-FM HISTORICAL HISTORICAL HISTORICAL 5/30 - HISTORICAL HISTORICAL 1/1 - 1/1 - 5/15(b) 1/1 - 5/15(o) 6/19(p) 1/1 - 8/26(q) 1/1 - 7/7(r) 7/7(s) ------------- ------------- -------------- ------------- ------------ ------------ Gross revenues.................... $(7,788) $(1,332) $(567) $(1,279) $(4,137) $(1,370) Less: agency commissions.......... 1,029 142 93 135 567 178 ------- ------- ----- ------- ------- ------- Net revenues...................... (6,759) (1,190) (474) (1,144) (3,570) (1,192) Operating expenses excluding depreciation and amortization.... (3,569) (994) (285) (1,276) (2,161) (1,738) Depreciation and amortization..... -- (212) (279) (305) (315) (84) Corporate general and administrative................... -- -- -- -- (70) -- Merger expense.................... -- -- -- -- -- -- Restructuring charge.............. -- -- -- -- -- -- Stock option compensation......... -- -- -- -- -- -- Profit participation fee.......... -- -- -- -- -- -- ------- ------- ----- ------- ------- ------- Operating income (loss)........... (3,190) 16 90 437 (1,024) 630 Interest expense.................. -- -- -- -- -- -- Interest income................... -- -- -- -- -- -- Other (income) expense............ -- -- -- -- -- -- ------- ------- ----- ------- ------- ------- Income (loss) before income taxes............................ (3,190) 16 90 437 (1,024) 630 Income tax benefit................ -- -- -- -- (260) -- ------- ------- ----- ------- ------- ------- Net income (loss)................. (3,190) 16 90 437 (764) 630 Preferred stock dividends......... -- -- -- -- -- -- ------- ------- ----- ------- ------- ------- Income (loss) attributable to common stock..................... $(3,190) $ 16 $ 90 $ 437 $ (764) $ 630 ======= ======= ===== ======= ======= ======= Broadcast cash flow............... $(3,190) $ (196) $(189) $ 132 $(1,409) $ 546 ======= ======= ===== ======= ======= ======= DISPOSITIONS ------------------------------------------------------------------------------- WBZS-AM WZHF-AM BONNEVILLE KDFC-FM KDFC-AM WLUP-FM OPTION WFLN-FM HISTORICAL HISTORICAL HISTORICAL HISTORICAL HISTORICAL 1/1 - 1/31(t) 1/1 - 8/13(u) 1/1 - 7/14(e) 1/1 - 10/1(i) 1/1 - 4/30(v) ------------- --------------- ------------- ------------- ------------- Gross revenues.................... $(278) $(1,091) $(6,928) $(31,429) $(1,298) Less: agency commissions.......... 26 23 935 3,951 134 ----- ------- ------- -------- ------- Net revenues...................... (252) (1,068) (5,993) (27,478) (1,164) Operating expenses excluding depreciation and amortization.... (224) (665) (5,642) (14,434) (728) Depreciation and amortization..... -- (54) (1,443) -- (800) Corporate general and administrative................... -- (18) -- -- -- Merger expense.................... -- -- -- -- -- Restructuring charge.............. -- -- -- -- -- Stock option compensation......... -- -- -- -- -- Profit participation fee.......... -- -- -- -- -- ----- ------- ------- -------- ------- Operating income (loss)........... (28) (331) 1,092 (13,044) 364 Interest expense.................. -- -- -- (1) -- Interest income................... -- -- -- 10 -- Other (income) expense............ -- -- -- -- -- ----- ------- ------- -------- ------- Income (loss) before income taxes............................ (28) (331) 1,092 (13,053) 364 Income tax benefit................ -- (98) -- -- -- ----- ------- ------- -------- ------- Net income (loss)................. (28) (233) 1,092 (13,053) 364 Preferred stock dividends......... -- -- -- -- -- ----- ------- ------- -------- ------- Income (loss) attributable to common stock..................... $ (28) $ (233) $ 1,092 $(13,053) $ 364 ===== ======= ======= ======== ======= Broadcast cash flow............... $ (28) $ (403) $ (351) $(13,044) $ (436) ===== ======= ======= ======== ======= DISPOSITIONS --------------- WBAB-FM WBLI-FM WGBB-AM WHFM-FM HISTORICAL COMPLETED 1/1 - TRANSACTIONS 12/31(w) HISTORICAL --------------- ------------ Gross revenues.................... $(12,794) $732,122 Less: agency commissions.......... 1,459 (68,623) -------- -------- Net revenues...................... (11,335) 663,499 Operating expenses excluding depreciation and amortization.... (8,048) 386,650 Depreciation and amortization..... -- 74,227 Corporate general and administrative................... -- 23,392 Merger expense.................... -- 6,124 Restructuring charge.............. -- 15,958 Stock option compensation......... -- 3,083 Profit participation fee.......... -- 2,322 -------- -------- Operating income (loss)........... (3,287) 151,743 Interest expense.................. -- 88,372 Interest income................... -- (753) Other (income) expense............ -- (242) -------- -------- Income (loss) before income taxes............................ (3,287) 64,366 Income tax benefit................ -- 18,700 -------- -------- Net income (loss)................. (3,287) 45,666 Preferred stock dividends......... -- 27,321 -------- -------- Income (loss) attributable to common stock..................... $ (3,287) $ 18,345 ======== ======== Broadcast cash flow............... $ (3,287) $276,849 ======== ========
P-9 169
ACQUISITIONS DISPOSITIONS -------------------------------------------------------------------- ------------ MARTIN AS WBAB-FM ADJUSTED FOR WBLI-FM COMPLETED PRIMEDIA WHITECO WGBB-AM NINE MONTHS KODA-FM WWDC-FM/AM MARTIN ACQUISITION ACQUISITION WHFM-FM COMPLETED ENDED HISTORICAL HISTORICAL TRANSACTIONS HISTORICAL HISTORICAL HISTORICAL TRANSACTIONS SEPTEMBER 30, 1998 1/1-5/29(j) 1/1-6/1(k) 1/1-7/31(l) 1/1-9/30(m) 1/1-9/30(n) 1/1-5/29(w) HISTORICAL - --------------------- ----------- ---------- ------------- ----------- ----------- ------------ ------------ Gross revenues....... $ 9,132 $4,273 $54,186 $11,749 $103,694 $(5,063) $177,971 Less: agency commissions........ (1,250) (528) (5,768) (3,070) (7,191) 514 (17,293) ------- ------ ------- ------- -------- ------- -------- Net revenues......... 7,882 3,745 48,418 8,679 96,503 (4,549) 160,678 Operating expenses excluding depreciation and amortization....... 2,771 2,158 23,171 4,954 49,625 (3,331) 79,348 Depreciation and amortization....... 841 45 15,083 2,158 8,760 -- 26,887 Corporate general and administrative..... -- -- 1,035 317 5,193 -- 6,545 Profit participation fee................ -- -- -- -- 1,756 -- 1,756 ------- ------ ------- ------- -------- ------- -------- Operating income (loss)............. 4,270 1,542 9,129 1,250 31,169 (1,218) 46,142 Interest expense..... -- 62 11,057 1,679 98 -- 12,896 Interest income...... -- (18) (261) -- (32) -- (311) Other expense (income)........... -- (49) 5,461 23 (820) -- 4,615 ------- ------ ------- ------- -------- ------- -------- Net income (loss).... $ 4,270 $1,547 $(7,128) $ (452) $ 31,923 $(1,218) $ 28,942 ======= ====== ======= ======= ======== ======= ======== Broadcast cash flow............... $ 5,111 $1,587 $25,247 $ 3,725 $ 46,878 $(1,218) $ 81,330 ======= ====== ======= ======= ======== ======= ========
- --------------- (a) On May 1, 1997, the Company acquired, in the Beasley Acquisition, WDAS-FM/AM in Philadelphia for $103,000 in cash. (b) On May 15, 1997, the Company exchanged, in the EZ Exchange, 5 of its 6 stations in the Charlotte market (WPEG-FM, WBAV-FM/AM, WRFX-FM and WFNZ-AM) for WUSL-FM and WIOQ-FM in Philadelphia. (c) On July 2, 1997, the Company acquired, in the Evergreen Viacom Acquisition, WLTW-FM and WAXQ-FM in New York and WMZQ-FM, WJZW-FM, WZHF-AM, and WBZS-AM in Washington, D.C. for approximately $612,388 in cash including various other direct acquisition costs. The Evergreen Viacom Acquisition was financed with (i) bank borrowings under the Senior Credit Facility (as defined) of $552,559; (ii) $53,750 in escrow funds paid by the Company on February 19, 1997 and (iii) $6,079 financed through working capital. In June 1997, Chancellor Media issued 5,990,000 shares of $3.00 Convertible Exchangeable Preferred Stock (the "$3.00 Convertible Preferred Stock") for net proceeds of approximately $287,800 which were contributed to the Company by Evergreen and used to repay borrowings under the Senior Credit Facility and subsequently were reborrowed on July 2, 1997 as part of the financing of the Evergreen Viacom Acquisition. On July 7, 1997, the Company sold WJZW-FM in Washington, D.C. to affiliates of Capital Cities/ABC Radio for $68,000 in cash. The assets of WJZW-FM, as well as the assets of WZHF-AM and WBZS-AM, which were sold on August 13, 1997, were accounted for as assets held for sale in connection with the purchase price allocation of the Viacom Acquisition and no gain or loss was recognized by the Company upon consummation of the sales (see 4(r) and 4(u)). (d) On September 5, 1997, pursuant to an Amended and Restated Agreement and Plan of Merger, dated as of February 19, 1997 and amended and restated on July 31, 1997 (the "Chancellor Merger Agreement"), among Chancellor Broadcasting Company ("Chancellor"), CRBC, Evergreen Media Corpora- P-10 170 tion ("Evergreen"), Evergreen Mezzanine Holdings Corporation ("EMHC") and Evergreen Media Corporation of Los Angeles ("EMCLA"), (i) Chancellor was merged with and into EMHC, a direct, wholly-owned subsidiary of Evergreen, with EMHC remaining as the surviving corporation and (ii) CRBC was merged with and into EMCLA, a direct, wholly-owned subsidiary of EMHC, with EMCLA remaining as the surviving corporation (collectively, the "Chancellor Merger"). Upon consummation of the Chancellor Merger, Evergreen was renamed Chancellor Media Corporation, EMHC was renamed Chancellor Mezzanine Holdings Corporation ("CMHC") and the Company was renamed Chancellor Media Corporation of Los Angeles ("CMCLA"). Consummation of the Chancellor Merger added 52 radio stations (36 FM and 16 AM) to the Company's portfolio of stations, including 13 stations in markets in which the Company previously operated. The total purchase price allocated to net assets acquired was approximately $1,998,383 which included (i) the conversion of each outstanding share of Chancellor Common Stock into 0.9091 shares of Chancellor Media Common Stock, resulting in the issuance of 34,617,460 shares of Chancellor Media Common Stock at $15.50 per share, (ii) the assumption of long-term debt of CRBC of $949,000 which included $549,000 of borrowings outstanding under the CRBC senior credit facility, $200,000 of CRBC's 9 3/8% Senior Subordinated Notes due 2004 and $200,000 of CRBC's 8 3/4% Senior Subordinated Notes due 2007, (iii) the issuance of 2,117,629 shares of the Company's 12% Exchangeable Preferred Stock (the "12% Preferred Stock") in exchange for CRBC's substantially identical securities with a fair value of $215,570 including accrued and unpaid dividends of $3,807, (iv) the issuance of 1,000,000 shares of the Company's 12 1/4% Series A Senior Cumulative Exchangeable Preferred Stock (the "12 1/4% Preferred Stock") in exchange for CRBC's substantially identical securities with a fair value of $120,217 including accrued and unpaid dividends of $772, (v) the issuance of 2,200,000 shares of Chancellor Media's 7% Convertible Preferred Stock (the "7% Convertible Preferred Stock") in exchange for Chancellor's substantially identical securities with a fair value of $111,048 including accrued and unpaid dividends of $1,048, (vi) the assumption of stock options issued to Chancellor stock option holders with a fair value of $34,977 and (vii) estimated acquisition costs of $31,000. P-11 171 CRBC's historical condensed combined statement of operations for the year ended December 31, 1997 and pro forma adjustments related to the transactions completed by CRBC prior to the Chancellor Merger (the "Completed Chancellor Transactions") is summarized below:
ACQUISITIONS DISPOSITIONS ------------------------- ------------- PRO FORMA CHANCELLOR ADJUSTMENTS CRBC AS VIACOM FOR THE ADJUSTED FOR CRBC COLFAX ACQUISITION WDRQ-FM COMPLETED COMPLETED HISTORICAL HISTORICAL HISTORICAL HISTORICAL CHANCELLOR CHANCELLOR YEAR ENDED DECEMBER 31, 1997 1/1-9/5 1/1-1/23(i) 1/1-7/2(ii) 1/1-8/11(iii) TRANSACTIONS TRANSACTIONS ---------------------------- ---------- ----------- ----------- ------------- ------------ ------------ Gross revenues...................... $215,018 $3,183 $29,214 $(2,395) $ (3,539)(iv) $241,481 Less: agency commissions............ (26,575) (384) (4,046) 251 -- (30,754) -------- ------ ------- ------- -------- -------- Net revenues........................ 188,443 2,799 25,168 (2,144) (3,539) 210,727 Operating expenses excluding depreciation and amortization..... 110,548 1,872 13,326 (1,986) (4,432)(iv) 119,328 Depreciation and amortization....... 23,919 -- 2,370 (186) 4,484(v) 30,505 (82)(vi) Corporate general and administrative.................... 7,102 -- 520 (42) (354)(vii) 7,226 Merger expense...................... 6,124 -- -- -- -- 6,124 Stock option compensation........... 3,083 -- -- -- -- 3,083 -------- ------ ------- ------- -------- -------- Operating income (loss)............. 37,667 927 8,952 70 (3,155) 44,461 Interest expense.................... 37,978 -- 3,178 -- 8,656 (viii 49,812 Interest income..................... (218) -- -- -- -- (218) Other income........................ (584) -- -- -- -- (584) -------- ------ ------- ------- -------- -------- Income (loss) before income taxes... 491 927 5,774 70 (11,811) (4,549) Income tax expense (benefit)........ 2,196 -- 1,558 18 (2,592)(ix) 1,180 -------- ------ ------- ------- -------- -------- Net income (loss)................... (1,705) 927 4,216 52 (9,219) (5,729) Preferred stock dividends........... 25,817 -- -- -- 1,504(x) 27,321 -------- ------ ------- ------- -------- -------- Income (loss) attributable to common stock............................. $(27,522) $ 927 $ 4,216 $ 52 $(10,723) $(33,050) ======== ====== ======= ======= ======== ======== Broadcast cash flow................. $ 77,895 $ 927 $11,842 $ (158) $ 893 $ 91,399 ======== ====== ======= ======= ======== ========
- --------------- (i) On January 23, 1997, CRBC acquired, in the Colfax Acquisition, Colfax Communications, a radio broadcasting company, with 12 radio stations (8 FM and 4 AM) located in 4 markets (Minneapolis-St. Paul, Phoenix, Washington, D.C. and Milwaukee markets). The total purchase price, including acquisition costs, allocated to net assets acquired was approximately $383,700. The Colfax Acquisition was financed through (i) a private placement by CRBC of $200,000 of 12% Exchangeable Preferred Stock for net proceeds of $191,817; (ii) a private placement by Chancellor of $110,000 of 7% Convertible Preferred Stock for net proceeds of $105,546; (iii) additional bank borrowings under CRBC's previous senior credit agreement of $65,937 and (iv) $20,400 in escrow funds. On March 31, 1997, CRBC sold WMIL-FM and WOKY-AM in Milwaukee for $41,253 in cash. The assets of WMIL-FM and WOKY-AM are classified as assets held for sale in connection with the purchase price allocation of the Colfax Acquisition. Accordingly, WMIL-FM and WOKY-AM net income of approximately $41 for the period January 23, 1997 through March 31, 1997 has been excluded from the Colfax historical condensed statement of operations for the year ended December 31, 1997. (ii) On July 2, 1997, CRBC acquired, in the Chancellor Viacom Acquisition, KIBB-FM and KYSR-FM in Los Angeles, WLIT-FM in Chicago and WDRQ-FM in Detroit for approximately $500,789 in cash including various other direct acquisition costs. The Chancellor Viacom Acquisition was financed with (i) bank borrowings of $273,159 under CRBC's restated senior credit agreement, dated July 2, 1997 (the "CRBC Restated Credit Agreement"); (ii) borrowings under an interim loan of Chancellor (the "Chancellor Broadcasting/Viacom Interim Financing") of $168,300 which were contributed to CRBC by Chancellor; (iii) escrow funds of $53,750 paid by CRBC on February 19, 1997 and (iv) $5,580 financed through working capital. The assets of WDRQ-FM in Detroit are classified as assets held for sale in connection with the purchase price allocation of the Chancellor Viacom Acquisition (see (iii) below). P-12 172 (iii)On August 11, 1997, CRBC sold, in the ABC/Detroit Disposition, WDRQ-FM in Detroit for $37,000 in cash. The assets of WDRQ-FM were classified as assets held for sale in connection with the purchase price allocation of the Chancellor Viacom Acquisition (see 4(d)(ii)). Accordingly, WDRQ-FM net income for the period July 2, 1997 to August 11, 1997 has been excluded from CRBC's historical condensed statement of operations. (iv) Reflects the elimination of time brokerage agreement fees received and paid by CRBC as follows:
YEAR ENDED DECEMBER 31, 1997 MARKET PERIOD REVENUE EXPENSE ---------------------------- ------ ------ ------- ------- WWWW-FM/WDFN-AM(1)...................... Detroit 1/1-1/31 $ (235) $ (16) WOMX-FM, WXXL-FM, WJHM-FM(2)............ Orlando 1/1-2/13 -- (911) WEAT-FM/AM, WOLL-FM(2).................. West Palm Beach 1/1-3/28 (593) (304) WAPE-FM, WFYV-FM(3)..................... Jacksonville 1/1-9/5 (2,711) (490) WBAB-FM, WBLI-FM, WGBB-AM, WHFM-FM(3)... Long Island 1/1-9/5 -- (2,711) ------- ------- Total adjustment for decrease in gross revenues and expenses...... $(3,539) $(4,432) ======= =======
- --------------- (1)On January 31, 1997, CRBC sold WWWW-FM and WDFN-AM in Detroit to the Company for $30,000 in cash. Prior to the completion of the sale, CRBC had entered into a joint sales agreement effective February 14, 1996 and a time brokerage agreement effective April 1, 1996 to sell substantially all of the broadcast time of WWWW-FM and WDFN-AM to the Company pending the completion of the sale. (2)On February 13, 1997, CRBC acquired, in the Omni Acquisition, substantially all of the assets and assumed certain liabilities of the OmniAmerica Group including WOMX-FM, WXXL-FM and WJHM-FM in Orlando, WEAT-FM/AM and WOLL-FM in West Palm Beach, Florida and WAPE-FM AND WFYV-FM in Jacksonville. The total purchase price, including acquisition costs, allocated to net assets acquired was approximately $181,046. Prior to the consummation of the Omni Acquisition, CRBC had entered into an agreement to operate the stations under a time brokerage agreement effective July 1, 1996. Additionally, prior to the consummation of CRBC's exchange of WEAT-FM/AM and WOLL-FM in West Palm Beach for KSTE-FM in Sacramento and $33,000 in cash on March 28, 1997, CRBC entered into time brokerage agreements to sell substantially all of the broadcast time of WEAT-FM/AM and WOLL-FM in West Palm Beach and WAPE-FM and WFYV-FM in Jacksonville effective July 1, 1996. (3)On July 1, 1996, CRBC entered into an agreement to exchange, in the SFX Exchange, WAPE-FM and WFYV-FM in Jacksonville, Florida, and $11,000 in cash to SFX for WBAB-FM, WBLI-FM, WGBB-AM, and WHFM-FM in Long Island. CRBC entered into time brokerage agreements to operate WBAB-FM, WBLI-FM, WGBB-AM, and WHFM-FM effective July 1, 1996 and entered into time brokerage agreements to sell substantially all of the broadcast time of WAPE-FM and WFYV-FM effective July 1, 1996. On November 6, 1997, the DOJ filed suit against the Company seeking to enjoin under the HSR Act the acquisition of the four Long Island properties under the SFX Exchange. On March 30, 1998, the Company and SFX entered into a Consent Decree under which the Company and SFX agreed that the SFX Exchange would not be consummated and that the time brokerage agreements under which the Company operated the Long Island properties would be terminated as soon as possible but no later than August 1, 1998. On May 29, 1998, the Company's time brokerage agreements regarding the Long Island properties were terminated as part of the Capstar Transaction (as defined). Furthermore, on May 29, 1998, the Company exchanged WAPE-FM and WFYV-FM in Jacksonville plus $90,250 in cash to Capstar in return for KODA-FM in Houston. P-13 173 (v) Reflects incremental amortization related to the Completed Chancellor Transactions and is based on the following allocation to intangible assets:
COMPLETED CHANCELLOR INCREMENTAL HISTORICAL ADJUSTMENT TRANSACTIONS AMORTIZATION INTANGIBLE AMORTIZATION AMORTIZATION FOR NET YEAR ENDED DECEMBER 31, 1997 PERIOD ASSETS, NET EXPENSE(1) EXPENSE INCREASE ---------------------------- ------------ ----------- ------------ ------------ ---------- Omni...................................... 1/1-2/13 $171,837 $ 525 $ -- $ 525 Colfax.................................... 1/1-1/23 317,894 508 -- 508 KSTE-FM................................... 1/1-3/28 (32,475) (198) -- (198) Chancellor Viacom Acquisition............. 1/1-7/2 451,690 5,709 2,060 3,649 -------- ------ ------ ------ Total............................. $908,946 $6,544 $2,060 $4,484 ======== ====== ====== ======
- --------------- (1) Intangible assets were amortized on a straight-line basis over an estimated average 40 year life by CRBC. In connection with purchase accounting for the Chancellor Merger, intangible assets are amortized over an estimated average life of 15 years in accordance with the Company's accounting policies and procedures. Historical depreciation expense of the Completed Chancellor Transactions is assumed to approximate depreciation expense on a pro forma basis. Actual depreciation and amortization may differ based upon final purchase price allocations. (vi) Reflects the elimination of disposed stations' historical depreciation and amortization expense of $82 for the year ended December 31, 1997 (WWWW-FM/WDFN-AM for the period of January 1, 1997 to January 31, 1997) recognized by CRBC during the time brokerage agreement holding period. (vii)Reflects the elimination of duplicate corporate expenses of $354 for the year ended December 31, 1997 related to the Completed Chancellor Transactions. (viii) Reflects the adjustment to interest expense in connection with the consummation of the Completed Chancellor Transactions, the issuance by CRBC of its 12 1/4% Series A Senior Cumulative Exchangeable Preferred Stock, the refinancing of CRBC's previous senior credit agreement on January 23, 1997 and the offering on June 24, 1997 by CRBC of $200.0 million aggregate principal amount of its 8 3/4% Senior Notes due 2007 (the "8 3/4% Notes"):
YEAR ENDED DECEMBER 31, 1997 ----------------- Additional bank borrowings related to: Completed Chancellor Acquisitions......................... $558,892 Completed Chancellor Dispositions......................... (104,253) New Loan Fees............................................. 6,873 -------- Total additional bank borrowings............................ $461,512 ======== Interest expense on additional bank borrowings at 7.5%...... $ 11,376 Less: historical interest expense of the stations acquired in the Completed Chancellor Transactions.................. (3,178) -------- Net increase in interest expense............................ 8,198 Reduction in interest expense on bank debt related to the application of net proceeds of the following at 7.5%: CRBC 8 3/4% Notes proceeds of $194,083 for the period January 1, 1997 to June 24, 1997.......................... (7,036)
P-14 174
YEAR ENDED DECEMBER 31, 1997 ----------------- Reduction in interest expense resulting from the redemption of CRBC's 12.5% Senior Subordinated Notes of $60,000 on June 5, 1997.............................................. (3,229) Interest expense on $70,133 additional bank borrowings at 7.5% related to the redemption of CRBC's 12.5% Senior Subordinated Notes on June 5, 1997........................ 2,265 Interest expense on $200,000 8 3/4% Notes issued June 24, 1997...................................................... 8,458 -------- Total adjustment for net increase in interest expense....... $ 8,656 ========
(ix) Reflects the income tax benefit related to pro forma adjustments. The adjustment to income taxes reflects the application of the estimated effective tax rate on a pro forma basis to income (loss) before income taxes for historical and pro forma adjustment amounts. (x) Reflects incremental dividends and accretion of $1,504 on the 12% Exchangeable Preferred Stock for the period January 1, 1997 to January 23, 1997: (e) On July 14, 1997, the Company completed the disposition of WLUP-FM in Chicago to Bonneville for net proceeds of $80,000 which were held by a qualified intermediary pending the completion of the deferred exchange of WLUP-FM for KZPS-FM and KDGE-FM in Dallas. On October 7, 1997, the Company applied the net proceeds from the disposition of WLUP-FM of $80,000 in cash, plus an additional $3,500 and various other direct acquisition costs, in a deferred exchange of WLUP-FM for KZPS-FM and KDGE-FM in Dallas. The exchange was accounted for as a like-kind exchange and no gain or loss was recognized upon consummation of the transaction. The Company had previously operated KZPS-FM and KDGE-FM under time brokerage agreements effective August 1, 1997. (f) On October 28, 1997, the Company and Chancellor Media acquired Katz Media Group, Inc. ("KMG"), a full-service media representation firm, in a tender offer transaction for a total purchase price of approximately $379,101 (the "Katz Acquisition") which included (i) the conversion of each outstanding share of KMG Common Stock into the right to receive $11.00 in cash, resulting in total cash payments of $149,601, (ii) the assumption of long-term debt of KMG and its subsidiaries of $222,000 which included $122,000 of borrowings outstanding under the KMG senior credit facility and $100,000 of the 10 1/2% Notes and (iii) estimated acquisition costs of $7,500. (g) On December 29, 1997, the Company acquired, in the Gannett Acquisition, 5 radio stations in 3 major markets from P&S, including WGCI-FM/AM in Chicago, KHKS-FM in Dallas, and KKBQ-FM/AM in Houston for $340,000 in cash. (h) On January 30, 1998, the Company acquired, in the Denver Acquisition, KXPK-FM in Denver from Ever Green Wireless LLC for $26,000 in cash (including $1,650 paid by Chancellor in escrow). The Company had previously been operating KXPK-FM under a time brokerage agreement since September 1, 1997. (i) On April 3, 1998, the Company exchanged WTOP-FM in Washington, KZLA-FM in Los Angeles and WGMS-FM in Washington plus $57,000 in cash for Bonneville's stations WBIX-FM in New York, KLDE-FM in Houston and KBIG-FM in Los Angeles (the "Bonneville Option"). The Company had previously paid $3,000 in cash to Bonneville on August 6, 1997. The Company had previously entered into time brokerage agreements to operate KLDE-FM and KBIG-FM effective October 1, 1997 and WBIX-FM effective October 10, 1997 and had entered into time brokerage agreements to sell substantially all of the broadcast time of WTOP-AM, KZLA-FM and WGMS-FM effective October 1, 1997. (j) On February 20, 1998, the Company entered into an agreement to acquire from Capstar Broadcasting Corporation (together with its subsidiaries, "Capstar") KTXQ-FM and KBFB-FM in Dallas/ Ft. Worth, KODA-FM, KKRW-FM and KQUE-AM in Houston, KPLN-FM and KYXY-FM in San Diego and WVTY-FM, WJJJ-FM, WXDX-FM and WDVE-FM in Pittsburgh (collectively, the "Capstar/SFX Stations") for an aggregate purchase price of approximately $637,500 in a series of purchases and exchanges over a period of three years (the "Capstar/SFX Transaction"). The Capstar/ P-15 175 SFX Stations were acquired by Capstar as part of Capstar's acquisition of SFX on May 29, 1998. On May 29, 1998, as part of the Capstar/SFX Transaction, the Company exchanged WAPE-FM and WFYV-FM in Jacksonville (valued for purposes of the Capstar/SFX Transaction at $53,000) plus $90,250 in cash to Capstar in return for KODA-FM in Houston (the "Houston Exchange"). CRBC entered into a time brokerage agreement to sell substantially all of the broadcast time of WAPE-FM and WFYV-FM effective July 1, 1996 (see 4 (d) (iv) (3)). Therefore, the results of operations of WAPE-FM and WFYV-FM are not included in the Company's historical condensed statements of operations for the year ended December 31, 1997 and the nine months ended September 30, 1998. (k) On June 1, 1998, the Company acquired WWDC-FM/AM in Washington, D.C. from Capitol Broadcasting Company and its affiliates for $74,062 in cash (including $2,062 for the purchase of the stations' accounts receivable) plus various other direct acquisition costs, of which $4,000 was previously paid by the Company as escrow funds (the "Capitol Broadcasting Acquisition"). (l) On July 31, 1998, the Company acquired Martin Media and certain affiliated companies ("Martin"), an outdoor advertising company with over 14,500 billboards and outdoor displays in 12 states serving 23 markets, for $591,674 in cash plus working capital of $19,443 subject to certain adjustments and direct acquisition costs of approximately $10,000. Martin's historical condensed combined statements of operations for the year ended December 31, 1997 and the nine months ended September 30, 1998 and pro forma adjustments related to the significant transactions completed by Martin prior to the Martin Acquisition (the "Completed Martin Transactions") are summarized below. The pro forma adjustments for the Martin Acquisition do not reflect certain acquisitions of assets by Martin with an aggregate purchase price of approximately $17,000 which, in the opinion of the Company's management is not material to such pro forma presentations either individually or in the aggregate. P-16 176
LAS VEGAS NEWMAN MARTIN KUNZ CONNELL OUTDOOR OUTDOOR POA ACQUISITION ACQUISITION ACQUISITION ACQUISITION ACQUISITION ACQUISITION HISTORICAL HISTORICAL HISTORICAL HISTORICAL HISTORICAL HISTORICAL YEAR ENDED DECEMBER 31, 1997 1/1-12/31 1/1-7/31(i) 1/1-12/23(ii) 1/1-12/31(iii) 1/1-12/31(iv) 1/1-12/31(v) ---------------------------- ----------- ------------ ------------- -------------- ------------- ------------ Gross revenues.................... $70,044 $5,569 $3,459 $1,840 $2,400 $1,570 Less: agency commissions.......... (7,894) -- (413) (181) (180) (315) ------- ------ ------ ------ ------ ------ Net revenues...................... 62,150 5,569 3,046 1,659 2,220 1,255 Operating expenses excluding depreciation and amortization... 31,196 2,318 1,553 1,353 1,628 788 Depreciation and amortization..... 12,084 281 518 30 279 -- Corporate general and administrative.................. 2,334 80 91 -- -- -- ------- ------ ------ ------ ------ ------ Operating income (loss)........... 16,536 2,890 884 276 313 467 Interest expense.................. 10,507 -- -- -- 243 -- Interest income................... (293) -- -- -- -- -- Other expense..................... 1,737 -- -- -- 30 -- ------- ------ ------ ------ ------ ------ Net income (loss)................. $ 4,585 $2,890 $ 884 $ 276 $ 40 $ 467 ======= ====== ====== ====== ====== ====== Broadcast cash flow............. $30,954 $3,251 $1,493 $ 306 $ 592 $ 467 ======= ====== ====== ====== ====== ====== PRO FORMA ADJUSTMENTS MARTIN AS FOR THE ADJUSTED COMPLETED FOR COMPLETED MARTIN MARTIN YEAR ENDED DECEMBER 31, 1997 TRANSACTIONS TRANSACTIONS ---------------------------- ------------- ------------- Gross revenues.................... $ -- $84,882 Less: agency commissions.......... -- (8,983) --------- ------- Net revenues...................... -- 75,899 Operating expenses excluding depreciation and amortization... -- 38,836 Depreciation and amortization..... 12,134(vi) 25,326 Corporate general and administrative.................. (1,425)(vii) 1,080 --------- ------- Operating income (loss)........... (10,709) 10,657 Interest expense.................. 6,263(viii) 17,013 Interest income................... -- (293) Other expense..................... -- 1,767 --------- ------- Net income (loss)................. $ (16,972) $(7,830) ========= ======= Broadcast cash flow............. $ -- $37,063 ========= =======
P-17 177
PRO FORMA MARTIN AS ADJUSTMENTS ADJUSTED MARTIN POA FOR THE FOR ACQUISITION ACQUISITION COMPLETED COMPLETED HISTORICAL HISTORICAL MARTIN MARTIN NINE MONTHS ENDED SEPTEMBER 30, 1998 1/1-7/31 1/1-7/9(v) TRANSACTIONS TRANSACTIONS ------------------------------------ ----------- ----------- ------------ ------------ Gross revenues................................ $53,285 $ 901 $ -- $54,186 Less: agency commissions...................... (5,612) (156) -- (5,768) ------- ----- ------- ------- Net revenues.................................. 47,673 745 -- 48,418 Operating expenses excluding depreciation and amortization................................ 22,671 500 -- 23,171 Depreciation and amortization................. 14,694 88 301(vi) 15,083 Corporate general and administrative.......... 3,030 -- (1,995)(vii) 1,035 ------- ----- ------- ------- Operating income.............................. 7,278 157 1,694 9,129 Interest expense.............................. 10,781 1 275(viii) 11,057 Interest income............................... (261) -- -- (261) Other expense................................. 5,448 13 -- 5,461 ------- ----- ------- ------- Net income(loss).............................. $(8,690) $ 143 $ 1,419 $(7,128) ======= ===== ======= ======= Broadcast cash flow........................... $25,002 $ 245 $ -- $25,247 ======= ===== ======= =======
- --------------- (i) On July 31, 1997, Martin acquired approximately 500 display faces of the Kunz Outdoor Advertising division from Kunz & Company, an outdoor advertising company with approximately 1,500 billboards and outdoor displays in five markets, for $20,500 in cash plus various other direct acquisition costs (the "Kunz Acquisition"). (ii) On December 23, 1997, Martin acquired Connell Outdoor Advertising Co., an outdoor advertising company with 88 billboards and outdoor displays in the Las Vegas market, for $30,000 in cash plus various other direct acquisition costs (the "Connell Acquisition"). (iii)On January 2, 1998, Martin acquired Las Vegas Outdoor Advertising, Inc., an outdoor advertising company with 90 billboards and outdoor displays in the Las Vegas market, for $16,800 in cash plus various other direct acquisition costs (the "Las Vegas Outdoor Acquisition"). (iv) On January 2, 1998, Martin acquired Newman Outdoor of Texas, Inc., an outdoor advertising company with over 1,200 billboards and outdoor displays in three markets, for $12,500 in cash plus various other direct acquisition costs (the "Newman Acquisition"). (v) On July 9, 1998, Martin acquired POA, an outdoor advertising company with over 1,240 billboards and outdoor displays in the Pittsburgh market, for $5,867 in cash plus various other direct acquisition costs (the "POA Acquisition"). (vi) Reflects incremental amortization related to the Completed Martin Transactions and is based on the following allocation to intangible assets:
INCREMENTAL HISTORICAL ADJUSTMENT AMORTIZATION INTANGIBLE AMORTIZATION AMORTIZATION FOR NET YEAR ENDED DECEMBER 31, 1997 PERIOD ASSETS, NET EXPENSE(1) EXPENSE INCREASE - ---------------------------- ------------ ----------- ------------ ------------ ---------- Kunz Acquisition................. 1/1-7/31 $17,260 $ 2,014 $ 42 $ 1,972 Connell Acquisition.............. 1/1-12/23 25,650 5,030 373 4,657 Las Vegas Outdoor Acquisition.... 1/1-12/31 14,408 2,882 -- 2,882 Newman Acquisition............... 1/1-12/31 10,249 2,050 -- 2,050 POA Acquisition.................. 1/1-12/31 2,867 573 -- 573 ------- ------- ---- ------- Total.................. $70,434 $12,549 $415 $12,134 ======= ======= ==== =======
P-18 178
INCREMENTAL HISTORICAL ADJUSTMENT AMORTIZATION INTANGIBLE AMORTIZATION AMORTIZATION FOR NET NINE MONTHS ENDED SEPTEMBER 30, 1998 PERIOD ASSETS, NET EXPENSE(1) EXPENSE INCREASE - ------------------------------------ ------------ ----------- ------------ ------------ ---------- POA Acquisition.................... 1/1-7/9 $ 2,867 $301 $ -- $301 ======= ==== ==== ====
- --------------- (1) Intangible assets were amortized on a straight-line basis over an estimated average 5 year life by Martin. Historical depreciation expense of the Completed Martin Transactions is assumed to approximate depreciation expense on a pro forma basis. Actual depreciation and amortization may differ based upon final purchase price allocations. (vii)On July 31, 1997, Martin paid $6,000 to Kunz & Company for an option to purchase approximately 1,000 display faces from its Kunz Outdoor Advertising division for $33,289 in cash plus various other direct acquisition costs. Martin began operating these 1,000 display faces under a management agreement effective July 31, 1997. Pursuant to the management agreement, Martin paid a management fee of $285 per month to Kunz & Company. Reflects the elimination of management fees paid by Martin to Kunz & Company of $1,425 for the year ended December 31, 1997 and $1,995 for the period January 1, 1998 through July 31, 1998. (viii) Reflects the adjustment to interest expense in connection with the consummation of the Completed Martin Transactions:
NINE MONTHS YEAR ENDED ENDED DECEMBER 31, SEPTEMBER 30, 1997 1998 ------------- ------------- Additional bank borrowings related to: Completed Martin Acquisitions........................... $85,667 $35,167 ------- ------- Interest expense on additional bank borrowings at 8.5%.... $ 6,506 $ 276 Less: historical interest expense of the companies acquired in the Completed Martin Transactions........... (243) (1) ------- ------- Net increase in interest expense.......................... $ 6,263 $ 275 ======= =======
(m) On October 23, 1998, the Company acquired Primedia Broadcast Group, Inc. ("Primedia") and certain of its affiliates, which own and operate eight FM stations in Puerto Rico, for approximately $76,050 in cash less working capital deficit of $1,280 plus various other direct acquisition costs (the "Primedia Acquisition"). (n) On December 1, 1998, the Company acquired the assets of the Outdoor Advertising division of Whiteco Industries, Inc., an outdoor advertising company with over 22,000 billboards and outdoor displays in 34 states, for $930,000 in cash plus working capital of $24,221 subject to certain adjustments and various other direct acquisition costs of approximately $20,000. (o) On May 15, 1997, the Company sold, in the EZ Sale, WNKS-FM in Charlotte for $10,000 in cash. (p) On May 30, 1997, the Company acquired, in the Century Acquisition, WPNT-FM in Chicago for $75,750 in cash (including $2,000 for the purchase of the station's accounts receivable) of which $5,500 was paid as escrow funds in July 1996. On June 19, 1997, the Company sold, in the Bonneville/WPNT Disposition, WPNT-FM in Chicago for $75,000 in cash and recognized a gain of $500. (q) On June 3, 1997, the Company sold, in the Crawford Disposition, WEJM-FM in Chicago for $14,750 in cash. On August 26, 1997, the Company sold, in the Douglas Chicago Disposition, WEJM-AM in Chicago for $7,500 in cash. (r) On July 7, 1997, the Company sold, in the ABC/Washington Disposition, WJZW-FM in Washington for $68,000 in cash. The assets of WJZW-FM were classified as assets held for sale in connection with the purchase price allocation of the Evergreen Viacom Acquisition (see 4(c)). Accordingly, P-19 179 WJZW-FM net income for the period July 2, 1997 to July 7, 1997 has been excluded from the Company's historical condensed statement of operations. (s) On July 7, 1997, the Company sold, in the San Francisco Frequency Disposition, the San Francisco 107.7 MHz FM dial position and transmission facility and the call letters from CRBC's KSAN-FM in San Francisco for $44,000 in cash. (t) On January 31, 1997, the Company acquired, in the KKSF/KDFC Acquisition, KKSF-FM and KDFC-FM/AM in San Francisco for $115,000 in cash. The Company had previously been operating KKSF-FM and KDFC-FM/AM under a time brokerage agreement since November 1, 1996. On July 21, 1997, the Company sold, in the Bonneville/KDFC Disposition, KDFC-FM in San Francisco for $50,000 in cash. The assets of KDFC-FM were classified as assets held for sale in connection with the purchase price allocation of the acquisition of KKSF-FM/KDFC-FM/AM. Accordingly, KDFC-FM net income of approximately $791 for the period February 1, 1997 through July 21, 1997 has been excluded from the Company's historical condensed statement of operations. Therefore, the KDFC-FM condensed statement of operations includes the results of operations for January 1, 1997 through January 31, 1997 (the time brokerage agreement holding period in 1997) for the year ended December 31, 1997. (u) On August 13, 1997, the Company sold, in the Douglas AM Dispositions, WBZS-AM and WZHF-AM in Washington (acquired as part of the Evergreen Viacom Acquisition -- see 4(c)) and KDFC-AM in San Francisco for $18,000 in the form of a promissory note. The assets of WBZS-AM and WZHF-AM were classified as assets held for sale in connection with the purchase price allocation of the Evergreen Viacom Acquisition (see 4(c)). Accordingly, WBZS-AM and WZHF-AM net income for the period July 2, 1997 to August 13, 1997 has been excluded from the Company's historical condensed statement of operations. (v) On April 13, 1998, the Company and Secret entered into a settlement agreement regarding WFLN-FM in Philadelphia. Previously in August 1996, the Company and Secret had entered into an agreement under which the Company would acquire WFLN-FM from Secret for $37,750 in cash. In April 1997, the Company entered into an agreement to sell WFLN-FM to Greater Media for $41,800 in cash. On July 16, 1997, Secret purported to terminate the sale of WFLN-FM to the Company. The Company subsequently brought suit against Secret to enforce its rights to acquire WFLN-FM. Pursuant to a court settlement entered in August 1997 and the settlement agreement between the Company and Secret entered on April 13, 1998, (i) Secret sold WFLN-FM directly to Greater Media for $37,750, (ii) Greater Media deposited $4,050 (the difference between the Company's proposed acquisition price for WFLN-FM from Secret and the Company's proposed sale price for WFLN-FM to Greater Media) with the court and (iii) the Company received $3,500 of such amount deposited by Greater Media with the court, plus interest earned during the period which the court held such amounts (the "WFLN Settlement"), and Secret received the balance of such amounts. (w) CRBC began operating WBAB-FM, WBLI-FM, WGBB-AM and WHFM-FM in Long Island under a time brokerage agreement effective July 1, 1996 (see 4(d)(iv)(3)). On May 29, 1998, as part of the Capstar/SFX Transaction, the Company's time brokerage agreements regarding the Long Island properties were terminated. The results of operations of WBAB-FM, WBLI-FM, WGBB-AM and WHFM-FM in Long Island are included in CRBC's historical condensed statement of operations for January 1, 1997 through September 5, 1997 and in the Company's historical condensed statement of operations for September 6, 1997 through December 31, 1997. Additionally, the Company's historical condensed statement of operations for the nine months ended September 30, 1998 includes the results of operations of WBAB-FM, WBLI-FM, WGBB-AM and WHFM-FM in Long Island for January 1, 1998 through May 29, 1998. (5) Reflects the elimination of intercompany transactions between the Company and Katz for the year ended December 31, 1997. P-20 180 (6) Reflects the elimination of time brokerage agreement fees received by the Company as follows:
YEAR ENDED DECEMBER 31, 1997 MARKET PERIOD REVENUE - ---------------------------- ------ ------ ------- KZLA-FM...................................... Los Angeles 10/1-12/31 $(567) WTOP-AM...................................... Washington, D.C. 10/1-12/31 (276) ----- $(843) =====
(7) Reflects incremental amortization related to the Completed Transactions and is based on the following allocation to intangible assets:
INCREMENTAL HISTORICAL ADJUSTMENT AMORTIZATION INTANGIBLE AMORTIZATION AMORTIZATION FOR NET YEAR ENDED DECEMBER 31, 1997 PERIOD(I) ASSETS, NET EXPENSE(I) EXPENSE INCREASE ---------------------------- ------------ ----------- ------------ ------------ ---------- WWWW-FM/WDFN-AM.................. 1/1-1/31 $ 26,590 $ 148 $ -- $ 148 KKSF-FM(ii)...................... 1/1-1/31 58,698 326 -- 326 WJLB-FM/WMXD-FM.................. 1/1-3/31 165,559 2,759 -- 2,759 WWRC-AM.......................... 1/1-4/2 16,808 286 -- 286 WDAS-FM/AM....................... 1/1-4/30 98,185 2,182 820 1,362 Evergreen Viacom Acquisition(iii)............... 1/1-7/2 515,654 17,379 793 16,586 Chancellor Merger(iv)............ 1/1-9/5 2,178,137 98,823 23,638 75,185 Chicago/Dallas Exchange.......... 1/1-10/7 (613) (31) -- (31) Katz Acquisition(v).............. 1/1-10/28 354,058 10,267 7,616 2,651 Gannett Acquisition.............. 1/1-12/29 334,892 22,264 1,228 21,036 Denver Acquisition............... 1/1-12/31 24,589 1,639 268 1,371 Bonneville Option................ 1/1-12/31 62,504 4,167 -- 4,167 KODA-FM.......................... 1/1-12/31 93,294 6,220 1,441 4,779 WWDC-FM/AM....................... 1/1-12/31 64,338 4,289 -- 4,289 Martin Acquisition(vi)........... 1/1-12/31 564,370 30,577 12,650 17,927 Primedia Acquisition............. 1/1-12/31 70,447 4,696 2,248 2,448 Kunz Option(vi).................. 1/1-12/31 29,467 1,665 -- 1,665 Whiteco Acquisition(vi).......... 1/1-12/31 873,317 49,342 6,114 43,228 ---------- -------- ------- -------- Total................... $5,530,294 $256,998 $56,816 $200,182 ========== ======== ======= ========
INCREMENTAL HISTORICAL ADJUSTMENT AMORTIZATION INTANGIBLE AMORTIZATION AMORTIZATION FOR NET NINE MONTHS ENDED SEPTEMBER 30, 1998 PERIOD(I) ASSETS, NET EXPENSE(I) EXPENSE INCREASE - ------------------------------------ ------------ ----------- ------------ ------------ ---------- Denver Acquisition................ 1/1-1/30 $ 24,589 $ 137 $ -- $ 137 Bonneville Option................. 1/1-4/3 62,504 1,076 -- 1,076 KODA-FM........................... 1/1-5/29 93,294 2,574 656 1,918 WWDC-FM/AM........................ 1/1-6/1 64,338 1,799 -- 1,799 Martin Acquisition(vi)............ 1/1-7/31 564,370 17,836 4,904 12,932 Primedia Acquisition.............. 1/1-9/30 70,447 3,522 1,620 1,902 Kunz Option(vi)................... 1/1-9/30 29,467 1,249 -- 1,249 Whiteco Acquisition(vi)........... 1/1-9/30 873,317 37,007 4,666 32,341 ---------- ------- ------- ------- Total.................... $1,782,326 $65,200 $11,846 $53,354 ========== ======= ======= =======
(i) Intangible assets are amortized on a straight-line basis over an estimated average 15 year life (except for the Katz Acquisition, the Martin Acquisition, the Kunz Option and the Whiteco Acquisition -- see (v) and (vi) below). The incremental amortization period represents the period of the year that the station was not owned by the Company. (ii) Intangible assets for KKSF-FM excludes (1) $50,000 of the purchase price allocated to KDFC-FM which has been classified as assets held for sale, (2) $1,500 to be reimbursed by the buyers of KDFC-FM for costs incurred in connection with relocating KKSF and (3) $4,802 of the purchase price allocated to KDFC-AM which was sold, in the Douglas AM Dispositions, on August 13, 1997. (iii)Intangible assets for the Evergreen Viacom Acquisition of $515,654 excludes (1) $67,231 of the purchase price allocated to WJZW-FM which was sold in the ABC/Washington Disposition on July 7, P-21 181 1997 and (2) $12,148 of the purchase price allocated to WZHF-AM and WBZS-AM which were sold in the Douglas AM Dispositions on August 13, 1997. (iv) Intangible assets for the Chancellor Merger of $2,178,137 includes $293,548 resulting from the recognition of deferred tax liabilities. (v) Intangible assets for the Katz Acquisition of $354,058 consist of goodwill of $249,058 and representation contract value of $105,000 with estimated average lives of 40 years and 17 years, respectively. (vi) Intangible assets for the Martin Acquisition, the Kunz Option and the Whiteco Acquisition of $564,370, $29,467 and $873,317, respectively, consist of goodwill, customer contact value and non-compete agreements with estimated average lives of 40 years, 5 years and 5 years, respectively. Historical depreciation expense of the Completed Transactions is assumed to approximate depreciation expense on a pro forma basis. Actual depreciation and amortization may differ based upon final purchase price allocations. (8) Reflects the elimination of management fees paid by the Company to Kunz & Company of $570 for the period August 1, 1998 through September 30, 1998 in connection with the Kunz Option. (9) Reflects the elimination of duplicate corporate expenses of $1,842 for the year ended December 31, 1997 related to the Completed Transactions. (10) Reflects the elimination of merger expenses of $6,124 for the year ended December 31, 1997 incurred by CRBC in connection with the Chancellor Merger. (11) Reflects the elimination of the profit participation fee paid by Whiteco to Metro Management Associates of $2,322 and $1,756 for the year ended December 31, 1997 and the nine months ended September 30, 1998, respectively. (12) Reflects the adjustment to interest expense in connection with the consummation of the Completed Transactions, the amendment and restatement of the Company's senior credit agreement on April 25, 1997 (the "Senior Credit Facility"), Chancellor Media's $3.00 Convertible Preferred Stock Offering completed on June 16, 1997, the offering by the Company of the 8 1/8% Notes on December 22, 1997, Chancellor Media's 1998 Equity Offering completed on March 13, 1998, the repurchase of the Company's 12% Exchange Debentures on June 10, 1998, the repurchase of the Company's 12 1/4% Exchange Debentures on August 19, 1998, the Company's offering of the 9% Notes on September 30, 1998 and the Company's offering of the 8% Senior Notes on November 17, 1998:
NINE MONTHS YEAR ENDED ENDED DECEMBER 31, SEPTEMBER 30, 1997 1998 ------------ ------------- Additional bank borrowings related to: Completed Acquisitions................................. $3,494,948 $1,967,889 Completed Dispositions................................. (349,250) -- Chancellor Merger(a)................................... 164,000 -- Katz Acquisition(b).................................... 157,101 -- New Loan Fees.......................................... 10,473 -- ---------- ---------- Total additional bank borrowings......................... $3,477,272 $1,967,889 ========== ========== Interest expense at 7.0%................................. $ 197,936 $ 89,122 Less: historical interest expense related to completed station acquisitions and dispositions.................. (20,251) (12,896) ---------- ---------- Net increase in interest expense......................... 177,685 76,226
P-22 182
NINE MONTHS YEAR ENDED ENDED DECEMBER 31, SEPTEMBER 30, 1997 1998 ------------ ------------- Reduction in interest expense on bank debt related to the application of net proceeds of the following at 7.0%: $3.00 Convertible Preferred Stock Offering proceeds contributed to the Company of $287,808 for the period January 1, 1997 to June 16, 1997............. (9,290) -- 8 1/8% Notes proceeds of $485,000 for the period January 1, 1997 to December 22, 1997 to December 22, 1997................................................ (33,196) -- Chancellor Media's 1998 Equity Offering proceeds contributed to the Company and used to reduce bank borrowings by $673,000 for the year ended December 31, 1997............................................ (47,110) (9,553) 9% Notes proceeds of $730,000 for the year ended December 31, 1997 and the nine months ended September 30, 1998.................................. (51,100) (38,325) 8% Notes proceeds of $730,000 for the year ended December 31, 1997 and the nine months ended September 30, 1998.................................. (51,100) (38,325) Interest expense on the Company's $500,000 8 1/8% Notes issued December 22, 1997............................... 39,722 -- Interest expense on borrowings to finance the repurchase of the Company's 12% Exchange Debentures on June 10, 1998................................................... 18,200 8,089 Interest expense on borrowings to finance the repurchase of the Company's 12 1/4% Exchange Debentures on August 19, 1998............................................... 9,949 6,329 Interest expense on the Company's $750,000 9% Notes issued September 30, 1998.............................. 67,500 50,625 Interest expense on the Company's $750,000 8% Senior Notes issued November 17, 1998......................... 60,000 45,000 Reduction in interest expense related to the application of the 7.0% interest rate to the Company's bank debt prior to the refinancing of the Senior Credit Facility, to CRBC's bank debt prior to consummation of the Chancellor Merger and to KMG's bank debt prior to consummation of the Katz Acquisition................... (24,387) (11,692) ---------- ---------- Total adjustment for net decrease in interest expense.... $ 156,873 $ 88,374 ========== ==========
- --------------- (a) The Company incurred additional bank borrowings of $133,000 to distribute to CMHC to retire outstanding borrowings under the Chancellor Broadcasting/Viacom Interim Financing and $31,000 to finance estimated acquisition costs related to the Chancellor Merger. (b) The Company incurred additional bank borrowings of $149,601 to finance the payment of $11.00 in cash for each outstanding share of Katz Common Stock and $7,500 to finance estimated acquisition costs related to the Katz Acquisition. (13) On October 9, 1998, the Company acquired approximately a 22.4% non-voting equity interest in Z Spanish Media Corporation ("Z Spanish Media") for $25,000 in cash (the "Z Spanish Acquisition"). Z Spanish Media, which is headquartered in Sacramento, California, is the owner and operator of 22 Hispanic format radio stations in California, Texas, Arizona and Illinois. The Z Spanish Acquisition is accounted for on the equity method. Accordingly, approximately 22.4% of the net loss of Z Spanish of $3,952 and $1,911 for the year ended December 31, 1997 and for the nine months ended September 30, 1998, respectively, is recorded as Other Expense. P-23 183 (14) Reflects the income tax benefit related to pro forma adjustments. The adjustment to income taxes reflects the application of the estimated effective tax rate on a pro forma basis to income (loss) before income taxes for historical and pro forma adjustment amounts. (15) Reflects the elimination of preferred stock dividends and accretion on the 12% Preferred Stock and the 12 1/4% Preferred Stock of $40,222 and $16,702 for the year ended December 31, 1997 and the nine months ended September 30, 1998, respectively, in connection with the exchange of the 12% Preferred Stock and 12 1/4% Preferred Stock into 12% Debentures and 12 1/4% Debentures, respectively, and the subsequent repurchase of all the 12% Debentures and 12 1/4% Debentures. ADJUSTMENTS TO UNAUDITED CONDENSED COMBINED STATEMENTS OF OPERATIONS RELATED TO THE PENDING TRANSACTIONS (16) The detail of the historical financial data of the companies to be acquired in the Pending Transactions for the year ended December 31, 1997 and the nine months ended September 30, 1998 has been obtained from the historical financial statements of the respective companies and is summarized below:
ACQUISITIONS DISPOSITIONS ------------------------------------------------ -------------- CAPSTAR/SFX CLEVELAND PHOENIX CHICAGO TRANSACTION ACQUISITIONS ACQUISITION DISPOSITION PENDING HISTORICAL HISTORICAL HISTORICAL HISTORICAL TRANSACTIONS YEAR ENDED DECEMBER 31, 1997 1/1 - 12/31(a) 1/1 - 12/31(b) 1/1 - 12/31(c) 1/1 - 12/31(d) HISTORICAL ---------------------------- -------------- -------------- -------------- -------------- ------------ Gross revenues................................. $60,701 $33,728 $13,796 $(15,231) $ 92,994 Less: agency commissions....................... (7,657) (4,102) (1,656) 1,990 (11,425) ------- ------- ------- -------- -------- Net revenues................................... 53,044 29,626 12,140 (13,241) 81,569 Operating expenses excluding depreciation and amortization................................. 37,857 16,433 7,132 (16,248) 45,174 Depreciation and amortization.................. 7,564 673 184 (592) 7,829 Corporate general and administrative........... -- 481 -- -- 481 ------- ------- ------- -------- -------- Operating income............................... 7,623 12,039 4,824 3,599 28,085 Interest expense............................... 10 714 -- -- 724 Interest income................................ -- (513) -- -- (513) Other (income) expense......................... -- (1,357) -- -- (1,357) ------- ------- ------- -------- -------- Income (loss) before income taxes.............. 7,613 13,195 4,824 3,599 29,231 Income tax expense............................. -- 75 1,750 -- 1,825 ------- ------- ------- -------- -------- Net income (loss).............................. $ 7,613 $13,120 $ 3,074 $ 3,599 $ 27,406 ======= ======= ======= ======== ======== Broadcast cash flow............................ $15,187 $13,193 $ 5,008 $ 3,007 $ 36,395 ======= ======= ======= ======== ========
P-24 184
ACQUISITIONS DISPOSITIONS --------------------------------------------- ------------- CAPSTAR/SFX CLEVELAND PHOENIX CHICAGO TRANSACTION ACQUISITIONS ACQUISITION DISPOSITION PENDING HISTORICAL HISTORICAL HISTORICAL HISTORICAL TRANSACTIONS NINE MONTHS ENDED SEPTEMBER 30, 1998 1/1 - 5/29(a) 1/1 - 9/30(b) 1/1 - 9/30(c) 1/1 - 8/20(d) HISTORICAL ------------------------------------ ------------- ------------- ------------- ------------- ------------ Gross revenues..................................... $23,382 $27,008 $10,310 $(10,931) $49,769 Less: agency commissions........................... (2,866) (3,539) (1,117) 1,221 (6,301) ------- ------- ------- -------- ------- Net revenues....................................... 20,516 23,469 9,193 (9,710) 43,468 Operating expenses excluding depreciation and amortization..................................... 14,269 12,696 5,243 (13,026) 19,182 Depreciation and amortization...................... 3,101 174 146 (367) 3,054 ------- ------- ------- -------- ------- Operating income (loss)............................ 3,146 10,599 3,804 3,683 21,232 Interest expense................................... 4 156 275 -- 435 Interest income.................................... 1 (46) -- -- (45) Other (income) expense............................. -- 873 -- -- 873 ------- ------- ------- -------- ------- Income (loss) before income taxes.................. 3,141 9,616 3,529 3,683 19,969 Income tax expense................................. -- -- 1,271 -- 1,271 ------- ------- ------- -------- ------- Net income (loss).................................. $ 3,141 $ 9,616 $ 2,258 $ 3,683 $18,698 ======= ======= ======= ======== ======= Broadcast cash flow................................ $ 6,247 $10,773 $ 3,950 $ 3,316 $24,286 ======= ======= ======= ======== =======
- --------------- (a) On February 20, 1998, the Company entered into an agreement to acquire from Capstar KTXQ-FM and KBFB-FM in Dallas/Ft. Worth, KODA-FM, KKRW-FM and KQUE-FM in Houston, KPLN-FM and KYXY-FM in San Diego and WDRV-FM, WJJJ-FM, WXDX-FM and WDVE-FM in Pittsburgh (collectively, the "Capstar/SFX Stations") for an aggregate purchase price of approximately $637,500 in a series of purchases and exchanges over a period of three years (the "Capstar/SFX Transaction"). The Capstar/SFX Stations were acquired by Capstar as part of Capstar's acquisition of SFX on May 29, 1998. On May 29, 1998, the Company completed the Houston Exchange (defined above) and began operating the remaining ten Capstar/SFX Stations under time brokerage agreements. The Company also provided a loan to Capstar in the principal amount of $150,000 (the "Capstar Loan") as part of the Capstar/SFX Transaction. A portion of the Capstar Loan will be prepaid in connection with the Company's acquisition of, and the proceeds of such prepayment would be used by the Company as a portion of the purchase price for, each Capstar/SFX Station. The Company is currently assessing whether the terms of the Capstar/SFX Transaction will be modified upon the consummation of the Capstar Merger by Chancellor Media. The purchase price for the remaining ten Capstar/SFX Stations will be approximately $494,250. (b) On August 11, 1998, the Company entered into an agreement to acquire four FM and two AM radio stations in Cleveland for an aggregate purchase price of approximately $275,000 in cash plus working capital of $10,877 plus various other direct acquisition costs (the "Cleveland Acquisitions"). The Cleveland Acquisitions consist of the purchase by the Company of (i) WDOK-FM and WRMR-AM from Independent Group Limited Partnership, (ii) WZAK-FM from Zapis Communications, (iii) Zebra Broadcasting Corporation which owns WZJM-FM and WJMO-AM and (iv) Wincom Broadcasting Corporation which owns WQAL-FM (the "Wincom Acquisition"). The consummation of each of the Cleveland Acquisitions (other than the Wincom Acquisition) is contingent upon the consummation of each of the other Cleveland Acquisitions (other than the Wincom Acquisition). The Company began operating WQAL-FM under a time brokerage agreement effective October 1, 1998. (c) On September 15, 1998, the Company entered into an agreement to acquire KKFR-FM and KFYI-AM in Phoenix from The Broadcast Group, Inc. for $90,000 in cash plus various other direct acquisition costs (the "Phoenix Acquisition"). The Company began operating KKFR-FM and KFYI-AM under a time brokerage agreement effective November 5, 1998. (d) On August 20, 1998, the Company entered into an agreement to sell WMVP-AM in Chicago to ABC, Inc. for $21,000 in cash (the "Chicago Disposition"). The Company entered into a time P-25 185 brokerage agreement to sell substantially all of the broadcast time of WMVP-AM effective September 10, 1998. (17) Reflects incremental amortization related to the assets acquired in the Pending Transactions and is based on the allocation of the total consideration as follows:
INCREMENTAL INTANGIBLE HISTORICAL ADJUSTMENT AMORTIZATION ASSETS, AMORTIZATION AMORTIZATION FOR NET YEAR ENDED DECEMBER 31, 1997 PERIOD(i) NET EXPENSE(i) EXPENSE INCREASE - ---------------------------- ------------ ---------- ------------ ------------ ---------- Capstar/SFX Transaction................. 1/1-12/31 $483,835 $32,256 $5,874 $26,382 Cleveland Acquisitions.................. 1/1-12/31 309,547 20,636 292 20,344 Chicago Disposition..................... 1/1-12/31 (2,844) (190) (339) 149 Phoenix Acquisition..................... 1/1-12/31 88,212 5,881 103 5,778 -------- ------- ------ ------- Total........................... $878,750 $58,583 $5,930 $52,653 ======== ======= ====== =======
INCREMENTAL INTANGIBLE HISTORICAL ADJUSTMENT AMORTIZATION ASSETS, AMORTIZATION AMORTIZATION FOR NET NINE MONTHS ENDED SEPTEMBER 30, 1998 PERIOD(i) NET EXPENSE(i) EXPENSE INCREASE - ------------------------------------ ------------ ---------- ------------ ------------ ---------- Capstar/SFX Transaction................ 1/1-9/30 $483,835 $24,192 $3,627 $20,565 Cleveland Acquisitions................. 1/1-9/30 309,547 15,477 19 15,458 Chicago Disposition.................... 1/1-9/30 (2,844) (142) (189) 47 Phoenix Acquisition.................... 1/1-9/30 88,212 4,411 78 4,333 -------- ------- ------ ------- Total.......................... $878,750 $43,938 $3,535 $40,403 ======== ======= ====== =======
- --------------- (i)Intangible assets are amortized on a straight-line basis over an estimated average 15 year life. The incremental amortization period represents the period of the year that the company was not owned by the Company. Historical depreciation expense of the Pending Transactions is assumed to approximate depreciation expense on a pro forma basis. Actual depreciation and amortization may differ based upon final purchase price allocations. (18) Reflects the adjustment to interest expense in connection with the consummation of the Pending Transactions:
NINE MONTHS YEAR ENDED ENDED DECEMBER 31, SEPTEMBER 30, 1997 1998 ------------ ------------- Additional bank borrowings related to: Pending Acquisitions................................... $720,214 $720,214 Pending Dispositions................................... (21,000) (21,000) -------- -------- Total additional bank borrowings....................... $699,214 $699,214 ======== ======== Interest expense at 7.0%............................... $ 48,945 $ 36,708 Less: historical interest expense related to completed station acquisitions and dispositions.................. (724) (434) -------- -------- Total adjustment for net increase in interest expense.... $ 48,221 $ 36,274 ======== ========
(19) Reflects the income tax benefit related to pro forma adjustments. The adjustment to income taxes reflects the application of the estimated effective tax rate on a pro forma basis to income (loss) before income taxes for historical and pro forma adjustment amounts. P-26 186 INDEX TO FINANCIAL STATEMENTS
PAGE ----- CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES Report of Independent Accountants......................... F-3 Independent Auditors' Report.............................. F-4 Consolidated Balance Sheets as of December 31, 1996 and 1997................................................... F-5 Consolidated Statements of Operations for the years ended December 31, 1995, 1996 and 1997....................... F-6 Consolidated Statements of Stockholder's Equity for the years ended December 31, 1995, 1996 and 1997........... F-7 Consolidated Statements of Cash Flows for the years ended December 31, 1995, 1996 and 1997....................... F-8 Notes to Consolidated Financial Statements................ F-9 Report of Independent Accountants......................... F-31 Schedule II -- Valuation and Qualifying Accounts.......... F-32 CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES Unaudited Consolidated Balance Sheets as of December 31, 1997 and September 30, 1998............................ F-33 Unaudited Consolidated Statements of Operations for the three and nine months ended September 30, 1997 and 1998................................................... F-34 Unaudited Consolidated Statements of Cash Flows for the nine months ended September 30, 1997 and 1998.......... F-35 Notes to Unaudited Consolidated Financial Statements...... F-36 CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES Report of Independent Accountants......................... F-47 Consolidated Balance Sheets as of December 31, 1995 and 1996................................................... F-48 Consolidated Statements of Operations for the years ended December 31, 1994, 1995 and 1996....................... F-49 Consolidated Statements of Changes in Common Stockholder's Equity for the years ended December 31, 1994, 1995 and 1996................................................... F-50 Consolidated Statements of Cash Flows for the years ended December 31, 1994, 1995 and 1996....................... F-51 Notes to Consolidated Financial Statements................ F-52 Unaudited Consolidated Balance Sheets as of December 31, 1996 and June 30, 1997................................. F-68 Unaudited Consolidated Statements of Operations for the three and six months ended June 30, 1996 and 1997...... F-69 Unaudited Consolidated Statements of Changes in Stockholder's Equity for the six months ended June 30, 1997................................................... F-70 Unaudited Consolidated Statements of Cash Flows for the six months ended June 30, 1996 and 1997................ F-71 Notes to Unaudited Consolidated Financial Statements...... F-72 RIVERSIDE BROADCASTING CO., INC. AND WAXQ INC. Independent Auditors' Report.............................. F-78 Combined Balance Sheets as of December 31, 1995 and 1996 and June 30, 1997 (unaudited).......................... F-79 Combined Statements of Earnings for the years ended December 31, 1994, 1995 and 1996 and the six months ended June 30, 1996 and 1997 (unaudited)............... F-80 Combined Statements of Cash Flows for the years ended December 31, 1994, 1995 and 1996 and the six months ended June 30, 1996 and 1997 (unaudited)............... F-81 Notes to Combined Financial Statements.................... F-82 WMZQ INC. AND VIACOM BROADCASTING EAST INC.: Independent Auditors' Report.............................. F-87 Combined Balance Sheets as of December 31, 1995 and 1996 and June 30, 1997 (unaudited).......................... F-88
F-1 187
PAGE ----- Combined Statements of Earnings for the years ended December 31, 1994, 1995 and 1996 and the six months ended June 30, 1996 and 1997 (unaudited)............... F-89 Combined Statements of Cash Flows for the years ended December 31, 1994, 1995 and 1996 and the six months ended June 30, 1996 and 1997 (unaudited)............... F-90 Notes to Combined Financial Statements.................... F-91 WDAS-AM/FM (STATION OWNED AND OPERATED BY BEASLEY FM ACQUISITION CORP.): Independent Auditors' Report.............................. F-96 Balance Sheets as of December 31, 1996 and March 31, 1997 (unaudited)............................................ F-97 Statements of Earnings and Station Equity for the year ended December 31, 1996 and the three months ended March 31, 1996 and 1997 (unaudited).................... F-98 Statements of Cash Flows for the year ended December 31, 1996 and the three months ended March 31, 1996 and 1997 (unaudited)............................................ F-99 Notes to Financial Statements............................. F-100 KYSR INC. AND KIBB INC.: Independent Auditors' Report.............................. F-104 Combined Balance Sheets as of December 31, 1995 and 1996 and June 30, 1997 (unaudited).......................... F-105 Combined Statements of Operations for the years ended December 31, 1994, 1995 and 1996 and the six months ended June 30, 1996 and 1997 (unaudited)............... F-106 Combined Statements of Cash Flows for the years ended December 31, 1994, 1995 and 1996 and the six months ended June 30, 1996 and 1997 (unaudited)............... F-107 Notes to Combined Financial Statements.................... F-108 WLIT INC.: Independent Auditors' Report.............................. F-113 Balance Sheets as of December 31, 1995 and 1996 and June 30, 1997 (unaudited)................................... F-114 Statements of Earnings for the years ended December 31, 1994, 1995 and 1996 and the six months ended June 30, 1996 and 1997 (unaudited).............................. F-115 Statements of Cash Flows for the years ended December 31, 1994, 1995 and 1996 and the six months ended June 30, 1996 and 1997 (unaudited).............................. F-116 Notes to Financial Statements............................. F-117 COLFAX COMMUNICATIONS, INC. RADIO GROUP Report of Independent Public Accountants.................. F-122 Combined Balance Sheets as of December 31, 1996, 1995, and 1994................................................... F-123 Combined Statements of Income for the years ended December 31, 1996, 1995, and 1994............................... F-124 Combined Statements of Changes in Partners' Equity for the years ended December 31, 1996, 1995, and 1994.......... F-125 Combined Statements of Cash Flows for the years ended December 31, 1996, 1995, and 1994...................... F-126 Notes to Combined Financial Statements.................... F-127 OUTDOOR ADVERTISING DIVISION OF WHITECO INDUSTRIES, INC. Independent Auditors' Report.............................. F-133 Balance Sheets as of December 31, 1996 and 1997 and September 30, 1998 (unaudited)......................... F-134 Statements of Income for the years ended December 31, 1995, 1996, 1997 and the nine months ended September 30, 1997 and 1998 (unaudited).......................... F-135 Statements of Cash Flows for the years ended December 31, 1995, 1996, 1997 and the nine months ended September 30, 1997 and 1998 (unaudited).......................... F-136 Notes to Financial Statements............................. F-137
F-2 188 REPORT OF INDEPENDENT ACCOUNTANTS The Board of Directors Chancellor Media Corporation of Los Angeles: We have audited the accompanying consolidated balance sheet of Chancellor Media Corporation of Los Angeles and subsidiaries (collectively, the "Company") as of December 31, 1997, and the related consolidated statements of operations, stockholder's equity and cash flows for the year ended December 31, 1997. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 1997, and the consolidated results of its operations and its cash flows for the year ended December 31, 1997 in conformity with generally accepted accounting principles. COOPERS & LYBRAND L.L.P. Dallas, Texas February 10, 1998, except for notes 2(b) paragraphs 1 and 3-5 as to which the date is February 20, 1998 and 9(a) as to which the date is March 13, 1998 F-3 189 INDEPENDENT AUDITORS' REPORT The Board of Directors Chancellor Media Corporation of Los Angeles: We have audited the accompanying consolidated balance sheet of Chancellor Media Corporation of Los Angeles (formerly Evergreen Media Corporation of Los Angeles) and subsidiaries as of December 31, 1996, and the related consolidated statements of operations, stockholder's equity and cash flows for the years ended December 31, 1995 and 1996. In connection with our audits of the consolidated financial statements, we have also audited the financial statement schedule as of and for the years ended December 31, 1995 and 1996. These consolidated financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Chancellor Media Corporation of Los Angeles and subsidiaries as of December 31, 1996, and the results of their operations and their cash flows for the years ended December 31, 1995 and 1996 in conformity with generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. KPMG PEAT MARWICK LLP Dallas, Texas January 31, 1997 F-4 190 CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31, 1996 AND 1997 (DOLLARS IN THOUSANDS, EXCEPT FOR SHARE DATA) ASSETS
1996 1997 ---------- ---------- Current assets: Cash and cash equivalents................................. $ 3,060 $ 16,584 Accounts receivable, less allowance for doubtful accounts of $2,292 in 1996 and $12,651 in 1997.................. 85,159 239,869 Other current assets (note 3)............................. 6,352 27,208 ---------- ---------- Total current assets.............................. 94,571 283,661 Property and equipment, net (note 4)........................ 48,193 159,797 Intangible assets, net (note 5)............................. 853,643 4,404,443 Other assets, net (note 3).................................. 24,552 113,576 ---------- ---------- $1,020,959 $4,961,477 ========== ========== LIABILITIES AND STOCKHOLDER'S EQUITY Current liabilities: Accounts payable and accrued expenses (note 6)............ $ 26,650 $ 171,017 Current portion of long-term debt (note 7)................ 26,500 -- ---------- ---------- Total current liabilities......................... 53,150 171,017 Long-term debt, excluding current portion (note 7).......... 331,500 2,573,000 Deferred tax liabilities (note 11).......................... 86,098 361,640 Other liabilities........................................... 800 44,405 ---------- ---------- Total liabilities................................. 471,548 3,150,062 ---------- ---------- Redeemable preferred stock (note 8): Redeemable senior cumulative exchangeable preferred stock of subsidiary, par value $.01 per share; 1,000,000 shares authorized, issued and outstanding in 1997; liquidation preference of $121,274..................... -- 119,445 Redeemable cumulative exchangeable preferred stock of subsidiary, par value $.01 per share; 3,600,000 shares authorized and 2,117,629 shares issued and outstanding in 1997; liquidation preference of $223,519............ -- 211,763 Stockholder's equity (note 9): Common stock, $.01 par value. Authorized 1,040 shares; issued and outstanding 1,000 shares in 1996 and 1,040 shares in 1997......................................... 1 1 Paid-in capital........................................... 662,922 1,637,628 Accumulated deficit....................................... (113,512) (157,422) ---------- ---------- Total stockholder's equity........................ 549,411 1,480,207 ---------- ---------- Commitments and contingencies (notes 2, 7 and 12)........... $1,020,959 $4,961,477 ========== ==========
See accompanying notes to consolidated financial statements. F-5 191 CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997 (DOLLARS IN THOUSANDS)
1995 1996 1997 -------- -------- -------- Gross revenues.............................................. $186,365 $337,405 $663,804 Less agency commissions................................... 23,434 43,555 81,726 -------- -------- -------- Net revenues........................................... 162,931 293,850 582,078 -------- -------- -------- Operating expenses: Station operating expenses excluding depreciation and amortization........................................... 97,674 174,344 316,248 Depreciation and amortization............................. 47,005 93,749 185,982 Corporate general and administrative...................... 4,475 7,797 21,442 -------- -------- -------- Operating expenses..................................... 149,154 275,890 523,672 -------- -------- -------- Operating income....................................... 13,777 17,960 58,406 -------- -------- -------- Nonoperating (income) expenses: Interest expense.......................................... 19,199 37,527 85,017 Interest income........................................... (55) (477) (1,922) Gain on disposition of assets (note 2).................... -- -- (18,380) Other expense, net........................................ 291 -- 383 -------- -------- -------- Nonoperating expenses, net............................. (19,435) (37,050) (65,098) -------- -------- -------- Loss before income taxes and extraordinary item........ (5,658) (19,090) (6,692) Income tax expense (benefit) (note 11)...................... 192 (2,896) 7,802 -------- -------- -------- Loss before extraordinary item......................... (5,850) (16,194) (14,494) Extraordinary item -- loss on extinguishment of debt, net of income tax benefit (note 7)............................... -- -- 4,350 -------- -------- -------- Net loss............................................... (5,850) (16,194) (18,844) Preferred stock dividends (note 8).......................... -- -- 12,901 -------- -------- -------- Net loss attributable to common stock.................. $ (5,850) $(16,194) $(31,745) ======== ======== ========
See accompanying notes to consolidated financial statements. F-6 192 CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997 (DOLLARS IN THOUSANDS, EXCEPT FOR SHARE DATA)
COMMON STOCK TOTAL --------------- PAID-IN ACCUMULATED STOCKHOLDER'S AMOUNT SHARES CAPITAL DEFICIT EQUITY ------ ------ ---------- ----------- ------------- Balances at December 31, 1994................. $1 1,000 $ 195,170 $ (82,818) $ 112,353 Net capital contributed by Parent............. -- -- 202,904 -- 202,904 Dividend to Parent............................ -- -- -- (4,830) (4,830) Net loss...................................... -- -- -- (5,850) (5,850) -- ----- ---------- --------- ---------- Balances at December 31, 1995................. 1 1,000 398,074 (93,498) 304,577 Net capital contributed by Parent............. -- -- 264,848 -- 264,848 Dividend to Parent............................ -- -- -- (3,820) (3,820) Net loss...................................... -- -- -- (16,194) (16,194) -- ----- ---------- --------- ---------- Balances at December 31, 1996................. 1 1,000 662,922 (113,512) 549,411 Net capital contributed by Parent............. -- -- 974,706 -- 974,706 Dividend to Parent............................ -- -- -- (12,165) (12,165) Issuance of common stock in connection with the Katz Acquisition........................ -- 40 -- -- -- Net loss...................................... -- -- -- (31,745) (31,745) -- ----- ---------- --------- ---------- Balances at December 31, 1997................. $1 1,040 $1,637,628 $(157,422) $1,480,207 == ===== ========== ========= ==========
See accompanying notes to consolidated financial statements. F-7 193 CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997 (DOLLARS IN THOUSANDS)
1995 1996 1997 --------- --------- ----------- Cash flows from operating activities: Net loss.................................................. $ (5,850) $ (16,194) $ (18,844) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation........................................... 5,508 7,707 14,918 Amortization of goodwill, intangible assets and other assets............................................... 41,497 86,042 171,064 Provision for doubtful accounts........................ 904 2,179 5,174 Deferred income tax benefit............................ (479) (4,353) (3,829) Gain on disposition of assets.......................... -- -- (18,380) Loss on extinguishment of debt, net of income tax benefit.............................................. -- -- 4,350 Changes in certain assets and liabilities, net of effects of acquisitions: Accounts receivable.................................. (6,628) (28,146) (29,977) Other current assets................................. 724 (2,804) 733 Accounts payable and accrued expenses................ 3,711 3,991 20,004 Other assets......................................... (184) (354) (4,283) Other liabilities.................................... 490 (587) (1,416) --------- --------- ----------- Net cash provided by operating activities......... 39,693 47,481 139,514 --------- --------- ----------- Cash flows from investing activities: Acquisitions, net of cash acquired........................ (188,004) (457,764) (1,631,505) Escrow deposits on pending acquisitions................... -- (17,000) (4,655) Proceeds from sale of assets.............................. -- 32,000 269,250 Payments made on purchases of representation contracts.... -- -- (31,456) Payments received on sales of station representation contracts.............................................. -- -- 9,296 Capital expenditures...................................... (2,642) (6,543) (11,666) Other..................................................... (1,466) (12,631) (22,273) --------- --------- ----------- Net cash used by investing activities............. (192,112) (461,938) (1,423,009) --------- --------- ----------- Cash flows from financing activities: Proceeds from issuance of long-term debt.................. 186,000 447,750 2,945,250 Principal payments on long-term debt...................... (159,000) (290,750) (1,901,250) Cash contributed by parent................................ 132,766 264,938 293,158 Dividends to parent....................................... (4,830) (3,820) (14,572) Payments for debt issuance costs.......................... (303) (3,941) (25,567) Redemption of preferred stock............................. -- (90) -- --------- --------- ----------- Net cash provided by financing activities......... 154,633 414,087 1,297,019 --------- --------- ----------- Increase (decrease) in cash and cash equivalents............ 2,214 (370) 13,524 Cash and cash equivalents at beginning of year.............. 1,216 3,430 3,060 --------- --------- ----------- Cash and cash equivalents at end of year.................... $ 3,430 $ 3,060 $ 16,584 ========= ========= ===========
See accompanying notes to consolidated financial statements. F-8 194 CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT FOR SHARE DATA) (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) Description of Business Chancellor Media Corporation of Los Angeles (formerly known as Evergreen Media Corporation of Los Angeles) ("CMCLA"), a wholly-owned subsidiary of Chancellor Media Corporation ("Chancellor Media"), and its subsidiaries (collectively, the "Company") own and operate commercial radio stations in various geographical regions across the United States. The Company's station portfolio as of December 31, 1997 included 96 stations (68 FM and 28 AM) comprising a total of 11 station clusters of four or five FM stations ("superduopolies") in seven of the 12 largest radio markets -- Los Angeles, New York, Chicago, San Francisco, Philadelphia, Washington, D.C. and Detroit -- and in four other large markets -- Denver, Minneapolis/St. Paul, Phoenix and Orlando. The Company also owns Katz Media Group, Inc. ("KMG" and, together with its operating subsidiaries, "Katz"), a full-service media representation firm that sells national spot advertising time for its clients in the television, radio and cable industries. (b) Principles of Consolidation The consolidated financial statements include the accounts of CMCLA and its subsidiaries all of which are wholly owned. Significant intercompany balances and transactions have been eliminated in consolidation. (c) Property and Equipment Property and equipment are stated at cost. Depreciation of property and equipment is computed using the straight-line method over the estimated useful lives of the assets. Repair and maintenance costs are charged to expense when incurred. (d) Intangible Assets Intangible assets consist primarily of broadcast licenses, goodwill, representation contracts and other identifiable intangible assets. Intangible assets resulting from acquisitions are valued based upon estimated fair values. The Company amortizes such intangible assets using the straight-line method over estimated useful lives ranging from 1 to 40 years. The Company continually evaluates the propriety of the carrying amount of goodwill and other intangible assets as well as the amortization period to determine whether current events or circumstances warrant adjustments to the carrying value and/or revised estimates of useful lives. This evaluation consists of the projection of undiscounted operating income before depreciation, amortization, nonrecurring charges and interest over the remaining amortization periods of the related intangible assets. The projections are based on a historical trend line of actual results since the acquisitions of the respective stations adjusted for expected changes in operating results. To the extent such projections indicate that undiscounted operating income is not expected to be adequate to recover the carrying amounts of the related intangible assets, such carrying amounts are written down by charges to expense. At this time, the Company believes that no significant impairment of goodwill and other intangible assets has occurred and that no reduction of the estimated useful lives is warranted. (e) Debt Issuance Costs The costs related to the issuance of debt are capitalized and amortized to expense over the lives of the related debt. During the years ended December 31, 1995, 1996 and 1997, the Company recognized amortization of debt issuance costs of $631, $1,113 and $1,337, respectively, which amounts are included in amortization expense in the accompanying consolidated statements of operations. F-9 195 CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (f) Barter Transactions The Company trades commercial air time for goods and services used principally for promotional, sales and other business activities. An asset and liability is recorded at the fair market value of the goods or services received. Barter revenue is recorded and the liability relieved when commercials are broadcast and barter expense is recorded and the asset relieved when goods or services are received or used. Barter amounts are not significant to the Company's consolidated financial statements. (g) Income Taxes Deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each year end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable earnings. Valuation allowances are established when necessary to reduce deferred tax assets to the amount more likely than not to be realized. Income tax expense is the total of tax payable for the period and the change during the period in deferred tax assets and liabilities which impacted operations. (h) Revenue Recognition Revenue is derived primarily from the sale of radio advertising time to local and national advertisers and from commissions on sales of advertising time for radio and television stations and cable television systems under representation contracts by the Company's media representation firm, Katz. Revenue is recognized as advertisements are broadcast. Fees received or paid pursuant to various time brokerage agreements are recognized as gross revenues or amortized to expense, respectively, over the term of the agreement using the straight-line method. (i) Representation Contracts Representation contracts typically may be terminated by either party upon written notice one year after receipt of such notice. In accordance with industry practice, in lieu of termination, an arrangement is typically made for the purchase of such contracts by the successor representation firm. Under such arrangements, the purchase price paid by the successor representation firm is based upon the historic commission income projected over the remaining contract period, including the evergreen notice period, plus 2 months. Income resulting from the disposition of representation contracts is recognized as other revenue over the remaining life of the contracts sold. Other revenue on the disposition of representation contracts included in gross revenue in the accompanying consolidated statement of operations was $153 for the year ended December 31, 1997. Costs of obtaining representation contracts are deferred and amortized over the related period of benefit. Amortization of costs of obtaining representation contracts included in depreciation and amortization in the accompanying consolidated statement of operations was $380 for the year ended December 31, 1997. (j) Statements of Cash Flows For purposes of the statements of cash flows, the Company considers temporary cash investments purchased with original maturities of three months or less to be cash equivalents. The Company paid approximately $19,134, $37,042 and $84,610 for interest in 1995, 1996 and 1997, respectively. The Company paid approximately $733 and $11,079 for income taxes in 1996 and 1997, respectively. F-10 196 CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (k) Derivative Financial Instruments The Company has only limited involvement with derivative financial instruments and does not use them for trading purposes. They are used to manage well-defined interest rate risks related to interest on the Company's outstanding debt. As interest rates change under interest rate swap and cap agreements, the differential to be paid or received is recognized as an adjustment to interest expense. The Company is not exposed to credit loss as its interest rate swap agreements are with the participating banks under the Company's senior credit facility. (l) Omission of Per Share Information Net loss per share is not presented as such information is not meaningful. All of the issued and outstanding shares of the Company's common stock have been owned, directly or indirectly, by Chancellor Media during the three-year period ended December 31, 1997. (m) Disclosure of Certain Significant Risks and Uncertainties The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. In the opinion of management, credit risk with respect to trade receivables is limited due to the large number of diversified customers and the geographic diversification of the Company's customer base. The Company performs ongoing credit evaluations of its customers and believes that adequate allowances for any uncollectible trade receivables are maintained. At December 31, 1995, 1996 and 1997, no receivable from any customer exceeded 5% of stockholders' equity and no customer accounted for more than 10% of net revenues in 1995, 1996 or 1997. (n) Stock Option Plan The Company does not have any stock compensation plans under which it grants stock awards to employees. Chancellor Media grants stock options to the Company's officers and other key employees on behalf of the Company. Prior to January 1, 1996, Chancellor Media accounted for its stock option plans in accordance with the provisions of Accounting Principles Board ("APB") Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations. As such, compensation expense would be recorded on the date of grant only if the current market price of the underlying stock exceeded the exercise price. SFAS No. 123, Accounting for Stock-Based Compensation, permits entities to recognize as expense over the vesting period the fair value of all stock-based awards on the date of grant or continue to apply the provisions of APB Opinion No. 25 and provide pro forma net income and pro forma earnings per share disclosures for employee stock option grants made in 1995 and future years as if the fair-value-based method defined in SFAS No. 123 had been applied. Chancellor Media has elected to continue to apply the provisions of APB Opinion No. 25 and provide the pro forma disclosures of SFAS No. 123. (o) Recently Issued Accounting Principles The Company adopted the provisions of SFAS No. 129, Disclosures of Information about Capital Structure, effective for the year ended December 31, 1997. This Statement consolidates existing pronouncements on required disclosures about a company's capital structure including a brief discussion of rights and F-11 197 CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) privileges for securities outstanding. The adoption of this Statement had no material effect on the Company's consolidated financial statements. In June 1997, the Financial Accounting Standards Board issued SFAS No. 130, Reporting Comprehensive Income. This Statement requires that all items that are required to be recognized under accounting standards as components of comprehensive income be reported in a financial statement that is displayed with the same prominence as other financial statements. SFAS No. 130 is effective for financial statement periods beginning after December 15, 1997. Management does not anticipate that this Statement will have a significant effect on the Company's consolidated financial statements. In June 1997, the Financial Accounting Standards Board issued SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information. This Statement establishes standards for reporting information about operating segments in annual financial statements and requires reporting of selected information about operating segments in interim financial reports issued to stockholders. It also establishes standards for related disclosures about products and services, geographic areas and major customers. SFAS No. 131 is effective for fiscal years beginning after December 15, 1997. Management does not anticipate that this Statement will have a significant effect on the Company's consolidated financial statements. (p) Reclassifications Certain reclassifications have been made to prior years' consolidated financial statements to conform to the current year presentation. (2) ACQUISITIONS AND DISPOSITIONS (a) Completed Transactions In May 1995, the Company acquired Broadcasting Partners, Inc. ("BPI"), a publicly traded radio broadcasting company with seven FM and four AM radio stations, eight of which are in the nation's ten largest radio markets (the "BPI Acquisition"). The BPI Acquisition was effected through the merger of a wholly-owned subsidiary of the Company with and into BPI, with BPI surviving the merger as a wholly-owned subsidiary of the Company. The BPI Acquisition included the conversion of each outstanding share of BPI common stock into the right to receive $12.00 in cash and .69 shares of Chancellor Media's Common Stock, resulting in total cash payments of $94,813 and the issuance of 11,222,018 shares of Chancellor Media's Common Stock valued at $6.25 per share. In addition, the Company retired existing BPI debt of $81,926 and incurred various other direct acquisition costs. The total purchase price, including closing costs, allocated to net assets acquired was approximately $258,634. On January 17, 1996, the Company acquired Pyramid Communications, Inc. ("Pyramid"), a radio broadcasting company with nine FM and three AM radio stations in five radio markets (Chicago, Philadelphia, Boston, Charlotte and Buffalo) (the "Pyramid Acquisition"). The Pyramid Acquisition was effected through the merger of a wholly-owned subsidiary of the Company with and into Pyramid, with Pyramid surviving the merger as a wholly-owned subsidiary of the Company. The total purchase price, including closing costs, allocated to net assets acquired was approximately $316,343 in cash. On May 3, 1996, the Company acquired WKLB-FM in Boston from Fairbanks Communications for $34,000 in cash plus various other direct acquisition costs. On November 26, 1996, the Company exchanged WKLB-FM in Boston (now known as WROR-FM) for WGAY-FM in Washington, D.C. The exchange was accounted for as a like-kind exchange and no gain or loss was recognized upon consummation of the transaction. The Company had previously been operating WGAY-FM under a time brokerage agreement and selling substantially all of the broadcast time of WKLB-FM under a time brokerage agreement, in each case since June 17, 1996, pending completion of the exchange. F-12 198 CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) On July 19, 1996, the Company sold WHTT-FM and WHTT-AM in Buffalo to Mercury Radio for $19,500 in cash, and on August 1, 1996, the Company sold WSJZ-FM in Buffalo to American Radio Systems for $12,500 in cash (collectively, the "Buffalo Stations"). The assets of the Buffalo Stations were classified as assets held for sale in the Pyramid Acquisition and no gain or loss was recognized by the Company upon consummation of the sales. The combined net income of the Buffalo stations of approximately $733 has been excluded from the consolidated statement of operations for the year ended December 31, 1996. The excess of the proceeds over the carrying amounts at the dates of sale approximated $2,561 (including interest costs during the holding period of approximately $1,169) and has been accounted for as an adjustment to the original purchase price of the Pyramid Acquisition. The Company had previously entered into time brokerage agreements (effective April 15, 1996 for WSJZ-FM and April 25, 1996 for WHTT-FM and WHTT-AM) to sell substantially all of the broadcast time of these stations pending completion of the sales. On August 14, 1996, the Company acquired KYLD-FM in San Francisco from Crescent Communications for $44,000 in cash plus various other direct acquisition costs. The Company had previously been operating KYLD-FM under a time brokerage agreement since May 1, 1996. On October 18, 1996, the Company acquired WEDR-FM in Miami from affiliates of the Rivers Group for $65,000 in cash plus various other direct acquisition costs. On January 31, 1997, the Company acquired WWWW-FM and WDFN-AM in Detroit from affiliates of Chancellor Radio Broadcasting Company ("CRBC") for $30,000 in cash plus various other direct acquisition costs. The Company had previously provided certain sales and promotional functions to WWWW-FM and WDFN-AM under a joint sales agreement since February 14, 1996 and subsequently operated the stations under a time brokerage agreement since April 1, 1996. On January 31, 1997, the Company acquired KKSF-FM and KDFC-FM/AM in San Francisco from affiliates of the Brown Organization for $115,000 in cash plus various other direct acquisition costs. The Company had previously been operating KKSF-FM and KDFC-FM/AM under a time brokerage agreement since November 1, 1996. On July 21, 1997, the Company sold KDFC-FM to Bonneville International Corporation ("Bonneville") for $50,000 in cash. The assets of KDFC-FM were classified as assets held for sale in connection with the purchase price allocation of the acquisition of KKSF-FM and KDFC-FM/AM and no gain or loss was recognized by the Company upon consummation of the sale. The combined net income of KDFC-FM of approximately $934 has been excluded from the consolidated statement of operations for the year ended December 31, 1997. The excess of the proceeds over the carrying amount at the date of sale approximated $739 (including interest costs during the holding period of approximately $1,750) and has been accounted for as an adjustment to the original purchase price of the acquisition of KKSF-FM and KDFC-FM/AM. On April 1, 1997, the Company acquired WJLB-FM and WMXD-FM in Detroit from Secret Communications, L.P. ("Secret") for $168,000 in cash plus various other direct acquisition costs. The Company had previously been operating WJLB-FM and WMXD-FM under time brokerage agreements since September 1, 1996. On April 3, 1997, the Company exchanged WQRS-FM in Detroit (which the Company acquired on April 3, 1997 from Secret for $32,000 in cash plus various other direct acquisition costs), to affiliates of Greater Media Radio, Inc. in return for WWRC-AM in Washington, D.C. and $9,500 in cash. The exchange was accounted for as a like-kind exchange and no gain or loss was recognized upon consummation of the transaction. The net purchase price to the Company of WWRC-AM was therefore $22,500. The Company had previously been operating WWRC-AM under a time brokerage agreement since June 17, 1996. On May 1, 1997, the Company acquired WDAS-FM/AM in Philadelphia from affiliates of Beasley FM Acquisition Corporation for $103,000 in cash plus various other direct acquisition costs. F-13 199 CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) On May 15, 1997, the Company exchanged five of its six stations in Charlotte, North Carolina (WPEG-FM, WBAV-FM/AM, WRFX-FM and WFNZ-AM) for two FM stations in Philadelphia (WIOQ-FM and WUSL-FM) owned by EZ Communications, Inc. ("EZ") in Philadelphia (the "Charlotte Exchange"), and also sold the Company's sixth radio station in Charlotte, WNKS-FM, to EZ for $10,000 in cash and recognized a gain of $3,536. The Charlotte Exchange was accounted for as a like-kind exchange and no gain or loss was recognized upon consummation of the transaction. On May 30, 1997, the Company acquired WPNT-FM in Chicago from affiliates of Century Broadcasting Company for $75,740 in cash (including $1,990 for the purchase of the station's accounts receivable) plus various other direct acquisition costs. On June 19, 1997, the Company sold WPNT-FM in Chicago to Bonneville for $75,000 in cash and recognized a gain of $529. On June 3, 1997, the Company sold WEJM-FM in Chicago to affiliates of Crawford Broadcasting for $14,750 in cash and recognized a gain of $9,258. On July 2, 1997, the Company acquired WLTW-FM and WAXQ-FM in New York and WMZQ-FM, WJZW-FM, WZHF-AM and WBZS-AM in Washington, D.C. from Viacom International, Inc. ("Viacom") for approximately $612,388 in cash including various other direct acquisition costs (the "Viacom Acquisition"). The Viacom Acquisition was financed with (i) bank borrowings under the Senior Credit Facility (as defined) of $552,559; (ii) $53,750 in escrow funds paid by the Company on February 19, 1997 and (iii) $6,079 financed through working capital. In June 1997, Chancellor Media issued 5,990,000 shares of $3.00 Convertible Exchangeable Preferred Stock for net proceeds of $287,808 which were contributed to the Company by Chancellor Media and used to repay borrowings under the Senior Credit Facility and subsequently were reborrowed on July 2, 1997 as part of the financing of the Viacom Acquisition. On July 7, 1997, the Company sold WJZW-FM in Washington, D.C. to affiliates of Capital Cities/ABC Radio for $68,000 in cash. The assets of WJZW-FM, as well as the assets of WZHF-AM and WBZS-AM, which were sold on August 13, 1997, were accounted for as assets held for sale in connection with the purchase price allocation of the Viacom Acquisition and no gain or loss was recognized by the Company upon consummation of the sales. The combined net income of WJZW-FM, WZHF-AM and WBZS-AM of approximately $153 has been excluded from the consolidated statement of operations for the year ended December 31, 1997. The excess of the carrying amounts over the proceeds at the dates of sale approximated $894 and has been accounted for as an adjustment to the original purchase price of the Viacom Acquisition. On July 7, 1997, the Company sold the Federal Communications Commission ("FCC") authorizations and certain transmission equipment previously used in the operation of KYLD-FM in San Francisco to Susquehanna Radio Corporation ("Susquehanna") for $44,000 in cash and recognized a gain of $1,726. Simultaneously therewith, CRBC sold the call letters "KSAN-FM" (which CRBC previously used in San Francisco) to Susquehanna. On July 7, 1997, the Company and CRBC entered into a time brokerage agreement to enable the Company to operate KYLD-FM on the frequency previously assigned to KSAN-FM, and on July 7, 1997, CRBC changed the call letters of KSAN-FM to KYLD-FM. Upon the consummation of the Chancellor Merger (as defined herein), the Company changed the format of the new KYLD-FM to the format previously operated on the old KYLD-FM. On July 14, 1997, the Company completed the disposition of WLUP-FM in Chicago to Bonneville for net proceeds of $80,000 which were held by a qualified intermediary pending the completion of the deferred exchange of WLUP-FM for KZPS-FM and KDGE-FM in Dallas. On October 7, 1997, the Company applied the net proceeds from the disposition of WLUP-FM of $80,000 in cash, plus an additional $3,500 and various other direct acquisition costs, in a deferred exchange of WLUP-FM for KZPS-FM and KDGE-FM in Dallas. The exchange was accounted for as a like-kind exchange and no gain or loss was recognized upon consummation of the transaction. The Company had previously operated KZPS-FM and KDGE-FM under time brokerage agreements effective August 1, 1997. F-14 200 CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) On July 21, 1997, the Company entered into a time brokerage agreement with CRBC whereby the Company began managing certain limited functions of CRBC's stations KBGG-FM, KNEW-AM and KABL-FM in San Francisco pending the consummation of the Chancellor Merger (as defined herein), which occurred on September 5, 1997. On August 13, 1997, the Company sold WBZS-AM and WZHF-AM in Washington, D.C. (acquired as part of the Viacom Acquisition) and KDFC-AM in San Francisco to affiliates of Douglas Broadcasting ("Douglas") for $18,000 in the form of a promissory note. The promissory note bears interest at 7 3/4%, with a balloon principal payment due four years after closing. At closing, Douglas was required to post a $1,000 letter of credit for the benefit of the Company that will remain outstanding until all amounts due under the promissory note are paid. On August 27, 1997, the Company sold WEJM-AM in Chicago to Douglas for $7,500 in cash and recognized a gain of $3,331. On September 5, 1997, pursuant to an Amended and Restated Agreement and Plan of Merger, dated as of February 19, 1997 and amended and restated on July 31, 1997 (the "Chancellor Merger Agreement"), among Chancellor Broadcasting Company ("Chancellor"), CRBC, Evergreen Media Corporation ("Evergreen"), Evergreen Mezzanine Holdings Corporation ("EMHC") and Evergreen Media Corporation of Los Angeles ("EMCLA"), (i) Chancellor was merged (the "Parent Merger") with and into EMHC, a direct, wholly-owned subsidiary of Evergreen, with EMHC remaining as the surviving corporation and (ii) CRBC was merged (the "Subsidiary Merger") with and into EMCLA, a direct, wholly-owned subsidiary of EMHC, with EMCLA remaining as the surviving corporation (collectively, the "Chancellor Merger"). Upon consummation of the Parent Merger, Evergreen was renamed Chancellor Media Corporation and EMHC was renamed Chancellor Mezzanine Holdings Corporation ("CMHC"). Upon consummation of the Subsidiary Merger, the Company was renamed Chancellor Media Corporation of Los Angeles . Consummation of the Chancellor Merger added 52 radio stations (36 FM and 16 AM) to the Company's portfolio of stations, including 13 stations in markets in which the Company previously operated. The total purchase price allocated to net assets acquired was approximately $1,998,383 which included (i) the conversion of each outstanding share of Chancellor Common Stock into 0.9091 shares of Chancellor Media Common Stock, resulting in the issuance of 34,617,460 shares of Chancellor Media Common Stock at $15.50 per share, (ii) the assumption of long-term debt of CRBC of $949,000 which included $549,000 of borrowings outstanding under the CRBC senior credit facility, $200,000 of CRBC's 9 3/8% Senior Subordinated Notes due 2004 and $200,000 of CRBC's 8 3/4% Senior Subordinated Notes due 2007 (iii) the issuance of 2,117,629 shares of the Company's 12% Exchangeable Preferred Stock in exchange for CRBC's substantially identical securities with a fair value of $215,570 including accrued and unpaid dividends of $3,807, (iv) the issuance of 1,000,000 shares of the Company's 12 1/4% Series A Senior Cumulative Exchangeable Preferred Stock in exchange for CRBC's substantially identical securities with a fair value of $120,217 including accrued and unpaid dividends of $772, (v) the issuance of 2,200,000 shares of Chancellor Media's 7% Convertible Preferred Stock in exchange for Chancellor's substantially identical securities with a fair value of $111,048 including accrued and unpaid dividends of $1,048, (vi) the assumption of stock options issued to Chancellor stock option holders with a fair value of $34,977 and (vii) estimated acquisition costs of $31,000. On October 28, 1997, the Company acquired Katz Media Group, Inc. ("KMG") a full-service media representation firm, in a tender offer transaction for a total purchase price of approximately $379,101 (the "Katz Acquisition") which included (i) the conversion of each outstanding share of KMG Common Stock into the right to receive $11.00 in cash, resulting in total cash payments of $149,601, (ii) the assumption of long-term debt of KMG of $222,000 which included $122,000 of borrowings outstanding under the KMG senior credit facility and $100,000 of 10 1/2% Senior Subordinated Notes due 2007 of Katz Media Corporation (a subsidiary of KMG) and (iii) estimated acquisition costs of $7,500. F-15 201 CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) On December 29, 1997, the Company acquired five radio stations from Pacific and Southern Company, Inc., a subsidiary of Gannett Co., Inc., consisting of WGCI-FM/AM in Chicago for $140,000, KKBQ-FM/AM in Houston for $110,000 and KHKS-FM in Dallas for $90,000, for an aggregate purchase price of $340,000 in cash plus various other direct acquisition costs. On January 30, 1998, the Company acquired KXPK-FM in Denver from Ever Green Wireless LLC (which is unrelated to the Company) for $26,000 in cash plus various other direct acquisition costs, of which $1,655 was previously paid by CRBC as escrow funds and are classified as other assets at December 31, 1997. The Company had previously been operating KXPK-FM under a time brokerage agreement since September 1, 1997. The acquisitions discussed above were accounted for as purchases. Accordingly, the accompanying consolidated financial statements include the results of operations of the acquired entities from the dates of acquisition. A summary of the net assets acquired follows:
1995 1996 1997 -------- -------- ---------- Working capital, including cash of $492 in 1995, $1,011 in 1996 and $9,724 in 1997................. $ 12,012 $ 11,218 $ 66,805 Property and equipment.............................. 11,684 11,519 118,371 Assets held for sale (note 2)....................... -- 32,000 131,000 Intangible assets................................... 264,650 465,824 3,823,746 Other assets........................................ -- -- 26,742 Deferred tax liability.............................. (29,712) (61,218) (279,371) Other liabilities................................... -- -- (39,681) -------- -------- ---------- $258,634 $459,343 $3,847,612 ======== ======== ==========
The pro forma consolidated condensed results of operations data for 1996 and 1997, as if the 1996 and 1997 acquisitions and dispositions discussed above, the 8 1/8% Notes offering described in note 7(f) and the amendment and restatement of the Senior Credit Facility described in note 7(a) occurred at January 1, 1996, follow:
UNAUDITED ---------------------- 1996 1997 --------- ---------- Net revenues................................................ $ 882,054 $1,002,784 Net loss.................................................... (216,229) (149,683)
The pro forma results are not necessarily indicative of what would have occurred if the transactions had been in effect for the entire periods presented. (b) Pending Transactions On July 1, 1996, CRBC entered into an agreement with SFX Broadcasting, Inc. ("SFX") pursuant to which CRBC agreed to exchange WAPE-FM and WFYV-FM in Jacksonville and $11,000 in cash to SFX in return for WBAB-FM, WBLI-FM, WHFM-FM and WGBB-AM in Nassau/Suffolk (Long Island) (the "SFX Exchange"). The Company currently operates WBAB-FM, WBLI-FM, WHFM-FM and WGBB-FM pursuant to a time brokerage agreement effective July 1, 1996 and SFX currently operates WAPE-FM and WFYV-FM pursuant to a time brokerage agreement effective July 1, 1996. On November 6, 1997, the Antitrust Division of the United States Department of Justice (the "DOJ") filed suit against the Company seeking to enjoin, under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR F-16 202 CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Act"), the Company's acquisition of the four Long Island properties from SFX. If the Company is unable to acquire the four Long Island properties, the SFX Exchange will not be consummated. Furthermore, under the terms of the Capstar Transaction (as defined below), upon consummation of Capstar Broadcasting Corporation's pending acquisition of SFX, the SFX Exchange would be terminated. On August 6, 1997, the Company paid $3,000 to Bonneville for an option to exchange WTOP-AM in Washington, KZLA-FM in Los Angeles and WGMS-FM in Washington and $57,000 in cash for Bonneville's stations WBIX-FM in New York, KLDE-FM in Houston and KBIG-FM in Los Angeles (the "Bonneville Option"). The Bonneville Option was exercised on October 1, 1997, and definitive exchange documentation is presently being negotiated. The Company has entered into time brokerage agreements to operate KLDE-FM and KBIG-FM effective October 1, 1997 and WBIX-FM effective October 10, 1997 and has entered into time brokerage agreements to sell substantially all of the broadcast time of WTOP-AM, KZLA-FM and WGMS-FM effective October 1, 1997. On February 17, 1998, the Company entered into an agreement to acquire WWDC-FM/AM in Washington, D.C. from Capitol Broadcasting Company and its affiliates for $72,000 in cash (including $4,000 paid by the Company in escrow on February 18, 1998), plus an amount equal to the value assigned to certain accounts receivable for the stations (the "Capitol Broadcasting Acquisition"). Consummation of the Capitol Broadcasting Acquisition is conditioned, among other things, on the consummation of the exchanges of the Company's Washington, D.C. stations that are subject to the Bonneville Option. On February 20, 1998, the Company entered into an agreement to acquire from Capstar Broadcasting Corporation (together with its subsidiaries, "Capstar") KTXQ-FM and KBFB-FM in Dallas/Ft. Worth, KODA-FM, KKRW-FM and KQUE-AM in Houston, KPLN-FM and KYXY-FM in San Diego and WVTY-FM, WJJJ-FM, WXDX-FM and WDVE-FM in Pittsburgh (collectively, the "Capstar/SFX Stations") for an aggregate purchase price of approximately $637,500 (the "Capstar Transaction"). The Capstar/SFX Stations are presently owned by SFX, and are expected to be acquired by Capstar as part of Capstar's pending acquisition of SFX (the "Capstar/SFX Acquisition"). The Capstar/SFX Stations would be acquired by the Company in a series of purchases and exchanges over a period of three years, and would be operated by the Company under time brokerage agreements immediately upon the consummation of the Capstar/SFX Acquisition until acquired by the Company. As part of the Capstar Transaction, the SFX Exchange would, upon consummation of the Capstar/SFX Acquisition, be terminated and the Company would exchange WAPE-FM and WFYV-FM in Jacksonville (valued for purposes of the Capstar Transaction at $53,000) plus $90,250 in cash for Capstar/SFX Station KODA-FM in Houston. The Company would pay approximately $494,250 for the remaining ten Capstar/SFX Stations. As part of the Capstar Transaction, the Company would, at the consummation of the Capstar/SFX Acquisition, provide a subordinated loan to Capstar in the principal amount of $250,000 (the "Capstar Loan"). The Capstar Loan would bear interest at the rate of 12% per annum (subject to increase in certain circumstances), and would be secured by a senior pledge of common stock of Capstar's direct subsidiaries and SFX and a senior guarantee by one of Capstar's direct subsidiaries. A portion of the Capstar Loan would be prepaid by Capstar in connection with the Company's acquisition of, and the proceeds of such prepayment would be used by the Company as a portion of the purchase price for, each Capstar/SFX Station. The Company's obligation to provide the Capstar Loan is conditioned, among other things, on Capstar's receipt of at least $650,000 in equity investments that are subordinate to the Capstar Loan between January 1, 1998 and the consummation of the Capstar/SFX Acquisition. Hicks, Muse, Tate & Furst, Incorporated ("Hicks Muse"), which is a substantial shareholder of the Company (see note 14), controls Capstar, and certain directors of the Company are directors and/or executive officers of Capstar and/or Hicks Muse. Consummation of each of the transactions discussed above is subject to various conditions, including approval from the FCC and the expiration or early termination of any waiting period required under the HSR Act. Except with respect to the SFX Exchange, which the Company expects will be terminated in connection F-17 203 CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) with the Capstar Transaction, the Company believes that such conditions will be satisfied in the ordinary course, but there can be no assurance that this will be the case. Escrow funds of $4,655 paid by the Company in connection with the acquisition of KXPK-FM in Denver on January 30, 1998 and the Bonneville Option have been classified as other assets in the accompanying balance sheet at December 31, 1997. (3) OTHER ASSETS Other current assets consist of the following at December 31, 1996 and 1997:
1996 1997 ------ ------- Representation contracts receivable......................... $ -- $16,462 Prepaid expenses and other.................................. 6,352 10,746 ------ ------- $6,352 $27,208 ====== =======
Other assets consist of the following at December 31, 1996 and 1997:
1996 1997 ------- -------- Deferred costs on purchases of representation contracts, less accumulated amortization of $380 in 1997............. $ -- $ 35,411 Deferred debt issuance costs, less accumulated amortization of $1,794 in 1996 and $943 in 1997........................ 7,086 24,624 Notes receivable (note 2)................................... -- 18,000 Representation contracts receivable......................... -- 12,187 Escrow deposits............................................. 17,000 4,655 Other....................................................... 466 18,699 ------- -------- $24,552 $113,576 ======= ========
(4) PROPERTY AND EQUIPMENT Property and equipment consists of the following at December 31, 1996 and 1997:
ESTIMATED USEFUL LIFE 1996 1997 --------------------- ------- -------- Broadcast and other equipment.................. 3-15 years $47,937 $115,440 Buildings and improvements..................... 3-20 years 11,735 24,308 Furniture and fixtures......................... 5-7 years 8,392 29,659 Land........................................... -- 7,379 23,122 ------- -------- 75,443 192,529 Less accumulated depreciation.................. 27,250 32,732 ------- -------- $48,193 $159,797 ======= ========
F-18 204 CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (5) INTANGIBLE ASSETS Intangible assets consist of the following at December 31, 1996 and 1997:
ESTIMATED USEFUL LIFE 1996 1997 --------------------- ---------- ---------- Broadcast licenses......................... 15-40 $ 498,766 $3,507,547 Goodwill................................... 15-40 131,775 717,576 Representation contracts................... 17 -- 105,000 Other intangibles.......................... 1-40 397,062 386,272 ---------- ---------- 1,027,603 4,716,395 Less accumulated amortization.............. 173,960 311,952 ---------- ---------- $ 853,643 $4,404,443 ========== ==========
In addition to broadcast licenses, goodwill and representation contracts, categories of other intangible assets include: (i) premium advertising revenue base (the value of the higher radio advertising revenues in certain of the Company's markets as compared to other markets of similar population); (ii) advertising client base (the value of the well-established advertising base in place at the time of acquisition of certain stations); (iii) talent contracts (the value of employment contracts between certain stations and their key employees); (iv) fixed asset delivery premium (the benefit expected from the Company's ability to operate fully constructed and operational stations from the date of acquisition), and (v) premium audience growth pattern (the value of expected above-average population growth in a given market). (6) ACCOUNTS PAYABLE AND ACCRUED EXPENSES Accounts payable and accrued expenses consist of the following at December 31, 1996 and 1997:
1996 1997 ------- -------- Accounts payable............................................ $17,746 $ 83,738 Accrued payroll............................................. 7,262 31,349 Representation contracts payable............................ -- 21,680 Accrued interest............................................ 1,642 18,130 Accrued dividends........................................... -- 16,120 ------- -------- $26,650 $171,017 ======= ========
(7) LONG-TERM DEBT Long-term debt consists of the following at December 31, 1996 and 1997:
1996 1997 -------- ---------- Senior Credit Facility(a)................................... $348,000 $1,573,000 Senior Notes(b)............................................. 10,000 -- 9 3/8% Notes(c)............................................. -- 200,000 8 3/4% Notes(d)............................................. -- 200,000 10 1/2% Notes(e)............................................ -- 100,000 8 1/8% Notes(f)............................................. -- 500,000 -------- ---------- Total long-term debt.............................. 358,000 2,573,000 Less current portion........................................ 26,500 -- -------- ---------- $331,500 $2,573,000 ======== ==========
F-19 205 CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (a) Senior Credit Facility On April 25, 1997, the Company entered into a loan agreement which amended and restated its prior senior credit facility. Under the amended and restated agreement, as amended on June 26, 1997, August 7, 1997, October 28, 1997 and February 10, 1998 (as amended, the "Senior Credit Facility"), the Company established a $1,250,000 revolving facility (the "Revolving Loan Facility") and a $500,000 term loan facility (the "Term Loan Facility"). Upon consummation of the Chancellor Merger, the aggregate commitments under the Revolving Loan Facility and the Term Loan Facility were increased to $1,600,000 and $900,000, respectively. In connection with the amendment and restatement of the Senior Credit Facility, the Company wrote off the unamortized balance of deferred debt issuance costs of $4,350 (net of a tax benefit of $2,343) as an extraordinary charge. Borrowings under the Senior Credit Facility bear interest at a rate based, at the option of the Company, on the participating banks' prime rate or Eurodollar rate, plus an incremental rate. Without giving effect to the interest rate swap and cap agreements described below, the interest rate on the $900,000 outstanding under the Term Loan at December 31, 1997 was 7.09% on a blended basis, based on Eurodollar rates, and the interest rate on the $665,000 and $8,000 of advances outstanding under the Revolving Loan were 7.06% on a blended basis and 8.63% at December 31, 1997, based on the Eurodollar and prime rates, respectively. The Company pays fees ranging from 0.25% to 0.375% per annum on the aggregate unused portion of the loan commitment based upon the leverage ratio for the most recent quarter end, in addition to an annual agent's fee. Pursuant to the Senior Credit Facility, the Company is required to enter into interest hedging agreements that result in fixing or placing a cap on the Company's floating rate debt so that no less than 50% of the principal amount of total debt outstanding has a fixed or capped rate. At December 31, 1997, interest rate swap agreements covering a notional balance of $1,325,000 were outstanding. These outstanding swap agreements mature from 1998 through 1999 and require the Company to pay fixed rates of 4.96% to 6.63% while the counterparty pays a floating rate based on the three-month London Interbank Borrowing Offered Rate ("LIBOR"). During the years ended December 31, 1995, 1996 and 1997, the Company recognized charges (income) under its interest rate swap agreements of $(275), $111 and $2,913, respectively. Because the interest rate swap agreements are with banks that are lenders under the Senior Credit Facility, the Company is not exposed to credit loss. The Term Loan Facility is payable in quarterly installments commencing on September 30, 2000 and ending June 30, 2005. The Revolving Loan Facility requires scheduled annual reductions of the commitment amount, payable in quarterly installments commencing on September 30, 2000 and ending on June 30, 2005. The capital stock of the Company's subsidiaries is pledged to secure the performance of the Company's obligations under the Senior Credit Facility, and each of the Company's subsidiaries have guaranteed those obligations. (b) Senior Notes The Company issued $20,000 of senior notes (the "Senior Notes") in 1989. The Senior Notes bear interest at 11.59% per annum payable quarterly and principal is payable in equal quarterly installments of $1,000 through May 1999. In connection with the amendment and restatement of the Senior Credit Facility, on April 25, 1997, the Company repaid all amounts outstanding under the Senior Notes. (c) 9 3/8% Notes Upon consummation of the Chancellor Merger, on September 5, 1997, the Company assumed CRBC's $200,000 aggregate principal amount of 9 3/8% Senior Subordinated Notes due 2004 (the "9 3/8% Notes"). Interest on the 9 3/8% Notes is payable semiannually, commencing on April 1, 1996. The 9 3/8% Notes mature on F-20 206 CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) October 1, 2004 and are redeemable, in whole or in part, at the option of the Company on or after February 1, 2000, at redemption prices ranging from 104.688% at February 1, 2000 and declining to 100% on or after February 1, 2003, plus in each case accrued and unpaid interest. In addition, on or prior to January 31, 1999, the Company may redeem up to 25% of the original aggregate principal amount of the 9 3/8% Notes at a redemption price of 107.031% plus accrued and unpaid interest with the net proceeds of one or more public equity offerings of CMHC or the Company. Upon the occurrence of a change in control (as defined in the indenture governing the 9 3/8% Notes), the holders of the 9 3/8% Notes have the right to require the Company to repurchase all or any part of the 9 3/8% Notes at a purchase price equal to 101% plus accrued and unpaid interest. (d) 8 3/4% Notes Upon consummation of the Chancellor Merger, on September 5, 1997, the Company assumed CRBC's $200,000 aggregate principal amount of 8 3/4% Senior Subordinated Notes due 2007 (the "8 3/4% Notes"). Interest on the 8 3/4% Notes is payable semiannually, commencing on December 15, 1997. The 8 3/4% Notes mature on June 15, 2007 and are redeemable, in whole or in part, at the option of the Company on or after June 15, 2002, at redemption prices ranging from 104.375% at June 15, 2002 and declining to 100% on or after June 15, 2005, plus in each case accrued and unpaid interest. In addition, prior to June 15, 2000, the Company may redeem up to 25% of the original aggregate principal amount of the 8 3/4% Notes at a redemption price of 108.75% plus accrued and unpaid interest with the net proceeds of one or more public equity offerings of CMHC or the Company. Upon the occurrence of a change in control (as defined in the indenture governing the 8 3/4% Notes) on or prior to June 15, 2000, the 8 3/4% Notes may be redeemed as a whole at the option of the Company at a redemption price of 100% plus the Applicable Premium (as defined in the indenture governing the 8 3/4% Notes) and accrued and unpaid interest. Upon the occurrence of a change in control after June 15, 2000, the holders of the 8 3/4% Notes have the right to require the Company to repurchase all or any part of the 8 3/4% Notes at a purchase price equal to 101% plus accrued and unpaid interest. (e) 10 1/2% Notes Upon consummation of the Katz Acquisition, on October 28, 1997, the Company assumed Katz Media Corporation's $100,000 aggregate principal amount of 10 1/2% Senior Subordinated Notes due 2007 (the "10 1/2% Notes"). Interest on the 10 1/2% Notes is payable semiannually, commencing on July 15, 1997. The 10 1/2% Notes mature on January 15, 2007 and are redeemable, in whole or in part, at the option of the Company on or after January 15, 2002, at redemption prices ranging from 105.25% at January 15, 2002 and declining to 100% on or after January 15, 2006, plus in each case accrued and unpaid interest. In addition, prior to January 15, 2000, the Company may redeem up to 35% of the original aggregate principal amount of the 10 1/2% Notes at a redemption price of 109.5% plus accrued and unpaid interest with the net proceeds of one or more offerings of equity interests of Chancellor Media, CMHC or the Company. Upon the occurrence of a change in control (as defined in the indenture governing the 10 1/2% Notes), the holders of the 10 1/2% Notes have the right to require the Company to repurchase all or any part of the 10 1/2% Notes at a purchase price equal to 101% plus accrued and unpaid interest. (f) 8 1/8% Notes On December 22, 1997, the Company issued $500,000 aggregate principal amount of 8 1/8% Senior Subordinated Notes due 2007 (the "8 1/8% Notes") for estimated net proceeds of $485,000. Interest on the 8 1/8% Notes is payable semiannually, commencing on June 15, 1998. The 8 1/8% Notes mature on December 15, 2007 and are redeemable, in whole or in part, at the option of the Company on or after December 15, 2002, at redemption prices ranging from 104.063% at December 15, 2002 and declining to 100% on or after December 15, 2005, plus in each case accrued and unpaid interest. In addition, prior to December 15, 2000, the Company may redeem up to 35% of the original aggregate principal amount of the 8 1/8% Notes at a F-21 207 CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) redemption price of 108.125% plus accrued and unpaid interest with the net proceeds of one or more public equity offerings of Chancellor Media, CMHC or the Company. Also, upon the occurrence of a change in control (as defined in the indenture governing the 8 1/8% Notes), the 8 1/8% Notes may be redeemed as a whole at the option of the Company at a redemption price of 100% plus the Applicable Premium (as defined in the indenture governing the 8 1/8% Notes) and accrued and unpaid interest. Upon the occurrence of a change in control after December 15, 2000, the holders of the 8 1/8% Notes have the right to require the Company to repurchase all or any part of the 8 1/8% Notes at a purchase price equal to 101% plus accrued and unpaid interest. (g) Summarized Financial Information of Subsidiary Guarantors The 9 3/8% Notes, the 8 3/4% Notes, the 10 1/2% Notes and the 8 1/8% Notes (collectively, the "Notes") are unsecured obligations of the Company, subordinated in right of payment to all existing and any future senior indebtedness of the Company. The Notes are fully and unconditionally guaranteed, on a joint and several basis, by all of the Company's direct and indirect subsidiaries other than certain inconsequential subsidiaries (the "Subsidiary Guarantors"). The Subsidiary Guarantors are wholly-owned subsidiaries of the Company. Summarized financial information of the Subsidiary Guarantors as of December 31, 1997 and for the year ended December 31, 1997 is presented below. Separate financial statements and other disclosures concerning the Subsidiary Guarantors are not presented because management has determined that they are not material to investors. There are no significant restrictions on distributions from each of the Subsidiary Guarantors to the Company.
1997 --------- Current assets.............................................. 223,913 Noncurrent assets........................................... 987,028 Current liabilities......................................... 89,362 Noncurrent liabilities...................................... 1,130,105 Net revenues................................................ 495,485 Operating income............................................ 58,354 Net loss.................................................... (17,721)
(h) Other The Senior Credit Facility and the indentures governing the Notes contain customary restrictive covenants, which, among other things and with certain exceptions, limit the ability of the Company and its subsidiaries to incur additional indebtedness and liens in connection therewith, enter into certain transactions with affiliates, pay dividends, consolidate, merge or effect certain asset sales, issue additional stock, effect an asset swap and make acquisitions. The Company is required under the Senior Credit Facility to maintain specified financial ratios, including leverage, cash flow and debt service coverage ratios (as defined). A summary of the future maturities of long-term debt at December 31, 1997 follows: 1998........................................................ $ -- 1999........................................................ -- 2000........................................................ 67,500 2001........................................................ 157,500 2002........................................................ 180,000 Thereafter.................................................. 2,168,000
F-22 208 CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (8) REDEEMABLE PREFERRED STOCK (a) 12 1/4% Preferred Stock Upon consummation of the Chancellor Merger, on September 5, 1997, the Company issued 1,000,000 shares of 12 1/4% Series A Senior Cumulative Exchangeable Preferred Stock (the "12 1/4% Preferred Stock") in exchange for CRBC's substantially identical securities with a fair value of $120,217 including accrued and unpaid dividends of $772. The liquidation preference of each share of 12 1/4% Preferred Stock is $119.445 plus accrued and unpaid dividends of $1,829 at December 31, 1997. The dividend rate on the 12 1/4% Preferred Stock is 12.25% per annum of the liquidation preference and is payable quarterly. If any dividend payable on any dividend payment date on or before February 15, 2001 is not declared or paid in full in cash on such dividend payment date, the amount not paid on such dividend payment date will be added to the liquidation preference of the 12 1/4% Preferred Stock and will be deemed paid in full and will not accumulate. The 12 1/4% Preferred Stock is redeemable in whole or in part, at the option of the Company on or after February 15, 2001, at redemption prices ranging from 106.125% at February 15, 2001 and declining to 100.0% of the liquidation preference on or after February 15, 2006, plus in each case accrued and unpaid dividends. In addition, prior to February 15, 1999, the Company may redeem up to 25% of the shares of 12 1/4% Preferred Stock originally issued at a redemption price of 109.8% of the liquidation preference plus accrued and unpaid dividends with the net proceeds of one or more public equity offerings of the Company. The Company is required, subject to certain conditions, to redeem all of the 12 1/4% Preferred Stock outstanding on February 15, 2008, at a redemption price of 100% of the liquidation preference, plus accrued and unpaid dividends. The 12 1/4% Preferred Stock is exchangeable, subject to certain conditions, at the option of the Company, in whole but not in part, for 12 1/4% Subordinated Exchange Debentures due 2008 (the "12 1/4% Exchange Debentures") at a rate of $1.00 principal amount of 12 1/4% Exchange Debentures for each $1.00 in liquidation preference of 12 1/4% Preferred Stock. Upon the occurrence of a change in control (as defined in the certificate of designation governing the 12 1/4% Preferred Stock), the holders of the 12 1/4% Preferred Stock have the right to require the Company to repurchase all or any part of the 12 1/4% Preferred Stock at a price of 101% of the liquidation preference plus accrued and unpaid dividends. The 12 1/4% Preferred Stock is senior in liquidation preference to the Common Stock of the Company and to the 12% Preferred Stock. (b) 12% Preferred Stock Upon consummation of the Chancellor Merger, on September 5, 1997, the Company issued 2,117,629 shares of 12% Exchangeable Preferred Stock (the "12% Preferred Stock") in exchange for CRBC's substantially identical securities with a fair value of $215,570 including accrued and unpaid dividends of $3,807. The liquidation preference of each share of 12% Preferred Stock is $100.00 plus accrued and unpaid dividends of $11,756 at December 31, 1997. The dividend rate on the 12% Preferred Stock is 12% per annum of the liquidation preference and is payable semi-annually. Dividends may be paid, at the Company's option, on any dividend payment date occurring on or prior to January 15, 2002 either in cash or in additional shares of 12% Preferred Stock. The 12% Preferred Stock is redeemable in whole or in part, at the option of the Company, on or after January 15, 2002, at redemption prices ranging from 106% at January 15, 2002 and declining to 100% of the liquidation preference on or after January 15, 2007, plus in each case accrued and unpaid dividends. In addition, prior to January 15, 2000, the Company may redeem all but $150,000 of the aggregate liquidation preference of 12% Preferred Stock at a redemption price of 112% of the liquidation preference plus accrued and unpaid dividends with the net proceeds of one or more public equity offerings of the Company. The Company is required, subject to certain conditions, to redeem all of the 12% Preferred Stock outstanding on January 15, 2009, at a redemption price of 100% of the liquidation preference, plus accrued and unpaid dividends. The 12% Preferred Stock is exchangeable, subject to certain conditions, at the option of the Company, in whole but not in part, for 12% Subordinated Exchange Debentures due 2009 (the "12% Exchange Debentures") at a rate of $1.00 principal amount of 12% Exchange Debentures for each $1.00 in liquidation preference of 12% Preferred Stock. Upon the occurrence of a change in control (as defined in F-23 209 CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) the certificate of designation governing the 12% Preferred Stock), the holders of the 12% Preferred Stock have the right to require the Company to repurchase all or any part of the 12% Preferred Stock at a price of 101% of the liquidation preference plus accrued and unpaid dividends. In addition, upon the occurrence of a change in control, the Company may redeem the 12% Preferred Stock in whole but not in part at a redemption price of 112% of the liquidation preference plus accrued and unpaid dividends. The 12% Preferred Stock is senior in liquidation preference to the Common Stock of the Company and is subordinate to the 12 1/4% Preferred Stock. (9) STOCKHOLDER'S EQUITY (a) On March 13, 1998, Chancellor Media completed a secondary public offering of 21,850,000 shares of its Common Stock (the "1998 Offering"). The net proceeds from the 1998 Offering of approximately $995.1 million were contributed to the Company by Chancellor Media. (b) Stock Options Chancellor Media has established the 1992, 1993 and 1995 Key Employee Stock Option Plans (the "Employee Option Plans") which provide for the issuance of stock options to officers and other key employees of the Company and its subsidiaries. The Employee Option Plans make available for issuance an aggregate of 7,215,000 shares of Common Stock. Options issued under the Employee Option Plans have varying vesting periods as provided in separate stock option agreements and generally carry an expiration date of ten years subsequent to the date of issuance. Options issued under the 1993 and 1995 Employee Option Plans are required to have exercise prices equal to or in excess of the fair market value of Chancellor Media Common Stock on the date of issuance. In May 1995, Chancellor Media also established the Stock Option Plan for Non-Employee Directors (the "Director Plan") which provides for the issuance of stock options to non-employee directors of the Company. The Director Plan makes available for issuance an aggregate of 450,000 shares of Chancellor Media Common Stock. Options issued under the Director Plan have exercise prices equal to the fair market value of Chancellor Media Common Stock on the date of issuance, vest over a three year period and have an expiration date of ten years subsequent to the date of issuance. In connection with the BPI Acquisition, Chancellor Media assumed outstanding options to purchase 310,276 shares of Chancellor Media Common Stock (the "BPI Options"). The BPI Options vested and became exercisable on May 12, 1996 and have an expiration date of ten years subsequent to the original date of issuance by BPI. In connection with the Chancellor Merger, Chancellor Media assumed outstanding options to purchase 3,526,112 shares of Chancellor Media Common Stock (the "Chancellor Options") with a fair value of $34,977. The Chancellor Options have varying vesting periods as provided in separate stock option agreements and generally carry an expiration date of ten years subsequent to the original date of issuance by Chancellor. The total options available for grant were 3,679,500 and 1,115,894 at December 31, 1996 and 1997, respectively. Chancellor Media applies APB Opinion No. 25 in accounting for its Employee Option Plans and, accordingly, no compensation cost has been recognized for its stock options in the consolidated financial statements. Had Chancellor Media determined compensation cost based on the fair value at the grant date for F-24 210 CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) its stock options under SFAS No. 123, the Company's net loss would have been increased to the pro forma amounts indicated below:
1995 1996 1997 ------- -------- -------- Net loss: As reported.......................................... $(5,850) $(16,194) $(31,745) Pro forma............................................ (8,787) (20,969) (36,650)
Pro forma net loss reflects only options granted in 1995, 1996 and 1997. Therefore, the full impact of calculating compensation cost for stock options under SFAS No. 123 is not reflected in the pro forma net loss amounts presented above because compensation cost is reflected over the options' vesting period of one year and compensation cost for options granted prior to 1995 is not considered. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions used for grants: expected volatility of 44.5% for 1995 and 1996 and 41.9% for 1997; risk-free interest rate of 6.0% for 1995 and 1996 and 5.4% for 1997; dividend yield of 0% and expected lives ranging from three to seven years for 1995, 1996 and 1997. Following is a summary of activity in the employee option plans and agreements discussed above for the years ended December 31, 1995, 1996 and 1997:
1995 1996 1997 -------------------- -------------------- -------------------- WEIGHTED WEIGHTED WEIGHTED AVERAGE AVERAGE AVERAGE EXERCISE EXERCISE EXERCISE SHARES PRICE SHARES PRICE SHARES PRICE --------- -------- --------- -------- --------- -------- Outstanding at beginning of year.......................... 1,956,000 $ 1.55 2,579,748 $ 3.46 3,559,984 $ 5.97 Granted......................... 516,000 10.08 1,174,500 11.56 2,773,590 22.89 Assumed in acquisitions......... 310,276 4.85 -- -- 3,526,112 9.29 Exercised....................... (51,000) 0.65 (166,806) 4.27 (994,526) 5.43 Canceled........................ (151,528) 4.30 (27,458) 4.96 (38,464) 19.46 --------- ------ --------- ------ --------- ------ Outstanding at end of year...... 2,579,748 $ 3.46 3,559,984 $ 5.97 8,826,696 $12.98 ========= ====== ========= ====== ========= ====== Options exercisable at year end........................... 1,890,000 1,935,484 5,687,960 ========= ========= ========= Weighted average fair value of options granted during the year.......................... 4.27 4.88 10.25 ========= ========= =========
The following table summarizes information about stock options outstanding at December 31, 1997:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE -------------------------------------------- ------------------------- NUMBER WEIGHTED WEIGHTED NUMBER WEIGHTED OUTSTANDING AT AVERAGE AVERAGE EXERCISABLE AT AVERAGE RANGE OF DECEMBER 31, REMAINING EXERCISE DECEMBER 31, EXERCISE EXERCISE PRICES 1997 CONTRACTUAL LIFE PRICE 1997 PRICE --------------- -------------- ---------------- -------- -------------- -------- $0.01........................... 1,000,000 5.3 years $ 0.01 1,000,000 $ 0.01 $4.13 to 6.17................... 2,186,056 7.2 years 4.58 2,039,692 4.60 $10.67 to 15.81................. 2,378,562 8.3 years 11.49 983,624 11.63 $17.05 to 23.75................. 2,769,078 9.5 years 21.38 1,464,644 22.50 $26.38 to 31.63................. 493,000 9.8 years 28.32 200,000 27.50 --------- ------ --------- ------ 8,826,696 12.98 5,687,960 10.44 ========= ====== ========= ======
F-25 211 CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (10) EMPLOYEE BENEFIT PLANS (a) 401(k) Plan The Company offers substantially all of its employees voluntary participation in a 401(k) Plan. The Company may make discretionary contributions to the plan; however, no such contributions were made by the Company during 1995, 1996 or 1997. (b) Katz Savings and Profit Sharing Plan Katz has a defined contribution retirement plan, The Katz Media Group Savings and Profit Sharing Plan (the "Katz Plan"). The Katz Plan covers substantially all employees of Katz with greater than six months of service. The Katz Plan permits Katz to match a percentage of a participant's contribution up to a stated maximum percentage of an employee's salary. Cash contributions included in to operating expenses approximated $200 for the year ended December 31, 1997. Effective January 1, 1998, the Company elected to discontinue cash contributions under the matching provision of the Katz Plan. The Company intends to merge the Katz Plan into the Company's 401(k) Plan during 1998. (c) Katz Other Postretirement Benefits Prior to the Company's acquisition of Katz on October 28, 1997, Katz provided for certain medical, dental and life insurance benefits for employees who retire beginning at age 55 with a minimum of 15 years of service and for employees who retire at age 65 with a minimum of 10 years of service. The Company will continue providing this coverage only for retirees and beneficiaries currently receiving coverage and those active employees who have, or will have attained by December 31, 1998, the age and service necessary to receive coverage. The accumulated post retirement benefit obligation ("APBO") consists of $703 for retirees and $337 for active employees fully eligible for benefits for a total APBO of $1,040 at December 31, 1997. As of December 31, 1997, Katz and its subsidiaries have not funded any portion of the accumulated postretirement benefit obligation. The net periodic postretirement benefit cost consists of interest cost on the APBO of $11 for the year ended December 31, 1997. The APBO was determined using an assumed discount rate of 6.5% and a health care cost trend rate of 5% per annum for all future years. The effect of a 1% increase in the health care cost trend rate would increase the APBO by $368 and would increase the service and interest cost components of the net periodic postretirement benefit cost by $24. (11) INCOME TAXES Income tax expense (benefit) from continuing operations consists of the following:
1995 1996 1997 ----- ------- ------- Current tax expense: Federal............................................... $ 246 $ 485 $ 6,840 State................................................. 425 972 4,791 ----- ------- ------- Total current tax expense............................... 671 1,457 11,631 Deferred benefit........................................ (479) (4,353) (3,829) ----- ------- ------- Total income tax expense (benefit)...................... $ 192 $(2,896) $ 7,802 ===== ======= =======
During 1997, the Company incurred an extraordinary loss on extinguishment of debt. The tax benefit related to the extraordinary loss is approximately $2,343. This tax benefit, which reduces current taxes payable, is separately allocated to the extraordinary item. F-26 212 CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Total income tax expense (benefit) differed from the amount computed by applying the U.S. federal statutory income tax rate of 35% to loss from continuing operations for the years ended December 31, 1995, 1996 and 1997 as a result of the following:
1995 1996 1997 ------- ------- ------- Computed "expected" tax benefit....................... $(1,980) $(6,682) $(2,342) Amortization of goodwill.............................. 788 2,477 5,744 Net operating loss carryforwards for which no tax benefit was recognized.............................. 923 -- -- State income taxes, net of federal benefit............ 276 632 2,533 Other, net............................................ 185 677 1,867 ------- ------- ------- $ 192 $(2,896) $ 7,802 ======= ======= =======
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities at December 31, 1996 and 1997 are presented below:
1996 1997 --------- --------- Deferred tax assets: Net operating loss and credit carryforwards............... $ 13,519 $ 38,552 Accrued compensation primarily relating to stock options................................................ 1,687 1,720 Differences in book and tax bases related to media representation contracts............................... -- 39,908 Differences in book and tax bases of lease liabilities.... -- 4,727 Other..................................................... 1,215 3,147 --------- --------- Total deferred tax assets......................... 16,421 88,054 --------- --------- Deferred tax liabilities: Property and equipment and intangibles, primarily resulting from difference in bases from BPI, Pyramid, Chancellor Merger and Katz acquisitions................ (101,761) (445,992) Other..................................................... (758) (3,702) --------- --------- Total deferred tax liabilities.................... (102,519) (449,694) --------- --------- Net deferred tax liability........................ $ (86,098) $(361,640) ========= =========
Deferred tax assets and liabilities are computed by applying the U.S. federal and state income tax rate in effect to the gross amounts of temporary differences and other tax attributes, such as net operating loss carryforwards. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. The Company expects the deferred tax assets at December 31, 1997 to be realized as a result of the reversal during the carryforward period of existing taxable temporary differences giving rise to deferred tax liabilities and the generation of taxable income in the carryforward period. At December 31, 1997, the Company has net operating loss carryforwards available to offset future taxable income of approximately $85,000, expiring from 1998 to 2012 and has alternative minimum tax credit carryforwards of approximately $3,600 that do not expire. All of the net operating loss and tax credit F-27 213 CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) carryforwards at December 31, 1997 are subject to annual use limitations under tax rules governing changes of ownership. (12) COMMITMENTS AND CONTINGENCIES The Company has noncancelable operating leases, primarily for office space. These leases generally contain renewal options for periods ranging from one to ten years and require the Company to pay all executory costs such as maintenance and insurance. Rental expense for operating leases (excluding those with lease terms of one month or less that were not renewed) was approximately $3,073, $5,462 and $10,913 during 1995, 1996 and 1997, respectively. Future minimum lease payments under noncancelable operating leases (with initial or remaining lease terms in excess of one year) as of December 31, 1997 are as follows: Year ending December 31: 1998...................................................... 30,784 1999...................................................... 28,644 2000...................................................... 26,533 2001...................................................... 25,188 2002...................................................... 23,506 Thereafter................................................ 156,335
In August 1993, the Company terminated an agreement with Sagittarius Broadcasting Company (an affiliate of Infinity Broadcasting Corporation) and One Twelve, Inc. (collectively, the "Claimants" or the "Plaintiffs") pursuant to which programming featuring radio personality Howard Stern was broadcast on radio station WLUP-AM (now WMVP-AM) in Chicago. The Claimants allege that termination of the agreement was wrongful and have sued the Company in the Supreme Court of the State of New York, County of New York (the "Court"). The agreement required payments to the Claimants in the amount of $2.6 million plus five percent of advertising revenues generated by the programming over the three-year term of the agreement. A total of approximately $680,000 was paid to the Claimants pursuant to the agreement prior to termination. Claimants' complaint alleged claims for breach of contract, indemnification, breach of fiduciary duty and fraud. Claimants' aggregate prayer for relief totaled $45.0 million. On July 12, 1994, the Court granted the Company's motion to dismiss Claimants' claims for fraud and breach of fiduciary duty. On June 6, 1995, the Court denied the Claimants' motion for summary judgment on their contract and indemnification claims and this order has been affirmed on appeal. On May 17, 1996, after the close of discovery, the Company filed a motion for summary judgment, seeking the dismissal of the remaining claims in the original complaint. On July 1, 1996, Claimants moved for leave to amend their complaint in order to add claims for breach of the covenant of good faith and fair dealing, tortious interference with business advantage and prima facia tort. In the proposed amended complaint, Claimants seek compensatory and punitive damages in excess of $25.0 million. On March 13, 1997, the Court denied the Company's motion for summary judgment, allowed Claimants' request to amend the complaint to add a claim for breach of the covenant of good faith and fair dealing and denied Claimants' request to amend the complaint to add claims for tortious interference with business advantage and prima facia tort. On April 25, 1997, the Company filed a notice of appeal of the denial of the Company's motion for summary judgment. In October 1997, the N.Y. State Supreme Court, Appellate Division, granted a portion of the appeal seeking to strike certain damages sought, but otherwise affirmed the denial of the motion for summary judgement and sent the case back to the trial court for trial. The Company believes that it acted within its rights in terminating the agreement. The Company is also involved in various other claims and lawsuits which are generally incidental to its business. The Company is vigorously contesting all such matters and believes that their ultimate resolution will not have a material adverse effect on its consolidated financial position, results of operations or cash flows. F-28 214 CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (13) FAIR VALUE OF FINANCIAL INSTRUMENTS The following table presents the carrying amounts and estimated fair values of the Company's financial instruments at December 31, 1996 and 1997. The fair value of a financial instrument is defined as the amount at which the instrument could be exchanged in a current transaction between willing parties.
1996 1997 ------------------- ----------------------- CARRYING FAIR CARRYING FAIR AMOUNT VALUE AMOUNT VALUE -------- -------- ---------- ---------- Interest rate swaps................................. $ -- $ 199 $ -- $ 3,919 Long-term debt -- Senior Credit Facility............ 348,000 348,000 1,573,000 1,573,000 Long-term debt -- Senior Notes...................... 10,000 10,572 -- -- Long-term debt -- 9 3/8% Notes...................... -- -- 200,000 209,000 Long-term debt -- 8 3/4% Notes...................... -- -- 200,000 205,000 Long-term debt -- 10 1/2% Notes..................... -- -- 100,000 110,000 Long-term debt -- 8 1/8% Notes...................... -- -- 500,000 500,000 Redeemable preferred stock -- 12 1/4% Preferred Stock............................................. -- -- 119,444 133,000 Redeemable preferred stock -- 12% Preferred Stock... -- -- 211,764 239,821
The following methods and assumptions were used to estimate the fair value of each class of financial instrument: Cash and cash equivalents, accounts receivable and accounts payable: The carrying amount of these assets and liabilities approximates fair value because of the short maturity of these instruments. Interest rate swaps: The fair value of the interest rate swap and cap contracts is estimated by obtaining quotations from brokers. The fair value is an estimate of the amounts that the Company would (receive) pay at the reporting date if the contracts were transferred to other parties or canceled by the broker. Long-term debt: The fair values of the Company's 9 3/8% Notes, 8 3/4% Notes, 10 1/2% Notes and 8 1/8% Notes are based on December 31, 1997 quoted market prices. As amounts outstanding under the Company's Senior Credit Facility agreements bear interest at current market rates, their carrying amounts approximate fair market value. Redeemable preferred stock: The fair values of the Company's 12 1/4% Preferred Stock and 12% Preferred Stock are based on December 31, 1997 quoted market prices. (14) RELATED PARTY TRANSACTIONS As of December 31, 1997, Thomas O. Hicks and affiliates of Hicks Muse beneficially owned an aggregate 18,727,028 shares of Common Stock of Chancellor Media. Mr. Hicks was elected Chairman of the Board and a director of the Company upon consummation of the Chancellor Merger. The Company is subject to a financial monitoring and oversight agreement, dated April 1, 1996, as amended on September 4, 1997, (the "Financial Monitoring and Oversight Agreement") with Hicks, Muse & Co. Partners, L.P. ("Hicks Muse Partners"), an affiliate of Hicks Muse. Pursuant thereto, the Company pays to Hicks Muse Partners an annual fee of not less than $1,000 , subject to increase or decrease (but not below $1,000), based upon changes in the Consumer Price Index. Hicks Muse Partners is also entitled to reimbursement for any out-of-pocket expenses incurred in connection with rendering services under the Financial Monitoring and Oversight Agreement. The Financial Monitoring and Oversight Agreement provides that the agreement will terminate at such time as Thomas O. Hicks and his affiliates collectively cease to beneficially own at least two-thirds of the number of shares of Chancellor Media Common Stock beneficially owned by them, collectively. The Company paid Hicks Muse Partners $333 in 1997 pursuant to the Financial F-29 215 CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Monitoring and Oversight Agreement which is included in corporate general and administrative expense in the accompanying consolidated statement of operations. In connection with the consummation of the Chancellor Merger, a Financial Advisory Agreement among Chancellor, CRBC and HM2/Management Partners, L.P. ("HM2/Management"), an affiliate of Hicks Muse, was terminated. In consideration thereof, in lieu of any payments required to be made under the Financial Advisory Agreement in respect of the transactions contemplated by the Chancellor Merger, HM2/Management was paid a fee of $10,000 in cash upon consummation of the Chancellor Merger which was accounted for as a direct acquisition cost. Notwithstanding the termination of the Financial Advisory Agreement, the Company paid Hicks Muse Partners $1,500 for financial advisory services in connection with the Katz Acquisition which was accounted for as a direct acquisition cost. Vernon E. Jordan, Jr., a director of the Company, also serves on the board of directors of Bankers Trust Company and Bankers Trust New York Corporation. Affiliates of Bankers Trust Company and Bankers Trust New York Corporation have provided a variety of commercial banking, investment banking and financial advisory services to the Company, and expect to continue to provide such services to the Company in the future. (15) SEGMENT DATA The Company operated in two principal business segments -- radio broadcasting and media representation -- in 1997. The Company's radio broadcasting segment included a portfolio of 96 stations (68 FM and 28 AM) for which the Company owned at December 31, 1997 in 21 large markets, including each of the nation's 12 largest radio revenue markets. The Company entered into the media representation segment with the acquisition of Katz on October 28, 1997. Katz is a full-service media representation firm serving multiple types of electronic media, with leading market share in the representation of radio and television stations and cable television systems. Katz is retained on an exclusive basis by radio stations, television stations and cable television systems in over 200 designated market areas throughout the United States, including at least one radio or television station in each of the 50 largest designated market areas, to sell national spot advertising air time. The media representation segment data for 1997 includes the results of operations of Katz from the date of acquisition.
DEPRECIATION NET OPERATING AND IDENTIFIABLE CAPITAL 1997 REVENUES INCOME AMORTIZATION ASSETS EXPENDITURES ---- -------- --------- ------------ ------------ ------------ Radio broadcasting....................... $548,856 $52,219 $182,314 $4,465,526 $11,430 Media representation..................... 33,222 6,187 3,668 495,951 436 -------- ------- -------- ---------- ------- Total.......................... $582,078 $58,406 $185,982 $4,961,477 $11,866 ======== ======= ======== ========== =======
(16) QUARTERLY FINANCIAL DATA (UNAUDITED)
QUARTER ENDED ------------------------------------------------ MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31 -------- -------- ------------ ----------- 1996: Net revenues....................................... $ 53,371 $ 72,991 $ 78,768 $ 88,720 Operating income (loss)............................ (8,223) 7,062 9,351 9,770 Net income (loss) attributable to common stock..... (14,273) (2,222) (793) 1,094 1997: Net revenues....................................... $ 81,897 $106,364 $145,022 $248,795 Operating income................................... 568 16,968 15,002 25,868 Income (loss) before extraordinary item............ (6,011) 9,870 (3,221) (15,132) Net income (loss) attributable to common stock..... (6,011) 5,520 (6,000) (25,254)
F-30 216 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors Chancellor Media Corporation of Los Angeles: Our report on the consolidated financial statements of Chancellor Media Corporation of Los Angeles and subsidiaries is included in this Registration Statement. In connection with our audit of such financial statements, we have also audited the related financial statement schedule of Chancellor Media Corporation of Los Angeles and subsidiaries as of and for the year ended December 31, 1997 included herein. In our opinion, the financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information required to be included therein. COOPERS & LYBRAND L.L.P. Dallas, Texas February 10, 1998, except for notes 2(b) paragraphs 1 and 3-5 as to which the date is February 20, 1998 and 9(a) as to which the date is March 13, 1998 F-31 217 SCHEDULE II CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES VALUATION AND QUALIFYING ACCOUNTS YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997 (DOLLARS IN THOUSANDS)
ADDITIONS ADDITIONS BALANCE AT CHARGED TO CHARGED BALANCE BEGINNING COSTS AND TO OTHER AT END DESCRIPTION OF PERIOD EXPENSES ACCOUNTS WRITEOFFS OF PERIOD ----------- ---------- ---------- --------- --------- --------- Allowance for doubtful accounts: Year ended December 31, 1997...... $ 2,292 5,174 7,049(1) 1,864 $12,651 ======= ===== ======= ===== ======= Year ended December 31, 1996...... $ 2,000 2,179 156(1) 2,043 $ 2,292 ======= ===== ======= ===== ======= Year ended December 31, 1995...... $ 835 904 1,644(1) 1,383 $ 2,000 ======= ===== ======= ===== ======= Deferred tax asset valuation allowance: Year ended December 31, 1997...... $ -- -- -- -- $ -- ======= ===== ======= ===== ======= Year ended December 31, 1996...... $ -- -- -- -- $ -- ======= ===== ======= ===== ======= Year ended December 31, 1995...... $14,458 -- (14,458) -- $ -- ======= ===== ======= ===== =======
- --------------- (1) Additions (deductions) result from the application of purchase accounting relating to the BPI Acquisition in 1995, the Pyramid Acquisition in 1996 and the Chancellor Merger, the Viacom Acquisition and the Katz Acquisition in 1997. F-32 218 CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (DOLLARS IN THOUSANDS, EXCEPT FOR SHARE DATA) ASSETS
DECEMBER 31, SEPTEMBER 30, 1997 1998 ------------ ------------- (UNAUDITED) Current assets: Cash and cash equivalents................................. $ 16,584 $ 13,063 Accounts receivable, less allowance for doubtful accounts of $12,651 in 1997 and $13,002 in 1998................. 239,869 321,391 Other current assets...................................... 27,208 42,343 ---------- ---------- Total current assets.............................. 283,661 376,797 Note receivable from affiliate.............................. -- 150,000 Property and equipment, net................................. 159,797 299,906 Intangible assets, net...................................... 4,404,443 4,916,533 Other assets, net........................................... 113,576 162,142 ---------- ---------- $4,961,477 $5,905,378 ========== ========== LIABILITIES AND STOCKHOLDER'S EQUITY Current liabilities: Accounts payable and accrued expenses..................... $ 171,017 $ 177,472 Long-term debt.............................................. 2,573,000 3,018,000 Deferred tax liabilities.................................... 361,640 312,731 Other liabilities........................................... 44,405 60,403 ---------- ---------- Total liabilities................................. 3,150,062 3,568,606 ---------- ---------- Redeemable preferred stock: Redeemable senior cumulative exchangeable preferred stock of subsidiary, par value $.01 per share; 1,000,000 shares authorized, issued and outstanding; liquidation preference of $121,274 in 1997......................... 119,445 -- Redeemable cumulative exchangeable preferred stock of subsidiary, par value $.01 per share; 3,600,000 shares authorized and 2,117,629 shares issued and outstanding; liquidation preference of $223,519 in 1997............. 211,763 -- Stockholder's equity: Common stock, $.01 par value, 1,040 shares authorized, issued and outstanding................................. 1 1 Paid-in capital............................................. 1,637,628 2,654,273 Accumulated deficit......................................... (157,422) (317,502) ---------- ---------- Total stockholder's equity........................ 1,480,207 2,336,772 ---------- ---------- $4,961,477 $5,905,378 ========== ==========
See accompanying notes to consolidated financial statements F-33 219 CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
THREE MONTHS ENDED NINE MONTHS ENDED ----------------------------- ----------------------------- SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, 1997 1998 1997 1998 ------------- ------------- ------------- ------------- Gross revenues............................... $166,817 $389,551 $382,994 $1,015,562 Less agency commissions.................... (21,795) (45,722) (49,711) (116,466) -------- -------- -------- ---------- Net revenues....................... 145,022 343,829 333,283 899,096 Operating expenses: Operating expenses, excluding depreciation and amortization........................ 73,551 175,062 184,713 491,924 Depreciation and amortization.............. 50,474 118,584 104,386 311,644 Corporate general and administrative....... 5,995 10,109 11,646 25,188 Executive severance charge................. -- -- -- 59,475 -------- -------- -------- ---------- Operating expenses................. 130,020 303,755 300,745 888,231 -------- -------- -------- ---------- Operating income................... 15,002 40,074 32,538 10,865 -------- -------- -------- ---------- Other (income) expense: Interest expense, net...................... 22,295 48,624 45,036 135,709 Gain on disposition of representation contracts............................... -- (18,497) -- (29,767) Other income............................... (5,057) -- (18,380) (3,559) -------- -------- -------- ---------- Other (income) expense............. 17,238 30,127 26,656 102,383 -------- -------- -------- ---------- Income (loss) before income taxes and extraordinary item........... (2,236) 9,947 5,882 (91,518) Income tax expense (benefit)................. 985 1,548 5,244 (15,380) -------- -------- -------- ---------- Income (loss) before extraordinary item............................. (3,221) 8,399 638 (76,138) Extraordinary loss, net of income tax benefit.................................... -- 15,224 4,350 47,089 -------- -------- -------- ---------- Net loss........................... (3,221) (6,825) (3,712) (123,227) Preferred stock dividends.................... 2,779 899 2,779 17,601 -------- -------- -------- ---------- Net loss attributable to common stock............................ $ (6,000) $ (7,724) $ (6,491) $ (140,828) ======== ======== ======== ==========
See accompanying notes to consolidated financial statements. F-34 220 CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (DOLLARS IN THOUSANDS)
NINE MONTHS ENDED ----------------------------- SEPTEMBER 30, SEPTEMBER 30, 1997 1998 ------------- ------------- Cash flows from operating activities: Net loss.................................................. $ (3,712) $ (123,227) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation........................................... 9,091 18,632 Amortization of goodwill, intangible assets and other assets............................................... 95,295 293,012 Executive severance charge -- stock option compensation......................................... -- 16,000 Provisions for doubtful accounts....................... 3,409 4,573 Deferred income tax expense (benefit).................. 5,244 (15,380) Gain on disposition of representation contracts........ -- (29,767) Gain on disposition of assets.......................... (18,380) -- Loss on extinguishment of debt......................... 4,350 47,089 Other.................................................. -- (1,893) Changes in certain assets and liabilities, net of effects of acquisitions: Accounts receivable.................................. (15,171) (73,528) Other current assets................................. 4,481 (10,283) Accounts payable and accrued expenses................ 8,445 12,737 Other assets......................................... 54 (4,114) Other liabilities.................................... 197 12,608 ----------- ----------- Net cash provided by operating activities......... 93,303 146,459 ----------- ----------- Cash flows from investing activities: Acquisitions, net of cash acquired........................ (2,083,701) (905,264) Escrow deposits on pending acquisitions................... (10,005) -- Payments made on purchases of representation contracts.... -- (25,724) Proceeds from sale of representation contracts............ -- 20,283 Proceeds from sale of assets.............................. 269,250 -- Issuance of note receivable from affiliate................ -- (150,000) Capital expenditures...................................... (6,436) (21,684) Other..................................................... (20,914) (39,750) ----------- ----------- Net cash used by investing activities............. (1,851,806) (1,122,139) ----------- ----------- Cash flows from financing activities: Proceeds from issuance of long-term debt.................. 2,105,000 1,973,000 Principal payments on long-term debt...................... (606,000) (1,528,000) Cash contributed by parent................................ 288,898 1,000,645 Repurchase of 12% and 12 1/4% Exchange Debentures......... -- (403,213) Dividends on preferred stock.............................. -- (31,183) Dividend to parent........................................ (5,748) (19,253) Payments for debt issuance costs.......................... (10,567) (19,837) Other..................................................... (158) -- ----------- ----------- Net cash provided by financing activities......... 1,771,425 972,159 ----------- ----------- Increase (decrease) in cash and cash equivalents............ 12,922 (3,521) Cash and cash equivalents at beginning of period............ 3,060 16,584 ----------- ----------- Cash and cash equivalents at end of period.................. $ 15,982 $ 13,063 =========== ===========
See accompanying notes to consolidated financial statements. F-35 221 CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE DATA) 1. BASIS OF PRESENTATION In the opinion of management, the accompanying unaudited interim financial statements contain all adjustments (consisting of normal recurring accruals) necessary to present fairly the financial position, results of operations and cash flows of Chancellor Media Corporation of Los Angeles and its subsidiaries (collectively, "CMCLA") for the periods presented. Chancellor Media Corporation of Los Angeles is an indirect, wholly owned subsidiary of Chancellor Media Corporation ("Chancellor Media"). Interim periods are not necessarily indicative of results to be expected for the year. It is suggested that these financial statements be read in conjunction with the consolidated financial statements and the notes thereto included in CMCLA's Annual Report on Form 10-K for the year ended December 31, 1997. The consolidated financial statements include the accounts of CMCLA and its subsidiaries, all of which are wholly-owned. All significant intercompany balances and transactions have been eliminated in consolidation. CMCLA adopted SFAS No. 130, Reporting Comprehensive Income, effective January 1, 1998. This statement requires that all items that are required to be recognized under accounting standards as components of comprehensive income be reported in a financial statement that is displayed with the same prominence as other financial statements. CMCLA has no items of comprehensive income for any period presented and therefore is not required to report comprehensive income. 2. ACQUISITIONS AND DISPOSITIONS 1997 Completed Transactions On January 31, 1997, CMCLA acquired WWWW-FM and WDFN-AM in Detroit from affiliates of Chancellor Radio Broadcasting Company ("CRBC") for $30,000 in cash plus various other direct acquisition costs. The Company had previously provided certain sales and promotional functions to WWWW-FM and WDFN-AM under a joint sales agreement since February 14, 1996 and subsequently operated the stations under a time brokerage agreement since April 1, 1996. On January 31, 1997, CMCLA acquired KKSF-FM and KDFC-FM/AM in San Francisco from affiliates of the Brown Organization for $115,000 in cash plus various other direct acquisition costs. CMCLA had previously been operating KKSF-FM and KDFC-FM/AM under a time brokerage agreement since November 1, 1996. On July 21, 1997, CMCLA sold KDFC-FM to Bonneville International Corporation ("Bonneville") for $50,000 in cash. The assets of KDFC-FM were classified as assets held for sale in connection with the purchase price allocation of the acquisition of KKSF-FM and KDFC-FM/AM and no gain or loss was recognized by CMCLA upon consummation of the sale. On April 1, 1997, CMCLA acquired WJLB-FM and WMXD-FM in Detroit from Secret Communications Limited Partnership ("Secret") for $168,000 in cash plus various other direct acquisition costs. CMCLA had previously been operating WJLB-FM and WMXD-FM under time brokerage agreements since September 1, 1996. On April 3, 1997, CMCLA exchanged WQRS-FM in Detroit (which CMCLA acquired on April 3, 1997 from Secret for $32,000 in cash plus various other direct acquisition costs), to affiliates of Greater Media Radio, Inc. ("Greater Media") in return for WWRC-AM in Washington, D.C. (now known as WTEM-AM) and $9,500 in cash. The exchange was accounted for as a like-kind exchange and no gain or loss was recognized upon consummation of the transaction. The net purchase price to CMCLA of WWRC-AM was therefore $22,500. CMCLA had previously been operating WWRC-AM under a time brokerage agreement since June 17, 1996. F-36 222 CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) On May 1, 1997, CMCLA acquired WDAS-FM/AM in Philadelphia from affiliates of Beasley FM Acquisition Corporation for $103,000 in cash plus various other direct acquisition costs. On May 15, 1997, CMCLA exchanged five of its six stations in Charlotte, North Carolina (WPEG-FM, WBAV-FM/AM, WRFX-FM and WFNZ-AM) for two FM stations in Philadelphia (WIOQ-FM and WUSL-FM) owned by EZ Communications, Inc. ("EZ") in Philadelphia (the "Charlotte Exchange"), and also sold CMCLA's sixth radio station in Charlotte, WNKS-FM, to EZ for $10,000 in cash and recognized a gain of $3,536. The Charlotte Exchange was accounted for as a like-kind exchange and no gain or loss was recognized upon consummation of the transaction. On May 30, 1997, CMCLA acquired WPNT-FM in Chicago from affiliates of Century Broadcasting Company for $75,740 in cash (including $1,990 for the purchase of the station's accounts receivable) plus various other direct acquisition costs. On June 19, 1997, CMCLA sold WPNT-FM in Chicago to Bonneville for $75,000 in cash and recognized a gain of $529. On June 3, 1997, CMCLA sold WEJM-FM in Chicago to affiliates of Crawford Broadcasting for $14,750 in cash and recognized a gain of $9,258. On July 2, 1997, CMCLA acquired WLTW-FM and WAXQ-FM in New York and WMZQ-FM, WJZW-FM, WZHF-AM and WBZS-AM in Washington, D.C. from Viacom International, Inc. ("Viacom") for approximately $612,388 in cash including various other direct acquisition costs (the "Viacom Acquisition"). The Viacom Acquisition was financed with (i) bank borrowings under the Senior Credit Facility (as defined) of $552,559; (ii) $53,750 in escrow funds paid by CMCLA on February 19, 1997 and (iii) $6,079 financed through working capital. In June 1997, Chancellor Media issued 5,990,000 shares of $3.00 Convertible Preferred Stock for net proceeds of $287,808 which were contributed to CMCLA and used to repay borrowings under the Senior Credit Facility and subsequently were reborrowed on July 2, 1997 as part of the financing of the Viacom Acquisition. On July 7, 1997, CMCLA sold WJZW-FM in Washington, D.C. to affiliates of Capital Cities/ABC Radio for $68,000 in cash. The assets of WJZW-FM, as well as the assets of WZHF-AM and WBZS-AM, which were also sold on August 13, 1997, were accounted for as assets held for sale in connection with the purchase price allocation of the Viacom Acquisition and no gain or loss was recognized by CMCLA upon consummation of the sales. On July 7, 1997, CMCLA sold the Federal Communications Commission ("FCC") authorizations and certain transmission equipment previously used in the operation of KYLD-FM in San Francisco to Susquehanna Radio Corporation ("Susquehanna") for $44,000 in cash and recognized a gain of $1,726. Simultaneously therewith, CRBC sold the call letters "KSAN-FM" (which CRBC previously used in San Francisco) to Susquehanna. On July 7, 1997, CMCLA and CRBC entered into a time brokerage agreement to enable CMCLA to operate KYLD-FM on the frequency previously assigned to KSAN-FM, and on July 7, 1997, CRBC changed the call letters of KSAN-FM to KYLD-FM. Upon the consummation of the Chancellor Merger (as defined herein), CMCLA changed the format of the new KYLD-FM to the format previously operated on the old KYLD-FM. On July 14, 1997, CMCLA completed the disposition of WLUP-FM in Chicago to Bonneville for net proceeds of $80,000 which were held by a qualified intermediary pending the completion of the deferred exchange of WLUP-FM for KZPS-FM and KDGE-FM in Dallas. On October 7, 1997, CMCLA applied the net proceeds from the disposition of WLUP-FM of $80,000 in cash, plus an additional $3,500 and various other direct acquisition costs, in a deferred exchange of WLUP-FM for KZPS-FM and KDGE-FM in Dallas. The exchange was accounted for as a like-kind exchange and no gain or loss was recognized upon consummation of the transaction. CMCLA had previously operated KZPS-FM and KDGE-FM under time brokerage agreements effective August 1, 1997. On July 21, 1997, CMCLA entered into a time brokerage agreement with CRBC whereby CMCLA began managing certain limited functions of CRBC's stations KBGG-FM, KNEW-AM and KABL-FM in F-37 223 CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) San Francisco pending the consummation of the Chancellor Merger (as defined herein), which occurred on September 5, 1997. On August 13, 1997, CMCLA sold WBZS-AM and WZHF-AM in Washington, D.C. (acquired as part of the Viacom Acquisition) and KDFC-AM in San Francisco to affiliates of Douglas Broadcasting ("Douglas") for $18,000 in the form of a promissory note. The promissory note, as amended on May 1, 1998, bears interest at 7 3/4% from the closing date through February 28, 1998 and at 10.0% from March 1, 1998 through the remainder of the term of the note, with a balloon principal payment due four years after closing. At closing, Douglas posted a $1,000 letter of credit for the benefit of CMCLA that will remain outstanding until all amounts due under the promissory note are paid. On August 27, 1997, CMCLA sold WEJM-AM in Chicago to Douglas for $7,500 in cash and recognized a gain of $3,331. On September 5, 1997, pursuant to an Amended and Restated Agreement and Plan of Merger, dated as of February 19, 1997 and amended and restated on July 31, 1997 (the "Chancellor Merger Agreement"), among Chancellor Broadcasting Company ("Chancellor"), CRBC, Evergreen Media Corporation ("Evergreen"), Evergreen Mezzanine Holdings Corporation ("EMHC") and Evergreen Media Corporation of Los Angeles ("EMCLA"), (i) Chancellor was merged with and into EMHC, a direct, wholly-owned subsidiary of Evergreen, with EMHC remaining as the surviving corporation and (ii) CRBC was merged with and into EMCLA, a direct, wholly-owned subsidiary of EMHC, with EMCLA remaining as the surviving corporation (collectively, the "Chancellor Merger"). Upon consummation of the Chancellor Merger, Evergreen was renamed Chancellor Media Corporation, EMHC was renamed Chancellor Mezzanine Holdings Corporation ("CMHC") and EMCLA was renamed Chancellor Media Corporation of Los Angeles ("CMCLA"). Consummation of the Chancellor Merger added 52 radio stations (36 FM and 16 AM) to CMCLA's portfolio of stations, including 13 stations in markets in which CMCLA previously operated. The total purchase price allocated to net assets acquired was approximately $1,998,383 which included (i) the conversion of each outstanding share of Chancellor Common Stock into 0.9091 shares of Chancellor Media's Common Stock, resulting in the issuance of 34,617,460 shares of Chancellor Media's Common Stock at $15.50 per share, (ii) the assumption of long-term debt of CRBC of $949,000 which included $549,000 of borrowings outstanding under the CRBC senior credit facility, $200,000 of CRBC's 9 3/8% Senior Subordinated Notes due 2004 and $200,000 of CRBC's 8 3/4% Senior Subordinated Notes due 2007, (iii) the issuance of 2,117,629 shares of CMCLA's 12% Exchangeable Preferred Stock in exchange for CRBC's substantially identical securities with a fair value of $215,570 including accrued and unpaid dividends of $3,807, (iv) the issuance of 1,000,000 shares of CMCLA's 12 1/4% Series A Senior Cumulative Exchangeable Preferred Stock in exchange for CRBC's substantially identical securities with a fair value of $120,217 including accrued and unpaid dividends of $772, (v) the issuance of 2,200,000 shares of Chancellor Media's 7% Convertible Preferred Stock in exchange for Chancellor's substantially identical securities with a fair value of $111,048 including accrued and unpaid dividends of $1,048, (vi) the assumption of stock options issued to Chancellor stock option holders with a fair value of $34,977 and (vii) estimated acquisition costs of $31,000. On October 28, 1997, Chancellor Media and CMCLA acquired Katz Media Group, Inc. ("KMG"), a full-service media representation firm, in a tender offer transaction for a total purchase price of approximately $379,101 (the "Katz Acquisition") which included (i) the conversion of each outstanding share of KMG Common Stock into the right to receive $11.00 in cash, resulting in total cash payments of $149,601, (ii) the assumption of long-term debt of KMG and its subsidiaries of $222,000 which included $122,000 of borrowings outstanding under the KMG senior credit facility and $100,000 of 10 1/2% Senior Subordinated Notes due 2007 of Katz Media Corporation (a subsidiary of KMG) and (iii) estimated acquisition costs of $7,500. On December 29, 1997, CMCLA acquired five radio stations from Pacific and Southern Company, Inc., a subsidiary of Gannett Co., Inc., consisting of WGCI-FM/AM in Chicago for $140,000, KKBQ-FM/AM in F-38 224 CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Houston for $110,000 and KHKS-FM in Dallas for $90,000, for an aggregate purchase price of $340,000 in cash plus various other direct acquisition costs. 1998 Completed Transactions On January 30, 1998, CMCLA acquired KXPK-FM in Denver from Ever Green Wireless LLC (which is unrelated to the Company) for $26,000 in cash plus various other direct acquisition costs, of which $1,650 was previously paid by CRBC as escrow funds and are classified as other assets at December 31, 1997. CMCLA had previously operated KXPK-FM under a time brokerage agreement since September 1, 1997. On April 3, 1998, CMCLA exchanged WTOP-AM in Washington, KZLA-FM in Los Angeles and WGMS-FM in Washington plus $63,000 in cash (including $3,000 paid by CMCLA in escrow and classified as other assets at December 31, 1997) to Bonneville for WBIX-FM in New York, KLDE-FM in Houston and KBIG-FM in Los Angeles (the "Bonneville Exchange"). CMCLA had previously operated KLDE-FM and KBIG-FM under time brokerage agreements since October 1, 1997 and WBIX-FM since October 10, 1997, and had sold substantially all of the broadcast time of WTOP-AM, KZLA-FM and WGMS-FM to Bonneville since October 1, 1997. On April 13, 1998, CMCLA and Secret entered into a settlement agreement regarding WFLN-FM in Philadelphia. Previously in August 1996, CMCLA and Secret had entered into an agreement under which CMCLA would acquire WFLN-FM from Secret for $37,750 in cash. In April 1997, CMCLA entered into an agreement to sell WFLN-FM to Greater Media for $41,800 in cash. On July 16, 1997, Secret purported to terminate the sale of WFLN-FM to CMCLA. CMCLA subsequently brought suit against Secret to enforce its rights to acquire WFLN-FM. Pursuant to a court settlement entered in August 1997 and the settlement agreement between CMCLA and Secret entered on April 13, 1998, (i) Secret sold WFLN-FM directly to Greater Media for $37,750, (ii) Greater Media deposited $4,050 (the difference between CMCLA's proposed acquisition price for WFLN-FM from Secret and CMCLA's proposed sale price for WFLN-FM to Greater Media) with the court and (iii) CMCLA received $3,500 of such amount deposited by Greater Media with the court, plus interest earned during the period which the court held such amounts (the "WFLN Settlement"), and Secret received the balance of such amounts. On May 29, 1998, as part of the Capstar/SFX Transaction (defined below), CMCLA exchanged WAPE-FM and WFYV-FM in Jacksonville (valued for purposes of the Capstar/SFX Transaction at $53,000) plus $90,250 in cash to Capstar Broadcasting Corporation (together with its subsidiaries, "Capstar") in return for KODA-FM in Houston (the "Houston Exchange"). Furthermore, on May 29, 1998, Capstar sold KKPN-FM in Houston (acquired by Capstar as part of Capstar's acquisition (the "SFX Acquisition") of SFX Broadcasting, Inc. ("SFX")) due to the attributable ownership of Hicks, Muse, Tate & Furst, Incorporated ("Hicks Muse") in both Capstar and CMCLA in order to comply with the FCC's multiple ownership limits. In connection with Capstar's sale of KKPN-FM, CMCLA received a commission from Capstar of $1,730. On May 29, 1998, CMCLA also provided a loan to Capstar in the principal amount of $150,000 as part of the Capstar/SFX Transaction (the "Capstar Loan"). The Capstar Loan bears interest at the rate of 12% per annum (subject to increase in certain circumstances), and is secured by a senior pledge of common stock of Capstar's direct subsidiary. A portion of the Capstar Loan will be prepaid by Capstar in connection with CMCLA's acquisition of, and the proceeds of such prepayment would be used by CMCLA as a portion of the purchase price for, each Capstar/SFX Station. Hicks Muse, which is a substantial shareholder of Chancellor Media, controls Capstar, and certain officers and directors of Chancellor Media and CMCLA are directors and/or executive officers of Capstar and/or Hicks Muse. On June 1, 1998, CMCLA acquired WWDC-FM/AM in Washington, D.C. from Capitol Broadcasting Company and its affiliates for $74,062 in cash (including $2,062 for the purchase of the stations' accounts receivable) plus various other direct acquisition costs, of which $4,000 was previously paid by CMCLA as F-39 225 CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) escrow funds and are classified as other assets at December 31, 1997 (the "Capitol Broadcasting Acquisition"). On May 1, 1998, CMCLA formed a new marketing group division, in an effort to enhance the revenues the Company derives from its sales promotion activities. On June 1, 1998, CMCLA acquired Global Sales Development, Inc., a consulting firm based in Richmond, Virginia, for $675 in cash plus various other direct acquisition costs to lead its marketing efforts for this new division. On June 15, 1998, CMCLA's national radio network, The AMFM Radio Networks, acquired the syndicated programming shows of Global Satellite Network for $14,000 in cash plus various other direct acquisition costs. The syndicated programming shows acquired include "Rockline", "Modern Rock Live", "Reelin' in the Years" and the concert series "Live from the Pit". On July 31, 1998, CMCLA acquired Martin Media, L.P. and certain affiliated companies ("Martin Media"), an outdoor advertising company with over 14,500 billboards and outdoor displays in 12 states serving 23 markets, for $591,674 in cash plus working capital of $19,443 subject to certain adjustments and various other direct acquisition costs of approximately $10,000. On August 28, 1998, CMCLA acquired various syndicated programming shows of Casey Kasem and the related programming libraries for $7,150 in cash and $7,000 in the form of a note due August 2000. In September 1998, CMCLA acquired approximately 325 billboards and outdoor displays in various markets for approximately $10,166 in cash. On October 9, 1998, CMCLA acquired approximately a 22.4% non-voting equity interest in Z-Spanish Media Corporation ("Z Spanish Media") for approximately $25,000 in cash (the "Z Spanish Acquisition"). Z Spanish Media, which is headquartered in Sacramento, California, is the owner and operator of 22 Hispanic format radio stations in California, Texas, Arizona and Illinois. On October 23, 1998, CMCLA acquired Primedia Broadcast Group, Inc. and certain of its affiliates, which own and operate eight FM stations in Puerto Rico, for approximately $76,050 in cash less working capital deficit of $1,280 plus various other direct acquisition costs (the "Primedia Acquisition"). In November 1998, CMCLA acquired approximately 290 billboards and outdoor displays in various markets for approximately $12,978 in cash. Pending Transactions On July 31, 1997, Martin Media paid $6,025 to Kunz & Company for an option to purchase approximately 1,000 display faces of its Kunz Outdoor Advertising division for $33,289 in cash plus various other direct acquisition costs (the "Kunz Option"). Although there can be no assurance, CMCLA expects that the exercise of the Kunz Option will be consummated in the fourth quarter of 1998. On February 20, 1998, CMCLA entered into an agreement to acquire from Capstar KTXQ-FM and KBFB-FM in Dallas/Ft. Worth, KODA-FM, KKRW-FM and KQUE-AM in Houston, KPLN-FM and KYXY-FM in San Diego and WDRV-FM, WJJJ-FM, WXDX-FM and WDVE-FM in Pittsburgh (collectively, the "Capstar/SFX Stations") for an aggregate purchase price of approximately $637,500 in a series of purchases and exchanges over a period of three years (the "Capstar/SFX Transaction"). The Capstar/SFX stations were acquired by Capstar as part of Capstar's acquisition of SFX on May 29, 1998. On May 29, 1998, CMCLA completed the Houston Exchange (defined above) and began operating the remaining ten Capstar/ SFX Stations under time brokerage agreements. CMCLA is currently assessing whether the terms of the Capstar/SFX Transaction will be modified upon the consummation of the Capstar Merger. On April 8, 1998, CMCLA entered into an agreement to acquire Petry Media Corporation, a leading independent television representation firm (the "Petry Acquisition"). The agreement currently provides for a F-40 226 CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) purchase price of $129.5 million in cash. On June 3, 1998, the Antitrust Division of the United States Department of Justice (the "DOJ") issued a second request for additional information under the HSR Act in connection with the Petry Acquisition to which CMCLA has responded. CMCLA and Petry are still negotiating with the DOJ regarding this transaction and have agreed to extend the waiting period under the HSR Act pending completion of these discussions. Accordingly at this time, CMCLA cannot be sure of the terms on which this transaction will be completed, if at all. On July 7, 1998, Chancellor Media entered into an agreement whereby the ultimate parent of LIN Television Corporation ("LIN") will merge into Chancellor Media (the "LIN Merger"). Pursuant to this agreement, Chancellor Media will issue .0300 shares of Chancellor Media Common Stock for each share of LIN's Common Stock resulting in the issuance of approximately 17,700,000 shares (comprised of approximately 16,200,000 newly issued shares, the assumption of LIN phantom stock units representing approximately 425,000 shares and the assumption of LIN options representing the right to purchase approximately 1,075,000 shares). Upon consummation of the LIN Merger, it is expected that LIN will own or operate 12 television stations in eight markets in the United States. Although there can be no assurance, Chancellor Media expects that the LIN Merger will be consummated in the first quarter of 1999. On August 11, 1998, CMCLA entered into agreements to acquire four FM and two AM radio stations in Cleveland for an aggregate purchase price of approximately $275,000 in cash plus various other direct acquisition costs (the "Cleveland Acquisitions"). The Cleveland Acquisitions consist of the purchase by the Company of (i) WDOK-FM and WRMR-AM from Independent Group Limited Partnership, (ii) WZAK-FM from Zapis Communications, (iii) Zebra Broadcasting Corporation which owns WZJM-FM and WJMO-AM and (v) Wincom Broadcasting Corporation which owns WQAL-FM (the "Wincom Acquisition"). The consummation of each of the Cleveland Acquisitions (other than the Wincom Acquisition) is contingent upon the consummation of each of the other Cleveland Acquisitions (other than the Wincom Acquisition). CMCLA began operating WQAL-FM under a time brokerage agreement effective October 1, 1998. Although there can be no assurance, CMCLA expects that the Cleveland Acquisitions will be consummated in the first quarter of 1999. On August 20, 1998, CMCLA entered into an agreement to sell WMVP-AM in Chicago to ABC, Inc. for $21,000 in cash (the "Chicago Disposition"). CMCLA entered into a time brokerage agreement to sell substantially all of the broadcast time of WMVP-AM effective September 10, 1998. Although there can be no assurance, CMCLA expects that the Chicago Disposition will be consummated in the fourth quarter of 1998. On August 26, 1998, Chancellor Media and Capstar entered into an agreement to merge in a stock-for-stock transaction that will create the nation's largest radio broadcasting entity. Pursuant to this agreement, Chancellor Media will acquire Capstar in a reverse merger in which Capstar will be renamed Chancellor Media Corporation. Each share of Chancellor Media Common Stock will represent one share in the combined entity. Each share of Capstar Common Stock will represent 0.480 shares of Common Stock in the combined entity, subject to an upward adjustment not to exceed 0.025 shares to the extent that Capstar's 1998 cash flow from specified assets exceeds certain specified targets. Capstar owns and operates more than 355 radio stations serving 83 mid-sized markets nationwide. Although there can be no assurance, Chancellor Media expects that the Capstar Merger will be consummated in the second quarter of 1999. On August 31, 1998, CMCLA entered into an agreement to acquire the assets of the Outdoor Advertising Division of Whiteco Industries, Inc., an outdoor advertising company with over 21,800 billboards and outdoor displays in 34 states, for $930,000 in cash plus working capital and various other direct acquisition costs (the "Whiteco Acquisition"). The DOJ has requested that CMCLA and Whiteco submit certain additional information on a voluntary basis in connection with the DOJ's review of the Whiteco Acquisition. CMCLA and Whiteco have responded to this request and are currently in discussions with the DOJ regarding the terms on which this transaction may be completed. Although there can be no assurance, CMCLA expects that the Whiteco Acquisition will be consummated in the fourth quarter of 1998. F-41 227 CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) On September 3, 1998, CMCLA entered into an agreement to acquire Pegasus, a television broadcasting company which owns a television station in Puerto Rico, for approximately $69,600 in cash (the "Pegasus Acquisition"). Although there can be no assurance, CMCLA expects that the Pegasus Acquisition will be consummated in the first quarter of 1999. In connection with the LIN Merger, CMCLA may assign its rights under its agreement with Pegasus to LIN. On September 15, 1998, CMCLA entered into an agreement to acquire KKFR-FM and KFYI-AM in Phoenix from The Broadcast Group, Inc. for $90,000 in cash (the "Phoenix Acquisition"). CMCLA began operating KKFR-FM and KFYI-AM under a time brokerage agreement effective November 5, 1998. Although there can be no assurance, CMCLA expects that the Phoenix Acquisition will be consummated in the second quarter of 1999. The foregoing are collectively referred to herein as the "Pending Transactions." Consummation of each of the Pending Transactions discussed above is subject to various conditions, including, in certain cases, approval from the FCC and the expiration or early termination of any waiting period required under the HSR Act. Except as described above, CMCLA believes that such conditions will be satisfied in the ordinary course, but there can be no assurance that this will be the case. Escrow funds of $6,025 related to the Kunz Option are classified as other assets in the accompanying balance sheet at September 30, 1998. Escrow funds of $4,650 paid by CMCLA in connection with the Bonneville Exchange and the Capitol Broadcasting Acquisition were classified as other assets in the accompanying balance sheet at December 31, 1997. Other Transactions On July 10, 1998, Chancellor Media entered into an agreement to acquire a 50% economic interest in Grupo Radio Centro, S.A. de C.V. ("GRC"), an owner and operator of radio stations in Mexico, for approximately $120.5 million in cash and $116.5 million in Chancellor Media Common Stock. On October 15, 1998, Chancellor Media announced that it had provided notice to GRC that it was terminating the acquisition agreement in accordance with its terms. Summary of Net Assets Acquired The completed acquisitions discussed above were accounted for as purchases. Accordingly, the accompanying consolidated financial statements include the results of operations of the acquired entities from the dates of acquisition. A summary of the net assets acquired follows:
YEAR NINE MONTHS ENDED ENDED DECEMBER 31, SEPTEMBER 30, 1997 1998 ------------ ------------- Working capital, including cash of $9,724 in 1997 and $6,505 in 1998................................ $ 66,805 $ 19,223 Property and equipment.............................. 118,371 137,060 Assets held for sale................................ 131,000 -- Intangible assets................................... 3,823,746 751,808 Other assets........................................ 26,742 6,025 Deferred tax liability.............................. (279,371) -- Other liabilities................................... (39,681) (697) ---------- -------- $3,847,612 $913,419 ========== ========
F-42 228 CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The pro forma consolidated condensed results of operations data for the nine months ended September 30, 1997 and 1998, as if the 1997 Completed Transactions and the 1998 Completed Transactions discussed above, the 8 1/8% Notes Offering, the amendment and restatement of the Senior Credit Facility and the 1998 Financing Transactions (as defined herein) occurred at January 1, 1997, follow:
NINE MONTHS ENDED ------------------------------ SEPTEMBER 30, SEPTEMBER 30, 1997 1998 -------------- ------------- Net revenues...................................... $ 826,026 $ 963,063 Net loss.......................................... (143,303) (119,198)
The pro forma results are not necessarily indicative of what would have occurred if the acquisitions had been in effect for the entire periods presented. 3. FINANCING TRANSACTIONS 1998 Completed Financing Transactions On March 13, 1998, Chancellor Media completed an offering of 21,850,000 shares of its Common Stock (the "1998 Equity Offering"). The net proceeds from the 1998 Equity Offering of approximately $994,642 were contributed to CMCLA and were used to reduce bank borrowings under the revolving credit portion of the Senior Credit Facility (as defined) and the excess proceeds were initially invested in short-term investment grade securities. The Company subsequently used the excess proceeds for general corporate purposes, including the financing of the Bonneville Exchange, the Capstar Loan and a portion of the Houston Exchange. On May 8, 1998, CMCLA completed a consent solicitation (the "12% Preferred Stock Consent Solicitation") to modify certain timing restrictions on its ability to exchange all shares of its 12% Exchangeable Preferred Stock (the "12% Preferred Stock") for its 12% Subordinated Exchange Debentures due 2009 (the "12% Debentures"). Consenting holders of 12% Preferred Stock received payments of $0.05 per share of 12% Preferred Stock. On May 13, 1998, CMCLA exchanged the shares of 12% Preferred Stock for 12% Debentures (the "12% Exchange"). In connection with the 12% Preferred Stock Consent Solicitation and 12% Exchange, CMCLA incurred approximately $270 in transaction costs which were recorded as deferred debt issuance costs. On June 10, 1998, CMCLA completed a cash tender offer (the "12% Debentures Tender Offer") for all of its 12% Debentures for an aggregate repurchase cost of $262,495 which included (i) the principal amount of the 12% Debentures of $211,763, (ii) premiums on the repurchase of the 12% Debentures of $47,798, (iii) accrued and unpaid interest on the 12% Debentures from May 14, 1998 through June 10, 1998 of $1,976 and (iv) estimated transaction costs of $958. In connection with the 12% Debentures Tender Offer, CMCLA recorded an extraordinary charge of $31,865 (net of a tax benefit of $17,158) consisting of the premiums, estimated transaction costs and the write-off of the unamortized balance of deferred debt issuance costs. On July 20, 1998, CMCLA completed a consent solicitation (the "12 1/4% Preferred Stock Consent Solicitation") to modify certain timing restrictions on its ability to exchange all shares of its 12 1/4% Series A Senior Cumulative Exchangeable Preferred Stock (the "12 1/4% Preferred Stock") for its 12 1/4% Subordinated Exchange Debentures due 2008 (the "12 1/4% Debentures"). Consenting holders of 12 1/4% Preferred Stock received payments of $0.05 per share of 12 1/4% Preferred Stock. On July 23, 1998, CMCLA exchanged the shares of 12 1/4% Preferred Stock for 12 1/4% Debentures (the "12 1/4% Exchange"). In connection with the 12 1/4% Preferred Stock Consent Solicitation and 12 1/4% Exchange, CMCLA incurred approximately $170 in transaction costs which were recorded as deferred debt issuance costs. F-43 229 CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) On August 19, 1998, CMCLA completed a cash tender offer (the "12 1/4% Debentures Tender Offer") for all of its 12 1/4% Debentures for an aggregate repurchase cost of $144,527 which included (i) the principal amount of the 12 1/4% Debentures of $119,445, (ii) premiums on the repurchase of the 12 1/4% Debentures of $22,683, (iii) accrued and unpaid interest on the 12 1/4% Debentures from August 16, 1998 through August 19, 1998 of $1,829 and (iv) estimated transaction costs of $570. In connection with the 12 1/4% Debentures Tender Offer, CMCLA recorded an extraordinary charge of $15,224 (net of a tax benefit of $8,199) consisting of the premiums, estimated transaction costs and the write-off of the unamortized balance of deferred debt issuance costs. On September 30, 1998, CMCLA issued $750,000 aggregate principal amount of 9% Senior Subordinated Notes due 2008 (the "9% Notes") for net proceeds of approximately $730,000 (the "9% Notes Offering"). The net proceeds from the 9% Notes Offering will be used to finance a portion of CMCLA's Pending Transactions. Prior to consummation of the Pending Transactions, CMCLA used the net proceeds to temporarily reduce borrowings outstanding under the revolving credit portion of the Senior Credit Facility. 1998 Pending Financing Transactions On November 12, 1998, CMCLA signed a definitive purchase agreement that provides for the issuance of $750,000 of 8% Senior Notes due 2008 (the "8% Senior Notes Offering"). The net proceeds from the 8% Senior Notes Offering will be used to reduce bank borrowings under the revolving credit portion of the Senior Credit Facility and any excess proceeds will be invested in short-term investment grade securities pending use for general corporate purposes. Although there can be no assurance, CMCLA expects that the 8% Senior Notes Offering will be consummated on November 17, 1998. 4. LONG-TERM DEBT Long-term debt consists of the following at December 31, 1997 and September 30, 1998:
DECEMBER 31, SEPTEMBER 30, 1997 1998 ------------ ------------- Senior Credit Facility(a)........................... $1,573,000 $ 1,268,000 9 3/8% Notes(b)..................................... 200,000 200,000 8 3/4% Notes(b)..................................... 200,000 200,000 10 1/2% Notes(b).................................... 100,000 100,000 8 1/8% Notes(b)..................................... 500,000 500,000 9% Notes(b)......................................... -- 750,000 ---------- ------------- Total long-term debt...................... $2,573,000 $ 3,018,000 ========== =============
(a) Senior Credit Facility On April 25, 1997, CMCLA entered into a loan agreement which amended and restated its prior senior credit facility. Under the amended and restated agreement, as amended on June 26, 1997, August 7, 1997, October 28, 1997, February 10, 1998, May 1, 1998, July 31, 1998 and November 9, 1998 (as amended, the "Senior Credit Facility"), CMCLA established a $1,250,000 revolving facility (the "Revolving Loan Facility") and a $500,000 term loan facility (the "Term Loan Facility"). Upon consummation of the Chancellor Merger, the aggregate commitments under the Revolving Loan Facility and the Term Loan Facility were increased to $1,600,000 and $900,000, respectively. In connection with the amendment and restatement of the Senior Credit Facility, CMCLA wrote off the unamortized balance of deferred debt issuance costs of $4,350 (net of a tax benefit of $2,343) as an extraordinary charge. Borrowings under the Senior Credit Facility bear interest at a rate based, at the option of CMCLA, on the participating banks' prime rate or Eurodollar rate, plus an incremental rate. Without giving effect to the F-44 230 CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) interest rate swap and cap agreements described below, the interest rate on the $900,000 outstanding under the Term Loan Facility at September 30, 1998 was 6.25% on a blended basis, based on Eurodollar rates, and the interest rate on advances of $355,000 and $13,000 outstanding under the Revolving Loan Facility were 6.25% and 8.50%, respectively, at September 30, 1998, based on the Eurodollar and prime rates, respectively. CMCLA pays fees ranging from 0.25% to 0.375% per annum on the aggregate unused portion of the loan commitment based upon the leverage ratio for the most recent quarter end, in addition to an annual agent's fee. Pursuant to the Senior Credit Facility, CMCLA is required to enter into interest hedging agreements that result in the fixing or placing a cap on CMCLA's floating rate debt so that not less than 50% of the principal amount of total debt outstanding has a fixed or capped rate. The Term Loan Facility is payable in quarterly installments commencing on September 30, 2000 and ending June 20, 2005. The Revolving Loan Facility requires scheduled annual reductions of the commitment amount, payable in quarterly installments commencing on September 30, 2000 and ending on June 30, 2005. At October 31, 1998, CMCLA had drawn $900,000 of the Term Loan Facility and $433,000 of the Revolving Loan Facility. The capital stock of CMCLA's subsidiaries is pledged to secure the performance of CMCLA's obligations under the Senior Credit Facility, and each of CMCLA's domestic subsidiaries have guaranteed those obligations. (b) Senior Subordinated Notes Upon consummation of the Chancellor Merger, on September 5, 1997, CMCLA assumed all of the obligations under CRBC's $200,000 aggregate principal amount 9 3/8% Senior Subordinated Notes due 2004 (the "9 3/8% Notes") and the indenture governing such securities, and assumed all of the obligations under CRBC's $200,000 aggregate principal amount 8 3/4% Senior Subordinated Notes due 2007 (the "8 3/4% Notes") and the indenture governing such securities. Upon consummation of the Katz Acquisition, on October 28, 1997, CMCLA assumed all of the obligations under Katz Media Corporation's $100,000 aggregate principal amount of 10 1/2% Senior Subordinated Notes due 2007 (the "10 1/2% Notes") and the amended and restated indenture governing such securities. On December 22, 1997, CMCLA issued $500,000 aggregate principal amount of 8 1/8 Senior Subordinated Notes due 2007 (the "8 1/8% Notes") for net proceeds of approximately $485,000. On September 30, 1998, CMCLA issued $750,000 aggregate principal amount of 9% Notes for net proceeds of approximately $730,000. (c) Summarized Financial Information of Subsidiary Guarantors The 9 3/8% Notes, the 8 3/4% Notes, the 10 1/2% Notes, the 8 1/8% Notes and the 9% Notes (collectively, the "Notes") are unsecured obligations of CMCLA, subordinated in right of payment to all existing and any future senior indebtedness of CMCLA. The Notes are fully and unconditionally guaranteed, on a joint and several basis, by all of CMCLA's direct and indirect subsidiaries other than certain inconsequential subsidiaries (the "Subsidiary Guarantors"). The Subsidiary Guarantors are wholly-owned subsidiaries of CMCLA. Summarized financial information of the Subsidiary Guarantors as of December 31, 1997 and September 30, 1998 and for the nine months ended September 30, 1998 is presented below. Separate financial statements and other disclosures concerning the subsidiary Guarantors are not presented because management has determined that they are not material to investors. There are no significant restrictions on distributions from each of the Subsidiary Guarantors to CMCLA.
DECEMBER 31, SEPTEMBER 30, 1997 1998 ------------ ------------- Current assets.............................................. $ 223,913 $ 300,154 Noncurrent assets........................................... 987,028 911,700 Current liabilities......................................... 89,362 90,250 Noncurrent liabilities...................................... 1,130,105 1,129,460
F-45 231 CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NINE MONTHS ENDED ------------- SEPTEMBER 30, 1998 ------------- Net revenues................................................ $724,806 Operating income............................................ 73,563 Net income.................................................. 20,827
(d) Other The Senior Credit Facility and the indentures governing the Notes contain customary restrictive covenants, which, among other things and with certain exceptions, limit the ability of CMCLA and its subsidiaries to incur additional indebtedness and liens in connection therewith, enter into certain transactions with affiliates, pay dividends, consolidate, merge or effect certain asset sales, issue additional stock, effect an asset swap and make acquisitions. CMCLA is required under the Senior Credit Facility to maintain specified financial ratios, including leverage, cash flow and debt service coverage ratios (as defined). 5. OTHER INCOME Other income consists of the following for the nine months ended September 30, 1997 and 1998:
NINE MONTHS ENDED ----------------------------- SEPTEMBER 30, SEPTEMBER 30, 1997 1998 ------------- ------------- Gain on disposition of assets(a)................... $18,380 $ -- WFLN Settlement(b)................................. -- 3,559 ------- ------ $18,380 $3,559 ======= ======
- --------------- (a) For the nine months ended September 30, 1997, CMCLA recorded a gain on disposition of assets of $18,380 related to the dispositions of WNKS-FM in Charlotte on May 15, 1997 ($3,536), WPNT-FM in Chicago on May 30, 1997 ($529), WEJM-FM in Chicago on June 3, 1997 ($9,258), the FCC authorizations and certain transmission equipment previously used in the operation of KYLD-FM in San Francisco on July 2, 1997 ($1,726) and WEJM-AM in Chicago on August 27, 1997 ($3,331). (b) For the nine months ended September 30, 1998, CMCLA recorded a gain from the WFLN Settlement (defined above) of $3,559. 6. CONTINGENCIES CMCLA is involved in several lawsuits that are incidental to its business. A discussion of certain of these lawsuits is contained in Part II, Item 1, "Legal Proceedings", of this Form 10-Q. CMCLA believes that the ultimate resolution of the lawsuits will not have a material effect on its financial position or results of operations. F-46 232 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors Chancellor Radio Broadcasting Company: We have audited the accompanying consolidated balance sheets of Chancellor Radio Broadcasting Company and Subsidiaries (collectively the "Company") as of December 31, 1995 and 1996 and the related consolidated statements of operations, changes in common stockholder's equity, and cash flows for each of the three years in the period ended December 31, 1996. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 1995 and 1996 and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1996, in conformity with generally accepted accounting principles. COOPERS & LYBRAND L.L.P. Dallas, Texas February 13, 1997, except for Note 15 as to which the date is February 19, 1997 F-47 233 CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS ASSETS
DECEMBER 31, ---------------------------- 1995 1996 ------------ ------------ Current assets: Cash...................................................... $ 1,314,214 $ 3,788,546 Accounts receivable, net of allowance for doubtful accounts of $263,528 and $1,023,660, respectively...... 13,243,292 46,584,705 Prepaid expenses and other................................ 546,405 2,753,731 ------------ ------------ Total current assets.............................. 15,103,911 53,126,982 Restricted cash........................................... -- 20,363,329 Property and equipment, net............................... 17,925,845 49,122,932 Intangibles and other, net................................ 203,808,395 551,406,094 Deferred financing costs, net............................. 4,284,413 16,723,346 ------------ ------------ Total assets...................................... $241,122,564 $690,742,683 ============ ============ LIABILITIES AND STOCKHOLDER'S EQUITY Current liabilities: Accounts payable.......................................... $ 1,873,888 $ 4,409,389 Accrued liabilities....................................... 4,692,948 12,529,831 Accrued interest.......................................... 2,710,891 6,868,839 Current portion of long-term debt......................... 4,062,500 400,000 ------------ ------------ Total current liabilities......................... 13,340,227 24,208,059 Long-term debt............................................ 168,107,242 354,913,499 Deferred income taxes..................................... 4,952,361 2,606,314 Other..................................................... -- 801,572 ------------ ------------ Total liabilities................................. 186,399,830 382,529,444 ------------ ------------ Commitments (Note 11) Redeemable senior cumulative exchangeable preferred stock, par value $.01 per share; 1,000,000 shares authorized, none and 1,000,000 shares issued and outstanding, respectively; preference in liquidation of $109,110,301... -- 107,222,416 Common stockholder's equity: Common stock, par value $.01 per share; 2,000 shares authorized, 1,000 shares issued and outstanding, respectively........................................... 10 10 Additional paid-in capital................................ 66,359,990 219,520,102 Accumulated deficit....................................... (11,637,266) (18,529,289) ------------ ------------ Total common stockholder's equity................. 54,722,734 200,990,823 ------------ ------------ Total liabilities and stockholder's equity........ $241,122,564 $690,742,683 ============ ============
The accompanying notes are an integral part of the financial statements. F-48 234 CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, ------------------------------------------- 1994 1995 1996 ----------- ------------ ------------ Gross broadcasting revenues............. $30,080,829 $ 73,278,860 $203,188,125 Less agency commissions................. 3,763,734 8,956,717 24,786,594 ----------- ------------ ------------ Net revenues.................. 26,317,095 64,322,143 178,401,531 ----------- ------------ ------------ Operating expenses: Programming, technical and news....... 5,678,829 11,734,285 40,987,411 Sales and promotion................... 7,137,039 17,556,256 47,026,490 General and administrative............ 2,844,284 8,174,189 23,195,565 Depreciation and amortization......... 2,954,159 8,256,268 20,877,374 Corporate expenses.................... 599,657 1,815,535 4,844,985 Stock option compensation............. -- 6,360,000 3,800,000 ----------- ------------ ------------ 19,213,968 53,896,533 140,731,825 ----------- ------------ ------------ Income from operations........ 7,103,127 10,425,610 37,669,706 Other (income) expense: Interest expense...................... 5,246,827 18,114,549 35,703,862 Other, net............................ (19,265) 42,402 68,419 ----------- ------------ ------------ Income (loss) before provision for income taxes and extraordinary loss.......... 1,875,565 (7,731,341) 1,897,425 Provision for income taxes.............. 1,163,716 3,799,955 4,612,551 ----------- ------------ ------------ Net income (loss) before extraordinary loss.......... 711,849 (11,531,296) (2,715,126) Extraordinary loss on early extinguishment of debt, net of income tax benefit........................... 817,819 -- 4,176,897 ----------- ------------ ------------ Net loss...................... (105,970) (11,531,296) (6,892,023) Dividends and accretion on preferred stock................................. -- -- 11,556,943 Loss on repurchase of preferred stock... -- -- 16,570,065 ----------- ------------ ------------ Net loss attributable to common stock................ $ (105,970) $(11,531,296) $(35,019,031) =========== ============ ============
The accompanying notes are an integral part of the financial statements. F-49 235 CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN COMMON STOCKHOLDER'S EQUITY
COMMON STOCK --------------- ADDITIONAL ACCUMULATED SHARES AMOUNT PAID-IN CAPITAL DEFICIT TOTAL ------ ------ --------------- ------------ ------------ Balance, December 31, 1993.............. -- -- -- -- -- Issuance of common stock on January 10, 1994........................... 1,000 $ 10 $ 25,499,990 -- $ 25,500,000 Issuance of common stock on October 12, 1994........................... 1,000 10 34,499,990 -- 34,500,000 Net loss.............................. -- -- -- $ (105,970) (105,970) ------ ---- ------------ ------------ ------------ Balance, December 31, 1994.............. 2,000 20 59,999,980 (105,970) 59,894,030 Stock option compensation............. -- -- 6,360,000 -- 6,360,000 Contribution of stock held by affiliate of Hicks, Muse, Tate & Furst.............................. (1,000) (10) 10 -- -- Net loss.............................. -- -- -- (11,531,296) (11,531,296) ------ ---- ------------ ------------ ------------ Balance, December 31, 1995.............. 1,000 10 66,359,990 (11,637,266) 54,722,734 Loss on repurchase of preferred stock.............................. -- -- (16,570,065) -- (16,570,065) Dividends and accretion on preferred stock.............................. -- -- (11,556,943) -- (11,556,943) Capital contributions................. -- -- 181,287,120 -- 181,287,120 Net loss.............................. -- -- -- (6,892,023) (6,892,023) ------ ---- ------------ ------------ ------------ Balance, December 31, 1996.............. 1,000 $ 10 $219,520,102 $(18,529,289) $200,990,823 ====== ==== ============ ============ ============
The accompanying notes are an integral part of the financial statements. F-50 236 CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31, -------------------------------------------- 1994 1995 1996 ------------- ------------ ------------- Cash flows from operating activities: Net loss................................................. $ (105,970) $(11,531,296) $ (6,892,023) Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization.......................... 2,954,159 8,256,268 20,877,374 Amortization of deferred financing costs............... 226,000 791,000 2,633,583 Stock option compensation.............................. -- 6,360,000 3,800,000 Deferred income taxes.................................. 1,490,716 3,788,877 4,548,481 Extraordinary loss..................................... 490,819 -- 4,176,897 Changes in assets and liabilities, net of the effects of acquired businesses: Accounts receivable, net............................. (9,675,567) (2,343,520) (13,408,364) Prepaids and other................................... 216,036 (214,868) (982,637) Accounts payable..................................... 1,509,064 (541,914) 1,429,070 Accrued liabilities.................................. 1,334,397 447,196 3,706,725 Accrued interest..................................... 2,251,654 459,237 4,157,948 ------------- ------------ ------------- Net cash provided by operating activities......... 691,308 5,470,980 24,047,054 ------------- ------------ ------------- Cash flows from investing activities: Purchases of broadcasting properties..................... (204,509,849) (24,351,529) (439,533,609) Purchases of other property and equipment................ (238,648) (1,709,897) (3,208,553) ------------- ------------ ------------- Net cash used in investing activities............. (204,748,497) (26,061,426) (442,742,162) ------------- ------------ ------------- Cash flows from financing activities: Proceeds from issuance of long-term debt................. 168,910,299 -- 277,627,630 Proceeds from borrowings under revolving debt facility... 5,639,237 54,458,819 101,966,762 Repayment of long-term debt.............................. (25,000,000) (2,437,500) (109,816,233) Repayments of borrowings under revolving debt facility... (3,975,539) (31,633,467) (105,540,183) Issuance of preferred stock.............................. -- -- 175,412,322 Repurchase of preferred stock............................ -- -- (95,462,423) Additional capital contributions......................... 60,000,000 -- 178,525,254 Distribution of additional paid in capital............... -- -- (1,038,134) Payment of preferred stock dividends..................... -- -- (505,555) ------------- ------------ ------------- Net cash provided by financing activities......... 205,573,997 20,387,852 421,169,440 ------------- ------------ ------------- Net increase (decrease) in cash................... 1,516,808 (202,594) 2,474,332 Cash, at beginning of year................................. -- 1,516,808 1,314,214 ------------- ------------ ------------- Cash, at end of year....................................... $ 1,516,808 $ 1,314,214 $ 3,788,546 ============= ============ ============= Supplemental Disclosure of Cash Flow Information (Note 5): Cash paid during the period for: Interest................................................. $ 2,769,173 $ 16,864,312 $ 28,912,331 Income taxes............................................. $ -- $ -- $ 62,407 Non-cash financing: Dividends and accretion on preferred stock............... $ -- $ -- $ 11,556,943
The accompanying notes are an integral part of the financial statements. F-51 237 CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. BUSINESS AND ORGANIZATION Chancellor Radio Broadcasting Company, formerly Chancellor Broadcasting Company ("Chancellor Radio Broadcasting") and its wholly owned subsidiaries (collectively, the "Company") operate in a single industry segment, which segment encompasses the ownership and management of radio broadcast stations located in markets throughout the United States. Chancellor Radio Broadcasting, a wholly owned subsidiary of Chancellor Broadcasting Company, formerly Chancellor Corporation ("Chancellor"), was formed in June 1994 to acquire and operate radio stations owned by American Media, Inc. and two corporations and one partnership affiliated with American Media, Inc. (collectively, the "American Media Station Group") and by Chancellor Communications Corporation ("Chancellor Communications"). That transaction was consummated on October 12, 1994. Chancellor Communications was formed in 1993 to acquire and operate radio stations KGBY-FM and KFBK-AM. That transaction closed on January 10, 1994 and the consolidated financial statements include the activity of all the stations since their respective dates of acquisition. In June 1995, the 1,000 shares of common stock of Chancellor Communications held by an affiliate of Hicks, Muse, Tate & Furst Incorporated ("Hicks Muse") were exchanged for additional shares of common stock of Chancellor, which subsequently contributed these shares to Chancellor Radio Broadcasting as an additional capital contribution. As a result, Chancellor Communications became a wholly owned subsidiary of Chancellor Radio Broadcasting. Chancellor Communications was then merged with the Company. The transactions had no effect on the financial position or results of operations of the Company. Chancellor Broadcasting Licensee Company is a wholly-owned non-operating legal entity formed to hold title to the Company's broadcast licenses. Such entity has no significant other assets and no material liabilities, contingencies or commitments. Consistent with industry practice for financial reporting purposes, no material value has been specifically allocated to the licenses. Accordingly, no financial statement information has been provided herein due to its immateriality to investors. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The consolidated financial statements include the accounts of Chancellor and its subsidiaries Chancellor Broadcasting and Chancellor Broadcasting Licensee Company for all periods presented, and its subsidiaries Trefoil Communications, Inc., Shamrock Broadcasting Inc., Shamrock Radio Licenses, Inc., Shamrock Broadcasting Licenses of Denver, Inc. and Shamrock Broadcasting of Texas, Inc. from their date of acquisition. All significant intercompany accounts and transactions have been eliminated. Cash The Company maintains cash in demand deposits with financial institutions. The Company had no cash equivalents during the periods presented. All highly liquid investments with an original maturity of less than Six months are considered cash equivalents. Property and Equipment Property and equipment is stated at cost, less accumulated depreciation and amortization. Depreciation is determined using the straight-line method over the estimated useful lives of the various classes of assets, which range from three to twenty-five years. Leasehold improvements are amortized over the shorter of their useful lives or the terms of the related leases. Costs of repairs and maintenance are charged to operations as incurred. F-52 238 CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Intangibles Goodwill represents the excess of cost over the fair values of the identifiable tangible and other intangible net assets acquired and is being amortized over the straight-line method over forty years. Other intangible assets comprise amounts paid for pending acquisitions, agreements not to compete, a tower lease advantage and organization costs incurred in the incorporation of the Company. Other intangibles, excluding pending acquisition costs, are being amortized by the straight-line method over their estimated useful lives ranging from three to ten years. Pending acquisition costs are deferred and capitalized as part of completed acquisitions or expensed in the period in which the pending acquisition is terminated. The Company evaluates intangible assets for potential impairment by analyzing the operating results, future cash flows on an undiscounted basis, trends and prospects of the Company's stations, as well as by comparing them to their competitors. The Company also takes into consideration recent acquisition patterns within the broadcast industry, the impact of recently enacted or potential FCC rules and regulations and any other events or circumstances which might indicate potential impairment. Deferred Financing Costs Costs associated with obtaining debt financing are capitalized and amortized using the interest method over the term of the related debt. As a result of refinancing the Company's original credit facility, during the year ended December 31, 1994 unamortized deferred financing costs of approximately $818,000 were expensed as an extraordinary item in the consolidated statements of operations. As a result of refinancing the Company's second credit facility, the early redemption of $20.0 million of its existing notes (defined) and the prepayment of $18.7 million of it's a Term Loan Facility (defined) from its third credit facility, during the year ended December 31, 1996 unamortized deferred financing costs of $3.4 million, less $543,500 of tax benefit, were expensed as an extraordinary item in the consolidated statements of operations. Approximately $5.1 million, $118,000 and $18.6 million of new financing costs were incurred for the years ended December 31, 1994, 1995 and 1996, respectively. Accumulated amortization at December 31, 1995 and 1996, amounted to approximately $959,000 and $2.8 million, respectively. Revenue Recognition Broadcasting operations derive revenue primarily from the sale of program time and commercial announcements to local, regional and national advertisers. Revenue is recognized when the programs and commercial announcements are broadcast. Barter Transactions Barter transactions represent advertising time exchanged for promotional items, advertising, supplies, equipment, and services. Barter revenue is recorded at the fair value of the goods or services received and is recognized in income when the advertisements are broadcast. Goods or services are charged to expense when received or used. Advertising time owed and goods or services due the Company are included in accounts payable and accounts receivable, respectively. Advertising Costs The Company incurs various marketing and promotional costs to add and maintain listenership. These costs are expensed as incurred and totaled approximately $1.4 million, $4.2 million and $16.2 million for the years ended December 31, 1994, 1995 and 1996, respectively. F-53 239 CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Stock Option Compensation Stock option compensation expense is recognized in accordance with Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees". Income Taxes Deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each year-end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable earnings. Valuation allowances are established when necessary to reduce deferred tax assets to the amount more likely than not to be realized. Income tax expense is the tax payable for the period and the change during the period in deferred tax assets and liabilities. Chancellor, Chancellor Radio Broadcasting and Chancellor Broadcasting Licensee Company have elected to file consolidated federal income tax returns (the "Chancellor Group") and Trefoil Communications, Inc., Shamrock Broadcasting Inc., Shamrock Radio Licenses, Inc., Shamrock Broadcasting Licenses of Denver, Inc. and Shamrock Broadcasting of Texas, Inc. have elected to file consolidated federal income tax returns (the "Shamrock Group"). Each of these groups have entered into a tax sharing agreement governing the allocation of any consolidated federal income tax liability among its members. In general, each subsidiary allocates and pays income taxes computed as if each subsidiary filed a separate federal income tax return. Similar principles apply to any consolidated state and local income tax liabilities. Concentration of Credit Risk The Company's revenue and accounts receivable primarily relate to advertising of products and services within the radio stations' broadcast areas. The Company performs ongoing credit evaluations of its customers' financial condition and, generally, requires no collateral from its customers. Credit losses have been within management's expectations and adequate allowances for any uncollectible trade receivables are maintained. Reclassifications Certain prior year amounts have been reclassified to conform with the current year's presentation. 3. PROPERTY AND EQUIPMENT Property and equipment consist of the following:
DECEMBER 31, -------------------------- 1995 1996 ----------- ----------- Land....................................................... $ 1,572,229 $ 3,036,663 Building and building improvements......................... 3,159,848 9,202,378 Towers and antenna systems................................. 3,689,972 14,476,104 Studio, technical and transmitting equipment............... 7,830,375 23,026,564 Office equipment, furniture and fixtures................... 2,484,261 5,521,010 Record library............................................. 1,800,510 2,193,236 Vehicles................................................... 362,787 1,117,908 Construction in progress................................... 503,504 78,877 ----------- ----------- 21,403,486 58,652,740 Less accumulated depreciation.............................. (3,477,641) (9,529,808) ----------- ----------- $17,925,845 $49,122,932 =========== ===========
F-54 240 CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Depreciation expense for the years ended December 31, 1994, 1995 and 1996 was $0.9 million, $2.6 million and $6.5 million, respectively. 4. INTANGIBLE AND OTHER ASSETS Intangible and other assets consist of the following:
DECEMBER 31, ---------------------------- 1995 1996 ------------ ------------ Goodwill................................................. $205,971,820 $567,377,120 Noncompete agreements.................................... 1,950,000 2,025,000 Tower lease advantage.................................... 305,000 305,000 Pending acquisition costs................................ 3,246,265 2,620,474 Other.................................................... 45,718 626,220 ------------ ------------ 211,518,803 572,953,814 Less accumulated amortization............................ (7,710,408) (21,547,720) ------------ ------------ $203,808,395 $551,406,094 ============ ============
Amortization expense for intangible assets for the years ended December 31, 1994, 1995 and 1996 was $2.0 million, $5.7 million and $14.3 million, respectively. 5. ACQUISITIONS AND DISPOSITIONS OF BROADCASTING PROPERTIES On January 9, 1994, Chancellor Communications purchased substantially all the assets and assumed certain liabilities of KGBY-FM and KFBK-AM for approximately $49.5 million, including acquisition costs. Liabilities assumed were limited to certain ongoing contractual rights and obligations. The acquisition has been accounted for as a purchase and, accordingly, the results of operations associated with the acquired assets have been included in the accompanying statements from the date of acquisition. The acquisition is summarized as follows (in thousands): Assets acquired and liabilities assumed: Property and equipment.................................... $ 4,921 Goodwill and other intangibles............................ 44,401 Prepaid expenses and other assets......................... 413 Accrued liabilities....................................... (205) ------- Total acquisition................................. $49,530 =======
On October 12, 1994, Chancellor Radio Broadcasting purchased substantially all the assets and assumed certain liabilities consisting solely of accrued expenses and future payments under ongoing contracts of the American Media Station Group (other than KHYL-FM in Sacramento, California) for approximately $139.5 million in cash, including acquisition costs and payments in respect of agreements not to compete. On the same date, Chancellor Communications purchased all the assets and certain liabilities consisting solely of accrued expenses and future payments under ongoing contracts of KHYL-FM for approximately $15.5 million in cash, including acquisition costs and payments in respect of an agreement not to compete. These acquisitions have been accounted for as purchases and, accordingly, the results of operations associated with the acquired assets have been included in the accompanying statements from the date of acquisition. F-55 241 CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The acquisition is summarized as follows (in thousands): Assets acquired and liabilities assumed: Property and equipment.................................... $ 12,671 Goodwill and other intangibles............................ 142,618 Prepaid expenses and other assets......................... 353 Accrued liabilities....................................... (662) -------- Total acquisition................................. $154,980 ========
Simultaneously with the closing of these transactions, Chancellor acquired all of Chancellor Communications' outstanding nonvoting stock in exchange for newly issued shares of Chancellor's nonvoting stock. Chancellor contributed all the acquired shares of Chancellor Communication's nonvoting stock to Chancellor Radio Broadcasting, as a result of which Chancellor Communications became a subsidiary of Chancellor Radio Broadcasting. Because these entities are under common management and control, this exchange has been accounted for at historical cost in a manner similar to a pooling of interests. On July 31, 1995, the Company purchased substantially all the assets and assumed certain liabilities of KDWB-FM for approximately $22.6 million, including acquisition costs. Liabilities assumed were limited to certain ongoing contractual rights and obligations. The acquisition has been accounted for as a purchase and, accordingly, the results of operations associated with the acquired assets have been included in the accompanying statements from the date of acquisition. The acquisition is summarized as follows (in thousands): Assets acquired and liabilities assumed: Property and equipment................ $ 1,866 Goodwill and other intangibles........ 21,032 Prepaid expenses and other assets..... 82 Other liabilities..................... (383) ------- Total acquisition............. $22,597 =======
On February 14, 1996, the Company acquired all of the outstanding capital stock of Trefoil Communications, Inc. ("Trefoil") for approximately $408.0 million, including acquisition costs. Trefoil is a holding company, the sole asset of which is the capital stock of Shamrock Broadcasting, Inc. ("Shamrock Broadcasting"). The acquisition of Trefoil was financed through a new credit agreement, new senior subordinated notes, Chancellor's initial public stock offering, senior exchangeable preferred stock and the issuance of unregistered common stock of Chancellor. The acquisition of Trefoil was accounted for as a purchase for financial accounting purposes and a non-taxable business combination for tax purposes and, accordingly, the results of operations associated with the acquired assets have been included in the accompanying statements from the date of acquisition. F-56 242 CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The acquisition is summarized as follows (in thousands): Assets acquired and liabilities assumed: Cash.................................. $ 38 Accounts receivable, net.............. 18,636 Prepaid expenses and other assets..... 1,274 Property and equipment................ 36,429 Goodwill and other intangibles........ 361,425 Deferred tax asset.................... 5,464 Accrued liabilities................... (14,564) Other noncurrent liabilities.......... (702) -------- Total acquisition............. $408,000 ========
Simultaneously with the acquisition of Trefoil, the Company entered into a time brokerage agreement with Evergreen Media Corporation for the outsourcing of certain limited functions of WWWW-FM and WDFN-AM, both Detroit stations acquired with Trefoil, and an option to purchase such stations for $30.0 million of cash. These stations were operated pursuant to this agreement until January 30, 1997, the date on which the disposition of these stations occurred. Subsequent to the acquisition of Trefoil, KTBZ-FM, a Houston station acquired with Trefoil, was operated by Secret Communications, L.P. ("Secret") under a Local Marketing Agreement ("LMA")/Exchange Agreement with the Company. In March 1996, the Company entered into an agreement to exchange KTBZ-FM and $5.6 million of cash to Secret for KALC-FM and KIMN-FM, Denver, Colorado. The Company began managing certain limited functions of these stations, pursuant to an LMA, effective April 1, 1996 and closed on the exchange of the stations effective July 31, 1996. The exchange has been accounted for using the fair values of the assets exchanged plus the $5.6 million of additional cash and $0.8 million of additional acquisition costs, and was allocated to the net assets acquired based upon their estimated fair market values. The excess of the purchase price over the estimated fair value of net assets acquired amounted to approximately $28.7 million, which has been accounted for as goodwill and is being amortized over 40 years using the straight line method. The exchange is summarized as follows (in thousands): Assets acquired and liabilities assumed: Prepaid expenses and other assets......................... $ 163 Property and equipment.................................... 2,363 Goodwill and other intangibles............................ 28,657 Accrued liabilities....................................... (138) ------- Total acquisition................................. $31,045 =======
On May 15, 1996, the Company entered into an agreement to acquire substantially all the assets and certain liabilities of OmniAmerica Group ("Omni") for an aggregate price of $178.0 million, including $163.0 million of cash and $15.0 million of Chancellor's Class A Common Stock. On June 24, 1996, the Company entered into an agreement with American Radio Systems Corporation ("American Radio") whereby it will exchange the West Palm Beach, Florida stations acquired from Omni for American Radio's KSTE-AM and $33.0 million of cash. KSTE-AM is located in Rancho Cordova, California and is part of the Sacramento market. On July 1, 1996, Chancellor entered into an agreement with SFX Broadcasting, Inc. ("SFX") whereby it will exchange the Jacksonville, Florida stations being acquired pursuant to the Omni acquisition agreement and $11.0 million of cash for SFX's WBAB-FM, WBLI-FM, WGBB-AM and WHFM-FM, Nassau-Suffolk, New York. Pursuant to various agreements, the Company began managing certain limited functions of the remaining Omni stations and the SFX stations beginning July 1, 1996, and station KSTE-AM beginning August 1, 1996. F-57 243 CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) On November 22, 1996, the Company acquired substantially all the assets of WKYN-AM, Florence, Kentucky, for approximately $1.4 million, including transaction costs. WKYN-AM serves the Cincinnati, Ohio market. On January 23, 1997, the Company acquired substantially all the assets and certain liabilities of Colfax Communications ("Colfax") for an aggregate price of $373.0 million. Liabilities assumed were limited to certain ongoing contractual rights and obligations. The acquisition will be accounted for as a purchase. Pursuant to the acquisition agreement, at December 31, 1996 the Company had $20.4 million of cash in a restricted escrow account which was remitted to Colfax at closing. On January 29, 1997, the Company entered into an agreement to sell WMIL-FM and WOKY-AM, Milwaukee, Wisconsin stations acquired from Colfax, to Clear Channel Radio, Inc. for $40.0 million in cash. On February 13, 1997, the Company acquired substantially all the assets and certain liabilities of Omni. Liabilities assumed were limited to certain ongoing contractual rights and obligations. The acquisition will be accounted for as a purchase. The following summarizes the unaudited consolidated pro forma data as though the acquisitions of KDWB-FM, Shamrock Broadcasting Company and KIMN-FM and KALC-FM had occurred as of the beginning of 1995 (in thousands):
1995 1996 ------------------------ ------------------------ HISTORICAL PRO FORMA HISTORICAL PRO FORMA ---------- ----------- ---------- ----------- (UNAUDITED) (UNAUDITED) Net revenue............................. $ 64,322 $162,360 $178,402 $187,198 Net income (loss) before extraordinary loss.................................. (11,531) (8,319) (2,715) (310) Net loss................................ (11,531) (8,319) (6,892) (310)
The following summarizes the unaudited consolidated pro forma balance sheet as of December 31, 1996 as though the acquisition of Colfax, the issuance of the Exchangeable Preferred Stock, the issuance of Chancellor's Convertible Preferred Stock (including the over-allotment), and the New Credit Agreement had occurred on that date (in thousands):
HISTORICAL PRO FORMA ---------- ----------- (UNAUDITED) Total assets................................................ $690,743 $1,053,833 ======== ========== Current liabilities......................................... $ 24,208 $ 40,598 Long-term liabilities....................................... 358,322 410,359 Preferred stock............................................. 107,222 404,585 Common stockholder's equity................................. 200,991 198,291 -------- ---------- Total liabilities and stockholders' equity.................. $690,743 $1,053,833 ======== ==========
6. ACCRUED LIABILITIES Accrued liabilities consist of the following:
DECEMBER 31, ------------------------- 1995 1996 ---------- ----------- Salaries................................................... $ 534,297 $ 3,697,072 Sales commissions.......................................... 889,010 2,149,167 Rep commissions............................................ 561,189 1,549,048 Other...................................................... 2,708,452 5,134,544 ---------- ----------- $4,692,948 $12,529,831 ========== ===========
F-58 244 CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 7. LONG-TERM DEBT Long-term debt consists of the following:
DECEMBER 31, ---------------------------- 1995 1996 ------------ ------------ Term loan............................................... $ 67,562,500 $ 74,968,527 Revolving credit loan................................... 24,607,242 20,344,972 Subordinated notes due 2004............................. 80,000,000 260,000,000 ------------ ------------ 172,169,742 355,313,499 Less current portion.................................... 4,062,500 400,000 ------------ ------------ $168,107,242 $354,913,499 ============ ============
The Company's term and revolving credit facilities were refinanced on January 23, 1997, in conjunction with the acquisition of Colfax Communications under a new bank credit agreement (the "New Credit Agreement") with Bankers Trust Company, as administrative agent, and other institutions party thereto. The New Credit Agreement includes a $225.0 million term loan facility (the "Term Loan Facility") and a revolving loan facility (the "Revolving Loan Facility" and, together with the Term Loan, the "New Bank Financing"). The Revolving Loan Facility originally provides for borrowings up to $120.0 million, which is subsequently reduced as and when the Company receives the net cash proceeds of the pending station swaps and dispositions. In connection with the refinancing of the term and revolving loan facilities, the Company incurred an extraordinary charge to write-off deferred finance costs of approximately $4.5 million. The New Bank Financing is collateralized by (i) a first priority perfected pledge of all capital stock and notes owned by the Company and (ii) a first priority perfected security interest in all other assets (including receivables, contracts, contract rights, securities, patents, trademarks, other intellectual property, inventory, equipment and real estate) owned by the Company, excluding FCC licenses, leasehold interests in studio or office space and leasehold and partnership interests in tower or transmitter sites in which necessary consents to the granting of a security interest cannot be obtained without payments to any other party or on a timely basis. The New Bank Financing also is guaranteed by the subsidiaries of Chancellor and Chancellor Radio Broadcasting, whose guarantees are collateralized by a first priority perfected pledge of the capital stock Chancellor Radio Broadcasting. The Term Loan Facility is due in increasing quarterly installments beginning in 1997 and matures in January 2003. All outstanding borrowings under the Revolving Facility mature in January 2003. The facilities bear interest at a rate equal to, at the Company's option, the prime rate of Bankers Trust Company, as announced from time to time, or the London Inter-Bank Offered Rate ("LIBOR") in effect from time to time, plus an applicable margin rate. The Company pays quarterly commitment fees in arrears equal to either .375% or .250% per annum on the unused portion of the Revolving Facility, depending upon whether the Company's leverage ratio is equal to or greater than 4.5:1 or less than 4.5:1, respectively. The bank financing facilities which existed on December 31, 1996 accrued interest at the prime rate plus 1.25% (9.5%) on $3.3 million and the LIBOR rate plus 2.50% (8.125%) on $92.0 million of borrowings. In connection with the IPO (defined), the Company redeemed 25% of its Existing Notes (defined) for approximately $22.2 million. The redemption was completed in March 1996 and resulted in an extraordinary charge of $2.8 million. The remaining $60.0 million 12 1/2% Senior Subordinated Notes due 2004 (the "Existing Notes") mature October 1, 2004, and bear interest at 12.5% per annum. On February 14, 1996, in conjunction with the acquisition of Trefoil Communications, Inc., the Company issued $200.0 million aggregate principal amount of 9 3/8% Senior Subordinated Notes due 2004 (the "New Notes" and, together with the Existing Notes, the "Notes"), which mature on October 1, 2004, and bear interest at 9.375% per annum. Interest on the Notes is paid semi-annually. The Existing and New Notes are redeemable, in whole or F-59 245 CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) in part, at the option of the Company on or after October 1, 1999 and February 1, 2000, respectively, at redemption prices expressed as a percentage of the principal amount, ranging from 100.000% to 105.556%, plus accrued interest thereon to the date of acquisition. In addition, prior to January 31, 1999, the Company may redeem up to 25% of the original aggregate principal amount of the New Notes with the net proceeds of one or more public equity offerings. The Notes are unsecured obligations of the Company, ranking subordinate in right of payment to all senior debt of the Company. The New Notes rank pari passu in right of payment to the Existing Notes. The Notes are guaranteed on a senior subordinated basis by Chancellor Radio Broadcasting Company's subsidiaries. Scheduled debt maturities for the Company's outstanding long-term debt at December 31, 1996 for each of the next five years and thereafter are as follows: 1997........................................................ $ 400,000 1998........................................................ 400,000 1999........................................................ 9,874,886 2000........................................................ 11,296,119 2001........................................................ 17,469,864 Thereafter.................................................. 315,872,630 ------------ $355,313,499 ============
See Note 5 for pro forma effects of the New Bank Financing subsequent to year end. Both the New Bank Financing and Notes indentures contain certain covenants, including, among others, limitations on the incurrence of additional debt, in the case of the New Bank Financing; requirements to maintain certain financial ratios; and restrictions on the payment of dividends to stockholders and from the subsidiaries to Chancellor. 8. CAPITAL STRUCTURE In February 1996, Chancellor sold 7.7 million shares of its Class A Common Stock, par value $.01 per share (the "Class A Common Stock"), in an initial public offering, (the "IPO"), which generated net proceeds of $142.4 million, and in a private placement, issued $100.0 million of exchangeable redeemable preferred stock (the "Acquisition Preferred Stock") of Chancellor Radio Broadcasting and 742,192 shares of Class A common stock of Chancellor to an affiliated entity and other investors. Immediately prior to the IPO, Chancellor effected a recapitalization of its current capital stock. Pursuant to the recapitalization, each six shares of Chancellor's Nonvoting Stock were reclassified into one share of Class A Common Stock. Each six shares of Chancellor's Voting Stock were reclassified into one share of Class B Common Stock and each six shares of Convertible Nonvoting Stock were reclassified into one share of Class C Common Stock. In connection with the recapitalization, 63,334 shares of Class A Common Stock were exchanged for an equal number of shares of Class B Common Stock, and an additional 8,484,410 shares of Class A Common Stock were exchanged for an equal number of shares of Class C Common Stock. The recapitalization has been given retroactive effect in the financial statements. In February 1996, subsequent to the IPO, the Company completed a private placement of $100.0 million of newly authorized Senior Cumulative Exchangeable Preferred Stock (the "Old Preferred Stock"). Upon completion, the proceeds of the Old Preferred Stock were used to redeem the Acquisition Preferred Stock and 55,664 shares of Class A Common Stock. The redemption resulted in a charge to net loss attributable to common stock of approximately $16.6 million and an additional reduction of paid-in capital of approximately $1.0 million. F-60 246 CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) In June 1996, the holders of Chancellor's Class C Common Stock filed an application with the FCC to convert the stock into Chancellor's Class B Common Stock. The holders of Class C Common Stock received approval of their applications and subsequently converted their stock on October 22, 1996. In August 1996 pursuant to an agreement entered into at the time of the IPO, Chancellor sold 1.2 million shares of Class A Common Stock in a private placement to an affiliated entity, which generated proceeds of $23.0 million which were contributed to Chancellor Radio Broadcasting. In September 1996, the Company completed an exchange offering whereby it exchanged the Old Preferred Stock for 1,000,000 shares of 12 1/4% Series A Senior Cumulative Exchangeable Preferred Stock (the "Senior Exchangeable Preferred Stock") in a transaction registered under the Securities Act of 1933, as amended. The terms of the Senior Exchangeable Preferred Stock are substantially identical to those of the Old Preferred Stock. Dividends on the Senior Exchangeable Preferred Stock accrue from its date of issuance and are payable quarterly commencing November 15, 1996, at a rate per annum of 12 1/4% of the then effective liquidation preference per share. Dividends may be paid, at the Company's option, on any dividend payment date occurring on or prior to February 15, 2001 either in cash or by adding such dividends to the then effective liquidation preference of the Senior Exchangeable Preferred Stock. The Senior Exchangeable Preferred Stock is redeemable at the Company's option, in whole or in part at any time on or after February 15, 2001, at various redemption prices, plus, accumulated and unpaid dividends to the date of redemption. In addition, prior to February 15, 1999, the Company may, at its option, redeem the Senior Exchangeable Preferred Stock with the net cash proceeds from one or more Public Equity Offerings (as defined), at various redemption prices, plus, accumulated and unpaid dividends to the redemption date; provided, however, that after any such redemption there is outstanding at least 75% of the number of shares of Senior Exchangeable Preferred Stock originally issued. The Company is required, subject to certain conditions, to redeem all of the Senior Exchangeable Preferred Stock outstanding on February 15, 2008, at a redemption price equal to 100% of the then effective liquidation preference thereof, plus, accumulated and unpaid dividends to the date of redemption. Upon the occurrence of a change of control (as defined), the Company must offer to purchase all of the then outstanding shares of Senior Exchangeable Preferred Stock at a price equal to 101% of the then effective liquidation preference thereof, plus, accumulated and unpaid dividends to the date of purchase. Subject to certain conditions, the Senior Exchangeable Preferred Stock is exchangeable in whole, but not in part, at the option of the Company, on any dividend payment date for the Company's 12 1/4% subordinated exchange debentures due 2008. On January 23, 1997, Chancellor completed a private placement of $100.0 million of newly authorized 7% Convertible Preferred Stock (the "Convertible Preferred Stock") and Chancellor Radio Broadcasting completed a private placement of $200.0 million of newly authorized 12% Exchangeable Preferred Stock (the "Exchangeable Preferred Stock"). Dividends on the Convertible Preferred Stock accrue from its date of issuance and are payable quarterly commencing April 15, 1997, at a rate per annum of 7% of the liquidation preference per share. The liquidation preference of the Convertible Preferred Stock is $50.00 per share, and requires cash dividends of $7.7 million per year. Because Chancellor is a holding company with no assets other than the common stock of the Company, Chancellor will rely solely on the dividends from the Company to satisfy its dividend payment obligation on the 7% Convertible Preferred Stock. The Convertible Preferred Stock is convertible at the option of the holder at any time after March 23, 1997, unless previously redeemed, into Class A Common Stock of Chancellor at a conversion price of $32.90 per share of Class A Common Stock, subject to adjustment in certain events. In addition, after January 19, 2000, the Company may, at its option, redeem the Convertible Preferred Stock, in whole or in part, at specified redemption prices plus accrued and unpaid dividends through the redemption date. Upon the occurrence of a change of control (as defined), Chancellor must, subject to certain conditions, offer to purchase all of the then outstanding shares of Convertible Preferred Stock at a F-61 247 CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) price equal to 101% of the liquidation preference thereof, plus accrued and unpaid dividends to the date of purchase. Dividends on the Exchangeable Preferred Stock will accrue from the date of its issuance and will be payable semi-annually commencing July 15, 1997, at a rate per annum of 12% of the liquidation preference per share. Dividends may be paid, at the Company's option, on any dividend payment date occurring on or prior to January 15, 2002 either in cash or in additional shares of Exchangeable Preferred Stock. The liquidation preference of the Exchangeable Preferred Stock will be $100.00 per share. The Exchangeable Preferred Stock is redeemable at the Company's option, in whole or in part at any time on or after January 15, 2002, at the redemption prices set forth herein, plus accrued and unpaid dividends to the date of redemption. In addition, prior to January 15, 2000, the Company may, at its option, redeem the Exchangeable Preferred Stock with the net cash proceeds from one or more Public Equity Offerings (as defined), at various redemption prices plus accrued and unpaid dividends to the redemption date; provided, however, that after any such redemption there is outstanding at least $150.0 million aggregate liquidation preference of Exchangeable Preferred Stock. The Company is required, subject to certain conditions, to redeem all of the Exchangeable Preferred Stock outstanding on January 15, 2009, at a redemption price equal to 100% of the liquidation preference thereof, plus accrued and unpaid dividends to the date of redemption. Upon the occurrence of a Change of Control (as defined), the Company will, subject to certain conditions, offer to purchase all of the then outstanding shares of Exchangeable Preferred Stock at a price equal to 101% of the liquidation preference thereof, plus accrued and unpaid dividends to the repurchase date. In addition, prior to January 15, 1999, upon the occurrence of a Change of Control, the Company will have the option to redeem the Exchangeable Preferred Stock in whole but not in part at a redemption price equal to 112% of the liquidation preference thereof, plus accrued and unpaid dividends to the date of redemption. The Exchangeable Preferred Stock will, with respect to dividend rights and rights on liquidation, rank junior to the Senior Exchangeable Preferred Stock. Subject to certain conditions, the Exchangeable Preferred Stock is exchangeable in whole, but not in part, at the option of the Company, on any dividend payment date for the Company's 12% subordinated exchange debentures due 2009, including any such securities paid in lieu of cash interest. In addition to the accrued dividends discussed above, the recorded value of the Senior Exchangeable Preferred Stock, the Convertible Preferred Stock and the Exchangeable Preferred Stock includes or will include an amount for the accretion of the difference between the stock's fair value at date of issuance and its mandatory redemption amount, calculated using the effective interest method. 9. INCOME TAXES All of the Company's revenues were generated in the United States. The provision for income taxes for continuing operations consists of the following:
YEAR ENDED DECEMBER 31 ------------------------------------ 1994 1995 1996 ---------- ---------- ---------- Current: State.......................................... $ -- $ 11,098 $ 64,070 Deferred: Federal........................................ 1,267,109 3,220,528 3,866,209 State.......................................... 223,607 568,329 682,272 ---------- ---------- ---------- Total provision........................ $1,490,716 $3,799,955 $4,612,551 ========== ========== ==========
F-62 248 CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Income tax expense differs from the amount computed by applying the federal statutory income tax rate of 34% to income before income taxes for the following reasons:
YEAR ENDED DECEMBER 31, ------------------------------------- 1994 1995 1996 ---------- ----------- ---------- U.S. federal income tax at statutory rate.................................. $ 637,692 $(2,628,656) $ 645,125 State income taxes, net of federal benefit............................... 112,533 (463,880) 113,846 Valuation allowance provided for loss carryforward generated during the current period........................ 720,490 6,589,750 307,000 Reconciliation of return to estimate.... -- 71,510 -- Permanent difference.................... 20,001 231,231 3,546,580 ---------- ----------- ---------- $1,490,716 $ 3,799,955 $4,612,551 ========== =========== ==========
DECEMBER 31, --------------------------- 1995 1996 ----------- ------------ The deferred tax assets (liabilities) consist of the following: Loss carryforwards expiring 2009 and 2010............................... $ 4,766,240 $ 11,806,985 Deferred stock option compensation deduction.......................... 2,544,000 4,064,000 Tax credits........................... -- 2,951,555 Other................................. 105,411 680,819 ----------- ------------ Gross deferred tax assets.......... 7,415,651 19,503,359 ----------- ------------ Depreciation and amortization......... (5,057,772) (21,488,463) ----------- ------------ Deferred tax assets valuation allowance.......................... (7,310,240) (621,210) ----------- ------------ Net deferred tax liabilities....... $(4,952,361) $ (2,606,314) =========== ============
The deferred tax valuation allowance was originally established due to the uncertainty surrounding the realizability of the Company's deferred tax assets using the "more likely than not" criteria. During the fourth quarter of 1996, the Company revised its estimate of the likelihood that it will realize the majority of its deferred tax assets and adjusted its valuation allowance accordingly. This revised estimate was the direct result of the acquisition of Trefoil. Reversal of the valuation allowance related to deferred tax assets which existed on the date of acquisition or which were acquired as a result of the Trefoil acquisition were credited against the original purchase accounting allocation to goodwill. The reversal of the valuation allowance related to deferred tax assets generated subsequent to the acquisition were credited as a reduction of income tax expense and extraordinary losses as appropriate. The Company's tax credits and net operating loss carryforwards at December 31, 1996 begin expiring in 1997 and 2001, respectively. The Company has provided a valuation allowance for those tax credits which do not meet a "more likely than not" realizability test. 10. EMPLOYEE BENEFIT PLAN The Company has a 401(k) Savings Plan, whereby eligible employees can contribute up to either 15% of their salary, per year, subject to certain maximum contribution amounts. Prior to 1996, the Company had not made any contributions to the plan, nor is it required to in future periods. However, the Company did elect to make a discretionary match for 1996 of approximately $250,000. Employees become eligible to participate in the plan after the completion of one year of service and the attainment of age twenty-one. F-63 249 CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 11. COMMITMENTS The Company leases real property, office space, broadcasting equipment and office equipment under various noncancellable operating leases. Certain of the Company's leases contain escalation clauses, renewal options and/or purchase options. In addition, the Company assumed lease obligations in connection with the acquisition of Trefoil on February 14, 1996. The Company also has employment and rating survey agreements in excess of one year, and has entered into a twelve-year financial monitoring and oversight agreement with Hicks Muse & Co. Partners, L.P., which is an affiliate of Hicks, Muse, Tate & Furst Incorporated. Future minimum payments under the noncancellable operating lease agreements at December 31, 1996 are approximately as follows: 1997........................................................ $ 6,023,586 1998........................................................ 4,865,095 1999........................................................ 4,277,779 2000........................................................ 3,564,247 2001........................................................ 2,805,282 Thereafter.................................................. 13,080,261 ----------- $34,616,250 ===========
Rent expense was approximately $227,000, $1.3 million and $4.8 million for the years ended December 31, 1994, 1995 and 1996, respectively. 12. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value: For cash, short-term debt, and other current amounts receivable and payable, and the variable-rate term debt, the carrying amount approximates fair value. For the fixed-rate long-term debt, the fair value is estimated based on quoted market prices. The carrying values at December 31, 1995 and 1996 was $80.0 million and $260.0 million, respectively, and the estimated fair values at each date were $85.4 million and $267.8 million, respectively. For Chancellor Radio Broadcasting's Senior Exchangeable Preferred Stock, the fair value of $113.75 per share at December 31, 1996 is estimated based on quoted market prices. 13. STOCK-BASED COMPENSATION During 1994, Chancellor's Board of Directors granted options to purchase 996,068 shares of its common stock to the senior management of the Company at exercise prices of $6.00 and $7.50. The option agreements vest over a five year period and originally contained certain performance criteria and indexed exercise prices. On September 30, 1995, Chancellor entered into an agreement with its senior management to substantially revise and amend these option agreements to eliminate certain of the performance criteria provisions and to adjust and fix the exercise prices at $7.50 and $8.40, respectively. Management developed an estimate of the fair value of the stock options in the amount of $19.0 million. Based upon this estimate and the applicable vesting periods, the Company recognized stock option compensation expense and a corresponding credit to equity of $6.4 million in 1995, with the remaining amount to be amortized over an approximate four year period. During 1994, Chancellor's Board of Directors adopted a stock option plan for its non-employee directors providing for the grant of options and stock awards for up to 480,000 shares of its common stock. Upon F-64 250 CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) election to the Board of Directors, each person shall be granted a stock option to purchase a number of shares of common stock equal to the number of shares of common stock acquired by purchase by such person upon their initial election to the Board of Directors. Each option shall be immediately vested, will have a maximum term of ten years and an exercise price, as determined by the plan committee, equal to or greater than the fair market value of the common stock on the respective dates of grant. In February 1996, Chancellor's Board of Directors adopted a stock award plan for the Company's management, employees and non-employee directors, elected after the date of adoption of the plan, providing for the grant of options and stock awards for up to 916,456 shares of Chancellor's Class A Common Stock. The Company's compensation committee has the sole authority to grant stock options and to establish option exercise prices and vesting schedules. However, per-share exercise prices shall not be less than the fair market value of the stock on the respective date of grant and if the compensation committee does not determine a vesting schedule, such option shall vest 20% on the first anniversary of the respective date of grant and the remaining 80% shall vest pro rata on a monthly basis over the four-year period following the first anniversary of the date of grant. Non-employee directors elected after the effective date of this plan automatically are granted a fully-vested option to purchase 5,000 shares of Chancellor's Class A Common Stock on the date he or she first becomes a member of the Board of Directors. Terms of all options are limited to ten years. A summary of the Company's option activity follows. The Company has elected to continue expense recognition under Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" and accordingly, has included certain required pro forma information. Estimates of weighted-average grant- date fair values of options granted and pro forma option compensation amounts were determined using the Black-Scholes Single Option approach assuming an expected option term of 6 years, interest rates ranging from 5.5% to 7.2%, a dividend yield of zero and a volatility factor of .4 (zero for options issued prior to the Company's initial public offering in February 1996).
FOR THE YEAR ENDED DECEMBER 31, ---------------------------------------------------------------------------------------- 1994 1995 1996 -------------------------- ---------------------------- ---------------------------- WEIGHTED AVERAGE WEIGHTED AVERAGE WEIGHTED AVERAGE SHARES EXERCISE PRICE SHARES EXERCISE PRICE SHARES EXERCISE PRICE ------- ---------------- --------- ---------------- --------- ---------------- Beginning of year............ -- $ -- 996,068 $7.27 1,022,734 $ 7.89 Granted: Exercise price: equals FMV............... 996,068 7.27 26,666 7.50 713,916 26.03 less than FMV............ -- -- 996,068 7.90 -- -- Exercised.................. -- -- -- -- -- -- Canceled................... -- -- (996,068) 7.27 (9,000) 24.51 ------- ----- --------- ----- --------- ------ End of year.................. 996,068 $7.27 1,022,734 $7.89 1,727,650 $15.30 ======= ===== ========= ===== ========= ====== Exercisable as of end of year....................... -- $ -- 225,879 $7.85 431,758 $ 8.06 ======= ===== ========= ===== ========= ====== Weighted-average grant-date fair value of options granted: Exercise price: equals FMV............... -- 3.59 12.69 less than FMV............ -- 21.56 --
F-65 251 CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
OPTIONS OUTSTANDING OPTIONS EXERCISABLE --------------------------------------- --------------------------- WEIGHTED AVERAGE --------------------------- RANGE OF REMAINING EXERCISE WEIGHTED AVERAGE EXERCISE PRICES SHARES CONTRACTUAL LIFE PRICE SHARES EXERCISE PRICE - --------------- --------- ---------------- -------- ------- ----------------- $ 7.50 -- $ 7.50 577,971 7.06 $ 7.50 247,188 $7.50 8.40 -- 8.40 444,763 7.83 8.40 177,904 8.40 20.00 -- 25.25 431,916 9.14 20.51 6,666 20.00 31.00 -- 36.75 273,000 9.75 34.81 -- -- --------- ---- ------ ------- ----- $ 7.50 -- $36.75 1,727,650 8.20 $15.30 431,758 $8.06 ========= ==== ====== ======= =====
YEAR ENDED YEAR ENDED DECEMBER 31, 1995 DECEMBER 31, 1996 ----------------- ----------------- Historical net loss......................................... $(11,531,296) $(6,892,023) Pro forma adjustment for stock option compensation.......... (781,465) (1,524,302) Pro forma tax benefit....................................... 312,586 609,721 ------------ ----------- Pro forma net loss.......................................... $(12,000,175) $(7,806,604) ============ ===========
14. RELATED PARTY TRANSACTIONS The Company has entered into a twelve-year agreement (the "Financial Monitoring and Oversight Agreement") with Hicks Muse & Co. Partners, L.P. ("Hicks Muse Partners") and HM2/Management Partners, L.P. ("HM2"), each of which is an affiliate of Hicks Muse. Chancellor and the Company paid Hicks Muse Partners an annual fee of $82,000, $200,000 and $408,000 for financial oversight and monitoring services for the years ended December 31, 1994, 1995 and 1996, respectively. The annual fee is adjustable each December 31, according to a formula based on changes in the consumer price index. HM2 received fees of approximately $0.3 million, $2.4 million and $6.2 million upon consummation of the acquisitions of KDWB-FM, the American Media Station Group and Trefoil Communications, Inc., respectively, and is entitled to receive a fee equal to 1.5% of the transaction value (as defined) upon the consummation of each add-on transaction (as defined) involving Chancellor or any of its subsidiaries. Effective April 1, 1996, the Company entered into a revised financial monitoring and oversight agreement with Hicks & Muse & Co. Partners, L.P. and HM2/Management Partners, L.P., each of which is an affiliate of Hicks, Muse, Tate & Furst Incorporated. The annual fee for financial oversight and monitoring services to the Company has been adjusted to $500,000. The annual fee is adjustable each January 1, to an amount equal to the budgeted consolidated annual net sales of the Company for the then-current fiscal year, multiplied by 0.25%, provided, however, that in no event shall the annual fee be less than $500,000. The Financial Monitoring and Oversight Agreement makes available the resources of HM2 and Hicks Muse Partners concerning a variety of financial matters. The services that have been and will continue to be provided by HM2 and Hicks Muse Partners could not otherwise be obtained by Chancellor and the Company without the addition of personnel or the engagement of outside professional advisors. In February of 1996, the Company lent $200,000 to an affiliate of the Company. The loan is unsecured, does not bear interest and will be forgiven during the next three years. 15. SUBSEQUENT EVENTS On February 14, 1997, Chancellor Radio Broadcasting completed a private placement of an additional $10.0 million of Convertible Preferred Stock pursuant to its over-allotment option. The net proceeds of this offering were used to repay borrowings under the Revolving Credit Facility. F-66 252 CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) On February 19, 1997, Chancellor and Chancellor Radio Broadcasting entered into an agreement to merge with Evergreen Media Corporation ("Evergreen") in a stock-for-stock transaction (the "Merger"), with Evergreen remaining as the surviving corporation (the "Surviving Company"). Pursuant to the agreement, shareholders of the Company's common stock will receive 0.9091 shares of Evergreen's common stock. Consummation of the merger is subject to shareholder approval and certain other closing conditions including regulatory approval. On February 19, 1997, the Company and Evergreen entered into a joint purchase agreement whereby in the event that consummation of the stock purchase agreement between Evergreen and Viacom International, Inc. ("Viacom") occurs prior to the consummation of the Merger, the Company will be required to purchase the Viacom subsidiaries which own four of the ten Viacom stations for $480.0 million and Evergreen will be required to purchase the Viacom subsidiaries which own six of the ten Viacom stations for $595.0 million. In the event that consummation of the stock purchase agreement between Evergreen and Viacom occurs after the consummation of the Merger, the Surviving Company will acquire the stock of certain Viacom subsidiaries which own and operate ten radio stations in five major markets. Consummation of the transaction is dependent upon certain closing conditions, including regulatory approval. 16. UNCERTAINTIES AND THE USE OF ESTIMATES AND ASSUMPTIONS On February 8, 1996, the President signed into law the Telecommunications Act of 1996. Among other things, this legislation requires the Federal Communications Commission (the "FCC"), to relax its numerical restrictions on local ownership and affords renewal applicants significant new protections from competing applications for their broadcast licenses. The new legislation will enable the Company to retain all of its radio stations and to acquire more properties; at the same time, this legislation will also allow other broadcast entities to increase their ownership in markets where the Company currently operates stations. The Company's management is unable to determine the ultimate effect of this legislation on its competitive environment. The pending acquisition, exchange and merger agreements are subject to various governmental approvals, including the Department of Justice under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the Federal Communications Commission. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual amounts could differ from those estimates. 17. RECENT ACCOUNTING PRONOUNCEMENT The Financial Accounting Standards Board issued SFAS No. 128, "Earnings Per Share" in March 1997, which establishes standards for computing and presenting earnings per share. The disclosure requirements of SFAS No. 128 will be effective for the Company's financial statements beginning in 1997. Management has not yet determined the impact that the adoption of SFAS No. 128 will have on the financial statements of the Company. F-67 253 CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (UNAUDITED) (DOLLARS IN THOUSANDS, EXCEPT FOR SHARE DATA) ASSETS
DECEMBER 31, JUNE 30, 1996 1997 ------------ ---------- Current assets: Cash...................................................... $ 3,789 $ 5,889 Accounts receivable, net of allowance for doubtful accounts of $1,024 and $1,182, respectively............ 46,585 63,576 Prepaid expenses and other................................ 2,754 2,887 -------- ---------- Total current assets.............................. 53,128 72,352 Restricted cash............................................. 20,363 53,750 Property and equipment, net................................. 49,123 69,581 Intangibles and other, net.................................. 551,406 970,080 Deferred financing costs, net............................... 16,723 16,827 Deferred income tax benefit................................. -- 1,183 -------- ---------- Total assets...................................... $690,743 $1,183,773 ======== ========== LIABILITIES AND STOCKHOLDER'S EQUITY Current liabilities: Accounts payable.......................................... $ 4,409 $ 4,989 Accrued liabilities....................................... 12,530 16,248 Accrued interest.......................................... 6,869 5,702 Current portion of long-term debt......................... 400 1,928 -------- ---------- Total current liabilities......................... 24,208 28,867 Long-term debt.............................................. 354,914 545,335 Deferred income taxes....................................... 2,606 -- Other....................................................... 802 997 -------- ---------- Total liabilities................................. 382,530 575,199 -------- ---------- Redeemable senior cumulative exchangeable preferred stock, par value $.01 per share; 1,000,000 shares authorized, issued and outstanding; preference in liquidation of $117,670.................................................. 107,222 114,271 Redeemable cumulative exchangeable preferred stock, par value $.01 per share; none and 3,600,000 shares authorized, respectively, none and 2,000,000 shares issued and outstanding, respectively; preference in liquidation of $210,774............................................... -- 202,891 Common stockholder's equity: Common stock, par value $.01 per share; 2,000 shares authorized, 1,000 shares issued and outstanding........ 1 1 Additional paid-in capital................................ 219,519 322,216 Accumulated deficit....................................... (18,529) (30,805) -------- ---------- Total stockholder's equity........................ 200,991 291,412 -------- ---------- Total liabilities and stockholder's equity........ $690,743 $1,183,773 ======== ==========
The accompanying notes are an integral part of the financial statements. F-68 254 CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (DOLLARS IN THOUSANDS)
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, ------------------- ------------------- 1996 1997 1996 1997 ------- -------- -------- -------- Gross broadcasting revenues........................ $50,759 $ 83,538 $ 79,848 $147,015 Less agency commissions............................ 6,333 10,450 9,780 18,073 ------- -------- -------- -------- Net revenues.................................. 44,426 73,088 70,068 128,942 ------- -------- -------- -------- Operating expenses: Programming, technical and news.................. 7,865 12,829 13,010 26,700 Sales and promotion.............................. 12,367 20,785 19,310 36,748 General and administrative....................... 6,002 8,051 10,405 16,404 Depreciation and amortization.................... 5,148 8,605 9,675 16,714 Corporate expenses............................... 832 2,222 1,839 3,934 Merger expense................................... -- 459 -- 2,515 Stock option compensation........................ 950 950 1,900 1,900 ------- -------- -------- -------- 33,164 53,901 56,139 104,915 ------- -------- -------- -------- Income from operations........................ 11,262 19,187 13,929 24,027 Other (income) expense: Interest expense................................. 9,680 12,488 17,327 23,908 Other, net....................................... 92 25 98 (1,607) ------- -------- -------- -------- Income (loss) before provision for income taxes and extraordinary loss................ 1,490 6,674 (3,496) 1,726 Provision for income taxes......................... 662 3,727 1,601 3,327 ------- -------- -------- -------- Income (loss) before extraordinary loss....... 828 2,947 (5,097) (1,601) Extraordinary loss on early extinguishment of debt, net of income tax benefit........................ -- 7,926 4,646 10,675 ------- -------- -------- -------- Net Income (loss)............................. 828 (4,979) (9,743) (12,276) Loss on repurchase of preferred stock.............. -- -- 16,570 -- Dividends and accretion on preferred stock......... 3,183 9,987 4,843 18,122 ------- -------- -------- -------- Net loss attributable to common stock......... $(2,355) $(14,966) $(31,156) $(30,398) ======= ======== ======== ========
The accompanying notes are an integral part of the financial statements. F-69 255 CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY (UNAUDITED) (DOLLARS IN THOUSANDS)
ADDITIONAL PAID-IN ACCUMULATED SHARES AMOUNT CAPITAL DEFICIT TOTAL ------ ------ ---------- ----------- -------- Balance, January 1, 1997.................... 1,000 $1 $219,519 $(18,529) $200,991 Dividends and accretion on preferred stock.................................. -- -- (18,122) -- (18,122) Capital contributions, net................ -- -- 120,819 -- 120,819 Net loss.................................. -- -- -- (12,276) (12,276) ----- -- -------- -------- -------- Balance, June 30, 1997...................... 1,000 $1 $322,216 $(30,805) $291,412 ===== == ======== ======== ========
The accompanying notes are an integral part of the financial statements. F-70 256 CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (DOLLARS IN THOUSANDS)
SIX MONTHS ENDED JUNE 30, -------------------------- 1996 1997 ----------- ----------- Cash flows from operating activities: Net loss.................................................. $ (9,743) $ (12,276) Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization.......................... 9,675 16,714 Amortization of deferred financing costs............... 1,393 1,236 Stock option compensation.............................. 1,900 1,900 Deferred income taxes.................................. 1,539 3,327 Gain on disposition of stations........................ -- (1,409) Extraordinary loss..................................... 4,646 10,675 Changes in assets and liabilities, net of the effects of acquired businesses: Accounts receivable.................................. (2,632) (3,741) Prepaids and other................................... (1,380) 365 Accounts payable..................................... (87) (806) Accrued liabilities.................................. (66) 1,564 Accrued interest..................................... 4,243 (1,167) --------- --------- Net cash provided by operating activities......... 9,488 16,382 --------- --------- Cash flows from investing activities: Purchases of broadcasting properties...................... (406,140) (582,383) Dispositions of broadcasting properties................... -- 103,259 Purchases of other property and equipment................. (1,374) (3,690) --------- --------- Net cash used in investing activities............. (407,514) (482,814) Cash flows from financing activities: Proceeds from issuance of long-term debt.................. 277,628 417,632 Proceeds from borrowings under revolving debt facility.... 46,764 255,441 Repayments of long-term debt.............................. (90,885) (342,856) Repayments of borrowings under revolving debt facility.... (68,432) (157,399) Issuances of preferred stock.............................. 175,119 191,817 Repurchase of preferred stock............................. (95,462) -- Additional capital contributions.......................... 155,475 105,672 Distribution of additional paid in capital................ (1,038) (1,775) Payment of preferred stock dividends...................... (506) --------- --------- Net cash provided by financing activities......... 398,663 468,532 --------- --------- Net increase in cash.............................. 637 2,100 Cash, at beginning of period................................ 1,314 3,789 --------- --------- Cash, at end of period...................................... $ 1,951 $ 5,889 ========= =========
The accompanying notes are an integral part of the financial statements. F-71 257 CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS 1. BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements of Chancellor Radio Broadcasting Company ("Chancellor Radio Broadcasting") and its subsidiaries (the "Company") have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and six month periods ended June 30, 1997 are not necessarily indicative of the results that may be expected for the year ending December 31, 1997. Chancellor Radio Broadcasting is a direct subsidiary of Chancellor Broadcasting Company ("Chancellor"). Certain prior year amounts have been reclassified to conform with the current year's presentation, which had no effect on net income or stockholder's equity. 2. ACQUISITIONS AND DISPOSITIONS On January 23, 1997, the Company acquired substantially all the assets and certain liabilities of Colfax Communications, Inc. and its affiliates ("Colfax") for an aggregate price of $383.7 million. Liabilities assumed were limited to certain ongoing contractual rights and obligations. The acquisition was accounted for as a purchase. Pursuant to the acquisition agreement, at December 31, 1996 the Company had $20.4 million of cash in a restricted escrow account which was remitted to Colfax at closing. On January 29, 1997, the Company entered into an agreement to sell WMIL-FM and WOKY-AM, Milwaukee stations acquired in this transaction, to Clear Channel Radio, Inc. for $41.3 million in cash. Accordingly, theses stations were recorded as assets held for sale with no results of operations or gain or loss recognized. Interest capitalized on this investment amounted to $580,000. The disposition of these stations was completed on March 31, 1997. The acquisition is summarized as follows (in thousands): Assets acquired and liabilities assumed: Accounts receivable, net.................................. $ 13,234 Prepaid and other assets.................................. 470 Property and equipment.................................... 14,624 Goodwill and other intangibles............................ 317,894 Other noncurrent assets................................... 46 Assets held for sale...................................... 41,253 Accrued liabilities....................................... (3,821) -------- $383,700
On January 31, 1997, the Company completed the sale of WWWW-FM and WDFN-AM in Detroit to Evergreen Media Corporation ("Evergreen") for $30.0 million in cash. The pre-tax gain of $1.4 million is included in other income. On February 13, 1997, the Company acquired substantially all the assets and certain liabilities of OmniAmerica Group ("Omni") for $166.0 million of cash and $15.0 million of Chancellor Class A Common Stock. Liabilities assumed were limited to certain ongoing contractual rights and obligations. The acquisition was accounted for as a purchase. The acquisition is summarized as follows (in thousands): Assets acquired and liabilities assumed: Property and equipment.................................... $ 9,209 Goodwill and other intangibles............................ 171,837 -------- $181,046
F-72 258 CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) On February 19, 1997, Chancellor and Chancellor Radio Broadcasting entered into an agreement to merge with Evergreen in a stock-for-stock transaction (the "Merger"), with Evergreen remaining as the surviving corporation. Pursuant to the agreement, shareholders of the Company's common stock will receive 0.9091 shares of Evergreen's common stock. Consummation of the merger is subject to shareholder approval and certain other closing conditions including regulatory approval. The Company has incurred certain costs related to the Merger which have been expensed in the period incurred. On February 19, 1997, the Company and Evergreen entered into a joint purchase agreement whereby in the event that consummation of the stock purchase agreement between Evergreen and Viacom International, Inc. ("Viacom") occurred prior to the consummation of the Merger, the Company would be required to purchase the Viacom subsidiaries which own four of the ten Viacom stations for $480.0 million, plus net working capital, and Evergreen would be required to purchase the Viacom subsidiaries which own six of the ten Viacom stations for $595.0 million, plus net working capital. On July 2, 1997, the Company acquired KIBB-FM and KYSR-FM in Los Angeles, WLIT-FM in Chicago and WDRQ-FM in Detroit from Viacom for approximately $489.8 million, plus various other direct acquisition costs (the "Chancellor Viacom Acquisition"). On March 24, 1997, the Company exchanged the West Palm Beach stations acquired from Omni for one AM station in Sacramento and approximately $33.0 million in cash from American Radio Systems Corporation (the "American Radio Exchange"). On July 7, 1997, the Company entered into a time brokerage agreement with Evergreen whereby Evergreen began managing certain limited functions of the Company's station in San Francisco which broadcasts on frequency 94.9 (formerly KSAN-FM). On July 14, 1997, the Company and Evergreen entered into an agreement pursuant to which a jointly-owned affiliate of Evergreen and the Company will acquire Katz Media Group, Inc. ("Katz"), a full-service media representation firm, in a tender offer transaction valued at approximately $373.0 million. Debt of Katz of approximately $218.0 million will also be assumed in the transaction. On July 21, 1997, the Company entered into a time brokerage agreement with Evergreen whereby Evergreen began managing certain limited functions of the Company's stations KBGG-FM, KNEW-AM and KABL-AM in San Francisco. On July 30, 1997, the Company entered into an agreement to acquire KXPK-FM in Denver from Evergreen Wireless LLC (which is unrelated to Evergreen) for $26.0 million in cash (including $1.7 million paid by the Company in escrow). The Company also entered into an agreement to operate KXPK-FM under a time brokerage agreement to be effective upon receipt of HSR Act approval. Although there can be no assurance, the Company expects that the acquisition will be completed in the first quarter of 1998, after completion of the Merger. On August 7, 1997, the Company and Evergreen announced that they had acquired, for $3.0 million, an option from Bonneville International Corporation ("Bonneville") to exchange Evergreen's station WTOP-AM in Washington, the Company's stations KZLA-FM in Los Angeles and WGMS-FM in Washington and $57.0 million of cash for Bonneville's stations WDBZ-FM in New York, KLDE-FM in Houston and KBIG-FM in Los Angeles. The option expires on December 31, 1997. On August 11, 1997, the Company completed the sale of WDRQ-FM in Detroit to Capital Cities/ABC for $37.0 million. The proceeds were used to repay borrowings under Chancellor's Interim Loan (as defined). F-73 259 CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The following summarizes the unaudited consolidated pro forma data as though the acquisitions of Shamrock Broadcasting Company, KIMN-FM and KALC-FM, Colfax, Omni and KSTE-AM, the dispositions of KTBZ-FM, WWWW-FM and WDFN-AM and the related financing transactions had occurred as of the beginning of 1996 (in thousands, except per share amounts):
SIX MONTHS ENDED SIX MONTHS ENDED JUNE 30, 1996 JUNE 30, 1997 ---------------------- ---------------------- HISTORICAL PRO FORMA HISTORICAL PRO FORMA ---------- --------- ---------- --------- Net revenue.................................. $ 70,068 $109,422 $128,942 $131,149 Loss before extraordinary loss............... (5,097) (9,428) (1,601) (1,687) Net loss attributable to common stock........ (31,156) (28,148) (30,398) (22,687)
3. LONG-TERM DEBT The Company's term and revolving credit facilities were refinanced on January 23, 1997, in conjunction with the acquisition of Colfax under a new bank credit agreement. In connection with the refinancing of the term and revolving loan facilities in January 1997, the Company incurred an extraordinary charge to write-off deferred finance costs of $4.6 million. On June 5, 1997, the Company closed on the tender offer for all $60.0 million of its outstanding 12 1/2% Senior Subordinated Notes for approximately $70.1 million, which included a premium. The redemption was funded through additional borrowings under the bank credit agreement and resulted in an extraordinary charge of $11.8 million. On June 24, 1997, the Company completed its private offering of $200.0 million of Chancellor Radio Broadcasting Company's 8 3/4% Senior Notes, which mature on June 15, 2007 and bear interest at 8.75% per annum. The proceeds were used to pay down borrowings under the bank credit agreement, which resulted in an extraordinary charge to write-off deferred finance costs of $1.4 million. On July 2, 1997, the Company entered into a restated credit agreement (the "Restated Credit Agreement") in order to finance the Chancellor Viacom Acquisition. The Restated Credit Agreement consists of a $400.0 million term loan facility and a $350.0 million revolving loan facility. Also, Chancellor received an interim loan of $170.0 million (the "Interim Loan"), the proceeds from which were contributed to Chancellor Radio Broadcasting in connection with the Viacom acquisition. The Restated Credit Agreement is collateralized by (i) a first priority perfected pledge of all capital stock and notes owned by the Company and (ii) a first priority perfected security interest in all other assets (including receivables, contracts, contract rights, securities, patents, trademarks, other intellectual property, inventory, equipment and real estate) owned by the Company, excluding FCC licenses, leasehold interests in studio or office space and leasehold and partnership interests in tower or transmitter sites in which necessary consents to the granting of a security interest cannot be obtained without payments to any other party or on a timely basis. The Restated Credit Agreement is also guaranteed by the subsidiaries of Chancellor and Chancellor Radio Broadcasting, whose guarantees are collateralized by a first priority perfected pledge of the capital stock of Chancellor Radio Broadcasting. The term loan facility is due in increasing quarterly installments beginning in 1997 and matures in June 2004. All outstanding borrowings under the revolving facility mature in June 2004. The facilities bear interest at a rate equal to, at the Company's option, the prime rate of Bankers Trust Company, as announced from time to time, or the London Inter-Bank Offered Rate ("LIBOR") in effect from time to time, plus an applicable margin rate. The Company pays quarterly commitment fees in arrears equal to either .375% or .250% per annum on the unused portion of the Revolving Facility, depending upon whether the Company's leverage ratio is equal to or greater than 4.5:1 or less than 4.5:1, respectively. The bank financing facilities which existed on June 30, 1997 accrued interest at the prime rate plus 1.00% (9.50%) on $11.9 million and the LIBOR rate plus 2.00% (7.6875%) on $135.4 million of borrowings. F-74 260 CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The Interim Loan is an unsecured obligation of Chancellor and is due on the earlier of the consummation of the Merger or July 2, 1999. Outstanding borrowings under the Interim Loan bear interest at a rate equal to the three-month LIBOR plus an applicable margin rate beginning at 3.25% and increasing to 9.00% at various intervals during the loan period. Scheduled debt maturities for the Company's outstanding long-term debt under the Restated Credit Agreement as of July 2, 1997, after completion of the Chancellor Viacom Acquisition, for each of the next five calendar years and thereafter were as follows, in thousands: 1997........................................................ $ -- 1998........................................................ 20,000 1999........................................................ 50,000 2000........................................................ 60,000 2001........................................................ 60,000 2002........................................................ 70,000 Thereafter.................................................. 153,000 -------- $413,000 ========
4. CAPITAL STRUCTURE During the first quarter of 1997, Chancellor completed a private placement of $110.0 million of newly authorized 7% Convertible Preferred Stock (the "Convertible Preferred Stock") and Chancellor Radio Broadcasting completed a private placement of $200.0 million of newly authorized 12% Exchangeable Preferred Stock (the "Exchangeable Preferred Stock"). Dividends on the Convertible Preferred Stock accrue from its date of issuance and are payable quarterly commencing April 15, 1997, at a rate per annum of 7% of the liquidation preference per share. The Convertible Preferred Stock is convertible at the option of the holder at any time after March 23, 1997, unless previously redeemed, into Class A Common Stock of Chancellor at a conversion price of $32.90 per share of Class A Common Stock, subject to adjustment in certain events. In addition, after January 19, 2000, the Company may, at its option, redeem the Convertible Preferred Stock, in whole or in part, at specified redemption prices plus accrued and unpaid dividends through the redemption date. Upon the occurrence of a change of control (as defined), Chancellor must, subject to certain conditions, offer to purchase all of the then outstanding shares of Convertible Preferred Stock at a price equal to 101% of the liquidation preference thereof, plus accrued and unpaid dividends to the date of purchase. Dividends on the Exchangeable Preferred Stock will accrue from the date of its issuance and will be payable semi-annually commencing July 15, 1997, at a rate per annum of 12% of the liquidation preference per share. Dividends may be paid, at the Company's option, on any dividend payment date occurring on or prior to January 15, 2002 either in cash or in additional shares of Exchangeable Preferred Stock. The Exchangeable Preferred Stock is redeemable at the Company's option, in whole or in part at any time on or after January 15, 2002, at the redemption prices set forth herein, plus accrued and unpaid dividends to the date of redemption. In addition, prior to January 15, 2000, the Company may, at its option, redeem the Exchangeable Preferred Stock with the net cash proceeds from one or more Public Equity Offerings (as defined), at various redemption prices plus accrued and unpaid dividends to the redemption date; provided, however, that after any such redemption there is outstanding at least $150.0 million aggregate liquidation preference of Exchangeable Preferred Stock. The Company is required, subject to certain conditions, to redeem all of the Exchangeable Preferred Stock outstanding on January 15, 2009, at a redemption price equal to 100% of the liquidation preference thereof, plus accrued and unpaid dividends to the date of redemption. Upon the occurrence of a Change of Control (as defined), the Company will, subject to certain conditions, offer to purchase all of the then outstanding shares of Exchangeable Preferred Stock at a price equal to 101% F-75 261 CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) of the liquidation preference thereof, plus accrued and unpaid dividends to the repurchase date. In addition, prior to January 15, 1999, upon the occurrence of a Change of Control, the Company will have the option to redeem the Exchangeable Preferred Stock in whole but not in part at a redemption price equal to 112% of the liquidation preference thereof, plus accrued and unpaid dividends to the date of redemption. The Exchangeable Preferred Stock will, with respect to dividend rights and rights on liquidation, rank junior to the Company's 12 1/4% Senior Cumulative Exchangeable Preferred Stock (the "Senior Exchangeable Preferred Stock"). Subject to certain conditions, the Exchangeable Preferred Stock is exchangeable in whole, but not in part, at the option of the Company, on any dividend payment date for the Company's 12% subordinated exchange debentures due 2009, including any such securities paid in lieu of cash interest. In addition to the accrued dividends discussed above, the recorded value of the Senior Exchangeable Preferred Stock and the Exchangeable Preferred Stock includes an amount for the accretion of the difference between the stock's fair value at date of issuance and its mandatory redemption amount, calculated using the effective interest method. 5. INCOME TAXES Income tax expense (benefit) differs from the amount computed by applying the federal statutory income tax rate of 34% to income (loss) before income taxes and extraordinary loss for the following reasons, dollars in thousands:
THREE MONTHS SIX MONTHS ENDED ENDED JUNE 30, JUNE 30, -------------- ----------------- 1996 1997 1996 1997 ---- ------ ------- ------ U.S. federal income tax at statutory rate....... $507 $2,269 $(1,189) $ 587 State income taxes, net of federal benefit...... 89 401 (210) 104 Valuation allowance provided for loss carryforward generated during the current period........................................ (59) -- 2,750 -- Permanent difference............................ -- 1,072 -- 2,636 Other........................................... 125 (15) 250 -- ---- ------ ------- ------ $662 $3,727 $ 1,601 $3,327 ==== ====== ======= ======
6. SUBSEQUENT EVENT In July 1997, the Company incurred non-cash stock option and severance compensation of approximately $685,000 and $1.4 million, respectively, for terminations associated with the Merger. In addition, the Company paid $945,000 for a two year consulting and non-compete agreement which will be deferred and amortized over the related period. 7. NEW ACCOUNTING PRONOUNCEMENTS Statement of Financial Accounting Standard No. 128, "Earnings per Share" was issued in February 1997, which establishes standards for computing and presenting earnings per share (EPS) and applies to entities with publicly held common stock or potential common stock. The disclosure requirements of SFAS No. 128 will be effective for the Company's financial statements beginning with the annual report for 1997. Management does not believe that the implementation of SFAS 128 will have a material effect on its financial statements. F-76 262 CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Statement of Financial Accounting Standard No. 130, "Reporting Comprehensive Income" was issued in June 1997, which establishes standards for reporting and display of comprehensive income and its components (revenues, expenses, gains, and losses) in a full set of general-purpose financial statements. The reporting and display requirements of SFAS No. 130 will be effective for the Company's financial statements beginning with the first quarterly report for 1998. Management does not believe that the implementation of SFAS 130 will have a material effect on its financial statements. F-77 263 INDEPENDENT AUDITORS' REPORT The Board of Directors Evergreen Media Corporation: We have audited the accompanying combined balance sheets of Riverside Broadcasting Co., Inc. and WAXQ Inc. as of December 31, 1995 and 1996, and the related combined statements of earnings and cash flows for each of the years in the three-year period ended December 31, 1996. These combined financial statements are the responsibility of the Companies' management. Our responsibility is to express an opinion on these combined financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the combined financial statements referred to above present fairly, in all material respects, the combined financial position of Riverside Broadcasting Inc. and WAXQ Inc. as of December 31, 1995 and 1996, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1996 in conformity with generally accepted accounting principles. KPMG Peat Marwick LLP Dallas, Texas March 14, 1997 F-78 264 RIVERSIDE BROADCASTING CO., INC. AND WAXQ INC. COMBINED BALANCE SHEETS (DOLLARS IN THOUSANDS) ASSETS
DECEMBER 31, ------------------ JUNE 30, 1995 1996 1997 ------- ------- ----------- (UNAUDITED) Current assets: Accounts receivable, less allowance for doubtful accounts of $99 in 1995, $208 in 1996 and $170 in 1997............................... $ 5,507 $ 9,713 $10,489 Prepaid expenses and other current assets............................. 178 381 162 Deferred income taxes................. 45 829 829 ------- ------- ------- Total current assets.......... 5,730 10,923 11,480 Property and equipment, net (note 4).... 1,075 4,177 2,668 Intangible assets, net (note 5)......... 47,422 66,626 74,038 ------- ------- ------- $54,227 $81,726 $88,186 ======= ======= ======= LIABILITIES AND EQUITY Current liabilities -- accounts payable and accrued expenses.................. $ 1,167 $ 3,669 $2,894 Deferred income taxes................... 222 4,373 4,373 Equity (note 9)......................... 52,838 73,684 80,919 Commitments and contingencies (note 10)................................... ------- ------- ------- $54,227 $81,726 $88,186 ======= ======= =======
See accompanying notes to combined financial statements. F-79 265 RIVERSIDE BROADCASTING CO., INC. AND WAXQ INC. COMBINED STATEMENTS OF EARNINGS (DOLLARS IN THOUSANDS)
SIX MONTHS YEARS ENDED DECEMBER 31, ENDED JUNE 30, --------------------------- ----------------- 1994 1995 1996 1996 1997 ------- ------- ------- ------- ------- (UNAUDITED) Gross revenues.......................... $28,254 $25,862 $36,121 $14,274 $25,135 Less agency commissions and national rep fees........................... 4,700 4,342 5,892 2,107 3,652 ------- ------- ------- ------- ------- Net revenues.................. 23,554 21,520 30,229 12,167 21,483 ------- ------- ------- ------- ------- Operating expenses: Station operating expenses excluding depreciation and amortization...... 9,212 9,069 12,447 5,192 8,893 Depreciation and amortization......... 1,662 1,676 4,528 838 1,290 Corporate general and administrative..................... 945 980 943 510 442 ------- ------- ------- ------- ------- Operating expenses................. 11,819 11,725 17,918 6,540 10,625 ------- ------- ------- ------- ------- Operating income................... 11,735 9,795 12,311 5,627 10,858 Other (income) expense (note 3)......... -- -- (741) -- -- ------- ------- ------- ------- ------- Earnings before income taxes....... 11,735 9,795 13,052 5,627 10,858 Income tax expense (note 6)............. 6,053 5,154 6,683 2,881 4,336 ------- ------- ------- ------- ------- Net earnings.................. $ 5,682 $ 4,641 $ 6,369 $ 2,746 $ 6,522 ======= ======= ======= ======= =======
See accompanying notes to combined financial statements. F-80 266 RIVERSIDE BROADCASTING CO., INC. AND WAXQ INC. COMBINED STATEMENTS OF CASH FLOWS (DOLLARS IN THOUSANDS)
SIX MONTHS YEARS ENDED DECEMBER 31, ENDED JUNE 30, --------------------------- ----------------- 1994 1995 1996 1996 1997 ------- ------- ------- ------- ------- (UNAUDITED) Cash flows provided by operating activities: Net earnings................................... $ 5,682 $ 4,641 $ 6,369 $ 2,746 $ 6,522 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation................................ 153 168 286 84 266 Amortization of goodwill.................... 1,509 1,508 1,811 754 1,024 Changes in certain assets and liabilities: Deferred income taxes..................... 32 110 (603) -- -- Accounts receivable, net.................. (676) 659 (4,172) (984) (776) Prepaid expenses and other current assets................................. 12 103 (203) 128 219 Accounts payable and accrued expenses..... (192) (483) 2,502 765 (775) ------- ------- ------- ------- ------- Net cash provided by operating activities........................... 6,520 6,706 5,990 3,493 6,480 ------- ------- ------- ------- ------- Cash flows used by investing activities --capital expenditures................................... (150) (129) (695) (250) (417) ------- ------- ------- ------- ------- Net cash used by financing activities -- distribution to parent........... (6,370) (6,577) (5,295) (3,243) (6,063) ------- ------- ------- ------- ------- Increase (decrease) in cash...................... -- -- -- -- -- Cash at beginning of period...................... -- -- -- -- -- ------- ------- ------- ------- ------- Cash at end of period............................ $ -- $ -- $ -- $ -- $ -- ======= ======= ======= ======= ======= Noncash financing activities -- contribution of radio station net assets by parent (note 3).... $ -- $ -- $19,772 $ -- $ -- ======= ======= ======= ======= =======
See accompanying notes to combined financial statements. F-81 267 RIVERSIDE BROADCASTING CO., INC. AND WAXQ INC. NOTES TO COMBINED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS) (1) ORGANIZATION AND BASIS OF PRESENTATION The accompanying combined financial statements include the accounts of Riverside Broadcasting Co., Inc. and WAXQ Inc. (collectively, the "Company"). The Company owns and operates two commercial radio stations in the New York City market -- WLTW-FM and WAXQ-FM and is wholly owned by Viacom International Inc. ("Viacom" or "Parent"), a wholly owned subsidiary of Viacom, Inc. Significant intercompany accounts and transactions have been eliminated in combination. On February 16, 1997, Viacom entered into a stock purchase agreement to sell all the issued and outstanding shares of capital stock of WAXQ Inc. and Riverside Broadcasting Co., Inc. in the New York City market, KYSR Inc. and KIBB Inc. in the Los Angeles market, Viacom Broadcasting East Inc. and WMZQ Inc. in the Washington, DC market, WLIT Inc. in the Chicago market and WDRQ Inc. in the Detroit market (collectively, the "Viacom Radio Properties") to Evergreen Media Corporation of Los Angeles ("Evergreen"), for $1.075 billion in cash ("Proposed Transaction"). The Proposed Transaction is expected to close after the expiration or termination of the applicable waiting periods under the HSR Act and approval by the Federal Communications Commission ("FCC"). Contemporaneous with this transaction, Evergreen entered into a joint purchase agreement with Chancellor Broadcasting Company ("Chancellor") under which Chancellor agreed to acquire the Chicago, Detroit and Los Angeles Viacom radio properties referred to above for $480 million from Evergreen or from Viacom directly. The accompanying combined financial statements reflect the carve-out historical results of operations and financial position of Riverside Broadcasting Co., Inc. and WAXQ Inc. These financial statements are not necessarily indicative of the results that would have occurred if the Company had been a separate stand-alone entity during the periods presented. The financial statements do not include Viacom's corporate assets or liabilities not specifically identifiable to the Company. Corporate overhead allocations have been included in the accompanying statements of earnings in corporate general and administrative expense and station operating expenses. (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) Property and Equipment Property and equipment are stated at cost. Depreciation of property and equipment is computed using the straight-line method over the estimated useful lives of the assets. Repair and maintenance costs are charged to expense when incurred. (b) Intangible Assets Intangible assets consist primarily of broadcast licenses. The Company amortizes such intangible assets using the straight-line method over 40 years. The Company continually evaluates the propriety of the carrying amount of intangible assets as well as the amortization period to determine whether current events or circumstances warrant adjustments to the carrying value and/or revised estimates of useful lives. This evaluation consists of the projection of undiscounted operating income before depreciation, amortization, nonrecurring charges and interest over the remaining amortization periods of the related intangible assets. At this time, the Company believes that no significant impairment of intangible assets has occurred and that no reduction of the estimated useful lives is warranted. (c) Barter Transactions The Company trades commercial air time for goods and services used principally for promotional, sales and other business activities. An asset and liability are recorded at the fair market value of the goods or F-82 268 RIVERSIDE BROADCASTING CO., INC. AND WAXQ INC. NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED) services to be received. Barter revenue is recorded and the liability relieved when commercials are broadcast and barter expense is recorded and the asset relieved when goods or services are received or used. (d) Revenue Recognition Revenue is derived primarily from the sale of commercial announcements to local and national advertisers. Revenue is recognized as commercials are broadcast. (e) Income Taxes Income taxes are accounted for under the asset and liability method. Deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each year end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable earnings. Valuation allowances are established when necessary to reduce deferred tax assets to the amount more likely than not to be realized. Income tax expense is the total of tax payable for the period and the change during the period in deferred tax assets and liabilities. (f) Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of The Company adopted the provisions of SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, on January 1, 1996. This Statement requires that long-lived assets and certain identifiable intangibles be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. The adoption of this Statement did not have a material impact on the Company's financial position, results of operations, or liquidity. (g) Fair Value The carrying amount of accounts receivable and accounts payable approximates fair value because of the short maturity of these instruments. (h) Disclosure of Certain Significant Risks and Uncertainties The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. In the opinion of management, credit risk with respect to trade receivables is limited due to the large number of diversified customers in the Company's customer base. The Company performs ongoing credit evaluations of its customers and believes that adequate allowances for any uncollectible trade receivables are maintained. No one customer accounted for more than 10% of net revenues in 1994, 1995, or 1996. (i) Unaudited Interim Financial Information In the opinion of management, the unaudited interim combined financial statements as of and for the six months ended June 30, 1996 and 1997, reflect all adjustments, consisting of only normal and recurring items, F-83 269 RIVERSIDE BROADCASTING CO., INC. AND WAXQ INC. NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED) which are necessary for a fair presentation of the results for the interim periods presented. The results for the interim periods ended June 30, 1996 and 1997 are not necessarily indicative of results to be expected for any other interim period or for the full year. (3) ACQUISITIONS AND DISPOSITIONS On August 1, 1996, Viacom exchanged the assets of KBSG-AM/FM and KNDD-FM in Seattle for the assets of WAXQ-FM in New York. The transaction was accounted for as a nonmonetary exchange and was based on the recorded amounts of the nonmonetary assets relinquished. For the period from July 1, 1996 to July 31, 1996, Viacom operated WAXQ-FM under a time brokerage agreement. Station start-up costs, including fees paid pursuant to the time brokerage agreement, amounting to $2,431,000, were capitalized and amortized during 1996. Acquisition-related costs are reflected in the accompanying financial statements as other expense. A summary of net assets relinquished by Viacom in connection with the exchange is as follows: Working capital............................................. $ 34 Property and equipment...................................... 2,693 Intangible assets........................................... 21,015 Deferred taxes.............................................. (3,970) ------- $19,772 =======
(4) PROPERTY AND EQUIPMENT Property and equipment consists of the following at December 31, 1995 and 1996:
ESTIMATED USEFUL LIFE 1995 1996 ----------- ------ ------ Broadcast facilities.................................. 8-20 years $1,971 $4,783 Office equipment and other............................ 5-8 years 557 754 Construction in progress.............................. 10 389 ------ ------ 2,538 5,926 Accumulated depreciation.............................. 1,463 1,749 ------ ------ $1,075 $4,177 ====== ======
(5) INTANGIBLE ASSETS Intangible assets at December 31, 1995 and 1996 consist of broadcast licenses which are being amortized over forty years and are presented net of accumulated amortization of $13,177 and $14,988, respectively. (6) INCOME TAXES The Company's results of operations are included in the combined U.S. federal and certain combined and separate state income tax returns of Viacom International Inc. The tax provisions and deferred tax liabilities presented have been determined as if the Company were a stand-alone business filing separate tax returns. Current tax liabilities are recorded through the equity account with Viacom. F-84 270 RIVERSIDE BROADCASTING CO., INC. AND WAXQ INC. NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED) Income tax expense (benefit) consists of:
1994 1995 1996 ------ ------ ------ Current: Federal.................................................. $3,889 $3,258 $4,672 State and local.......................................... 2,132 1,786 2,614 Deferred: Federal.................................................. 21 71 (356) State.................................................... 11 39 (247) ------ ------ ------ $6,053 $5,154 $6,683 ====== ====== ======
A reconciliation of the U.S. Federal statutory tax rate to the Company's effective tax rate on earnings before income taxes is as follows:
1994 1995 1996 ---- ---- ---- Statutory U.S. tax rate..................................... 35.0% 35.0% 35.0% Amortization of intangibles................................. 4.6 5.4 4.3 State and local taxes, net of federal tax benefit........... 11.9 12.1 11.8 Other, net.................................................. 0.1 0.1 0.1 ---- ---- ---- Effective tax rate........................................ 51.6% 52.6% 51.2% ==== ==== ====
Deferred tax assets and liabilities are computed by applying the U.S. federal income tax rate in effect to the gross amounts of temporary differences and other tax attributes. These temporary differences are primarily the result of fixed asset basis differences and bad debt expense. (7) DEBT AND INTEREST COST Viacom has not allocated any portion of its debt or related interest cost to the Company, and no portion of Viacom's debt is specifically related to the operations of the Company. Accordingly, the Company's financial statements include no charges for interest. (8) RELATED PARTY TRANSACTIONS Intercompany balances between the Company and Viacom resulting from normal trade activity are reflected in Equity in the accompanying combined financial statements (see note 9). Viacom provides services for the Company in management, accounting and financial reporting, human resources and information systems. The allocation of these expenses, which is generally based on revenue dollars, is reflected in the accompanying combined financial statements as corporate general and administrative expense. Management believes that the method of allocation of corporate overhead is reasonable. Viacom has a noncontributory pension plan covering substantially all of its employees, including the employees of the Company. Costs related to these plans are allocated to the Company based on payroll dollars. The Company recognized expense related to these costs in the amounts of $63, $41 and $97 for 1994, 1995 and 1996, respectively. The assets and the related benefit obligation of the plans will not be transferred to the Company upon consummation of the Proposed Transaction, therefore, such assets and obligations are not included in the notes to the Company's combined financial statements. Viacom utilizes a centralized cash management system. As a result, the Company carries minimal cash. Disbursements are funded by the Parent upon demand and cash receipts are transferred to the Parent daily. F-85 271 RIVERSIDE BROADCASTING CO., INC. AND WAXQ INC. NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED) The Company, from time to time, enters into transactions with companies owned by or affiliated with Viacom. Generally, services received from such related parties are charged to the Company at amounts which would be incurred in transactions between unrelated entities. (9) EQUITY Equity represents Viacom's ownership interest in the recorded net assets of the Company. All cash transactions and intercompany transactions flow through the equity account. A summary of the activity is as follows:
1994 1995 1996 -------- -------- -------- Balance at beginning of period.......... $ 55,462 $ 54,774 $ 52,838 Net earnings............................ 5,682 4,641 6,369 Net intercompany activity............... (6,370) (6,577) 14,477 -------- -------- -------- Balance at end of period................ $ 54,774 $ 52,838 $ 73,684 ======== ======== ========
(10) COMMITMENTS AND CONTINGENCIES The Company has noncancelable operating leases, primarily for office space. These leases generally contain renewal options for periods ranging from one to ten years and require the Company to pay all executory costs such as maintenance and insurance. Rental expense for operating leases (excluding those with lease terms of one month or less that were not renewed) was approximately $192, $155 and $442 during 1994, 1995 and 1996, respectively. Future minimum lease payments under noncancelable operating leases (with initial or remaining lease terms in excess of one year) as of December 31, 1996 are as follows: Year ending December 31: 1997.................................... $ 709 1998.................................... 722 1999.................................... 759 2000.................................... 795 2001.................................... 818 Thereafter.............................. 2,411 ------ $6,214 ======
F-86 272 INDEPENDENT AUDITORS' REPORT The Board of Directors Evergreen Media Corporation: We have audited the accompanying combined balance sheets of WMZQ Inc. and Viacom Broadcasting East Inc. as of December 31, 1995 and 1996, and the related combined statements of earnings and cash flows for each of the years in the three-year period ended December 31, 1996. These combined financial statements are the responsibility of the Companies' management. Our responsibility is to express an opinion on these combined financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the combined financial statements referred to above present fairly, in all material respects, the combined financial position of WMZQ Inc. and Viacom Broadcasting East Inc. as of December 31, 1995 and 1996, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1996 in conformity with generally accepted accounting principles. KPMG Peat Marwick LLP Dallas, Texas March 14, 1997, except for note 10, which is as of April 14, 1997 F-87 273 WMZQ INC. AND VIACOM BROADCASTING EAST INC. COMBINED BALANCE SHEETS (DOLLARS IN THOUSANDS) ASSETS
DECEMBER 31 ------------------ JUNE 30, 1995 1996 1997 ------- ------- ----------- (UNAUDITED) Current assets: Accounts receivable, less allowance for doubtful accounts of $150 in 1995, $235 in 1996 and $136 in 1997............................... $ 4,893 $ 5,401 $ 5,407 Prepaid expenses and other current assets............................. 467 629 55 Deferred income taxes (note 5)........ 60 94 94 ------- ------- ------- Total current assets.......... 5,420 6,124 5,556 Property and equipment, net (note 3).... 2,407 2,316 2,408 Intangible assets, net (note 4)......... 50,204 48,695 50,399 ------- ------- ------- $58,031 $57,135 $58,363 ======= ======= ======= LIABILITIES AND EQUITY Current liabilities -- accounts payable and accrued expenses.................. $ 2,411 $ 2,458 $ 1,814 Deferred income taxes (note 5).......... 1,899 2,121 2,123 Equity (note 8)......................... 53,721 52,556 54,426 Commitments and contingencies (note 9).................................... ------- ------- ------- $58,031 $57,135 $58,363 ======= ======= =======
See accompanying notes to combined financial statements. F-88 274 WMZQ INC. AND VIACOM BROADCASTING EAST INC. COMBINED STATEMENTS OF EARNINGS (DOLLARS IN THOUSANDS)
SIX MONTHS ENDED YEARS ENDED DECEMBER 31, JUNE 30, --------------------------- ----------------- 1994 1995 1996 1996 1997 ------- ------- ------- ------- ------- (UNAUDITED) Gross revenues................................... $21,389 $25,656 $26,584 $13,422 $13,837 Less agency commissions and national rep fees........................................ 3,321 4,131 4,075 1,624 1,818 ------- ------- ------- ------- ------- Net revenues........................... 18,068 21,525 22,509 11,798 12,019 ------- ------- ------- ------- ------- Operating expenses: Station operating expenses excluding depreciation and amortization............... 10,398 11,445 11,362 6,394 6,043 Depreciation and amortization.................. 1,798 1,814 1,884 906 989 Corporate general and administrative........... 694 940 674 436 240 ------- ------- ------- ------- ------- Operating expenses.......................... 12,890 14,199 13,920 7,736 7,272 ------- ------- ------- ------- ------- Earnings before income taxes................ 5,178 7,326 8,589 4,062 4,747 Income tax expense (note 5)...................... 2,607 3,437 3,929 1,858 1,556 ------- ------- ------- ------- ------- Net earnings........................... $ 2,571 $ 3,889 $ 4,660 $ 2,204 $ 3,191 ======= ======= ======= ======= =======
See accompanying notes to combined financial statements. F-89 275 WMZQ INC. AND VIACOM BROADCASTING EAST INC. COMBINED STATEMENTS OF CASH FLOWS (DOLLARS IN THOUSANDS)
SIX MONTHS YEARS ENDED DECEMBER 31, ENDED JUNE 30, --------------------------- ----------------- 1994 1995 1996 1996 1997 ------- ------- ------- ------- ------- (UNAUDITED) Cash flows provided by operating activities: Net earnings.......................... $ 2,571 $ 3,889 $ 4,660 $ 2,204 $ 3,191 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation....................... 289 305 375 150 237 Amortization of goodwill........... 1,509 1,509 1,509 756 752 Deferred income tax expense........ 323 302 188 -- -- Changes in certain assets and liabilities, net of effects of acquisitions: Accounts receivable, net......... 179 (1,485) (508) (445) (6) Prepaid expenses and other current assets................ 14 (121) (162) (730) 574 Accounts payable and accrued expenses...................... (559) 20 47 2,446 (644) ------- ------- ------- ------- ------- Net cash provided by operating activities.................. 4,326 4,419 6,109 4,381 4,104 ------- ------- ------- ------- ------- Cash flows used by investing activities -- capital expenditures.... (194) (491) (284) (142) (232) ------- ------- ------- ------- ------- Cash flows used by financing activities -- distribution to Parent................................ (4,132) (3,928) (5,825) (4,239) (3,872) ------- ------- ------- ------- ------- Increase (decrease) in cash............. -- -- -- -- -- Cash at beginning of period............. -- -- -- -- -- ------- ------- ------- ------- ------- Cash at end of period................... $ -- $ -- $ -- $ -- $ -- ======= ======= ======= ======= =======
See accompanying notes to combined financial statements. F-90 276 WMZQ INC. AND VIACOM BROADCASTING EAST INC. NOTES TO COMBINED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS) (1) ORGANIZATION AND BASIS OF PRESENTATION The accompanying combined financial statements include the accounts of WMZQ Inc. and Viacom Broadcasting East Inc. (collectively, the "Company"). The Company owns and operates four commercial radio stations in the Washington, DC market, WMZQ-FM, WJZW-FM, WBZS-AM and WZHF-AM, and is wholly owned by Viacom International Inc. ("Viacom" or "Parent"), a wholly owned subsidiary of Viacom, Inc. Significant intercompany accounts and transactions have been eliminated in combination. On February 16, 1997, Viacom International Inc. entered into a stock purchase agreement to sell all the issued and outstanding shares of capital stock of WAXQ Inc. and Riverside Broadcasting Co., Inc. in the New York City market, KYSR Inc. and KIBB Inc. in the Los Angeles market, Viacom Broadcasting East Inc. and WMZQ Inc. in the Washington, DC market, WLIT Inc. in the Chicago market and WDRQ Inc. in the Detroit market (collectively the "Viacom Radio Properties") to Evergreen Media Corporation for $1.075 billion in cash ("Proposed Transaction"). The Proposed Transaction is expected to close after the expiration or termination of the applicable waiting periods under the HSR Act and approval by the Federal Communications Commission ("FCC"). Contemporaneous with this transaction, Evergreen entered into a joint purchase agreement with Chancellor Broadcasting Company ("Chancellor"), under which Chancellor agreed to acquire the Chicago, Detroit and Los Angeles Viacom Radio Properties referred to above for $480 million from Evergreen or from Viacom directly. The accompanying combined financial statements reflect the carve-out historical results of operations and financial position of WMZQ Inc. and Viacom Broadcasting East, Inc. These financial statements are not necessarily indicative of the results that would have occurred if the Company had been a separate stand-alone entity during the periods presented. The financial statements do not include Viacom's corporate assets or liabilities not specifically identifiable to the Company. Corporate overhead allocations have been included in the accompanying statements of earnings in corporate general and administrative expense and station operating expenses. (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) Property and Equipment Property and equipment are stated at cost. Depreciation of property and equipment is computed using the straight-line method over the estimated useful lives of the assets. Repair and maintenance costs are charged to expense when incurred. (b) Intangible Assets Intangible assets consist primarily of broadcast licenses. The Company amortizes such intangible assets using the straight-line method over 40 years. The Company continually evaluates the propriety of the carrying amount of intangible assets as well as the amortization period to determine whether current events or circumstances warrant adjustments to the carrying value and/or revised estimates of useful lives. This evaluation consists of the projection of undiscounted operating income before depreciation, amortization, nonrecurring charges and interest over the remaining amortization periods of the related intangible assets. At this time, the Company believes that no significant impairment of intangible assets has occurred and that no reduction of the estimated useful lives is warranted. (c) Barter Transactions The Company trades commercial air time for goods and services used principally for promotional, sales and other business activities. An asset and liability are recorded at the fair market value of the goods or F-91 277 WMZQ INC. AND VIACOM BROADCASTING EAST INC. NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED) services to be received. Barter revenue is recorded and the liability relieved when commercials are broadcast and barter expense is recorded and the asset relieved when goods or services are received or used. (d) Revenue Recognition Revenue is derived primarily from the sale of commercial announcements to local and national advertisers. Revenue is recognized as commercials are broadcast. (e) Income Taxes Income taxes are accounted for under the asset and liability method. Deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each year end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable earnings. Valuation allowances are established when necessary to reduce deferred tax assets to the amount more likely than not to be realized. Income tax expense is the total of tax payable for the period and the change during the period in deferred tax assets and liabilities. (f) Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of The Company adopted the provisions of SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, on January 1, 1996. This Statement requires that long-lived assets and certain identifiable intangibles be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. The adoption of this Statement did not have a material impact on the Company's financial position, results of operations, or liquidity. (g) Fair Value The carrying amount of accounts receivable and accounts payable approximates fair value because of the short maturity of these instruments. (h) Disclosure of Certain Significant Risks and Uncertainties The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. In the opinion of management, credit risk with respect to trade receivables is limited due to the large number of diversified customers in the Company's customer base. The Company performs ongoing credit evaluations of its customers and believes that adequate allowances for any uncollectible trade receivables are maintained. No one customer accounted for more than 10% of net revenues in 1994, 1995, or 1996. (i) Unaudited Interim Financial Information In the opinion of management, the unaudited interim combined financial statements as of and for the six months ended June 30, 1996 and 1997, reflect all adjustments, consisting of only normal and recurring items, F-92 278 WMZQ INC. AND VIACOM BROADCASTING EAST INC. NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED) which are necessary for a fair presentation of the results for the interim periods presented. The results for the interim periods ended June 30, 1996 and 1997 are not necessarily indicative of results to be expected for any other interim period or for the full year. (3) PROPERTY AND EQUIPMENT Property and equipment consists of the following at December 31, 1995 and 1996:
ESTIMATED USEFUL LIFE 1995 1996 --------------- ------ ------ Broadcast facilities................................... 8 - 20 years $2,268 $2,366 Land................................................... 440 440 Building............................................... 30 - 40 years 146 146 Office equipment and other............................. 5 - 8 years 1,866 1,808 Construction in progress............................... -- 5 ------ ------ 4,720 4,765 ------ ------ Accumulated depreciation............................... 2,313 2,449 ------ ------ $2,407 $2,316 ====== ======
(4) INTANGIBLE ASSETS Intangible assets at December 31, 1995 and 1996 consist of broadcast licenses which are being amortized over forty years and are presented net of accumulated amortization of $10,714 and $12,223, respectively. (5) INCOME TAXES The Company's results of operations are included in the U.S. federal and certain combined and separate state income tax returns of Viacom International Inc. The tax provisions and deferred tax liabilities presented have been determined as if the Company were a stand-alone business filing separate tax returns. Current tax liabilities are recorded through the equity account with Viacom. Income tax expense consists of:
1994 1995 1996 ------ ------ ------ Current: Federal................................................... $1,704 $2,434 $2,943 State and local........................................... 580 701 798 Deferred federal and state.................................. 323 302 188 ------ ------ ------ $2,607 $3,437 $3,929 ====== ====== ======
F-93 279 WMZQ INC. AND VIACOM BROADCASTING EAST INC. NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED) A reconciliation of the U.S. Federal statutory tax rate to the Company's effective tax rate on earnings before income taxes is as follows:
1994 1995 1996 ---- ---- ---- Statutory U.S. tax rate................. 35.0% 35.0% 35.0% Amortization of intangibles............. 7.4 5.2 4.5 State and local taxes, net of federal tax benefit........................... 7.9 6.7 6.2 Other, net.............................. 0.0 0.0 0.0 ---- ---- ---- Effective tax rate.................... 50.3% 46.9% 45.7% ==== ==== ====
Deferred tax assets and liabilities are computed by applying the U.S. federal income tax rate in effect to the gross amounts of temporary differences and other tax attributes. These temporary differences are primarily the result of fixed asset basis differences and bad debt expense. Deferred tax assets and liabilities relating to state income taxes are not material. (6) DEBT AND INTEREST COST Viacom has not allocated any portion of its debt or related interest cost to the Company, and no portion of Viacom's debt is specifically related to the operations of the Company. Accordingly, the Company's financial statements include no charges for interest. (7) RELATED PARTY TRANSACTIONS Intercompany balances between the Company and Viacom resulting from normal trade activity are reflected in Equity in the accompanying combined financial statements (see note 8). Viacom provides services for the Company in management, accounting and financial reporting, human resources, information systems, legal, taxes and other corporate services. The allocation of these expenses, which is generally based on revenue dollars, is reflected in the accompanying financial statements as corporate general and administrative expense. Management believes that the method of allocation of corporate overhead is reasonable. Viacom has a noncontributory pension plan covering substantially all of its employees, including the employees of the Company. Costs related to these plans are allocated to the Company based on payroll dollars and are included in station operating expenses. The Company recognized expense related to these costs in the amounts of $77, $74 and $242 for 1994, 1995 and 1996, respectively. The assets and the related benefit obligation of the plans will not be transferred to the Company upon consummation of the Proposed Transaction, therefore, such assets and obligations are not included in the notes to the Company's financial statements. Viacom utilizes a centralized cash management system. As a result, the Company carries minimal cash. Disbursements are funded centrally upon demand and cash receipts are transferred to the Parent daily. The Company, from time to time, enters into transactions with companies owned by or affiliated with Viacom. Generally, services received from such related parties are charged to the Company at amounts which would be incurred in transactions between unrelated entities. F-94 280 WMZQ INC. AND VIACOM BROADCASTING EAST INC. NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED) (8) EQUITY Equity represents Viacom's ownership interest in the recorded net assets of the Company. All cash transactions and intercompany transactions flow through the equity account. A summary of the activity is as follows:
1994 1995 1996 ------- ------- ------- Balance at beginning of period......................... $55,321 $53,760 $53,721 Net earnings........................................... 2,571 3,889 4,660 Net intercompany activity.............................. (4,132) (3,928) (5,825) ------- ------- ------- Balance at end of period............................... $53,760 $53,721 $52,556 ======= ======= =======
(9) COMMITMENTS AND CONTINGENCIES The Company has noncancelable operating leases, primarily for office space. These leases generally contain renewal options for periods ranging from 1 to 10 years and require the Company to pay all executory costs such as maintenance and insurance. Rental expense for operating leases (excluding those with lease terms of one month or less that were not renewed) was approximately $332, $356 and $373 during 1994, 1995 and 1996, respectively. Future minimum lease payments under noncancelable operating leases (with initial or remaining lease terms in excess of one year) as of December 31, 1996 are as follows: Year ending December 31: 1997........................................................ $ 506 1998........................................................ 523 1999........................................................ 310 2000........................................................ 222 2001........................................................ 200 Thereafter.................................................. 814 ------ $2,575 ======
(10) SUBSEQUENT EVENT On April 14, 1997, Evergreen Media Corporation and Chancellor Broadcasting Company entered into an agreement with ABC Radio ("ABC"), a division of The Walt Disney Company, whereby ABC will purchase from Evergreen and Chancellor two radio stations, WDRQ-FM and WJZW-FM for a total of $105 million. F-95 281 INDEPENDENT AUDITORS' REPORT The Board of Directors Beasley FM Acquisition Corp.: We have audited the accompanying balance sheet of WDAS-AM/FM (station owned and operated by Beasley FM Acquisition Corp.) as of December 31, 1996, and the related statements of earnings and station equity and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of WDAS-AM/FM as of December 31, 1996, and the results of its operations and its cash flows for the year then ended in conformity with generally accepted accounting principles. KPMG Peat Marwick LLP St. Petersburg, Florida March 28, 1997 F-96 282 WDAS-AM/FM (STATION OWNED AND OPERATED BY BEASLEY FM ACQUISITION CORP.) BALANCE SHEETS ASSETS
DECEMBER 31, MARCH 31, 1996 1997 ------------ ----------- (UNAUDITED) (IN THOUSANDS) Current assets: Cash...................................................... $ 2,111 $ 2,805 Accounts receivable, less allowance for doubtful accounts of $166 and $138 in 1996 and 1997...................... 3,693 2,938 Trade sales receivable.................................... 359 29 Prepaid expense and other................................. 150 130 ------- ------- Total current assets.............................. 6,313 5,902 Property and equipment, net (note 2)........................ 3,297 3,523 Notes receivable from related parties (note 5).............. 2,766 3,625 Intangibles, less accumulated amortization.................. 17,738 17,122 ------- ------- $30,114 $30,172 ======= ======= LIABILITIES AND STATION EQUITY Current liabilities: Current installments of long-term debt (note 3)........... $ 49 $ 49 Notes payable to related parties (note 5)................. 352 494 Accounts payable.......................................... 269 191 Accrued expenses.......................................... 515 313 Trade sales payable....................................... 39 12 ------- ------- Total current liabilities......................... 1,224 1,059 Long-term debt, less current installments (note 3).......... 627 627 ------- ------- Total liabilities................................. 1,851 1,686 Station equity.............................................. 28,263 28,486 Commitments and related party transactions (notes 4 and 5)........................................................ ------- ------- $30,114 $30,172 ======= =======
See accompanying notes to financial statements. F-97 283 WDAS-AM/FM (STATION OWNED AND OPERATED BY BEASLEY FM ACQUISITION CORP.) STATEMENTS OF EARNINGS AND STATION EQUITY
THREE MONTHS YEAR ENDED ENDED MARCH 31, DECEMBER 31, ------------------ 1996 1996 1997 ------------ ------- ------- (UNAUDITED) (IN THOUSANDS) Net revenues................................................ $14,667 $ 2,623 $ 3,000 ------- ------- ------- Costs and expenses: Program and production.................................... 2,028 445 620 Technical................................................. 212 59 50 Sales and advertising..................................... 3,514 660 802 General and administrative................................ 2,005 497 459 ------- ------- ------- 7,759 1,661 1,931 ------- ------- ------- Operating income, excluding items shown separately below........................................... 6,908 962 1,069 Management fees (note 5).................................... (620) (156) (128) Depreciation and amortization............................... (2,763) (651) (657) Interest income (expense), net.............................. (40) (13) 7 Other....................................................... -- -- (78) ------- ------- ------- Net income........................................ 3,485 142 213 Station equity, beginning of period......................... 25,367 25,367 28,273 Forgiveness of related party note receivable (note 5)....... (589) -- -- ------- ------- ------- Station equity, end of period............................... $28,263 $25,509 $28,486 ======= ======= =======
See accompanying notes to financial statements. F-98 284 WDAS-AM/FM (STATION OWNED AND OPERATED BY BEASLEY FM ACQUISITION CORP.) STATEMENTS OF CASH FLOWS
THREE MONTHS YEAR ENDED ENDED MARCH 31, DECEMBER 31, ------------------------------- 1996 1996 1997 ------------ --------------- ------------- (UNAUDITED) (IN THOUSANDS) Cash flows from operating activities: Net income........................................... $ 3,485 $ 142 $ 213 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization..................... 2,763 651 657 Allowance for doubtful accounts................... 8 (56) (28) Decrease (increase) in receivables................ (398) 792 1,113 (Increase) decrease) in prepaid expense and other assets.......................................... (96) (104) 20 Decrease in payables and accrued expenses......... (507) (331) (297) ------- ----- ------ Net cash provided by operating activities.... 5,255 1,094 1,678 ------- ----- ------ Cash flows from investing activities -- capital expenditures for property and equipment.............. (775) (572) (267) ------- ----- ------ Cash flows from financing activities: Proceeds from issuance of indebtedness............... 676 - - Principal payments on indebtedness................... (820) - - Payment of loan fees................................. (6) - - Net change in borrowings to/from affiliates.......... (2,647) (305) (717) ------- ----- ------ Net cash used in financing activities........ (2,797) (305) (717) ------- ----- ------ Net increase in cash................................... 1,683 217 694 Cash at beginning of period............................ 428 428 2,111 ------- ----- ------ Cash at end of period.................................. $ 2,111 $ 645 $2,805 ======= ===== ====== Noncash transactions: Forgiveness of related note receivable Release of WDAS-AM/FM's obligations under a note payable which related to obtaining an easement. WDAS-AM/FM is now directly responsible for the costs necessary to obtain this easement and has included these costs in accrued expenses in the accompanying balance sheet........................................ $ 350 =======
See accompanying notes to financial statements. F-99 285 WDAS-AM/FM (STATION OWNED AND OPERATED BY BEASLEY FM ACQUISITION CORP.) NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1996 (IN THOUSANDS) (1) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) Organization WDAS-AM/FM (the Station) is a radio station operating in Philadelphia, Pennsylvania. The assets, liabilities and operations of WDAS-AM/FM are part of Beasley FM Acquisition Corp. (BFMA). These financial statements reflect only the assets, liabilities and operations relating to radio station WDAS-AM/FM and are not representative of the financial statements of BFMA. (b) Revenue Recognition Revenue is recognized as advertising air time is broadcast and is net of advertising agency commissions. (c) Property and Equipment Property and equipment are stated at cost. Depreciation is calculated using the straight-line method over the estimated lives of the assets, which range from 5 to 31 years. (d) Intangibles Intangibles consist primarily of FCC licenses, which are amortized straight-line over ten years. Other intangibles are amortized straight-line over 5 to 10 years. (e) Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed Of BFMA adopted the provisions of Statement of Financial Accounting Standards No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of, on January 1, 1996. This Statement requires that long-lived assets and certain identifiable intangibles be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceed the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. Adoption of this Statement did not have a material impact on the Station's financial position, results of operations, or liquidity. (f) Barter Transactions Trade sales are recorded at the fair value of the products or services received and totaled approximately $676 for the year ended December 31, 1996. Products and services received and expensed totaled approximately $449 for the year ended December 31, 1996. (g) Income Taxes BFMA has elected to be treated as an "S" Corporation under provisions of the Internal Revenue Code. Under this corporate status, the stockholders of BFMA are individually responsible for reporting their share of taxable income or loss. Accordingly, no provision for federal or state income taxes has been reflected in the accompanying financial statements. F-100 286 WDAS-AM/FM (STATION OWNED AND OPERATED BY BEASLEY FM ACQUISITION CORP.) NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) (h) Defined Contribution Plan BFMA has a defined contribution plan which conforms with Section 401(k) of the Internal Revenue Code. Under this plan, employees may contribute a minimum of 1% of their compensation (no maximum) to the Plan. The Internal Revenue Code, however, limited contributions to $9,500 in 1996. There are no employer matching contributions. (i) Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amount of revenues and expenses during the reporting period. Actual results could differ from these estimates. To the extent management's estimates prove to be incorrect, financial results for future periods may be adversely affected. (j) Interim Financial Statements In the opinion of management, the accompanying unaudited interim financial statements contain all adjustments, consisting of normal recurring accruals, necessary to present fairly the financial position, results of operations, and cash flows of the Station for the three-month periods ended March 31, 1997 and 1996 and as of June 30, 1997. (2) PROPERTY AND EQUIPMENT Property and equipment, at cost, is comprised of the following at December 31, 1996: Land, buildings, and improvements........................... $2,204 Broadcast equipment......................................... 1,200 Office equipment and other.................................. 477 Transportation equipment.................................... 79 ------ 3,960 Less accumulated depreciation..................... (663) ------ $3,297 ======
(3) LONG-TERM DEBT BFMA and six affiliates (the Group) refinanced their $100,000 revolving credit loan on June 24, 1996. Under terms of the new agreement, the Group was provided a revolving credit loan with an initial maximum commitment of $115,000. The credit agreement was subsequently amended and the maximum commitment was increased to $120,000. The Group's borrowings under the revolving credit loan totaled $115,784 at December 31, 1996, of which $676 was allocated to WDAS-AM/FM. The loan bears interest at either the base rate or LIBOR plus a margin which is determined by the Group's debt to cash flow ratio. The base rate is equal to the higher of the prime rate or the overnight federal funds effective rate plus 0.5%. At December 31, 1996, the revolving credit loan carried interest at an average rate of 8.61%. Interest is generally payable monthly. The Group has entered into interest rate hedge agreements as discussed in note 6. The amount available under the Group's revolving credit loan will be reduced quarterly beginning September 30, 1997 through its maturity on December 31, 2003. The loan agreement includes restrictive covenants and requires the Group to maintain certain financial ratios. The loans are secured by the common stock and substantially all assets of the Group. F-101 287 WDAS-AM/FM (STATION OWNED AND OPERATED BY BEASLEY FM ACQUISITION CORP.) NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) Annual maturities on the Group's revolving credit loan for the next five years are as follows:
DEBT MATURITIES ---------- 1997........................................................ $ 8,434 1998........................................................ 12,650 1999........................................................ 13,800 2000........................................................ 14,950 2001........................................................ 15,525 Thereafter.................................................. 50,425 -------- Total............................................. $115,784 ========
S-AM/FM paid interest of approximately $79 in 1996. (4) COMMITMENTS On September 19, 1996, BFMA entered into an asset purchase agreement (APA) with Evergreen Media Corporation of Los Angeles (Evergreen) for the sale of WDAS-AM/FM. Under the terms of the APA, BFMA will convey substantially all of the assets used in the operation of the station to Evergreen in exchange for a purchase price of $103,000, subject to adjustment, to be paid in cash. BFMA expects to close on this sale before July 1, 1997. WDAS-AM/FM leases facilities and a tower under 10-year operating leases which expire in July 2004 and January 2007, respectively. WDAS-AM/FM also leases certain other office equipment on a month-to-month basis. Lease expense was approximately $215 in 1996. Future minimum lease payments by year are summarized as follows: 1997........................................................ $ 236 1998........................................................ 247 1999........................................................ 258 2000........................................................ 270 2001........................................................ 283 Thereafter.................................................. 1,275 ------ $2,569 ======
In the normal course of business, the Station is party to various legal matters. The ultimate disposition of these matters will not, in management's judgment, have a material adverse effect on the Station's financial position. (5) RELATED PARTY TRANSACTIONS The Company has a management agreement with Beasley Management Company, an affiliate of the Company's principal stockholder. Management fee expense under the agreement was $620 in 1996. The notes receivable from/payable to related parties are non-interest bearing and are due on demand. A note receivable due from a related party of $589 was forgiven in 1996. F-102 288 WDAS-AM/FM (STATION OWNED AND OPERATED BY BEASLEY FM ACQUISITION CORP.) NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) (6) FINANCIAL INSTRUMENTS WDAS-AM/FM's significant financial instruments and the methods used to estimate their fair value are as follows: Revolving credit loan -- The fair value approximates carrying value due to the loan being refinanced on June 24, 1996 and the interest rate being based on current market rates. Notes receivable from/payable to related parties -- It is not practicable to estimate the fair value of these notes payable due to their related party nature. Interest rate swap, cap and collar agreements -- The Group entered into an interest rate swap agreement with a notional amount of $15,000, an interest rate cap agreement with a notional amount of $3,100, and an interest rate collar agreement with a notional amount of $15,000 to act as a hedge by reducing the potential impact of increases in interest rates on the revolving credit loan. These agreements expire on various dates in 1999. The Group is exposed to credit loss in the event of nonperformance by the other parties to the agreements. The Group, however, does not anticipate nonperformance by the counterparties. The fair value of the interest rate swap agreement is estimated using the difference between the present value of discounted cash flows using the base rate stated in the swap agreement (5.37%) and the present value of discounted cash flows using the LIBOR rate at December 31, 1996. The fair values of the interest rate cap agreement, which establishes a maximum base rate of 7.50%, and the interest rate collar agreement, which establishes a minimum base rate of 4.93% and a maximum base rate of 6%, are estimated based on the amounts the Group would expect to receive or pay to terminate the agreement. The estimated fair value of each of these agreements is negligible. F-103 289 INDEPENDENT AUDITORS' REPORT The Board of Directors Chancellor Broadcasting Company: We have audited the accompanying combined balance sheets of KYSR Inc. and KIBB Inc. as of December 31, 1995 and 1996, and the related combined statements of operations and cash flows for each of the years in the three-year period ended December 31, 1996. These combined financial statements are the responsibility of the Companies' management. Our responsibility is to express an opinion on these combined financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the combined financial statements referred to above present fairly, in all material respects, the combined financial position of KYSR Inc. and KIBB Inc. as of December 31, 1995 and 1996, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1996, in conformity with generally accepted accounting principles. KPMG Peat Marwick LLP Dallas, Texas March 14, 1997 F-104 290 KYSR INC. AND KIBB INC. COMBINED BALANCE SHEETS (DOLLARS IN THOUSANDS) ASSETS
DECEMBER 31, ------------------- JUNE 30, 1995 1996 1997 -------- -------- ----------- (UNAUDITED) Current assets: Accounts receivable, less allowance for doubtful accounts of $218 in 1995 and $246 in 1996 and $321 in 1997...... $ 6,253 $ 7,283 $ 7,403 Prepaid expenses and other................................ 412 609 18 Deferred income taxes (note 5)............................ 89 101 101 -------- -------- -------- Total current assets.............................. 6,754 7,993 7,522 Property and equipment, net (note 3)........................ 4,172 4,082 4,195 Intangible assets, net (note 4)............................. 116,946 113,644 111,984 Other assets, net........................................... 22 22 22 -------- -------- -------- $127,894 $125,741 $123,723 ======== ======== ======== LIABILITIES AND EQUITY Current liabilities -- accounts payable and accrued expenses.................................................. $ 3,883 $ 3,624 $ 2,082 Deferred income taxes (note 5).............................. 9,683 11,027 11,027 Equity (note 8)............................................. 114,328 111,090 110,614 Commitments and contingencies (note 9)...................... -------- -------- -------- $127,894 $125,741 $123,723 ======== ======== ========
See accompanying notes to combined financial statements. F-105 291 KYSR INC. AND KIBB INC. COMBINED STATEMENTS OF OPERATIONS (DOLLARS IN THOUSANDS)
SIX MONTHS ENDED YEARS ENDED DECEMBER 31, JUNE 30, --------------------------- ----------------- 1994 1995 1996 1996 1997 ------- ------- ------- ------- ------- (UNAUDITED) Gross revenues.......................... $28,590 $30,571 $33,769 $15,762 $16,784 Less agency commissions and national rep fees........................... 4,490 4,882 5,462 2,196 2,385 ------- ------- ------- ------- ------- Net revenues.................. 24,100 25,689 28,307 13,566 14,399 ------- ------- ------- ------- ------- Operating expenses: Station operating expenses, excluding depreciation and amortization...... 13,407 12,901 13,378 6,834 7,119 Depreciation and amortization......... 3,640 3,661 3,627 1,826 1,844 Corporate general and administrative..................... 892 1,094 844 542 302 ------- ------- ------- ------- ------- Operating expenses................. 17,939 17,656 17,849 9,202 9,265 ------- ------- ------- ------- ------- Operating income................... 6,161 8,033 10,458 4,364 5,134 Interest expense (note 7)............... 6,374 6,374 6,374 3,187 3,178 ------- ------- ------- ------- ------- Earnings (loss) before income taxes... (213) 1,659 4,084 1,177 1,956 Income tax expense (benefit) (note 5)... (70) 699 1,694 494 296 ------- ------- ------- ------- ------- Net earnings (loss)........... $ (143) $ 960 $ 2,390 $ 683 $ 1,660 ======= ======= ======= ======= =======
See accompanying notes to combined financial statements. F-106 292 KYSR INC. AND KIBB INC. COMBINED STATEMENTS OF CASH FLOWS (DOLLARS IN THOUSANDS)
SIX MONTHS YEARS ENDED DECEMBER 31, ENDED JUNE 30, ------------------------ ----------------- 1994 1995 1996 1996 1997 ------ ------ ------ ------- ------- (UNAUDITED) Cash flows provided by operating activities: Net earnings (loss).......................... $ (143) $ 960 $2,390 $ 683 $ 1,660 Adjustments to reconcile net earnings (loss) to net cash provided by operating activities: Depreciation.............................. 338 359 325 175 193 Amortization of intangibles............... 3,302 3,302 3,302 1,651 1,651 Deferred tax expense...................... 1,597 1,412 1,332 -- -- Changes in certain assets and liabilities: Accounts receivable, net................ (1,452) (120) (1,030) (330) (120) Prepaid expenses and other current assets............................... 372 (149) (197) (1,468) 591 Accounts payable and accrued expenses... (345) 265 (259) 2,236 (1,542) ------ ------ ------ ------- ------- Net cash provided by operating activities......................... 3,669 6,029 5,863 2,947 2,433 ------ ------ ------ ------- ------- Cash used by investing activities -- capital expenditures................................. (280) (223) (235) (80) (296) ------ ------ ------ ------- ------- Cash flows used by financing activities -- distributions to Parent........ (3,389) (5,806) (5,628) (2,867) (2,137) ------ ------ ------ ------- ------- Increase (decrease) in cash.................... -- -- -- -- -- Cash at beginning of period.................... -- -- -- -- -- ------ ------ ------ ------- ------- Cash at end of period.......................... $ -- $ -- $ -- $ -- $ -- ====== ====== ====== ======= =======
See accompanying notes to combined financial statements. F-107 293 KYSR INC. AND KIBB INC. NOTES TO COMBINED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS) (1) ORGANIZATION AND BASIS OF PRESENTATION The accompanying combined financial statements include the accounts of KYSR Inc. and KIBB Inc. (collectively, the "Company"). The Company owns and operates two commercial radio stations in the Los Angeles market, KYSR-FM and KIBB-FM, and is wholly owned by Viacom International Inc. ("Viacom" or "Parent"), a wholly owned subsidiary of Viacom, Inc. Significant intercompany balances and transactions have been eliminated in combination. On February 16, 1997, Viacom entered into a stock purchase agreement to sell all the issued and outstanding shares of capital stock of WAXQ Inc. and Riverside Broadcasting Co., Inc. in the New York City market, KYSR Inc. and KIBB Inc. in the Los Angeles market, Viacom Broadcasting East Inc. and WMZQ Inc. in the Washington, DC market, WLIT Inc. in the Chicago market and WDRQ Inc. in the Detroit market (collectively, the "Viacom Radio Properties") to Evergreen Media Corporation of Los Angeles ("Evergreen"), for $1.075 billion in cash ("Proposed Transaction"). The Proposed Transaction is expected to close after the expiration or termination of the applicable waiting periods under the HRS Act and approval by the Federal Communications Commission ("FCC"). Contemporaneous with this transaction, Evergreen entered into a joint purchase agreement with Chancellor Broadcasting Company ("Chancellor") under which Chancellor agreed to acquire the Chicago, Detroit and Los Angeles Viacom Radio Properties referred to above for $480 million from Evergreen or from Viacom directly. The accompanying combined financial statements reflect the carve-out historical results of operations and financial position of KYSR Inc. and KIBB Inc. These financial statements are not necessarily indicative of the results that would have occurred if the Company had been a separate stand-alone entity during the period presented. The combined financial statements do not include Viacom's corporate assets or liabilities not specifically identifiable to the Company. Corporate overhead allocations have been included in the accompanying combined statements of earnings in corporate general and administrative expense and station operating expenses. (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) Property and Equipment Property and equipment are stated at cost. Depreciation of property and equipment is computed using the straight-line method over the estimated useful lives of the assets. Repair and maintenance costs are charged to expense when incurred. (b) Intangible Assets Intangible assets consist primarily of broadcast licenses. The Company amortizes such intangible assets using the straight-line method over 40 years. The Company continually evaluates the propriety of the carrying amount of intangible assets as well as the amortization period to determine whether current events or circumstances warrant adjustments to the carrying value and/or revised estimates of useful lives. This evaluation consists of the projection of undiscounted operating income before depreciation, amortization, nonrecurring charges and interest over the remaining amortization periods of the related intangible assets. At this time, the Company believes that no significant impairment of intangible assets has occurred and that no reduction of the estimated useful lives is warranted. F-108 294 KYSR INC. AND KIBB INC. NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED) (c) Barter Transactions The Company trades commercial air time for goods and services used principally for promotional, sales and other business activities. An asset and liability are recorded at the fair market value of the goods or services to be received. Barter revenue is recorded and the liability relieved when commercials are broadcast and barter expense is recorded and the asset relieved when goods or services are received or used. (d) Revenue Recognition Revenue is derived primarily from the sale of commercial announcements to local and national advertisers. Revenue is recognized as commercials are broadcast. (e) Income Taxes Income taxes are accounted for under the asset and liability method. Deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each year end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable earnings. Valuation allowances are established when necessary to reduce deferred tax assets to the amount more likely than not to be realized. Income tax expense is the total of tax payable for the period and the change during the period in deferred tax assets and liabilities. (f) Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of The Company adopted the provisions of SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, on January 1, 1996. This Statement requires that long-lived assets and certain identifiable intangibles be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. The adoption of this Statement did not have a material impact on the Company's financial position, results of operations, or liquidity. (g) Fair Value The carrying amount of accounts receivable and accounts payable approximates fair value because of the short maturity of these instruments. (h) Disclosure of Certain Significant Risks and Uncertainties The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. In the opinion of management, credit risk with respect to trade receivables is limited due to the large number of diversified customers in the Company's customer base. The Company performs ongoing credit evaluations of its customers and believes that adequate allowances for any uncollectible trade receivables are maintained. No one advertiser accounted for more than 10% of net revenues in 1994, 1995, or 1996. Certain F-109 295 KYSR INC. AND KIBB INC. NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED) advertisers purchase the advertising of the stations through a third party buying service. Approximately 22%, 20% and 19% of total revenue was derived through the use of this service in 1994, 1995 and 1996, respectively. (i) Unaudited Interim Financial Information In the opinion of management, the unaudited interim combined financial statements as of and for the six months ended June 30, 1996 and 1997, reflect all adjustments, consisting of only normal and recurring items, which are necessary for a fair presentation of the results for the interim periods presented. The results for the interim periods ended June 30, 1996 and 1997 are not necessarily indicative of results to be expected for any other interim period or for the full year. (3) PROPERTY AND EQUIPMENT Property and equipment consists of the following at December 31, 1995 and 1996:
ESTIMATED USEFUL LIFE 1995 1996 ----------- ------ ------ Land.................................................... $2,875 $2,875 Building................................................ 40 years 474 474 Broadcast facilities.................................... 8-20 years 1,501 1,572 Office equipment and other.............................. 5-8 years 725 902 Construction in progress................................ 36 24 ------ ------ 5,611 5,847 Accumulated depreciation................................ 1,439 1,765 ------ ------ $4,172 $4,082 ====== ======
(4) INTANGIBLE ASSETS Intangible assets at December 31, 1995 and 1996 consist of broadcast licenses which are being amortized over forty years and are presented net of accumulated amortization of $15,148 and $18,450, respectively. (5) INCOME TAXES The Company's results of operations are included in the combined U.S. federal and certain combined and separate state income tax returns of Viacom International Inc. The tax provisions and deferred tax liabilities presented have been determined as if the Company were a stand-alone business filing separate tax returns. Current tax liabilities are recorded through the equity account with Viacom. Income tax expense (benefit) consists of:
1994 1995 1996 ------- ----- ------ Current: Federal.................................................. $(1,289) $(551) $ 278 State and local.......................................... (378) (162) 84 Deferred federal........................................... 1,597 1,412 1,332 ------- ----- ------ $ (70) $ 699 $1,694 ======= ===== ======
F-110 296 KYSR INC. AND KIBB INC. NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED) A reconciliation of the U.S. Federal statutory tax rate to the Company's effective tax rate on earnings (loss) before income taxes is as follows:
1994 1995 1996 ---- ---- ---- Statutory U.S. tax rate..................................... 35.0% 35.0% 35.0% State and local taxes, net of federal tax benefit........... 6.2 6.2 6.1 Other, net.................................................. (8.3) 0.9 0.4 ---- ---- ---- Effective tax rate.......................................... 32.9% 42.1% 41.5% ==== ==== ====
Deferred tax assets and liabilities are computed by applying the U.S. federal income tax rate in effect to the gross amounts of temporary differences and other tax attributes. These temporary differences are primarily the result of fixed asset basis differences and bad debt expense. Deferred tax assets and liabilities relating to state income taxes are not material. (6) DEBT AND INTEREST COST Viacom has not allocated any portion of its debt or related interest cost to the Company, and no portion of Viacom's debt is specifically related to the operations of the Company. (7) RELATED PARTY TRANSACTIONS Intercompany balances between the Company and Viacom resulting from normal trade activity are reflected in Equity in the accompanying combined financial statements (see note 8). On January 25, 1990, KYSR, Inc., formerly KXEZ, Inc., issued an intercompany demand note to Viacom in the amount of $66,400. The note bears interest at 9.6% per year payable on the last day of each calendar year. The principal and final interest payment are payable on January 25, 2000. However, immediately prior to closing of the Proposed Transaction, all debts between the Company and Viacom will be canceled. As such, the promissory note issued to Viacom is reflected as an increase to equity and included in intercompany activity in the amount of $66,400 at December 31, 1995 and 1996 (see note 8). Viacom provides services for the Company in management, accounting and financial reporting, human resources, information systems, legal, taxes and other corporate services. The allocation of these expenses, which is generally based on revenue dollars, is reflected in the accompanying combined financial statements as corporate general and administrative expense. Management believes that the method of allocation of overhead is reasonable. Viacom has a noncontributory pension plan covering substantially all of its employees, including the employees of the Company. Costs related to this plan are allocated to the Company based on payroll dollars and are included in station operating expenses. The Company recognized expense related to this plan in the amounts of $70, $56 and $191 for 1994, 1995 and 1996, respectively. The assets and the related benefit obligation of the plan will not be transferred to the Company upon consummation of the Proposed Transaction, therefore, such assets and obligations are not included in the notes to the Company's combined financial statements. Viacom utilizes a centralized cash management system. As a result, the Company carries minimal cash. Disbursements are funded by the Parent upon demand and cash receipts are transferred to the Parent daily. The Company, from time to time, enters into transactions with companies owned by or affiliated with Viacom. Generally, services rendered from such related parties are charged to the Company at amounts which would be incurred in transactions between unrelated entities. F-111 297 KYSR INC. AND KIBB INC. NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED) (8) EQUITY Equity represents Viacom's ownership interest in the recorded net assets of the Company. All cash transactions and intercompany transactions flow through the equity account. A summary of the activity is as follows:
1994 1995 1996 -------- -------- -------- Balance at beginning of period....................... $122,706 $119,174 $114,328 Net earnings (loss).................................. (143) 960 2,390 Net intercompany activity............................ (3,389) (5,806) (5,628) -------- -------- -------- Balance at end of period............................. $119,174 $114,328 $111,090 ======== ======== ========
(9) COMMITMENTS AND CONTINGENCIES The Company has noncancelable operating leases, primarily for office space. These leases generally contain renewal options for periods ranging from one to ten years and require the Company to pay all executory costs such as maintenance and insurance. Rental expense for operating leases (excluding those with lease terms of one month or less that were not renewed) was approximately $377, $365 and $405 during 1994, 1995 and 1996, respectively. Future minimum lease payments under noncancelable operating leases (with initial or remaining lease terms in excess of one year) as of December 31, 1996 are as follows:
YEAR ENDING DECEMBER 31: - ------------ 1997.................................................................. $ 365 1998.................................................................. 366 1999.................................................................. 312 2000.................................................................. 19 Thereafter............................................................ -- ------ $1,062 ======
F-112 298 INDEPENDENT AUDITORS' REPORT The Board of Directors Chancellor Broadcasting Company: We have audited the accompanying balance sheets of WLIT Inc. as of December 31, 1995 and 1996, and the related statements of earnings and cash flows for each of the years in the three-year period ended December 31, 1996. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of WLIT Inc. as of December 31, 1995 and 1996, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 1996, in conformity with generally accepted accounting principles. KPMG Peat Marwick LLP Dallas, Texas March 14, 1997 F-113 299 WLIT INC. BALANCE SHEETS (DOLLARS IN THOUSANDS) ASSETS
DECEMBER 31, ----------------- JUNE 30, 1995 1996 1997 ------- ------- ----------- (UNAUDITED) Current assets: Accounts receivable, less allowance for doubtful accounts of $79 in 1995 and $87 in 1996 and $110 in 1997........ $ 3,110 $ 3,627 $ 3,836 Prepaid expenses and other current assets................. 592 490 200 Deferred income taxes (note 5)............................ 37 44 44 ------- ------- ------- Total current assets.............................. 3,739 4,161 4,080 Property and equipment, net (note 3)........................ 461 457 545 Intangible assets, net (note 4)............................. 16,958 16,415 16,143 ------- ------- ------- $21,158 $21,033 $20,768 ======= ======= ======= LIABILITIES AND EQUITY Current liabilities -- accounts payable and accrued expenses.................................................. $ 1,442 $ 1,195 $ 1,376 Deferred income taxes (note 5).............................. 58 53 53 Equity (note 8)............................................. 19,658 19,785 19,339 Commitment and contingencies (note 9)....................... ------- ------- ------- $21,158 $21,033 $20,768 ======= ======= =======
See accompanying notes to financial statements. F-114 300 WLIT INC. STATEMENTS OF EARNINGS YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996 (DOLLARS IN THOUSANDS)
SIX MONTHS YEARS ENDED DECEMBER 31, ENDED JUNE 30, --------------------------- ---------------- 1994 1995 1996 1996 1997 ------- ------- ------- ------ ------- (UNAUDITED) Gross revenues................................ $14,367 $16,720 $18,294 $8,080 $10,035 Less agency commissions and national rep fees..................................... 2,523 2,848 3,071 1,144 1,410 ------- ------- ------- ------ ------- Net revenues........................ 11,844 13,872 15,223 6,936 8,625 ------- ------- ------- ------ ------- Operating expenses: Station operating expenses excluding depreciation and amortization............ 6,555 6,977 7,508 3,839 4,221 Depreciation and amortization............... 655 653 659 327 340 Corporate general and administrative........ 478 630 479 274 172 ------- ------- ------- ------ ------- Operating expenses....................... 7,688 8,260 8,646 4,440 4,733 ------- ------- ------- ------ ------- Earnings before income taxes............. 4,156 5,612 6,577 2,496 3,892 Income tax expense (note 5)................... 1,804 2,359 2,728 1,048 1,280 ------- ------- ------- ------ ------- Net earnings........................ $ 2,352 $ 3,253 $ 3,849 $1,448 $ 2,612 ======= ======= ======= ====== =======
See accompanying notes to financial statements. F-115 301 WLIT INC. STATEMENTS OF CASH FLOWS (DOLLARS IN THOUSANDS)
SIX MONTHS ENDED YEARS ENDED DECEMBER 31, JUNE 30, --------------------------- ----------------- 1994 1995 1996 1996 1997 ------- ------- ------- ------- ------- (UNAUDITED) Cash flows provided by operating activities: Net earnings.......................... $ 2,352 $ 3,253 $ 3,849 $ 1,448 $ 2,612 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation....................... 114 114 116 55 68 Amortization of intangibles........ 541 539 543 272 272 Deferred income taxes.............. (13) 5 (8) -- -- Changes in certain assets and liabilities: Accounts receivable, net......... (73) (460) (517) (476) (209) Prepaid expenses and other current assets................ (101) (181) 98 (577) 295 Accounts payable and accrued expenses...................... (384) 173 (247) 1,461 (1,542) ------- ------- ------- ------- ------- Net cash provided by operating activities.................. 2,436 3,443 3,834 2,183 1,496 ------- ------- ------- ------- ------- Cash flows used by investing activities -- capital expenditures.... (180) (110) (112) (45) (156) ------- ------- ------- ------- ------- Cash flows used by financing activities -- distributions to Parent................................ (2,256) (3,333) (3,722) (2,138) (1,340) ------- ------- ------- ------- ------- Increase (decrease) in cash............. -- -- -- -- -- Cash at beginning of period............. -- -- -- -- -- ------- ------- ------- ------- ------- Cash at end of period................... $ -- $ -- $ -- $ -- $ -- ======= ======= ======= ======= =======
See accompanying notes to financial statements. F-116 302 WLIT INC. NOTES TO FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS) (1) ORGANIZATION AND BASIS OF PRESENTATION The accompanying financial statements include the accounts of WLIT Inc. (the "Company"). The Company owns and operates a commercial radio station in the Chicago market, WLIT-FM, and is wholly owned by Viacom International Inc. ("Viacom" or "Parent"), a wholly owned subsidiary of Viacom, Inc. On February 16, 1997, Viacom International Inc. entered into a stock purchase agreement to sell all the issued and outstanding shares of capital stock of WAXQ Inc. and Riverside Broadcasting Co., Inc. in the New York City market, KYSR Inc. and KIBB Inc. in the Los Angeles market, Viacom Broadcasting East Inc. and WMZQ Inc. in the Washington, DC market, WLIT Inc. in the Chicago market and WDRQ Inc. in the Detroit market (collectively, the "Viacom Radio Properties") to Evergreen Media Corporation ("Evergreen") for $1.075 billion in cash ("Proposed Transaction"). The Proposed Transaction is expected to close after the expiration or termination of the applicable waiting periods under the HSR Act and approval by the Federal Communications Commission ("FCC"). Contemporaneous with this transaction, Evergreen entered into a joint purchase agreement with Chancellor Broadcasting Company ("Chancellor"), under which Chancellor agreed to acquire the Chicago, Detroit and Los Angeles Viacom Radio Properties referred to above for $480 million from Evergreen or from Viacom directly. The accompanying financial statements reflect the carve-out historical results of operations and financial position of WLIT Inc. These financial statements are not necessarily indicative of the results that would have occurred if the Company had been a separate stand-alone entity during the periods presented. The financial statements do not include Viacom's corporate assets or liabilities not specifically identifiable to the Company. Corporate overhead allocations have been included in the accompanying statements of earnings in corporate general and administrative expense and station operating expenses. (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) Property and Equipment Property and equipment are stated at cost. Depreciation of property and equipment is computed using the straight-line method over the estimated useful lives of the assets. Repair and maintenance costs are charged to expense when incurred. (b) Intangible Assets Intangible assets consist primarily of broadcast licenses. The Company amortizes such intangible assets using the straight-line method over 40 years. The Company continually evaluates the propriety of the carrying amount of intangible assets as well as the amortization period to determine whether current events or circumstances warrant adjustments to the carrying value and/or revised estimates of useful lives. This evaluation consists of the projection of undiscounted operating income before depreciation, amortization, nonrecurring charges and interest over the remaining amortization periods of the related intangible assets. At this time, the Company believes that no significant impairment of intangible assets has occurred and that no reduction of the estimated useful lives is warranted. (c) Barter Transactions The Company trades commercial air time for goods and services used principally for promotional, sales and other business activities. An asset and liability are recorded at the fair market value of the goods or services to be received. Barter revenue is recorded and the liability relieved when commercials are broadcast and barter expense is recorded and the asset relieved when goods or services are received or used. F-117 303 WLIT INC. NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) (d) Revenue Recognition Revenue is derived primarily from the sale of commercial announcements to local and national advertisers. Revenue is recognized as commercials are broadcast. (e) Income Taxes Income taxes are accounted for under the asset and liability method. Deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each year end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable earnings. Valuation allowances are established when necessary to reduce deferred tax assets to the amount more likely than not to be realized. Income tax expense is the total of tax payable for the period and the change during the period in deferred tax assets and liabilities. (f) Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of The Company adopted the provisions of SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, on January 1, 1996. This Statement requires that long-lived assets and certain identifiable intangibles be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. The adoption of this Statement did not have a material impact on the Company's financial position, results of operations, or liquidity. (g) Fair Value The carrying amount of accounts receivable and accounts payable approximates fair value because of the short maturity of these instruments. (h) Disclosure of Certain Significant Risks and Uncertainties The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. In the opinion of management, credit risk with respect to trade receivables is limited due to the large number of diversified customers in the Company's customer base. The Company performs ongoing credit evaluations of its customers and believes that adequate allowances for any uncollectible trade receivables are maintained. No one customer accounted for more than 10% of net revenues in 1994, 1995, or 1996. (i) Unaudited Interim Financial Information In the opinion of management, the unaudited interim combined financial statements as of and for the six months ended June 30, 1996 and 1997, reflect all adjustments, consisting of only normal and recurring items, which are necessary for a fair presentation of the results for the interim periods presented. The results for the interim periods ended June 30, 1996 and 1997 are not necessarily indicative of results to be expected for any other interim period or for the full year. F-118 304 WLIT INC. NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) (3) PROPERTY AND EQUIPMENT Property and equipment consists of the following at December 31, 1995 and 1996:
ESTIMATED USEFUL LIFE 1995 1996 ----------- ------ ------ Broadcast facilities.................................... 8-20 years $1,116 $1,141 Office equipment and other.............................. 5-8 years 791 868 Construction in progress................................ 13 13 ------ ------ 1,920 2,022 Accumulated depreciation................................ 1,459 1,565 ------ ------ $ 461 $ 457 ====== ======
(4) INTANGIBLE ASSETS Intangible assets at December 31, 1995 and 1996 consist of broadcast licenses which are being amortized over forty years and are presented net of accumulated amortization of $5,585 and $6,128, respectively. (5) INCOME TAXES The Company's results of operations are included in the U.S. federal and certain combined and separate state income tax returns of Viacom International Inc. The tax provisions and deferred tax liabilities presented have been determined as if the Company were a stand-alone business filing separate tax returns. Current tax liabilities are recorded through the equity account with Viacom. Income tax expense (benefit) consists of:
1994 1995 1996 ------ ------ ------ Current: Federal.................................................. $1,588 $2,058 $2,391 State and local.......................................... 229 296 345 Deferred federal........................................... (13) 5 (8) ------ ------ ------ $1,804 $2,359 $2,728 ====== ====== ======
A reconciliation of the U.S. Federal Statutory tax rate to the Company's effective tax rate on earnings before income taxes is as follows:
1994 1995 1996 ---- ---- ---- Statutory U.S. tax rate..................................... 35.0% 35.0% 35.0% Amortization of intangibles................................. 4.7 3.4 2.9 State and local taxes, net of federal tax benefit........... 3.6 3.4 3.4 Other, net.................................................. 0.2 0.2 0.2 ---- ---- ---- Effective tax rate................................ 43.5% 42.0% 41.5% ==== ==== ====
Deferred tax assets and liabilities are computed by applying the U.S. federal income tax rate in effect to the gross amounts of temporary differences and other tax attributes. These temporary differences are primarily the result of fixed asset basis differences and bad debt expense. Deferred tax assets and liabilities relating to state income taxes are not material. F-119 305 WLIT INC. NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) (6) DEBT AND INTEREST COST Viacom has not allocated any portion of its debt or related interest cost to the Company, and no portion of Viacom's debt is specifically related to the operations of the Company. Accordingly, the Company's financial statements include no charges for interest. (7) RELATED PARTY TRANSACTIONS Intercompany balances between the Company and Viacom resulting from normal trade activity are reflected in Equity in the accompanying financial statements (see note 8). Viacom provides services for the Company in management, accounting and financial reporting, human resources, information systems, legal, tax and other corporate services. The allocation of these expenses, which is generally based on revenue dollars, is reflected in the accompanying financial statements as corporate general and administrative expense. Management believes that the method of allocation of corporate overhead is reasonable. Viacom has a noncontributory pension plan covering substantially all of its employees, including the employees of the Company. Costs related to this plan are allocated to the Company based on payroll dollars. The Company recognized expense related to this plan in the amounts of $67, $46 and $126 for 1994, 1995 and 1996, respectively. The assets and the related benefit obligation of the plan will not be transferred to the Company upon consummation of the Proposed Transaction, therefore, such assets and obligations are not included in the notes to the Company's financial statements. Viacom utilizes a centralized cash management system. As a result, the Company carries minimal cash. Disbursements are funded by the Parent upon demand and cash receipts are transferred to the Parent daily. The Company, from time to time, enters into transactions with companies owned by or affiliated with Viacom. Generally, services received from such related parties are charged to the Company at amounts which would be incurred in transactions between unrelated entities. (8) EQUITY Equity represents Viacom's ownership interest in the recorded net assets of the Company. All cash transactions and intercompany transactions flow through the equity account. A summary of the activity is as follows:
1994 1995 1996 ------- ------- ------- Balance at beginning of period.......................... $19,642 $19,738 $19,658 Net earnings............................................ 2,352 3,253 3,849 Net intercompany activity............................... (2,256) (3,333) (3,722) ------- ------- ------- Balance at end of period................................ $19,738 $19,658 $19,785 ======= ======= =======
F-120 306 WLIT INC. NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) (9) COMMITMENTS AND CONTINGENCIES The Company has noncancelable operating leases, primarily for office space. These leases generally contain renewal options for periods ranging from 1 to 10 years and require the Company to pay all executory costs such as maintenance and insurance. Rental expense for operating leases (excluding those with lease terms of one month or less that were not renewed) was approximately $319, $337 and $327 during 1994, 1995 and 1996, respectively. Future minimum lease payments under noncancelable operating leases (with initial or remaining lease terms in excess of one year) as of December 31, 1996 are as follows:
YEAR ENDING DECEMBER 31: - ------------ 1997.................................................................. $ 266 1998.................................................................. 291 1999.................................................................. 298 2000.................................................................. 287 2001.................................................................. 296 Thereafter............................................................ 103 ------ $1,541 ======
F-121 307 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Partners of Colfax Communications, Inc. Radio Group: We have audited the accompanying combined balance sheets of the Colfax Communications, Inc. Radio Group (the "Company") as of December 31, 1996, 1995, and 1994, and the related combined statements of income (loss), changes in partners' equity and cash flows for each of the three years in the period ended December 31, 1996. These combined financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these combined financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform an audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In January 1997, substantially all of the assets and liabilities of the Company were sold. In our opinion, the combined financial statements referred to above present fairly, in all material respects, the financial position of the Colfax Communications, Inc. Radio Group as of December 31, 1996, 1995, and 1994, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1996, in conformity with generally accepted accounting principles. /s/ ARTHUR ANDERSEN LLP Washington, D.C. March 31, 1997 F-122 308 COLFAX COMMUNICATIONS, INC. RADIO GROUP COMBINED BALANCE SHEETS AS OF DECEMBER 31, 1996, 1995, AND 1994
1996 1995 1994 ------------ ----------- ----------- Current assets: Cash............................................... $ 1,718,589 $ 682,672 $ 216,414 Accounts receivable, net of allowance for doubtful accounts of $710,813, $441,889, and $238,801, respectively.................................... 15,514,187 7,626,579 8,978,881 Prepaid expenses and other current assets.......... 520,358 286,774 343,441 ------------ ----------- ----------- Total current assets....................... 17,753,134 8,596,025 9,538,736 Property and equipment at cost, net of depreciation....................................... 14,508,097 8,675,724 9,608,603 Intangibles and other noncurrent assets at cost, net of amortization.................................... 147,579,599 32,383,587 37,653,803 ------------ ----------- ----------- Total assets............................... $179,840,830 $49,655,336 $56,801,142 ============ =========== =========== Liabilities: Accounts payable and accrued expenses.............. $ 5,116,890 $ 3,224,139 $ 3,883,242 Current maturities of long-term debt............... -- -- 900,000 ------------ ----------- ----------- Total current liabilities.................. 5,116,890 3,224,139 4,783,242 Long-term debt..................................... 55,650,000 39,225,000 7,100,000 ------------ ----------- ----------- Total liabilities.......................... 60,766,890 42,449,139 11,883,242 ------------ ----------- ----------- Commitments (Note 8): Partners' equity: Radio Acquisition Associates....................... (1,141,558) (2,783,226) (3,121,671) Equity Group Holdings.............................. 119,013,080 9,888,902 47,558,478 Colfax Communications, Inc......................... 1,202,418 100,521 481,093 Class B Limited Partners........................... -- -- -- ------------ ----------- ----------- Total partners' equity..................... 119,073,940 7,206,197 44,917,900 ------------ ----------- ----------- Total liabilities and partners' equity..... $179,840,830 $49,655,336 $56,801,142 ============ =========== ===========
The accompanying notes are an integral part of these balance sheets. F-123 309 COLFAX COMMUNICATIONS, INC. RADIO GROUP COMBINED STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
1996 1995 1994 ----------- ----------- ----------- Advertising revenues: Local sponsors...................................... $37,496,454 $23,425,588 $24,147,363 National sponsors................................... 12,885,713 9,151,724 8,221,228 Other............................................... 2,518,200 1,910,483 2,090,737 ----------- ----------- ----------- Gross advertising revenues.................. 52,900,367 34,487,795 34,459,328 Less -- Commissions................................. (6,785,322) (4,345,062) (4,283,386) ----------- ----------- ----------- Net advertising revenues.................... 46,115,045 30,142,733 30,175,942 ----------- ----------- ----------- Operating expenses: Programming......................................... 7,675,793 5,461,691 9,604,067 Sales and advertising............................... 14,507,662 11,360,597 10,885,717 General and administrative.......................... 5,793,377 4,332,286 3,651,832 Engineering......................................... 1,260,447 1,014,375 1,084,282 Depreciation and amortization....................... 4,617,958 6,505,492 7,599,901 ----------- ----------- ----------- Total operating expenses.................... 33,855,237 28,674,441 32,825,799 ----------- ----------- ----------- Income (loss) from operations............... 12,259,808 1,468,292 (2,649,857) Interest expense...................................... 4,368,669 655,795 531,387 Loss on sale of fixed assets.......................... -- 770,689 -- Other expense (income)................................ (184,289) -- 75,364 ----------- ----------- ----------- Net income (loss)........................... $ 8,075,428 $ 41,808 $(3,256,608) =========== =========== ===========
The accompanying notes are an integral part of these statements. F-124 310 COLFAX COMMUNICATIONS, INC. RADIO GROUP COMBINED STATEMENTS OF CHANGES IN PARTNERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
RADIO EQUITY CLASS B ACQUISITION COLFAX GROUP LIMITED ASSOCIATES COMM., INC. HOLDINGS PARTNERS TOTAL ----------- ----------- ------------ -------- ------------ Balance, December 31, 1993.......... $(2,464,398) $ 528,938 $ 52,305,936 $ -- $ 50,370,476 Capital contributions from partners....................... 368,281 60,023 5,949,744 -- 6,378,048 Capital distributions to partners....................... (1,678,638) (68,618) (6,826,760) -- (8,574,016) Net income (loss)................. 653,084 (39,250) (3,870,442) -- (3,256,608) ----------- ---------- ------------ ----- ------------ Balance, December 31, 1994.......... (3,121,671) 481,093 47,558,478 -- 44,917,900 Capital contributions from partners....................... -- 5,735 567,746 -- 573,481 Capital distributions to partners....................... (1,031,464) (372,709) (36,922,819) -- (38,326,992) Net income (loss)................. 1,369,909 (13,598) (1,314,503) -- 41,808 ----------- ---------- ------------ ----- ------------ Balance, December 31, 1995.......... (2,783,226) 100,521 9,888,902 -- 7,206,197 Capital contributions from partners....................... 5,104 1,130,725 111,941,654 -- 113,077,483 Capital distributions to partners....................... (981,106) (82,845) (8,221,217) -- (9,285,168) Net income (loss)................. 2,617,670 54,017 5,403,741 -- 8,075,428 ----------- ---------- ------------ ----- ------------ Balance, December 31, 1996.......... $(1,141,558) $1,202,418 $119,013,080 $ -- $119,073,940 =========== ========== ============ ===== ============
The accompanying notes are an integral part of these statements. F-125 311 COLFAX COMMUNICATIONS, INC. RADIO GROUP COMBINED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
1996 1995 1994 ------------- ------------ ----------- Cash flows from operating activities: Net income (loss)................................ $ 8,075,428 $ 41,808 $(3,256,608) Adjustments to reconcile net loss to net cash used in operating activities -- Depreciation and amortization................. 4,617,958 6,505,492 7,599,901 Loss on asset disposal........................ -- 770,689 57,398 Restructuring charge.......................... -- 737,729 -- Change in assets and liabilities: (Increase) decrease in accounts receivable............................... (7,888,416) 1,352,302 (1,664,323) (Increase) decrease in prepaid expenses and other current assets..................... (233,584) 56,667 170,619 Increase (decrease) in accounts payable and accrued expenses......................... 1,892,751 (1,396,832) 708,448 ------------- ------------ ----------- Net cash provided by operating activities............................. 6,464,137 8,067,855 3,615,435 ------------- ------------ ----------- Cash flows from investing activities: Cash paid for acquisition of intangibles and other noncurrent assets....................... (126,017,951) (363,174) (12,944) Payments for additions to property and equipment..................................... (5,907,584) (823,737) (968,929) Disposal of intangible assets.................... 6,280,000 -- -- Disposal of fixed assets......................... -- 113,825 -- ------------- ------------ ----------- Net cash used in investing activities.... (125,645,535) (1,073,086) (981,873) ------------- ------------ ----------- Cash flows from financing activities: Repayment of note payable........................ (5,800,000) (8,000,000) (800,000) Loan proceeds.................................... 22,225,000 39,225,000 -- Capital contributions from partners.............. 113,077,483 573,481 6,378,048 Capital distributions to partners................ (9,285,168) (38,326,992) (8,190,101) ------------- ------------ ----------- Net cash provided by (used in) financing activities............................. 120,217,315 (6,528,511) (2,612,053) ------------- ------------ ----------- Net increase (decrease) in cash.................... 1,035,917 466,258 21,509 Cash, beginning of period.......................... 682,672 216,414 194,905 ------------- ------------ ----------- Cash, end of period................................ $ 1,718,589 $ 682,672 $ 216,414 ============= ============ =========== Supplemental disclosure of cash flow information: Cash paid during the year for interest........... $ 4,391,300 $ 615,900 $ 514,213 ============= ============ ===========
The accompanying notes are an integral part of these statements. F-126 312 COLFAX COMMUNICATIONS, INC. RADIO GROUP NOTES TO COMBINED FINANCIAL STATEMENTS AS OF DECEMBER 31, 1996, 1995, AND 1994 1. BASIS OF PRESENTATION: The accompanying combined financial statements include the radio station holdings of Colfax Communications, Inc. ("Colfax"), a Maryland Corporation. Three of the stations serve the Washington, D.C., market: WGMS-FM (classical format), WBIG-FM (oldies format), and WTEM(AM) (all-sports format). Two stations, WBOB-FM (country format) and KQQL(FM) (oldies format), serve the Minneapolis-St. Paul market. Five of the stations serve the Phoenix market: KOOL-FM (oldies format), KOY(AM) (nostalgia format), KZON-FM (alternative format), KISO(AM) (urban adult contemporary format), and KYOT-FM (new adult contemporary format). Two stations serve the Milwaukee market: WMIL-FM (country format) and WOKY(AM) (adult standard format). Three stations serve the Boise market: KIDO(AM) (news/talk format), KLTB(FM) (oldies format), and KARO(FM) (class rock format). All stations are owned by entities under the common control of Colfax and its affiliates. 2. DESCRIPTION OF COLFAX COMMUNICATIONS, INC., RADIO GROUP: Classical Acquisition Limited Partnership Classical Acquisition Limited Partnership ("CALP") is a Maryland limited partnership formed to acquire and operate radio stations WGMS(AM) (currently WTEM(AM)) and WGMS-FM. Radio Acquisition Associates Limited Partnership, a Maryland limited partnership, had a 98.04 percent general partner interest and Equity Group Holdings, a District of Columbia general partnership, had a 1.96 percent limited partner interest in CALP prior to the admission of the Class B Limited Partners as discussed below. Radio Acquisition Associates Limited Partnership has Colfax as a 1 percent general partner and Equity Group Holdings as a 99 percent limited partner. Certain Class B Limited Partners were admitted to the partnership on January 1, 1993 and on January 1, 1995. The Class B Limited Partners have a 13.25 percent interest in CALP and Equity Group Holdings' limited partnership interest in CALP was reduced to 1.813 percent effective January 1, 1993. Radio Acquisition Associates' Limited Partnership general partnership interest was reduced to 90.687 percent and 84.937 percent effective January 1, 1993 and January 1, 1995, respectively. Radio 570 Limited Partnership Radio 570 Limited Partnership ("Radio 570") is a Maryland limited partnership formed on December 10, 1991, to operate radio station WTEM-AM (formerly WGMS-AM). Radio 570 was formed by Colfax as the 1 percent general partner and Equity Group Holdings as the 99 percent limited partner. WTEM began broadcasting on May 24, 1992. Effective January 1, 1993, certain Class B Limited Partners were admitted to the partnership. On September 15, 1995, a Class B Limited Partner was redeemed of his partnership interest. As of December 31, 1996 and 1995, the Class B Limited Partners had a 9.25 percent interest and Equity Group Holdings had an 89.75 percent Class A Limited Partnership interest. Radio 100 Limited Partnership Radio 100 Limited Partnership ("Radio 100") was formed on August 11, 1992, to acquire and operate radio stations. Radio 100 was formed by Colfax as the 1 percent general partner and Equity Group Holdings as the 99 percent limited partner. In 1993, Radio 100 completed its acquisition of two radio stations in Minnesota for $25,500,000. WBOB-FM (formerly WCTS-FM) and KQQL(FM) began on-air operations under Radio 100 ownership on May 7, 1993, and February 18, 1993, respectively. F-127 313 COLFAX COMMUNICATIONS, INC. RADIO GROUP NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED) Effective January 1, 1993, certain Class B Limited Partners were admitted to the partnership. The Class B Limited Partners have a 10.25 percent interest and the Equity Group Holdings Class A Limited Partnership interest was reduced to 88.75 percent. Radio 100 of Maryland Limited Partnership Radio 100 of Maryland Limited Partnership ("Radio 100 of Maryland") was formed on December 2, 1992 to acquire and operate radio stations. Radio 100 of Maryland was formed by Colfax as the 1 percent general partner and Equity Group Holdings as the 99 percent limited partner. On June 3, 1993, Radio 100 of Maryland acquired WBIG-FM (formerly WJZE-FM) in Washington, D.C. for $19,500,000. Effective January 1, 1993, certain Class B Limited Partners were admitted to the partnership. On September 15, 1995, a Class B Limited Partner was redeemed of his partnership interest. On October 1, 1995, a Class B Limited Partner was admitted to the partnership. As of December 31, 1996 and 1995, the Class B Limited Partners had an 11.25 percent interest and Equity Group Holdings had an 87.75 percent Class A Limited Partnership interest. Radio 94 of Phoenix Limited Partnership Radio 94 of Phoenix Limited Partnership ("Radio 94") was formed on January 3, 1996, to acquire and operate radio stations. Radio 94 was formed by Colfax as the 1 percent general partner and Equity Group Holdings as the 99 percent limited partner. On April 1, 1996, Radio 94 acquired KOOL(AM) and KOOL-FM in Phoenix, Arizona for $35,000,000. Effective April 5, 1996, certain Class B Limited Partners were admitted to the partnership. The Class B Limited Partners have an 8.25 percent interest and the Equity Group Holdings Class A Limited Partnership interest was reduced to 90.75 percent. On October 4, 1996, Radio 94 sold KOOL(AM) to Salem Media of Arizona, Inc. Radio 95 of Phoenix Limited Partnership Radio 95 of Phoenix Limited Partnership ("Radio 95") was formed on May 3, 1996, to acquire and operate radio stations. Radio 95 was formed by Colfax as the 1 percent general partner and Equity Group Holdings as the 99 percent limited partner. On September 12, 1996, Radio 95 acquired KYOT-FM, KZON-FM, KOY(AM), and KISO(AM), each in Phoenix, Arizona; KIDO(AM) and KLTB(FM), each in Boise, Idaho; KARO(FM) in Caldwell, Idaho; WMIL-FM in Waukesha, Wisconsin; and WOKY(AM) in Milwaukee, Wisconsin, for $95,000,000. F-128 314 COLFAX COMMUNICATIONS, INC. RADIO GROUP NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED) Sale of Stations On August 24, 1996, Chancellor Radio Broadcasting Company ("Chancellor"), a Delaware Corporation, agreed to purchase substantially all of the assets of CALP, Radio 570, Radio 100, Radio 100 of Maryland, Radio 94 (with the exception of KOOL(AM)), and Radio 95 (with the exception of KIDO(AM), KLTB(FM), and KARO(FM)) for total consideration of $365,000,000 plus the net working capital of the stations. The transaction closed on January 23, 1997. The agreement stipulates that the purchase price for the assets be allocated among the limited partnerships as follows: CALP........................................................ $ 50,000,000 Radio 570................................................... 21,000,000 Radio 100................................................... 85,000,000 Radio 100 of Maryland....................................... 90,000,000 Radio 94.................................................... 30,000,000 Radio 95.................................................... 89,000,000 ------------ $365,000,000 ============
On October 28, 1996, Jacor Broadcasting of Idaho, Inc., an Ohio corporation, entered into an agreement to purchase substantially all of the assets of radio stations KIDO(AM), KLTB(FM), and KARO(FM) for $11,000,000. The transaction closed on January 31, 1997. Partnership Allocations The partnerships distribute cash from operations and allocate net profits or losses to the partners, in general, in accordance with their stated interests except that no partner shall receive any distribution from a partnership until such time as the net invested capital of the general partner and Class A Limited Partner have been distributed, along with a cumulative priority return on the average net invested capital at an annual rate equal to the prime rate plus one quarter of one percent compounded monthly. In accordance with the Company's debt agreement (described below) distributions to partners may be permitted on a quarterly basis if certain requirements are met. 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Basis of Accounting The accompanying financial statements are prepared on the accrual basis of accounting in accordance with generally accepted accounting principles. Barter Transactions The partnerships enter into barter transactions in which they provide on-air advertising in exchange for goods and services. Revenues and expenses from barter transactions are presented in the accompanying statement of revenues and expenses based on the estimated fair market value of the goods or services received. Barter revenue approximated $1,925,000, $1,590,000, and $1,870,000 for the years ended December 31, 1996, 1995, and 1994, respectively; while barter expense approximated $1,763,000, $1,486,000, and $1,520,000 for the years ended December 31, 1996, 1995, and 1994, respectively. Income Taxes Provision for Federal and state income taxes has not been made in the accompanying financial statements since the partnerships do not pay Federal and state income taxes but rather allocate profits and losses to the partners for inclusion in their respective income tax returns. F-129 315 COLFAX COMMUNICATIONS, INC. RADIO GROUP NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED) Buildings and Leasehold Improvements Buildings and leasehold improvements are recorded at cost or appraised value at acquisition. Depreciation is recorded using the straight-line method over 31.5 or 40 years as prescribed by the Internal Revenue Code. Furniture, Fixtures and Equipment Furniture, fixtures and equipment are recorded at cost or appraised value at acquisition. Depreciation is recorded using the straight-line method over the estimated useful life of the assets, which is typically 5 to 7 years. Intangible Assets Intangible assets are recorded at cost or appraised value at acquisition. Amortization is recorded over their useful lives. The estimated useful lives of intangible assets as of December 31, 1996, are as follows:
USEFUL LIFE ----------- FCC Licenses................................................ 7-25 years Covenants Not to Compete.................................... 3 years Employment Agreements....................................... 2 years Organizational Costs........................................ 5 years Start-up Costs.............................................. 5 years
Land Certain partners have contributed to Radio 570 a parcel of land in Germantown, Maryland which is being used as the site for a new array of broadcasting towers. The land has been recorded at its original purchase price plus costs related to preparing the land for its intended use. Radio 100 of Maryland acquired a parcel of land and property in Washington, D.C., in connection with the acquisition of WJZE-FM. This parcel of land was recorded at its appraised value at acquisition. This land was sold in February 1995. Radio 100 acquired a parcel of land in Nowthen, Minnesota, through the purchase of KQQL-FM. This parcel of land was recorded at its appraised value at acquisition. Radio 95 acquired various parcels of land located in Phoenix, Milwaukee, and Boise in connection with its purchase of nine stations during 1996. These parcels of land were recorded at their estimated market value at acquisition. Estimates The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Fair Value of Financial Instruments In 1995 the Company adopted Statement of Financial Accounting Standard ("SFAS") No. 107, "Disclosure about Fair Value of Financial Instruments," which requires disclosures of fair value information about financial instruments, whether or not recognized in the balance sheet. F-130 316 COLFAX COMMUNICATIONS, INC. RADIO GROUP NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED) The carrying amount reported in the balance sheets for cash, accounts receivable, accounts payable and accrued liabilities, approximate their fair value due to the immediate or short-term maturity of such instruments. The carrying amount reported for long-term debt approximates fair value due to the debt being priced at floating rates (see Note 7 for additional information). 4. PROPERTY AND EQUIPMENT: The components of property and equipment at December 31, 1996 and 1995, are summarized below:
1996 1995 1994 ----------- ----------- ----------- Land.................................... $ 3,719,572 $ 1,901,663 $ 2,233,341 Buildings............................... 1,372,161 26,453 604,927 Construction in progress................ 27,660 27,232 201,404 Furniture, fixtures and equipment....... 11,323,175 8,520,853 7,690,841 Leasehold improvements.................. 835,407 816,031 522,806 ----------- ----------- ----------- 17,277,975 11,292,232 11,253,319 Less -- Accumulated depreciation........ (2,769,878) (2,616,508) (1,644,716) ----------- ----------- ----------- $14,508,097 $ 8,675,724 $ 9,608,603 =========== =========== ===========
5. FCC LICENSES AND OTHER NONCURRENT ASSETS: The components of FCC licenses and other noncurrent assets at December 31, 1996 and 1995, are summarized below:
AS OF DECEMBER 31, -------------------------------------------- 1996 1995 1994 ------------ ------------ ------------ FCC licenses............................ $163,988,330 $ 39,505,773 $ 39,505,773 Covenants not to compete................ 1,931,834 8,493,147 8,493,147 Start-up and organization costs......... 2,489,973 2,132,587 2,153,036 Other................................... 1,376,763 958,245 1,891,395 ------------ ------------ ------------ 169,786,900 51,089,752 52,043,351 Less -- Accumulated amortization........ (22,207,301) (18,706,165) (14,389,548) ------------ ------------ ------------ $147,579,599 $ 32,383,587 $ 37,653,803 ============ ============ ============
6. RELATED-PARTY TRANSACTIONS: Each partnership is involved in certain transactions with other partnerships in the radio group related to sharing of services and purchasing. These transactions are settled on a current basis through adjustments to partners' equity accounts. On January 18, 1995, CALP and Radio 100 of Maryland each entered into a 10 year agreement to lease tower space from Colfax Towers, Inc. The annual rental payment for CALP equaled $31,200 and $30,000 for the years ended December 31, 1996 and 1995, respectively. The annual rental payment for Radio 100 of Maryland equaled $37,200 and $36,000 for the years ended December 31, 1996 and 1995, respectively. Colfax Towers, Inc., is owned by the shareholders of Colfax Communications, Inc. Employees of Colfax perform activities on behalf of and oversee the operations of the radio stations included in the radio group. Colfax does not charge any fees to the radio stations for the performance of such services. Corporate expenses of $1,240,253, $1,354,296, and $1,144,082 related to those services are not included in the financial statements of the radio group for the years ending December 31, 1996, 1995, and F-131 317 COLFAX COMMUNICATIONS, INC. RADIO GROUP NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED) 1994, respectively. These corporate expenses were funded directly by the owners of Colfax Communications, Inc. 7. LONG-TERM DEBT: On December 27, 1995, CALP, Radio 570, Radio 100, and Radio 100 of Maryland entered into a $40 million revolving loan agreement. On April 2, 1996, under an amendment to the loan agreement, CALP, Radio 570, Radio 100, Radio 100 of Maryland, and Radio 94 (collectively, the "Borrowers") increased the amount available under the revolving loan agreement to $60 million. At December 31, 1996, $55,650,000 was outstanding under this agreement. The proceeds were allocated to each borrower on the basis of each station's capital account as follows: CALP........................................................ $ 5,702,360 Radio 570................................................... 4,156,587 Radio 100................................................... 16,423,860 Radio 100 of Maryland....................................... 9,214,544 Radio 94.................................................... 20,152,649 ----------- $55,650,000 ===========
The initial proceeds were used to repay the indebtedness of CALP to make certain permitted distributions to partners of the Borrowers, and for working capital purposes in the operations of the Borrowers. Borrowings under this agreement bear interest at floating rates equal to prime and/or LIBOR (as defined in the loan agreement) plus an applicable margin determined by a leverage ratio. The expiration date of the loan agreement is December 31, 2002. Under the loan agreement, the Borrowers are required to maintain a specific leverage ratio and certain ratios pertaining to cash flow coverage. In connection with the sale of the stations (discussed in Note 2), the debt was repaid in full in January 1997. 8. COMMITMENTS: The Radio Group has entered into various contracts for exclusive radio broadcasting rights and other programming. In addition, the partnerships lease office space and have entered into various service contracts, including certain personal service contracts. These broadcasting rights, leases and service contracts expire over periods ranging from 1997 to 2012. The minimum future commitments under these agreements, leases and service contracts are as follows: 1997........................................................ $ 3,766,028 1998........................................................ 2,826,433 1999........................................................ 1,178,594 2000........................................................ 1,140,345 2001........................................................ 646,234 Thereafter.................................................. 2,077,616 ----------- $11,635,250 ===========
9. RESTRUCTURING CHARGES: During 1995, the Radio Group recorded restructuring costs of $737,729 at certain radio stations. These costs included severance and salary payments to terminated employees of $357,563, costs related to hiring a new general manager at one of the radio stations of $135,519 and costs related to a loss on space vacated by one of the radio stations of $244,647. F-132 318 INDEPENDENT AUDITORS' REPORT The Board of Directors Whiteco Industries, Inc. Merrillville, Indiana We have audited the accompanying balance sheets of the Outdoor Advertising Division of Whiteco Industries, Inc. as of December 31, 1996 and 1997, and the related statements of income and cash flows for each of the three years in the period ended December 31, 1997. These financial statements are the responsibility of the Division's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Outdoor Advertising Division of Whiteco Industries, Inc. as of December 31, 1996 and 1997, and the results of its operations and cash flows for each of the three years in the period ended December 31, 1997, in conformity with generally accepted accounting principles. BDO Seidman, LLP Chicago, Illinois September 17, 1998 F-133 319 OUTDOOR ADVERTISING DIVISION OF WHITECO INDUSTRIES, INC. BALANCE SHEETS ASSETS
DECEMBER 31, --------------------------- SEPTEMBER 30, 1996 1997 1998 ------------ ------------ ------------- (UNAUDITED) Current assets Cash............................................. $ 155,781 $ 249,733 $ 7,109,413 Accounts receivable (net of $631,000, $1,111,000 and $1,941,000 allowance for uncollectible accounts for December 31, 1996, 1997 and September 30, 1998, respectively)............. 9,112,798 10,718,470 13,113,464 Prepaid expenses and other receivables................................... 2,520,913 2,684,801 2,655,593 Prepaid sign costs............................... 4,880,789 5,064,178 4,951,369 ------------ ------------ ------------ Total current assets..................... 16,670,281 18,717,182 27,829,839 ------------ ------------ ------------ Property and equipment Land, buildings and improvements................. 5,389,827 6,279,957 6,980,180 Advertising signs................................ 134,120,274 150,697,192 160,138,490 Equipment........................................ 4,226,984 4,925,336 6,210,613 ------------ ------------ ------------ Total cost............................... 143,737,085 161,902,485 173,329,283 Accumulated depreciation......................... 84,300,457 91,601,392 98,914,094 ------------ ------------ ------------ Net property and equipment......................... 59,436,628 70,301,093 74,415,189 ------------ ------------ ------------ Other sign costs................................... 707,273 1,424,848 2,164,372 ------------ ------------ ------------ $ 76,814,182 $ 90,443,123 $104,409,400 ============ ============ ============ LIABILITIES AND DIVISIONAL EQUITY Current liabilities Accounts payable................................. $ 505,561 $ 900,145 $ 462,790 Customers' advance payments and deposits......... 127,925 70,174 17,777 Accrued expenses................................. 1,577,194 2,210,355 3,965,815 ------------ ------------ ------------ Total current liabilities................ 2,210,680 3,180,674 4,446,382 ------------ ------------ ------------ Commitments Divisional equity.................................. 74,603,502 87,262,449 99,963,018 ------------ ------------ ------------ $ 76,814,182 $ 90,443,123 $104,409,400 ============ ============ ============
See accompanying notes to financial statements. F-134 320 OUTDOOR ADVERTISING DIVISION OF WHITECO INDUSTRIES, INC. STATEMENTS OF INCOME
NINE MONTHS ENDED YEAR ENDED DECEMBER 31, SEPTEMBER 30, ------------------------------------------ -------------------------- 1995 1996 1997 1997 1998 ------------ ------------ ------------ ----------- ------------ (UNAUDITED) Revenues................................. $108,447,476 $117,268,324 $126,800,754 $93,827,208 $103,693,938 Less: Agency discounts................... 6,616,011 8,400,821 8,702,563 6,372,877 7,190,622 ------------ ------------ ------------ ----------- ------------ Net revenues........................... 101,831,465 108,867,503 118,098,191 87,454,331 96,503,316 Cost of revenues......................... 40,659,116 42,021,229 45,615,461 34,260,557 34,981,851 Selling and administrative expenses............................... 14,878,784 16,288,955 18,369,034 13,127,709 14,642,469 Corporate overhead expenses.............. 5,176,832 5,644,490 6,073,671 4,786,406 5,193,299 Depreciation and amortization............ 8,675,204 10,501,844 11,525,410 8,232,183 8,760,265 Profit participation fee................. 2,101,620 2,248,329 2,321,884 1,701,068 1,756,342 ------------ ------------ ------------ ----------- ------------ Income from operations before other income and interest expense............ 30,339,909 32,162,656 34,192,731 25,346,408 31,169,090 Other income, less other expenses............................... (1,060,355) (1,131,033) (1,833,411) 1,523,219 852,526 Interest expense......................... 38,556 17,927 3,794 (622) (98,231) ------------ ------------ ------------ ----------- ------------ Net income............................... $ 31,361,708 $ 33,275,762 $ 36,022,348 $26,869,005 $ 31,923,385 ============ ============ ============ =========== ============
See accompanying notes to financial statements. F-135 321 OUTDOOR ADVERTISING DIVISION OF WHITECO INDUSTRIES, INC. STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED YEAR ENDED DECEMBER 31, SEPTEMBER 30, ------------------------------------------ --------------------------- 1995 1996 1997 1997 1998 ------------ ------------ ------------ ------------ ------------ (UNAUDITED) Cash flows from operating activities Net income................................... $ 31,361,708 $ 33,275,762 $ 36,022,348 $ 26,869,005 $ 31,923,385 Adjustments to reconcile net income to net cash provided by operating activities Provision for depreciation and amortization........................... 8,675,204 10,501,844 11,525,410 8,232,183 8,760,266 Gain on disposals of assets.............. (795,498) (812,482) (1,488,665) (1,369,119) (792,637) Increase in accounts receivable.......... (694,344) (1,853,160) (1,605,672) (1,332,818) (2,394,994) Decrease (increase) in prepaid expenses and other receivables.................. (220,881) (1,202,910) (163,888) (373,047) 29,208 Increase in prepaid sign costs and other sign costs............................. (1,044,722) (815,916) (1,840,672) (963,958) (1,063,971) (Decrease) increase in accounts payable and accrued expenses................... (66,319) 869,627 1,027,745 570,828 1,318,105 Increase (decrease) in customers' advance payments and deposits.................. 185,750 (57,825) (57,751) (41,035) (52,397) ------------ ------------ ------------ ------------ ------------ Total adjustments.................... 6,039,190 6,629,178 7,396,507 4,723,034 5,803,580 ------------ ------------ ------------ ------------ ------------ Net cash provided by operating activities.... 37,400,898 39,904,940 43,418,855 31,592,039 37,726,965 ------------ ------------ ------------ ------------ ------------ Cash flows from investing activities Proceeds from sales of assets.............. 1,352,297 1,115,793 2,474,779 1,679,067 1,170,065 Expenditures for advertising signs......... (26,033,225) (14,713,166) (19,541,162) (16,815,288) (9,563,563) Expenditures for property and equipment.... (1,986,847) (2,180,644) (2,895,119) (2,111,561) (3,250,971) ------------ ------------ ------------ ------------ ------------ Net cash used in investing activities........ (26,667,775) (15,778,017) (19,961,502) (17,247,782) (11,644,469) ------------ ------------ ------------ ------------ ------------ Cash flows from financing activities Interdivisional transactions............... (11,489,912) (24,124,287) (23,363,401) (7,445,015) (19,222,816) ------------ ------------ ------------ ------------ ------------ Net cash used in financing activities........ (11,489,912) (24,124,287) (23,363,401) (7,445,015) (19,222,816) ------------ ------------ ------------ ------------ ------------ Net (decrease) increase in cash.............. (756,789) 2,636 93,952 6,899,242 6,859,680 Cash, at beginning of year................... 909,934 153,145 155,781 155,781 249,733 ------------ ------------ ------------ ------------ ------------ Cash, at end of year......................... $ 153,145 $ 155,781 $ 249,733 $ 7,055,023 $ 7,109,413 ============ ============ ============ ============ ============
See accompanying notes to financial statements. F-136 322 OUTDOOR ADVERTISING DIVISION OF WHITECO INDUSTRIES, INC. NOTES TO FINANCIAL STATEMENTS (INFORMATION AS OF SEPTEMBER 30, 1998 AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1998 IS UNAUDITED) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation Whiteco Industries, Inc. ("Whiteco") has entered into an agreement to sell substantially all of the assets and certain liabilities of its Outdoor Advertising Division (the "Division"). The Division owns and operates outdoor advertising signs throughout the United States. During the periods covered by the financial statements, the Division was conducted as an integral part of Whiteco's overall operations and separate financial statements were not prepared. These financial statements have been prepared from Whiteco's historical accounting records. Corporate overhead expenses are actual expenses incurred by the Division. The Division operated independently from Whiteco Industries, Inc. However, the expenses incurred by the Division for corporate overhead may not necessarily be indicative of expenses that would have been incurred had the Division been operated as a separate entity. Interim Financial Statements The financial information as of September 30, 1998 and with respect to the nine months ended September 30, 1997 and 1998 is unaudited. In the opinion of management, the financial statements contain all adjustments consisting of normal recurring accruals, necessary for the fair presentation of the results for such periods. The information is not necessarily indicative of the results of operations to be expected for the fiscal year end. Contracts and Revenue Recognition Outdoor advertising signs are contracted to customers under individual advertising contracts that primarily run from one month to five years. Revenue is recognized ratably over the life of the contract. Costs associated with the outdoor advertising operations, including contract costs and land rental, are expensed over the related contract term. Prepaid Sign Costs and Other Sign Costs Prepaid sign costs and other sign costs are primarily land rental payments relating to future periods. Amortization on these assets was $1,020,942, $1,075,827 and $939,708 for the years ended December 31, 1995, 1996 and 1997, and $223,975 and $437,256 for the nine months ended September 30, 1997 and 1998, respectively. Property and Equipment LAND, BUILDINGS AND IMPROVEMENTS AND EQUIPMENT Land, buildings and improvements and equipment are carried at cost, including interest charges capitalized during construction. Depreciation on these assets is computed over various lives under the straight-line method and amounted to $767,872, $911,890 and $1,092,869 for the years ended December 31, 1995, 1996 and 1997 and $957,510 and $1,113,288 for the nine months ended September 30, 1997 and 1998, respectively. ADVERTISING SIGNS Advertising sign structures are depreciated by the straight-line method over lives principally from eight to twelve years. Depreciation of advertising signs was $6,886,390, $8,514,127 and $9,492,833 for the years ended F-137 323 OUTDOOR ADVERTISING DIVISION OF WHITECO INDUSTRIES, INC. NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) December 31, 1995, 1996 and 1997, and $7,050,698 and $7,209,722 for the nine months ended September 30, 1997 and 1998, respectively. Income Taxes The Division is part of Whiteco Industries, Inc. which is an "S" corporation and, as such, federal and most state income taxes are the responsibility of the stockholder and therefore not reflected on the Division's financial statements. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. 2. LEASES The Division leases office facilities and property under various operating leases. The Division's primary office premises are leased from a partnership in which Whiteco Industries, Inc. is the general partner. Annual minimum rental payments under leases that have an initial or remaining term in excess of one year at December 31, 1997 are as follows:
RELATED YEAR PARTY OTHER TOTAL ---- -------- -------- ---------- 1998................................................ $224,000 $270,000 $ 494,000 1999................................................ 224,000 131,000 355,000 2000................................................ 224,000 130,000 354,000 2001................................................ 224,000 131,000 355,000 2002................................................ 224,000 131,000 355,000 Thereafter.......................................... 56,000 962,000 1,018,000
Total lease expense was approximately $675,000, $646,000 and $665,000 for the years ended December 31, 1995, 1996 and 1997, and $326,000 and $333,000 for the nine months ended September 30, 1997 and 1998, respectively. Related party lease expense was $254,000, $230,000 and $117,000 for the years ended December 31, 1995, 1996 and 1997, and $172,000 and $176,000 for the nine months ended September 30, 1997 and 1998, respectively. 3. RETIREMENT SAVINGS PLAN The Division is a part of Whiteco Industries, Inc. ("Whiteco") who maintains a qualified plan under Section 401(k) of the Internal Revenue Code. This plan is available for all employees who have completed one year or more of continuous service. The plan permits employees to contribute up to 15% of their annual compensation. The plan allows for discretionary Whiteco contributions. Currently, Whiteco matches 20% of the employees' contributions, to a maximum of 6% of earnings, and also makes a 1% quarterly matching contribution. Contributions were $154,160, $171,270 and $177,100 for the years ended December 31, 1995, 1996 and 1997, and $135,000 and $186,432 for the nine months ended September 30, 1997 and 1998, respectively. F-138 324 OUTDOOR ADVERTISING DIVISION OF WHITECO INDUSTRIES, INC. NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) 4. MANAGEMENT AGREEMENT In October 1984, the Division entered into an agreement with Metro Management Associates (the "Partnership"), a partnership in which several partners are employees of Whiteco, for the management and operation of approximately 540 outdoor advertising signs located in Indiana, Texas, Rhode Island, Missouri, Ohio, Florida, Illinois, Kentucky, Pennsylvania and Virginia. All revenue and operating expenses related to the management and operation of the Partnership's outdoor advertising signs are included in the Division's results of operations. The Division is required to pay a profit participation fee to the Partnership which approximates the operating profit of the managed assets and is based upon a fixed monthly fee and a variable fee based upon revenue. On August 31, 1998, the Partnership entered into an agreement to sell substantially all of the assets and certain specified liabilities of the Partnership to Chancellor Media Corporation. The management agreement between the Division and the Partnership will be terminated upon consummation of the acquisition by Chancellor Media Corporation. 5. SUBSEQUENT EVENT On August 31, 1998, Whiteco Industries, Inc. entered into an agreement to sell substantially all of the assets and certain specified liabilities of the Division to Chancellor Media Corporation. F-139 325 ------------------------------------------------------ ------------------------------------------------------ WE HAVE NOT AUTHORIZED ANYONE TO GIVE YOU ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS ABOUT THE TRANSACTIONS WE DISCUSS IN THIS PROSPECTUS OTHER THAN THOSE CONTAINED HEREIN OR IN THE DOCUMENTS WE INCORPORATE HEREIN BY REFERENCE. IF YOU ARE GIVEN ANY INFORMATION OR REPRESENTATIONS ABOUT THESE MATTERS THAT IS NOT DISCUSSED OR INCORPORATED IN THIS PROSPECTUS, YOU MUST NOT RELY ON THAT INFORMATION. THIS PROSPECTUS IS NOT AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY SECURITIES ANYWHERE OR TO ANYONE WHERE OR TO WHOM WE ARE NOT PERMITTED TO OFFER OR SELL SECURITIES UNDER APPLICABLE LAW. THE DELIVERY OF THIS PROSPECTUS OFFERED HEREBY DOES NOT, UNDER ANY CIRCUMSTANCES, MEAN THAT THERE HAS NOT BEEN A CHANGE IN OUR AFFAIRS SINCE THE DATE HEREOF. IT ALSO DOES NOT MEAN THAT THE INFORMATION IN THIS PROSPECTUS OR IN THE DOCUMENTS WE INCORPORATE HEREIN BY REFERENCE IS CORRECT AFTER THIS DATE. ------------------------------ TABLE OF CONTENTS
PAGE ---- Where You Can Find More Information........ i Prospectus Summary......................... 1 Risk Factors............................... 13 Use of Proceeds............................ 23 Capitalization............................. 23 Selected Consolidated Historical Financial Data..................................... 25 Management's Discussion and Analysis of Financial Condition and Results of Operations............................... 27 Business................................... 35 Management and Board of Directors.......... 69 Security Ownership of Certain Beneficial Owners and Management.................... 86 Certain Relationships and Related Transactions............................. 89 The Exchange Offer......................... 91 Description of New Notes................... 100 Book-Entry; Delivery and Form.............. 128 Description of Certain Indebtedness........ 130 Description of Capital Stock............... 143 Certain Federal Income Tax Considerations........................... 151 Plan of Distribution....................... 151 Legal Matters.............................. 152 Experts.................................... 152 Pro Forma Financial Information............ P-1 Index to Financial Statements.............. F-1
------------------------------ UNTIL MARCH 10, 1999, ALL DEALERS EFFECTING TRANSACTIONS IN THE NEW NOTES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS. ------------------------------------------------------ ------------------------------------------------------ ------------------------------------------------------ ------------------------------------------------------ OFFER TO EXCHANGE ALL OUTSTANDING 9% SENIOR SUBORDINATED NOTES DUE 2008 FOR 9% SENIOR SUBORDINATED NOTES DUE 2008 CHANCELLOR MEDIA CORPORATION OF LOS ANGELES ------------------------- PROSPECTUS ------------------------- DECEMBER 10, 1998 ------------------------------------------------------ ------------------------------------------------------ 326 PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS. Section 145 of the General Corporation Law of the State of Delaware ("DGCL") empowers a Delaware corporation to indemnify any person who is, or is threatened to be made, a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of such corporation) by reason of the fact that such person is or was an officer or director of such corporation, or is or was serving at the request of such corporation as a director, officer, employee or agent of another corporation or enterprise. The indemnity may include expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding, provided that he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. A Delaware corporation may indemnify officers and directors in an action by or in the right of the corporation under the same conditions, except that no indemnification is permitted without judicial approval if the officer or director is adjudged to be liable for negligence or misconduct in the performance of his duty to the corporation. Where an officer or director is successful on the merits or otherwise in the defense of any action referred to above, the corporation must indemnify him against the expenses which he actually and reasonably incurred in connection therewith. CMCLA's Certificate of Incorporation, as amended, provides that no director of the Company shall be liable to the Company or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to CMCLA or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the DGCL, or (iv) for any transaction from which the director derived an improper personal benefit. CMCLA's Bylaws provide that CMCLA shall indemnify every person who is or was a party or is or was threatened to be made a party to any action suit, or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he is or was a director or officer of the corporation or, while a director or officer or employee of the corporation, is or was serving at the request of the corporation as a director, officer, employee, agent or trustee of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonable incurred by him in connection with such action, suit or proceeding, to the full extent permitted by applicable law. II-1 327 ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES. A. Exhibits
EXHIBIT NO. DESCRIPTION OF EXHIBIT ------- ---------------------- 2.11(h) -- Agreement and Plan of Merger by and among Pyramid Communications, Inc., Evergreen Media Corporation and Evergreen Media/Pyramid Corporation dated as of July 14, 1995 (see table of contents for list of omitted exhibits and schedules). 2.11A(i) -- Amendment to Plan and Agreement of Merger by and among Pyramid Communications, Inc., Evergreen Media Corporation and Evergreen Media/Pyramid Corporation dated September 7, 1995. 2.11B(i) -- Amendment to Plan and Agreement of Merger by and among Pyramid Communications, Inc., Evergreen Media Corporation and Evergreen Media/Pyramid Corporation dated January 11, 1996. 2.12(j) -- Purchase Agreement between Fairbanks Communications, Inc. and Evergreen Media Corporation dated October 12, 1995 (see table of contents for list of omitted exhibits and schedules). 2.13(n) -- Option Agreement dated as of January 9, 1996 between Chancellor Broadcasting Company and Evergreen Media Corporation (including Form of Advertising Brokerage Agreement and Form of Asset Purchase Agreement). 2.14(o) -- Asset Purchase Agreement dated April 4, 1996 between American Radio Systems Corporation and Evergreen Media Corporation of Buffalo (see table of contents for list of omitted exhibits and schedules). 2.15(o) -- Asset Purchase Agreement dated April 11, 1996 between Mercury Radio Communications, L.P. and Evergreen Media Corporation of Los Angeles, Evergreen Media/Pyramid Holdings Corporation, WHTT (AM) License Corp. and WHTT (FM) License Corp. (see table of contents for list of omitted exhibits and schedules). 2.16(o) -- Asset Purchase Agreement dated April 19, 1996 between Crescent Communications L.P. and Evergreen Media Corporation of Los Angeles (see table of contents for list of omitted exhibits and schedules). 2.17(p) -- Asset Purchase Agreement dated June 13, 1996 between Evergreen Media Corporation of Los Angeles and Greater Washington Radio, Inc. (see table of contents for list of omitted exhibits and schedules). 2.18(p) -- Asset Exchange Agreement dated June 13, 1996 among Evergreen Media Corporation of Los Angeles, Evergreen Media Corporation of the Bay State, WKLB License Corp., Greater Media Radio, Inc. and Greater Washington Radio, Inc. (see table of contents for list of omitted exhibits and schedules). 2.19(p) -- Purchase Agreement dated June 27, 1996 between WEDR, Inc., and Evergreen Media Corporation of Los Angeles. (See table of contents for list of omitted schedules).
II-2 328
EXHIBIT NO. DESCRIPTION OF EXHIBIT ------- ---------------------- 2.20(p) -- Time Brokerage Agreement dated July 10, 1996 by and between Evergreen Media Corporation of Detroit, as Licensee, and Kidstar Interactive Media Incorporated, as Time Broker. 2.21(p) -- Asset Purchase Agreement dated July 15, 1996 by and among Century Chicago Broadcasting L.P., Century Broadcasting Corporation, Evergreen Media Corporation of Los Angeles and Evergreen Media Corporation of Chicago. 2.22(p) -- Asset Purchase Agreement dated August 12, 1996 by and among Chancellor Broadcasting Company, Shamrock Broadcasting, Inc. and Evergreen Media Corporation of the Great Lakes. 2.23(p) -- Asset Purchase Agreement dated as of August 12, 1996 between Secret Communications Limited Partnership and Evergreen Media Corporation of Los Angeles (WQRS-FM). (See table of contents for list of omitted exhibits and schedules) 2.24(p) -- Asset Purchase Agreement dated as of August 12, 1996 between Secret Communications Limited Partnership and Evergreen Media Corporation of Los Angeles. (See table of contents for list of omitted schedules) 2.25(q) -- Letter of intent dated August 27, 1996 between EZ Communications, Inc. and Evergreen Media Corporation. 2.26(q) -- Asset Purchase Agreement dated September 19, 1996 between Beasley-FM Acquisition Corp., WDAS License Limited Partnership and Evergreen Media Corporation of Los Angeles. 2.27(q) -- Asset Purchase Agreement dated September 19, 1996 between The Brown Organization and Evergreen Media Corporation of Los Angeles. 2.28(r) -- Stock Purchase Agreement by and between Viacom International Inc. and Evergreen Media Corporation of Los Angeles, dated February 16, 1997 (See table of contents for omitted schedules and exhibits). 2.29(r) -- Agreement and Plan of Merger, by and among Evergreen Media Corporation, Chancellor Broadcasting Company and Chancellor Radio Broadcasting Company, dated as of February 19, 1997. 2.30(r) -- Stockholders Agreement, by and among Chancellor Broadcasting Company, Evergreen Media Corporation, Scott K. Ginsburg (individually and as custodian for certain shares held by his children), HM2/Chancellor, L.P., Hicks, Muse, Tate & First Equity Fund II, L.P., HM2/HMW, L.P., The Chancellor Business Trust, HM2/HMD Sacramento GP, L.P., Thomas O. Hicks, as Trustee of the William Cree Hicks 1992 Irrevocable Trust, Thomas O. Hicks, as Trustee of the Catherine Forgave Hicks 1993 Irrevocable Trust, Thomas O. Hicks, as Trustee of the John Alexander Hicks 1984 Trust, Thomas O. Hicks, as Trustee of the Mack Hardin Hicks 1984 Trust, Thomas O. Hicks, as Trustee of Robert Bradley Hicks 1984 Trust, Thomas O. Hicks, as Trustee of the Thomas O. Hicks, Jr. 1984 Trust, Thomas O. Hicks and H. Rand Reynolds, as Trustees for the Muse Children's GS Trust, and Thomas O. Hicks, dated as of February 19, 1997.
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EXHIBIT NO. DESCRIPTION OF EXHIBIT ------- ---------------------- 2.31(r) -- Joint Purchase Agreement, by and among Chancellor Radio Broadcasting Company, Chancellor Broadcasting Company, Evergreen Media Corporation of Los Angeles, and Evergreen Media Corporation, dated as of February 19, 1997. 2.32(s) -- Asset Exchange Agreement, by and among EZ Communications, Inc., Professional Broadcasting Incorporated, EZ Philadelphia, Inc., Evergreen Media Corporation of Los Angeles, Evergreen Media Corporation of Charlotte, Evergreen Media Corporation of the East, Evergreen Media Corporation of Carolinaland, WBAV/ WBAV-FM/WPEG License Corp. and WRFX License Corp., dated as of December 5, 1996 (See table of contents for list of omitted schedules). 2.33(s) -- Asset Purchase Agreement, by and among EZ Communications, Inc., Professional Broadcasting Incorporated, EZ Charlotte, Inc., Evergreen Media Corporation of Los Angeles, Evergreen Media Corporation of the East and Evergreen Media Corporation of Carolinaland, dated as of December 5, 1996 (See table of contents for list of omitted schedules). 2.34(t) -- Asset Purchase Agreement by and between Pacific and Southern Company, Inc. and Evergreen Media Corporation of Los Angeles (re: WGCI-AM and WGCI-FM), dated as of April 4, 1997 (see table of contents for list of omitted schedules and exhibits). 2.35(t) -- Asset Purchase Agreement by and between Pacific and Southern Company, Inc. and Evergreen Media Corporation of Los Angeles (re: KKBQ-AM and KKBQ-FM), dated as of April 4, 1997 (see table of contents for list of omitted schedules and exhibits). 2.36(t) -- Asset Purchase Agreement by and between Pacific and Southern Company, Inc. and Evergreen Media Corporation of Los Angeles (re: KHKS-FM), dated as of April 4, 1997 (see table of contents for list of omitted schedules and exhibits). 2.41(y) -- Amended and Restated Agreement and Plan of Merger among Chancellor Broadcasting Company, Chancellor Radio Broadcasting Company, Evergreen Media Corporation, Evergreen Mezzanine Holdings Corporation and Evergreen Media Corporation of Los Angeles, dated as of February 19, 1997, amended and restated as of July 31, 1997. 2.42(gg) -- Option Agreement, by and among Evergreen Media Corporation, Chancellor Broadcasting Company, Bonneville International Corporation and Bonneville Holding Company, dated as of August 6, 1997. 2.43(ss) -- Letter Agreement, dated February 20, 1998, between CMCLA and Capstar Broadcasting Corporation. 2.44(yy) -- Amendment No. 1, dated May 19, 1998, to Letter Agreement dated February 20, 1998, between CMCLA and Capstar Broadcasting Corporation.
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EXHIBIT NO. DESCRIPTION OF EXHIBIT ------- ---------------------- 2.45(yy) -- Unit and Stock Purchase Agreement by and among CMCLA, Martin Media, L.P., Martin & MacFarlane, Inc., Nevada Outdoor Systems, Inc., MW Sign Corp. and certain sellers named therein, dated as of June 19, 1998 (see table of contents for list of omitted schedules and exhibits). 2.46(yy) -- Agreement and Plan of Merger between Chancellor Media Corporation and Ranger Equity Holdings Corporation dated as of July 7, 1998. 2.47(yy) -- Asset Purchase Agreement, dated August 11, 1998, between Chancellor Media Corporation of Los Angeles and Independent Group Limited Partnership. 2.48(yy) -- Asset Purchase Agreement, dated August 11, 1998, between Chancellor Media Corporation of Los Angeles and Zapis Communications Corporation. 2.49(yy) -- Stock Purchase Agreement, dated August 11, 1998, among Chancellor Media Corporation of Los Angeles, Young Ones, Inc., Zebra Broadcasting Corporation and the Sellers named therein. 2.50(yy) -- Stock Purchase Agreement, dated August 11, 1998, among Chancellor Media Corporation of Los Angeles, ML Media Partners LP., Wincom Broadcasting Corporation and WIN Communications, Inc. 2.51(yy) -- Stock Purchase and Merger Agreement, dated July 9, 1998, by and among Chancellor Media Corporation, Chancellor Mexico LLC, Grupo Radio Centro, S.A. De C.V., and the Selling Shareholders. 2.52+ -- Asset Purchase Agreement, dated August 30, 1998, by and among Chancellor Media Corporation of Los Angeles, Whiteco Industries Inc. and Metro Management Associates. 3.3(ff) -- Certificate of Incorporation of Chancellor Media Corporation of Los Angeles, formerly known as Evergreen Media Corporation. 3.3A(pp) -- Amendment to Certificate of Incorporation of Chancellor Media Corporation of Los Angeles, filed September 5, 1997. 3.3B(uu) -- Amendment to the Certificate of Incorporation of Chancellor Media Corporation, filed October 28, 1997. 3.4(ff) -- Bylaws of Chancellor Media Corporation of Los Angeles. 3.5* -- Certificate of Incorporation of Chancellor Media of the Lone Star State. 3.6* -- Bylaws of Chancellor Media Corporation of the Lone Star State. 3.7* -- Certificate of Incorporation of KZPS/KDGE License Corp. 3.8* -- Bylaws of KZPS/KDGE License Corp. 3.9* -- Certificate of Incorporation of Chancellor Media Corporation of California. 3.10* -- Bylaws of Chancellor Media Corporation of California. 3.11* -- Certificate of Incorporation of KIOI License Corp. 3.12* -- Bylaws of KIOI License Corp.
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EXHIBIT NO. DESCRIPTION OF EXHIBIT ------- ---------------------- 3.13* -- Certificate of Incorporation of Chancellor Media Corporation of Illinois. 3.14* -- Bylaws of Chancellor Media Corporation of Illinois. 3.15* -- Certificate of Incorporation of Chancellor Media Illinois License Corp. 3.16* -- Bylaws of Chancellor Media Illinois License Corp. 3.17* -- Certificate of Incorporation of Chancellor Media Corporation of Dade County. 3.18* -- Bylaws of Chancellor Media Corporation of Dade County. 3.19* -- Certificate of Incorporation of WVCG License Corp. 3.20* -- Bylaws of WVCG License Corp. 3.21* -- Certificate of Incorporation of Chancellor Media Corporation of Massachusetts. 3.22* -- Bylaws of Chancellor Media Corporation of Massachusetts. 3.23* -- Certificate of Incorporation of Chancellor Media Pennsylvania License Corp. 3.24* -- Bylaws of Chancellor Media Pennsylvania License Corp. 3.25* -- Certificate of Incorporation of Chancellor Media Corporation of Miami. 3.26* -- Bylaws of Chancellor Media Corporation of Miami. 3.27* -- Certificate of Incorporation of WEDR License Corp. 3.28* -- Bylaws of WEDR License Corp. 3.29* -- Agreement of Limited Partnership of Chancellor Media Corporation of Houston Limited Partnership. 3.30* -- Certificate of Incorporation of Chancellor Media Corporation of Houston. 3.31* -- Bylaws of Chancellor Media Corporation of Houston. 3.32* -- Certificate of Incorporation of Chancellor Media Corporation of the Keystone State. 3.33* -- Bylaws of Chancellor Media Corporation of the Keystone State. 3.34* -- Certificate of Incorporation of Chancellor Media Corporation of New York. 3.35* -- Bylaws of Chancellor Media Corporation of New York. 3.36* -- Certificate of Incorporation of Chancellor Media Corporation of Charlotte. 3.37* -- Bylaws of Chancellor Media Corporation of Charlotte. 3.38* -- Certificate of WIOQ License Corp. 3.39* -- Bylaws of WIOQ License Corp. 3.40* -- Certificate of Incorporation of Chancellor Media Corporation of Washington, D.C. 3.41* -- Bylaws of Chancellor Media Corporation of Washington, D.C. 3.42* -- Certificate of Incorporation of Chancellor Media Corporation of St. Louis.
II-6 332
EXHIBIT NO. DESCRIPTION OF EXHIBIT ------- ---------------------- 3.43* -- Bylaws of Chancellor Media Corporation of St. Louis. 3.44* -- Certificate of Incorporation of Chancellor Media Corporation of Michigan. 3.45* -- Bylaws of Chancellor Media Corporation of Michigan. 3.46* -- Certificate of Incorporation of Chancellor Media/WAXQ License Corp. 3.47* -- Bylaws of Chancellor Media/WAXQ License Corp. 3.48* -- Certificate of WAXQ License Corp. 3.49* -- Bylaws of WAXQ License Corp. 3.50* -- Certificate of Incorporation of Chancellor Media/KCMG Inc. 3.51* -- Bylaws of Chancellor Media/KCMG Inc. 3.52* -- Certificate of Incorporation of Chancellor Media/Riverside Broadcasting Co., Inc. 3.53* -- Bylaws of Chancellor Media/Riverside Broadcasting Co., Inc. 3.54* -- Certificate of Incorporation of WLTW License Corp. 3.55* -- Bylaws of WLTW License Corp. 3.56* -- Certificate of Incorporation of Chancellor Media Corporation of the Capital City. 3.57* -- Bylaws of Chancellor Media Corporation of the Capital City. 3.58* -- Certificate of Incorporation of Chancellor Media D.C. License Corp. 3.59* -- Bylaws of Chancellor Media D.C. License Corp. 3.60* -- Certificate of Incorporation of Chancellor Media Licensee Company. 3.61* -- Bylaws of Chancellor Media Licensee Company. 3.62* -- Certificate of Incorporation of Chancellor Media/Trefoil Communications, Inc. 3.63* -- Amended and Restated Bylaws of Chancellor Media/Trefoil Communications, Inc. 3.64* -- Certificate of Incorporation of Chancellor Media/Shamrock Broadcasting, Inc. 3.65* -- Amended and Restated Bylaws of Chancellor Media/Shamrock Broadcasting, Inc. 3.66* -- Certificate of Incorporation of Chancellor Media/Shamrock Radio Licenses, Inc. 3.67* -- Bylaws of Chancellor Media/Shamrock Radio Licenses, Inc. 3.68* -- Certificate of Incorporation of Chancellor Media/Shamrock Broadcasting Licenses of Denver, Inc. 3.69* -- Bylaws of Chancellor Media/Shamrock Broadcasting Licenses of Denver, Inc. 3.70* -- Articles of Incorporation of Chancellor Media/Shamrock Broadcasting of Texas, Inc.
II-7 333
EXHIBIT NO. DESCRIPTION OF EXHIBIT ------- ---------------------- 3.71* -- Amended and Restated Bylaws of Chancellor Media/Shamrock Broadcasting of Texas, Inc. 3.72* -- Limited Liability Company Agreement of Chancellor Media/Shamrock Radio Licenses, LLC. 3.73* -- Certificate of Incorporation of Chancellor Media Outdoor Corporation. 3.74* -- Bylaws of Chancellor Media Outdoor Corporation. 3.75* -- Certificate of Incorporation of Chancellor Media Nevada Sign Corporation. 3.76* -- Bylaws of Chancellor Media Nevada Sign Corporation. 3.77* -- Certificate of Incorporation of Chancellor Media MW Sign Corporation. 3.78* -- Bylaws of Chancellor Media MW Sign Corporation. 3.79* -- Certificate of Incorporation of Chancellor Media Martin Corporation. 3.80* -- Bylaws of Chancellor Media Martin Corporation. 3.81* -- Articles of Incorporation of Western Poster, Inc. 3.82* -- Bylaws of Western Poster, Inc. 3.83* -- Certificate of Incorporation of The AMFM Radio Networks, Inc. 3.84* -- Bylaws of The AMFM Radio Networks, Inc. 3.85* -- Certificate of Incorporation of Chancellor Media Air Services Corporation. 3.86* -- Bylaws of Chancellor Media Air Services Corporation. 3.87* -- Certificate of Incorporation of Chancellor Media Whiteco Outdoor Corporation. 3.88* -- Bylaws of Chancellor Media Whiteco Outdoor Corporation. 3.89* -- Certificate of Incorporation of Chancellor Merger Corp. 3.90* -- Bylaws of Chancellor Merger Corp. 3.91* -- Articles of Organization of Broadcast Architecture, Inc. 3.92* -- Bylaws of Broadcast Architecture, Inc. 3.93+ -- Agreement of Limited Partnership of Martin Media. 3.94* -- Articles of Incorporation of Dowling Company Incorporated. 3.95* -- Bylaws of Dowling Company Incorporated. 3.96* -- Articles of Incorporation of Nevada Outdoor Systems, Inc. 3.97* -- Bylaws of Nevada Outdoor Systems, Inc. 3.98* -- Articles of Incorporation of MW Sign Corp. 3.99* -- Bylaws of MW Sign Corp. 3.100* -- Articles of Incorporation of Martin & MacFarlane, Inc. 3.101* -- Bylaws of Martin & MacFarlane, Inc. 3.102* -- Certificate of Incorporation of Katz Media Corporation. 3.103* -- Bylaws of Katz Media Corporation. 3.104* -- Certificate of Incorporation of Katz Communications, Inc.
II-8 334
EXHIBIT NO. DESCRIPTION OF EXHIBIT ------- ---------------------- 3.105* -- Bylaws of Katz Communications, Inc. 3.106* -- Certificate of Incorporation of Katz Millennium Marketing, Inc. 3.107* -- Bylaws of Katz Millennium Marketing, Inc. 3.108* -- Certificate of Incorporation of Amcast Radio Sales, Inc. 3.109* -- Bylaws of Amcast Radio Sales, Inc. 3.110* -- Certificate of Incorporation of Christal Radio Sales, Inc. 3.111* -- Amended and Restated Bylaws of Christal Radio Sales, Inc. 3.112* -- Certificate of Incorporation of Eastman Radio Sales, Inc. 3.113* -- Bylaws of Eastman Radio Sales, Inc. 3.114* -- Certificate of Incorporation of Seltel, Inc. 3.115* -- Bylaws of Seltel, Inc. 3.116* -- Certificate of Incorporation of Katz Cable Corporation. 3.117* -- Amended and Restated Bylaws of Katz Cable Corporation. 3.118* -- Certificate of Incorporation of The National Payroll Company, Inc. 3.119* -- Bylaws of The National Payroll Company, Inc. 3.120* -- Limited Liability Company Agreement of Chancellor Media Radio Licenses, LLC 3.121* -- Agreement of Limited Partnership of KLOL License Limited Partnership. 3.122* -- Agreement of Limited Partnership of WTOP License Limited Partnership. 3.123* -- Certificate of Formation of Radio 100, L.L.C. 4.10(t) -- Second Amended and Restated Loan Agreement dated as of April 25, 1997 among Evergreen Media Corporation of Los Angeles, the financial institutions whose names appear as Lenders on the signature pages thereof (the "Lenders"), Toronto Dominion Securities, Inc., as Arranging Agent, The Bank of New York and Bankers Trust Company, as Co-Syndication Agents, NationsBank of Texas, N.A. and Union Bank of California, as Co-Documentation Agents, and Toronto Dominion (Texas), Inc., as Administrative Agent for the Lenders, together with certain collateral documents attached thereto as exhibits, including Assignment of Partnership Interests, Assignment of Trust Interests, Borrower's Pledge Agreement, Parent Company Guaranty, Stock Pledge Agreement, Subsidiary Guaranty and Subsidiary Pledge Agreement (see table of contents for list of omitted schedules and exhibits. 4.11(z) -- First Amendment to Second Amended and Restated Loan Agreement, dated June 26, 1997, among Evergreen Media Corporation of Los Angeles, the Lenders, the Agents and the Administrative Agent. 4.15(aa) -- Indenture, dated as of February 14, 1996, governing the 9 3/8% Senior Subordinated Notes due 2004 of CMCLA.
II-9 335
EXHIBIT NO. DESCRIPTION OF EXHIBIT ------- ---------------------- 4.16(bb) -- First Supplemental Indenture, dated as of February 14, 1996, to the Indenture dated February 14, 1996, governing the 9 3/8% Senior Subordinated Notes due 2004 of CMCLA. 4.17(cc) -- Indenture, dated as of February 26, 1996, governing the 12 1/4% Subordinated Exchange Debentures due 2008 of CMCLA. 4.18(dd) -- Indenture, dated as of January 23, 1997, governing the 12% Subordinated Exchange Debentures due 2009 of CMCLA. 4.19(ee) -- Indenture, dated as of June 24, 1997, governing the 8 3/4% Senior Subordinated Notes due 2007 of CMCLA. 4.21(ff) -- Specimen of the 12 1/4% Series A Senior Cumulative Exchangeable Preferred Stock Certificate of CMCLA. 4.22(ff) -- Specimen of the 12% Exchangeable Preferred Stock Certificate of CMCLA. 4.23(ff) -- Form of Certificate of Designation for the 12 1/4% Series A Senior Cumulative Exchangeable Preferred Stock of CMCLA. 4.24(ff) -- Form of Certificate of Designation for the 12% Exchangeable Preferred Stock of CMCLA. 4.25(pp) -- Second Amendment to Second Amended and Restated Loan Agreement, dated August 7, 1997, among Evergreen Media Corporation of Los Angeles, the Lenders, the Agents and the Administrative Agent. 4.26(hh) -- Second Supplemental Indenture, dated as of April 15, 1997, to the Indenture dated February 14, 1996, governing the 9 3/8% Senior Subordinated Notes due 2004 of CMCLA. 4.27(pp) -- Third Supplemental Indenture, dated as of September 5, 1997, to the Indenture dated February 14, 1996, governing the 9 3/8% Senior Subordinated Notes due 2004 of CMCLA. 4.28(pp) -- First Supplemental Indenture, dated as of September 5, 1997, to the Indenture dated June 24, 1997, governing the 8 3/4% Senior Subordinated Notes due 2007 of CMCLA. 4.29(pp) -- First Supplemental Indenture, dated as of September 5, 1997, to the Indenture dated February 26, 1997, governing the 12 1/4% Subordinated Exchange Debentures due 2008 of CMCLA. 4.30(pp) -- First Supplemental Indenture, dated as of September 5, 1997, to the Indenture dated January 23, 1997, governing the 12% Subordinated Exchange Debentures due 2009 of CMCLA. 4.34(uu) -- Amended and Restated Indenture, dated as of October 28, 1997, governing the 10 1/2% Senior Subordinated Notes due 2007 of CMCLA. 4.35(uu) -- Second Supplement Indenture, dated as of October 28, 1997, to the Amended and Restated Indenture dated October 28, 1997 governing the 10 1/2% Senior Subordinated Notes due 2007 of CMCLA. 4.36(uu) -- Third Amendment to Second Amended and Restated Loan Agreement, dated October 28, 1997, among CMCLA, the Lenders, the Agents and the Administrative Agent.
II-10 336
EXHIBIT NO. DESCRIPTION OF EXHIBIT ------- ---------------------- 4.37(uu) -- Fourth Amendment to Second Amended and Restated Loan Agreement, dated February 10, 1998, among CMCLA, the Lenders, the Agents and the Administrative Agent. 4.38(vv) -- Indenture, dated as of December 22, 1997, governing the 8 1/8% Senior Subordinated Notes due 2007 of CMCLA. 4.39(ww) -- Fifth Amendment to Second Amended and Restated Loan Agreement, dated May 1, 1998, among CMCLA, the Lenders, the Agents and the Administrative Agent. 4.40(yy) -- Sixth Amendment to Second Amended and Restated Loan Agreement, dated July 31, 1998, among CMCLA, the Lenders, the Agents and the Administrative Agent. 4.41* -- Indenture, dated as of September 30, 1998, governing the 9% Senior Subordinated Notes due 2008 of CMCLA. 4.42* -- Purchase Agreement, dated as of September 25, 1998, among CMCLA, the Guarantors named therein and Goldman, Sachs & Co. 4.43* -- Registration Rights Agreement, dated as of September 30, 1998, among CMCLA, the Guarantors named therein and Goldman, Sachs & Co. 4.44(aaa) -- Seventh Amendment to Second Amended and Restated Loan Agreement, dated November 9, 1998, among CMCLA, the Lenders, the Agents and the Administrative Agent. 4.45+ -- Indenture, dated as of November 17, 1998, governing the 8% Senior Notes due 2008 of CMCLA. 4.46+ -- Purchase Agreement, dated as of November 12, 1998, among CMCLA, the Guarantors named therein, BT Alex. Brown Incorporated, Chase Securities Inc., Morgan Stanley & Co. Incorporated and Salomon Smith Barney Inc. 4.47+ -- Registration Rights Agreement, dated as of November 17, 1998, among CMCLA, the Guarantors named therein, BT Alex. Brown Incorporated, Chase Securities Inc., Morgan Stanley & Co. Incorporated and Salomon Smith Barney Inc. 5.1* -- Opinion of Weil, Gotshal & Manges LLP. 10.23(xx) -- Amended and Restated Chancellor Media Corporation Stock Option Plan for Non-employee Directors. 10.26(n)** -- Employment Agreement dated February 9, 1996 by and between Evergreen Media Corporation and Kenneth J. O'Keefe. 10.28(o) -- 1995 Stock Option Plan for executive officers and key employees of Evergreen Media Corporation. 10.30(pp)** -- First Amendment to Employment Agreement dated March 1, 1997 by and between Evergreen Media Corporation and Kenneth J. O'Keefe. 10.31(pp)** -- Employment Agreement dated September 4, 1997 by and among Evergreen Media Corporation, Evergreen Media Corporation of Los Angeles and Scott K. Ginsburg.
II-11 337
EXHIBIT NO. DESCRIPTION OF EXHIBIT ------- ---------------------- 10.32(pp)** -- Employment Agreement dated September 4, 1997 by and among Evergreen Media Corporation, Evergreen Media Corporation of Los Angeles and James de Castro. 10.33(pp)** -- Employment Agreement dated September 4, 1997 by and among Evergreen Media Corporation, Evergreen Media Corporation of Los Angeles and Matthew E. Devine. 10.34(pp)** -- Second Amendment to Employment Agreement dated September 4, 1997 by and among Evergreen Media Corporation, Evergreen Media Corporation of Los Angeles and Kenneth J. O'Keefe. 10.35(ii)** -- Employment Agreement dated February 14, 19965 by and among Chancellor Broadcasting Company, Chancellor Radio Broadcasting Company and Steven Dinetz. 10.36(jj) -- Chancellor Broadcasting Company 1996 Stock Award Plan. 10.37(kk) -- Chancellor Holdings Corp. 1994 Director Stock Option Plan. 10.38(ll) -- Stock Option Grant Letter dated September 30, 1996 from Chancellor Corporation to Steven Dinetz. 10.39(mm) -- Stock Option Grant Letter dated September 30, 1996 from Chancellor Corporation to Eric W. Neumann. 10.40(nn) -- Stock Option Grant Letter dated September 30, 1996 from Chancellor Corporation to Marvin Dinetz. 10.41(oo) -- Stock Option Grant Letter dated February 14, 1997 from Chancellor Broadcasting Company to Carl M. Hirsch. 10.44(vv)** -- Agreement dated April 20, 1998 by and among Chancellor Media Corporation, Chancellor Media Corporation of Los Angeles and Scott K. Ginsburg. 10.45(vv)** -- Employment Agreement dated April 29, 1998 by and among Chancellor Media Corporation, Chancellor Media Corporation of Los Angeles and Jeffrey A. Marcus. 10.46(yy) -- Chancellor Media Corporation 1998 Stock Option Plan. 10.47(yy) -- Voting Agreement, among Chancellor Media Corporation and Rangers Equity Partners, L.P. dated as of July 7, 1998. 10.48* -- Employment Agreement, dated as of May 18, 1998, by and among Chancellor Media Corporation, Chancellor Media Corporation of Los Angeles and James E. de Castro. 10.49* -- Employment Agreement, dated as of May 18, 1998, by and among Chancellor Media Corporation, Chancellor Media Corporation of Los Angeles and Matthew E. Devine. 10.50* -- Employment Agreement, dated as of June 1, 1998, by and among Chancellor Media Corporation, Chancellor Media Corporation of Los Angeles and Eric C. Neuman. 10.51* -- Employment Agreement, dated as of August 18, 1998, by and among Chancellor Media Corporation, Chancellor Media Corporation of Los Angeles and James A. McLaughlin, Jr. 12.1* -- Chancellor Media Corporation of Los Angeles Computation of Ratio of Earnings to Combined Fixed Charges.
II-12 338
EXHIBIT NO. DESCRIPTION OF EXHIBIT ------- ---------------------- 23.1* -- Consent of Weil, Gotshal & Manges LLP (included as part of their opinion listed as Exhibit 5.1). 23.2+ -- Consent of PricewaterhouseCoopers LLP, independent accountants. 23.3+ -- Consent of KPMG Peat Marwick LLP, independent accountants. 23.4+ -- Consent of PricewaterhouseCoopers LLP, independent accountants. 23.5+ -- Consent of KPMG Peat Marwick LLP, independent accountants. 23.6+ -- Consent of Arthur Andersen LLP, independent accountants. 23.7+ -- Consent of BDO Seidman, LLP, independent accountants. 24.1* -- Powers of Attorney. 25.1+ -- Statement of Eligibility and Qualification of The Bank of New York, as trustee, under the Indenture listed as Exhibit 4.41 hereto on Form T-1. 99.1* -- Form of Letter of Transmittal. 99.2* -- Form of Notice of Guaranteed Delivery.
- --------------- * Previously filed. ** Management Contract or Compensatory Agreement. + Filed herewith. (a) Incorporated by reference to the identically numbered exhibit to the Registration Statement on Form S-1, as amended (Reg. No. 33-60036), of Evergreen Media Corporation ("Evergreen"). (f) Incorporated by reference to the identically numbered exhibit to Evergreen's Registration Statement on Form S-4, as amended (Reg. No. 33-89838). (h) Incorporated by reference to the identically numbered exhibit to Evergreen's Current Report on Form 8-K dated July 14, 1995. (i) Incorporated by reference to the identically numbered exhibit to Evergreen's Current Report on Form 8-K dated January 17, 1996. (j) Incorporated by reference to the identically numbered exhibit to Evergreen's Quarterly Report on Form 10-Q for the quarterly period ending June 30, 1995. (k) Incorporated by reference to the identically numbered exhibit to Evergreen's Registration Statement on Form S-1, as amended (Reg. No. 33-69752). (n) Incorporated by reference to the identically numbered exhibit to Evergreen's Annual Report on Form 10-K for the fiscal year ended December 31, 1995. (o) Incorporated by reference to the identically numbered exhibit to Evergreen's Quarterly Report on Form 10-Q for the quarterly period ending March 31, 1996. (p) Incorporated by reference to the identically numbered exhibit to Evergreen's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 1996. (q) Incorporated by reference to the identically numbered exhibit to Evergreen's Registration Statement on Form S-3, as amended (Reg. No. 333-12453). II-13 339 (r) Incorporated by reference to the identically numbered exhibit to Evergreen's Current Report on Form 8-K dated February 16, 1997 and filed March 9, 1997. (s) Incorporated by reference to the identically numbered exhibit to Evergreen's Annual Report on Form 10-K for the fiscal year ended December 31, 1996. (t) Incorporated by reference to the identically numbered exhibit to Evergreen's Current Report on Form 8-K dated April 1, 1997 and filed May 9, 1997. (y) Incorporated by reference to the identically numbered exhibit of Evergreen's Registration Statement on Form S-4, filed August 1, 1997. (z) Incorporated by reference to the identically numbered exhibit to Evergreen's Current Report on Form 8-K dated July 7, 1997 and filed July 31, 1997. (aa) Incorporated by reference to Exhibit 4.4 to the Current Report on Form 8-K of Chancellor Broadcasting Company and Chancellor Radio Broadcasting Company, as filed on February 29, 1996. (bb) Incorporated by reference to Exhibit 4.5 to the Annual Report on Form 10-K of Chancellor Broadcasting Company, Chancellor Radio Broadcasting Company and Chancellor Broadcasting Licensee Company for the fiscal year ended December 31, 1995. (cc) Incorporated by reference to Exhibit 4.6 to the Current Report on Form 8-K of Chancellor Broadcasting Company and Chancellor Radio Broadcasting Company, as filed on February 29, 1996. (dd) Incorporated by reference to Exhibit 4.7 to the Current Report on Form 8-K of Chancellor Radio Broadcasting Company, as filed on February 6, 1997. (ee) Incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K of Chancellor Broadcasting Company and Chancellor Radio Broadcasting Company as filed on July 17, 1997. (ff) Incorporated by reference to the identically-numbered exhibit to the Registration Statement on Form S-4 (Reg. No. 333-32259), dated July 29, 1997, as amended, of Evergreen Media Corporation of Los Angeles ("EMCLA"). (gg) Incorporated by reference to the identically numbered exhibit to the Quarterly Report on Form 10-Q of Evergreen and EMCLA for the quarterly period ending June 30, 1997. (hh) Incorporated by reference to Exhibit 4.8 to the Quarterly Report on Form 10-Q of Chancellor Broadcasting Company ("CBC") and CRBC for the quarterly period ending March 31, 1997. (ii) Incorporated by reference to Exhibit 10.6 to CBC's Registration Statement on Form S-1 (Reg. No. 333-02782) filed February 9, 1996. (jj) Incorporated by reference to Exhibit 4.22 to Chancellor Media's Registration Statement on Form S-8 (Reg. No. 333-35039), dated September 5, 1997. (kk) Incorporated by reference to Exhibit 4.23 to Chancellor Media's Registration Statement on Form S-8 (Reg. No. 333-35039), dated September 5, 1997. (ll) Incorporated by reference to Exhibit 4.24 to Chancellor Media's Registration Statement on Form S-8 (Reg. No. 333-35039), dated September 5, 1997. (mm) Incorporated by reference to Exhibit 4.25 to Chancellor Media's Registration Statement on Form S-8 (Reg. No. 333-35039), dated September 5, 1997. II-14 340 (nn) Incorporated by reference to Exhibit 4.26 to Chancellor Media's Registration Statement on Form S-8 (Reg. No. 333-35039), dated September 5, 1997. (oo) Incorporated by reference to Exhibit 4.27 to Chancellor Media's Registration Statement on Form S-8 (Reg. No. 333-35039), dated September 5, 1997. (pp) Incorporated by reference to the identically numbered exhibit to the CMCLA's Registration Statement on Form S-4 (Reg. No. 333-36451), dated September 26, 1997, as amended. (ss) Incorporated by reference to the identically numbered exhibit to the Current Report on Form 8-K of Chancellor Media and CMCLA, dated as of February 23, 1998 and filed as of February 27, 1998. (tt) Incorporated by reference to the identically numbered exhibit to the Annual Report on Form 10-K of Chancellor Media and the CMCLA for the fiscal year ended December 31, 1997. (uu) Incorporated by reference to the identically numbered exhibit to the Annual Report on Form 10-K of Chancellor and CMCLA for the fiscal year ended December 31, 1997. (vv) Incorporated by reference to the identically numbered exhibit to CMCLA's Registration Statement on Form S-4 (Reg. No. 333-50739), dated April 22, 1998, as amended. (ww) Incorporated by reference to the identically numbered exhibit to the Quarterly Report on Form 10-Q of Chancellor Media and CMCLA for the quarterly period ending March 31, 1998. (xx) Incorporated by reference to Exhibit 4.41 to Chancellor Media's Registration Statement on Form S-8 (Reg. No. 333-53179), dated May 20, 1998. (yy) Incorporated by reference to the identically numbered exhibit to the Quarterly Report on Form 10-Q of Chancellor Media and CMCLA for the quarterly period ending June 30, 1998. (aaa) Incorporated by reference to Exhibit 4.42 to the Quarterly Report on Form 10-Q of Chancellor Media and CMCLA for the quarterly period ending September 30, 1998. The Company hereby agrees to furnish supplementary a copy of any omitted schedule or exhibit to the Commission upon request. B. Financial Statement Schedules All schedules have been omitted since the required information is either not present or not present in amounts sufficient to require submission of the schedules, or because the information required is included in the consolidated financial statements or the notes thereto. ITEM 22. UNDERTAKINGS. A. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the provisions described under Item 20 above, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event II-15 341 that a claim for indemnification against such liabilities (other than the payment by the registrant of expense incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted against the registrant by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. B. The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrant's Annual report pursuant to section 13(a) or section 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan's Annual report pursuant to section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. C. The undersigned registrant hereby undertakes to respond to requests for information that is incorporated by reference into the prospectus pursuant to Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means. This includes information contained in documents filed subsequent to the effective date of the registration statement through the date of responding to the request. D. The undersigned registrant hereby undertakes to supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in the registration statement when it became effective. E. (1) The undersigned registrant hereby undertakes as follows: that prior to any public reoffering of the securities registered hereunder through use of a prospectus which is a part of this registration statement, by any person or party who is deemed to be an underwriter within the meaning of Rule 145, the issuer undertakes that such reoffering prospectus will contain the information called for by the applicable registration form with respect to reofferings by persons who may be deemed underwriters, in addition to the information called for by the other items of the applicable form. (2) The registrant undertakes that every prospectus: (i) that is filed pursuant to paragraph (1) immediately preceding, or (ii) that purports to meet the requirements of Section 10(a)(3) of the Securities Act of 1933, as amended, and is used in connection with an offering of securities subject to Rule 415, will be filed as a part of an amendment to the registration statement and will not be used until such amendment is effective, and that, for purposes of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. II-16 342 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this Amendment No. 1 to Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Dallas, State of Texas, on December 8, 1998. CHANCELLOR MEDIA CORPORATION OF LOS ANGELES By: /s/ MATTHEW E. DEVINE -------------------------------------- Matthew E. Devine Senior Vice President and Chief Financial Officer Pursuant to the requirements of the Securities and Exchange Act of 1933, as amended, this Amendment No. 1 to Registration Statement has been signed below by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE --------- ----- ---- * Chairman of the Board December 8, 1998 - ------------------------------------------ Thomas O. Hicks * Chief Executive Officer December 8, 1998 - ------------------------------------------ and President (Principal Jeffrey A. Marcus Executive Officer) * Chief Operating Officer December 8, 1998 - ------------------------------------------ and Director James E. de Castro /s/ MATTHEW E. DEVINE Senior Vice President and December 8, 1998 - ------------------------------------------ Chief Financial Officer Matthew E. Devine (Principal Financial Officer and Principal Accounting Officer) * Director December 8, 1998 - ------------------------------------------ Thomas J. Hodson * Director December 8, 1998 - ------------------------------------------ Perry J. Lewis Director - ------------------------------------------ John H. Massey * Director December 8, 1998 - ------------------------------------------ Michael J. Levitt * Director December 8, 1998 - ------------------------------------------ Lawrence D. Stuart, Jr.
II-17 343
SIGNATURE TITLE DATE --------- ----- ---- * Director December 8, 1998 - ------------------------------------------ Steven Dinetz * Director December 8, 1998 - ------------------------------------------ Vernon E. Jordan, Jr. * Director December 8, 1998 - ------------------------------------------ J. Otis Winters *By: /s/ MATTHEW E. DEVINE ------------------------------------- Matthew E. Devine Attorney-in-Fact
II-18 344 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, each of the Co-Registrants listed on Attachment A hereto has duly caused this Amendment No. 1 to Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Dallas, State of Texas, on December 8, 1998. THE CO-REGISTRANTS LISTED ON ATTACHMENT A HERETO By: /s/ MATTHEW E. DEVINE -------------------------------------- Matthew E. Devine Vice President of Each Co-Registrant Listed on Attachment A Pursuant to the requirements of the Securities and Exchange Act of 1933, as amended, this Amendment No. 1 to Registration Statement has been signed below by the following persons in the capacities and on the dates indicated.
SIGNATURES TITLE DATE ---------- ----- ---- * Chief Executive Officer December 8, 1998 - ------------------------------------------ and President of Each Jeffrey A. Marcus Co-Registrant (Principal Executive Officer of Each Co-Registrant) /s/ MATTHEW E. DEVINE Vice President and December 8, 1998 - ------------------------------------------ Director of Each Matthew E. Devine Co-Registrant (Principal Financial Officer and Principal Accounting Officer of Each Co-Registrant) * Director of Each Co- December 8, 1998 - ------------------------------------------ Registrant Eric C. Neuman * Director of Each Co- December 8, 1998 - ------------------------------------------ Registrant Lawrence D. Stuart, Jr. *By: /s/ MATTHEW E. DEVINE ------------------------------------- Matthew E. Devine Attorney-in-Fact
II-19 345 ATTACHMENT A
NAME Chancellor Media Corporation of the Lone Star State KZPS/KDGE License Corp. Chancellor Media Corporation of California KIOI License Corp. Chancellor Media Corporation of Illinois Chancellor Media Illinois License Corp. Chancellor Media Corporation of Dade County WVCG License Corp. Chancellor Media Corporation of Massachusetts Chancellor Media Pennsylvania License Corp. Chancellor Media Corporation of Miami WEDR License Corp. Chancellor Media Corporation of Houston Chancellor Media Corporation of the Keystone State Chancellor Media Corporation of New York Chancellor Media Corporation of Charlotte WIOQ License Corp. Chancellor Media Corporation of Washington, D.C. Chancellor Media Corporation of St. Louis Chancellor Media Corporation of Michigan Chancellor Media/WAXQ Inc. WAXQ License Corp. Chancellor Media/KCMG Inc. Chancellor Media/Riverside Broadcasting Co., Inc. WLTW License Corp. Chancellor Media Corporation of the Capital City Chancellor Media D.C. License Corp. Chancellor Media Licensee Company Chancellor Media/Trefoil Communications, Inc. Chancellor Media/Shamrock Broadcasting, Inc. Chancellor Media/Shamrock Radio Licenses, Inc. Chancellor Media/Shamrock Broadcasting Licenses of Denver, Inc. Chancellor Media/Shamrock Broadcasting of Texas, Inc. The AMFM Radio Networks, Inc. Chancellor Media Air Services Corporation Chancellor Merger Corp. Broadcast Architecture, Inc.
II-20 346 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, each of the Co-Registrants listed on Attachment B hereto has duly caused this Amendment No. 1 to Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Dallas, State of Texas, on December 8, 1998. THE CO-REGISTRANTS LISTED ON ATTACHMENT B HERETO. By: /s/ MATTHEW E. DEVINE -------------------------------------- Matthew E. Devine Vice President of Each Co-Registrant Listed on Attachment B Pursuant to the requirements of the Securities and Exchange Act of 1933, as amended, this Amendment No. 1 to Registration Statement has been signed below by the following persons in the capacities and on the dates indicated.
SIGNATURES TITLE DATE ---------- ----- ---- * Chief Executive Officer, December 8, 1998 - ------------------------------------------ President and Director Jeffrey A. Marcus of Each Co-Registrant (Principal Executive Officer) /s/ MATTHEW E. DEVINE Vice President of Each December 8, 1998 - ------------------------------------------ Co-Registrant, Matthew E. Devine (Principal Financial Officer and Principal Accounting Officer) * Director of Each December 8, 1998 - ------------------------------------------ Co-Registrant Eric C. Neuman *By: /s/ MATTHEW E. DEVINE --------------------------------------- Matthew E. Devine Attorney-in-Fact
II-21 347 ATTACHMENT B
NAME Chancellor Media Outdoor Corporation Chancellor Media Nevada Sign Corporation Chancellor Media MW Sign Corporation Chancellor Media Martin Corporation Chancellor Media Whiteco Outdoor Corporation Dowling Company Incorporated Nevada Outdoor Systems, Inc.
II-22 348 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, each of the Co-Registrants listed on Attachment C hereto has duly caused this Amendment No. 1 to Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Dallas, State of Texas, on December 8, 1998. THE CO-REGISTRANTS LISTED ON ATTACHMENT C HERETO. By: /s/ RICHARD E. VENDIG -------------------------------------- Richard E. Vendig Senior Vice President, Chief Financial and Administrative Officer, Treasurer of Each Co-Registrant Listed on Attachment C Pursuant to the requirements of the Securities and Exchange Act of 1933, as amended, this Amendment No. 1 to Registration Statement has been signed below by the following persons in the capacities and on the dates indicated.
SIGNATURES TITLE DATE ---------- ----- ---- * Senior Vice President, December 8, 1998 - ------------------------------------------ Chief Financial and Richard E. Vendig Administrative Officer, Treasurer of Each Co-Registrant (Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer) * Director of Each December 8, 1998 - ------------------------------------------ Co-Registrant Jeffrey A. Marcus /s/ MATTHEW E. DEVINE Director of Each December 8, 1998 - ------------------------------------------ Co-Registrant Matthew E. Devine * Director of Each December 8, 1998 - ------------------------------------------ Co-Registrant Eric C. Neuman *By: /s/ MATTHEW E. DEVINE --------------------------------------- Matthew E. Devine Attorney-in-Fact
II-23 349 ATTACHMENT C
NAME MW Sign Corp. Martin & MacFarlane, Inc. Katz Media Corporation Katz Communications, Inc. Katz Millennium Marketing, Inc. Amcast Radio Sales, Inc. Christal Radio Sales, Inc. Eastman Radio Sales, Inc. Seltel, Inc. Katz Cable Corporation The National Payroll Company, Inc.
II-24 350 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, each of the Co-Registrants has duly caused this Amendment No. 1 to Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Dallas, State of Texas, on December 8, 1998. CHANCELLOR MEDIA/SHAMROCK RADIO LICENSES, LLC CHANCELLOR MEDIA RADIO LICENSES, LLC RADIO 100, L.L.C. By: /s/ MATTHEW E. DEVINE -------------------------------------- Matthew E. Devine Vice President of Each Co-Registrant Pursuant to the requirements of the Securities and Exchange Act of 1933, as amended, this Amendment No. 1 to Registration Statement has been signed below by the following persons in the capacities and on the dates indicated.
SIGNATURES TITLE DATE ---------- ----- ---- * Chief Executive Officer December 8, 1998 - ------------------------------------------ and President of Each Jeffrey A. Marcus Co-Registrant (Principal Executive Officer) /s/ MATTHEW E. DEVINE Vice President of Each December 8, 1998 - ------------------------------------------ Co-Registrant (Principal Matthew E. Devine Financial Officer and Principal Accounting Officer) *By: /s/ MATTHEW E. DEVINE --------------------------------------- Matthew E. Devine Attorney-in-Fact
II-25 351 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Co-Registrant has duly caused this Amendment No. 1 to Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Dallas, State of Texas, on December 8, 1998. WTOP LICENSE LIMITED PARTNERSHIP By: CHANCELLOR MEDIA CORPORATION OF WASHINGTON, D.C., its general partner By: /s/ MATTHEW E. DEVINE -------------------------------------- Matthew E. Devine Vice President Pursuant to the requirements of the Securities and Exchange Act of 1933, as amended, this Amendment No. 1 to Registration Statement has been signed below by the following persons in the capacities and on the dates indicated.
SIGNATURES TITLE DATE ---------- ----- ---- * Chief Executive Officer and December 8, 1998 - ------------------------------------------ President (Principal Jeffrey A. Marcus Executive Officer) /s/ MATTHEW E. DEVINE Vice President and Director December 8, 1998 - ------------------------------------------ (Principal Financial Matthew E. Devine Officer and Principal Accounting Officer) * Director December 8, 1998 - ------------------------------------------ Eric C. Neuman * Director December 8, 1998 - ------------------------------------------ Lawrence D. Stuart, Jr. *By: /s/ MATTHEW E. DEVINE ------------------------------------- Matthew E. Devine Attorney-in-Fact
II-26 352 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, each of the Co-Registrants has duly caused this Amendment No. 1 to Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Dallas, State of Texas, on December 8, 1998. CHANCELLOR MEDIA CORPORATION OF HOUSTON LIMITED PARTNERSHIP KLOL LICENSE LIMITED PARTNERSHIP By: CHANCELLOR MEDIA CORPORATION OF HOUSTON, their general partner By: /s/ MATTHEW E. DEVINE -------------------------------------- Matthew E. Devine Vice President Pursuant to the requirements of the Securities and Exchange Act of 1933, as amended, this Amendment No. 1 to Registration Statement has been signed below by the following persons in the capacities and on the dates indicated.
SIGNATURES TITLE DATE ---------- ----- ---- * Chief Executive Officer December 8, 1998 - ------------------------------------------ and President (Principal Jeffrey A. Marcus Executive Officer) /s/ MATTHEW E. DEVINE Vice President and December 8, 1998 - ------------------------------------------ Director (Principal Matthew E. Devine Financial Officer and Principal Accounting Officer) * Director December 8, 1998 - ------------------------------------------ Eric C. Neuman * Director December 8, 1998 - ------------------------------------------ Lawrence D. Stuart, Jr. *By: /s/ MATTHEW E. DEVINE ------------------------------------- Matthew E. Devine Attorney-in-Fact
II-27 353 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Co-Registrant has duly caused this Amendment No. 1 to Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Dallas, State of Texas, on December 8, 1998. MARTIN MEDIA, L.P. By: MW SIGN CORP., its general partner By: /s/ MATTHEW E. DEVINE -------------------------------------- Matthew E. Devine Vice President Pursuant to the requirements of the Securities and Exchange Act of 1933, as amended, this Amendment No. 1 to Registration Statement has been signed below by the following persons in the capacities and on the dates indicated.
SIGNATURES TITLE DATE ---------- ----- ---- * Chief Executive Officer, December 8, 1998 - ------------------------------------------ President and Director Jeffrey A. Marcus (Principal Executive Officer) /s/ MATTHEW E. DEVINE Vice President and December 8, 1998 - ------------------------------------------ Director (Principal Matthew E. Devine Financial Officer and Principal Accounting Officer) * Director December 8, 1998 - ------------------------------------------ Eric C. Neuman *By: /s/ MATTHEW E. DEVINE ------------------------------------- Matthew E. Devine Attorney-in-Fact
II-28 354 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Co-Registrant has duly caused this Amendment No. 1 to Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Dallas, State of Texas, on December 8, 1998. WESTERN POSTER SERVICE, INC. By: /s/ MATTHEW E. DEVINE -------------------------------------- Matthew E. Devine Vice President Pursuant to the requirements of the Securities and Exchange Act of 1933, as amended, this Amendment No. 1 to Registration Statement has been signed below by the following persons in the capacities and on the dates indicated.
SIGNATURES TITLE DATE ---------- ----- ---- * Chief Executive Officer, December 8, 1998 - ------------------------------------------ President and Director Jeffrey A. Marcus (Principal Executive Officer) /s/ MATTHEW E. DEVINE Vice President and December 8, 1998 - ------------------------------------------ Director (Principal Matthew E. Devine Financial Officer and Principal Accounting Officer) * Director December 8, 1998 - ------------------------------------------ Eric C. Neuman Director - ------------------------------------------ Rachel Kitchens Director - ------------------------------------------ William Pierce *By: /s/ MATTHEW E. DEVINE ------------------------------------- Matthew E. Devine Attorney-in-Fact
II-29 355 INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION OF EXHIBIT ------- ---------------------- 2.11(h) -- Agreement and Plan of Merger by and among Pyramid Communications, Inc., Evergreen Media Corporation and Evergreen Media/Pyramid Corporation dated as of July 14, 1995 (see table of contents for list of omitted exhibits and schedules). 2.11A(i) -- Amendment to Plan and Agreement of Merger by and among Pyramid Communications, Inc., Evergreen Media Corporation and Evergreen Media/Pyramid Corporation dated September 7, 1995. 2.11B(i) -- Amendment to Plan and Agreement of Merger by and among Pyramid Communications, Inc., Evergreen Media Corporation and Evergreen Media/Pyramid Corporation dated January 11, 1996. 2.12(j) -- Purchase Agreement between Fairbanks Communications, Inc. and Evergreen Media Corporation dated October 12, 1995 (see table of contents for list of omitted exhibits and schedules). 2.13(n) -- Option Agreement dated as of January 9, 1996 between Chancellor Broadcasting Company and Evergreen Media Corporation (including Form of Advertising Brokerage Agreement and Form of Asset Purchase Agreement). 2.14(o) -- Asset Purchase Agreement dated April 4, 1996 between American Radio Systems Corporation and Evergreen Media Corporation of Buffalo (see table of contents for list of omitted exhibits and schedules). 2.15(o) -- Asset Purchase Agreement dated April 11, 1996 between Mercury Radio Communications, L.P. and Evergreen Media Corporation of Los Angeles, Evergreen Media/Pyramid Holdings Corporation, WHTT (AM) License Corp. and WHTT (FM) License Corp. (see table of contents for list of omitted exhibits and schedules). 2.16(o) -- Asset Purchase Agreement dated April 19, 1996 between Crescent Communications L.P. and Evergreen Media Corporation of Los Angeles (see table of contents for list of omitted exhibits and schedules). 2.17(p) -- Asset Purchase Agreement dated June 13, 1996 between Evergreen Media Corporation of Los Angeles and Greater Washington Radio, Inc. (see table of contents for list of omitted exhibits and schedules). 2.18(p) -- Asset Exchange Agreement dated June 13, 1996 among Evergreen Media Corporation of Los Angeles, Evergreen Media Corporation of the Bay State, WKLB License Corp., Greater Media Radio, Inc. and Greater Washington Radio, Inc. (see table of contents for list of omitted exhibits and schedules). 2.19(p) -- Purchase Agreement dated June 27, 1996 between WEDR, Inc., and Evergreen Media Corporation of Los Angeles. (See table of contents for list of omitted schedules). 2.20(p) -- Time Brokerage Agreement dated July 10, 1996 by and between Evergreen Media Corporation of Detroit, as Licensee, and Kidstar Interactive Media Incorporated, as Time Broker.
356
EXHIBIT NO. DESCRIPTION OF EXHIBIT ------- ---------------------- 2.21(p) -- Asset Purchase Agreement dated July 15, 1996 by and among Century Chicago Broadcasting L.P., Century Broadcasting Corporation, Evergreen Media Corporation of Los Angeles and Evergreen Media Corporation of Chicago. 2.22(p) -- Asset Purchase Agreement dated August 12, 1996 by and among Chancellor Broadcasting Company, Shamrock Broadcasting, Inc. and Evergreen Media Corporation of the Great Lakes. 2.23(p) -- Asset Purchase Agreement dated as of August 12, 1996 between Secret Communications Limited Partnership and Evergreen Media Corporation of Los Angeles (WQRS-FM). (See table of contents for list of omitted exhibits and schedules) 2.24(p) -- Asset Purchase Agreement dated as of August 12, 1996 between Secret Communications Limited Partnership and Evergreen Media Corporation of Los Angeles. (See table of contents for list of omitted schedules) 2.25(q) -- Letter of intent dated August 27, 1996 between EZ Communications, Inc. and Evergreen Media Corporation. 2.26(q) -- Asset Purchase Agreement dated September 19, 1996 between Beasley-FM Acquisition Corp., WDAS License Limited Partnership and Evergreen Media Corporation of Los Angeles. 2.27(q) -- Asset Purchase Agreement dated September 19, 1996 between The Brown Organization and Evergreen Media Corporation of Los Angeles. 2.28(r) -- Stock Purchase Agreement by and between Viacom International Inc. and Evergreen Media Corporation of Los Angeles, dated February 16, 1997 (See table of contents for omitted schedules and exhibits). 2.29(r) -- Agreement and Plan of Merger, by and among Evergreen Media Corporation, Chancellor Broadcasting Company and Chancellor Radio Broadcasting Company, dated as of February 19, 1997. 2.30(r) -- Stockholders Agreement, by and among Chancellor Broadcasting Company, Evergreen Media Corporation, Scott K. Ginsburg (individually and as custodian for certain shares held by his children), HM2/Chancellor, L.P., Hicks, Muse, Tate & First Equity Fund II, L.P., HM2/HMW, L.P., The Chancellor Business Trust, HM2/HMD Sacramento GP, L.P., Thomas O. Hicks, as Trustee of the William Cree Hicks 1992 Irrevocable Trust, Thomas O. Hicks, as Trustee of the Catherine Forgave Hicks 1993 Irrevocable Trust, Thomas O. Hicks, as Trustee of the John Alexander Hicks 1984 Trust, Thomas O. Hicks, as Trustee of the Mack Hardin Hicks 1984 Trust, Thomas O. Hicks, as Trustee of Robert Bradley Hicks 1984 Trust, Thomas O. Hicks, as Trustee of the Thomas O. Hicks, Jr. 1984 Trust, Thomas O. Hicks and H. Rand Reynolds, as Trustees for the Muse Children's GS Trust, and Thomas O. Hicks, dated as of February 19, 1997.
357
EXHIBIT NO. DESCRIPTION OF EXHIBIT ------- ---------------------- 2.31(r) -- Joint Purchase Agreement, by and among Chancellor Radio Broadcasting Company, Chancellor Broadcasting Company, Evergreen Media Corporation of Los Angeles, and Evergreen Media Corporation, dated as of February 19, 1997. 2.32(s) -- Asset Exchange Agreement, by and among EZ Communications, Inc., Professional Broadcasting Incorporated, EZ Philadelphia, Inc., Evergreen Media Corporation of Los Angeles, Evergreen Media Corporation of Charlotte, Evergreen Media Corporation of the East, Evergreen Media Corporation of Carolinaland, WBAV/ WBAV-FM/WPEG License Corp. and WRFX License Corp., dated as of December 5, 1996 (See table of contents for list of omitted schedules). 2.33(s) -- Asset Purchase Agreement, by and among EZ Communications, Inc., Professional Broadcasting Incorporated, EZ Charlotte, Inc., Evergreen Media Corporation of Los Angeles, Evergreen Media Corporation of the East and Evergreen Media Corporation of Carolinaland, dated as of December 5, 1996 (See table of contents for list of omitted schedules). 2.34(t) -- Asset Purchase Agreement by and between Pacific and Southern Company, Inc. and Evergreen Media Corporation of Los Angeles (re: WGCI-AM and WGCI-FM), dated as of April 4, 1997 (see table of contents for list of omitted schedules and exhibits). 2.35(t) -- Asset Purchase Agreement by and between Pacific and Southern Company, Inc. and Evergreen Media Corporation of Los Angeles (re: KKBQ-AM and KKBQ-FM), dated as of April 4, 1997 (see table of contents for list of omitted schedules and exhibits). 2.36(t) -- Asset Purchase Agreement by and between Pacific and Southern Company, Inc. and Evergreen Media Corporation of Los Angeles (re: KHKS-FM), dated as of April 4, 1997 (see table of contents for list of omitted schedules and exhibits). 2.41(y) -- Amended and Restated Agreement and Plan of Merger among Chancellor Broadcasting Company, Chancellor Radio Broadcasting Company, Evergreen Media Corporation, Evergreen Mezzanine Holdings Corporation and Evergreen Media Corporation of Los Angeles, dated as of February 19, 1997, amended and restated as of July 31, 1997. 2.42(gg) -- Option Agreement, by and among Evergreen Media Corporation, Chancellor Broadcasting Company, Bonneville International Corporation and Bonneville Holding Company, dated as of August 6, 1997. 2.43(ss) -- Letter Agreement, dated February 20, 1998, between CMCLA and Capstar Broadcasting Corporation. 2.44(yy) -- Amendment No. 1, dated May 19, 1998, to Letter Agreement dated February 20, 1998, between CMCLA and Capstar Broadcasting Corporation.
358
EXHIBIT NO. DESCRIPTION OF EXHIBIT ------- ---------------------- 2.45(yy) -- Unit and Stock Purchase Agreement by and among CMCLA, Martin Media, L.P., Martin & MacFarlane, Inc., Nevada Outdoor Systems, Inc., MW Sign Corp. and certain sellers named therein, dated as of June 19, 1998 (see table of contents for list of omitted schedules and exhibits). 2.46(yy) -- Agreement and Plan of Merger between Chancellor Media Corporation and Ranger Equity Holdings Corporation dated as of July 7, 1998. 2.47(yy) -- Asset Purchase Agreement, dated August 11, 1998, between Chancellor Media Corporation of Los Angeles and Independent Group Limited Partnership. 2.48(yy) -- Asset Purchase Agreement, dated August 11, 1998, between Chancellor Media Corporation of Los Angeles and Zapis Communications Corporation. 2.49(yy) -- Stock Purchase Agreement, dated August 11, 1998, among Chancellor Media Corporation of Los Angeles, Young Ones, Inc., Zebra Broadcasting Corporation and the Sellers named therein. 2.50(yy) -- Stock Purchase Agreement, dated August 11, 1998, among Chancellor Media Corporation of Los Angeles, ML Media Partners LP., Wincom Broadcasting Corporation and WIN Communications, Inc. 2.51(yy) -- Stock Purchase and Merger Agreement, dated July 9, 1998, by and among Chancellor Media Corporation, Chancellor Mexico LLC, Grupo Radio Centro, S.A. De C.V., and the Selling Shareholders. 2.52+ -- Asset Purchase Agreement, dated August 30, 1998, by and among Chancellor Media Corporation of Los Angeles, Whiteco Industries Inc. and Metro Management Associates. 3.3(ff) -- Certificate of Incorporation of Chancellor Media Corporation of Los Angeles, formerly known as Evergreen Media Corporation. 3.3A(pp) -- Amendment to Certificate of Incorporation of Chancellor Media Corporation of Los Angeles, filed September 5, 1997. 3.3B(uu) -- Amendment to the Certificate of Incorporation of Chancellor Media Corporation, filed October 28, 1997. 3.4(ff) -- Bylaws of Chancellor Media Corporation of Los Angeles. 3.5* -- Certificate of Incorporation of Chancellor Media of the Lone Star State. 3.6* -- Bylaws of Chancellor Media Corporation of the Lone Star State. 3.7* -- Certificate of Incorporation of KZPS/KDGE License Corp. 3.8* -- Bylaws of KZPS/KDGE License Corp. 3.9* -- Certificate of Incorporation of Chancellor Media Corporation of California. 3.10* -- Bylaws of Chancellor Media Corporation of California. 3.11* -- Certificate of Incorporation of KIOI License Corp. 3.12* -- Bylaws of KIOI License Corp.
359
EXHIBIT NO. DESCRIPTION OF EXHIBIT ------- ---------------------- 3.13* -- Certificate of Incorporation of Chancellor Media Corporation of Illinois. 3.14* -- Bylaws of Chancellor Media Corporation of Illinois. 3.15* -- Certificate of Incorporation of Chancellor Media Illinois License Corp. 3.16* -- Bylaws of Chancellor Media Illinois License Corp. 3.17* -- Certificate of Incorporation of Chancellor Media Corporation of Dade County. 3.18* -- Bylaws of Chancellor Media Corporation of Dade County. 3.19* -- Certificate of Incorporation of WVCG License Corp. 3.20* -- Bylaws of WVCG License Corp. 3.21* -- Certificate of Incorporation of Chancellor Media Corporation of Massachusetts. 3.22* -- Bylaws of Chancellor Media Corporation of Massachusetts. 3.23* -- Certificate of Incorporation of Chancellor Media Pennsylvania License Corp. 3.24* -- Bylaws of Chancellor Media Pennsylvania License Corp. 3.25* -- Certificate of Incorporation of Chancellor Media Corporation of Miami. 3.26* -- Bylaws of Chancellor Media Corporation of Miami. 3.27* -- Certificate of Incorporation of WEDR License Corp. 3.28* -- Bylaws of WEDR License Corp. 3.29* -- Agreement of Limited Partnership of Chancellor Media Corporation of Houston Limited Partnership. 3.30* -- Certificate of Incorporation of Chancellor Media Corporation of Houston. 3.31* -- Bylaws of Chancellor Media Corporation of Houston. 3.32* -- Certificate of Incorporation of Chancellor Media Corporation of the Keystone State. 3.33* -- Bylaws of Chancellor Media Corporation of the Keystone State. 3.34* -- Certificate of Incorporation of Chancellor Media Corporation of New York. 3.35* -- Bylaws of Chancellor Media Corporation of New York. 3.36* -- Certificate of Incorporation of Chancellor Media Corporation of Charlotte. 3.37* -- Bylaws of Chancellor Media Corporation of Charlotte. 3.38* -- Certificate of WIOQ License Corp. 3.39* -- Bylaws of WIOQ License Corp. 3.40* -- Certificate of Incorporation of Chancellor Media Corporation of Washington, D.C. 3.41* -- Bylaws of Chancellor Media Corporation of Washington, D.C. 3.42* -- Certificate of Incorporation of Chancellor Media Corporation of St. Louis.
360
EXHIBIT NO. DESCRIPTION OF EXHIBIT ------- ---------------------- 3.43* -- Bylaws of Chancellor Media Corporation of St. Louis. 3.44* -- Certificate of Incorporation of Chancellor Media Corporation of Michigan. 3.45* -- Bylaws of Chancellor Media Corporation of Michigan. 3.46* -- Certificate of Incorporation of Chancellor Media/WAXQ License Corp. 3.47* -- Bylaws of Chancellor Media/WAXQ License Corp. 3.48* -- Certificate of WAXQ License Corp. 3.49* -- Bylaws of WAXQ License Corp. 3.50* -- Certificate of Incorporation of Chancellor Media/KCMG Inc. 3.51* -- Bylaws of Chancellor Media/KCMG Inc. 3.52* -- Certificate of Incorporation of Chancellor Media/Riverside Broadcasting Co., Inc. 3.53* -- Bylaws of Chancellor Media/Riverside Broadcasting Co., Inc. 3.54* -- Certificate of Incorporation of WLTW License Corp. 3.55* -- Bylaws of WLTW License Corp. 3.56* -- Certificate of Incorporation of Chancellor Media Corporation of the Capital City. 3.57* -- Bylaws of Chancellor Media Corporation of the Capital City. 3.58* -- Certificate of Incorporation of Chancellor Media D.C. License Corp. 3.59* -- Bylaws of Chancellor Media D.C. License Corp. 3.60* -- Certificate of Incorporation of Chancellor Media Licensee Company. 3.61* -- Bylaws of Chancellor Media Licensee Company. 3.62* -- Certificate of Incorporation of Chancellor Media/Trefoil Communications, Inc. 3.63* -- Amended and Restated Bylaws of Chancellor Media/Trefoil Communications, Inc. 3.64* -- Certificate of Incorporation of Chancellor Media/Shamrock Broadcasting, Inc. 3.65* -- Amended and Restated Bylaws of Chancellor Media/Shamrock Broadcasting, Inc. 3.66* -- Certificate of Incorporation of Chancellor Media/Shamrock Radio Licenses, Inc. 3.67* -- Bylaws of Chancellor Media/Shamrock Radio Licenses, Inc. 3.68* -- Certificate of Incorporation of Chancellor Media/Shamrock Broadcasting Licenses of Denver, Inc. 3.69* -- Bylaws of Chancellor Media/Shamrock Broadcasting Licenses of Denver, Inc. 3.70* -- Articles of Incorporation of Chancellor Media/Shamrock Broadcasting of Texas, Inc.
361
EXHIBIT NO. DESCRIPTION OF EXHIBIT ------- ---------------------- 3.71* -- Amended and Restated Bylaws of Chancellor Media/Shamrock Broadcasting of Texas, Inc. 3.72* -- Limited Liability Company Agreement of Chancellor Media/Shamrock Radio Licenses, LLC. 3.73* -- Certificate of Incorporation of Chancellor Media Outdoor Corporation. 3.74* -- Bylaws of Chancellor Media Outdoor Corporation. 3.75* -- Certificate of Incorporation of Chancellor Media Nevada Sign Corporation. 3.76* -- Bylaws of Chancellor Media Nevada Sign Corporation. 3.77* -- Certificate of Incorporation of Chancellor Media MW Sign Corporation. 3.78* -- Bylaws of Chancellor Media MW Sign Corporation. 3.79* -- Certificate of Incorporation of Chancellor Media Martin Corporation. 3.80* -- Bylaws of Chancellor Media Martin Corporation. 3.81* -- Articles of Incorporation of Western Poster, Inc. 3.82* -- Bylaws of Western Poster, Inc. 3.83* -- Certificate of Incorporation of The AMFM Radio Networks, Inc. 3.84* -- Bylaws of The AMFM Radio Networks, Inc. 3.85* -- Certificate of Incorporation of Chancellor Media Air Services Corporation. 3.86* -- Bylaws of Chancellor Media Air Services Corporation. 3.87* -- Certificate of Incorporation of Chancellor Media Whiteco Outdoor Corporation. 3.88* -- Bylaws of Chancellor Media Whiteco Outdoor Corporation. 3.89* -- Certificate of Incorporation of Chancellor Merger Corp. 3.90* -- Bylaws of Chancellor Merger Corp. 3.91* -- Articles of Organization of Broadcast Architecture, Inc. 3.92* -- Bylaws of Broadcast Architecture, Inc. 3.93+ -- Agreement of Limited Partnership of Martin Media. 3.94* -- Articles of Incorporation of Dowling Company Incorporated. 3.95* -- Bylaws of Dowling Company Incorporated. 3.96* -- Articles of Incorporation of Nevada Outdoor Systems, Inc. 3.97* -- Bylaws of Nevada Outdoor Systems, Inc. 3.98* -- Articles of Incorporation of MW Sign Corp. 3.99* -- Bylaws of MW Sign Corp. 3.100* -- Articles of Incorporation of Martin & MacFarlane, Inc. 3.101* -- Bylaws of Martin & MacFarlane, Inc. 3.102* -- Certificate of Incorporation of Katz Media Corporation. 3.103* -- Bylaws of Katz Media Corporation. 3.104* -- Certificate of Incorporation of Katz Communications, Inc.
362
EXHIBIT NO. DESCRIPTION OF EXHIBIT ------- ---------------------- 3.105* -- Bylaws of Katz Communications, Inc. 3.106* -- Certificate of Incorporation of Katz Millennium Marketing, Inc. 3.107* -- Bylaws of Katz Millennium Marketing, Inc. 3.108* -- Certificate of Incorporation of Amcast Radio Sales, Inc. 3.109* -- Bylaws of Amcast Radio Sales, Inc. 3.110* -- Certificate of Incorporation of Christal Radio Sales, Inc. 3.111* -- Amended and Restated Bylaws of Christal Radio Sales, Inc. 3.112* -- Certificate of Incorporation of Eastman Radio Sales, Inc. 3.113* -- Bylaws of Eastman Radio Sales, Inc. 3.114* -- Certificate of Incorporation of Seltel, Inc. 3.115* -- Bylaws of Seltel, Inc. 3.116* -- Certificate of Incorporation of Katz Cable Corporation. 3.117* -- Amended and Restated Bylaws of Katz Cable Corporation. 3.118* -- Certificate of Incorporation of The National Payroll Company, Inc. 3.119* -- Bylaws of The National Payroll Company, Inc. 3.120* -- Limited Liability Company Agreement of Chancellor Media Radio Licenses, LLC 3.121* -- Agreement of Limited Partnership of KLOL License Limited Partnership. 3.122* -- Agreement of Limited Partnership of WTOP License Limited Partnership. 3.123* -- Certificate of Formation of Radio 100, L.L.C. 4.10(t) -- Second Amended and Restated Loan Agreement dated as of April 25, 1997 among Evergreen Media Corporation of Los Angeles, the financial institutions whose names appear as Lenders on the signature pages thereof (the "Lenders"), Toronto Dominion Securities, Inc., as Arranging Agent, The Bank of New York and Bankers Trust Company, as Co-Syndication Agents, NationsBank of Texas, N.A. and Union Bank of California, as Co-Documentation Agents, and Toronto Dominion (Texas), Inc., as Administrative Agent for the Lenders, together with certain collateral documents attached thereto as exhibits, including Assignment of Partnership Interests, Assignment of Trust Interests, Borrower's Pledge Agreement, Parent Company Guaranty, Stock Pledge Agreement, Subsidiary Guaranty and Subsidiary Pledge Agreement (see table of contents for list of omitted schedules and exhibits. 4.11(z) -- First Amendment to Second Amended and Restated Loan Agreement, dated June 26, 1997, among Evergreen Media Corporation of Los Angeles, the Lenders, the Agents and the Administrative Agent. 4.15(aa) -- Indenture, dated as of February 14, 1996, governing the 9 3/8% Senior Subordinated Notes due 2004 of CMCLA.
363
EXHIBIT NO. DESCRIPTION OF EXHIBIT ------- ---------------------- 4.16(bb) -- First Supplemental Indenture, dated as of February 14, 1996, to the Indenture dated February 14, 1996, governing the 9 3/8% Senior Subordinated Notes due 2004 of CMCLA. 4.17(cc) -- Indenture, dated as of February 26, 1996, governing the 12 1/4% Subordinated Exchange Debentures due 2008 of CMCLA. 4.18(dd) -- Indenture, dated as of January 23, 1997, governing the 12% Subordinated Exchange Debentures due 2009 of CMCLA. 4.19(ee) -- Indenture, dated as of June 24, 1997, governing the 8 3/4% Senior Subordinated Notes due 2007 of CMCLA. 4.21(ff) -- Specimen of the 12 1/4% Series A Senior Cumulative Exchangeable Preferred Stock Certificate of CMCLA. 4.22(ff) -- Specimen of the 12% Exchangeable Preferred Stock Certificate of CMCLA. 4.23(ff) -- Form of Certificate of Designation for the 12 1/4% Series A Senior Cumulative Exchangeable Preferred Stock of CMCLA. 4.24(ff) -- Form of Certificate of Designation for the 12% Exchangeable Preferred Stock of CMCLA. 4.25(pp) -- Second Amendment to Second Amended and Restated Loan Agreement, dated August 7, 1997, among Evergreen Media Corporation of Los Angeles, the Lenders, the Agents and the Administrative Agent. 4.26(hh) -- Second Supplemental Indenture, dated as of April 15, 1997, to the Indenture dated February 14, 1996, governing the 9 3/8% Senior Subordinated Notes due 2004 of CMCLA. 4.27(pp) -- Third Supplemental Indenture, dated as of September 5, 1997, to the Indenture dated February 14, 1996, governing the 9 3/8% Senior Subordinated Notes due 2004 of CMCLA. 4.28(pp) -- First Supplemental Indenture, dated as of September 5, 1997, to the Indenture dated June 24, 1997, governing the 8 3/4% Senior Subordinated Notes due 2007 of CMCLA. 4.29(pp) -- First Supplemental Indenture, dated as of September 5, 1997, to the Indenture dated February 26, 1997, governing the 12 1/4% Subordinated Exchange Debentures due 2008 of CMCLA. 4.30(pp) -- First Supplemental Indenture, dated as of September 5, 1997, to the Indenture dated January 23, 1997, governing the 12% Subordinated Exchange Debentures due 2009 of CMCLA. 4.34(uu) -- Amended and Restated Indenture, dated as of October 28, 1997, governing the 10 1/2% Senior Subordinated Notes due 2007 of CMCLA. 4.35(uu) -- Second Supplement Indenture, dated as of October 28, 1997, to the Amended and Restated Indenture dated October 28, 1997 governing the 10 1/2% Senior Subordinated Notes due 2007 of CMCLA. 4.36(uu) -- Third Amendment to Second Amended and Restated Loan Agreement, dated October 28, 1997, among CMCLA, the Lenders, the Agents and the Administrative Agent.
364
EXHIBIT NO. DESCRIPTION OF EXHIBIT ------- ---------------------- 4.37(uu) -- Fourth Amendment to Second Amended and Restated Loan Agreement, dated February 10, 1998, among CMCLA, the Lenders, the Agents and the Administrative Agent. 4.38(vv) -- Indenture, dated as of December 22, 1997, governing the 8 1/8% Senior Subordinated Notes due 2007 of CMCLA. 4.39(ww) -- Fifth Amendment to Second Amended and Restated Loan Agreement, dated May 1, 1998, among CMCLA, the Lenders, the Agents and the Administrative Agent. 4.40(yy) -- Sixth Amendment to Second Amended and Restated Loan Agreement, dated July 31, 1998, among CMCLA, the Lenders, the Agents and the Administrative Agent. 4.41* -- Indenture, dated as of September 30, 1998, governing the 9% Senior Subordinated Notes due 2008 of CMCLA. 4.42* -- Purchase Agreement, dated as of September 25, 1998, among CMCLA, the Guarantors named therein and Goldman, Sachs & Co. 4.43* -- Registration Rights Agreement, dated as of September 30, 1998, among CMCLA, the Guarantors named therein and Goldman, Sachs & Co. 4.44(aaa) -- Seventh Amendment to Second Amended and Restated Loan Agreement, dated November 9, 1998, among CMCLA, the Lenders, the Agents and the Administrative Agent. 4.45+ -- Indenture, dated as of November 17, 1998, governing the 8% Senior Notes due 2008 of CMCLA. 4.46+ -- Purchase Agreement, dated as of November 12, 1998, among CMCLA, the Guarantors named therein, BT Alex. Brown Incorporated, Chase Securities Inc., Morgan Stanley & Co. Incorporated and Salomon Smith Barney Inc. 4.47+ -- Registration Rights Agreement, dated as of November 17, 1998, among CMCLA, the Guarantors named therein, BT Alex. Brown Incorporated, Chase Securities Inc., Morgan Stanley & Co. Incorporated and Salomon Smith Barney Inc. 5.1* -- Opinion of Weil, Gotshal & Manges LLP. 10.23(xx) -- Amended and Restated Chancellor Media Corporation Stock Option Plan for Non-employee Directors. 10.26(n)** -- Employment Agreement dated February 9, 1996 by and between Evergreen Media Corporation and Kenneth J. O'Keefe. 10.28(o) -- 1995 Stock Option Plan for executive officers and key employees of Evergreen Media Corporation. 10.30(pp)** -- First Amendment to Employment Agreement dated March 1, 1997 by and between Evergreen Media Corporation and Kenneth J. O'Keefe. 10.31(pp)** -- Employment Agreement dated September 4, 1997 by and among Evergreen Media Corporation, Evergreen Media Corporation of Los Angeles and Scott K. Ginsburg.
365
EXHIBIT NO. DESCRIPTION OF EXHIBIT ------- ---------------------- 10.32(pp)** -- Employment Agreement dated September 4, 1997 by and among Evergreen Media Corporation, Evergreen Media Corporation of Los Angeles and James de Castro. 10.33(pp)** -- Employment Agreement dated September 4, 1997 by and among Evergreen Media Corporation, Evergreen Media Corporation of Los Angeles and Matthew E. Devine. 10.34(pp)** -- Second Amendment to Employment Agreement dated September 4, 1997 by and among Evergreen Media Corporation, Evergreen Media Corporation of Los Angeles and Kenneth J. O'Keefe. 10.35(ii)** -- Employment Agreement dated February 14, 19965 by and among Chancellor Broadcasting Company, Chancellor Radio Broadcasting Company and Steven Dinetz. 10.36(jj) -- Chancellor Broadcasting Company 1996 Stock Award Plan. 10.37(kk) -- Chancellor Holdings Corp. 1994 Director Stock Option Plan. 10.38(ll) -- Stock Option Grant Letter dated September 30, 1996 from Chancellor Corporation to Steven Dinetz. 10.39(mm) -- Stock Option Grant Letter dated September 30, 1996 from Chancellor Corporation to Eric W. Neumann. 10.40(nn) -- Stock Option Grant Letter dated September 30, 1996 from Chancellor Corporation to Marvin Dinetz. 10.41(oo) -- Stock Option Grant Letter dated February 14, 1997 from Chancellor Broadcasting Company to Carl M. Hirsch. 10.44(vv)** -- Agreement dated April 20, 1998 by and among Chancellor Media Corporation, Chancellor Media Corporation of Los Angeles and Scott K. Ginsburg. 10.45(vv)** -- Employment Agreement dated April 29, 1998 by and among Chancellor Media Corporation, Chancellor Media Corporation of Los Angeles and Jeffrey A. Marcus. 10.46(yy) -- Chancellor Media Corporation 1998 Stock Option Plan. 10.47(yy) -- Voting Agreement, among Chancellor Media Corporation and Rangers Equity Partners, L.P. dated as of July 7, 1998. 10.48* -- Employment Agreement, dated as of May 18, 1998, by and among Chancellor Media Corporation, Chancellor Media Corporation of Los Angeles and James E. de Castro. 10.49* -- Employment Agreement, dated as of May 18, 1998, by and among Chancellor Media Corporation, Chancellor Media Corporation of Los Angeles and Matthew E. Devine. 10.50* -- Employment Agreement, dated as of June 1, 1998, by and among Chancellor Media Corporation, Chancellor Media Corporation of Los Angeles and Eric C. Neuman. 10.51* -- Employment Agreement, dated as of August 18, 1998, by and among Chancellor Media Corporation, Chancellor Media Corporation of Los Angeles and James A. McLaughlin, Jr. 12.1* -- Chancellor Media Corporation of Los Angeles Computation of Ratio of Earnings to Combined Fixed Charges.
366
EXHIBIT NO. DESCRIPTION OF EXHIBIT ------- ---------------------- 23.1* -- Consent of Weil, Gotshal & Manges LLP (included as part of their opinion listed as Exhibit 5.1). 23.2+ -- Consent of PricewaterhouseCoopers LLP, independent accountants. 23.3+ -- Consent of KPMG Peat Marwick LLP, independent accountants. 23.4+ -- Consent of PricewaterhouseCoopers LLP, independent accountants. 23.5+ -- Consent of KPMG Peat Marwick LLP, independent accountants. 23.6+ -- Consent of Arthur Andersen LLP, independent accountants. 23.7+ -- Consent of BDO Seidman, LLP, independent accountants. 24.1* -- Powers of Attorney. 25.1+ -- Statement of Eligibility and Qualification of The Bank of New York, as trustee, under the Indenture listed as Exhibit 4.41 hereto on Form T-1. 99.1* -- Form of Letter of Transmittal. 99.2* -- Form of Notice of Guaranteed Delivery.
- --------------- * Previously filed. ** Management Contract or Compensatory Agreement. + Filed herewith. (a) Incorporated by reference to the identically numbered exhibit to the Registration Statement on Form S-1, as amended (Reg. No. 33-60036), of Evergreen Media Corporation ("Evergreen"). (f) Incorporated by reference to the identically numbered exhibit to Evergreen's Registration Statement on Form S-4, as amended (Reg. No. 33-89838). (h) Incorporated by reference to the identically numbered exhibit to Evergreen's Current Report on Form 8-K dated July 14, 1995. (i) Incorporated by reference to the identically numbered exhibit to Evergreen's Current Report on Form 8-K dated January 17, 1996. (j) Incorporated by reference to the identically numbered exhibit to Evergreen's Quarterly Report on Form 10-Q for the quarterly period ending June 30, 1995. (k) Incorporated by reference to the identically numbered exhibit to Evergreen's Registration Statement on Form S-1, as amended (Reg. No. 33-69752). (n) Incorporated by reference to the identically numbered exhibit to Evergreen's Annual Report on Form 10-K for the fiscal year ended December 31, 1995. (o) Incorporated by reference to the identically numbered exhibit to Evergreen's Quarterly Report on Form 10-Q for the quarterly period ending March 31, 1996. (p) Incorporated by reference to the identically numbered exhibit to Evergreen's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 1996. (q) Incorporated by reference to the identically numbered exhibit to Evergreen's Registration Statement on Form S-3, as amended (Reg. No. 333-12453). 367 (r) Incorporated by reference to the identically numbered exhibit to Evergreen's Current Report on Form 8-K dated February 16, 1997 and filed March 9, 1997. (s) Incorporated by reference to the identically numbered exhibit to Evergreen's Annual Report on Form 10-K for the fiscal year ended December 31, 1996. (t) Incorporated by reference to the identically numbered exhibit to Evergreen's Current Report on Form 8-K dated April 1, 1997 and filed May 9, 1997. (y) Incorporated by reference to the identically numbered exhibit of Evergreen's Registration Statement on Form S-4, filed August 1, 1997. (z) Incorporated by reference to the identically numbered exhibit to Evergreen's Current Report on Form 8-K dated July 7, 1997 and filed July 31, 1997. (aa) Incorporated by reference to Exhibit 4.4 to the Current Report on Form 8-K of Chancellor Broadcasting Company and Chancellor Radio Broadcasting Company, as filed on February 29, 1996. (bb) Incorporated by reference to Exhibit 4.5 to the Annual Report on Form 10-K of Chancellor Broadcasting Company, Chancellor Radio Broadcasting Company and Chancellor Broadcasting Licensee Company for the fiscal year ended December 31, 1995. (cc) Incorporated by reference to Exhibit 4.6 to the Current Report on Form 8-K of Chancellor Broadcasting Company and Chancellor Radio Broadcasting Company, as filed on February 29, 1996. (dd) Incorporated by reference to Exhibit 4.7 to the Current Report on Form 8-K of Chancellor Radio Broadcasting Company, as filed on February 6, 1997. (ee) Incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K of Chancellor Broadcasting Company and Chancellor Radio Broadcasting Company as filed on July 17, 1997. (ff) Incorporated by reference to the identically-numbered exhibit to the Registration Statement on Form S-4 (Reg. No. 333-32259), dated July 29, 1997, as amended, of Evergreen Media Corporation of Los Angeles ("EMCLA"). (gg) Incorporated by reference to the identically numbered exhibit to the Quarterly Report on Form 10-Q of Evergreen and EMCLA for the quarterly period ending June 30, 1997. (hh) Incorporated by reference to Exhibit 4.8 to the Quarterly Report on Form 10-Q of Chancellor Broadcasting Company ("CBC") and CRBC for the quarterly period ending March 31, 1997. (ii) Incorporated by reference to Exhibit 10.6 to CBC's Registration Statement on Form S-1 (Reg. No. 333-02782) filed February 9, 1996. (jj) Incorporated by reference to Exhibit 4.22 to Chancellor Media's Registration Statement on Form S-8 (Reg. No. 333-35039), dated September 5, 1997. (kk) Incorporated by reference to Exhibit 4.23 to Chancellor Media's Registration Statement on Form S-8 (Reg. No. 333-35039), dated September 5, 1997. (ll) Incorporated by reference to Exhibit 4.24 to Chancellor Media's Registration Statement on Form S-8 (Reg. No. 333-35039), dated September 5, 1997. (mm) Incorporated by reference to Exhibit 4.25 to Chancellor Media's Registration Statement on Form S-8 (Reg. No. 333-35039), dated September 5, 1997. 368 (nn) Incorporated by reference to Exhibit 4.26 to Chancellor Media's Registration Statement on Form S-8 (Reg. No. 333-35039), dated September 5, 1997. (oo) Incorporated by reference to Exhibit 4.27 to Chancellor Media's Registration Statement on Form S-8 (Reg. No. 333-35039), dated September 5, 1997. (pp) Incorporated by reference to the identically numbered exhibit to the CMCLA's Registration Statement on Form S-4 (Reg. No. 333-36451), dated September 26, 1997, as amended. (ss) Incorporated by reference to the identically numbered exhibit to the Current Report on Form 8-K of Chancellor Media and CMCLA, dated as of February 23, 1998 and filed as of February 27, 1998. (tt) Incorporated by reference to the identically numbered exhibit to the Annual Report on Form 10-K of Chancellor Media and the CMCLA for the fiscal year ended December 31, 1997. (uu) Incorporated by reference to the identically numbered exhibit to the Annual Report on Form 10-K of Chancellor and CMCLA for the fiscal year ended December 31, 1997. (vv) Incorporated by reference to the identically numbered exhibit to CMCLA's Registration Statement on Form S-4 (Reg. No. 333-50739), dated April 22, 1998, as amended. (ww) Incorporated by reference to the identically numbered exhibit to the Quarterly Report on Form 10-Q of Chancellor Media and CMCLA for the quarterly period ending March 31, 1998. (xx) Incorporated by reference to Exhibit 4.41 to Chancellor Media's Registration Statement on Form S-8 (Reg. No. 333-53179), dated May 20, 1998. (yy) Incorporated by reference to the identically numbered exhibit to the Quarterly Report on Form 10-Q of Chancellor Media and CMCLA for the quarterly period ending June 30, 1998. (aaa) Incorporated by reference to Exhibit 4.42 to the Quarterly Report on Form 10-Q of Chancellor Media and CMCLA for the quarterly period ending September 30, 1998. EX-2.52 2 ASSET PURCHASE AGREEMENT DATED AUGUST 30, 1998 1 ================================================================================ ASSET PURCHASE AGREEMENT by and among CHANCELLOR MEDIA CORPORATION OF LOS ANGELES, WHITECO INDUSTRIES, INC. and METRO MANAGEMENT ASSOCIATES Dated: August 30, 1998 ================================================================================ 2 TABLE OF CONTENTS
Page ---- ARTICLE I. DEFINITIONS .............................................. 1 1.1. Defined Terms ............................................ 1 1.2. Other Defined Terms ...................................... 9 ARTICLE II. PURCHASE AND SALE OF ASSETS .............................. 11 2.1. Transfer of Assets ....................................... 11 2.2. Assumption of Liabilities ................................ 12 2.3. Purchase Price ........................................... 12 2.4. Calculation of the Purchase Price ........................ 13 2.5. Final Adjustment ......................................... 13 2.6. Disputed Final Adjustment Amount ......................... 14 2.7. Resolution of Disputed Final Adjustment Amount ........... 14 2.8. Closing Costs; Transfer Taxes and Fees ................... 14 ARTICLE III. CLOSING ................................................. 15 3.1. Closing .................................................. 15 3.2. Conveyances at Closing ................................... 15 ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF SELLER ................. 16 4.1. Organization of Seller and Partnership ................... 16 4.2. Authorization ............................................ 16 4.3. Absence of Certain Changes or Events ..................... 17 4.4. Warranted Assets ......................................... 17 4.5. Owned Real Property ...................................... 18 4.6. Contracts ................................................ 19 4.7. No Conflict or Violation ................................. 20 4.8. Consents and Approvals ................................... 21 4.9. Financial Statements ..................................... 21 4.10. Projections .............................................. 21 4.11. Books and Records ........................................ 21 4.12. Litigation ............................................... 22 4.13. Labor Matters ............................................ 22 4.14. Compliance with Law ...................................... 22 4.15. No Brokers ............................................... 23 4.16. No Other Agreements to Sell the Assets ................... 23 4.17. Proprietary Rights ....................................... 23 4.18. Employee Benefit Plans ................................... 24 4.19. Tax Matters .............................................. 27 4.20. Customers ................................................ 27 4.21. Environmental Matters .................................... 27
i 3
Page ---- 4.22. Intracompany Transactions .................................... 28 4.23. Third Party Asset Purchase Agreements ........................ 28 4.24. Condition of Property ........................................ 28 ARTICLE V. REPRESENTATIONS AND WARRANTIES OF BUYER ...................... 28 5.1. Organization of Buyer ........................................ 28 5.2. Authorization ................................................ 28 5.3. No Conflict or Violation ..................................... 29 5.4. Consents and Approvals ....................................... 29 5.5. Broker and Finders ........................................... 29 5.6. Litigation and Proceedings ................................... 29 5.7. Financial Ability ............................................ 29 5.8. Compliance with Law .......................................... 30 ARTICLE VI. COVENANTS OF SELLER, PARTNERSHIP AND BUYER ................... 30 6.1. Further Assurances ........................................... 30 6.2. No Solicitation .............................................. 31 6.3. Notification of Certain Matters .............................. 31 6.4. Access to Information ........................................ 31 6.5. Conduct of Business .......................................... 34 6.6. Employee Matters ............................................. 35 6.7. Services ..................................................... 36 6.8. No Business Employee Solicitation ............................ 37 6.9. Third Party Asset Purchase Agreements ........................ 37 6.10. HSR Act Filing ............................................... 38 6.11. Excluded Real Property ....................................... 38 6.12. Profile Systems .............................................. 38 ARTICLE VII. CONDITIONS TO SELLER'S AND PARTNERSHIP'S OBLIGATIONS ......... 38 7.1. No Proceedings, Litigation or Laws ........................... 39 7.2. Opinion of Counsel ........................................... 39 7.3. Certificates ................................................. 39 7.4. Corporate Documents .......................................... 39 7.5. HSR Act ...................................................... 39 7.6. Ancillary Agreements ......................................... 39 ARTICLE VIII. CONDITIONS TO BUYER'S OBLIGATIONS ........................ 39 8.1. No Proceedings or Litigation ................................. 40 8.2. Opinion of Counsel ........................................... 40 8.3. Certificates ................................................. 40 8.4. Corporate Documents .......................................... 40 8.5. HSR Act ...................................................... 40 8.6. Ancillary Agreements ......................................... 40
ii 4
Page ---- 8.7. Nonforeign Affidavit .................................................. 40 8.8. Conduct of Business ................................................... 41 ARTICLE IX. RISK OF LOSS; CONSENTS TO ASSIGNMENT .................................... 41 9.1. Damage or Destruction of Assets Prior to Closing ...................... 41 9.2. Elimination of Some Signage Structures from Transfer; Corresponding Reduction of Purchase Price and Other Amendments ........ 41 9.3. Consents to Assignment ................................................ 42 ARTICLE X. ACTIONS BY BUYER, SELLER AND PARTNERSHIP AFTER THE CLOSING ............... 43 10.1. Further Actions ....................................................... 43 10.2. Survival of Representations, Etc. ..................................... 43 10.3. Books and Records ..................................................... 43 10.4. Indemnification ....................................................... 44 10.5. Bulk Sales ............................................................ 46 10.6. Taxes and Asset Allocation ............................................ 46 10.7. Covenant Not To Compete ............................................... 47 10.8. Confidentiality ....................................................... 47 10.9. Use of Name ........................................................... 48 10.10. Maintenance of Net Worth .............................................. 48 ARTICLE XI. MISCELLANEOUS ........................................................... 48 11.1. Termination ........................................................... 48 11.2. Liquidated Damages .................................................... 49 11.3. Specific Performance .................................................. 50 11.4. Representations and Warranties Relating to the Signage Properties and Disclosures Thereof ............................................... 50 11.5. Assignment ............................................................ 50 11.6. Notices ............................................................... 50 11.7. Choice of Law ......................................................... 52 11.8. Amendments and Waivers ................................................ 52 11.9. Multiple Counterparts ................................................. 52 11.10. Expenses .............................................................. 52 11.11. Invalidity ............................................................ 53 11.12. Titles ................................................................ 53 11.13. Publicity ............................................................. 53 11.14. Arbitration ........................................................... 53 11.15. Knowledge ............................................................. 53
iii 5 SCHEDULES
Schedule - -------- 1.1(a) Acquired Real Property 1.1(b) Assets of the Partnership 1.1(c) Capital Expenditures Amount 1.1(d) Excluded Real Property 1.1(e) Retained Assets 4.3 Absence of Certain Changes or Events 4.5 Owned Real Property 4.5.1 Ground Leases 4.5(e) Improvements, Fixtures and Equipment 4.5(f) Special Assessments 4.6 Contracts 4.6(b) Absence of Breaches or Defaults 4.7 Conflicts or Violations 4.8 Consents and Approvals 4.9 Business Statements 4.10 Projections 4.12 Litigation 4.13 Labor Matters 4.14 Compliance with Laws 4.16 Agreements to Sell the Assets 4.17 Proprietary Rights 4.18(b) Employee Benefit Plans 4.18(c) Exceptions as to Employee Benefit Plans 4.20 Industry Customer Groups 4.21 Environmental Matters 4.22 Intracompany Transactions 4.23 Third Party Asset Purchase Agreements 4.24 Condition of Warranted Assets Other Than Signage Property 6.1 Further Assurances 6.5 Conduct of Business 6.7 Services
EXHIBITS
Exhibits - -------- 2.4 Business Financial Statement Accounting Conventions A Headquarters Sublease Agreement B Data Processing Agreement C Monitoring Systems Agreement D Telephone Services Agreement E Future Use Rights Agreement F Section 6.6 Agreement G Terms of Severance Agreements H-1 Opinion of Latham & Watkins H-2 Opinion of Chadbourne & Parke LLP I Projected Pro Forma Net Sign Revenues and EBITDA by Operating Region for 1998
iv 6 ASSET PURCHASE AGREEMENT This ASSET PURCHASE AGREEMENT, dated as of August 30, 1998, is by and among CHANCELLOR MEDIA CORPORATION OF LOS ANGELES, a Delaware corporation ("Buyer"), WHITECO INDUSTRIES, INC., a Nebraska corporation ("Seller") and METRO MANAGEMENT ASSOCIATES, an Indiana general partnership ("Partnership"). RECITALS A. Seller owns and operates an outdoor advertising business and certain related assets and the Partnership owns certain assets which Seller operates as part of Seller's outdoor advertising business. B. Buyer desires to purchase and assume from Seller and Partnership, and Seller and Partnership desire to sell and transfer to Buyer, substantially all of the assets of Seller and the assets of Partnership as set forth on Schedule 1.1(b) primarily relating to the Business (as defined below), all as more specifically set forth in this Agreement, upon the terms and subject to the conditions of this Agreement. AGREEMENT NOW THEREFORE, in consideration of the premises and mutual covenants and promises contained herein and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows: ARTICLE I. DEFINITIONS 1.1. Defined Terms. As used herein and on the attached exhibits and Disclosure Schedule, the terms below shall have the following meanings. Any of such terms, unless the context otherwise requires, may be used in the singular or plural, depending upon the reference. "Acquired Real Property" shall mean the parcels of land described on Schedule 1.1(a) which are the subject of purchase agreements between Seller and the parties listed on Schedule 1.1(a), and any additional parcels of land that become the subject of purchase agreements between Seller and a third party which are approved by Buyer that Buyer agrees with Seller to be treated as if set forth on Schedule 1.1(a). "Acquired Real Property Payment Amount" shall mean the aggregate amount of purchase price paid by Seller, as approved by Buyer, and aggregate out-of-pocket cost incurred by Seller in connection with the acquisitions of Acquired Real Property. 7 "Advertising Contracts" shall mean all of Seller's and Partnership's interest in Contracts, including all records and correspondence with respect thereto, for advertising relating to the use of the Signage Structures and for outdoor advertising structures not owned by Seller or the Partnership by the customers and clients of Seller. "Affiliate" means, with respect to any Person, any other Person which directly or indirectly controls, is controlled by, or is under common control with such Person, where the term "control" means the ownership, directly or indirectly, of more than fifty percent (50%) of the equity capital or the right or power in fact to direct the management of such Person. "Ancillary Agreements" shall mean the Headquarters Sublease Agreement, Data Processing Agreement, Monitoring Systems Agreement, Telephone Services Agreement, Future Use Rights Agreements and Section 6.6 Agreement in the forms attached hereto as Exhibits A, B, C, D, E and F, respectively. "Books and Records" shall mean, to the extent they are primarily used or held for use in, or pertaining to, the Business or relate primarily to the Business (a) all records and lists of Seller and Partnership, (b) all records and lists of Seller and Partnership pertaining to the customers, business prospects, business relationships, suppliers or personnel of Seller and Partnership, (c) all product, business and marketing plans of Seller and Partnership and (d) all books, files, reports, plans, drawings and operating records of every kind maintained by Seller and Partnership, but excluding the originals of Seller's minute books and stock books, Partnership's partnership records and Seller's and Partnership's tax returns. "Business" shall mean (a) the outdoor advertising business and related assets of Seller in the United States, broadly described, and wherever located, including all tangible and intangible assets used therein and (b) the assets of the Partnership in the United States set forth on Schedule 1.1(b). "Business Interim Statements" shall have the meaning set forth in the definition of Financial Statements. "Buyer" shall have the meaning set forth in the preamble. "Capital Expenditures Amount" shall mean the difference (if any) between (a) the actual amount of capital expenditures (including deposits made on triwaves) and construction in progress for new build signs during the portion of the calendar year 1998 prior to the Closing Date and triwaves existing on the Closing Date and (b) the amount of 1998 budgeted capital expenditures (which includes anticipated construction in progress and deposits made on triwaves) through the Closing Date for new build signs and triwaves, as provided on Schedule 1.1(c), and as calculated on a pro rata basis for any incomplete quarter. The Capital Expenditures Amount shall be deemed to be positive if (a) exceeds (b), and shall be deemed to be negative if (b) exceeds (a). Amounts of Third Party Asset Purchase Expenditures shall not constitute a Capital Expenditure Amount. Amounts expended by Seller for additional construction on locations acquired under Third Party Asset Purchase Agreements to the extent approved by Buyer, shall be deemed Third Party Asset Purchase Expenditure Amounts. 2 8 "Business Statements" shall have the meaning set forth in the definition of Financial Statements. "Buyer" shall have the meaning set forth in the preamble. "Closing Balance Sheet Net Working Capital" shall mean the difference between the current assets and current liabilities of the Business reflected on the Closing Balance Sheet. "Closing Date" shall mean (i) the date which is ten (10) business days after the date on which all conditions set forth in Articles VII and VIII have been satisfied or waived, or (ii) such other date as Buyer and Seller shall mutually agree upon. "Confidentiality Agreement" shall mean that certain Confidentiality Agreement dated July 10, 1997 [sic] [1998], by and among Chancellor Media Corporation and Seller. "Contracts" shall mean all written or binding contracts, leases, licenses, commitments and agreements relating to the Business to which Seller or Partnership is a party or is bound other than Signage Occupancy Rights and Signage Permits. For the avoidance of doubt, the term Contracts shall not include any contracts, leases, licenses, commitments and agreements that do not relate to the Business. "Data Processing Agreement" shall mean that certain Data Processing Agreement between Buyer and Seller, dated as of the date hereof, in the form attached hereto as Exhibit B. "Disclosure Schedule" shall mean the schedule attached hereto which contains the General Disclosure Statement and which sets forth certain exceptions to the representations and warranties contained in Article IV hereof and certain other information called for by this Agreement. Unless otherwise specified, each reference in this Agreement to any numbered schedule is a reference to that numbered schedule contained in the Disclosure Schedule and each numbered Schedule shall be deemed to incorporate the General Disclosure Statement and each other numbered Schedule. "EBITDA" shall mean, with respect to any Person for any period, earnings before deductions for interest, taxes, depreciation and amortization, determined in accordance with generally accepted accounting principles consistently applied. "Encumbrance" shall mean any claim, lien, pledge, option, charge, easement, security interest, deed of trust, mortgage, right-of-way, encroachment, building or use restriction, conditional sales agreement, encumbrance or other right of third parties, whether voluntarily incurred or arising by operation of law, and includes, without limitation, any agreement to give any of the foregoing in the future, and any contingent sale or other title retention agreement or lease in the nature thereof. "Environmental Laws" shall mean all federal, state, local or foreign laws, statutes, ordinances, regulations, requirements, rules, judgments, policies, plans, decrees or orders which (i) regulate or relate to the protection or clean-up of the environment, the Handling of Substances, the preservation or protection of surface water, groundwater, drinking water, air, wildlife, plants 3 9 or other natural resources, or the health and safety of Persons or property, including, without limitation, protection of the health and safety of employees or (ii) impose liability with respect to any of the foregoing, including, without limitation, the Federal Water Pollution Control Act, Resource Conservation & Recovery Act, Safe Drinking Water Act, Toxic Substances Control Act, Clean Air Act, Comprehensive Environmental Response, Compensation and Liability Act, or any other similar federal, state or local law of similar effect, each as amended. "Environmental Liabilities for Facilities Real Property" shall mean any and all liabilities, damages and losses and reasonable costs and expenses, in each case only to the extent required or imposed under or resulting from rights or claims related to applicable Environmental Law, arising from any Facilities Environmental Matters, including, without limitation, reasonable costs of investigation, cleanup, removal, remedial, corrective or response action, the reasonable costs associated with posting financial assurances for the completion of investigation, cleanup, removal, remedial, corrective or response actions, reasonable attorney's fees, the preparation of any closure or other necessary or required plans or analyses, or other necessary reports or analyses submitted to or prepared for regulating agencies. "Excluded Liabilities" shall mean the following liabilities and obligations of Seller or Partnership except to the extent (i) the amount of such liabilities is set forth in the Closing Balance Sheet Net Working Capital on the Final Balance Sheet or (ii) that Buyer has specifically assumed or agreed to assume responsibility for in this Agreement or any other written instrument: (a) all claims by and obligations owing to third parties relating to (a) events occurring prior to the Closing and (b) the period prior to the Closing attributable to a condition existing on or prior to the Closing Date; (b) all liabilities and obligations for fees and expenses incurred by or on behalf of Seller or Partnership in connection with the transactions contemplated by this Agreement; (c) all liabilities and obligations arising out of or relating to the Retained Assets except to the extent arising from Buyer's use of Future Use Rights; (d) all liabilities and obligations for which Seller and/or Partnership have expressly assumed responsibility pursuant to this Agreement; (e) all Environmental Liabilities for Facilities Real Property; (f) all liabilities and obligations relating to former employees of Seller or Partnership no longer employed by Seller or Partnership as of the close of business on the Closing Date; (g) all Financing Obligations; (h) all liabilities with respect to all actions, suits, proceedings, disputes, claims or investigations arising out of or relating to (a) events occurring prior to the Closing and 4 10 (b) the period prior to the Closing attributable to a condition existing on or prior to the Closing; (i) all debts, liabilities or obligations of Seller and/or Partnership that do not arise out of or are not principally related to the Business; and (j) Excluded Taxes. "Excluded Real Property" shall mean the real property identified on Schedule 1.1(d). "Excluded Taxes" shall mean all Taxes of Seller or Partnership. "Facilities Environmental Matters" shall mean (i) the production, use, generation, management, storage, treatment, recycling, disposal, discharge, release, or other handling or disposition at any time on or prior to the Closing Date (collectively, "Handling"), of any toxic, hazardous, or other regulated wastes, substances, products, pollutants or materials which are regulated under any applicable Environmental Law including, without limitation, asbestos, petroleum and petroleum products (collectively, "Substances"), either in, on, under or from any Facilities Real Properties including, without limitation, the effects of such Handling of Substances on resources, Persons, disposal facilities or property within or outside the boundaries of any Facilities Real Property, (ii) the presence as of the Closing Date of Substances in, on or under any Facilities Real Property (to the extent of the amounts of such Substances then present) regardless of how the Substances came to rest at, on or under the Facilities Real Property, (iii) the failure on or prior to the Closing Date of any Facilities Real Property to be in compliance with any applicable Environmental Laws (to the extent of such non-compliance), and (iv) any other act, omission or condition existing with respect to the Facilities Real Property prior to the Closing Date which gives rise to liability under any applicable Environmental Laws (to the extent of such act, omission or condition as of the Closing Date). "Facilities Real Property" shall mean all real property owned by Seller and used or held for use in, or pertaining to, the Business, other than (a) the Excluded Real Property and (b) the Signage Real Property. "Final Balance Sheet Net Working Capital" shall mean the difference between the current assets and current liabilities of the Business reflected on the Final Balance Sheet which shall be deemed to be positive if current assets exceed current liabilities and shall be deemed to be negative if current liabilities exceed current assets. "Financial Statements" shall mean (i) the audited financial statements of Seller for the years ended December 31, 1996 and December 31, 1997 ("Whiteco Audited Statements"), (ii) the audited financial statements of the Partnership for the years ended December 31, 1996 and December 31, 1997 ("Partnership Annual Statements"), (iii) the interim unaudited financial statements of Whiteco for the period ending June 30, 1998 ("Whiteco Interim Statements"), (iv) the interim unaudited financial statements of the Partnership for the period ending June 30, 1998 ("Partnership Interim Statements"), (v) the unaudited financial statements reflecting the 5 11 operations of the Business for the calendar year 1997 ("1997 Business Statements"), and (vi) the unaudited financial statements reflecting the operations of the Business for the six month period ending June 30, 1998 ("Business Interim Statements" and, together with the 1997 Business Statements, the "Business Statements"). "Financing Obligations" shall mean (i) indebtedness of Seller and Partnership for borrowed money, (ii) obligations of Seller and Partnership evidenced by bonds, notes, debentures or similar instruments, (iii) obligations under capitalized leases, (iv) obligations under conditional sale, title retention or similar agreements or arrangements creating an obligation of Seller or Partnership with respect to the deferred purchase price of property, goods or services (other than customary trade credit), and (v) all obligations of Seller or Partnership to guarantee any of the foregoing types of obligations on behalf of others. "Fixtures and Equipment" shall mean all of the signage (other than Signage Structures), furniture, fixtures, furnishings, machinery, automobiles, trucks, equipment and other tangible personal property owned by Seller and Partnership and used primarily in, or pertain primarily to, the Business. "Future Use Rights" shall mean those rights relating to Excluded Real Property to be granted to Buyer pursuant to the Future Use Rights Agreements. "Future Use Rights Agreements" shall mean the Future Use Rights Agreements between Buyer and Seller, dated as of the Closing Date, in the proper form for the relevant jurisdictions and suitable for recording therein in the form attached hereto as Exhibit E. "Goodwill" shall mean any and all goodwill and going concern value pertaining to the Business or the Assets. "Ground Leases" shall mean all of Seller's interest in ground leases other than ground leases included in Signage Properties, including all Seller's records and correspondence with respect thereto. "Handling" shall have the meaning set forth in the definition of Facilities Environmental Matters. "Headquarters Sublease Agreement" shall mean that certain Headquarters Sublease Agreement between Buyer and Seller, dated as of the Closing Date, in the form attached hereto as Exhibit A. "HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations promulgated thereunder. "Inventory" shall mean all Seller's raw materials, both new and used, including but not limited to, wood and steel poles, lumber, panels, lighting fixtures and parts, electrical wire, conduit, I-beams, catwalks and similar items used in the construction, repair and maintenance of Signage Structures and similar items, in each case wherever the same may be located and primarily used or held for use in the Business. 6 12 "Leasehold Improvements" shall mean all leasehold improvements situated in or on Ground Leases or Signage Locations. "Material Adverse Change" shall mean any significant and substantial adverse change in the financial condition, business or operations of the Business taken as a whole or on the Assets taken as a whole or on the ability of Seller or Partnership to consummate the transactions contemplated hereby, or any event or condition which would reasonably be expected to constitute such a "material adverse change," except any such change resulting from or arising in connection with (i) industry-wide developments similarly affecting other companies in businesses similar to the Business or (ii) changes or conditions affecting the economy in general. The fact of this Agreement or the transactions contemplated hereunder shall not be deemed to constitute a Material Adverse Change. "Material Adverse Effect" shall mean any significant and substantial adverse effect in the financial condition, business or operations of the Business taken as a whole or on the Assets taken as a whole or on the ability of Seller or Partnership to consummate the transactions contemplated hereby, or any event or condition which would reasonably be expected to constitute such a "material adverse effect," except any such effect resulting from or arising in connection with (i) industry-wide developments similarly affecting other companies in businesses similar to the Business or (ii) changes or conditions affecting the economy in general. The fact of this Agreement or the transactions contemplated hereunder shall not be deemed to constitute a Material Adverse Effect. "Monitoring Systems Agreement" shall mean that certain Monitoring Systems Agreement between Buyer and Profile Systems, LLC, an Affiliate of Seller, in the form attached hereto as Exhibit C. "1997 Business Statements" shall have the meaning set forth in the definition of Financial Statements. "Non-Signage Permits" shall mean all Seller's licenses, permits, authorizations, consents and other approvals granted or required by governmental and regulatory authorities that pertain to the Business other than Signage Permits. "Owned Real Property" shall mean all Signage Real Property and all Facilities Real Property. "Partnership" shall have the meaning set forth in the preamble. "Partnership Annual Statements" shall have the meaning set forth in the definition of Financial Statements. "Partnership Interim Statements" shall have the meaning set forth in the definition of Financial Statements. 7 13 "Person" shall mean any individual, partnership, corporation, trust, association, unincorporated organization, government or any department or agency thereof or any other entity. "Personal Property Leases" shall mean all of the existing leases with respect to the personal property of Seller and Partnership used primarily in, or pertaining primarily to, the Business other than the Signage Occupancy Rights. "Proprietary Rights" shall mean all of Seller's and Partnership's (i) domestic and foreign registrations of trademarks and other marks, trade names and trade rights (except the names "Whiteco Construction Services," "Whiteco Industries, Inc.," "Whiteco International," "Whiteco-Qingyu Advertising Company Ltd." and "Whiteco Data Systems"), including the names, "Whiteco Outdoor Advertising" and "Whiteco Outdoor," and the names "Whiteco" and "White," except to the extent currently used by Seller or Partnership in its real estate, construction or lodging operations and in Whiteco International (ii) pending applications for such registrations, (iii) patents and applications therefor, (iv) trademarks and other marks, trade names and other trade rights whether or not registered, (v) copyrights and registrations thereof, (vi) trade secrets, designs, plans, specifications, technical information and other proprietary rights, and (vii) rights under any licenses to Seller or Partnership to use any copyrights, marks, trade names, trade rights, patents or other proprietary rights, in each case that is used or held for use in, or pertaining to, the Business. "Retained Assets" shall mean the Excluded Real Property and certain other properties of Seller and Partnership as set forth on Schedule 1.1(e). "Seller" shall have the meaning set forth in the preamble. "Signage Locations" shall mean all locations on which Signage Structures are erected, or to be erected, other than Signage Real Property. "Signage Occupancy Rights" shall mean the leases, licenses, easements or other arrangements whether or not expired or contested representing the basis on which Signage Structures are erected or to be erected on Signage Locations. "Signage Permits" shall mean all Seller's licenses, permits, authorizations, consents and other approvals granted or required by governmental and regulatory authorities for the existence, operation, and maintenance of the Signage Structures, including all of Seller's records and correspondence with respect thereto. "Signage Properties" shall mean all Signage Structures, Signage Real Property, Signage Occupancy Rights and Signage Permits. "Signage Real Property" shall mean real property owned by Seller or Partnership which is used or is to be used exclusively by Seller or Partnership for the erection of Signage Structures. 8 14 "Signage Structures" shall mean all Seller's and Partnership's outdoor advertising structures, faces, and equipment attached thereto, in the United States, including those listed on Seller's computer program "CNTY_STRC_FACE_ORA" dated August 26, 1998, a copy of which has been provided by Seller to Buyer as the same may change in the ordinary course of business or as contemplated by this Agreement between the date hereof and the Closing Date by virtue of additions and deletions. "Substances" shall have the meaning set forth in the definition of Facilities Environmental Matters. "Tax" shall mean any federal, state, local, or foreign income, gross receipts, license, payroll, employment, excise, severance, stamp, occupation, windfall profits, environmental (including taxes under Code Sec. 59A), capital stock, franchise, profits, withholding, social security unemployment, disability, real property, personal property, sales, use, transfer, value added, alternative or add-on minimum, estimated, or other tax, governmental fee or like assessment or charge of any kind whatsoever, including any interest, penalty, or addition thereto, whether disputed or not including, without limitation, any liability for the unpaid Taxes of any party under Treas. Reg. Section 1.1502-6 or any similar provision of state, local or foreign law, as a transferee or successor, by contract, or otherwise. "Third Party Asset Purchase Agreements" shall mean the contracts and arrangements existing on the date hereof listed on Schedule 4.23 and additional similar contracts or arrangements of Seller with third parties executed between the date hereof and the Closing Date approved by Buyer and acknowledged by Buyer to constitute Third Party Asset Purchase Agreements. "Third Party Asset Purchase Expenditure Amounts" shall mean the amount of $1,025,512.80 expended by Seller on or prior to the date hereof with respect to payment of purchase price on the contract with Capital Signs listed on Schedule 4.23 plus expenditures between the date hereof and the Closing Date of payments of purchase price on Third Party Asset Purchase Agreements. "Warranted Assets" shall mean the Assets other than the Signage Properties. "Whiteco Audited Statements" shall have the meaning set forth in the definition of Financial Statements. "Whiteco Interim Statements" shall have the meaning set forth in the definition of Financial Statements. "Whiteco Outdoor Advertising" shall mean the outdoor advertising division of Seller in the United States. 1.2. Other Defined Terms. The following terms shall have the meanings defined for such terms in the Sections set forth below: 9 15
Term Section - ---- ------- Acquisitions 4.23 Actions 4.12 Aggregate Fair Market Value 10.6(b) Assets 2.1 Assumed Liabilities 2.2 Assumption Document 3.2(b) Auditor 2.7 Benefit Arrangement 4.18(a)(i) Bulk Sales Act 10.5 Buyer Indemnitees 10.4(a) Claim 10.4(d) Claim Notice 10.4(d) Closing 3.1 Closing Date Audit Certificate 2.4 Closing Payment 2.3(b) Code 4.18(a)(ii) Consultant 6.4(b)(i) Damages 10.4(a) EBITDA Attributable to the Eliminated Signs 9.2 Eliminated Signs 9.2 Employees 6.6(a) Employees 4.18(a)(iii) Environmental Auditor 6.4(b)(iv) Environmental Claims 10.4(g) Environmental Remediation 6.4(b)(ii) ERISA 4.18(a)(iv) ERISA Affiliate 4.18(a)(v) Final Adjustment Amount 2.5 Final Balance Sheet 2.4 Indemnitees 10.4(b) Liquidated Damages Payment 11.2 Multiemployer Plan 4.18(a)(vi) PBGC 4.18(a)(vii) Pension Plan 4.18(a)(viii) Permitted Encumbrances 4.5(a) Purchase Price 2.3(a) Section 6.1(iii)(D) Items 6.1 Seller Indemnitees 10.4(b) Third Party Notice 10.4(d) Transferred Employees 6.6(a) Welfare Plan 4.18(a)(ix)
10 16 ARTICLE II. PURCHASE AND SALE OF ASSETS 2.1. Transfer of Assets. Upon the terms and subject to the conditions contained herein, at the Closing, Seller and Partnership will sell, convey, transfer, assign and deliver to Buyer, and Buyer will purchase from Seller and Partnership, all of the right, title and interest of Seller and Partnership in and to properties, assets and rights of any kind, whether tangible or intangible, real or personal used or held for use in, or pertaining to, the Business, except for Retained Assets (collectively, the "Assets"), wherever located, as the same shall exist immediately prior to the Closing, including, without limitation, all of Seller's and Partnership's right, title and interest in the following: (a) accounts and notes receivable (whether current or noncurrent), refunds, deposits, prepayments or prepaid expenses; (b) Cash and cash equivalents contained in the bank accounts set forth on Schedule 1.1(e); (c) Contracts; (d) Signage Properties; (e) Owned Real Property; (f) Leasehold Improvements; (g) Fixtures and Equipment; (h) Inventory; (i) Books and Records; (j) Proprietary Rights; (k) Signage Permits; (1) Non-Signage Permits; (m) computer software exclusively used or exclusively held for use in the Business, to the extent transferable; (n) rights under or pursuant to all warranties, representations and guarantees made by suppliers in connection with the Assets or services furnished to Seller or Partnership, to the extent such warranties, representations and guarantees (i) are not required by Seller or Partnership to fulfill its obligations under this Agreement and (ii) are assignable; 11 17 (o) prepaid items (or portions thereof); (p) all telephone, facsimile, and pager numbers, all internet and other electronic mail addresses and all listings in all telephone books and directories (in any form or medium) that relate to the Business; (q) Goodwill; (r) Personal Property Leases; and (s) Ground Leases. 2.2. Assumption of Liabilities. Upon the terms and subject to the conditions contained herein, including the adjustments provided in Sections 2.4 and 2.5, Buyer shall, at the Closing, assume and become responsible for all liabilities and obligations of Seller and Partnership pertaining to the Business of any kind, whether known or unknown, fixed or contingent, except for the Excluded Liabilities (the "Assumed Liabilities"), including, without limitation: (a) liabilities and obligations accruing, arising out of, or relating to events or occurrences under the Contracts and Ground Leases; (b) accounts payable, accrued expenses and other current liabilities to the extent the amount of such liability is reflected in the Closing Balance Sheet Net Working Capital on the Final Balance Sheet; (c) liabilities and obligations arising out of Buyer's employment of Transferred Employees after the Closing Date; and (d) liabilities and obligations under Signage Occupancy Rights. 2.3. Purchase Price. (a) Total Price. The aggregate purchase price to be paid by Buyer (the "Purchase Price") shall be an amount equal to the aggregate amount of Nine Hundred Thirty Million Dollars ($930,000,000), plus the Acquired Real Property Payment Amount, plus the Third Party Asset Purchase Expenditure Amounts, plus the Closing Balance Sheet Net Working Capital if a positive number, minus the Closing Balance Sheet Net Working Capital if a negative number, plus the Capital Expenditures Amount if a positive number, minus the Capital Expenditures Amount if a negative number. (b) Payment at Closing. At the Closing Buyer shall pay an amount (the "Closing Payment") equal to the sum of Nine Hundred Thirty Million Dollars ($930,000,000), of which $57,798,000 shall be payable to Partnership and $872,202,000 shall be payable to Seller, plus or minus the amount set forth in the Closing Payment Certificate (as defined below) if Seller causes such Certificate to be delivered to Buyer on or before five (5) days before the Closing 12 18 Date. The Closing Payment shall be made by wire transfer of immediately available funds to up to five accounts designated by Seller and Partnership. The "Closing Payment Certificate" shall mean a statement prepared by Seller and certified by Dennis Kackos or John Peterman as the best estimate of the amount, if any, by which the Purchase Price exceeds or is less than Nine Hundred Thirty Million Dollars ($930,000,000) which shall include separate estimates for the Acquired Real Property Payment Amount, Third Party Asset Purchase Expenditure Amounts, the Closing Balance Sheet Net Working Capital and the Capital Expenditures Amount, if any. 2.4. Calculation of the Purchase Price. On or before ninety (90) days after the Closing Date, Buyer shall prepare and deliver to Seller and Partnership (i) a balance sheet of the Business dated the Closing Date which shall be audited by Buyer's independent auditors, and the related audit report of such firm (the "Final Balance Sheet"), and (ii) a Certificate (the "Closing Date Audit Certificate") setting out a calculation of the Purchase Price including schedules setting out in reasonable detail calculations of the Acquired Real Property Payment Amount, the Third Party Asset Purchase Expenditure Amounts, the Closing Balance Sheet Net Working Capital (which for purposes of the Closing Date Audit Certificate shall be prepared using the accounting rules set forth in Exhibit 2.4 whether or not these rules are in accordance with generally accepted accounting principles and whether or not these rules were used in the preparation of the Final Balance Sheet) and the Capital Expenditures Amount, if any. Subject to the final proviso in this Section 2.4, the Final Balance Sheet shall be prepared in accordance with generally accepted accounting principles consistent with the preparation of the Business Statements, but if such methods are not in accordance with generally accepted accounting principles, appropriate adjustments will be made to adopt generally accepted accounting principles. The Final Balance Sheet shall fairly present the financial position of the Business as of the close of business on the Closing Date. The Final Balance Sheet shall fairly present the Assets and the known Assumed Liabilities as of the Closing Date, to the extent generally accepted accounting principles as above described consistently applied require such Assets and Assumed Liabilities to be set forth on a balance sheet. In preparing the Final Balance Sheet: (i) all known accounting entries (including all liabilities and accruals), regardless of amount, will be taken into account, and all identified errors and omissions will be corrected and all adjustments made, and (ii) the aggregate reserves and provisions (whether or not denominated reserves) reflected in the Final Balance Sheet will be adequate, appropriate and reasonable for their purposes, and calculated consistent with past practices, provided, however, as hereinabove provided the Closing Date Audit Certificate shall be prepared reflecting the accounting rules set forth in Exhibit 2.4. 2.5. Final Adjustment. The Purchase Price as set forth in the Closing Date Audit Certificate shall be compared with the Closing Payment. The difference between the two amounts is herein referred to as the "Final Adjustment Amount." If the Purchase Price is less than the Closing Payment, Seller shall pay to Buyer, in immediately available funds, an amount equal to the Final Adjustment Amount. If the Purchase Price is greater than the Closing Payment, Buyer shall pay to Seller, in immediately available funds, an amount equal to the Final Adjustment Amount. Any payment required to be made by Buyer or Seller pursuant to this Section 2.5 shall bear interest from the 13 19 Closing Date through the date of payment on the basis of the average daily rate of interest publicly announced from time to time by Bank of America as its prime rate. 2.6. Disputed Final Adjustment Amount. If Seller shall disagree with the calculation of the Purchase Price as provided in the Closing Date Audit Certificate, it shall notify Buyer of such disagreement in writing specifying in detail the particulars of such disagreement within sixty (60) business days after Seller's receipt of the Closing Date Audit Certificate. Buyer shall provide Seller and Seller's accountants full access to the records of Buyer, and, subject to the consent of Buyer's independent auditors (which consent Buyer will obtain), to the work papers of Buyer's independent auditors, to the extent reasonably related to Seller's evaluation of the Final Balance Sheet and preparation of the Closing Date Audit Certificate. 2.7. Resolution of Disputed Final Adjustment Amount. Buyer and Seller shall use their reasonable efforts for a period of thirty (30) calendar days after Seller's delivery of the notice referred to in Section 2.6 above (or such longer period as Buyer and Seller shall mutually agree upon) to resolve any disagreements raised by Seller with respect to the calculation of the Final Adjustment Amount. If, at the end of such period, Buyer and Seller are unable to resolve all such disagreements, Seller's independent auditors and Buyer's independent auditors shall jointly select a third independent auditor of recognized national standing (the "Auditor") to resolve any remaining disagreements. The Auditor shall determine the differences submitted to the Auditor and shall determine whether and to what extent, if any, the Closing Date Audit Certificate requires adjustment. The determination of the Auditor shall be final, binding and conclusive on the parties. Buyer and Seller shall use their reasonable efforts to cause the Auditor to make its determination within thirty (30) calendar days of accepting its selection. Within three (3) calendar days after the date of determination of the Auditor, the Final Adjustment Amount shall be calculated and paid to Buyer by Seller (or to Seller by Buyer, as the case may be) in the manner set forth in Section 2.4. The fees and expenses of the Auditor shall be borne equally by the parties. 2.8. Closing Costs; Transfer Taxes and Fees. The cost of any surveys, title reports or title searches, and the recording or filing of all applicable conveyancing instruments incurred by reason of the transfer of Assets hereunder shall be paid by Buyer. The cost of any documentary, sales and transfer taxes in connection therewith shall be divided equally between Buyer on the one hand and Seller and Partnership on the other hand, and each of Buyer, Seller and Partnership shall promptly pay its respective portion of such taxes. Seller and Partnership shall cooperate with Buyer in its efforts to obtain title commitments with respect to the Owned Real Property. 14 20 ARTICLE III. CLOSING 3.1. Closing. The Closing of the transactions contemplated herein (the "Closing") shall be held at 10:00 a.m. local time on the Closing Date at the offices of Latham & Watkins, Sears Tower, Suite 5800, 233 South Wacker Drive, Chicago, Illinois 60606-6401, unless the parties hereto otherwise agree. 3.2. Conveyances at Closing. (a) Instruments and Possession. To effect the sale and assumption referred to in Article II, Seller and Partnership will, at the Closing, execute and deliver to Buyer: (i) one or more special warranty deeds in the proper form for each relevant jurisdiction and suitable for recording therein conveying good and valid fee simple title to all Owned Real Property to Buyer or its designee; (ii) one or more bills of sale conveying in the aggregate all of Seller's and Partnership's owned personal property included in the Assets; (iii) one or more Assignments of Lease with respect to the Ground Leases and the Personal Property Leases and such of the Signage Occupancy Rights as are represented by leaseholds; (iv) general bills of sale and assignments of all of Seller's and Partnership's right, title and interest in and to the Signage Properties other than the Signage Real Property; (v) one or more Assignment of Contracts; (vi) assignments of those Proprietary Rights included in the Assets, in recordable form to the extent necessary to assign such rights; (vii) the Ancillary Agreements; and (viii) all closing certificates, opinions of counsel and other documents required to be delivered by Seller or Partnership to Buyer at the Closing pursuant to this Agreement. (b) Assumption and Other Documents. To effect the sale and assumption referred to in Article II, Buyer at the Closing shall execute and deliver to Seller and Partnership: (i) the Closing Payment; 15 21 (ii) an instrument of assumption evidencing Buyer's assumption, pursuant to Section 2.2, of the Assumed Liabilities (the "Assumption Document"); (iii) one or more assumptions of Ground Leases and Personal Property Leases; (iv) one or more assumptions of Contracts; (v) the Ancillary Agreements; and (vi) all closing certificates, opinions of counsel and other documents required to be delivered by Buyer to Seller or Partnership at the Closing pursuant to this Agreement. ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF SELLER Seller hereby represents and warrants to Buyer as follows, except as otherwise set forth on the Disclosure Schedule: 4.1. Organization of Seller and Partnership. Seller is a corporation duly organized, validly existing and in good standing under the laws of the State of Nebraska. Partnership is a general partnership duly formed, validly existing and in good standing under the laws of the State of Indiana. Seller and Partnership are duly qualified to do business and are in good standing in each jurisdiction where, by reason of the nature of the Business, the same is required, except for such jurisdictions in which the failure to be so qualified or in good standing would not have a Material Adverse Effect. Copies of the Articles of Incorporation and Bylaws of Seller and the Amended and Restated General Partnership Agreement of Partnership, and all amendments thereto, heretofore delivered to Buyer are accurate and complete as of the date hereof. 4.2. Authorization. Seller and Partnership each have all requisite corporate or partnership (as applicable) power and authority to own, lease, operate and sell the Assets, to conduct the Business as it is presently being conducted, to execute and deliver this Agreement and the Ancillary Agreements to which it is a party, and to perform its obligations hereunder and thereunder. The execution and delivery by Seller and Partnership of this Agreement and the Ancillary Agreements to which it is a party and the consummation by Seller and Partnership of the transactions contemplated hereby and thereby have been duly authorized by all requisite corporate or partnership (as applicable) actions on the part of Seller and Partnership, respectively. This Agreement has been duly executed and delivered by Seller and Partnership and is a legal, valid and binding obligation of Seller and Partnership, and each of the Ancillary Agreements to be delivered by Seller pursuant to this Agreement, when executed and delivered at Closing, will constitute a 16 22 valid and binding obligation of Seller, enforceable against Seller in accordance with their respective terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and general equity principles. 4.3. Absence of Certain Changes or Events. Except as set forth on Schedule 4.3 or as contemplated by this Agreement, since June 30, 1998, there has not been any: (a) Material Adverse Change; (b) change in accounting methods, principles or practices by Seller or Partnership, except as required by law or by generally applicable changes instituted in the accounting profession; (c) material damage, destruction or loss (whether or not covered by insurance) adversely affecting the Assets or the Business; (d) cancellation of any indebtedness or waiver or release of any right or claim of Seller or Partnership pertaining to the Business, except for any such cancellations, waivers or releases made in the ordinary course of business; (e) increase in the rate of compensation payable or to become payable to any director, officer or other employee of the Business, except as provided in any employment agreement (including any union contract) between Seller or Partnership and any such Persons or in any Employee Plan, and any increases in the normal course of business; (f) adverse change in employee relations which has had or would have a Material Adverse Effect; (g) amendment, cancellation or termination of any material Contract or entry into any material Contract which is not in the ordinary course of business of Seller or Partnership; (h) sale, assignment or transfer of any portion of the Assets, other than in the ordinary course of business, except as approved by Buyer; (i) changes in payment terms with customers or suppliers adversely affecting the Assets or the Business, except for such changes made in the ordinary course of business; or (j) agreement by Seller or Partnership to do any of the things described in the preceding clauses (a) through (i) other than as expressly provided for herein. 4.4. Warranted Assets. Each of Seller and Partnership (as applicable) have and will transfer good and valid title to the Warranted Assets (other than those which are leased or licensed by Seller or 17 23 Partnership) free and clear of any Encumbrances, other than Permitted Encumbrances, in the case of Owned Real Property. 4.5. Owned Real Property. Schedule 4.5 contains a complete and accurate list of all Owned Real Property. Schedule 4.5.1 contains a complete and accurate list of all Ground Leases. To Seller's and Partnership's knowledge, all Ground Leases are valid, binding and enforceable in all material respects in accordance with their terms and are in full force and effect. Seller has delivered or will deliver prior to the Closing Date to Buyer copies of all title policies in their possession with respect to the Owned Real Property. (a) Owned Real Property. Except as set forth on Schedule 4.5, Seller has good and valid fee simple title to all Owned Real Property and all Excluded Real Property that is subject to Future Use Rights. At the Closing, Seller will transfer to Buyer good and valid fee simple title to all Owned Real Property subject only to the following (the "Permitted Encumbrances"): (i) materialmen's, mechanics', carriers', workmen's, repairmen's or other like liens arising in the ordinary course of Seller's business for amounts not yet due or which are being contested in good faith by appropriate proceedings; (ii) liens for current taxes not yet due or any taxes being contested in good faith by appropriate proceedings; (iii) any other Encumbrances and other matters affecting title to Owned Real Property, which do not (A) materially adversely affect the use or value (in respect of its current use) of Owned Real Property, (B) secure any Financing Obligation or (C) constitute a lease, sublease or other occupancy agreement that gives any third party any right to occupy or use all or any portion of the Owned Real Property other than Advertising Contracts to the extent that such Contracts deal with advertising on such signage. (b) Actions. Except as set forth on Schedule 4.12, there are no pending or, to the knowledge of Seller and Partnership, threatened condemnation proceedings with respect to any portion of Owned Real Property or Excluded Real Property that is subject to Future Use Rights, or litigation or administrative actions relating to any portion of Owned Real Property or Excluded Real Property that is subject to Future Use Rights. (c) Certificate of Occupancy. Seller and Partnership (as applicable) have received all material approvals of governmental authorities (including, without limitation, Non-Signage Permits and certificates of occupancy or other similar certificates permitting lawful occupancy of the Owned Real Property) required in connection with the present use of the Owned Real Property and all improvements thereon. (d) Utilities. All Owned Real Property and the improvements thereon are supplied with utilities and other services necessary for the operation of such facilities as currently operated. (e) Improvements, Fixtures and Equipment. Except as provided in Schedule 4.5(e), all Leasehold Improvements (other than Leasehold Improvements on Signage Locations) and all Fixtures and Equipment and other tangible assets (other than Signage Structures) owned, leased or used by Seller on the Owned Real Property are, (i) in good 18 24 condition and repair (normal wear and tear excepted), (ii) free from material structural defect and (iii) sufficient for the operation of the Business as presently conducted. Except as provided in Schedule 4.5(e), none of the improvements on the Owned Real Property encroach in any material respect on any property owned by any other Person and no improvements located on any property owned by any Person encroaches in any material respect on any portion of the Owned Real Property. (f) No Special Assessment. Neither Seller nor Partnership has received notice of any special assessment relating to any Owned Real Property or any portion thereof which remains unpaid and neither Seller nor Partnership has any knowledge of any pending or threatened special assessment, other than any special assessments disclosed on Schedule 4.5(f). 4.6. Contracts. (a) Contracts. Schedule 4.6 sets forth a true, correct and complete list of all Contracts of the following categories (other than Contracts set forth elsewhere on the Disclosure Schedule): (i) Contracts not made in the ordinary course of Seller's or Partnership's business obligating Seller or Partnership to make payments in excess of $150,000; (ii) Employment contracts and severance agreements, including, without limitation, Contracts (A) to employ or terminate executive officers or other personnel and other contracts with present or former officers, directors, shareholders, partners, representatives or agents of Seller or Partnership or (B) that will result in the payment by, or the creation of any commitment or obligation (absolute or contingent) to pay on behalf of Buyer, Seller or Partnership any severance, termination, "golden parachute," or other similar payments to any present or former personnel following termination of employment or otherwise as a result of the consummation of the transactions contemplated by this Agreement; (iii) Labor or union contracts (including, but not limited to, any employee collective bargaining agreement); (iv) Material distribution, franchise, license, sales, commission, consulting or agency contracts for advertising to be provided to Seller excluding Advertising Contracts providing for annual payments in excess of $150,000 which are not cancelable on thirty (3 0) calendar days' notice; (v) Material options to buy any property, real or personal, or material options to sell any Owned Real Property or personal property included in the Assets; (vi) Contracts (except Personal Property Leases and construction Contracts), in the case of each Contract, involving expenditures or liabilities in 19 25 excess of $250,000 or aggregate expenditures or liabilities in excess of $2,000,000 or otherwise material to the Business; (vii) Material Contracts containing covenants limiting the freedom of Seller or Partnership to engage in the Business or compete with any Person other than in connection with any license agreements to which Seller or Partnership is a party (other than provisions in Signage Occupancy Rights that limit the type of advertising messages or advertising that may be displayed on Signage Structures or the types of advertisers); and (viii) Personal Property Leases involving expenditures or liabilities in excess of $400,000 for each such lease. Seller and Partnership have delivered or made available to Buyer true, correct and complete copies of all of the Contracts listed on Schedule 4.6, including all amendments and supplements thereto, all of which Contracts are being assumed by Buyer. (b) Absence of Breaches or Defaults. Except as set forth on Schedule 4.6(b), to Seller's and Partnership's knowledge, all of the Contracts set forth on Schedule 4.6 and any Advertising Contract not set forth therein (subject to the disclosures set forth in the Disclosure Schedule) are valid and in full force and effect. Each of Seller or Partnership has duly performed all of its obligations under such Contracts to the extent those obligations to perform have accrued, and no violation of, or default or breach under, such Contracts by Seller or Partnership, or, to Seller's and Partnership's knowledge, any other party has occurred and neither Seller nor Partnership, nor, to Seller's or Partnership's knowledge, any other party has repudiated any provisions thereof. 4.7. No Conflict or Violation. Except as set forth on Schedule 4.7, neither the execution, delivery or performance of this Agreement and the Ancillary Agreements when so executed by Seller or Partnership (as applicable) nor the consummation by Seller and Partnership of the transactions contemplated hereby and thereby will (a) violate or conflict with any provision of the Articles of Incorporation or Bylaws of Seller or the Amended and Restated General Partnership Agreement of Partnership, (b) except to the extent related to Signage Occupancy Rights or Signage Permits, violate, conflict with, or result in a breach of any provision of, or constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) under, or result in the termination of, or accelerate the performance required by, or result in a right of termination or acceleration under, or result in the creation of any material Encumbrance upon any of the Assets under, any of the terms, conditions or provisions of any Contract, indebtedness, note, bond, indenture, security or pledge agreement, commitment, license, lease, franchise, Signage Permit, agreement, or other instrument or obligation (i) to which Seller or Partnership is a party or (ii) by which the Assets are bound, (c) except to the extent related to Signage Occupancy Rights or Signage Permits (other than federal and state but not local laws applicable thereto), violate any statute, rule, regulation, ordinance, code, order, judgment, ruling, writ, injunction, decree or award to which Seller or 20 26 Partnership (with respect to the Business) or the Assets is subject or (d) except to the extent related to Signage Occupancy Rights, impose any Encumbrance on the Assets. 4.8. Consents and Approvals. Except as set forth on Schedule 4.8 or in connection with compliance with the HSR Act or to the extent related to Signage Occupancy Rights or Signage Permits (other than state and federal laws applicable thereto), no material consent, approval or authorization of, or declaration, filing or registration with, any governmental or regulatory authority is required to be made or obtained by Seller or Partnership in connection with Seller's or Partnership's execution, delivery and performance of this Agreement, other than any such requirement that is applicable as a result of the specific legal or regulatory status of Buyer or as a result of any other facts that specifically relate to the business or activities in which Buyer is or proposes to be engaged, other than the Business. 4.9. Financial Statements. The Whiteco Audited Statements, the Partnership Annual Statements, the Whiteco Interim Statements and the Partnership Interim Statements, have been furnished to Buyer's independent auditors for their review and retention without duplication or distribution thereof (a) were prepared in accordance with the Books and Records of Seller and Partnership, (b) were prepared in accordance with generally accepted accounting principles consistently applied throughout the periods covered thereby (subject, in the case of the unaudited financial statements, to the absence of footnotes and in the case of Interim Statements to normal year-end adjustments), and (c) fairly present the assets, liabilities (including all reserves) and financial position of Seller and Partnership as applicable, as of the respective dates thereof and the results of operations and changes in cash flows for the periods then ended. The Whiteco Audited Statements have been audited by independent certified public accountants, whose reports thereon are included with such audited financial statements. The Business Statements attached as Schedule 4.9 fairly present the assets, liabilities (including all reserves) and the financial position of the Business as of the respective dates thereof and the results of operations and changes in cash flows for the periods then ended subject to the notes and ancillary information included in such statements. 4.10. Projections. The financial projections attached as Schedule 4.10, subject to the notes included in such projections, represent Seller's best estimate of the anticipated future results of the Business without giving effect to the transactions contemplated by this Agreement, based on assumptions believed by Seller to be reasonable. 4.11. Books and Records. Seller and Partnership as the case may be have made and kept (and given Buyer access to) the Books and Records, which, in all material respects accurately and fairly reflect the activities of Seller and Partnership that would be so recorded. 21 27 4.12. Litigation. Except as set forth on Schedule 4.12, there is no material action, order, writ, injunction, judgment or decree outstanding or any material claim, suit, litigation, proceeding, labor dispute, arbitral action, governmental audit or investigation (collectively, "Actions") pending or, to the knowledge of Seller, threatened (a) against, related to or affecting (i) the Business or the Assets, or (ii) any officers, directors, partners, representatives or agents of Seller or Partnership as such (b) seeking as of the date hereof to delay, limit or enjoin the transactions contemplated by this Agreement, (c) that would materially impair the abilities of Seller or Partnership to perform their respective obligations under this Agreement or any of the Ancillary Agreements, (d) which would prevent or be violated by in any material manner (as applicable) the consummation of the transactions contemplated hereby or (e) in which Seller or Partnership is a plaintiff pertaining to the Business, including any derivative suits brought by or on behalf of Seller or Partnership. Neither Seller nor Partnership is in default with respect to or subject to any judgment, order, writ, injunction or decree of any court or governmental agency in any material matter, and to the knowledge of Seller or Partnership, there are no material unsatisfied judgments against Seller or Partnership with respect to the Business or the Assets. 4.13. Labor Matters. Except as set forth on Schedule 4.13, (i) Seller and Partnership (with respect to the Business) are not parties to any labor agreement with respect to their employees with any labor organization, union, group or association and there are no employee unions (nor any other similar labor or employee organizations) (with respect to the Business) under local statutes, custom or practice and (ii) in the last three (3) years, Seller and Partnership have not experienced any attempt by organized labor or its representatives to make Seller (with respect to the Business) or Partnership (with respect to the Business) conform to demands of organized labor relating to its employees or enter into a binding agreement with organized labor that would cover the employees. Except as set forth on Schedule 4.13, there is no labor strike or labor disturbance pending or, to Seller's and Partnership's knowledge, threatened against Seller (with respect to the Business) or Partnership (with respect to the Business), and in the past three (3) years Seller and Partnership (with respect to the Business) have not experienced a work stoppage or other labor difficulty. Seller and Partnership are in material compliance with all applicable laws respecting employment practices, employee documentation, terms and conditions of employment and wages and hours and, to Seller's and Partnership's knowledge, neither Seller nor Partnership has engaged in any unfair labor practice. There is no unfair labor practice charge or complaint against Seller or Partnership pending, or to the knowledge of Seller or Partnership, threatened before the National Labor Relations Board or any other domestic or foreign governmental agency arising out of the conduct of the business of Seller and Partnership. 4.14. Compliance with Law. Except as set forth on Schedule 4.14, Seller and Partnership have complied in all material respects with all applicable statutes and governmental rules, regulations, and Signage Permits and Non-Signage Permits in connection with their conduct of the Business and in respect of the Assets, and neither Seller nor Partnership is, in any material respect, in violation of or 22 28 default under any applicable statutes and governmental rules, regulations, and Signage Permits and Non-Signage Permits with respect to the operation of the Business or the Assets, except for such violations or defaults that have not had and could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, or has received any written notification thereof; it being understood that nothing in this Section 4.14 is intended to address any compliance with laws of the type covered by Sections 4.5 (Owned Real Property), 4.17 (Proprietary Rights), 4.18 (Employee Benefit Plans) and 4.19 (Tax Matters). 4.15. No Brokers. No broker, finder or similar agent is entitled to any finder's fee, brokerage fees or commission or similar payment from Seller or Partnership in connection with the transactions contemplated hereby. 4.16. No Other Agreements to Sell the Assets. Except as set forth in Schedule 4.16, neither Seller nor Partnership nor any of their respective officers, directors, shareholders, partners, representatives or agents have any commitment or legal obligation, absolute or contingent, to any other Person other than Buyer to sell, assign, transfer or effect a sale of any portion of the Assets (other than in the ordinary course of business), to sell or effect a sale of the capital stock of Seller or an equity interest in Partnership, to effect any merger, consolidation, liquidation, dissolution or other reorganization of Seller or Partnership, or to enter into any agreement or cause the entering into of an agreement with respect to any of the foregoing business combination transactions. 4.17. Proprietary Rights. (a) Proprietary Rights. Schedule 4.17 is a true, correct and complete list of all Proprietary Rights and all material agreements under which Seller or Partnership are licensed to use Proprietary Rights. (b) Ownership and Protection of Proprietary Rights. Seller or Partnership owns and/or has the right to use each of the Proprietary Rights listed on Schedule 4.17. The Proprietary Rights listed on Schedule 4.17 (together with any other Proprietary Rights being assigned to Buyer hereunder) constitute all of the Proprietary Rights necessary to conduct the Business in the manner presently conducted. None of the Proprietary Rights is involved in any pending or, to the knowledge of Seller and Partnership, threatened litigation. To the knowledge of Seller and Partnership, no other Person (i) has the right to use any of the Proprietary Rights, except pursuant to the Contracts; or (ii) is infringing upon any Proprietary Rights. To the knowledge of Seller and Partnership, Seller's and Partnership's use of the Proprietary Rights is not infringing upon or otherwise violating the rights of any third party. No proceedings have been instituted against or written notices received by Seller or Partnership that are presently outstanding alleging that Seller's or Partnership's use of the Proprietary Rights infringes upon or otherwise violates any rights of a third party in or to such Proprietary Rights. Except as provided in Schedule 4.17, all Proprietary Rights necessary to the conduct the Business as presently 23 29 conducted are assignable by Seller or Partnership to Buyer and/or may be licensed by Seller or Partnership to Buyer in the manner contemplated by this Agreement. 4.18. Employee Benefit Plans. (a) Definitions. The following terms, when used in this Section 4.18, shall have the following meanings. Any of these terms may, unless the context otherwise requires, be used in the singular or the plural depending on the reference. (i) Benefit Arrangement. "Benefit Arrangement" shall mean any employment, consulting, severance or other similar contract, arrangement or policy and each plan, arrangement (written or oral), program, agreement or commitment providing for insurance coverage (including without limitation any self-insured arrangements), workers' compensation, disability benefits, supplemental unemployment benefits, vacation benefits, retirement benefits, life, health, disability or accident benefits (including without limitation any "voluntary employees' beneficiary association" as defined in Section 501(c)(9) of the Code providing for the same or other benefits) or for deferred compensation, profit-sharing bonuses, stock options, stock appreciation rights, stock purchases or other forms of incentive compensation or post-retirement insurance, compensation or benefits which (A) is not a Welfare Plan, Pension Plan or Multiemployer Plan, (B) is entered into, maintained, contributed to or required to be contributed to, as the case may be, by Seller, Partnership or an ERISA Affiliate or under which Seller, Partnership or any ERISA Affiliate may incur any liability, and (C) covers any employee or former employee of Seller, Partnership or any ERISA Affiliate. (ii) Code. "Code" shall mean the Internal Revenue Code of 1986, as amended, and the rules and regulations thereunder. (iii) Employee Plans. "Employee Plans" shall mean all Benefit Arrangements, Multiemployer Plans, Pension Plans and Welfare Plans. (iv) ERISA. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended. (v) ERISA Affiliate. "ERISA Affiliate" shall mean any entity which is (or at any relevant time was) a member of a "controlled group of corporations" with, under "common control" with, or a member of an "affiliated service group" with, Seller as defined in Section 414(b), (c), (m) or (o) of the Code. (vi) Multiemployer Plan. "Multiemployer Plan" shall mean any "multiemployer plan," as defined in Section 4001(a)(3) of ERISA, which Seller, Partnership or any ERISA Affiliate maintains, administers, contributes to or is required to contribute to, or, after September 25, 1980, maintained, administered, contributed to or was required to contribute to, or under which Seller, Partnership or any ERISA Affiliate may incur any liability and which covers any employee or former employee of Seller, Partnership or any ERISA Affiliate. (vii) PBGC. "PBGC" shall mean the Pension Benefit Guaranty Corporation. 24 30 (viii) Pension Plan. "Pension Plan" shall mean any "employee pension benefit plan" as defined in Section 3(2) of ERISA (other than a Multiemployer Plan) which Seller, Partnership or any ERISA Affiliate maintains, administers, contributes to or is required to contribute to, or, within the five years prior to the closing date, maintained, administered, contributed to or was required to contribute to, or under which Seller, Partnership or any ERISA Affiliate may incur any liability and which covers any employee or former employee of Seller, Partnership or any ERISA Affiliate. (ix) Welfare Plan. "Welfare Plan" shall mean any "employee welfare benefit plan" as defined in Section 3(l) of ERISA, which Seller, Partnership or any ERISA Affiliate maintains, administers, contributes to or is required to contribute to, or under which Seller, Partnership or any ERISA Affiliate may incur any liability and which covers any employee or former employee of Seller, Partnership or any ERISA Affiliate. (b) Disclosure; Delivery of Copies of Relevant Documents and Other Information. Schedule 4.18(b) contains a complete list of each Employee Plan which covers or has covered employees of the Business. True and complete copies of each of the following documents have been delivered by Seller to Buyer: (i) each Employee Plan and, if applicable, each related trust agreement which covers or has covered Transferred Employees as defined in Section 6.6 including written interpretations thereof and written descriptions thereof which have been distributed to such Transferred Employees (including descriptions of the number and level of employees covered thereby) and a complete description of any such material Employee Plan which is not in writing, (ii) the most recent determination letter issued by the Internal Revenue Service with respect to each Pension Plan and each voluntary employees beneficiary association as defined under Section 501(c)(9) of the Code, (iii) for the three most recent plan years, Annual Reports on Form 5500 Series required to be filed with any governmental agency for each Pension Plan and Welfare Plan, and (iv) a list of names, service dates and salaries as of August 26, 1998 for employees of the Business. (c) Representations. Except as set forth in Schedule 4.18(c), Seller and Partnership represent and warrant as follows: (i) Pension Plans (A) Neither Seller, Partnership nor any ERISA Affiliates has failed to make a contribution or taken any other action or failed to take any other action or failed to take any action relating to a Pension Plan, the result of which would be the imposition of a lien on the Assets. Neither Seller, Partnership nor any ERISA Affiliate is subject to any lien imposed under Section 412(n) of the Code or Section 302(f) of ERISA, whichever may apply, with respect to any Pension Plan. None of the Pension Plans has ever been subject to title IV of ERISA, Section 302 of ERISA or Section 401 of the Code it being understood for such purpose that the Whiteco Industries, Inc. Employees Retirement Savings Plan 401(k) plan is not so subject. (ii) Multiemployer Plans 25 31 (A) Neither Seller, Partnership nor any ERISA Affiliate has, at any time, withdrawn from a Multiemployer Plan in a "complete withdrawal" or a "partial withdrawal" as defined in Sections 4203 and 4205 of ERISA, respectively, so as to result in any material unsatisfied liability, contingent or otherwise (including without limitation the obligations pursuant to an agreement entered into in accordance with Section 4204 of ERISA), of Seller, Partnership or any ERISA Affiliate. Neither Seller, Partnership nor any ERISA Affiliate has engaged in, or is a successor or parent corporation to an entity that has engaged in, a transaction described in Section 4212(c) of ERISA. (B) All contributions required to be made by Seller, Partnership or any ERISA Affiliate to each Multiemployer Plan have been made when due. (C) If, as of the Closing Date, Seller, Partnership (and all ERISA Affiliates) were to withdraw from all Multiemployer Plans to which it (or any of them) has contributed or been obligated to contribute, it (and they) would incur no material liability to such plans under Title IV of ERISA. (D) To the best of Seller's knowledge with respect to each Multiemployer Plan: (1) no such Multiemployer Plan has been terminated or has been in reorganization under ERISA so as to result, directly or indirectly, in any liability, contingent or otherwise, of Seller, Partnership or any ERISA Affiliate under Title IV of ERISA; (2) no proceeding has been initiated by any person (including the PBGC) to terminate any Multiemployer Plan; (3) Seller, Partnership and the ERISA Affiliates have no reason to believe that any Multiemployer Plan will be terminated or will be reorganized under ERISA; and (4) Seller, Partnership and the ERISA Affiliates do not expect to withdraw from any Multiemployer Plan. (iii) Welfare Plans (A) Each Welfare Plan which covers employees of the Business and which is a "group health plan," as defined in Section 607(l) of ERISA, has been operated in compliance with provisions of Part 6 of Title 1, Subtitle B of ERISA and Section 4980B of the Code at all times. (B) Neither Seller nor any ERISA Affiliate has incurred any material, unsatisfied liability with respect to any Welfare Plan that is a "multiemployer plan", as defined in Section 3(37) of ERISA, relating to the employees of the Business under the terms of such Welfare Plan, any collective bargaining agreement or otherwise resulting from any cessation of contributions, cessation of obligation to make contributions or other form of withdrawal from such Welfare Plan. (C) If, as of the Closing Date, Seller, Partnership (and all ERISA Affiliates) were to have a cessation of contributions, cessation of obligations to make contribution or other form of withdrawal from all Welfare 26 32 Plans that are "multiemployer plans", as defined in Section 3(37) of ERISA covering the employees of the Business, it (and they) would incur no liabilities with respect to any such Welfare Plans under the terms of such Welfare Plans, any collective bargaining agreement or otherwise. (D) None of Seller, Partnership, any ERISA Affiliate or any Welfare Plan has any present or future obligation to make any payment to, or with respect to, any present or former employees of the Business pursuant to any retiree medical benefit plan, or other retiree Welfare Plan, and no condition exists which would prevent Seller or Partnership (as applicable) from amending or terminating any such benefit plan or Welfare Plan. (iv) No Acceleration or Creation of Rights. Neither the execution and delivery of this Agreement by Seller and Partnership nor the consummation of the transaction contemplated hereby will result in the acceleration or creation of any rights of any person to benefits under any Employee Plan (including, without limitation, the acceleration of the vesting or exercisability of any stock options, the acceleration of the vesting of any restricted stock, the acceleration of the accrual or vesting of any benefits under any Pension Plan or the acceleration or creation of any rights under any severance, parachute or change in control agreement). 4.19. Tax Matters. (a) Foreign Person. Neither Seller nor the Partnership nor any partner thereof is a person, other than a United States person, within the meaning of the Code. (b) No Withholding. The transaction contemplated herein is not subject to the tax withholding provisions of Section 3406 of the Code, or Subchapter A of Chapter 3 of the Code or of any other provision of law. 4.20. Customers. Schedule 4.20 sets forth an accurate list of the names of the ten (10) largest industry groups of customers of the Business for the most recent fiscal year, showing the approximate percentage of total sales for each such industry group during such fiscal year in connection with the Business. 4.21. Environmental Matters. Seller has provided Buyer true, complete and correct copies of all environmental audits, investigations, studies, and assessments relating to the Business conducted in the past ten years by outside consultants and all material environmental investigations conducted in the past ten years by employees of the Seller that are in the possession of Seller with respect to the Assets. Seller has set forth on Schedule 4.21 all matters of which Seller has knowledge relating to: (a) any notices of violation or alleged violation, any writs, injunctions, decrees, orders, or judgments outstanding, or any actions, suits, claims, proceedings or investigations pending or threatened, relating to the Business under any Environmental Laws; (b) any agreement under which Seller or 27 33 Partnership is obliged, directly or indirectly, by any representation, warranty, indemnification, covenant, restriction or other undertaking concerning liabilities under Environmental Laws relating to the Business; or (c) the presence of any underground storage tanks or polychlorinated biphenyls at any of the Assets; or (d) any material non-compliance with Environmental Laws in connection with the Business. 4.22. Intracompany Transactions. Schedule 4.22 contains a complete list describing all material arrangements (including for the provision of products or services), relationships and transactions between the Business, on the one hand, and other units or divisions of Seller or Partnership or affiliates of Seller or Partnership, on the other hand. 4.23. Third Party Asset Purchase Agreements. Schedule 4.23 contains an accurate and complete summary of all Third Party Asset Purchase Agreements. 4.24. Condition of Property. Except as set forth on Schedule 4.24, the Warranted Assets are, in all material respects, (i) in good operating condition, except normal wear and tear, and (ii) suitable for the purposes for which they are presently held. ARTICLE V. REPRESENTATIONS AND WARRANTIES OF BUYER Buyer hereby represents and warrants to Seller and Partnership as follows: 5.1. Organization of Buyer. Buyer is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. Buyer is duly licensed and qualified to do business and is in good standing in each jurisdiction in which such qualification is required or will be required as a result of the transaction contemplated by this Agreement by applicable law, except where the failure to be so qualified will not have a material adverse effect on the ability of Buyer to consummate the transactions contemplated hereby. Copies of the Certificate of Incorporation and Bylaws of Buyer, heretofore delivered by Buyer to Seller, are accurate and complete as of the date hereof. 5.2. Authorization. Buyer has full corporate power and authority to execute and deliver this Agreement, and the Ancillary Agreements, and to perform its obligations hereunder and thereunder. The execution, delivery and performance by Buyer of this Agreement and the 28 34 Ancillary Agreements have been duly authorized by all requisite corporate action on the part of Buyer. This Agreement has been duly executed and delivered by Buyer and is a legal, valid and binding obligation of Buyer, and each of the Ancillary Agreements when executed and delivered at Closing will constitute a valid and binding obligation of Buyer, enforceable against Buyer in accordance with their respective terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and general equity principles. 5.3. No Conflict or Violation. Neither the execution and delivery of this Agreement nor the Ancillary Agreements by Buyer nor the performance of its obligations hereunder and thereunder will result in (a) a violation of or a conflict with any provision of the Certificate of Incorporation or Bylaws of Buyer, (b) violate or conflict with or result in a breach of or constitute a default under any term or provision of any contract, agreement, commitment, lease, license, franchise or permit or other instrument or obligation to which Buyer is a party or is bound, or (c) a violation by Buyer of any statute, rule, regulation, ordinance, code, order, judgment, writ, ruling, injunction, decree, or award, to which Buyer is subject. 5.4. Consents and Approvals. No consent, approval or authorization of, or declaration, filing or registration with any governmental or regulatory authority, or any other Person, is required to be made or obtained by Buyer in connection with Buyer's execution, delivery and performance of this Agreement and the Ancillary Agreements or Buyer's consummation of the transactions contemplated hereby and thereby, except in connection with or in compliance with the HSR Act. 5.5. Broker and Finders. Buyer has not entered into any agreement or incurred any obligation, directly or indirectly, for the payment of any brokerage fees, commissions or finder's fee in connection with the transactions contemplated by this Agreement or any Ancillary Agreement, except for any arrangements with BT Alex. Brown Incorporated, for which Buyer shall be solely responsible. 5.6. Litigation and Proceedings. There are no Actions pending or, to the best knowledge of Buyer, threatened, (a) seeking as of the date hereof to delay, limit or enjoin the transactions contemplated by this Agreement, (b) that would materially impair the abilities of Buyer to perform its obligations under this Agreement or any of the Ancillary Agreements or (c) which would prevent or be violated by (as applicable) the consummation of the transactions contemplated hereby or thereby. 5.7. Financial Ability. Buyer has the financial resources necessary to consummate the transactions contemplated by this Agreement and the Ancillary Agreements, including, without limitation, the ability to pay the Purchase Price. 29 35 5.8. Compliance with Law. Buyer is and since its organization has been, in compliance in all material respects with all applicable statutes and governmental rules, regulations and permits. ARTICLE VI. COVENANTS OF SELLER, PARTNERSHIP AND BUYER Seller, Partnership and Buyer each covenant as follows: 6.1. Further Assurances. Each of the parties hereto agrees, both before and after the Closing, (i) to use all reasonable efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable to consummate and make effective the transactions contemplated by this Agreement and the Ancillary Agreements; provided, however, that, subject to the final sentence of this paragraph, nothing herein contained shall require Seller or Partnership prior to the Closing to seek to obtain consents to the transfer of Signage Properties other than those set forth on Schedule 6.1, (ii) to execute any documents, instruments or conveyances of any kind which may be reasonably necessary or advisable to carry out any of the transactions contemplated under this Agreement and the Ancillary Agreements, and (iii) to cooperate with each other in connection with the foregoing, including using their respective reasonable efforts (A) to obtain all necessary waivers, consents and approvals from governmental authorities and from parties to the Contracts and leases other than those relating to Signage Property to be assumed by Buyer, (B) to obtain all necessary Permits as are required to be obtained under any federal, state, local or foreign law or regulations, (C) to timely effect all necessary registrations and filings, including, without limitation, submissions of information requested by governmental authorities, (D) to provide to Buyer's independent auditors on a timely basis such representation letters and other certificates requested by Buyer's independent auditors; and (E) to fulfill all conditions to this Agreement; provided, however, that neither Buyer, Seller nor Partnership shall be required to make any material payments, commence litigation, incur any obligation or liability or agree to any material modifications to the terms of any Contracts, Ground Leases, Signage Permits, Non-Signage Permits or Signage Occupancy Rights in connection with the foregoing except as contemplated by this Agreement. At Buyer's request, Seller shall use its commercially reasonable efforts to obtain consents from lessors of Signage Properties identified by Buyer to the assignment of the leases thereto; provided, however, that Seller may decline to seek such consents in any circumstances in which such action would, in Seller's reasonable judgment, disserve its business interests. Buyer acknowledges that the furnishing by Seller of the information and documents referred to in Section 6.1(iii)(D) ("Section 6.1(iii)(D) Items") is at the request of, and an accommodation to, Buyer. Buyer will use its reasonable best efforts to maintain the confidentiality of Section 6.1(iii)(D) Items subject to the requirements of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder or as otherwise required by law to be disclosed. Buyer (for itself and its 30 36 Affiliates, officers, directors, shareholders, representatives and agents) hereby waives any claim Buyer or its Affiliates, officers, directors, shareholders, representatives and agents may have against Seller with respect to Section 6.1(iii)(D) Item information and documents so provided, whether or not any of such Section 6.1(iii)(D) Items is inaccurate, or misleading or omits any material information. Buyer will indemnify and hold harmless Seller or any of its Affiliates, officers, directors, shareholders, representatives and agents for any damages Seller or any of its Affiliates, officers, directors, shareholders, representatives and agents may incur as a result of or relating to the furnishing of any such Section 6.1(iii)(D) Items, including any claims or actions by Buyer, any of its Affiliates, officers, directors, shareholders, representatives and agents of any of the foregoing, or any other party. 6.2. No Solicitation. From the date hereof through the Closing or the earlier termination of this Agreement pursuant to Section 11.1, Seller and Partnership shall not, and Seller and Partnership shall not knowingly permit its officers, directors, partners, representatives, agents and employees to, and Seller and Partnership shall use all reasonable efforts to cause each of their respective representatives (including, without limitation, investment bankers, attorneys and accountants) not to, directly or indirectly, entertain, enter into, solicit, initiate or continue any discussions or negotiations with, or encourage or respond to any inquiries or proposals by, or participate in any negotiations with, or provide any information to, or otherwise cooperate in any other way with, any Person, other than Buyer and its representatives, concerning any sale of all or any portion of the Assets or the Business, or of any shares of capital stock of Seller or partnership interests of Partnership, or any merger, consolidation, liquidation, dissolution or similar transaction involving Seller or Partnership (other than the sale of inventory in the ordinary course of business). 6.3. Notification of Certain Matters. From the date hereof through the Closing (a) Buyer shall give prompt notice to Seller of any litigation or administrative proceeding pending and known to such party, or to its knowledge threatened, the occurrence of which challenges the transactions contemplated hereby and (b) Seller shall give prompt notice to Buyer of any litigation or administrative proceeding pending, or to its knowledge threatened, which challenges the transactions contemplated hereby or the occurrence of any significant or material event known to Seller or Partnership that relates to the Business or the Assets. 6.4. Access to Information. (a) Access. From the date hereof through the Closing, each of Seller and Partnership shall, and shall cause its officers, directors and employees to, afford Buyer and its authorized representatives, during normal business hours and upon reasonable notice to Seller and Partnership and in a manner which will not unduly interfere with the operations of Seller, Partnership or the Business, complete access at all reasonable times to the Assets for the purpose of inspecting the same, and to the officers and employees of Seller or Partnership, shall furnish 31 37 Buyer and its authorized representatives all financial, operating and other data and information as Buyer may reasonably request, except to the extent that such access would violate any governmental regulation, law or order to which Seller, or Partnership, their employees or the Assets are subject; provided that Seller and Partnership shall have the right to have a representative present at all such times; and provided further that such access shall be at the expense of Buyer. Notwithstanding such access and the information provided to Buyer after the date hereof, Buyer acknowledges and agrees that neither Seller nor Partnership makes any representations or warranties, express or implied, at common law, by statute or otherwise, except as specifically set forth in this Agreement. (b) Environmental Liabilities. (i) At any time prior to or following the Closing Date, Buyer shall have the right, at its sole cost and expense, to engage an independent environmental consultant (the "Consultant") to conduct a Phase I and/or Phase II audit, as such terms are commonly understood, with respect to Facilities Real Property and Ground Leases which will include the right to (A) conduct tests of the soil, surface or subsurface waters and air quality at, in, on, beneath or about the Facilities Real Property and Ground Leases, and such other procedures as may be recommended by the Consultant based on its reasonable professional judgment, in a manner consistent with good engineering practice, (B) inspect records, reports, permits, applications, monitoring results, studies, correspondence, data and any other information or documents relevant to environmental conditions or environmental noncompliance, (C) inspect all buildings and equipment at the Facilities Real Property and the real estate subject to Ground Leases including, without limitation, the visual inspection thereof for asbestos-containing construction materials and (D) interview Seller and Partnership employees; except that the rights above granted to Buyer with respect to Ground Leases shall be subject to any required consent of landlord and provided, in each case, such tests, inspections, and interviews shall be conducted only (1) during regular business hours upon reasonable notice to Seller or Partnership (as applicable); and (2) in a manner which will not unduly interfere with the operation of the business of Seller or Partnership (as applicable) and/or the use of, access to or egress from the Facilities Real Property and the properties covered by Ground Leases. (ii) If the audits conducted in connection with Section 6.4(b)(i) above detail "recognized environmental conditions" (as such term is commonly used in a Phase I audit) in connection with the Facilities Real Property, Seller shall be responsible for all costs and expenses of cleanup, removal, remedial, corrective or response action necessary to address such recognized environmental condition ("Environmental Remediation"). Seller shall have the right to control such Environmental Remediation. (iii) If Seller and Buyer shall disagree as to the required extent of Environmental Remediation, Seller or Partnership shall notify Buyer of such disagreement in writing specifying in detail the particulars of such disagreement within twenty (20) business days after Seller's receipt of a Phase I or Phase II audit conducted pursuant to Section 6.4(b)(i) above. Buyer shall provide Seller full access to the audits (and all related records) that are the cause of such disagreement. 32 38 (iv) Buyer and Seller shall use their reasonable efforts for a period of thirty (30) calendar days after Buyer's delivery of the notice referred to in Section 6.4(b)(iii) above (or such longer period as Buyer and Seller shall mutually agree upon) to resolve any disagreements raised by Seller with respect to the extent of Environmental Remediation. If, at the end of such period, Buyer and Seller are unable to resolve all such disagreements, Dames & Moore (the "Environmental Auditor") shall determine the extent of Environmental Remediation required. The determination of the Environmental Auditor shall be final, binding and conclusive on the parties. Buyer, Seller and Partnership shall use their reasonable efforts to cause the Environmental Auditor to make its determination within thirty (30) calendar days of receipt of the parties' request for a determination. Within thirty (30) calendar days after the date of determination of the Environmental Auditor, Seller and Partnership shall initiate the Environmental Remediation. The fees and expenses of the Environmental Auditor shall be shared equally between Buyer and Seller. (v) In the event Seller reasonably determines that the cost of Environmental Remediation is greater than the fair market value of the parcel of Facilities Real Property being remediated or proposed to be remediated, Seller shall have the option to purchase such Facilities Real Property from Buyer on one year's notice at its fair market value determined by averaging the appraisals of three recognized appraisers, one selected by Buyer, one selected by Seller and one selected by the two appraisers so selected; provided, however, that the fair market value of any such Facilities Real Property calculated pursuant to this Section 6.4(b)(v) shall not take into account any diminution of value of any such Facilities Real Property as a result of any "recognized environmental condition" thereon. If Seller exercises this option, Seller shall have no further obligation to conduct any Environmental Remediation with respect to such Facilities Real Property. (vi) In the event that within twelve (12) months of the closing Buyer determines that potential environmental liabilities of Seller at the sites of one or more Ground Leases are material, Buyer shall have the right to reassign the Ground Leases to Seller at Seller's expense and without liability to Buyer, after which Buyer shall have no liabilities or rights under such Ground Leases. (c) Legal Description. Prior to the Closing, Seller and Partnership shall deliver to Buyer legal descriptions for all Owned Real Property. (d) Advertising Contracts and Contact Persons. On or before the Closing, Seller and Partnership shall deliver to Buyer a substantially complete and accurate list of Advertising Contracts and shall use its reasonable best efforts to deliver to Buyer the names and addresses of the ten most important contact persons for the sale of advertising in each region. (e) On or before the Closing, Seller shall deliver to Buyer Schedule 4.8. 33 39 6.5. Conduct of Business. From the date hereof through the Closing, each of Seller and Partnership shall, except as contemplated by this Agreement, or as consented to by Buyer in writing, (i) operate the Business and maintain the Assets in the ordinary course and substantially in accordance with past practice, (ii) use their best efforts to maintain the ordinary and customary relationships of the Business with its suppliers, customers and others having business relationships with it, (iii) use their best efforts to maintain the books and records of the Business in accordance with past practices, (iv) use reasonable efforts to preserve intact the goodwill of the Business, (v) use their best efforts to keep available the services of the officers and employees of the Business as a group, subject to changes in the ordinary course; (vi) use their best efforts to notify Buyer of any emergency or other material change in the normal course of the Business or in the operation of the Assets and of any complaints, investigations or hearings (or communications indicating that the same may be contemplated) of any governmental body or authority other than nonmaterial complaints, investigations or hearings arising in the ordinary course of business, and (vii) not take any action inconsistent with this Agreement. Without limiting the generality of the foregoing, Seller and Partnership shall not, except as specifically contemplated by this Agreement or as set forth on Schedule 6.5; (a) propose or adopt any amendments to (i) the Articles of Incorporation or Bylaws of Seller or (ii) the Amended and Restated General Partnership Agreement of Partnership, except as otherwise required by law; (b) (i) enter into, extend, materially modify, terminate or renew any Contract, Ground Lease or Signage Occupancy Rights, except in the ordinary course of business; (ii) settle or otherwise resolve any financial issue, claim or adjustment under any Contract, Ground Lease or Signage Occupancy Rights, except in the ordinary course of business; or (iii) effect any modification to any Contract, Ground Lease or Signage Occupancy Rights in connection with obtaining any consent or approval necessitated by the transactions contemplated hereby; (c) sell, assign, transfer, convey, lease, license, mortgage, pledge or otherwise dispose of or encumber any Assets, or any interests therein, except in the ordinary course of business; (d) except as otherwise required by law and only with respect to those employees engaged in the Business, take any action with respect to the grant of any bonus, severance or termination pay (otherwise than pursuant to policies or agreements of Seller or Partnership in effect on the date hereof that are described on the Disclosure Schedule or as contemplated by Section 6.6(b)) or with respect to any increase of benefits payable under its severance or termination pay policies or agreements in effect on the date hereof or increase in any material respect the compensation or fringe benefits of any employee or pay any benefit not in the ordinary course of business and consistent with past practice and not required by any existing Employee Plan, agreement or policy; provided, however, in the event the conditions specified in Sections 7.5 and 8.5 have not been met within 35 days from the date hereof, Seller may grant stay-on bonuses, the cost of which will be shared equally among Buyer and Seller, to any 34 40 employee of the Business in such amounts as Seller shall deem appropriate in its sole discretion, provided however, Buyer's obligations hereunder shall not exceed $1,000,000; (e) voluntarily make any change in the key management structure of the Business, including, without limitation, the hiring of additional officers or the termination of existing officers other than in the ordinary course of business; (f) except in the ordinary course of business, adopt, enter into or amend any Employee Plan, agreement (including, without limitation, any collective bargaining or employment agreement), trust, fund or other arrangement for the benefit or welfare of any employee of the Business; (g) other than failures in the ordinary course of business, fail to maintain the Assets in substantially their current state of repair, excepting normal wear and tear, or fail to replace consistent with past practice, inoperable, worn-out, obsolete or destroyed Assets; (h) except with respect to endorsement of negotiable instruments executed in the ordinary course of business, incur, assume or guarantee any indebtedness for borrowed money pertaining to the Business; (i) cancel any debt or waive any claim or right pertaining to the Business or Assets except in the ordinary course of business; (j) enter into any agreement, or otherwise become obligated, to do any action prohibited hereunder; (k) alter the past practices of Seller and Partnership with respect to the collection of receivables or the payment of payables; or (l) intentionally do any other act which would cause any representation or warranty of Seller or Partnership in this Agreement to be or become untrue in any material respect. 6.6. Employee Matters. (a) Buyer shall extend offers of employment to all employees of Seller actively employed as of the Closing Date in connection with the Business except John R. Ayers (such employees who accept such offers of employment are hereinafter referred to as the "Transferred Employees"), effective as of the Closing, which offers shall be on terms and conditions which shall be substantially comparable individually and in the aggregate to those currently provided by Seller or Partnership, as the case may be, to such employees and the prior service of the Transferred Employees with Seller or Partnership shall be taken into account by Buyer for all purposes in Employee Benefits Plans maintained by Buyer. Buyer's Benefit Plans shall waive any pre-existing limitations and waiting periods which would otherwise be applicable to the Transferred Employees and shall provide that any expenses incurred by such employees (and their dependents) during the plan year within which the Closing occurs shall be taken into account for purposes of satisfying applicable deductible, coinsurance and maximum out-of-pocket payments under such 35 41 Buyer Plans. Seller and Partnership shall cooperate with and use commercially reasonable efforts to assist Buyer in its efforts to secure satisfactory employment arrangements with those employees of Seller and Partnership to whom Buyer makes offers of employment. (b) Buyer shall assume all obligations with respect to Transferred Employees under any collective bargaining agreement under which Seller or the Partnership is obligated, effective as of the Closing. To the extent necessary to avoid the imposition on Seller or the Partnership of withdrawal liability under a Multiemployer Plan, Buyer shall enter into an agreement described in Section 4204 of ERISA with Seller or the Partnership, as the case may be. Seller and Partnership agree to cooperate with Buyer with respect to any request that any Multiemployer Plan waive the bond, escrow or security requirements of Section 4204(a)(1)(B) of ERISA so as to eliminate any requirement that Buyer provide such bond, escrow or security. In the event any such variance or exemption is granted, Buyer's obligation to provide the bond, escrow or other security shall be eliminated during the period that such variance or exemption is in effect. Buyer shall assume all obligations to pay to the Transferred Employees all bonuses that any such Transferred Employees will be entitled to receive as of December 31, 1998; provided, however, that appropriate accruals have been made for any such bonuses in the calculation of the Closing Balance Sheet Net Working Capital. Buyer, at its sole cost and expense, shall enter into severance agreements with the terms set forth in Exhibit G. (c) Except as provided in (b), above, Seller or Partnership (as applicable) shall be solely responsible for all of the Employee Plans and all obligations and liabilities thereunder. Except as provided in (b), Buyer shall not assume any of the Employee Plans or any obligation or liability thereunder. (d) Nothing contained in this Agreement shall confer upon any Transferred Employee any right with respect to continuance of employment by Buyer, nor shall anything herein interfere with the right of Buyer to terminate the employment of any of the Transferred Employees at any time, with or without cause, or restrict Buyer in the exercise of its independent business judgment in modifying any of the terms and conditions of the employment of the Transferred Employees except that the severance agreements set forth in Exhibit G shall not be modified without the consent of the affected employee. Buyer shall be solely responsible for all liabilities and obligations relating to such a termination of employment. (e) Except as set forth in Exhibit G, no provision of this Agreement shall create any third party beneficiary rights in any beneficiary or dependent of a Transferred Employee, or any collective bargaining representative thereof, with respect to the compensation, terms and conditions of employment and benefits that may be provided to any Transferred Employee by Buyer or under any benefit plan which Buyer may maintain. 6.7. Services. At Buyer's request, Seller and Partnership (as applicable) shall, following the Closing, except as set forth in Schedule 6.7 and except for matters covered in the Ancillary Agreements provide Buyer any services currently provided by Seller to the Business for a period not exceeding the term of the Headquarters Sublease Agreement at the same rates as currently 36 42 charged to the Business, provided, however, Buyer, Seller and/or Partnership (as applicable) shall on the Closing Date enter into the following agreements in the forms attached hereto as Exhibits A, B, C and D respectively: (i) Headquarters Sublease Agreement; (ii) Data Processing Agreement; (iii) Monitoring Systems Agreement; and (iv) Telephone Services Agreement. 6.8. No Business Employee Solicitation. (a) For a period commencing on the date hereof and extending five (5) years following the Closing Date, Seller and Partnership will not, and will cause each of its Affiliates, officers, directors, employees, representatives, and agents to not, knowingly solicit the employment of any officer or employee of the Business. The term "solicit the employment (or similar terms) shall not be deemed to include general solicitations of employment through newspaper or other public media or a blind search conducted by an executive search firm, in either case not specifically directed towards employees of the Business and circumstances where (a) Buyer first terminates the employment of such employee or gives its prior written consent to such employment or offer of employment, (b) such employee contacts Seller regarding employment opportunities, (c) such employee responds to any general solicitation by Seller for employment with Seller or (d) the employment of such employee with Buyer has terminated. (b) Following the termination of this Agreement pursuant to Section 11.1, for a period commencing on any such date of termination and extending five (5) years following any such termination date, Buyer will not, and will cause each of its Affiliates, officers, directors, employees, representatives, and agents to not, knowingly solicit the employment of any officer or employee of Seller or Partnership. 6.9. Third Party Asset Purchase Agreements. Seller shall continue to negotiate and use its reasonable efforts to consummate Third Party Asset Purchase Agreements. To compensate and induce Seller with respect to negotiation of Third Party Asset Purchase Agreements, Buyer agrees to pay to Seller (in addition to the payment of the Third Party Asset Purchase Expenditure Amount and irrespective of whether such closing occurs prior to or after the Closing Date) an amount equal to (i) one percent (1%) of the purchase price of any Third Party Asset Purchase Agreements), plus (ii) ten percent (10%) of the amount by which the purchase price of any Third Party Asset Purchase Agreements is less than 12.7 times the projected 1999 EBITDA estimated by Seller and approved by Buyer for the Assets Purchased under Third Party Asset Purchase Agreements. Payments with respect to Third Party Asset Purchase Agreements closed prior to the Closing Date shall be paid by the Closing Date, and payments on Third Party Asset Purchase Agreements which close after the Closing Date shall be made on the date they close. 37 43 6.10. HSR Act Filing. Within three (3) days of the date hereof, each party shall, in cooperation with each other, file any reports or notifications or supplementary information which may be required to be filed by it under the HSR Act with the Federal Trade Commission or the Department of Justice, and shall furnish to each other party hereto all such information in its possession as may be necessary for the completion of the reports and notifications to be filed by such parties. Each party agrees to request early termination and to prosecute such application with diligence and cooperation. The fees for such filings shall be shared equally by the parties. Each party shall keep the other parties apprised of the status of any inquiries made of such party by the Federal Trade Commission or the Department of Justice or any other governmental or regulatory authority with respect to this Agreement or the transactions contemplated herein. 6.11. Excluded Real Property. On the Closing Date, Buyer and Seller shall enter into the Future Use Rights Agreement. 6.12. Profile Systems. Seller hereby grants to Buyer a right of first refusal to purchase Seller's ownership interests in Profile Systems, LLC ("Profile") pursuant to which Seller shall offer to Buyer an opportunity to purchase Seller's ownership interest in Profile at a stated price and upon stated terms for a thirty (30) day period (the "Option Period") before Seller offers the opportunity to purchase all or any portion of Seller's ownership interest in Profile to any third party. If Buyer does not exercise its option to purchase Seller's ownership interest in Profile at such stated price and upon such terms within the Option Period, Seller shall have the right, for a ninety (90) day period thereafter to sell its ownership interests in Profile to another purchaser for a price at least equal to the price and upon the same terms originally offered to Buyer. If Seller does not consummate a sale of its ownership interests in Profile within such ninety (90) day period, Buyer's right of first refusal will arise again. In any case in which any offer of Seller contains an element of consideration other than cash, Buyer shall have the right to substitute cash in an amount equal to Buyer's determination of the fair economic value of the non-cash consideration, and any sale to Buyer for cash shall be based on such determination of fair economic value. If Seller disagrees with such determination by Buyer, Seller shall have the right to submit such dispute to binding arbitration under to Section 11.14, and to the extent the arbitration award determines that Buyer's determination of the fair economic value of such consideration was too low, Buyer shall promptly pay Seller such deficiency with interest at the prime rate charged by Bank of America. ARTICLE VII. CONDITIONS TO SELLER'S AND PARTNERSHIP'S OBLIGATIONS The obligations of Seller and Partnership to effect the Closing are subject, in the discretion of Seller and Partnership, to the satisfaction, on or prior to the Closing, of each of the following conditions, any of which may be waived by Seller and Partnership: 38 44 7.1. No Proceedings, Litigation or Laws. No Action by any governmental authority of competent jurisdiction shall have been instituted or threatened which would enjoin, restrain, or prohibit the consummation of the transactions contemplated by this Agreement and no court order shall have been entered in action or proceeding which enjoins, restrains or prohibits the consummation of the transactions contemplated hereby. 7.2. Opinion of Counsel. Buyer shall have delivered to Seller and Partnership an opinion of Latham & Watkins, counsel to Buyer, dated as of the Closing Date, in substantially the form set forth in Exhibit H-1. 7.3. Certificates. Buyer shall furnish Seller and Partnership with such certificates of its duly authorized officers and others to evidence compliance with the conditions set forth in this Article VII as may be reasonably requested by Seller or Partnership. 7.4. Corporate Documents. Seller and Partnership shall have received from Buyer resolutions adopted by the board of directors of Buyer approving this Agreement and the Ancillary Agreements and the transactions contemplated hereby and thereby, certified by Buyer's corporate secretary, as applicable. 7.5. HSR Act. All required filings under the HSR Act shall have been completed and all applicable time limitations under the HSR Act shall have expired without a request for further information by the relevant federal authorities under the HSR Act or been terminated, or, in the event of such a request for further information, the expiration of all applicable time limitations under the HSR Act without the objection of such federal authorities. 7.6. Ancillary Agreements. Buyer shall have executed and delivered the Ancillary Agreements in the forms attached as exhibits hereto. ARTICLE VIII. CONDITIONS TO BUYER'S OBLIGATIONS The obligations of Buyer to consummate the transactions provided for hereby are subject, in the discretion of Buyer, to the satisfaction, on or prior to the Closing, of each of the following conditions, any of which may be waived by Buyer: 39 45 8.1. No Proceedings or Litigation. No Action by any governmental authority of competent jurisdiction shall have been instituted or threatened which would enjoin, restrain or prohibit the consummation of the transactions contemplated by this Agreement, and no court order shall have been entered in any action or proceeding which enjoins, restrains or prohibits the consummation of the transaction contemplated hereby. 8.2. Opinion of Counsel. Seller and Partnership shall have delivered to Buyer and their lenders an opinion of counsel, dated as of the Closing Date, in substantially the form set forth in Exhibit G-2. 8.3. Certificates. Each of Seller and Partnership shall furnish Buyer with a certificate of a duly authorized officer certifying as to the satisfaction of conditions set forth in this Article VIII. 8.4. Corporate Documents. Buyer shall have received from Seller and Partnership, as applicable, resolutions adopted by the board of directors of Seller and the partners of Partnership approving this Agreement, the Ancillary Agreements and/or the transactions contemplated hereby and thereby (as applicable), certified by Seller's corporate secretary and by any general partner of Partnership (as applicable). 8.5. HSR Act. All required filings under the HSR Act shall have been completed and all applicable time limitations under the HSR Act shall have expired without a request for further information by the relevant federal authorities under the HSR Act or been terminated, or, in the event of such a request for further information, the expiration of all applicable time limitations under the HSR Act without the objection of such federal authorities. 8.6. Ancillary Agreements. Seller shall have executed and delivered the Ancillary Agreements. 8.7. Nonforeign Affidavit. Each of Seller and Partnership shall furnish Buyer an affidavit, stating, under penalty of perjury, that the indicated number is the transferor's United States taxpayer identification number and that the transferor is not a foreign person, pursuant to Section 1445(b)(2) of the Code. 40 46 8.8. Conduct of Business. Since the date of this Agreement, each of Seller and Partnership, except as contemplated by this Agreement or as set forth in the Disclosure Schedule, shall have in all material respects operated the Business and maintained the Assets in the ordinary course and substantially in accordance with past practice, and each of Seller and Partnership shall furnish Buyer with a certificate of a duly authorized officer or representative certifying as to that effect. ARTICLE IX. RISK OF LOSS; CONSENTS TO ASSIGNMENT 9.1. Damage or Destruction of Assets Prior to Closing. If any material portion of the Assets is destroyed or damaged by fire or any other cause on or prior to the Closing Date, Seller and/or Partnership shall give written notice to Buyer as soon as practicable thereafter, but in any event within five (5) calendar days of discovery of such damage or destruction. Seller shall either repair such damages or destruction at its cost and expense or shall reimburse Buyer for the reasonable cost incurred by Buyer to repair such damages or destruction. 9.2. Elimination of Some Signage Structures from Transfer; Corresponding Reduction of Purchase Price and Other Amendments. In the event Buyer and Seller agree to remove one or more Sign Structures from the Assets being sold to Buyer hereunder ("Eliminated Signs") due to damage, destruction, or any other reason, the Agreement shall be amended in the manner set forth in this Section 9.2. (a) Purchase Price Adjustment. (i) The portion of the Purchase Price represented by $930,000,000 (nine hundred and thirty million dollars) shall be reduced by an amount equal to fourteen (14) times the "EBITDA attributable to the Eliminated Signs" calculated as provided below. The "EBITDA attributable to Eliminated Signs" shall be calculated in the following manner: (A) each Eliminated Sign shall be identified to the numbered district in Exhibit I in which its gross revenue for the calendar year 1998 was included, (B) the aggregate net revenue of all Signs in the identified district shall be determined for the first six months of 1998 from the books and records of the Seller, (C) the net revenue of all Eliminated Signs in the identified district shall be determined from the books and records of the Seller and aggregated, (D) a calculation shall be made of the percentage which the aggregate amount in (C) above bears to the aggregate amount in (B) above, (E) the percentage derived in (D) shall be multiplied by the EBITDA of the identified district shown in Exhibit I, and (F) the result of such multiplication shall be combined with the results of similar multiplications for all districts in which there were Eliminated Signs, and the aggregate amount so obtained shall constitute the "EBITDA attributable to Eliminated Signs"; (ii) the amount of the Acquired Real Property Payment Amount shall be reduced by the portion thereof attributable to Eliminated Signs; 41 47 (iii) the amount of the Third Party Asset Purchase Expenditure Amount shall be reduced by the portion thereof attributable to the Eliminated Signs; and (iv) the Closing Payment and the Closing Date Audit Certificate shall be prepared reflecting the reduction of Purchase Price provided by this Section 9.2(a). Sections 2.5, 2.6, 2.7 and 2.8 shall remain applicable in determining the reduction of Purchase Price attributable to Eliminated Signs. (b) Redefinition of the Term "Business" and Other Amendments to the Agreement. While the parties regard it as unlikely that there will be Eliminated Signs, they recognize that if Sign Structures are removed from the assets being sold to Buyer it will be necessary to adjust and/or amend a number of provisions in the Agreement in addition to the adjustment of Purchase Price set forth in this Section 9.2(a) to reflect such reduction in an economically equitable manner. Rather than attempting to parse through each provision of the Agreement, the parties hereby agree to the following governing rules: (i) in the event Sign Structures are removed from the Assets, the term "Business" shall be redefined by adding the following proviso: "provided, however, the Business shall not include any Sign Structures which under Section 9.2 become Eliminated Signs" and (ii) all other definitions and provisions in the Agreement shall be redefined and amended mutatis mutandis to the extent, if any, required to reflect in an economically equitable manner the elimination of Sign Structures which become Eliminated Signs under this Section 9.2, including by way of illustration but not by way of limitation, the covenant not to compete set forth in Section 10.7, and the right of Seller to use the name Whiteco Outdoor in connection with the Eliminated Signs while they are owned by Seller. 9.3. Consents to Assignment. Anything in this Agreement to the contrary notwithstanding, this Agreement shall not constitute an agreement to assign any Contract, Ground Lease, Personal Property Lease or Signage Occupancy Rights, or any claim or right or any benefit arising thereunder or resulting therefrom, if an attempted assignment thereof, without the consent of a third party thereto, would constitute a breach thereof or in any way adversely affect the rights of Buyer thereunder. If such consent is not obtained, or if an attempted assignment thereof would be ineffective or would affect the rights thereunder so that Buyer would not receive all such rights, Seller, Partnership and Buyer will cooperate, in all reasonable respects, to obtain such consent as soon as practicable and, until such consent is obtained, to provide to Buyer the benefits under any Contract, Ground Lease, Personal Property Lease or Signage Occupancy Rights to which such consent relates (with Buyer responsible for all the liabilities and obligations thereunder). In particular, in the event that any such consent is not obtained prior to Closing, then Buyer, Seller and/or Partnership shall enter into such arrangements (including subleasing or subcontracting if permitted) to provide to the parties the economic and operational equivalent of obtaining such consent and assigning such Contract, Ground Lease, Personal Property Lease or Signage Occupancy Rights including enforcement for the benefit of Buyer of all claims or rights arising thereunder, and the performance by Buyer of the obligations thereunder. 42 48 ARTICLE X. ACTIONS BY BUYER, SELLER AND PARTNERSHIP AFTER THE CLOSING 10.1. Further Actions. On and after the Closing Date, Buyer, Seller and Partnership will take all appropriate actions and execute all documents, instruments or conveyances of any kind which may be reasonably necessary or advisable to confirm or effect Buyer's ownership, possession and control (in accordance with this Agreement) of the Assets and assumption of the Assumed Liabilities. 10.2. Survival of Representations, Etc. No claim or cause of action for the Indemnification provided by Section 10.4 shall be brought by Buyer under Section 10.4(a)(i) more than one year after the Closing Date except for claims under Sections 4.4, the first paragraph of Section 4.5, Section 4.5(a), and Section 4.21. Claims or causes of action by Buyer for Indemnification for matters excluded under the preceding sentence and under Sections 10.4(a)(ii), 10.4(a)(iii), 10.4(a)(iv), 10.4(a)(v), 10.4(a)(vi), and 10.4(a)(vii) shall survive until the expiration of the applicable statute of limitations (with extensions) plus forty-five (45) days with respect to the matters addressed in such Sections. Each covenant and agreement contained herein shall survive the Closing and remain in full force and effect unless otherwise limited by its terms. This termination of the representations and warranties provided herein shall not affect the rights of a party in respect of any Claim made by such party in a writing received by the other party prior to the expiration of the applicable survival period provided herein. 10.3. Books and Records. (a) Of Buyer. Buyer agrees that it will cooperate with and make available to Seller and Partnership, during normal business hours, all Books and Records, information and employees (without substantial disruption of employment) which are necessary or useful in connection with any tax inquiry, audit, investigation or dispute, any litigation or investigation or any other matter requiring any such Books and Records, information or employees for any reasonable business purpose; it being understood that all Books and Records shall be maintained by Buyer for seven (7) years following the Closing. Except as otherwise required in Section 10.4, Seller and Partnership shall bear all of the out-of-pocket costs and expenses (including, without limitation, attorneys' fees, but excluding reimbursement for salaries and employee benefits) reasonably incurred in connection with providing such Books and Records, information or employees. All information received pursuant to this Section 10.3 shall be subject to the confidentiality provisions of Section 10.8. (b) Of Seller and Partnership. Seller and Partnership agree that they will cooperate with and make available to Buyer, during normal business hours, all books and records, information and employees (without substantial disruption of employment) which are necessary or useful in connection with any tax inquiry, audit, investigation or dispute, any litigation or 43 49 investigation or any other matter requiring any such books and records, information or employees for any reasonable business purpose; it being understood that all books and records shall be maintained by Seller and Partnership for seven (7) years following the Closing. Except as otherwise required in Section 10.4, Buyer shall bear all of the out-of-pocket costs and expenses (including, without limitation, attorneys' fees, but excluding reimbursement for salaries and employee benefits) reasonably incurred in connection with providing such books and records, information or employees. All information received pursuant to this Section 10.3 shall be subject to the confidentiality provisions of Section 10.8. 10.4. Indemnification. (a) By Seller. Seller shall indemnify, save and hold harmless Buyer, its Affiliates, and their respective directors, officers, shareholders and employees (the "Buyer Indemnitees ") from and against any and all necessary and required costs, losses, Taxes, liabilities, damages, lawsuits, deficiencies, claims, demands, and expenses (whether or not arising out of third party claims), including, without limitation, reasonable attorneys' fees and all reasonable amounts paid in investigation, defense or settlement of any of the foregoing herein, (collectively, "Damages"), incurred in connection with, arising out of, or resulting from (i) subject to Section 10.4(f)(i) and 10.4(f)(iv), any breach of any representation or warranty made by Seller or Partnership in this Agreement or the failure of any representation or warranty made by Seller or Partnership in this Agreement to be true and correct in all material respects at and as of the Closing Date, except for such changes as are contemplated by this Agreement; (ii) subject to Section 10.4(f)(i), any breach of any covenant or agreement made by Seller or Partnership in this Agreement; (iii) waiver of any requirements of the Bulk Sales Act, as provided in Section 10.5; (iv) the existence of Environmental Liabilities for Facilities Real Property including, without limitation, liabilities arising from Facilities Real Property repurchased by Seller pursuant to Section 6.4(b)(v); (v) third party claims against Buyer arising out of any violation of any applicable Environmental Law as a result of occupancy of the premises at Ground Leases which Buyer elects to cause Seller to reassume in accordance with Section 6.4(b)(vi); (vi) for a period of twelve (12) months from the Closing Date, third party claims against Buyer arising out of any violations of any applicable Environmental Law as a result of occupancy of the premises at Ground Leases which Buyer does not elect to cause Seller to reassume in accordance with Section 6.4(b)(vi); and (vii) any third party claim arising out of Excluded Liabilities. (b) By Buyer. Buyer shall indemnify, save and hold harmless Seller and Partnership, and their respective directors, officers, shareholders and employees (the "Seller Indemnitees" and together with the Buyer Indemnitees, the "Indemnitees") from and against any and all Damages incurred in connection with, arising out of, or resulting from (i) subject to Section 10.4(f)(ii) and Section 10.4(f)(iv), any breach of any representation or warranty made by Buyer in this Agreement or the failure of any representation or warranty made by Buyer in this Agreement to be true and correct in all material respects at and as of the Closing Date; (ii) subject to Section 10.4(f)(ii), any breach of any covenant or agreement made by Buyer in this Agreement; (iii) any Assumed Liability or any third party claims related to Assumed Liabilities; or (iv) any matters arising out of Buyer's actions with respect to Future Use Rights. 44 50 (c) The term "Damages" as used in this Section 10.4 is not limited to matters asserted by third parties, but includes Damages incurred or sustained by an Indemnitee in the absence of third party claims. Payments by an Indemnitee of amounts for which such Indemnitee is indemnified hereunder shall not necessarily be a condition precedent to recovery. (d) Defense of Claims. If a claim for Damages (a "Claim") is to be made by an Indemnitee, such Indemnitee shall, subject to Section 10.2, give written notice (a "Claim Notice") to the indemnifying party as soon as practicable after such Indemnitee becomes aware of any fact, condition or event which may give rise to Damages for which indemnification may be sought under this Section 10.4. If any lawsuit or enforcement action is filed against any Indemnitee hereunder, notice thereof (a "Third Party Notice") shall be given to the indemnifying party as promptly as practicable (and in any event within fifteen (15) calendar days after the service of the citation or summons). The failure of any indemnified party to give timely notice hereunder shall not affect rights to indemnification hereunder, except to the extent that the indemnifying party demonstrates actual damage caused by such failure. After receipt of a Third Party Notice, if the indemnifying party shall acknowledge in writing to the indemnified party that the indemnifying party shall be obligated under the terms of its indemnity hereunder in connection with such lawsuit or action, then the indemnifying party shall be entitled, if it so elects, (i) to take control of the defense and investigation of such lawsuit or action, (ii) to employ and engage attorneys of its own choice to handle and defend the same, at the indemnifying party's cost, risk and expense unless the named parties to such action or proceeding include both the indemnifying party and the indemnified party and the indemnified party has been advised in writing by counsel that there may be one or more legal defenses available to such indemnified party that are different from or additional to those available to the indemnifying party, and (iii) to compromise or settle such claim, which compromise or settlement shall be made only with the written consent of the indemnified party, such consent not to be unreasonably withheld. The indemnified party shall cooperate in all reasonable respects with the indemnifying party and such attorneys in the investigation, trial and defense of such lawsuit or action and any appeal arising therefrom; and the indemnified party may, at its own cost, participate in the investigation, trial and defense of such lawsuit or action and any appeal arising therefrom. The parties shall also cooperate with each other in any notifications to insurers. If the indemnifying party fails to assume the defense of such claim within fifteen (15) calendar days after receipt of the Third Party Notice, the indemnified party against which such claim has been asserted will (upon delivering notice to such effect to the indemnifying party) have the right to undertake the defense, compromise or settlement of such claim and the indemnifying party shall have the right to participate therein at its own cost; provided, however, that such claim shall not be compromised or settled without the written consent of the indemnifying party, which consent shall not be unreasonably withheld. If the indemnified party shall reject any settlement which provides for a release of the indemnified party, the indemnifying party shall not be liable for any damages in excess of the proposed settlement amount. In the event the indemnified party assumes the defense of the claim, the indemnified party will keep the indemnifying party reasonably informed of the progress of any such defense, compromise or settlement. (e) Brokers and Finders. Pursuant to the provisions of this Section 10.4, each of Buyer, Seller and Partnership shall indemnify, hold harmless and defend the other party from the payment of any and all broker's and finder's expenses, commissions, fees or other forms of 45 51 compensation which may be due or payable from or by the indemnifying party, or may have been earned by any third party acting on behalf of the indemnifying party in connection with the negotiation and execution hereof and the consummation of the transactions contemplated hereby. (f) Limitations. (i) Seller shall be liable to Buyer for all Damages with respect to the matters contained in Section 10.4(a)(i) or Section 10.4(a)(ii) once the Damages therefrom exceed, in the aggregate, $100,000; provided that Seller and Partnership shall not be liable for all such Damages in Sections 10.4(a)(i) and 10.4(a)(ii) in excess of the Purchase Price; and provided further that Damages with respect to the representations and warranties contained in Section 4.21 shall not be subject to the limitations of the immediately preceding clause of this Section 10.4(f)(i). (ii) Buyer shall be liable to Seller or Partnership for all Damages with respect to the matters contained in Section 10.4(b)(i) or Section 10.4(b)(ii) once the Damages therefrom exceed, in the aggregate, $100,000, provided that Buyer shall not be liable for such Damages in excess of the Purchase Price. (iii) Following the consummation of the Closing, the indemnity provisions in this Agreement are the exclusive remedy for any misrepresentations, breaches of representations, warranties or covenants or any other claims relating in any way to this Agreement or the transactions contemplated hereby, provided, however, that nothing herein shall limit the right of either party to seek specific performance or other injunctive relief with respect to any breach of a covenant. The parties hereto agree that Partnership shall have no liability hereunder and the Buyer agrees that no claim shall be made against Partnership. (iv) No claim based on a breach of any representation or warranty or the failure of any representation or warranty to be true and correct in all material respects shall be valid unless first made in writing within the survival period set forth in Section 10.2. 10.5. Bulk Sales. It may not be practicable to comply or attempt to comply with the procedures of the "Bulk Sales Act" or similar law of any or all of the states in which the Assets are situated or of any other state which may be asserted to be applicable to the transactions contemplated hereby. Accordingly, Buyer, Seller and Partnership waive any requirements, to the extent they are entitled to benefits thereunder, for compliance with any or all of such laws. 10.6. Taxes and Asset Allocation. (a) Asset Allocation. Subject to the division of Purchase Price made in Section 2.3, Buyer, Seller and the Partnership agree that the aggregate fair market value of the Assets, the Future Use Rights Agreement and Buyer's right of first refusal to purchase Seller's ownership interest in Profile (the "Aggregate Fair Market Value") will be appraised by the appraisal firm of Buyer's selection. The fees and expenses related to such appraisal shall be paid by Buyer. Buyer shall prepare one or more IRS Form 8594 reflecting the Aggregate Fair Market 46 52 Value as found by the appraisal firm of Buyer's selection reasonably acceptable to Seller and such other information as required by the form, and shall forward it within 120 days after Closing to Seller and the Partnership for their approval, which approval shall not be unreasonably withheld, conditioned or delayed. Buyer, Seller and the Partnership shall each file with their respective federal income Tax Return for the tax year in which the Closing occurs, IRS Form 8594 containing the information agreed upon by the parties pursuant to the immediately preceding sentence. Buyer agrees to report the purchase of the Assets, and Seller and Partnership each agree to report the sale of such assets on all federal, state and local Tax Returns in a manner consistent with the information agreed upon by the parties pursuant to this section and contained in its IRS Form 8594. Notwithstanding any other provision of this Agreement, the provisions of this Section 10.6(b) shall survive the Closing without limitation. 10.7. Covenant Not To Compete. For a period of five (5) years following the Closing, Seller, Partnership, Dean White, John Peterman and Dennis Kackos shall not, directly or indirectly (i) engage in, own, operate, be employed by, consult with, assist or advise any business that competes, directly or indirectly, with the Business in any state in the United States in which the Business is currently conducted; provided, however, that the following activities shall not be deemed a violation of this covenant: (a) the permitting and construction of signs so long as such signs are used solely in connection with other activities of Seller or such signs are sold to others, and in either case no advertising is sold directly or indirectly by Seller or an Affiliate or agent of Seller on such signs and (b) the leasing or licensing of real estate to other persons for the purpose of construction of signs, (ii) solicit any customers of the Business; provided, however, that the solicitation of customers of the Business shall not be deemed a violation of this covenant if such solicitation is for the conduct of a sign business outside of the United States or such solicitation is made in connection with activities of Seller which are not restricted under this covenant, or (iii) hire or offer employment to any employee of Seller or Partnership whose employment is continued by Buyer after the Closing Date or any employee of Buyer or any successor or Affiliate of Buyer which is engaged in the Business, unless (a) Buyer first terminates the employment of such employee or gives its prior written consent to such employment or offer of employment (b) such employee contacts Seller regarding employment opportunities, (c) such employee responds to any general solicitation by Seller for employment with Seller or (d) the employment of such employee by Buyer has terminated. Seller and Partnership acknowledge and agree that the time, scope, geographic area and other provisions of this Covenant Not to Compete have been specifically negotiated by sophisticated parties and that such provisions are reasonable under the circumstances. The parties further agree that if, despite the foregoing acknowledgment, a court or other tribunal of competent jurisdiction holds that any of the restrictions of this Covenant Not to Compete are unenforceable, the maximum restrictions of time, scope or geographic area reasonable under the circumstances, as determined by such court or tribunal, shall be substituted for any such restrictions held unenforceable. 10.8. Confidentiality. Seller and Partnership have obtained confidential information relating to the business, operations and assets of Buyer and its Affiliates and are in possession of confidential 47 53 information relating to the Business and the Assets (such information, "Buyer Confidential Information"). Buyer has obtained confidential information relating to the business, operations and assets of Seller and Partnership and their Affiliates, including the Business and the Assets (such information, "Seller Confidential Information"). For a period of five (5) years from the date hereof, Seller and Partnership shall treat the Buyer Confidential Information and Buyer shall treat the Seller Confidential Information, as the case may be, as confidential, preserve the confidentiality thereof, not duplicate or use the Buyer Confidential Information or the Seller Confidential Information, as the case may be, and instruct its respective employees who have had access to the Buyer Confidential Information or the Seller Confidential Information, as the case may be, to keep confidential and not to use any Buyer Confidential Information or Seller Confidential Information, as the case may be, unless the Buyer Confidential Information or the Seller Confidential Information, as the case may be, (i) is now or is hereafter disclosed, through no act or omission of Buyer or its Affiliates or Seller or Partnership or their Affiliates, as the case may be, in a manner making it available to the general public or (ii) is required by law to be disclosed; provided, however, if the Closing does not occur, Seller and Partnership shall have no obligation to keep any Buyer Confidential Information that relates to the Business or the Assets confidential, and if the Closing does occur, Buyer shall have no obligation to keep any Seller Confidential Information that relates to the Business or the Assets confidential. 10.9. Use of Name. (a) Seller and Partnership shall not use the name "Whiteco" or "White" in the United States in any way that is reasonably likely to cause confusion with the use of such names by Buyer in connection with the Business in the United States. 10.10. Maintenance of Net Worth. Following the Closing, Seller shall maintain a net worth (determined in accordance with generally accepted accounting principles) not less than the amounts and for the periods as follows: (a) $150 million from the Closing Date to the first anniversary of the Closing; (b) $100 million from the day after the first anniversary of the Closing to the second anniversary of the Closing; and (c) $50 million from the day after the second anniversary of the closing to (x) the earlier of (i) the eighth anniversary of the Closing or (ii) the expiration of all applicable statutes of limitation or (y) if later, the satisfaction, dismissal or termination of any claims for indemnification outstanding on the date determined under clause (x). ARTICLE XI. MISCELLANEOUS 11.1. Termination. (a) Termination. This Agreement may be terminated at any time prior to Closing: (i) By mutual written consent of Buyer, Seller and Partnership; 48 54 (ii) By Buyer or Seller if the applicable waiting period under the HSR Act shall not have expired without adverse action by the Federal Trade Commission or the Department of Justice on or before February 28, 1999; or (iii) By Buyer or Seller if the Closing has not occurred within (30) days after the applicable waiting period under the HSR Act has expired or been terminated. (b) In the Event of Termination. In the event of termination of this Agreement: (i) Each party will redeliver all documents, work papers and other material of any other party relating to the transactions contemplated hereby, whether so obtained before or after the execution hereof, to the party furnishing the same; (ii) The provisions of the Confidentiality Agreement and Section 10.8 shall continue in full force and effect; and (iii) No party hereto shall have any liability or further obligation to any other party to this Agreement, except (A) as provided in Section 11.2, (B) as stated in subsections (i), (ii) and (iii) of this Section 11.1(b) and (C) except for any willful breach of Section 6.10 occurring prior to the proper termination of this Agreement. 11.2. Liquidated Damages. If (a) the transactions contemplated by this agreement are not consummated due to Buyer's default and on the date which is ten (10) business days after the date the condition set forth in Section 8.5 has been satisfied (or such later date as Buyer and Seller shall mutually agree upon as the Closing Date); (b) neither Seller nor Partnership is in material breach of Section 6.5; (c) the conditions set forth in Sections 8.1, and 8.5 have been satisfied; and (d) Seller and Partnership have made a tender of the documents specified in Sections 8.2, 8.3, 8.4, 8.6, 8.7, 8.8 and 2.1, then and in that event, Buyer shall be obligated to pay to Seller and Partnership, collectively, Ninety-Five Million Dollars ($95,000,000) (the "Liquidated Damages Payment"). The parties acknowledge and agree that it is difficult or impossible to determine with precision the amount of damages that would or might be incurred by Seller and Partnership if the transactions contemplated by this Agreement were not consummated as a result of a material breach by Buyer. It is understood that the Liquidated Damages Payment shall be the sole and exclusive measure of damages with respect to any such occurrence. Once the Liquidated Damages Payment has been made in accordance with the provisions of this Section 11.2, Buyer shall be relieved of any further liability in respect of damages relating to the fact or circumstance giving rise to the Liquidated Damages Payment. 49 55 11.3. Specific Performance. The parties recognize that if, prior to Closing, Seller or Partnership breaches this Agreement and refuses to perform under the provisions of this Agreement, monetary damages alone would not be adequate to compensate Buyer for its injury. Buyer shall therefore be entitled, in addition to any other remedies that may be available (including but not limited to the provisions of Section 10.4 (relating to indemnification)), to obtain specific performance of the terms of this Agreement prior to Closing. If any action is brought by Buyer to enforce this Agreement prior to Closing, Seller and Partnership shall waive the defense that there is an adequate remedy at law. Following the Closing, Buyer shall be entitled, in addition to any other remedies that may be available, to seek specific performance of the terms of this Agreement if such remedy is available at equity. In the event Buyer elects to terminate this Agreement as a result of Seller's or Partnership's default instead of seeking specific performance, Buyer shall be entitled to recover Buyer's damages. 11.4. Representations and Warranties Relating to the Signage Properties and Disclosures Thereof. Buyer agrees that it is accepting the Signage Properties "as is, where is, with all faults" and that such transfer is being made without any representation or warranty of any kind express or implied including any warranty of future income potential, or future operation expense, use, merchantability or fitness for a particular purpose, or quality with respect to any of the Signage Properties being so transferred, or as to the condition or workmanship thereof or the absence of any defects therein, whether latent or patent or whether properly permitted or licensed (collectively, the "Sign Property Conditions") all of which representations and warranties are hereby renounced by Seller and Partnership. However, Seller and Partnership do represent and warrant that the Sign Property Conditions are not materially different from the Sign Property Conditions as they have existed during the preceding four year period. 11.5. Assignment. Neither this Agreement, the Ancillary Agreements nor any of the rights or obligations hereunder or thereunder may be assigned by any party without the prior written consent of the other parties thereto; except that Buyer may, without such consent, assign all such rights to any lender as collateral security and assign all such rights and obligations to a wholly-owned subsidiary (or a partnership controlled by Buyer) of Buyer. 11.6. Notices. All notices under this Agreement shall be in writing and shall be deemed to have been duly given when received if personally delivered; when transmitted if transmitted by telecopy, electronic or digital transmission method provided that such transmission is confirmed by telephone; the day after it is sent, if sent for next day delivery to a domestic address by overnight mail; and upon receipt, if sent by certified or registered mail, return receipt requested. In each case notice shall be sent to: 50 56 If to Seller, addressed to: Whiteco Industries, Inc. 1000 E. 80th Place Suite 700 North Merrillville, Indiana 46410 Attention: Ann Bowman With a copy to: Chadbourne & Parke LLP 30 Rockefeller Plaza New York, New York 10112 Attention: Donald Schapiro If to Partnership, addressed to: Metro Management Associates c/o Whiteco Industries, Inc. 1000 E. 80th Place Suite 700 North Merrillville, Indiana 46410 Attention: Dennis Kackos With a copy to: Chadbourne & Parke LLP 30 Rockefeller Plaza New York, New York 10112 Attention: Donald Schapiro If to Buyer, addressed to: 300 Crescent Court Suite 600 Dallas, Texas 75201 Attention: Eric Neuman With a copy to: Latham & Watkins 1001 Pennsylvania Avenue, N.W., Suite 1300 Washington, D.C. 20004 Attention: Eric L. Bernthal If to Dean White, John Peterman or Dennis Kackos, addressed to: 51 57 c/o Whiteco Industries, Inc. 1000 E. 80th Place Suite 700 North Merrillville, Indiana 46410 With a copy to: Chadbourne & Parke LLP 30 Rockefeller Plaza New York, New York 10112 Attention: Donald Schapiro or to such other place and with such other copies as any party may designate as to itself by written notice to the others. 11.7. Choice of Law. This Agreement shall be construed, interpreted and the rights of the parties determined in accordance with the internal law, and not the law of conflicts, of the State of New York. 11.8. Amendments and Waivers. This Agreement, the Ancillary Agreements, together with all exhibits and schedules hereto and thereto (including the Disclosure Schedule), and the Confidentiality Agreement constitutes the entire agreement among the parties pertaining to the subject matter hereof and supersedes all prior agreements, understandings, negotiations and discussions, whether oral or written, of the parties. This Agreement may not be amended or supplemented except by an instrument in writing signed on behalf of each of the parties hereto. No modification or waiver of this Agreement shall be binding unless executed in writing by the party to be bound thereby. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provision hereof (whether or not similar), nor shall such waiver constitute a continuing waiver unless otherwise expressly provided. 11.9. Multiple Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 11.10. Expenses. Except as otherwise specified in this Agreement, each party hereto shall pay its own legal, accounting, out-of-pocket and other expenses incident to this Agreement and to any action taken by such party in preparation for carrying this Agreement into effect. 52 58 11.11. Invalidity. In the event that any one or more of the provisions contained in this Agreement or in any other instrument referred to herein, shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, then to the maximum extent permitted by law, such invalidity, illegality or unenforceability shall not affect any other provision of this Agreement or any other such instrument. 11.12. Titles. The titles, captions or headings of the Articles and Sections herein are inserted for convenience of reference only and are not intended to be a part of or to affect the meaning or interpretation of this Agreement. 11.13. Publicity. Except as otherwise required by applicable law, neither Buyer, Seller or Partnership shall issue any press release or make any public or private statement or disclosure regarding the existence, nature, terms or conditions of the transactions contemplated hereby (other than such disclosure to Seller's and Partnership's key employees as Seller or Partnership deem appropriate) prior to the Closing Date, without prior approval of the other parties. 11.14. Arbitration. Notwithstanding anything herein to the contrary, in the event that there shall be a dispute among the parties after the Closing arising out of or relating to this Agreement, including, without limitation, the indemnities provided in Article X, the parties agree that such dispute shall be submitted to binding arbitration in New York, New York, before a before a panel of three arbitrators, one selected by the Buyer, one selected by the Seller and one selected by the two arbitrators so selected and otherwise in accordance with the rules of commercial arbitration of the American Arbitration Association. Any award issued as a result of such arbitration shall be final and binding between the parties thereto, and shall be enforceable by any court having jurisdiction over the party against whom enforcement is sought. The fees and expenses of such arbitration (including reasonable attorneys' fees) or any action to enforce an arbitration award shall be paid by the party that does not prevail in such arbitration. 11.15. Knowledge. Whenever this Agreement refers to the "knowledge of Seller," "knowledge of Partnership" or a similar phrase, it refers to the collective actual knowledge of Dean V. White, John M. Peterman, John R. Ayers, Dennis Kackos, Mark Harris, Gina Crist, Ann Bowman, John Savey and Richard Mostak. Whenever this Agreement refers to "knowledge of Buyer" or a similar phrase, it refers to the collective actual knowledge of directors and key management employees of Buyer. 53 59 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed on their respective behalf, by their respective officers thereunto duly authorized, all as of the day and year first, above written WHITECO INDUSTRIES, INC. By: /s/ DEAN V. WHITE ------------------------------------ Name: Dean V. White Title: Chairman of the Board METRO MANAGEMENT ASSOCIATES By: /s/ DENNIS KACKOS ------------------------------------ Name: Dennis Kackos Title: General Partner CHANCELLOR MEDIA CORPORATION OF LOS ANGELES By: /s/ JEFFREY MARCUS ------------------------------------ Name: Jeffrey Marcus Title: Chief Executive Officer FOR PURPOSES OF SECT10N 10.7 ONLY: DEAN WHITE /s/ DEAN WHITE --------------------------------------- JOHN PETERMAN /s/ JOHN PETERMAN --------------------------------------- DENNIS KACKOS /s/ DENNIS KACKOS --------------------------------------- 54 60 FOR PURPOSES OF SECTION 10.10 AS WELL: DEAN WHITE /s/ DEAN WHITE --------------------------------------- 55 EX-3.93 3 AGREEMENT OF LIMITED PARTNERSHIP OF MARTIN MEDIA 1 EXHIBIT 3.93 THIRD AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT OF MARTIN MEDIA, A California Limited Partnership (formerly COLORADO RIVER MARKETS, A California Limited Partnership) 2 TABLE OF CONTENTS
Page ---- ARTICLE 1. DEFINITIONS ...................................................................1 1.1. Act ...............................................................................1 1.2. Affiliate .........................................................................1 1.3. Affiliate Transaction .............................................................2 1.4. Agreement .........................................................................2 1.5. Asset Sale ........................................................................2 1.6. Asset Sale Proceeds ...............................................................2 1.7. Assignee ..........................................................................2 1.8. Available Asset Sale Proceeds .....................................................2 1.9. Bankruptcy; Bankrupt ..............................................................2 1.10. Bankrupt Limited Partner .........................................................3 1.11. Book Value .......................................................................3 1.12. Business Day .....................................................................3 1.13. Capital Account ..................................................................3 1.14. Cash Available for Distribution ..................................................3 1.15. Capital Contribution .............................................................3 1.16. Capital Transactions .............................................................3 1.17. Certificate of Limited Partnership ...............................................3 1.18. Change of Control ................................................................3 1.19. Change of Control Offer ..........................................................4 1.20. Change of Control Payment Date ...................................................4 1.21. Change of Control Purchase Price .................................................4 1.22. Code .............................................................................4 1.23. Credit Agreement .................................................................4 1.24. Dissolved; Dissolution ...........................................................4 1.25. Distribution .....................................................................4 1.26. Exchange Act .....................................................................4 1.27. General Partner ..................................................................4 1.29. Incompetent; Incompetency ........................................................5 1.30. Initial Warrants .................................................................6 1.31. Kunz Subsequent Acquisition ......................................................6 1.32. Limited Partner ..................................................................6 1.33. Martin & MacFarlane ..............................................................6 1.34. Majority of the Limited Partners .................................................6 1.35. Minimum Gain .....................................................................6 1.36. Net Income; Net Loss .............................................................6 1.37. Nonrecourse Liability ............................................................7 1.38. Notice of Proposed Sale ..........................................................7 1.39. Partner ..........................................................................7
(i) 3 1.40. Partner-Funded Debt ...............................................................7 1.41. Partnership .......................................................................7 1.42. Partnership Assets ................................................................7 1.43. Person ............................................................................7 1.44. Preferred Limited Partnership Units ...............................................7 1.45. Preferred Return ..................................................................7 1.46. Preferred Unit Certificates .......................................................7 1.47. Preferred Units; Units of Preferred Limited Partnership Interests .................7 1.48. Preferred Units Capital Account Amount ............................................8 1.49. Purchase Agreement ................................................................8 1.50. Quarterly Warrants ................................................................8 1.51. Record Date .......................................................................8 1.53. Redemption Date ...................................................................8 1.54. Redemption Notice .................................................................8 1.55. Regulatory Allocations ............................................................8 1.56. Selling Limited Partner ...........................................................8 1.58. Temporary Cash Investments ........................................................9 1.59. Time of Purchase ..................................................................9 1.60. Transfer ..........................................................................9 1.61. Units: Units of Common Partnerships Interests .....................................9 1.62. U.S. Government Obligations........................................................9 1.63. Warrants ..........................................................................9 1.64. Warrants Agreement ................................................................9 1.65. Warrants Units ....................................................................9 ARTICLE 2. ORGANIZATION ...................................................................9 2.1. Formation ..........................................................................9 2.2. Name ...............................................................................9 2.3. Principal Office ..................................................................10 2.4. Agent for Service of Process ......................................................10 2.5. Term of the Partnership ...........................................................10 2.6. Purposes ..........................................................................10 ARTICLE 3. CAPITAL CONTRIBUTIONS AND FINANCING ...........................................10 3.2. Units Upon Execution of Agreement .................................................10 3.3. Loans by a Partner ................................................................10 3.4. Withdrawal of Capital .............................................................10 3.5. Redemption ........................................................................10 3.6. Loans from the Partnership ........................................................11 3.7. Additional Capital Contributions and Admission of New Partners ....................11 ARTICLE 4. ACCOUNTING ....................................................................12 4.1. Capital Accounts ..................................................................12
(ii) 4 4.2. Fiscal Year, Tax Matters Partner ..................................................13 4.3. Books and Records to be Maintained ................................................13 4.4. Information to be Provided to the Limited Partners ................................13 4.5. Interim Closing of the Books ......................................................14 4.6. Tax Withholding ...................................................................14 ARTICLE 5. NET INCOME AND NET LOSS; DISTRIBUTIONS ........................................14 5.1. Allocation of Income and Loss .....................................................14 5.2. Built-in Gain .....................................................................15 5.3. Minimum Gain Chargeback ...........................................................15 5.4. Qualified Income Offset ...........................................................15 5.5. Partner-Funded Debt ...............................................................16 5.6. Curative Allocations ..............................................................16 5.7. Excess Non-Recourse Liability Safe Harbor .........................................16 5.8. Treatment of Interest to Partners .................................................16 5.9. Transfer During Taxable Year ......................................................16 5.10. Depreciation Recapture ...........................................................17 5.11. Economic Allocations .............................................................17 5.12. Distributions ....................................................................17 5.13. Distributions Limitation .........................................................18 5.14. Cash Distributions in respect of Preferred Units .................................18 ARTICLE 6. RIGHTS AND DUTIES OF THE GENERAL PARTNER ......................................18 6.1. General Partner Compensation; Expenses ............................................18 6.2. Partnership Expenses ..............................................................19 6.3. Time Devoted to the Partnership ...................................................19 6.4. Partnership Governance ............................................................20 6.5. Competing Interests ...............................................................21 6.6. Restriction on Powers of the General Partner ......................................21 6.7. Limitation on General Partner Liability ...........................................21 6.8. Indemnification of General Partner ................................................21 6.9. Certain Transactions; General Partner Agreements ..................................22 6.10. Warrants .........................................................................22 ARTICLE 7. RIGHTS AND DUTIES OF LIMITED PARTNERS .........................................22 7.1. Basic Rights ......................................................................22 7.2. Prohibition Against Involvement in Management .....................................23 7.3. Acts Not Constituting Management ..................................................23
(iii) 5 ARTICLE 8. VOTING, MEETINGS AND PROXIES ..................................................23 8.1. Actions Requiring Approval by the Limited Partners ................................23 8.2. Actions Requiring Unanimous Consent of the Limited Partners .......................23 8.3. Meetings - Place ..................................................................24 8.4. Meetings - Calling ................................................................24 8.5. Meetings - Notice .................................................................24 8.6. Meetings - Quorum .................................................................24 8.7. Written Consent Without Meeting ...................................................25 8.8. Proxies ...........................................................................25 ARTICLE 9. DISPOSITION OF LIMITED PARTNER INTERESTS ......................................25 9.1. Withdrawal of Limited Partner .....................................................25 9.2. Transfers Restricted ..............................................................25 9.3. Transfers to Trust ................................................................25 9.4. Transfer to a Legal Entity.........................................................26 9.5. Transfer to Beneficial Owners .....................................................26 9.6. Substituted Limited Partner .......................................................26 9.7. Effect of Assignment and Substitution .............................................27 9.8. Assignee's Capital ................................................................27 ARTICLE 10. PURCHASE OPTIONS .............................................................27 10.1. Option to Purchase Interest in Event of Death of a Limited Partner ...............27 10.2. Option to Purchase Interest in the Event of Divorce of a Limited Partner .........28 10.3. Option to Purchase Interest in the Event of Bankruptcy of a Limited Partner ......29 10.4. Option to Purchase Interest in Event of Incompetency of a Limited Partner.........30 10.5. Option to Purchase Interest in the Event of Notice of Proposed Sale to a Third- party Purchaser ................................................................30 10.6. Limitation .......................................................................31 ARTICLE 11. PURCHASE PRICE AND TERMS .....................................................32 11.1. Purchase Price ...................................................................32 11.2. Effective Date ...................................................................32 ARTICLE 12. TERMINATION AND ADMISSION OF A GENERAL PARTNER ...............................32 12.1. Termination of a General Partner .................................................32 12.2. No Removal of General Partner ....................................................33 12.3. Transfer by General Partner ......................................................33 12.4. Permissible Transfers by MW Sign Corp. ...........................................33 12.5. Withdrawal of General Partner ....................................................33 12.6. Additional General Partner .......................................................33 12.7. Termination of General Partner ...................................................33
(iv) 6 ARTICLE 13. DISSOLUTION AND TERMINATION OF PARTNERSHIP ...................................33 13.1. Dissolution and Termination ......................................................33 13.2. Reconstitution ...................................................................34 13.3. Events Not Dissolving the Partnership ............................................34 13.4. Winding Up .......................................................................35 13.5. Waiver of Rights to Court Decree of Dissolution ..................................36 ARTICLE 14. SPECIAL POWER OF ATTORNEY ....................................................36 14.1. Attorney-in-Fact .................................................................36 14.2. Special Provisions ...............................................................37 ARTICLE 15. COVENANTS ....................................................................37 ARTICLE 16. CERTAIN PROVISIONS APPLICABLE TO PREFERRED UNITS .............................38 16.1. Redemption .......................................................................38 16.2. Limitation on Certain Asset Sales ................................................39 16.3. Change of Control ................................................................41 16.4. Subordination Agreement ..........................................................43 ARTICLE 17. MISCELLANEOUS ................................................................43 17.1. Headings .........................................................................43 17.2. Time of Essence ..................................................................43 17.3. Entire Agreement; Modification; Waiver ...........................................43 17.4. Amendment ........................................................................44 17.5. Governing Law ....................................................................44 17.6. Recovery of Litigation Costs .....................................................44 17.7. Severability .....................................................................44 17.8. Notices ..........................................................................45 17.9. Gender and Number ................................................................45 17.10. Additional Documents ............................................................45 17.11. Parties in Interest .............................................................45 17.12. Counterparts ....................................................................45 17.13. Statutory References ............................................................45 17.14. Certificate of Nonforeign Status ................................................45 17.15. Preferred Units Certificates ....................................................45 17.16. .................................................................................46
(v) 7 THIRD AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT OF MARTIN MEDIA, A California Limited Partnership (formerly COLORADO RIVER MARKETS. A California Limited Partnership) This Third Amended and Restated Limited Partnership Agreement is made and entered into by and between MW Sign Corp., a California corporation, as the General Partner, and the Limited Partners shown on Exhibit A, attached and incorporated by this reference. Background A. Colorado River Markets, A California Limited Partnership, was formed on December 19, 1984) with Martin & MacFarlane, Inc., a California corporation, as General Partner, and was operated in accordance with a Limited Partnership Agreement dated December 18, 1984, as amended until on or about August 22, 1991. B. On or about August 22, 1991, in accordance with the First Amended and Restated Limited Partnership Agreement (adopted by unanimous written consent of the Partners), Martin & MacFarlane, Inc., transferred its interest as General Partner to MW Sign Corp., who was admitted as the General Partner, and the name of the Partnership was changed from Colorado River Markets, A California Limited Partnership, to Martin Media, A California Limited Partnership. C. Effective as of September 30, 1991, the Partners executed a Second Amended and Restated Limited Partnership Agreement for the Partnership. D. Effective as of May 1, 1996, the Partners executed a First Amendment to Second Amended and Restated Limited Partnership Agreement for the Partnership. E. Effective as of January 1, 1997, the Partners executed a Second Amendment to Second Amended and Restated Limited Partnership Agreement for the Partnership. The Partners desire to amend and restate the agreement of the parties. ARTICLE 1. DEFINITIONS. 1.1 Act. The California Revised Limited Partnership Act. 1.2. Affiliate. Any Person directly or indirectly through one or more intermediaries controlling, controlled by or under common control with another Person. The term "control" (including the terms "controlled by" and "under common control with") means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise. Notwithstanding the foregoing, no holder of Preferred Units, Warrants or Warrant Units, as such, shall be deemed an Affiliate of the Partnership or the General Partner. 8 1.3. Affiliate Transaction. As defined in Section 15.1(b). 1.4. Agreement. This Third Amended and Restated Limited Partnership Agreement, as amended from time to time in accordance with the provisions hereof. 1.5. Asset Sale. The sale, transfer or other disposition (other than to the Partnership or any of its wholly-owned Subsidiaries) in any single transaction or series of related transactions of (a) any capital stock of or other equity interest in any Subsidiary of the Partnership, (b) real property interest in or/real property (other than real property or interest in real property) or (c) all or substantially all of the assets (other than real property or interest in real property) of any business, or part thereof, owned by the Partnership or any Subsidiary thereof, or a division, line of business or comparable business segment of the Partnership or any Subsidiary thereof. Any transaction constituting a Change of Control shall not be deemed to be an Asset Sale. 1.6. Asset Sale Proceeds. With respect to any Asset Sale, (i) cash received by the Partnership or any Subsidiary from such Asset Sale, after (a) provision for all income tax distributions or other taxes measured by or resulting from such Asset Sale, (b) payment of all brokerage commissions, underwriting and other fees and expenses related to such Asset Sale, (c) provision for minority interests in any Subsidiary as a result of such Asset Sale and (d) deduction of appropriate amounts to be provided by the Partnership or a Subsidiary as a reserve, in accordance with generally accepted accounting principles, against any liabilities associated with the assets sold or disposed of in such Asset Sale and retained by the Partnership or a Subsidiary after such Asset Sale, including without limitation, pension and other postemployment benefit liabilities and liabilities related to environmental matters or against any indemnification obligations associated with assets sold or disposed of in such Asset Sale, and (ii) promissory notes and other non-cash consideration received by the Partnership or any Subsidiary from such Asset Sale or other disposition upon the liquidation or conversion of such notes or non-cash consideration into cash. 1.7. Assignee. A Person who has acquired a beneficial interest in this Partnership from a Partner but who is not a substituted Partner. 1.8. Available Asset Sale Proceeds. With respect to any Asset Sale, the aggregate Asset Sale Proceeds from such Asset Sale that have not been applied in accordance with clause (iii)(A) or (iii)(B) of Section 16.2 and which have not been the basis for an Excess Proceeds Offer in accordance with clause (iii)(C) of such Section 16.2. 1.9. Bankruptcy, Bankrupt. Any of the following (a) the filing of a voluntary, petition under any federal or state law for the relief of debtors including the filing of a voluntary petition under any Chapter of Title 11 of the United States Code; (b) the filing of an involuntary proceeding under any such law; (c) the making of a general assignment for the benefit of the assignor's creditors; (d) the appointment of a receiver or trustee of a substantial portion of a Person's assets; (e) the seizure by a sheriff, receiver or trustee of a substantial portion of a Person's assets; provided that no bankruptcy shall occur in the case of an event described in clause (b), (d) or (e) above, until the proceeding, appointment or seizure has been pending or has been in force for sixty (60) days. -2- 9 1.10. Bankrupt Limited Partner. As defined in Section 10.3. 1.11. Book Value. The amount carried on the books of the Partnership for financial accounting purposes. 1.12. Business Day. A day that is not a Saturday, a Sunday or a day on which banking institutions in the State of New York or in the State of California are not required to be open. 1.13. Capital Account. As defined in Section 4.1. 1.14. Cash Available for Distribution. The excess of the Partnership's positive cash flow over the Partnership's working capital needs. The Partnership's positive cash flow shall mean the excess of cash receipts over cash disbursements for any given period. The Partnership's working capital needs shall be determined by the General Partner and shall include, but not be limited to, reasonable reserves for current and future operating expenses, debt service, contingencies and emergencies. The terms of the Partnership's borrowings as negotiated by the General Partner may severely restrict Cash Available for Distribution. 1.15. Capital Contribution. With respect to any Partner at any time, the aggregate amount of cash and the Gross Asset Value of any property (other than cash) contributed to the Partnership by such Partner as of such time. 1.16. Capital Transactions. Any of the following: (i) any sale, exchange, taking by eminent domain, damage, destruction or other disposition of all or any part of the assets of the Partnership, other than tangible personal property disposed of in the ordinary course of business; or (ii) any financing or refinancing of any Partnership indebtedness; provided however, that the receipt by the Partnership of Capital Contributions shall not constitute Capital Transactions. 1.17. Certificate of Limited Partnership. The certificate referred to in Section 15621 of the Act and any amendments thereto. 1.18. Change of Control. 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 however effected, including, without limitation, by way of merger or reorganization) of assets of the Partnership or Subsidiaries thereof, which assets constitute all or substantially all of the assets of the Partnership and its Subsidiaries, taken as a whole, to any Person or group of related Persons for purposes of Section 13(d) of the Exchange Act (a "Group"), together with any Affiliates thereof; (ii) the approval by the General Partner or Partners of any plan or proposal for the liquidation or dissolution of the Partnership or an event of dissolution as described in Section 13.1(c) occurs; (iii) E. Thomas Martin and David B. Weyrich, individually or in the aggregate, shall cease to beneficially own (for purposes of this definition, within the meaning of Rule 13d-3 under the Exchange Act), directly or indirectly, voting capital stock of the Managing General Partner (as defined in the last sentence of this definition) representing more than 50% of all such outstanding voting common stock; (iv) any Person or Group (other than E. Thomas Martin and David B. Weyrich) shall become the owner, directly or indirectly, beneficially or of record, of Units representing more than a 50% interest in the profits, losses and distributions of the -3- 10 Partnership or 50% or more of the Units then outstanding; (v) the replacement of a majority of the Board of Directors of the Managing General Partner over a two-year period from the directors who constituted the Board of Directors of the Managing General Partner at the beginning of such period, and such replacement shall not have been approved by a vote of at least two-thirds of the Board of Directors of the Managing General Partner then still in office who either were members of such Board of Directors at the beginning of such period or whose election as a member of such Board of Directors was previously so approved; or (vi) the occurrence of any "Change of Control" as defined in the Credit Agreement either as in effect on the date hereof or as defined in such Agreement as the same may hereafter be amended. The Managing General Partner of the Partnership means each general partner thereof that has sole power, directly or indirectly, to take all of the actions that any and all general partners are entitled or required to take under this Agreement, as in effect at the Time of Purchase. 1.19. Change of Control Offer. As defined in Section 16.3. 1.20. Change of Control Payment Date. As defined in Section 16.3. 1.21. Change of Control Purchase Price. As defined in Section 16.3. 1.22. Code. The Internal Revenue Code of 1986, as amended, or corresponding provisions of subsequent federal revenue laws. 1.23. Credit Agreement. The Second Amended and Restated Credit Agreement, dated as of July 31, 1997, among the Partnership, the General Partner, the Lenders, the Administrative Agent and the Co-Agent (as such terms are defined therein), as amended by Amendment No. 3 thereto, dated as of December 23, 1997, as the same may be amended from time to time. 1.24. Dissolved; Dissolution. The termination of a trust or an estate or the dissolution of a partnership, corporation or other legal entity as determined by applicable state law. 1.25. Distribution. The transfer of money or property by the Partnership to a Partner without consideration. 1.26. Exchange Act. The Securities Exchange Act of 1934, as amended. 1.27. General Partner. MW Sign Corp. or any Person succeeding it as General Partner or any subsequently admitted General Partner. 1.28. Gross Asset Value means, with respect to any asset, the asset's adjusted basis for federal income tax purposes, except as follows: (a) The initial Gross Asset Value of any asset contributed by a Partner to the Partnership shall be the gross fair market value of such asset, as determined by the General Partner and the contributing Partner. -4- 11 (b) The Gross Asset Values of all Partnership assets immediately prior to the occurrence of any event described in subsections (i) through (iv) hereof shall be adjusted to equal their respective gross fair market values, as determined by the General Partner using such reasonable method of valuation as it may adopt in its reasonable discretion as of the following times: (i) the acquisition of an interest in the Partnership by a new or existing Partner in exchange for more than a de minimis Capital Contribution, if the General Partner reasonably determines that such adjustment is necessary or appropriate to reflect the relative economic interests of the Partners in the Partnership; (ii) the distribution by the Partnership to a Partner of more than a de minimis amount of Partnership Assets as consideration for an interest in the Partnership, if the General Partner reasonably determines that such adjustment is necessary or appropriate to reflect the relative economic interests of the Partners in the Partnership; (iii) the liquidation of the Partnership within the meaning of Regulation Section 1.704-1(b)(2)(ii)(g); and (iv) at such other times as the General Partner shall reasonably determine necessary or advisable in order to comply with Regulation Sections 1.704-1(b) and 1.704-2. (c) The Gross Asset Value of any Partnership Asset distributed to a Partner shall be the gross fair market value of such asset on the date of distribution as reasonably determined by the General Partner. (d) The Gross Asset Values of Partnership Assets shall be increased (or decreased) to reflect any adjustments to the adjusted basis of such assets pursuant to Code Section 734(b) or Code Section 743(b), but only to the extent that such adjustments are taken into account in determining Capital Accounts pursuant to Regulation Section 1.704-1(b)(2)(iv)(m); provided, however, that Gross Asset Values shall not be adjusted pursuant to this subparagraph (d) to the extent that the General Partner reasonably determines that an adjustment pursuant to subparagraph (b) is necessary or appropriate in connection with a transaction that would otherwise result in an adjustment pursuant to this subparagraph(d). 1.29. Gross Asset Value means, with respect to any asset, the asset's adjusted basis for federal income tax purposes, except as follows: -5- 12 1.30. Initial Warrants. As defined in the Purchase Agreement. 1.31. Kunz Subsequent Acquisition. As defined in the Credit Agreement as in effect on the date hereof. 1.32. Limited Partner. Each of the Persons admitted to the Partnership as a Limited Partner in accordance with this Agreement. For purposes of the Transfer provisions contained in this Agreement, the Persons deemed Limited Partners and spouses are shown on Exhibit A and/or B. 1.33. Martin & MacFarlane shall mean Martin & MacFarlane, Inc., a California corporation. 1.34. Majority of the Limited Partners. Limited Partners holding more than fifty percent (50%) of the Units held by all the Limited Partners. The term "Majority of the Limited Partners" shall be used in lieu of the term "majority-in-interest of the limited partners" as defined in Act Section 16611(u) for all purposes in connection with this Agreement. 1.35. Majority of Preferred Units. Holders of more than 85% of the outstanding Preferred Units at the time of the termination: provided that from and after the date on which CIBC Oppenheimer Corp. has sold (other than to its Affiliates) more than 3.750 of the Preferred Units purchased by it on the date hereof, such percentage shall be 50%. 1.36. Minimum Gain. The amount determined, at the end of a taxable year of the Partnership, by computing, with respect to each Nonrecourse Liability and each Partner-Funded Debt of the Partnership, the amount of net gains from Capital Transactions (of whatever character), if any, that would be realized by the Partnership if it disposed of (in a taxable transaction) the Partnership property subject to such Nonrecourse Liability or Partner-Funded Debt in full satisfaction thereof, and by then aggregating the amounts so computed. For the purpose of determining the amount of such gain, (i) only that portion of the Partnership's Gross Asset Value allocable, pursuant to the Treasury Regulations under Section 704(b) of the Code, to such Nonrecourse Liability or Partner-Funded Debt shall be taken into account, (ii) the Gross Asset Value of Partnership property shall be computed after taking into account depreciation for such year and (iii) the amount of the unpaid principal balance of each Nonrecourse Liability shall be reduced by repayments of all or a portion of such Nonrecourse Liability made during each year. 1.37. Net Income: Net Loss. "Net Income" or "Net Loss" for each taxable year or other period shall be the taxable income or loss of the Partnership determined in accordance with Code section 703(a) (for this purpose, all items of income, gain, loss or deduction required to be separately stated pursuant to Code section 703(a)(1) shall be included in taxable income or loss) using the accrual method of accounting, including tax-exempt income and as adjusted as provided in Treasury Regulations section 1.704-1(b)(2)(iv)(i), but excluding any items that are specially allocated pursuant to Article 5. The amounts of the items of Partnership income, gain, loss or deduction available to be specifically allocated pursuant to Article 5 hereof shall be determined by applying rules analogous to those set forth in this definition of Net Income or Net Loss. Net -6- 13 Income and Net Losses and items thereof shall be determined and allocated with respect to each fiscal year of the Partnership as of the end of such fiscal year. 1.39. Nonrecourse Liability. Has the meaning set forth in Section 1.704-2(b)(3) of the Treasury Regulations. 1.40. Notice of Proposed Sale. As defined in Section 10.5. 1.41. Partner. Any Person who is a limited Partner or a General Partner in the Partnership. 1.42. Partner-Funded Debt. Any non-recourse indebtedness of the Partnership which is loaned or guaranteed by any Partner or is treated as "partner nonrecourse debt" under Section 1.704-2(b)(4) of Treasury Regulations. 1.43. Partnership. The Partnership formed by this Agreement. 1.44. Partnership Assets. All direct and indirect interests in real and personal property owned by the Partnership from time to time, and shall include both tangible and intangible property (including cash). 1.45. Person. An individual, partnership, limited liability company, trust, estate, association, corporation or other entity, as well as a guardian, trustee, executor, administrator, committee, trustee in bankruptcy, receiver, assignee for the benefit of creditors, conservator or other Person acting in a fiduciary capacity. 1.46. Preferred Limited Partnership Interests. Limited partnership interests having the rights to distributions set forth in Section 5.12(b)(1) and (2) hereof and Section 13.4(b) insofar as such Section refers to Section 5.12(b)(1) and (2) hereof. 1.47. Preferred Return. With respect to a holder of Preferred Units, an amount sufficient to provide to such holder an annual rate of return, compounded quarterly, on the excess (on a weighted average basis during each fiscal year of the Partnership), if any, of (i) the aggregate Capital Contributions previously made (or deemed to be made) by such holder in respect of such Units (increased by all accrued but unpaid Preferred Returns from prior fiscal quarters), over (ii) any distributions received by such holder pursuant to Section 5.12(b)(1) (to the extent the Preferred Returns allocable to such distribution was previously taken into account under (i) above) and Section 5.12(b)(2) equal to (a) 14%, from December 23, 1997 until June 23, 1998; (b) 15%, from June 23, 1998 until September 23, 1998; and (c) 15% plus 50 basis points for each three-month period in which any Preferred Units shall remain outstanding from and after September 23, 1998; provided, however, that the Preferred Return shall not exceed a rate of 20% per annum compounded quarterly. 1.48. Preferred Unit Certificates. As defined in Section 16.1. -7- 14 1.49. Preferred Units Capital Account Amount. The aggregate amount, at the time of determination thereof, of the Capital Accounts for all Preferred Units, determined without giving effect to any Preferred Return previously credited to such Capital Accounts; and, when used with reference to any Preferred Unit, the Preferred Units Capital Account Amount allocable to such Unit. 1.50. Purchase Agreement. The Purchase Agreement, dated as of December 23, 1997, by and among the Partnership, the General Partner and the Purchasers set forth on Schedule I thereto. 1.51. Quarterly Warrants. As defined in the Purchase Agreement. 1.52. Record Date. As defined in Section 11.1(a). 1.53. Redemption Amount. The aggregate amount, at the time of determination thereof, of the Capital Accounts for all Preferred Units plus the Preferred Return for all such Units (to the extent not previously credited to such Capital Accounts) to the applicable Redemption Date or purchase date hereunder; and, when used with reference to any Preferred Unit, the Redemption Amount allocable to such Unit. 1.54. Redemption Date. With respect to any Preferred Units, the date fixed for redemption of such Units pursuant to Section 16.1. 1.55. Redemption Notice. As defined in Section 16.1. 1.56. Regulatory Allocations. Has the meaning set forth in Section 5.6. 1.57. Selling Limited Partner. As defined in Section 10.5. 1.58. Subsidiary. With respect to any specified Person, any corporation, partnership, joint venture, limited liability company, association or other business entity, whether now existing or hereafter organized or acquired, (i) in the case of a corporation, of which more than 50% of the total voting power of the capital stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, officers or trustees thereof is held by such first-named Person or any of its Subsidiaries; or (ii) in the case of a partnership, joint venture, limited liability company, association or other business entity, with respect to which such first-named Person or any of its Subsidiaries has the power to direct or cause the direction of the management and policies of such entity by contract or otherwise or if in accordance with generally accepted accounting principles such entity is consolidated with the first-named Person for financial statement purposes. -8- 15 1.59. Temporary Cash Investments. (i) Investments in U.S. Government Obligations maturing within 365 days of the date of purchase; (ii) investments in certificates of deposit issued by a bank organized under the laws of the United States of America or any state thereof or the District of Columbia, in each case having capital, surplus and undivided profits totaling more than $500,000,000 and rated at least A by Standard & Poor's Corporation and A-2 by Moody's Investors Service Inc. maturing within 365 days of purchase; or (iii) investments not exceeding 365 days in duration in money market funds that invest substantially all of such funds' assets in investments described in the preceding clauses (i) and (ii). 1.60. Time of Purchase. As defined in the Purchase Agreement. 1.61. Transfer. Sell, pledge, transfer, encumber, assign or otherwise dispose of property. 1.62. Units the number of Units shall not exceed 10,000. Preferred Units shall not constitute Units. The number of Units held by each Partner in the Partnership are set forth in Exhibit A, attached hereto and made a part hereof. Subsequent to the admission of additional Limited Partners acquiring Units, the Transfer of Units or the redemption of Units, the General Partner is authorized to revise Exhibit A to reflect the Units of each Partner after giving effect to such transaction. The General Partner shall provide a copy of Exhibit A, as revised, to each Limited Partner. 1.63. U.S. Government Obligations. (a) Securities that are direct obligations of the United States of America for the payment of which its full faith and credit are pledged or (b) obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States of America, the payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States of America, which, in either case, are not callable or redeemable at the option of the issuer thereof. 1.64. Warrants. As defined in the Purchase Agreement. 1.65 Warrant Agreement. The Warrant Agreement, dated as of December 23, 1997, by and among the Partnership, the Warrant Agent (as defined therein) and MW Sign Corp. 1.66. Warrant Units. As defined in the Warrant Agreement. ARTICLE 2. ORGANIZATION. 2.1. Formation. The Partnership was formed on December 19, 1984, by filing a Certificate of Limited Partnership in the office of the California Secretary of State in accordance with Section 15621 of the Act. 2.2. Name. The name of the Partnership is Martin Media, A California Limited Partnership. -9- 16 2.3. Principal Office. The principal office of the Partnership is located at 1245 Vine Street, Paso Robles, California 93446, and may be changed to such place as the General Partner shall determine. 2.4. Agent for Service of Process. The name and address of the agent for service of process shall be determined by the General Partner. 2.5. Term of the Partnership. The Partnership commenced as of the date of filing of the Certificate of Limited Partnership in the office of the California Secretary of State on December 19, 1984. The Partnership shall continue until December 31, 2024, or until Dissolution of the Partnership as otherwise provided in this Agreement. 2.6. Purposes. The purposes of the Partnership are to purchase, construct, manage, operate and hold for investment and sell outdoor advertising structures, and invest in and hold interests in joint ventures, limited liability companies, corporations or similar entities, and transfer assets into such Subsidiary entities, and do all things reasonably incident thereto, including but not limited to borrowing money for Partnership purposes and securing such borrowing at any time. ARTICLE 3. CAPITAL CONTRIBUTIONS AND FINANCING. 3.1. Intentionally left blank. 3.2. Units Upon Execution of Agreement. Upon execution of this Agreement, the number of Units held by the Partners and the number of Preferred Units held by certain Limited Partners shall be as set forth on Exhibits A and B hereto, respectively. 3.3. Loans by a Partner. A Partner may make a loan to the Partnership or may advance money on the Partnership's behalf only with the prior written consent of the General Partner. Any loan or advance shall not increase the Capital Account of the Partner or entitle the Partner to any greater share of Partnership Distributions or subject the Partner to any greater share of Partnership Net Income or Net Loss. The amount of the loan or advance shall: (a) be a debt owed by the Partnership; (b) be evidenced by appropriate loan documentation; and (c) bear interest at a fair market rate. 3.4. Withdrawal of Capital. No partner shall have the right or power to withdraw capital from the Partnership or to reduce the Partner's Capital Account except as provided in this Agreement. No partner shall receive interest on Capital Contributions. 3.5. Redemption. Subject to the provisions of Section 15.1: The General Partner is authorized without the consent of the Limited Partners to cause the Partnership to redeem such interest of any of the Limited Partners as the General Partner deems appropriate, from time to time, on such terms as the General Partner deems it in the best interest of the Partnership to offer to any Limited Partner, provided that such Limited Partner covenants to such terms. If the General Partner causes the Partnership to redeem an interest in the Partnership from a Person who is an Affiliate of the General Partner, the General Partner shall be authorized to cause the Partnership to redeem such interest on terms that the General Partner believes in good faith are not more than what a Limited Partner who is not an Affiliate of the General Partner would -10- 17 receive. The General Partner may require the Partnership to redeem such Affiliate's interest notwithstanding that the General Partner is aware that any unaffiliated Limited Partner is desiring for such unaffiliated Limited Partner to have its interest redeemed. The Limited Partners intend that the General Partner shall have the absolute right to select what Limited Partner's interest or Limited Partners' interests shall be redeemed. This selection right may be made without regard to whether such Person is affiliated with the General Partner. Upon redemption of Units held by a Limited Partner, the General Partner shall transfer to the Partnership for no consideration a number of Units held by the General Partner such that the quotient obtained by dividing the number of Units held by the General Partner by the aggregate number of Units held by all Partners, in which case immediately after such redemption, equals the quotient obtained by dividing the number of Units held by the General Partner by the aggregate number of Units held by all Partners, in each case immediately before such redemption. 3.6. Loans from the Partnership. Subject to the provisions of Section 15.1, in any subsequent offerings of limited Partnership interests, the General Partner in its sole discretion may cause the Partnership to make a loan to Persons desiring to purchase limited Partnership interests. The Limited Partners acknowledge that the General Partner has caused the Partnership to assume a loan from Nevada Outdoor Systems, Inc. ("NOS") to David B. Weyrich in the amount of ONE HUNDRED THOUSAND DOLLARS ($100,000) in connection with the acquisition of certain assets and liabilities of NOS, and that such loan will be repaid on or before January 10, 1998. 3.7. Additional Capital Contributions and Admission of New Partners. a) Subject to Section 15.1: The General Partner shall have the right to admit one or more additional Limited Partners to the Partnership or approve admission or substitution of a member in any limited liability company or limited partner in any other limited partnership in which the Partnership has an interest on terms and conditions as the General Partner deems to be in the best interests of the Partnership. It is contemplated that the Partnership may acquire additional outdoor advertising structures or entities that engage in outdoor advertising businesses through the exchange of limited partnership interests for such assets. In addition, the General Partner may admit one or more additional Limited Partners to the Partnership for cash or property contributions to the capital of the Partnership on such terms as the General Partner, in its discretion, determines. Upon the admission of a Limited Partner, the Partnership shall issue to the General Partner for no consideration a number of Units such that the quotient obtained by dividing the number of Units held by the General Partner by the aggregate number of Units held by all Partners, in each case immediately before such admission, equals the quotient obtained by dividing the number of Units held by the General Partner by the aggregate number of Units held by all Partners, in each case immediately after such admission. b) Notwithstanding the foregoing, the Partnership shall not issue any other interests in the Partnership on a parity or senior basis with respect to distributions (or otherwise) to be made on the Preferred Units pursuant to this Agreement "without the consent of holders of at least 85% of the Preferred Units then outstanding. -11- 18 ARTICLE 4. ACCOUNTING. 4.1. Capital Accounts. a) Maintenance of Capital Accounts. A Capital Account shall be established and maintained for each Partner. Each Partner's Capital Account shall be maintained in a manner consistent with Treasury Regulations section 1.704-1(b)(2)(iv). b) Calculation of Capital Accounts. Each Partner's Capital Account shall be: (1) Increased by the amount of money contributed by the Partner to the Partnership; (2) Increased by the fair market value of property contributed by the Partner to the Partnership (net of liabilities securing such contributed property, that the Partnership is considered to assume or take subject to under section 752 of the Code); (3) Increased by allocations to the Partner of Partnership income and gain or items thereof including income and gain except from tax (except to the extent such income or gain has previously been reflected in the Partner's Capital Account by adjustments thereto); (4) Decreased by the amount of money distributed to the Partner by the Partnership; (5) Decreased by the fair market value of property distributed to the Partner (net of liabilities securing such distributed property that such Partner is considered to assume or take subject to under section 752 of the Code); (6) Decreased by allocations of Partnership loss, deduction or items thereof except to the extent such loss or deduction has previously been reflected in the Partner's Capital Account by adjustments thereto and expenditures described in section 705(a)(2)(B) of the Code, and (7) Otherwise adjusted in accordance with Treasury Regulations section 1.704-1(b)(2)(iv). c) Adjustment Upon Distribution of Property. If Partnership property is distributed to a Partner, then, before the Capital Account of such Partner is adjusted as required by this Section 4.1, the Capital Accounts of the Partners shall be adjusted to reflect the manner in which the unrealized income, gain, loss and deduction inherent in such property (that has not been reflected in such Capital Accounts previously) would be allocated among the Partners if there were a taxable disposition of such property for its fair market value on the date of Distribution. -12- 19 d) Holders of Preferred Units. In addition to the adjustments set forth in this Section 4.1(b), the Capital Account for each holder of Preferred Units shall be adjusted as provided in Section 5.1(a). 4.2. Fiscal Year; Tax Matters Partner. The Partnership shall continue to use a fiscal year ending on December 31 for all purposes. The General Partner, MW Sign Corp., shall be the Partnership's tax matters partner for purposes of Code section 6231(a)(7). 4.3. Books and Records to be Maintained. The Partnership shall keep at its principal office full and accurate books and records, including the following: a) Partners. A current list of the full name and last known business or residence address of each Partner set forth in alphabetical order, together with the Capital Contribution and share in Net Income and Net Loss of each Partner; b) Certificate of Limited Partnership. A copy of the Certificate of Limited Partnership and all certificates of amendment thereto, together with executed copies of any powers of attorney pursuant to which any Certificate of Limited Partnership has been executed; c) Tax Returns. Copies of the Partnership's federal, state and local income tax or information returns and reports, if any, for the six (6) most recent fiscal years; d) Agreement. Copies of the original Partnership Agreement and all amendments thereto, together with executed copies of any powers of attorney pursuant to which any amendment has been executed; e) Financial Statements. Financial statements of the Partnership for the six (6) most recent fiscal years; and f) Books and Records. The Partnership's books and records for the three (3) most recent fiscal years. 4.4. Information to be Provided to the Limited Partners. a) Information Maintained by Partnership. At the expense of the Partnership and upon demand by a Limited Partner or a Limited Partner's agent or attorney, the General Partner shall promptly furnish a copy of the information required to be maintained by Section 4.3. b) Limited Partner Inspection Rights. A Limited Partner or the Limited Partner's agent or attorney has the right, upon reasonable request, to inspect and copy during normal business hours any of the Partnership records required to be maintained by Section 4.3. c) Tax Information. The General Partner shall send to each of the Partners, within ninety (90) days after the end of each taxable year, such information as is necessary to complete the Partner's federal and state income tax or information returns and a copy of the Partnership's federal, state and local tax or information returns for the year. -13- 20 d) Annual Report. The General Partner shall cause an annual report to be sent to each of the Partners within one hundred twenty (120) days after the end of each fiscal year. The report will include the financial statements of the Partnership. If the financial statements are compiled, reviewed or audited, they will be accompanied by the report of any independent certified public accounting firm that compiled, reviewed or audited them. 4.5. Interim Closing of the Books. There shall be an interim closing of the books of account of the Partnership at such time as the Partnership's taxable year ends pursuant to the Code and at such other times as the General Partner shall determine is required by generally accepted accounting practices or is appropriate under the circumstances. 4.6. Tax Withholding. The Partnership shall at all times be entitled to make payments with respect to any Partner in amounts required to discharge any legal obligation of the Partnership pursuant to any provision of the Code, the Treasury Regulations or any other tax provision or any provision enacted in the future imposing a similar obligation of the Partnership to withhold or make payments to any governmental authority with respect to any U.S. federal, state and local or foreign tax liability of such Partner arising as a result of such Partner's Units. ARTICLE 5. NET INCOME AND NET LOSS; DISTRIBUTIONS. 5.1. Allocation of Income and Loss. a) Preferred Return. The Capital Account of each holder of Preferred Units, as such, shall be credited with gross income for each fiscal year in an amount equal to the Preferred Return for the fiscal year, whether or not actually paid as a distribution on such Preferred Units, it being understood that such gross income will be treated as a "guaranteed payment" within the meaning of Section 707(c) of the Code. b) Allocation of Net Income or Net Loss. (1) Net Loss for any fiscal year shall be allocated among the Partners as follows: (a) First, to all Partners (other than to holders of Preferred Units, as such) according to their respective Units, with consideration given for the varying Units of such Partners during such year; (b) Second, to holders of Preferred Units, as such, to the extent of their positive Capital Account balances in respect of their respective Preferred Units; (c) Third, to the General Partner. (2) Net Income for any fiscal year shall be allocated among the Partners as follows: (a) First, to the General Partner to the extent of Net Loss allocated to the General Partner under Section 5.1(b)(1)(c); -14- 21 (b) Second, to holders of Preferred Units, as such, to the extent of and in proportion to the amount by which the Net Loss allocated to each such Partner for the current and all prior fiscal years of the Partnership under Section 5.1(b)(1)(b) exceeds the Net Income allocated to each such Partner for the current and all of the prior fiscal years of the Partnership under this Section 5.1(b)(2)(b); (c) Third, to the Partners, to the extent of, and in proportion to, the amount by which the Net Loss allocated to each such Partner for the current and all prior fiscal years of the Partnership under Section 5.1(b)(1)(a) exceeds the Net Income allocated to each such Partner for the current and all prior fiscal years of the Partnership pursuant this Section 5.1(b)(2)(c); (d) Fourth, to the General Partner, until the General Partner is allocated a cumulative amount (from December 19,1984) of NINE HUNDRED SIXTY THOUSAND DOLLARS ($960,000) pursuant to this Section 5.1(b)(2)(d); and (e) Then, to the Partners, according to their Units with consideration for the varying Units of the Partners during such year. 5.2. Built-In Gain. In determining each Partner's distributive share of items of income, gain, loss or deduction realized by the Partnership with respect to all property and assets whose book value is greater than their adjusted basis or federal income tax purposes (including any partnership or tenancy in common interest contributed to the Partnership) shall be allocated among the Partners as provided in Section 704(c) of the Code and the Treasury Regulations thereunder. 5.3. Minimum Gain Chargeback. Notwithstanding the allocations provided for in Sections 5.1 and 5.2, if there is a net decrease in Minimum Gain during a taxable year of the Partnership (including any Minimum Gain attributable to Partner-Funded Debt), each Partner at the end of such year shall be allocated, before any other allocations of profits, losses, net gains from Capital Transactions and net losses from Capital Transactions are made under this Agreement for such year, items of income and gain for such year (and, if necessary, subsequent years) in the amount and in the proportions described in Section 1.704-2(f) of the Treasury Regulations. 5.4. Qualified Income Offset. Notwithstanding the allocations provided for in Sections 5.1 and 5.2, no allocation of an item of loss or deduction shall be made to a Partner to the extent such allocation would cause or increase a deficit Capital Account balance in such Partner's Capital Account as of the end of the taxable year to which such allocation relates, after taking into account any adjustment, allocation or distribution described in Section 1.704-1(b)(2)(ii)(d)(4), (5) or (6) of the Treasury Regulations, and if any such adjustment, allocation or distribution unexpectedly occurs, the Partners shall be allocated (after taking into account any allocations made pursuant to this Section 5.4) items of income and gain in an amount and manner to eliminate any Capital Account deficit attributable to such adjustment, allocation or distribution as quickly as possible. For purposes of this Section 5.4, there shall be excluded from a Partner's deficit Capital Account balance at the end of a taxable year of the Partnership (x) such Partner's -15- 22 share, determined in accordance with Section 704(b) of the Code and Section 1.704-2(g) of the Treasury Regulations, of Minimum Gain (provided that in the case of Minimum Gain attributable to Partner-Funded Debt, such Minimum Gain shall be allocated only to the Partner or Partners to which such debt is attributable pursuant to Section 1.704-2(i) of the Treasury Regulations), (y) the amount of any loans (other than Partner-Funded Debt) for which such Partner is personally liable (whether as a result of a guarantee or otherwise), and (z) the amount such Partner is obligated to restore to the Partnership under Section 1.704-1(b)(2)(ii) of the Treasury Regulations. 5.5. Partner-Funded Debt. Notwithstanding the allocations provided for in Sections 5.1 and 5.2, if there is a net increase in Minimum Gain during a taxable year of the Partnership that is attributable to Partner-Funded Debt then, first depreciation, to the extent the increase in such Minimum Gain is allocable to depreciable property, and then a proportionate part of other deductions and expenditures described in Section 705(a)(2)(B) of the Code, shall be allocated to the lending or guaranteeing Partner (and to joint lenders or guarantors in proportion to their relative obligations), provided that the total amount of deductions so allocated for any year shall not exceed the increase in Minimum Gain attributable to such Partner-Funded Debt in such year. 5.6. Curative Allocations. The allocations set forth in Sections 5.3, 5.4 and 5.5 (the "Regulatory Allocations") are intended to comply with certain requirements of Sections 1.704-l(b) of the Treasury Regulations. Notwithstanding any provision of this Article 5 other than the Regulatory Allocations, the Regulatory Allocations shall be taken into account in allocating other net income, net losses, net gains and net losses from Capital Transactions, and net gains and net losses from Capital Transactions resulting in a dissolution of the Partnership between the Partners so that, to the extent possible, the net amount of such other allocations and the Regulatory Allocations to each Partner shall be equal to the net amount that would have been allocated to such Partner if the Regulatory Allocations had not been made. 5.7. Excess Non-Recourse Liability Safe Harbor. Pursuant to Section 1.752-3(a)(3) of the Treasury Regulations, solely for purposes of determining each Partner's proportionate share of the "excess non-recourse liabilities" of the Partnership (as defined in Section 1.752-3(a)(3) of the Treasury Regulations), the Partners' respective interests in Partnership profits shall be in accordance with their interests in the Partnership. 5.8. Treatment of Interest to Partners. For purposes of this Article 5, interest paid by the Partnership to any Partner related to a loan made by the Partner to the Partnership shall be treated as an expense of the Partnership. 5.9. Transfer During Taxable Year. Subject to section 706 of the Code, in the event of a Transfer of a Partner's interest or any part thereof at any time other than the close of the Partnership's fiscal year, the allowable shares of the various items of the Partnership's income, gain, loss, deduction and credit (and other items separately reported) as computed for federal and state income tax purposes, shall be allocated between the transferor and the transferee by closing the Partnership's books with respect to such Transfer as of the close of the calendar month in which such Transfer occurs (unless a different method of allocation is approved, in writing, by the transferor and the transferee and the General Partner). -16- 23 5.10. Depreciation Recapture. Each Partner's allocable share of Partnership Net Income which is characterized as ordinary income pursuant to section 1245 or 1250 of the Code or Section 18211 or 18212 of the California Revenue and Taxation Code, as amended (the "depreciation recapture"), with respect to the disposition of an item of Partnership property shall be borne, as to depreciation recapture arising from depreciation accrued prior to the date of this Agreement, by the Limited Partners in proportion to their respective Units prior to the date of this Agreement, and as to depreciation recapture arising from depreciation accrued from and after the date of this Agreement, by the Limited Partners and the General Partner in the same ratio as such Limited Partners' or General Partner's allocable share of depreciation from and after the date of this Agreement bears to all the Limited Partners' and the General Partner's allocable shares of depreciation from and after the date of this Agreement. In no event shall depreciation recapture be allocable to holders of Preferred Units, as such. 5.11. Economic Allocations. It is the intent of the Partners that the good faith allocations of income or loss made by the General Partner under this Agreement reflect the economic expectations of the Partners. If any allocation of any item of Net Income and Net Loss under this Agreement is adjusted pursuant to an income tax audit by the Internal Revenue Service or California Franchise Tax Board or by court determination, the Partners agree that all Distributions, including liquidating Distributions, shall continue to be made under the method used by the General Partner in good faith to allocate income and loss and to make Distributions under this Agreement prior to a court's, the Internal Revenue Service's, Franchise Tax Board's or any other state's equivalent agency's adjustment of the allocations of any items of the Partnership's income or loss. 5.12. Distributions. a) Generally. Except as otherwise provided in Articles 13, 15 and 16 hereof, the General Partner may distribute Cash Available for Distribution during the fiscal year to the Partners pursuant to Section 5.12(b). b) Interim Distributions. Distributions to be made to the Partners prior to, and otherwise not in conjunction with, the final liquidation of the partnership shall be distributed as follows: (1) First, to the holders of Preferred Units, as such, in proportion to the number of Preferred Units held thereby on the date of distribution, until the cumulative amount previously and currently distributed to the holders of Preferred Units, as such, under this Section 5.12(b)(1) equals the Preferred Return for the then-current fiscal year and each prior fiscal year; (2) Second, to the holders of Preferred Units, as such, in proportion to the number of Units held thereby on the date of distribution, in an amount equal to $25,000,000, provided that no such distribution shall be made on or before September 23, 1998; -17- 24 (3) Third, to the General Partner until the General Partner is distributed a cumulative amount (from December 19, 1984) of NINE HUNDRED SIXTY THOUSAND DOLLARS ($960,000); and (4) Fourth, in accordance with the number of Units held by each Partner on the date that the General Partner declares that a Distribution will be made. c) Subject to Section 5.13, if the Partnership has Net Income for federal income tax purposes for any fiscal year, then the Partnership shall first distribute at least an amount of cash ("Tax Distribution"), first to holders of Preferred Units, as such, in proportion to the number of Preferred Units held thereby on the date of distribution, and then (if amounts are still available) to all other Partners, which, when combined with all other distributions to such Partners in the current and all preceding fiscal years, equals the product of the highest combined federal, state and local marginal income tax rate applicable to any Partner and the excess, if any, of (i) the aggregate net taxable income allocated to such Partner in the current and all preceding fiscal years over (ii) the aggregate net taxable loss allocated to such Partner in all preceding taxable years. Any amounts distributed to a Partner pursuant to this Section 5.12(c) shall reduce, on a dollar for dollar basis, until fully recovered any distribution to which a Partner is otherwise entitled under this Agreement. 5.13. Distributions Limitation. If after allocation of Net Income and Net Loss and all allocations of income or deduction not included in Net Income of Net Loss, a Distribution to a Limited Partner would cause such Limited Partner's Capital Account to be negative in excess of the Limited Partner's obligation to restore a deficit and such Partner's share of minimum gain, no Distribution shall be made to such Limited Partner to the extent that the Distribution would cause such an excess Capital Account deficit to arise for such Limited Partner. The Distribution shall be made in such succeeding fiscal year when a Distribution to such Limited Partner will not violate the requirements of the preceding sentence. The provisions of this Section 5.13 shall not apply to the holders of Preferred Units, as such. 5.14. Cash Distributions in respect of Preferred Units. Anything in this Agreement to the contrary notwithstanding, without the written consent of the holders of Preferred Units receiving the same, the Partnership shall not distribute any property to such holders other than cash in respect of such Units. ARTICLE 6. RIGHTS AND DUTIES OF THE GENERAL PARTNER. 6.1. General Partner Compensation; Expenses. a) No Compensation for Management. The General Partner shall not be entitled to receive any compensation from the Partnership except as expressly provided by this Agreement. b) Administrative Fee. The Partnership shall pay to Martin & MacFarlane, Inc., (or the General Partner if Martin & MacFarlane, Inc. ceases to serve), a monthly administrative fee for management of the Partnership's business in an amount equal to four -18- 25 percent (4%) of the gross revenue earned on the Partnership's sign structures in the preceding calendar month. c) Commission. The Partnership shall pay the General Partner a commission for services rendered in connection with the purchase or contribution (in case of an acquisition involving in whole or in part of the issuance of Units in exchange for sign structures), sale, refinancing or exchange of any of the Partnership's sign structures in an amount equal to either four percent (4%) of the fair market value of the sign structures received in a purchase, exchange or contribution, four percent (4%) of the gross sales price of such structures, or four percent (4%) of the principal balance of any refinancing indebtedness, whichever is applicable. If there is a sale, purchase, exchange or refinancing of any sign structures in any entity in which the Partnership has an interest, or if there is a contribution of sign structures to an entity in which the Partnership has an interest (other than a contribution by the Partnership of its sign structures), the commission shall be prorated based upon (i) the gross sales price of such structure, (ii) the principal balance of any refinancing indebtedness, or (iii) the fair market value of the purchased, exchanged or contributed sign structures, times the Partnership's percentage interest in the entity as determined immediately before the transaction. d) Reimbursable Expenses. The Partnership shall reimburse the General Partner for direct expenses incurred in organizing, capitalizing and developing the Partnership, or in connection with obtaining additional capital or facilities for the Partnership, including legal filing, printing, accounting, acquisition and leasing expenses. In addition, the General Partner shall be reimbursed by the Partnership for any expenses of the Partnership, including but not limited to those specified in Section 6.2, that are advanced by the General Partner. e) Payment of Deferred Fee. On January 2, 1998, the Partnership shall pay the General Partner THREE MILLION FOUR HUNDRED THOUSAND DOLLARS ($3,400,000), which amount represents a deferred fee. The Partnership shall treat such amount as a "guaranteed payment" within the meaning of Section 707(c) of the Code. 6.2. Partnership Expenses. The Partnership shall pay all of its expenses, which may include, but are not limited to: a) All costs of borrowed money, taxes and assessments on the Partnership assets and other taxes applicable to the Partnership assets; b) Legal, accounting, consulting and brokerage fees; c) Expenses and taxes incurred in the distribution, Transfer and recording of documents evidencing ownership of an interest in the Partnership or in the Partnership assets; and d) The cost of any audit of the Partnership's financial statements performed by an independent certified public accounting firm. 6.3. Time Devoted to the Partnership. The General Partner is not obligated to devote full time to the affairs of the Partnership. The General Partner may become involved in other businesses, occupations and partnerships. The General Partner shall devote such time to the -19- 26 Partnership as may be reasonably necessary to manage the Partnership business and perform the duties of a General Partner. 6.4. Partnership Governance. The Limited Partners acknowledge that the General Partner shall have full authority over the governance and management of the Partnership, except as otherwise provided by this Agreement. Notwithstanding anything in this Agreement to the contrary but subject to Section 17.4, the General Partner shall have the right to amend this Agreement without the consent of any of the Limited Partners: (a) to reflect the addition or substitution of Limited Partners or the reduction of the Capital Accounts upon the return of capital to the Partners; and (b) to delete or add any provision from or to this Agreement required to be so deleted or added by a state regulatory agency, the deletion or addition of which provision is deemed by such regulatory agency to be for the benefit or protection of the Limited Partners. The General Partner shall also have full charge of the day-to-day management, conduct and operation of the Partnership's operations. Notwithstanding anything in this Agreement to the contrary other than Section 15.1, the General Partner shall have the right, responsibility and authority, on behalf of the Partnership and without the consent of the Limited Partners, to: a) Lease, hire or contract with personnel needed to advance the purposes of the Partnership; b) Employ, from time to time, at the expense of the Partnership, such accountants, attorneys or other professionals as it may determine to be necessary or appropriate; c) Do all acts required of the Partnership under the terms of any agreement of which the Partnership is a party; d) Borrow money on the Partnership's behalf, encumber Partnership assets and prepay, increase, modify, refinance or extend Partnership indebtedness; e) Execute, acknowledge and deliver any and all instruments to carry out the General Partner's duties; f) Pay all syndication, organization and reorganization expenses incurred by the Partnership; g) Pay all expenses incurred in the operation of the Partnership; h) Maintain all necessary Partnership books and records; i) Assume the overall duties imposed upon a General Partner by the Act; j) Invest in joint ventures, partnerships, corporations, limited liability companies or other entities that purchase, construct, manage, operate and hold for investment or for sale outdoor advertising structures; k) Acquire by any legal means other outdoor advertising businesses, including, subject to Section 15.1, any business in which the General Partner or owners of the -20- 27 General Partner or any Affiliate thereof has any interest, on such terms as the General Partner determines in good faith is acceptable to the Partnership. To the extent California Corporations Code Sections 15678.1 through 15679-14 applies to the acquisition, the General Partner shall obtain the Limited Partners' approval as provided in Section 8.1(d); l) Subject to Section 15.1 to redeem Limited Partner interests; and m) Except as otherwise provided in this Agreement, to admit additional or substituted Limited Partners. 6.5. Competing Interests. Each Partner may engage in or possess an interest in other business ventures of every nature and description independently or with others, regardless of whether such a venture competes with the Partnership. Neither the Partnership nor any Partner shall have any right in or to such other ventures or to the income or the profits derived therefrom. 6.6. Restriction on Powers of the General Partner. The General Partner may not, without the written consent or ratification of all other Partners, do any act in contravention of this Agreement or which would make it impossible to carry out the ordinary business of the Partnership, confess a judgment against the Partnership or possess, pledge or hypothecate any Partnership asset for other than a Partnership purpose. 6.7. Limitation on General Partner Liability. Neither a General Partner nor any of that General Partner's directors, officers or agents shall be liable to the Partnership or the Limited Partners for any act or omission based upon errors of judgment or other fault in connection with the business or affairs of the Partnership, so long as: (a) the Person against whom liability is asserted acted in good faith and in a manner reasonably believed by such Person to be within the scope of the Person's authority under this Agreement and in the best interests of the Partnership; and (b) such action or failure to act does not constitute willful misconduct. The General Partner shall not be personally liable for the return of Capital Contributions made by any Partner. The General Partner is specifically permitted to satisfy any Partnership obligations as to which the General Partner is personally liable before satisfying Partnership obligations as to which the General Partner has no such personal liability. 6.8. Indemnification of General Partner. The Partnership agrees to indemnify the General Partner and its directors, officers and agents to the fullest extent permitted by law and to defend, save and hold them harmless from and in respect of all fees, costs, losses, damages and expenses (including attorneys' fees) incurred in connection with or resulting from any claim, action or demand arising out of or in any way relating to the Partnership or its assets, including amounts paid in settlement or compromise (if recommended by the Partnership's counsel) of any such claim, action or demand and all fees, costs and expenses (including attorneys' fees) in connection therewith. This indemnification shall apply only if the Person against whom a claim, action or demand is asserted has acted in good faith on behalf of the Partnership and in a manner reasonably believed by such Person to be within the scope of its authority under this Agreement and in the best interests of the Partnership, and such action or failure to act does not constitute willful misconduct. The termination of any action, suit or proceeding by judgment, order, -21- 28 settlement or upon a plea of nolo contendere or its equivalent, shall not of itself create a presumption that any Person's misconduct was willful. 6.9. Certain Transactions; General Partner Agreements. The Limited Partners hereby acknowledge that the General Partner expects to enter into the following agreements on behalf of the Partnership, and the Limited Partners hereby authorize the Partnership to execute, deliver and perform these agreements in the form negotiated and agreed to by the General Partner: a) Agreement for Purchase and Sale of Assets, dated as of December 15, 1997, between the Partnership and Connell Co. (doing business as Connell Outdoor Advertising); and b) Agreement for Purchase and Sale of Assets, dated as of November 17, 1997, by and among the Partnership, Vegas Outdoor Advertising, Inc. and RS Enterprises, Inc. 6.10. Warrants. The Limited Partners hereby approve the issuance by the Partnership of the Warrants and the issuance of Units pursuant thereto as set forth in this Section 6.10. Initial Warrants shall be issuable upon the 270th day following the Time of Purchase (provided that any Preferred Units shall then be outstanding) for such number of Units as shall equal 1.0% of the sum of (i) the aggregate Units outstanding on the date of issuance of the Initial Warrants (ii) the aggregate number of Units outstanding on December 23, 1997 that were acquired by the Partnership or its Subsidiaries on or before the date of issuance of such Warrant and (iii) all Units issuable upon the exercise of all options, warrants (not including Quarterly Warrants thereafter issuable pursuant to the Purchase Agreement), rights or other securities convertible into or exchangeable for Units outstanding on the date of issuance of the Initial Warrants. Quarterly Warrants shall be issuable upon the last day of each three-month period following the date which is 270 days after the Time of Purchase (each such last day, a "Quarterly Warrant Issuance Date") (provided that any Preferred Units shall remain outstanding on such Quarterly Warrant Issuance Date) for such number of Units as shall equal 0.25% of the sum of (i) the aggregate Units outstanding on the date of issuance of the Quarterly Warrants (ii) aggregate number of Units outstanding on December 23, 1997 that were acquired by the Partnership or its Subsidiaries on or before the date of issuance of such Quarterly Warrant and (iii) all Units issuable upon the exercise of all options, warrants (including pursuant to the Warrants then outstanding, but not including Quarterly Warrants thereafter issuable pursuant to the Purchase Agreement), rights or other securities convertible into or exchangeable for Units outstanding on the date of issuance of the Quarterly Warrants (after giving effect to all anti-dilution adjustments set forth in the Warrant Agreement reflecting the issuance of such Quarterly Warrants). The issuance of Units upon exercise of the Warrants, and the admission as Limited Partners of the Persons to whom such Units are issued, shall not require any approval of any of the Partners. -22- 29 ARTICLE 7. RIGHTS AND DUTIES OF LIMITED PARTNERS. 7.1. Basic Rights. The rights and duties of the Partners in relation to the Partnership shall be determined by the following rules: a) Limited Liability. No Limited Partner shall be required to make any additional Capital Contribution to the Partnership other than as provided in Section 13.4(c), or return any Distribution other than as provided in Section 13.4(d). b) Compromise. The obligation of a Partner to make a Capital Contribution or return money or property paid or distributed in violation of this Agreement may be compromised only by the written consent of all the Partners, except as provided in Section 15666 of the Act. c) Distributions. Except as provided in Section 12 and Section 13 of the Warrant Agreement, no Limited Partner shall have the right to receive property other than cash upon Dissolution or any sale of Partnership assets; however, the General Partner may distribute Partnership assets in kind as provided in Section 13.4(e). 7.2. Prohibition Against Involvement In Management. A Person acting in the capacity of a Limited Partner shall not participate in the control or management of the Partnership. 7.3. Acts Not Constituting Management. A Limited Partner does not participate in the control or management of the Partnership solely by: (a) exercising a right of inspection; (b) exercising a right to information; (c) exercising voting or consent rights provided in this Agreement; or (d) acting as a director, officer, member or shareholder of a General Partner. This provision shall be read to supplement, and not limit, Section 15632 of the Act. ARTICLE 8. VOTING, MEETINGS AND PROXIES. 8.1. Actions Requiring Approval by the Limited Partners. Except as otherwise specifically provided in this Agreement, the Limited Partners do not have the right to vote on any Partnership matter. The actions specified in this Section 8.1 may be taken only upon the affirmative vote or written consent of the General Partner, a Majority of the Limited Partners and a Majority of the Preferred Units. a) A change in the Partnership's business or purposes. b) The admission of a General Partner, other than under the circumstances described in Section 8.2 or 13.2. c) The amendment of the Partnership Agreement, except as otherwise provided in Section 6.4 or Section 17.4 hereof or Section 10 of the Warrant Agreement. -23- 30 d) Limited Partner approval rights in Section 15678.2 Section 15679.2 relating to mergers and reorganizations to the extent that the Act precludes a partnership agreement from modifying or eliminating such approval rights. 8.2. Actions Requiring Unanimous Consent of the Limited Partners. The Limited Partners are hereby given the right, by a unanimous vote or unanimous written consent, to: (a) admit a new General Partner after the General Partner ceases to be a General Partner where there is no remaining or surviving General Partner; and (b) elect to continue the business of the Partnership pursuant to Section 13.2 where there is no remaining or surviving General Partner. 8.3. Meetings - Place. Meetings of Partners shall be held at the principal office of the Partnership or such other site in San Luis Obispo County as designated by the General Partner. 8.4. Meetings - Calling. Meetings of the Partners may be called by the General Partner or by Limited Partners holding greater than ten percent (10%) of the Units, only Limited Partners holding greater than ten percent (10%) of the Preferred Units, in each case held by all such Limited Partners for any matters for which such Limited Partners may vote. 8.5. Meetings - Notice. a) Time and Contents. A written notice of the meeting shall be given by a General Partner not less then ten (10) nor more than sixty (60) days before the date of the meeting to each Partner. The notice shall state the place, date and hour of the meeting and the general nature of the business to be transacted, and no other business may be transacted. b) Manner of Giving Notice. Notice of a Partners' meeting or any report shall be given either personally or by mail or other means of written communication, addressed to the Partner at the address of the Partner appearing on the books of the Partnership for the purpose of notice. The notice or report shall be deemed to have been given at the time when delivered personally or deposited in the mail or sent by other means of written communication. A declaration of mailing of any notice or report in accordance with this Article 8, executed by a General Partner and maintained with the records of the Partnership, shall be prima facie evidence of the giving of the notice or report. c) Constructive Notice. If any notice or report addressed to a Partner at the address of the Partner appearing on the books of the Partnership is returned to the Partnership by the United States Postal Service marked to indicate that the United States Postal Service is unable to deliver the notice or report to the Partner at the address, all future notices or reports shall be deemed to have been duly given without further mailing if they are made available for the Partner at the principal office of the Partnership for a period of one (1) year from the date of the giving of the notice or report to all other Partners. d) Written Waiver, Consent and Approval. The transactions of any meeting of Partners, however called and noticed, and wherever held, are as valid as though had at a meeting duly held after regular call and notice, either before or after the meeting, if each of the -24- 31 Persons entitled to vote, not present in person or by proxy, signs a written waiver of notice or a consent to the holding of the meeting or an approval of the minutes thereof. All waivers, consents and approvals shall be filed with the Partnership records or made a part of the minutes of the meeting. Attendance of a Partner at a meeting shall constitute a waiver of notice of the meeting, except when the Partner objects at the beginning of the meeting. Neither the business to be transacted nor the purpose of any meeting of the Partners need be specified in any written waiver of notice. 8.6. Meetings - Quorum. A Majority of the Limited Partners represented in person or by proxy, shall constitute a quorum at a meeting of Partners. 8.7. Written Consent Without Meeting. Any action which may be taken at a meeting of the Partners may be taken without a meeting if a consent in writing, setting forth the action so taken, is approved by Partners having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all entitled to vote thereon were present and voted. If the Limited Partners are requested to consent on a matter without a meeting, each Partner shall be given notice of the motion to be voted upon in the same manner as described above with respect to an actual meeting. If the General Partner, or Limited Partners representing the requisite percentage of Units or Preferred Units specified in Section 8.4, request a meeting to discuss or vote on the matter, the notice of a meeting shall be given in accordance with Section 8.5(b), and no action shall be taken until the meeting is held. Any action taken without a meeting shall be effective fifteen (15) days after the required minimum number of Partners have signed the consent; however, the action will be effective immediately if the General Partner and Limited Partners representing at least ninety percent (90%) of the Units held by Limited Partners have signed the consent. 8.8. Proxies. The use of proxies in connection with this Article 8 will be governed in the same manner as corporations formed under the General Corporation Law of California. ARTICLE 9. DISPOSITION OF LIMITED PARTNER INTERESTS. 9.1. Withdrawal of Limited Partner. A Limited Partner may not withdraw from the Partnership, except as otherwise specifically provided in this Agreement. 9.2. Transfers Restricted. Except for the Transfer of Preferred Units and Units constituting Warrant Units (and the interests in the Partnership relating thereto) as to which the following provisions of Section 9.2 and the provisions of Section 9.3, Section 9.4 and Section 9.5 shall not apply, no Limited Partner shall Transfer all or part of the Limited Partner's interest in the Partnership without the written consent of the General Partner, which consent may be withheld at the sole discretion of the General Partner, except as provided in this Agreement. Any Transfer not permitted by this Agreement shall be null and void. 9.3. Transfers to Trust. Notwithstanding any other provision in this Agreement, an individual Limited Partner shall have the right to Transfer the Limited Partner's interest in the Partnership to a trust for the benefit of the Limited Partner or for the benefit of any family member (spouse, siblings, ancestors or lineal descendants), provided that the Limited Partner and/or the Limited Partner's spouse is/are the sole trustee(s) of the trust or, if not the sole trustee(s) of the trust, is/are the only trustee(s) allowed to vote on Partnership decisions. The addition of a different trustee allowed to vote on Partnership decisions shall constitute a Transfer that is not permitted by this Article 9. When the General Partner receives notice that the trust has one or more trustees empowered to vote on Partnership decisions other than the original Limited Partner or spouse or when the General Partner receives notice that the original Limited Partner is no longer a trustee empowered to vote (by reason of death or otherwise), the interest of the trust shall be deemed offered to a Third-party Purchaser, thereby triggering the application of the option to purchase pursuant to Section 10.5. -25- 32 9.4. Transfer to a Legal Entity. a) A Limited Partner who is an individual may Transfer the Limited Partner's interest in the Partnership to a legal entity if the Limited Partner owns a majority of the beneficial interest of the legal entity. However, a subsequent Transfer of a beneficial interest in the legal entity shall not be permitted under this Article 9 if, immediately after giving effect to the purported Transfer, the Person who was the Limited Partner on the effective date of this Agreement or a purchaser in a subsequent offering ceases to own a majority of the beneficial interest in the legal entity. In such circumstance, when the General Partner receives notice that the Person who was the Limited Partner on the effective date of this Agreement or a purchaser in a subsequent offering has ceased to own a majority of the beneficial interest in the legal entity, the interest of the affected Limited Partner shall be deemed offered to a Third-party Purchaser, thereby triggering the application of the option to purchase pursuant to Section 10.5. b) A Limited Partner that is a legal entity may Transfer its interest to another legal entity if the same Persons (or their Affiliates) have the beneficial ownership of a majority interest in the other legal entity. However, a subsequent Transfer of a beneficial interest in the entity shall not be permitted under this Article 9 if, immediately after giving effect to the purported Transfer, those Persons who own a beneficial interest in the original entity cease to own a majority of the beneficial interest in the new entity. In such circumstance, when the General Partner receives notice that the Persons who owned a beneficial interest in the original entity have ceased to own a majority of the beneficial interest in the new entity, the interest of the affected Limited Partner shall be deemed offered to a Third-party Purchaser, thereby triggering the application of the option to purchase pursuant to Section 10.5. 9.5. Transfer to Beneficial Owners. A Limited Partner may Transfer its interest to the beneficial owners of the Limited Partner upon Dissolution of the Limited Partner as determined by applicable state law if the beneficial owner was a Limited Partner on the effective date of this Agreement or a purchaser in a subsequent offering. The Transfer to a beneficial owner who was not a Limited Partner as of the effective date of this Agreement or purchaser in a subsequent offering, shall be deemed offered to a Third-party Purchaser, thereby triggering the application of the option to purchase pursuant to Section 10.5. -26- 33 9.6. Substituted Limited Partner. An Assignee of a Limited Partner's interest shall become a Limited Partner only upon the satisfaction of all of the following conditions: a) Transfer Instrument. Filing with the Partnership a duly executed and acknowledged written instrument of assignment in a form approved by the General Partner specifying the interest being assigned and setting forth the intention of the assignor that the Assignee succeed to the assignor's interest as a Limited Partner. b) Written Opinion. If requested by the General Partner, providing, the Partnership with a written opinion of counsel acceptable to the General Partner that the proposed Transfer will not: (1) Violate, or cause the Partnership to be in violation of, any federal or state securities laws; (2) Jeopardize the exempt status of the sale of Partnership interests by the Partnership under the federal or state securities laws; (3) Cause a termination of the Partnership under Code section 708; or (4) Jeopardize the characterization of the Partnership as a partnership under any federal or state tax law, regulation or ruling. c) Partnership Agreement. Execution and acknowledgment by the assignor and Assignee of any instruments required by the General Partner, including the execution of this Agreement and any supplement to it, in which the transferee agrees to be bound by the terms and conditions of this Agreement as are applicable to the Units or interests being Transferred, as supplemented, and the execution, acknowledgment and delivery to the General Partner of a special power of attorney in the form described in Article 14. d) Consent of General Partner. The General Partner's written consent may be withheld in its sole discretion; provided that the General Partner's consent shall not be required to admit any Assignee of Preferred Units or Units constituting Warrant Units (and the interests in the Partnership relating thereto), such admission to occur upon satisfaction of all requirements of this Section 9.6 other than this Section 9.6(d). 9.7. Effect of Assignment and Substitution. No assignment by any Limited Partner of all or any part of an interest in the Partnership, whether or not in compliance with the terms of this Agreement, shall cause or constitute a Dissolution of this Partnership. If a substitution of a Limited Partner is permitted as provided in Section 9.6, the General Partner shall prepare, publish, file and/or record such documents or instruments as may be required. The consent or execution of such instruments by any of the other Limited Partners shall not be required to effect such substitution. 9.8. Assignee's Capital. An Assignee of Preferred Units, Units and/or partnership interests shall have the same number of Preferred Units, Units and/or partnership interests, Capital Account, share of Partnership Net Income and Net Loss or items -27- 34 of income or deduction and credit for Capital Contributions in the same amounts and percentages as adjusted for any revaluations required by this Agreement or any state or federal law which are attributed to the assigned Preferred Units, Units and/or partnership interests when held by the assignor. ARTICLE 10. PURCHASE OPTIONS. 10.1. Option to Purchase Interest in Event of Death of a Limited Partner. Upon the death of a Limited Partner (other than a holder of Preferred Units or Warrant Units, as such), the personal representative of the deceased Limited Partner shall give notice of the death to the General Partner. The notice shall include the personal representative's name and address for correspondence. a) General Partner Option. For thirty (30) days after the General Partner receives notice of the death of a Limited Partner, the General Partner shall have an option to purchase or designate (subject to the agreement of such Limited Partner to do so) one or more other Limited Partners to purchase all or a part of the interest owned by the deceased Limited Partner (other than interests relating to Preferred Units or Warrant Units) at the price and on the terms provided in Article 11. b) Partnership Option. If the General Partner does not exercise its option to purchase all of the interest under Section 10.1(a), for thirty (30) days after the expiration of the General Partner's option or notice of the intention not to exercise the option as to all or part of the interest whichever occurs earlier, the Partnership shall have an option to redeem all or any part of the remaining interest subject to this option at the price and on the terms provided in Article 11. c) Exercise of Option. Notice of the exercise of the option provided by Sections 10.1(a) and 10.1(b), or intent not to exercise the option, shall be given to the personal representative of the deceased Limited Partner during the term of the option period. d) Failure to Exercise Option. There is no requirement that the General Partner or its designees or the Partnership must collectively purchase all of the interest held by the deceased Limited Partner, if the General Partner or the Partnership does not exercise the option provided by Section 10.1 as to any part of the interest, then the interest not transferred shall be transferred to the successor-in-interest of the deceased Limited Partner. The transferee shall be an Assignee and shall only become a Limited Partner upon satisfaction of the conditions provided in Section 9.6. 10.2. Option to Purchase Interest in the Event of Divorce of a Limited Partner. In the event that the interest of a Limited Partner is transferred to the spouse of such Limited Partner in a legal separation agreement or upon Dissolution of marriage (the "Former Spouse"), the Limited Partner whose marriage is being dissolved (the "Divorcing Limited Partner") shall give notice to the General Partner. The notice shall be given within thirty (30) days of the date the Transfer to the Former Spouse becomes effective. a) Divorcing Limited Partner Option. For fifteen (15) days after the Divorcing Limited Partner gives notice of the Transfer to the Former Spouse, the Divorcing Limited Partner shall have the option to purchase all or part of the interest owned by the Former Spouse upon the legal separation or dissolution of marriage at the price and on the terms provided in Article 11. b) General Partner Option. If the Divorcing Limited Partner does not exercise the option to purchase all of the interest under Section 10.2(a), for fifteen (15) days after the expiration of the Divorcing Limited Partner's option or notice of the intent not to exercise the option as to all or part of the interest, whichever occurs earlier, the General Partner shall have an option to purchase or designate (subject to the agreement of such Limited Partner to do so) one or more of the other Limited Partners to purchase all or part of the remaining interest owned by the Former Spouse (other than interests relating to Preferred units or Warrant Units) at the price and on the terms provided in Article 11. -28- 35 c) Partnership Option. If the General Partner does not exercise its option to purchase all of the remaining interest under Section 10.2(b), for thirty (30) days after the expiration of the General Partner's option or notice of its intention not to exercise the option as to all or part of the interest, whichever occurs earlier, the Partnership shall have an option to redeem all or any part of the remaining interest subject to this option at the price and on the terms provided in Article 11. d) Exercise of Option. Notice of the exercise of the option provided by Sections 10.2(a), 10.2(b) and 10.2(c), or intent not to exercise the option shall be given to the General Partner and the Former Spouse during the term of the option period. e) Failure to Exercise Option. There is no required that the Divorcing Limited Partner, the General Partner or its designees, or the Partnership must collectively purchase all of the interest held by the Former Spouse. If the Divorcing Limited Partner, the General Partner or its designees, or the Partnership does not exercise the option provided by Section 10.2 as to any part of the interest, then the Former Spouse shall be an Assignee and shall only become a Limited Partner upon satisfaction of the conditions provided in Section 9.6. 10.3. Option to Purchase Interest in the Event of Bankruptcy of a Limited Partner. In the event of the Bankruptcy of a Limited Partner (other than a holder of Preferred Units or Warrant Units, as such), such Limited Partner (the "Bankrupt Limited Partner") shall give notice of such Bankruptcy to the General Partner. The notice shall be given within ten (10) days of the Bankruptcy. a) General Partner Option. For thirty (30) days after the General Partner receives notice of such Bankruptcy, the General Partner shall have an option to purchase or designate (subject to the agreement of such Limited Partner to do so) one or more other Limited Partners to purchase all or part of the interest owned by the Bankrupt Limited Partner at the price and on the terms provided in Article 11. b) Partnership Option. If the General Partner does not exercise its option to purchase all of the interest under Section 10.3(a), for thirty (30) days after the expiration of the General Partner's option or notice of the intention not to exercise the option as to all or part of the interest, whichever occurs earlier, the Partnership shall have an option to redeem all or any part of the remaining interest subject to this option at the price and on the terms provided in Article 11. c) Exercise of Option. Notice of the exercise of the option provided by Sections 10.3(a) and 10.3(b), or intent not to exercise the option, shall be given to the Bankrupt Limited Partner during the term of the option period. d) Failure to Exercise Option. There is no requirement that the General Partner or its designees or the Partnership must collectively purchase all of the interest held by the Bankrupt Limited Partner. If the General Partner or the Partnership does not exercise the option provided by Section 10.3 as to any part of the interest, then the Bankrupt Limited Partner shall retain the interest not transferred subject to the rights of a trustee in Bankruptcy. -29- 36 10.4. Option to Purchase Interest in Event of Incompetency of a Limited Partner. Upon the entry by a court of competent jurisdiction appointing a guardian or conservator for the Limited Partner (other than a holder of Preferred Units or Warrant Units, as such) or the estate of the Limited Partner (other than a Holder of Preferred Units or Warrant Units, as such) ("Incompetency"), the guardian or the conservator shall give notice of the Incompetency to the General Partner and the other Limited Partners. The notice shall include, the name of the guardian or conservator and the address for correspondence. a) General Partner Option. For thirty (30) days after the General Partner receives notice of the Incompetency of a Limited Partner, the General Partner shall have an option to purchase or designate (subject to the agreement of such Limited Partner to do so) one or more other Limited Partners to purchase all or part of the interest owned by the Incompetent Limited Partner (other than interests relating to Preferred Units or Warrant Units) at the price and on the terms provided in Article 11. b) Partnership Option. If the General Partner does not exercise its option to purchase all of the interest under Section 10.4(a), for thirty (30) days after the expiration of the General Partner's option or notice of the intention not to exercise the option as to all or part of the interest, whichever occurs earlier, the Partnership shall have an option to redeem all or any part of the remaining interest subject to this option at the price and on the terms provided in Article 11. c) Exercise of Option. Notice of the exercise of the option provided by Sections 10.4(a) and 10.4(b), or intent not to exercise the option, shall be given to the guardian or conservator of the Incompetent Limited Partner during the term of the option period. d) Failure to Exercise Option. There is no requirement that the General Partner or its designees or the Partnership must collectively purchase all of the interest held by the Incompetent Limited Partner. If the General Partner does not exercise the option provided by Section 10.3 as to any part of the interest, then the Incompetent Limited Partner shall retain the interest not transferred subject to the rights of the guardian or conservator. 10.5. Option to Purchase Interest in the Event of Notice of Proposed Sale to a Third-party Purchaser. A Limited Partner (other than a holder of Preferred Units or Warrant Units, as such) shall not Transfer an interest in the Partnership to any Person who is not the Partnership, the General Partner or a Limited Partner ("Third-party Purchaser") without complying with the provisions of this Section 10.5. Any Transfer or encumbrance in violation of this Section 10.05 shall be null and void. If a Limited Partner (other than the holder of Preferred Units or Warrant Units, as such) desires to sell an interest to a Third-party Purchaser, the Limited Partner ("Selling Limited Partner") shall first give notice stating, that desire to the General Partner and to the other Limited Partners; ("Notice of Proposed Sale"). The Notice of Proposed Sale shall state the identity of the Third-party Purchaser, the Units to be sold and the price and terms for which the Limited Partner intends to sell such Units. The following options shall then apply: a) General Partner Option. For fifteen (15) days after the General Partner receives the Notice of Proposed Sale, the General Partner shall have an option to purchase all or -30- 37 part of the interest (other than interests relating to Preferred Units or Warrant Units) at either: (1) the price and on the terms provided in Article 11; or (2) the price and terms contained in the Notice of Proposed Sale. b) Partnership Option. If The General Partner does not exercise its option to purchase all of the interest under Section 10.5, for thirty (30) days after the expiration of the General Partner's option or notice of the intention not to exercise the option as to all or part of the interest, whichever occurs earlier, the Partnership shall have an option to redeem all or any part of the remaining interest subject to this option at either: (1) the price and on the terms provided in Article 11; or (2) the price and terms contained in the Notice of Proposed Sale. c) Other Limited Partners Option. If the Partnership does not exercise its option to purchase all of the interest under Section 10.5(b), for fifteen (15) days after expiration of the Partnership's option or notice of the intention not to exercise the option as to all or part of the interest, whichever occurs earlier, the other Limited Partners shall have an option to purchase all of the remaining interest Subject to the option at either: (1) the price and on the terms provided in Article 11; or (2) the price and terms contained in the Notice of Proposed Sale. Those Limited Partners electing to purchase the remaining interest shall do so in proportion to their share ownership, or as they shall otherwise agree. d) Exercise of 0ption. Notice of the exercise or the option provided by Section 10.5(a) or the intent not to exercise the option shall be given to the Partnership, the Selling Limited Partner and the other Limited Partners during the term of the option period. Notice of the exercise of the option provided by Section 10.5(b), or intent not to exercise the option, shall be given to the Selling Limited Partner and the other Limited Partners during the term of the option period. Notice of the exercise of the option provided by Section 10.5(c) shall be given to the selling Limited Partner during the term of the option period. -31- 38 e) Requirement to Collectively Purchase Entire Interest. If the General Partner, the Partnership or the other Limited Partners exercise the options provided by Section 10.5, they must collectively purchase all of the interest offered by the Selling Limited Partner on the same price and terms unless otherwise agreed to. All options arising under Section 10.5 shall be deemed waived if any of the offered interests are not acquired through the exercise of such an option. f) Failure to Exercise Option. If the General Partner, the Partnership or the remaining Limited Partners do not exercise the options provided by Section 10.5 as to all of the interest offered, then the Selling Limited Partner may Transfer the interest described in the Notice of Proposed Sale to the Third-party Purchaser at the price and upon the terms specified therein at any time within ninety (90) days from the date of the Notice of Proposed Sale. If no Transfer occurs, the Selling Limited Partner shall remain a member of the Partnership. If a Transfer does occur, the Third-party Purchaser shall become an Assignee and shall only become a Limited Partner upon satisfaction of the conditions set forth in Section 9.6. 10.6. Limitation. The provisions of this Article 10 are subject in all respects to the provisions of Section 15.1. ARTICLE 11. PURCHASE PRICE AND TERMS. 11.1. Purchase Price. The purchase price for the Limited Partner interest sold pursuant to the options contained in Article 10 shall be equal to trailing net cash flow multiplied by 6.5, with the product reduced by long-term debt and the difference between current assets and current liabilities determined as of the last day of the month preceding the month in which the option is exercised. The "trailing net cash flow" means Net Income for the twelve (12) months ending on the last day of the month preceding the month in which the option is exercised, increased by depreciation and interest expense during the period. For example, if as of January 1, 1998, a Limited Partner with Units representing one percent of the outstanding partnership interests sold such Units, the value of such Units is calculated based on amounts determined as of December 31, 1996 as follows: Net Income $ 2,860,059.00 Depreciation Increase 3,399,377.00 Interest Expense Increase 5,030,100.00 --------------- TRAILING NET CASH FLOW $ 11,289,536.00 Multiplied by 6.5 73,381,984.00 Less Long-Term Debt (47,897,028.00) Plus current assets, less current liability 2,926,680.00 --------------- NET VALUE $ 28,411,636.00
-32- 39 Because the Limited Partner's Units represent one percent (1%) of the outstanding partnership interests, the value of the Limited Partner's Units would be $284,116.36. 11.2. Effective Date. The effective date of any purchase of a limited Partnership interest under Article 10 shall be forty-five (45) days after the notice of the death of the Limited Partner, the notice of the interest being transferred to the Former Spouse upon dissolution of marriage, the notice of the Bankruptcy of the Limited Partner, the notice of the Incompetency of the Limited Partner or the Notice of Proposed Sale to a Third-party Purchaser, respectively. ARTICLE 12. TERMINATION AND ADMISSION OF A GENERAL PARTNER. 12.1. Termination of a General Partner. A Partner ceases to be a General Partner and becomes a Limited Partner holding the same Capital Account, share of Partnership Net Income and Net Loss and credit for Capital Contributions in the same amounts and percentages as adjusted for any revaluations required by this Agreement or any state or federal law upon the happening of any of the following events: a) Withdrawal. Withdrawal as a General Partner; b) Dissolution. The Dissolution of a General Partner under state law; c) Death or Incompetency. The death or Incompetency of a General Partner, if an individual; or d) Bankruptcy or Financial Difficulty. The Bankruptcy of a General Partner or the issuance of a charging order against the General Partner's interest which is not removed within thirty (30) days of its issuance. 12.2. No Removal of General Partner. The General Partner may not be removed by a vote of the Limited Partners. 12.3. Transfer by General Partner. A General Partner may not Transfer all or any part of its interest as a General Partner except as specifically provided in this Agreement. If a General Partner Transfers or assigns any part of its interest as a General Partner in contravention of this Agreement, that Person shall be an Assignee and shall become a substituted Limited Partner upon the satisfaction of the conditions set forth in Section 9.6. 12.4. Permissible Transfers by MW Sign Corp. MW Sign Corp. may Transfer its entire interest as a General Partner to Martin & MacFarlane, Inc., or to any of its other Affiliates or Martin & MacFarlane's Affiliates, who shall thereupon be admitted to the Partnership as a General Partner having the same Units, Capital Account, share of Partnership Net Income and Net Loss and credit for capital contributions in the same amounts and percentages as MW Sign Corp. had immediately before the Transfer. Thereafter, all references to MW Sign Corp. in this Agreement shall be read as referring to the Affiliate to which the General Partner interest was Transferred. 12.5. Withdrawal of General Partner. Unless otherwise specifically provided by this Agreement, a General Partner may not withdraw from the Partnership before the expiration of the term of the Partnership as provided in Section 2.5. 12.6. Additional General Partner. No General Partner shall be admitted to the Partnership except as specifically provided in this Agreement. Any additional General Partner shall be admitted only upon the vote of all the existing General Partners, a Majority of the Limited Partners and holders of at least 85% or the Preferred Units then outstanding. As long as MW Sign Corp. is a General Partner, no other Person shall have the rights, powers and responsibilities ascribed to a General Partner under this Agreement. Any other General Partner shall have all of the rights and responsibilities of Limited Partners. If there is more than one General Partner and MW Sign Corp. is not a General Partner, the General Partner's rights, powers and responsibilities shall be exercised or borne equally by all General Partners. 12.7. Termination of General Partner. If the General Partner is terminated as General Partner and there is no remaining or surviving General Partner, the Partnership shall be Dissolved. The Limited Partners may reconstitute the business of the Partnership as provided in Section 13.2. ARTICLE 13. DISSOLUTION AND TERMINATION OF PARTNERSHIP. 13.1. Dissolution and Termination. Upon the occurrence of any of the following events, the Partnership shall be Dissolved, unless the option provided in Section 13.2 is exercised: -33- 40 a) Expiration of Term. Upon the expiration of the term of this Partnership pursuant to Section 2.5. b) Election. By the election of the General Partner, provided that the General Partner shall not make such election without the prior written consent of holders of at least 85% of the Preferred Units then outstanding. c) No General Partner. When a General Partner ceases to be the General Partner and there is no remaining General Partner. 13.2. Reconstitution. If the General Partner ceases to be a General Partner where there is no remaining or surviving General Partner, the Partners may reconstitute and continue the business of the Partnership in a new limited partnership on the same terms as those contained in this Agreement. Such an election shall require the vote of a majority-in-interest of the capital and profits of the Partners, and shall be effective only if the election is made within ninety (90) days of the date the last General Partner ceases to be a General Partner. Once such an election has been made, a new General Partner may be admitted into the new partnership. All Partners of the Partnership including the former General Partner, may vote on whether to continue the business or admit a new General Partner. Expenses incurred in the reformation, or attempted reformation, of the Partnership shall be deemed expenses of the Partnership. 13.3. Events Not Dissolving the Partnership. A technical tax termination under any applicable provisions of federal or state income tax laws shall not cause a Dissolution of the Partnership. The withdrawal of a Partner and/or the admission of a new Partner shall not cause a Dissolution of the Partnership. 13.4. Winding Up. a) Partnership Operations. Upon Dissolution of the Partnership as provided in Section 13.1, the continuing operation of the Partnership's business shall be confined to those activities reasonably necessary to wind up the Partnership's affairs, discharge its obligations and preserve and distribute its assets in accordance with this Section 13.4, except as otherwise provided in this Agreement. Allocations of Net Income and Net Loss and allocations of items of income and deduction shall be made among the Partners as provided in Article 5. b) Liquidating Distributions. Upon Dissolution of the Partnership, the affairs of the Partnership shall be wound up, the assets liquidated (except as otherwise provided in Section 13.4(e)) and the proceeds and other assets distributed in the following order: (1) Liabilities owing to creditors, including expenses of liquidation, and liabilities to Partners who are creditors to the extent permitted by law, in satisfaction of liabilities of the Partnership other than any liability for a Distribution to a Partner under Act Section 15661, 15664 or 15665; (2) Deposit in a trust account of a reasonable reserve for payment of contingent liabilities and expenses; and -34- 41 (3) To the Partners in accordance with Section 5.12 hereof. c) Partner's Obligation to Make Up Negative Capital Account. (1) Except as otherwise provided in this Section 13.4(c), no Partner shall have an obligation to restore its negative Capital Account balance, if any. (2) If, after taking into account all Capital Account adjustments for the Partnership's taxable year during which the General Partner's interest is liquidated, the General Partner has a deficit in its Capital Account, the General Partner shall contribute to the capital of the Partnership the amount of the deficit balance in the Capital Account. (3) If, after taking into account all Capital Account adjustments for the Partnership's taxable year during which the Limited Partner interest of either F. Thomas Martin or David B. Weyrich is liquidated, that Limited Partner has a deficit in his Capital Account, he shall contribute to the capital of the Partnership. Any contribution to restore such deficit Capital Account balance required by this Section 13.4(c)(3) shall be limited to the lesser of: (a) the amount of Martin's or Weyrich's deficit Capital Accounts that they respectively have agreed with the Partnership to restore; or (b) the amount of the deficit balance in the Capital Account. (4) Any amounts contributed to the Partnership pursuant to Section 13.4(c)(3) shall be made by the later of: (a) the end of such Partnership taxable year; or (b) within ninety (90) days after the date of such liquidation. Any amounts contributed to the Partnership under this Section 13.4(c) shall be used first to pay creditors of the Partnership and any remaining amount shall be distributed to the other Partners then having a positive balance in their respective Capital Accounts in proportion to such positive balances. A Partner's interest in the Partnership shall be deemed liquidated for purposes of this Section 13.4(c)(4) upon the liquidation of the Partnership or on the date of liquidation of the Partner's interest in the Partnership under Treasury Regulations section 1.761-1(d). A liquidation for such purposes shall occur upon a termination of the Partnership under Code section 708(b)(1) or upon cessation of the Partnership as a going concern as defined in Treasury Regulations section 1.704-1(b)(2)(ii)(g). -35- 42 (5) This Section 13.4(c) is intended to operate as a full or partial, as the case may be, deficit restoration obligation or obligation to make a payment within the mean of Treasury Regulations section 1.704-1(b)(2)(ii)(b) and section 1.752-2(b), respectively. d) Restoration of Distributions. Each Partner, other than, unless otherwise required by law, holders of Preferred Units, as such, shall return a Distribution to the extent that, immediately after giving effect to the Distribution, all liabilities of the Partnership exceed the fair market value of the Partnership assets to the extent provided in Act Section 15666. e) Distributions in Kind. The General Partner may distribute Partnership assets in kind, rather than liquidate such assets. The General Partner is specifically authorized to distribute such assets to itself. A Distribution in kind shall be made in a manner consistent with Section 13.4(b). Any Distributions in kind shall be based upon the current fair market value of Partnership assets. No Limited Partner shall have the right or power to demand or receive property other than cash in return for the Partner's invested capital. If the value of property distributed to a Partner exceeds the amount that Partner is entitled to upon Dissolution, then the Partner receiving the Distribution in kind will be obligated to contribute to the Partnership concurrently with the Partner's receipt of the Distribution an amount in cash equal to the amount of such excess. 13.5 Waiver of Right to Court Decree of Dissolution. None of the Partners shall have the right to dissolve the Partnership except as otherwise provided in this Agreement. The Partners agree that irreparable damage would be done to the Partnership if one of the Partners should bring an action in court to dissolve the Partnership. Care has been taken in this Agreement to provide what the Partners feel is a fair settlement between them in the event of various contingencies, including Dissolution, and each Partner accepts the provisions of this Agreement as establishing the Partners' rights and duties. Each Partner hereby waives the right to seek a court decree of Dissolution or to seek the appointment by a court of a liquidator for the Partnership. ARTICLE 14. SPECIAL POWER OF ATTORNEY. 14.1. Attorney-in-Fact. Each Limited Partner grants to the General Partner a special power of attorney irrevocably making, constituting and appointing the General Partner as attorney-in-fact, with power and authority to act in the Limited Partner's name and on the Limited Partner's behalf to execute, acknowledge and swear to in the execution and acknowledgment of filing of the following documents. a) Government Instruments. Any instrument or document required to be filed by the Partnership under the laws of any state or by any governmental agency, or which the General Partner elects to file in furtherance of the Partnership's business. b) Partnership Changes. Any instrument or document that may be required to effect the continuation of the Partnership, the admission of an additional or substituted Partner, or the Dissolution and termination of the Partnership (provided that the continuation, admission or Dissolution and termination are in accordance with the terms of this Agreement), or to reflect any change in amount of the Partner's Capital Account in accordance with the terms of this Agreement. c) Agreement Amendment. Any amendment of this Agreement duly approved in accordance with the terms of this Agreement. The General Partner shall promptly furnish to the Limited Partner a copy of any amendment to this Agreement executed pursuant to a power of attorney from the Limited Partner. 14.2. Special Provisions. The special power of attorney being granted by each Limited Partner under this Article 14: (a) is a special power of attorney coupled with an interest; (b) is irrevocable; (c) shall survive the Incompetency of the granting Limited Partner; and (d) is limited to the matters set forth in Section 14.1. -36- 43 ARTICLE 15. COVENANTS. 15.1. The General Partner hereby covenants and agrees, for so long as any Preferred Units are outstanding and notwithstanding any other provision of this Agreement to the contrary, as follows. a) Limitation on Distributions. Except as set forth in Section 5.12(c), Section 5.12(d), the Partnership shall not (nor shall it permit any of its Subsidiaries to) pay or make any distribution on, or make any payment on account of, or purchase, redeem, defease, retire or otherwise acquire, or set apart assets for a sinking or other analogous fund for, the purchase, redemption, defeasance, retirement or other acquisition of, any interests in the Partnership (other than in respect of Preferred Units), whether now or hereafter outstanding, or make any other distribution or payment in respect thereof, either directly or indirectly, whether in cash or property or in obligations of the Partnership or any such Subsidiary. b) Limitation on Transactions with Affiliates. Except as provided in Sections 6.1(b),(c) or (d) and 6.8 and the last sentence of Section 3.6 and except with respect to the Kunz Subsequent Acquisition, the Partnership shall not (and shall not permit any of its Subsidiaries to) enter into any transaction (an "Affiliate Transaction"), including without limitation, any purchase, sale, lease or exchange of property or the rendering of any service, with the General Partner or any Affiliate of the Partnership or the General Partner (other than transactions entirely between the Partnership and its Subsidiaries) unless (i) such Affiliate Transaction is on terms that are no less favorable to the Partnership or the relevant Subsidiary than those that would have been obtained in a comparable transaction by the Partnership or the relevant Subsidiary with an unrelated Person: (ii) in the case of such an Affiliate Transaction -37- 44 involving aggregate payments in excess of $250,000, the Partnership delivers to the holders of Preferred Units, Warrants and Warrant Units a resolution of the Board of Directors of the General Partner set forth in an officer's certificate certifying that such transaction complies with clause (i) above, is in the best interests of the Partnership or the relevant Subsidiary and has been approved by a majority of the disinterested directors of the General Partner; and (iii) with respect to any Affiliate Transaction involving aggregate payments in excess of $1,500,000, the Partnership delivers to the holders of Preferred Units; Warrants and Warrant Units an opinion as to the fairness to the Partnership or the relevant Subsidiary from a financial point of view which is issued by an investment banking firm of national standing; or (B) than has been delivered to the Partnership the prior written consent of a majority of the Preferred Units and the holders of a majority of the Warrants (determined by reference to the number of Warrant Units issuable thereunder) and Warrant Units then outstanding. The Partnership will give written notice of each Affiliate Transaction to each holder of Preferred Units, Warrants and Warrant Units no later than five days before consummation thereof. ARTICLE 16. CERTAIN PROVISIONS APPLICABLE TO PREFERRED UNITS 16.1. Redemption. a) Optional Redemption. Until September 23, 1998, the Preferred Units may be redeemed at the option of the Partnership, in whole or from time to time in part, in the manner provided in Section 16.1(c) at a redemption price equal to 102% of the Preferred Units Capital Account Amount for the Preferred Units so redeemed, payable in cash, plus the aggregate Preferred Return (cumulative from the date of this Agreement) for all such Preferred Units, which shall also be paid in cash, to the Redemption Date. Following September 23, 1998, the Preferred Units may be redeemed at the option of the Partnership, in whole or from time to time in part, at 100% of the Preferred Units Capital Account Amount for the Preferred Units so redeemed, payable in cash, plus the aggregate Preferred Return (cumulative from the date of this Agreement) for all such Preferred Units, which shall also be paid in cash, to the Redemption Date. b) Mandatory Redemption. The Partnership shall be obligated to redeem all outstanding Preferred Units on December 23, 2006 at a redemption price equal to the Redemption Amount, payable in cash. c) Procedure for Redemption. (i) In the event of a redemption of less than all of the Preferred Units, the Units so redeemed will be determined by the Partnership pro rata according to the number of such Units held by each holder thereof. (ii) The Partnership shall send a written notice of redemption (the "Redemption Notice") by first-class mail, postage prepaid, not fewer than 30 days nor more than 60 days prior to the applicable Redemption Date to each holder of Preferred Units as of the record date fixed for such redemption of Preferred Units at such holder's address as the same appears on the records of the Partnership; provided, however, that no failure to give such notice to any holder or holders nor any deficiency therein shall affect the validity of the procedure for the redemption of any Preferred Units to be redeemed except as to the holder or holders to whom the Partnership has failed to give said notice or except as to the holder or holders whose notice was defective. The Redemption Notice shall state: (A) whether all or less than all the outstanding Preferred Units are to be redeemed and the total number of Preferred Units being redeemed; (B) the number of Preferred Units held of record by that specific holder that the Partnership intends to redeem; (C) the applicable Redemption Date; -38- 45 (D) the manner and place or places at which payment for the Preferred Units called for redemption will, upon presentation and surrender to the Partnership of the certificates, if any, representing the Preferred Units ("Preferred Unit Certificates") being redeemed, be made; and (E) that the Preferred Return with respect to the Preferred Units being redeemed shall cease to accrue on the applicable Redemption Date. (iii) On the applicable Redemption Date, the full applicable redemption price shall become payable for the Preferred Units being redeemed on such Redemption Date. As a condition of payment of the applicable redemption price, each holder of Preferred Units must surrender the Preferred Units Certificates, if any, representing the Preferred Units being redeemed by the Partnership in the manner and at the place designated in the applicable Redemption Notice. The full applicable redemption price for such Units properly tendered for payment shall be paid in accordance with the provisions of Section 8.1 of the Purchase Agreement to the person whose name appears on such Preferred Unit Certificate or Certificates, if any, as the owner thereof, on and after the applicable Redemption Date when and as Preferred Unit Certificates, if any, for the Preferred Units being redeemed are properly tendered for payment. Each such surrendered Preferred Unit Certificate shall be canceled and retired. In the event that less than all of the Preferred Units represented by any such Preferred Unit Certificate are redeemed, a new Preferred Units Certificate shall be issued representing the unredeemed Units if requested by such holder pursuant to Section 17.15. (iv) On the applicable Redemption Date, unless the Partnership defaults in the payment of the applicable redemption price, the Preferred Return will cease to accrue with respect to the Preferred Units called for redemption. All rights of holders of such redeemed Preferred Units will terminate except for the right to receive the applicable redemption price. 16.2. Limitation on Certain Asset Sales. a) The Partnership will not, and will not permit any of its Subsidiaries to, consummate an Asset Sale unless (i) the Partnership or such Subsidiary, as the case may be, -39- 46 receives consideration at the time of such sale or other disposition at least equal to the fair market value thereof (as determined in good faith by the Board of Directors of the General Partner); (ii) not less than 85% of the consideration received by the Partnership or such Subsidiary, as the case may be, is in the form of cash or Temporary Cash Investments and is received at the time of such disposition; and (iii) the Asset Sale Proceeds received by the Partnership or such Subsidiary are applied (A) first, to the extent the Partnership elects, or is required, to prepay, repay or purchase debt under any then existing indebtedness of the Partnership or any Subsidiary within 180 days following the receipt of the Asset Sale Proceeds from any Asset Sale, provided that any such repayment shall result in permanent reduction of the commitments thereunder in an amount equal to the principal amount so repaid; (B) second, to the extent of the balance of Asset Sale Proceeds after application as described above, to the extent the Partnership elects, to an investment in assets (including capital stock or other securities purchased in connection with the acquisition of capital stock or property of another Person) used or useful in a business similar or ancillary to the business of the Partnership or such Subsidiary as conducted on the date hereof, provided that such investment is consummated within 180 days following the receipt of such Asset Sale Proceeds (the "Reinvestment Date"); and (C) third, if on the Reinvestment Date with respect to any Asset Sale, the Available Asset Sale Proceeds exceed $1,000,000, the Partnership shall apply an amount equal to such Available Asset Sale Proceeds in excess of $1,000,000 to an offer to repurchase Preferred Units at a purchase price in cash equal to, the Redemption Amount (an "Excess Proceeds Offer"). b) If the Partnership is required to make an Excess Proceeds Offer, the Partnership shall mail, within 30 days following the Reinvestment Date, a notice to the holders of Preferred Units stating, among other things: (1) that such holders of Preferred Units have the right to require the Partnership to apply such Available Asset Sale Proceeds to repurchase Preferred Units at a purchase price in cash as set forth above; (2) the purchase date (the "Purchase Date"), which shall be no earlier than 30 days and not later than 60 days from the date such notice is mailed; (3) the instructions, determined by the Partnership, that each holder of Preferred Units must follow in order to have such Preferred Units repurchased; and (4) the calculations used in determining the amount of Available Asset Sale Proceeds to be applied to the repurchase of such Preferred Units. The Excess Proceeds Offer shall remain open for a period of 20 business days following its commencement (the "Offer Period"). The notice, which shall govern the terms of the Excess Proceeds Offer, shall also state: (1) that the Excess Proceeds Offer is being made pursuant to this Section 16.2 and the length of time the Excess Proceeds offer will remain open; (2) the purchase price and the Purchase Date; (3) that any Preferred Units not tendered or accepted for payment will continue to accrue the Preferred Return; (4) that any Preferred Units accepted for payment pursuant to the Excess Proceeds Offer shall cease to accrue the Preferred Return on and after the Purchase Date; (5) that holders electing to have Preferred Units purchased pursuant to any Excess Proceeds Offer will be required to surrender the Preferred Unit Certificates, if any, representing such Preferred Units to the Partnership or a paying agent at the address specified in the notice at least three Business Days before the Purchase Date; (6) that holders will be entitled to withdraw their election if the Partnership, or any paying agent, as the case may be, receives, not later than the expiration of the Offer Period, a telegram, telex, facsimile transmission or letter setting forth the name of such holder, the aggregate Preferred Units the holder delivered for purchase and a statement that such holder is withdrawing its election to have such Preferred Units purchased; (7) that, if the aggregate purchase price of the Preferred Units surrendered by holders exceeds the Available Asset Sale Proceeds, the Partnership shall select the -40- 47 Preferred Units to be purchased on a pro rata basis based on the number of such Units surrendered by holders not otherwise withdrawn by the expiration of the Offer Period; and (8) that holders whose Preferred Units were purchased only in part will be issued new Preferred Unit Certificates, if so requested pursuant to Section 17.15, representing Capital Accounts equal to the Capital Accounts for the unpurchased portion of the Preferred Units surrendered. On or before the Purchase Date, the Partnership shall, to the extent lawful, accept for payment, on a pro rata basis as set forth above to the extent necessary, Preferred Units or portions thereof tendered pursuant to the Excess Proceeds Offer. The Partnership or its paying agent, as the case may be, shall, in accordance with the provisions of Section 8.1 of the Purchase Agreement, pay to each tendering holder an amount equal to the purchase price of the Preferred Units tendered by such holders and so accepted, and the Partnership shall promptly issue a new Preferred Unit Certificate, if so requested pursuant to Section 17.15, mail or deliver any such new Preferred Unit Certificate to such holder representing Capital Accounts equal to the Capital Accounts for any unpurchased portion of such Preferred Units. Preferred Unit Certificates, if any, representing any Preferred Unit not so accepted shall be promptly mailed or delivered by the Partnership to the holder thereof. If an Excess Proceeds Offer is not fully subscribed, the Partnership may retain that portion of the Available Asset Sale Proceeds not required to repurchase Preferred Units. 16.3. Change of Control. a) Within 30 days of the occurrence of a Change of Control, the Partnership shall notify the holders of Preferred Units in writing of such occurrence and shall make an offer to purchase (the "Change of Control Offer") the outstanding Preferred Units at a purchase price in cash equal to, for each such holder, (i) in respect of any Change of Control Payment Date occurring on or before September 23, 1998, 102% of the Preferred Units Capital Account Amount for the Preferred Units so redeemed plus the aggregate Preferred Return (cumulative from the date of this Agreement) to the Change of Control Payment Date for all such Preferred Units and (ii) in respect of any Change of Control Payment Date thereafter, 100% of the Preferred Units Capital Account Amount for the Preferred Units so redeemed plus the aggregate Preferred Return (cumulative from the date of this Agreement) to the Change of Control Payment Date for all such Preferred Units (such purchase price being hereinafter referred to as the "Change of Control Purchase Price") in accordance with the procedures set forth in this Section 16.3. b) Within 30 days of the occurrence of a Change of Control, the Partnership also shall send by first-class mail, postage prepaid, to each holder of Preferred Units, at the address appearing in the records of the Partnership, a notice stating: (1) that the Change of Control Offer is being made pursuant to this Section 16.3 and that all Preferred Units tendered will be accepted for payment, subject to the terms and conditions set forth herein; -41- 48 (2) the Change of Control Purchase Price and the purchase date (which shall be a Business Day no earlier than 20 Business Days from the date such notice is mailed (the "Change of Control Payment Date")); (3) that any Preferred Unit not tendered will continue to accrue the Preferred Return; (4) that, unless the Partnership defaults in the payment of the Change of Control Purchase Price, any Preferred Unit accepted for payment pursuant to the Change of Control Offer shall cease to accrue the Preferred Return on and after the Change of Control Payment Date; (5) that holders accepting the offer to have their Preferred Units purchased pursuant to a Change of Control Offer will be required to surrender the Preferred Unit Certificates, if any, representing the Preferred Units to the paying agent or the Partnership, as the case may be, at the address specified in the notice prior to the close of business on the Business Day preceding the Change of Control Payment Date; (6) that holders will be entitled to withdraw their acceptance if the paying agent or the Partnership, as the case may be, receives, not later than the close of business on the third Business Day preceding the Change of Control Payment Date, a telegram, telex, facsimile transmission or letter setting forth the name of the holder, the number of Preferred Units delivered for purchase and a statement that such holder is withdrawing its election to have such Preferred Units purchased; (7) that holders whose Preferred Units are being purchased only in part will be issued new Preferred Unit Certificates, if so requested pursuant to Section 17.15, representing Preferred Units with Capital Accounts equal to the Capital Accounts for the unpurchased portion of the Preferred Units surrendered; (8) any other procedures that a holder must follow to accept a Change of Control Offer or effect withdrawal of such acceptance; and (9) the name and address of the paying agent. -42- 49 On the Change of Control Payment Date, the Partnership shall, to the extent lawful, (i) accept for payment Preferred Units or portions thereof tendered pursuant to the Change of Control Offer, and (ii) deposit with the paying agent money sufficient to pay the purchase price of Preferred Units or portions thereof so tendered. The paying agent shall, in accordance with the provisions of Section 8.1 of the Purchase Agreement, pay to each such holder an amount equal to the purchase price of such Preferred Units so tendered and the Partnership shall execute and issue Preferred Unit Certificates, if so requested pursuant to Section 17.15, representing Preferred Units with Capital Accounts equal to the Capital Accounts for any unpurchased portion of the Preferred Units surrendered. 16.4. Subordination Agreement. a) To the extent that, pursuant to the terms of the Subordination Agreement, dated December 23, 1997, by and among the Administrative Agent (as defined in the Credit Agreement), the holders of Preferred Units outstanding on the date hereof and the Partnership, holders of Preferred Units, Warrants and Warrant Units shall be required to return certain cash distributions or payments made to such holders by the Partnership hereunder, all such cash distributions so returned shall be deemed to not have been made hereunder and all rights of such holders against the Partnership hereunder in respect of such cash distributions or otherwise shall remain in full force and effect and be returned, from and after the date on which such distributions or payments were made, to what they would have been had such distributions or payments not been made. b) In the event that the Administrative Agent shall not provide holders of Preferred Units, Warrants or Warrant Units the acknowledgment referred to in the last sentence of Section 1 of the Subordination Agreement on or before five days after the date of the distribution or payment to which such acknowledgment (had it been given) relates, the Partnership shall, at the request of any such holder, accept the return of such portion of such distribution or payment specified by such holder in a notice given to the Partnership no later than 20 days after the date on which such distribution or payment was made, whereupon the provisions of Section 16.4(a) shall apply in respect of returned distribution or payment. ARTICLE 17. MISCELLANEOUS. 17.1. Headings. The titles and headings of the various sections of this Agreement are intended solely for convenience of reference and are not intended to explain, modify or place any interpretation upon any of the provisions of this Agreement. 17.2. Time of Essence. All times and dates in this Agreement shall be of the essence. 17.3 Entire Agreement; Modification; Waiver. This Agreement supersedes all prior and contemporaneous oral agreements, representations and understandings of the parties. No supplement, modification or amendment of this Agreement shall be binding unless executed in writing by all of the parties. No waiver of any of the provisions of this Agreement shall be deemed, or shall constitute, a waiver of any other provisions, whether or not similar, nor shall any -43- 50 waiver constitute a continuing waiver. No waiver shall be binding unless executed in writing by the party making the waiver; 17.4. Amendment. a) Except as otherwise provided in this Section 17.4 or in Section 6.4, this Agreement may be amended only by a writing signed by the General Partner and approved by a Majority of the Limited Partners. b) Notwithstanding the foregoing clause (a) of this Section 17.4, an amendment to the Agreement that modifies a Limited Partner's Units or share of Net Income and Net Loss in a way that is disproportionate to the way other Limited Partners are affected by the amendment, must be approved in writing by the affected Partner. c) Notwithstanding the foregoing clauses (a) and (b) of this Section 17.4, (i) no amendment to this Agreement which modifies any provision of Section 3.7(b) or Article 5, 13, 15 or 16 hereof or this Section 17.4, or any other provision relating specifically to the holders of Preferred Units, as such, or the Preferred Units, or any of the definitions used in any such Article or provisions shall be effective unless and until such amendment is approved in writing by a majority of the Preferred Units and (ii) any amendment to this Agreement which modifies any provision of Section 16.2 made without the prior written consent of the Lenders party to the Credit Agreement shall be void. (d) Notwithstanding any provision of this Article 17 or Section 6.4 hereof, the General Partner shall not (i) amend this Agreement in any manner adverse to the holders of the Warrants or Warrant Units or which may impose liability hereunder on the holders of the Warrants or Warrant Units except as are required by law or (ii) amended this Agreement so as to restrict the transferability of the Warrant Units. (e) Notwithstanding any provision of this Article 17 or Section 6.4 hereof, the General Partner shall have the power to amend this Agreement from time to time without obtaining the consent of any Limited Partner in connection with the obligation of the Partnership to issue Units to the holders of the Warrants upon exercise thereof. 17.5. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of California. 17.6. Recovery of Litigation Costs. If any legal action or any arbitration or other proceeding is brought for the enforcement of this Agreement, or because of an alleged dispute, breach, default or misrepresentation in connection with any of the provisions of this Agreement, the successful or prevailing party or parties shall be entitled to recover reasonable attorneys' fees and other costs incurred in that action or proceeding, in addition to any other relief to which it or they may be entitled. 17.7. Severability. In case any one or more of the provisions contained in this Agreement or any application of the provisions shall be invalid, illegal or unenforceable in any -44- 51 respect, the validity, legality and enforceability of the remaining provisions or the remaining applications will not in any way be affected or impaired. 17.8. Notices. Notices given under this Agreement shall be in writing and shall either be served personally or delivered by Certified first-class United States mail, postage prepaid return receipt requested. Notices shall be directed to the Partners at the addresses shown in the Partnership records required to be kept in accordance with the provisions of Section 4.3(a). Any Partner may change the Partner's address for purposes of this Section 17.8 by giving written notice of the new address to the General Partner. 17.9. Gender and Number. As used in this Agreement, the masculine, feminine or neuter gender, and the singular or plural number, shall each include the others whenever the context so indicates. 17.10. Additional Documents. Each party hereto agrees to execute and acknowledge, if required, any and all other documents and writings which may be necessary to carry out the purposes and provisions hereof. 17.11. Parties in Interest. Nothing in this Agreement, whether express or implied, is intended to confer any rights or remedies under or by reason of this Agreement on any Persons other than the parties to it and their respective successors and assigns and the holders of Warrants and Warrant Units, nor is anything in this Agreement intended to relieve or discharge the obligation or liability of any third Persons to any party), to this Agreement, nor shall any provision give any third Person any right of subrogation or action over or against any party to this Agreement. 17.12. Counterparts. This Agreement may be executed in one or more duplicate counterparts, each of which together are deemed to be equivalent to a signed original for all purposes. 17.13. Statutory References. All references to statutes in this Agreement shall be read as referring to such statutes as amended from time to time, and shall also refer to the comparable provisions of any successor statutes, as amended from time to time. 17.14. Certificate of Nonforeign Status. Each Limited Partner (other than holders of Preferred Units, Warrants and Warrant Units) represents and warrants that it is, or is composed of Persons who are United States citizens or resident aliens. Each Limited Partner will execute Certificates of Nonforeign Status in the form attached hereto as Exhibit B and will inform the General Partner immediately of any changes that would render the certificate invalid or misleading. 17.15. Preferred Unit Certificates. Upon the request by a majority of the holders of Preferred Units, the Partnership shall provide for the issuance of Preferred Unit Certificates in such form as shall be reasonably acceptable to holders of at least 85% of the Preferred Units then outstanding. 17.16. No provision of this Agreement shall abrogate any rights of any Limited Partner pursuant to Section 15636(f)(1)(g) and Section 15636(f)(3) of the Act. -45- 52 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of December 23, 1997. GENERAL PARTNER: MW SIGN CORP., a California corporation By /s/ E. THOMAS MARTIN ------------------------------------- Its President ------------------------------------ LIMITED PARTNERS MW SIGN CORP. December 23, 1997 By: /s/ E. THOMAS MARTIN ------------------------------------- For John X. Aguilar* MW SIGN CORP. December 23, 1997 By: /s/ E. THOMAS MARTIN ------------------------------------- For Dianne H. Barnes* MW SIGN CORP. December 23, 1997 By: /s/ E. THOMAS MARTIN ------------------------------------- For J. Mark Barnes* JOHN E. AND ANN MARTIN BOWLER MW SIGN CORP. December 23, 1997 By: /s/ E. THOMAS MARTIN ------------------------------------- For Ann Martin Bowler* MW SIGN CORP. December 23, 1997 By: /s/ E. THOMAS MARTIN ------------------------------------- For John E. Bowler* MW SIGN CORP. December 23, 1997 By: /s/ E. THOMAS MARTIN ------------------------------------- For Patrice Boyle* -45- 53 MW SIGN CORP. December 23, 1997 By: /s/ E. THOMAS MARTIN ------------------------------------- For John Brophy* ROBERT L. AND STEPHANIE A. BURKE MW SIGN CORP. December 23, 1997 By: /s/ E. THOMAS MARTIN ------------------------------------- For Stephanie A. Burke* MW SIGN CORP. December 23, 1997 By: /s/ E. THOMAS MARTIN ------------------------------------- For Robert L. Burke* MW SIGN CORP. December 23, 1997 By: /s/ E. THOMAS MARTIN ------------------------------------- For Mary Ellen Coleman* MW SIGN CORP. December 23, 1997 By: /s/ E. THOMAS MARTIN ------------------------------------- For Michael L. Fisher* MW SIGN CORP. December 23, 1997 By: /s/ E. THOMAS MARTIN ------------------------------------- For Barry S. Heffner* MW SIGN CORP. December 23, 1997 By: /s/ E. THOMAS MARTIN ------------------------------------- For Robert D. Humanson* ELLIS AND BEVERLY JUMP MW SIGN CORP. December 23, 1997 By: /s/ E. THOMAS MARTIN ------------------------------------- For Beverly Jump* -46- 54 MW SIGN CORP. December 23, 1997 By: /s/ E. THOMAS MARTIN ------------------------------------- For Ellis Jump* MW SIGN CORP. December 23, 1997 By: /s/ E. THOMAS MARTIN ------------------------------------- For Steve R. Landaker* FRANCIS X. AND SUSAN LOJACONO MW SIGN CORP. December 23, 1997 By: /s/ E. THOMAS MARTIN ------------------------------------- For Susan Lojacono* MW SIGN CORP. December 23, 1997 By: /s/ E. THOMAS MARTIN ------------------------------------- For Francis X. Lojacono* December 23, 1997 FRANCIS X. LOJACONO, AS TRUSTEE OF THE FRANCIS X. LOJACONO, M.D., INC. PROFIT SHARING TRUST* MW SIGN CORP. By: /s/ E. THOMAS MARTIN ------------------------------------- Title: --------------------------------- MW SIGN CORP. December 23, 1997 By: /s/ E. THOMAS MARTIN ------------------------------------- For Carole Martin* December 23, 1997 /s/ E. THOMAS MARTIN ------------------------------------- E. Thomas Martin* -47- 55 MW SIGN CORP. December 23, 1997 By: /s/ E. THOMAS MARTIN ------------------------------------- For Patricia Martin* MW SIGN CORP., a California corporation December 23, 1997 By: /s/ E. THOMAS MARTIN ------------------------------------- Title: President --------------------------------- MW SIGN CORP. December 23, 1997 By: /s/ E. THOMAS MARTIN ------------------------------------- For Gary M. Noren* MW SIGN CORP. December 23, 1997 By: /s/ E. THOMAS MARTIN ------------------------------------- For Robert M. Nyland* TERENCE V. AND JUDY O'KEEFE MW SIGN CORP. December 23, 1997 By: /s/ E. THOMAS MARTIN ------------------------------------- For Judy O'Keefe* MW SIGN CORP. December 23, 1997 By: /s/ E. THOMAS MARTIN ------------------------------------- For Terence V. O'Keefe* MW SIGN CORP. December 23, 1997 By: /s/ E. THOMAS MARTIN ------------------------------------- For Carlos A. Prietto, M.D.* MW SIGN CORP. December 23, 1997 By: /s/ E. THOMAS MARTIN ------------------------------------- For Frank M. Sanchez* -48- 56 DAVID B. AND MARY WEYRICH MW SIGN CORP. December 23, 1997 By: /s/ E. THOMAS MARTIN ------------------------------------- For Mary Weyrich* MW SIGN CORP. December 23, 1997 By: /s/ E. THOMAS MARTIN ------------------------------------- For David B. Weyrich* NEVADA OUTDOOR, a Nevada corporation MW SIGN CORP. December 23, 1997 By: /s/ E. THOMAS MARTIN ------------------------------------- Title: --------------------------------- MW SIGN CORP. December 23, 1997 By: /s/ E. THOMAS MARTIN ------------------------------------- For Lynn Terlaga* MW SIGN CORP. December 23, 1997 By: /s/ E. THOMAS MARTIN ------------------------------------- For Brent Baer* MW SIGN CORP. December 23, 1997 By: /s/ E. THOMAS MARTIN ------------------------------------- For David C. Lamberger* MW SIGN CORP. December 23, 1997 By: /s/ E. THOMAS MARTIN ------------------------------------- For Thomas S. Jones* *By MW SIGN CORP., a California corporation, as Attorney-in-Fact December 23, 1997 By: /s/ E. THOMAS MARTIN ------------------------------------- E. Thomas Martin Title: President -49- 57 EXHIBIT A MARTIN MEDIA, A CALIFORNIA LIMITED PARTNERSHIP LIMITED PARTNERS At December 23, 1997 NAME Number of Units - ---- --------------- MW Sign Corp. (as General Partner) MW Sign Corp. (as a Limited Partner) Carole Martin Robert & Stephanie Burke Steve Landaker E. Thomas Martin David Weyrich John X. Aquilar Frank Sanchez Patrice Boyle Lojacano Trust J. Mark Barnes Dianne Barnes Robert Humanson Ellis & Beverly Jump Francis & Susan Lojacano Robert Nyland Gary Noren Terence & Judy O'Keefe John & Ann Bowler John Brophy Mary Ellen Coleman Michael Fisher Barry Heffner Carlos Prietto Estate of Patricia Martin Nevada Outdoor Systems, Inc. Lynn Terlaga Brent Baer Dave Lamberger Thomas Jones --------------- TOTAL: =============== - ------ 58 EXHIBIT B MARTIN MEDIA, A CALIFORNIA LIMITED PARTNERSHIP HOLDERS OF PREFERRED UNITS At December 23, 1997
Name Number of Units - ---- --------------- CIBC Oppenheimer Corp. 7,500 Total Return Portfolio 2,000 IDS Life Income Advantage Fund 1,500 IDS Life Special Income Fund 2,500 High Yield Portfolio 11,500 ------ Total 25,000 ======
EX-4.45 4 INDENTURE DATED AS OF NOVEMBER 17, 1998 1 EXHIBIT 4.45 =============================================================================== INDENTURE DATED AS OF NOVEMBER 17, 1998 AMONG CHANCELLOR MEDIA CORPORATION OF LOS ANGELES, AS ISSUER THE GUARANTORS NAMED HEREIN AND THE BANK OF NEW YORK, AS TRUSTEE $750,000,000 8% SENIOR NOTES DUE 2008 =============================================================================== 2 CROSS-REFERENCE TABLE
TIA Indenture Section Section - -------------------------------------------------------------------------------------------------------- 310(a) (1)..........................................................................................7.10 (a)(2)..............................................................................................7.10 (a)(3)..............................................................................................N.A. (a)(4)..............................................................................................N.A. (a)(5)........................................................................................7.08; 7.10 (b)....................................................................................7.08; 7.10; 11.02 (c).................................................................................................N.A. 311(a)..............................................................................................7.11 (b).................................................................................................7.11 (c).................................................................................................N.A. 312(a)..............................................................................................2.05 (b)................................................................................................11.03 (c)................................................................................................11.03 313(a)..............................................................................................7.06 (b)(1)..............................................................................................N.A. (b)(2)..............................................................................................7.06 (c)..........................................................................................7.06; 11.02 (d).................................................................................................7.06 314(a).................................................................................4.07; 4.09; 11.02 (b).................................................................................................N.A. (c)(1).............................................................................................11.04 (c)(2).............................................................................................11.04 (c)(3)..............................................................................................N.A. (d).................................................................................................N.A. (e).................................................................................................N.A. (f)..................................................................................................N.A 315(a)...........................................................................................7.01(b) (b)..........................................................................................7.05; 11.02 (c)..............................................................................................7.01(a) (d)..............................................................................................7.01(c) (e).................................................................................................6.11 316(a) (last sentence)..............................................................................2.09 (a)(1)(A)...........................................................................................6.05 (a)(1)(B)...........................................................................................6.04 (a)(2)..............................................................................................N.A. (b).................................................................................................6.07 317(a) (1)..........................................................................................6.08 (a)(2)..............................................................................................6.09 (b).................................................................................................2.04 318(a).............................................................................................11.01 (c)................................................................................................11.01
- ------------------ N.A. means Not Applicable NOTE: This Cross-Reference Table shall not, for any purpose, be deemed to be a part of the Indenture. i 3 TABLE OF CONTENTS
PAGE ---- ARTICLE 1. DEFINITIONS AND INCORPORATION BY REFERENCE.............................................................1 Section 1.01. Definitions......................................................................1 Section 1.02. Incorporation by Reference of TIA...............................................16 Section 1.03. Rules of Construction...........................................................16 ARTICLE 2. THE SECURITIES........................................................................................17 Section 2.01. Form and Dating.................................................................17 Section 2.02. Execution and Authentication....................................................18 Section 2.03. Registrar and Paying Agent......................................................19 Section 2.04. Paying Agent to Hold Money in Trust.............................................19 Section 2.05. Holder Lists....................................................................19 Section 2.06. Transfer and Exchange...........................................................19 Section 2.07. Replacement Securities..........................................................31 Section 2.08. Outstanding Securities..........................................................32 Section 2.09. Treasury Securities.............................................................32 Section 2.10. Temporary Securities............................................................32 Section 2.11. Cancellation....................................................................33 Section 2.12. Defaulted Interest..............................................................33 Section 2.13. CUSIP Number....................................................................33 Section 2.14. Deposit of Moneys...............................................................33 ARTICLE 3. REDEMPTION............................................................................................33 Section 3.01. Notices to Trustee..............................................................33 Section 3.02. Selection of Securities To Be Redeemed..........................................34 Section 3.03. Notice of Redemption............................................................34 Section 3.04. Effect of Notice of Redemption..................................................35 Section 3.05. Deposit of Redemption Price.....................................................35 Section 3.06. Securities Redeemed in Part.....................................................35 ARTICLE 4. COVENANTS.............................................................................................35 Section 4.01. Payment of Securities...........................................................35 Section 4.02. Maintenance of Office or Agency.................................................35 Section 4.03. Limitation on Restricted Payments...............................................36 Section 4.04. Corporate Existence.............................................................38 Section 4.05. Payment of Taxes and Other Claims...............................................39 Section 4.06. Maintenance of Properties and Insurance.........................................39 Section 4.07. Compliance Certificate; Notice of Default.......................................39 Section 4.08. Compliance with Laws............................................................40 Section 4.09. SEC Reports.....................................................................40 Section 4.10. Waiver of Stay, Extension or Usury Laws.........................................40 Section 4.11. Limitation on Transactions with Affiliates......................................41 Section 4.12. Limitation on Incurrence of Additional Indebtedness.............................41
ii 4
Section 4.13. Limitation on Dividend and Other Payment Restrictions Affecting Subsidiaries......................................................41 Section 4.14. [Indentionally Omitted].........................................................42 Section 4.15. Change of Control...............................................................42 Section 4.16. Limitation on Asset Sales.......................................................43 Section 4.17. Limitation on Preferred Stock of Subsidiaries...................................46 Section 4.18. Limitation on Liens.............................................................46 Section 4.19. Guarantees of Certain Indebtedness..............................................46 Section 4.20. Limitation on Sale and Leaseback Transaction....................................46 Section 4.21. Limitation on Line of Business..................................................46 Section 4.22. Limitation on Asset Swaps.......................................................47 ARTICLE 5. SUCCESSOR CORPORATION.................................................................................47 Section 5.01. When Company May Merge, Etc.....................................................47 Section 5.02. Successor Corporation Substituted...............................................48 ARTICLE 6. DEFAULT AND REMEDIES..................................................................................48 Section 6.01. Events of Default...............................................................48 Section 6.02. Acceleration....................................................................49 Section 6.03. Other Remedies..................................................................50 Section 6.04. Waiver of Past Defaults.........................................................50 Section 6.05. Control by Majority.............................................................50 Section 6.06. Limitation on Suits.............................................................50 Section 6.07. Rights of Holders To Receive Payment............................................51 Section 6.08. Collection Suit by Trustee......................................................51 Section 6.09. Trustee May File Proofs of Claim................................................51 Section 6.10. Priorities......................................................................51 Section 6.11. Undertaking for Costs...........................................................52 ARTICLE 7. TRUSTEE 52 Section 7.01. Duties of Trustee...............................................................52 Section 7.02. Rights of Trustees..............................................................53 Section 7.03. Individual Rights of Trustee....................................................54 Section 7.04. Trustee's Disclaimer............................................................54 Section 7.05. Notice of Default...............................................................54 Section 7.06. Reports by Trustee to Holders...................................................55 Section 7.07. Compensation and Indemnity......................................................55 Section 7.08. Replacement of Trustee..........................................................56 Section 7.09. Successor Trustee by Merger, Etc................................................56 Section 7.10. Eligibility; Disqualification...................................................56 Section 7.11. Preferential Collection of Claims Against the Company...........................57 ARTICLE 8. DISCHARGE OF INDENTURE; DEFEASANCE....................................................................57 Section 8.01. Termination of the Company's Obligations........................................57 Section 8.02. Acknowledgment of Discharge by Trustee..........................................59 Section 8.03. Application of Trust Money......................................................59 Section 8.04. Repayment to the Company........................................................59
iii 5
Section 8.05. Reinstatement...................................................................59 ARTICLE 9. AMENDMENTS, SUPPLEMENTS AND WAIVERS...................................................................60 Section 9.01. Without Consent of Holder.......................................................60 Section 9.02. With Consent of Holders.........................................................60 Section 9.03. Compliance with TIA.............................................................61 Section 9.04. Revocation and Effect of Consents...............................................61 Section 9.05. Notation on or Exchange of Securities...........................................61 Section 9.06. Trustee To Sign Amendments, Etc.................................................62 ARTICLE 10. [Intentionally Omitted]..............................................................................62 ARTICLE 11. GUARANTEES OF THE SECURITIES.........................................................................62 Section 11.01. Guarantees.....................................................................62 Section 11.02. Execution and Delivery of the Guarantees.......................................63 Section 11.03. Additional Guarantors..........................................................64 Section 11.04. Limitation of Guarantors' Liability............................................64 Section 11.05. Guarantors May Consolidate, etc., on Certain Terms.............................64 Section 11.06. Contribution...................................................................65 Section 11.07. Waiver of Subrogation..........................................................65 ARTICLE 12. [Intentionally Omitted]..............................................................................65 ARTICLE 13. MISCELLANEOUS........................................................................................65 Section 13.01. TIA Controls...................................................................65 Section 13.02. Notices........................................................................66 Section 13.03. Communications by Holders with Other Holders...................................66 Section 13.04. Certificate and Opinion as to Conditions Precedent.............................66 Section 13.05. Statements Required in Certificate.............................................67 Section 13.06. Rules by Trustee, Paying Agent, Registrar......................................67 Section 13.07. Legal Holidays.................................................................67 Section 13.08. Governing Law..................................................................67 Section 13.09. No Adverse Interpretation of Other Agreements..................................67 Section 13.10. No Recourse Against Others.....................................................68 Section 13.11. Successors.....................................................................68 Section 13.12. Duplicate Originals............................................................68 Section 13.13. Severability...................................................................68
iv 6 EXHIBITS Exhibit A-1 Form of Global Security Exhibit A-2 Form of Regulation S Temporary Global Security Exhibit B Form of Certificate of Transfer Exhibit C Form of Certificate of Exchange Exhibit D Form of Certificate from Acquiring Institutional Accredited Investor - ---------------- Note: This Table of Contents shall not, for any purpose, be deemed to be part of the Indenture. v 7 INDENTURE, dated as of November 17, 1998, among Chancellor Media Corporation of Los Angeles, a Delaware corporation (the "COMPANY"), and each subsidiary guarantor named on the signature pages hereto (collectively the "GUARANTORS") and The Bank of New York, a New York banking corporation, as trustee (the "Trustee"). Each party hereto agrees as follows for the benefit of the other parties and for the equal and ratable benefit of the Holders of the Company's 8% Senior Notes due 2008 (the "SECURITIES"): ARTICLE 1. DEFINITIONS AND INCORPORATION BY REFERENCE SECTION 1.01. DEFINITIONS. "144A GLOBAL SECURITY" means a global security in the form of Exhibit A-1 hereto bearing the Global Security Legend and the Private Placement Legend and deposited with or on behalf of, and registered in the name of, the Depositary or its nominee that will be issued in a denomination equal to the outstanding principal amount of the Securities sold in reliance on Rule 144A. "8-1/8% NOTES" means the $500.0 million aggregate principal amount of 8-1/8% Senior Subordinated Notes due 2007 of the Company, issued pursuant to an indenture (the "8-1/8% NOTES INDENTURE"), dated as of December 22, 1997, as amended, as the same may be modified or amended from time to time and future refinancings thereof. "8-3/4% NOTES" means the $200.0 million aggregate principal amount of 8-3/4% Senior Subordinated Notes due 2007 of the Company, issued pursuant to an indenture (the "8-3/4% NOTES INDENTURE"), dated as of June 24, 1997, as amended, as the same may be modified or amended from time to time and future refinancings thereof. "9% NOTES" means the $750.0 million aggregate principal amount of 9% Senior Subordinated Notes due 2008 of the Company, issued pursuant to an indenture (the "9% NOTES INDENTURE"), dated as of September 30, 1998, as amended, as the same may be modified or amended from time to time and future refinancings thereof. "9-3/8% NOTES" means the $200.0 million aggregate principal amount of 9-3/8% Senior Subordinated Notes due 2004 of the Company, issued pursuant to an indenture (the "9-3/8% NOTES INDENTURE"), dated as of February 14, 1996, as amended, as the same may be modified or amended from time to time and future refinancings thereof. "9-3/8% NOTES ISSUE DATE" means February 14, 1996. "10-1/2% NOTES" means the $100.0 million aggregate principal amount of 10-1/2% Senior Subordinated Notes due 2007 of the Company, issued pursuant to an amended and restated indenture (the "10-1/2% NOTES INDENTURE"), dated as of December 19, 1996, and amended and restated as of October 28, 1997, as amended, as the same may be modified or amended from time to time and future refinancings thereof. "ACCELERATION NOTICE" has the meaning provided in Section 6.02. "ACQUIRED INDEBTEDNESS" means Indebtedness of a Person or any of its Subsidiaries existing at the time such Person becomes a Subsidiary of the Company or at the time it merges or consolidates with the Company or any of its Subsidiaries or assumed in connection with the acquisition of assets from such Person and not incurred by such Person in connection with, or in anticipation or contemplation of, such Person becoming a Subsidiary of the Company or such acquisition, merger or consolidation. 8 "ACQUIRED PREFERRED STOCK" means Preferred Stock of any Person at the time such Person becomes a Subsidiary of the Company or at the time it merges or consolidates with the Company or any of its Subsidiaries and not issued by such Person in connection with, or in anticipation or contemplation of, such acquisition, merger or consolidation. "ADJUSTED NET ASSETS" of a Guarantor at any date shall mean the lesser of the amount by which (x) the fair value of the property of such Guarantor exceeds the total amount of liabilities, including, without limitation, contingent liabilities (after giving effect to all other fixed and contingent liabilities incurred or assumed on such date), but excluding liabilities under the Guarantee of such Guarantor at such date, and (y) the present fair salable value of the assets of such Guarantor at such date exceeds the amount that will be required to pay the probable liability of such Guarantor on its debts (after giving effect to all other fixed and contingent liabilities incurred or assumed on such date and after giving effect to any collection from any Subsidiary of such Guarantor in respect of the obligations of such Subsidiary under the Guarantee), excluding debt in respect of the Guarantee, as they become absolute and matured. "AFFILIATE" of any Person means any other Person who, directly or indirectly, through one or more intermediaries, controls, or is controlled by, or is under common control with, such Person. The term "control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise. "AFFILIATE TRANSACTION" has the meaning provided in Section 4.11. "AGENT" means any Registrar, Paying Agent or Co-Registrar. "ASSET ACQUISITION" means (i) an Investment by the Company or any Subsidiary of the Company in any other Person pursuant to which such Person shall become a Subsidiary of the Company or shall be consolidated or merged with the Company or any Subsidiary of the Company or (ii) the acquisition by the Company or any Subsidiary of the Company of assets of any Person comprising a division or line of business of such Person. "ASSET SALE" means any direct or indirect sale, issuance, conveyance, transfer, lease (other than operating leases entered into in the ordinary course of business), assignment or other transfer for value by the Company or any of its Subsidiaries (excluding any Sale and Leaseback Transaction or any pledge of assets or stock by the Company or any of its Subsidiaries) to any Person other than the Company or a Wholly-Owned Subsidiary of the Company of (i) any Capital Stock of any Subsidiary of the Company or (ii) any other property or assets of the Company or any Subsidiary of the Company other than in the ordinary course of business; provided, however, that for purposes of Section 4.16, Asset Sales shall not include (a) a transaction or series of related transactions for which the Company or its Subsidiaries receive aggregate consideration of less than $500,000, (b) transactions permitted under Section 4.22, (c) transactions permitted under Section 5.01 or (d) any Contract Buy Out. "ASSET SWAP" means the execution of a definitive agreement, subject only to approval of the Federal Communications Commission and other customary closing conditions, that the Company in good faith believes will be satisfied, for a substantially concurrent purchase and sale, or exchange, of Productive Assets between the Company or any of its Subsidiaries and another Person or group of affiliated Persons; provided that any amendment to or waiver of any closing condition which individually or in the aggregate is material to the Asset Swap shall be deemed to be a new Asset Swap. 2 9 "ATTRIBUTABLE VALUE" in respect of a sale and leaseback arrangement of any property means, as at the time of determination, the greater of (i) the fair market value of the property subject to such arrangement (as determined in good faith by the Board of Directors of the Company) or (ii) the present value (discounted at the interest rate borne by the Securities, compounded annually) of the total obligations of the lessee for rental payments during the remaining term of the lease included in such arrangement. "BANKRUPTCY LAW" means Title 11, United States Code or any similar federal, state or foreign law for the relief of debtors. "BOARD OF DIRECTORS" means, with respect to any Person, the board of directors (or any other equivalent governing body) of such Person or any committee of the board of directors of such Person duly authorized, with respect to any particular matter, to exercise the power of the board of directors of such Person. "BOARD RESOLUTION" means, with respect to any Person, a duly adopted resolution of the Board of Directors of such Person. "BUSINESS DAY" means a day that is not a Legal Holiday. "CAPITALIZED LEASE OBLIGATION" means, as to any Person, the obligation of such Person to pay rent or other amounts under a lease to which such Person is a party that is required to be classified and accounted for as a capital lease obligation under GAAP and, for purposes of this definition, the amount of such obligation at any date shall be the capitalized amount of such obligation at such date, determined in accordance with GAAP. "CAPITAL STOCK" means (i) with respect to any Person that is a corporation, any and all shares, interests, participations or other equivalents (however designated) of capital stock, including each class of common stock and Preferred Stock of such Person and (ii) with respect to any Person that is not a corporation, any and all partnership or other equity interests of such Person. "CASH EQUIVALENTS" means (i) marketable direct obligations issued by, or unconditionally guaranteed by, the United States Government or issued by any agency thereof and backed by the full faith and credit of the United States, in each case maturing within one year from the date of acquisition thereof; (ii) marketable direct obligations issued by any state of the United States of America or any political subdivision of any such state or any public instrumentality thereof maturing within one year from the date of acquisition thereof and, at the time of acquisition, having one of the two highest ratings obtainable from either Standard & Poor's Corporation or Moody's Investors Service, Inc.; (iii) commercial paper maturing no more than one year from the date of creation thereof and, at the time of acquisition, having a rating of at least A-1 from Standard & Poor's Corporation or at least P-1 from Moody's Investors Service, Inc.; (iv) certificates of deposit or bankers' acceptances maturing within one year from the date of acquisition thereof issued by any commercial bank 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. 3 10 "CEDEL" means Cedel Bank, S.A. "CHANCELLOR BROADCASTING" means Chancellor Broadcasting Company, a Delaware corporation that was merged with and into Evergreen Mezzanine Holdings Corporation, a Delaware corporation, on the Merger Date. "CHANCELLOR MEDIA" means Chancellor Media Corporation, a Delaware corporation formerly known as Evergreen Media 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 Company to any Person or group of related Persons for purposes of Section 13(d) of the Exchange Act (a "GROUP") (whether or not otherwise in compliance with the provisions of this Indenture), other than to Hicks Muse or any of its Affiliates, officers, and directors (the "PERMITTED HOLDERS"); or (ii) a majority of the Board of Directors of Chancellor Media, CMHC or the Company shall consist of Persons who are not Continuing Directors; or (iii) the acquisition by any Person or Group (other than the Permitted Holders) of the power, directly or indirectly, to vote or direct the voting of securities having more than 50% of the ordinary voting power for the election of directors of Chancellor Media, CMHC or the Company. "CHANGE OF CONTROL DATE" has the meaning provided in Section 4.15. "CHANGE OF CONTROL OFFER" has the meaning provided in Section 4.15. "CHANGE OF CONTROL PAYMENT DATE" has the meaning provided in Section 4.15. "CMHC" means Chancellor Mezzanine Holdings Corporation, a Delaware corporation formerly known as Evergreen Mezzanine Holdings Corporation, and its successors. "COMMODITY AGREEMENT" means any commodity futures contract, commodity option or other similar agreement or arrangement entered into by the Company or any of its Subsidiaries designed to protect the Company or any of its Subsidiaries against fluctuations in the price of commodities actually used in the ordinary course of business of the Company and its Subsidiaries. "COMPANY" means the party named as such in this Indenture until a successor replaces it pursuant to this Indenture and thereafter means such successor and also includes for the purposes of any provision contained herein and required by the TIA any other obligor on the Securities. "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 non-recurring gains or losses), (B) Consolidated Interest Expense and (C) Consolidated Non-Cash Charges, all as determined on a consolidated basis for such Person and its Subsidiaries in conformity with GAAP. "CONSOLIDATED INTEREST EXPENSE" means, with respect to any Person for any period, without duplication, the sum of (i) the interest expense of such Person and its Subsidiaries for such period as determined on a consolidated basis in accordance with GAAP, including, without limitation, (a) any amortization of debt discount, (b) the net cost under Interest Swap Obligations (including any amortization of discounts), (c) the interest portion of any deferred payment obligation, (d) all commissions, discounts and other fees and charges owed with respect to letters of credit, bankers' acceptance financing or similar facilities, and (e) all accrued interest and (ii) the interest component of Capitalized Lease Obligations paid or accrued by such Person and its Subsidiaries during such period as determined on a consolidated basis in accordance with GAAP. 4 11 "CONSOLIDATED NET INCOME" of any Person means, for any period, the aggregate net income (or loss) of such Person and its Subsidiaries for such period on a consolidated basis, determined in accordance with GAAP; provided that there shall be excluded therefrom, without duplication, (a) gains and losses from Asset Sales (without regard to the $500,000 limitation set forth in the definition thereof) or abandonments or reserves relating thereto and the related tax effects, (b) items classified as extraordinary or nonrecurring gains and losses, and the related tax effects according to GAAP, (c) the net income (or loss) of any Person acquired in a pooling of interests transaction accrued prior to the date it becomes a Subsidiary of such first referred to Person or is merged or consolidated with it or any of its Subsidiaries, (d) the net income of any Subsidiary to the extent that the declaration of dividends or similar distributions by that Subsidiary of that income is restricted by contract, operation of law or otherwise and (e) the net income of any Person, other than a Subsidiary, except to the extent of the lesser of (x) dividends or distributions paid to such first referred to Person or its Subsidiary by such Person and (y) the net income of such Person (but in no event less than zero), and the net loss of such Person shall be included only to the extent of the aggregate Investment of the first referred to Person or a consolidated Subsidiary of such Person. "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 Media, CMHC or the Company on the date of this Indenture, (ii) was nominated for election or elected to the Board of Directors of Chancellor Media, CMHC or the Company with the affirmative vote of a majority of the Continuing Directors who were members of such Board of Directors at the time of such nomination or election, or (iii) is a representative of a Permitted Holder. "CONTRACT BUY OUT" means the involuntary disposition or termination (including, without limitation, pursuant to buy out) of a contract between a media representation company and a client station. "CORPORATE TRUST OFFICE" means the office of the Trustee at which at any particular time its corporate trust business shall be principally administered, which office at the date of execution and delivery of this Indenture is located at 101 Barclay Street, Floor 21W, New York, New York 10286. "CRBC" means Chancellor Radio Broadcasting Company, a Delaware corporation that was merged with and into the Company on the Merger Date. "CREDIT AGREEMENT" means the Credit Agreement, dated on or about February 14, 1996, among Chancellor Broadcasting, CRBC, the lenders thereto and Bankers Trust Company as managing agent, as such agreement may be amended (including any amendment and restatement thereof), supplemented or otherwise modified from time to time, including any agreement extending the maturity of, refinancing, replacing or otherwise restructuring (including by way of adding Subsidiaries of CRBC as additional borrowers or guarantors thereunder) all or any portion of the Indebtedness under such agreement or any successor or replacement agreement and whether by the same or any other agent, lender or group of lenders. 5 12 "CURRENCY AGREEMENT" means any foreign exchange contract, currency swap agreement or other similar agreement or arrangement designed to protect the Company or any of its Subsidiaries against fluctuations in currency values. "CUSTODIAN" means any receiver, trustee, assignee, liquidator, sequestrator or similar official under any Bankruptcy Law. "DEFAULT" means an event or condition the occurrence of which is, or with the lapse of time or the giving of notice or both would be an Event of Default. "DEFINITIVE SECURITY" means a certificated Security registered in the name of the Holder thereof and issued in accordance with Section 2.06 hereof, in the form of Exhibit A-1 hereto except that such Security shall not bear the Global Security Legend and shall not have the "Schedule of Exchanges of Interests in the Global Security" attached thereto. "DEPOSITARY" means, with respect to the Securities issuable or issued in whole or in part in global form, the Person specified in Section 2.03 hereof as the Depositary with respect to the Securities, and any and all successors thereto appointed as depositary hereunder and having become such pursuant to the applicable provision of this Indenture. "DISCHARGED" has the meaning provided in Section 8.01. "DISQUALIFIED CAPITAL STOCK" means any Capital Stock which, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable), or upon the happening of any event, matures (excluding any maturity as the result of an optional redemption by the issuer thereof) or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable at the sole option of the holder thereof (except, in each case, upon the occurrence of a Change of Control), in whole or in part, on or prior to the final maturity date of the Securities. "EVENT OF DEFAULT" has the meaning provided in Section 6.01. "EUROCLEAR" means Morgan Guaranty Trust Company of New York, Brussels office, as operator of the Euroclear system. "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission promulgated thereunder. "EXCHANGE OFFER" has the meaning set forth in the Registration Rights Agreement. "EXCHANGE OFFER REGISTRATION STATEMENT" has the meaning set forth in the Registration Rights Agreement. "EXCHANGE SECURITIES" means the Securities issued in the Exchange Offer pursuant to Section 2.06(f) hereof. "FINANCIAL MONITORING AND OVERSIGHT AGREEMENTS" means the Financial Monitoring and Oversight Agreement among Hicks, Muse & Co. Partners, L.P., CRBC and Chancellor Broadcasting, as in effect on the 9-3/8% Notes Issue Date, and the Financial Advisory Agreement among HM2/Management Partners, L.P., CRBC and Chancellor Broadcasting, as in effect on the 9-3/8% Notes Issue Date, or as each is amended in connection with the merger of Chancellor Broadcasting, CRBC, Chancellor Media, CMHC and the Company on the Merger Date. 6 13 "FUNDS" has the meaning provided in Section 8.01. "GAAP" means generally accepted accounting principles as in effect in the United States of America as of the Issue Date. "GLOBAL SECURITIES" means, individually and collectively, each of the Restricted Global Securities and the Unrestricted Global Securities, in the form of Exhibit A-1 and Exhibit A-2 hereto issued in accordance with Section 2.01, 2.06(b)(iv), 2.06(d)(ii) or 2.06(f) hereof. "GLOBAL SECURITY LEGEND" means the legend set forth in Section 2.06(g)(ii), which is required to be placed on all Global Securities issued under this Indenture. "GUARANTEES" means the guarantees of the Securities on a senior basis by the Guarantors pursuant to Article Eleven. "GUARANTORS" means (i) initially, all of the Company's Subsidiaries on the Issue Date except Katz International Limited, Katz Television Sales Limited, Katz Radio Sales Limited, National Cable Communications, L.P., WOYE, Inc., WNZT, Inc., WRPC, Inc., WLDI, Inc., WIO, Inc., Codena Esterlotempo, Inc., WOQI, Inc., Puerto Rican American Broadcasting, Inc. and WOQI (FM), Inc. and (ii) each of the Company's Subsidiaries that, subsequent to the Issue Date, executes a supplemental indenture in which such Subsidiary agrees to be bound by the terms of this Indenture as a Guarantor; provided that any Person constituting a Guarantor as described above shall cease to constitute a Guarantor when its respective Guarantee is released in accordance with the terms thereof. "HICKS MUSE" means Hicks, Muse, Tate & Furst Incorporated, a Texas corporation. "HOLDER" or "SECURITYHOLDER" means the Person in whose name a Security is registered on the Registrar's books. "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, bankers' acceptance or similar credit transaction, (vi) for Indebtedness of others guaranteed by such Person, (vii) for Interest Swap Obligations, Commodity Agreements and Currency Agreements and (viii) for Indebtedness of any other Person of the type referred to in clauses (i) through (vii) which are secured by any Lien on any property or asset of such first referred to Person, the amount of such Indebtedness being deemed to be the lesser of the value of such property or asset or the amount of the Indebtedness so secured. The amount of Indebtedness of any Person at any date shall be the outstanding principal amount of all unconditional obligations described above, as such amount would be reflected on a balance sheet prepared in accordance with GAAP, and the maximum liability at such date of such Person for any contingent obligations described above. "INDENTURE" means this Indenture, as amended or supplemented from time to time in accordance with the terms hereof. 7 14 "INDIRECT PARTICIPANT" means a Person who holds a beneficial interest in a Global Security through a Participant. "INITIAL PURCHASERS" means BT Alex. Brown Incorporated, Chase Securities Inc., Morgan Stanley & Co. Incorporated and Salomon Smith Barney Inc., pursuant to the Purchase Agreement. "INSTITUTIONAL ACCREDITED INVESTOR" means an institution that is an "accredited investor" as that term is defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act. "INTEREST PAYMENT DATE" means the stated maturity of an installment of interest on the Securities. "INTEREST SWAP OBLIGATIONS" means the obligations of any Person under any interest rate protection agreement, interest rate future, interest rate option, interest rate swap, interest rate cap or other interest rate hedge or arrangement. "INVESTMENT" means (i) any transfer or delivery of cash, stock or other property of value in exchange for Indebtedness, stock or other security or ownership interest in any Person by way of loan, advance, capital contribution, guarantee or otherwise and (ii) an investment deemed to have been made by the Company at the time any entity which was a Subsidiary of the Company ceases to be such a Subsidiary in an amount equal to the value of the loans and advances made, and any remaining ownership interest in, such entity immediately following such entity ceasing to be a Subsidiary of the Company. The amount of any non-cash Investment shall be the fair market value of such Investment, as determined conclusively in good faith by management of the Company 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 of the Company at the time such Investment is made. "ISSUE DATE" means the date of original issuance of the Series A Securities. "LEGAL HOLIDAY" has the meaning provided in Section 13.07. "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 8 15 Acquisitions (including, without limitation, any Asset Acquisition giving rise to the need to make such calculation as a result of such Person or one of its Subsidiaries (including any Person who becomes a Subsidiary as a result of such Asset Acquisition) incurring, assuming or otherwise becoming liable for Indebtedness) at any time on or subsequent to the first day of the Four Quarter Period and on or prior to the date of determination, as if such Asset Sale or Asset Acquisition (including the incurrence, assumption or liability for any such Indebtedness and also including any Consolidated EBITDA associated with such Asset Acquisition) occurred on the first day of the Four Quarter Period. Furthermore, in calculating Consolidated Interest Expense, for purposes of the calculation of Consolidated EBITDA, (i) interest on Indebtedness determined on a fluctuating basis as of the date of determination (including Indebtedness actually incurred on the date of the transaction giving rise to the need to calculate the Leverage Ratio) and which will continue to be so determined thereafter shall be deemed to have accrued at a fixed rate per annum equal to the rate of interest on such Indebtedness as in effect on the date of determination and (ii) notwithstanding (i) above, interest determined on a fluctuating basis, to the extent such interest is covered by Interest Swap Obligations, shall be deemed to accrue at the rate per annum resulting after giving effect to the operation of such agreements. "LIEN" means any lien, mortgage, deed of trust, pledge, security interest, charge or encumbrance of any kind (including any conditional sale or other title retention agreement, any lease in the nature thereof and any agreement to give any security interest). "MATURITY DATE" means November 1, 2008. "MERGER DATE" means September 5, 1997. "NET CASH PROCEEDS" means, with respect to any Asset Sale, the proceeds in the form of cash or Cash Equivalents (including payments in respect of deferred payment obligations when received in the form of cash or Cash Equivalents) received by the Company or any of its Subsidiaries from such Asset Sale net of (i) reasonable out-of-pocket expenses and fees relating to such Asset Sale (including, without limitation, legal, accounting and investment banking fees and sales commissions, recording fees, title insurance premiums, appraisers fees and costs reasonably incurred in preparation of any asset or property for sale), (ii) taxes paid or reasonably estimated to be payable (calculated based on the combined state, federal and foreign statutory tax rates applicable to the Company or the Subsidiary engaged in such Asset Sale) and (iii) repayment of Indebtedness secured by assets subject to such Asset Sale; provided that if the instrument or agreement governing such Asset Sale requires the transferor to maintain a portion of the purchase price in escrow (whether as a reserve for adjustment of the purchase price or otherwise) or to indemnify the transferee for specified liabilities in a maximum specified amount, the portion of the cash or Cash Equivalents that is actually placed in escrow or segregated and set aside by the transferor for such indemnification obligation shall not be deemed to be Net Cash Proceeds until the escrow terminates or the transferor ceases to segregate and set aside such funds, in whole or in part, and then only to the extent of the proceeds released from escrow to the transferor or that are no longer segregated and set aside by the transferor. "NET PROCEEDS OFFER" has the meaning provided in Section 4.16. "NON-U.S. PERSON" means a person who is not a U.S. person, as defined in Regulation S. "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. 9 16 "OFFERING MEMORANDUM" means the Offering Memorandum dated November 12, 1998 pursuant to which $750.0 million in aggregate principal amount of the Securities were offered, and any supplement thereto. "OFFICER" means, with respect to any Person, the Chairman of the Board, the Chief Executive Officer, the President, any Vice President, the Chief Financial Officer, the Treasurer, the Controller, or the Secretary of such Person, or any other officer designated by the Board of Directors serving in a similar capacity. "OFFICERS' CERTIFICATE" means, with respect to any Person, a certificate signed by two Officers or by an Officer and either an Assistant Treasurer or an Assistant Secretary of such Person and otherwise complying with the requirements of Sections 13.04 and 13.05, as they relate to the making of an Officers' Certificate. "OPINION OF COUNSEL" means a written opinion from legal counsel who is reasonably acceptable to the Trustee complying with the requirements of Sections 13.04 and 13.05, as they relate to the giving of an opinion of Counsel. "PARTICIPANT" means, with respect to the Depositary, Euroclear or Cedel, a Person who has an account with the Depositary, Euroclear or Cedel, respectively (and, with respect to The Depository Trust Company, shall include Euroclear and Cedel). "PAYING AGENT" has the meaning provided in Section 2.03, except that, during the continuance of a Default or Event of Default and for the purposes of Articles Three and Eight and Sections 4.15 and 4.16, the Paying Agent shall not be the Company or any Affiliate of the Company. "PENDING TRANSACTIONS" has the meaning set forth in the Offering Memorandum. "PERMITTED INDEBTEDNESS" means, without duplication, (i) the Securities; (ii) the Guarantees; (iii) Indebtedness of the Company incurred pursuant to the Credit Agreement in an aggregate principal amount at any time outstanding not to exceed the sum of the aggregate commitments pursuant to the Credit Agreement as initially in effect on the 9-3/8% Notes Issue Date; (iv) the 9-3/8% Notes, the 8-3/4% Notes, the 10-1/2% Notes, the 8-1/8% Notes and the 9% Notes, and the Guarantees thereof; (v) Interest Swap Obligations; provided that such Interest Swap Obligations are entered into to protect the Company from fluctuations in interest rates of its Indebtedness; (vi) additional Indebtedness of the Company or any of its Subsidiaries not to exceed $10,000,000 in principal amount outstanding at any time (which amount may, but need not, be incurred under the Senior Credit Facility); (vii) Refinancing Indebtedness; (viii) Indebtedness owed by the Company to any Wholly-Owned Subsidiary or by any Subsidiary to the Company or any Wholly-Owned Subsidiary of the Company; and (ix) guarantees by Subsidiaries of any Indebtedness permitted to be incurred pursuant to this Indenture. "PERMITTED INVESTMENTS" means (i) Investments by the Company or any Subsidiary to acquire the stock or assets of any Person (or Indebtedness of such Person acquired in connection with a transaction in which such Person becomes a Subsidiary of the Company) engaged in the broadcast business or businesses reasonably related thereto, including, without limitation, media representation, sale of advertising and such other activities as are incidental or similar or related thereto; provided that if any such Investment or series of related Investments involves an Investment by the Company in excess of $5,000,000, the Company is able, at the time of such Investment and immediately after giving effect thereto, to incur at least $1.00 of additional Indebtedness (other than Permitted Indebtedness) in compliance with Section 4.12, (ii) Investments received by the Company or its Subsidiaries as consideration for a sale of assets, including an Asset Sale effected in compliance with Section 4.16, 10 17 (iii) Investments by the Company or any Wholly-Owned Subsidiary of the Company in any Wholly-Owned Subsidiary of the Company (whether existing on the Issue Date or created thereafter) or any Person that after such Investments, and as a result thereof, becomes a Wholly-Owned Subsidiary of the Company and Investments in the Company by any Wholly-Owned Subsidiary of the Company, (iv) cash and Cash Equivalents, (v) Investments in securities of trade creditors, wholesalers or customers received pursuant to any plan of reorganization or similar arrangement and (vi) additional Investments in an aggregate amount not to exceed $2,500,000 at any time outstanding. "PERMITTED LIENS" means (i) Liens for taxes, assessments and governmental charges to the extent not required to be paid under this Indenture, (ii) statutory Liens of landlords and carriers, warehousemen, mechanics, suppliers, materialmen, repairmen or other like Liens to the extent not required to be paid under this Indenture, (iii) pledges or deposits to secure lease obligations or nondelinquent obligations under workers' compensation, unemployment insurance or similar legislation, (iv) Liens to secure the performance of public statutory obligations that are not delinquent, performance bonds or other obligations of a like nature (other than for borrowed money), in each case incurred in the ordinary course of business, (v) easements, rights-of-way, restrictions, minor defects or irregularities in title and other similar charges or encumbrances incurred in the ordinary course of business not interfering in any material respect with the business of the Company or its Subsidiaries, (vi) Liens upon specific items of inventory or other goods and proceeds of any Person securing such Person's obligations in respect of letters of credit or bankers' acceptances issued or created for the account of such Person to facilitate the purchase, shipment or storage of such inventory or other goods in the ordinary course of business, (vii) judgment and attachment Liens not giving rise to an Event of Default, (viii) leases or subleases granted to others in the ordinary course of business consistent with past practice not interfering in any material respect with the business of the Company or its Subsidiaries, (ix) any interest or title of a lessor in the property subject to any lease, whether characterized as capitalized or operating other than any such interest or title resulting from or arising out of a default by the Company or its Subsidiaries of its obligations under such lease and (x) Liens arising from filing UCC financing statements for precautionary purposes in connection with true leases of personal property that are otherwise permitted under this Indenture and under which the Company or any of its Subsidiaries is a lessee. "PERSON" means an individual, partnership, corporation, limited liability company, unincorporated organization, trust or joint venture, or a governmental agency or political subdivision thereof. "PREFERRED STOCK" of any Person means any Capital Stock of such Person that has preferential rights to any other Capital Stock of such Person with respect to dividends or redemptions or upon liquidation. "PRINCIPAL" of any Indebtedness (including the Securities) means the principal amount of such Indebtedness plus the premium, if any, on such Indebtedness. "PRIVATE PLACEMENT LEGEND" means the legend set forth in Section 2.06(g)(i) to be placed on all Notes issued under this Indenture except where otherwise permitted by the provisions of this Indenture. "PROCEEDS PURCHASE DATE" shall have the meaning provided in Section 4.16. "PRODUCTIVE ASSETS" means assets of a kind used or usable by the Company and its Subsidiaries in broadcast businesses or businesses reasonably related thereto, including, without limitation, media representation, sale of advertising and such other activities as are incidental or similar or related thereto, and specifically includes assets acquired through Asset Acquisitions. 11 18 "PUBLIC EQUITY OFFERING" means an underwritten, fully registered public offering of Capital Stock (other than Disqualified Capital Stock) of the Company, Chancellor Media, CMHC or upon consummation of the Capstar Merger, Capstar Broadcasting Corporation, or any of their respective successors, pursuant to an effective registration statement filed with the Commission in accordance with the Securities Act, the gross proceeds of which are at least $150 million; provided, however, that in the case of a Public Equity Offering by Chancellor Media, CMHC or upon consummation of the Capstar Merger, Capstar Broadcasting Corporation, or any of their respective successors, the issuer of the public equity must contribute to the capital of the Company an amount sufficient to redeem the Notes, if any, called for redemption in accordance with the terms thereof. For the avoidance of doubt, no (i) offerings pursuant to rule 144A of the Securities Act, (ii) "best efforts" offerings (even if registered), or (iii) private placements of capital stock shall qualify as "Public Equity Offerings." "PURCHASE AGREEMENT" means the Purchase Agreement dated as of November 12, 1998 by and among the Company, the Guarantors and the Initial Purchasers relating to the purchase of $750.0 million aggregate principal amount of Securities. "QUALIFIED CAPITAL STOCK" means any Capital Stock that is not Disqualified Capital Stock. "QUALIFIED INSTITUTIONAL BUYER" or "QIB" shall have the meaning specified in Rule 144A under the Securities Act. "REDEMPTION DATE" means, with respect to any Securities, the Maturity Date of such Security or the earlier date on which such Security is to be redeemed by the Company pursuant to the terms of the Securities. "REDEMPTION PRICE" shall have the meaning provided in Section 3.03. "REFINANCING INDEBTEDNESS" means any refinancing by the Company of Indebtedness of the Company or any of its Subsidiaries incurred in accordance with Section 4.12 (other than pursuant to clause (iii) or (iv) of the definition of Permitted Indebtedness) that does not (i) result in an increase in the aggregate principal amount of Indebtedness (such principal amount to include, for purposes of this definition, any premiums, penalties or accrued interest paid with the proceeds of the Refinancing Indebtedness) of such Person or (ii) create Indebtedness with (A) a Weighted Average Life to Maturity that is less than the Weighted Average Life to Maturity of the Indebtedness being refinanced or (B) a final maturity earlier than the final maturity of the Indebtedness being refinanced. "REGISTERED EXCHANGE OFFER" means the consummation of the offer to exchange the Series B Securities for all of the outstanding Series A Securities in accordance with the Registration Rights Agreement. "REGISTRAR" has the meaning provided in Section 2.03. "REGISTRATION RIGHTS AGREEMENT" means the Registration Rights Agreement by and among the Company, the Guarantors and the Initial Purchasers, relating to $750.0 million aggregate principal amount of Securities and dated the Issue Date, as the same may be amended, supplemented or otherwise modified from time to time in accordance with the terms thereof. "REGULATION S" means Regulation S under the Securities Act. 12 19 "REGULATION S GLOBAL SECURITY" means a Regulation S Temporary Global Security or Regulation S Permanent Global Security, as appropriate. "REGULATION S PERMANENT GLOBAL SECURITY" means a permanent global Security in the form of Exhibit A-1 hereto bearing the Global Security Legend and the Private Placement Legend and deposited with or on behalf of and registered in the name of the Depositary or its nominee, issued in a denomination equal to the outstanding principal amount of the Regulation S Temporary Global Security upon expiration of the Restricted Period. "REGULATION S TEMPORARY GLOBAL SECURITY" means a temporary global Security in the form of Exhibit A-2 hereto bearing the Global Security Legend and the Private Placement Legend and deposited with or on behalf of and registered in the name of the Depositary or its nominee, issued in a denomination equal to the outstanding principal amount of the Securities initially sold in reliance on Rule 903 of Regulation S. "RESTRICTED DEFINITIVE SECURITY" means a Definitive Security bearing the Private Placement Legend. "RESTRICTED GLOBAL SECURITY" means a Global Security bearing the Private Placement Legend. "RESTRICTED PAYMENT" has the meaning provided in Section 4.03. "RESTRICTED PERIOD" means the 40 day restricted period as defined in Regulation S. "RESTRICTED SECURITY" as defined in Rule 144A(a)(3) under the Securities Act; provided, however, that the Trustee shall be entitled to request and conclusively rely on an Opinion of Counsel with respect to whether any Security constitutes a Restricted Security. "RULE 144" means Rule 144 promulgated under the Securities Act. "RULE 144A" means Rule 144A promulgated under the Securities Act. "RULE 903" means Rule 903 promulgated under the Securities Act. "RULE 904" means Rule 904 promulgated the Securities Act. "SALE AND LEASEBACK TRANSACTION" means any direct or indirect arrangement with any Person or to which any such Person is a party, providing for the leasing to the Company or a Subsidiary of any property, whether owned by the Company or any Subsidiary at the Issue Date or later acquired, which has been or is to be sold or transferred by the Company or such Subsidiary to such Person or to any other Person from whom funds have been or are to be advanced by such Person on the security of such property. "SEC" means the Securities and Exchange Commission. "SECURITIES" means the Series A Securities and Series B Securities, as amended or supplemented from time to time in accordance with the terms hereof, that are issued pursuant to this Indenture. "SECURITIES ACT" means the Securities Act of 1933, as amended, and the rules and regulations of the SEC promulgated thereunder. 13 20 "SENIOR CREDIT FACILITY" means the Second Amended and Restated Loan Agreement, dated April 25, 1997, as amended from time to time, among the Company, the lenders from time to time named party thereto, Toronto Dominion (Texas), Inc., Bankers Trust Company, The Bank of New York, NationsBank of Texas, N.A. and Union Bank of California, as managing agents, Toronto Dominion Securities (USA), Inc., as arranging agent, and Toronto Dominion (Texas), Inc., as administrative agent for the lenders, together with the related documents thereto (including, without limitation, any guarantee agreements, stock pledge agreements and other 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 Company as additional borrowers or guarantors thereunder) all or any portion of the Indebtedness under such agreement or any successor or replacement agreement and whether by the same or any other agent, lender or group of lenders. "SERIES A SECURITIES" means the 8% Senior Notes due 2008, Series A, issued, authenticated and delivered under this Indenture, as amended or supplemented from time to time pursuant to the terms of this Indenture. "SERIES B SECURITIES" means the 8% Senior Notes due 2008, Series B (the terms of which are identical to the Series A Securities except that, unless any Series B Securities shall be issued as Private Exchange Securities (as defined in the Registration Rights Agreement), the Series B Securities shall be registered under the Securities Act, and shall not contain the respective legend on the face of the form of the Series A Securities), to be issued in exchange for the Series A Securities pursuant to the Registered Exchange Offer and this Indenture or the Private Exchange (as defined in the Registration Rights Agreement). "SHELF REGISTRATION" means the Shelf Registration as defined in the Registration Rights Agreement. "SIGNIFICANT SUBSIDIARY" means for any Person each Subsidiary of such Person which (i) for the most recent fiscal year of such Person accounted for more than 5% of the consolidated net income of such Person or (ii) as at the end of such fiscal year, was the owner of more than 5% of the consolidated assets of such Person. "SUBSIDIARY," with respect to any Person, (i) means any corporation of which the outstanding Capital Stock having at least a majority of the votes entitled to be cast in the election of directors under ordinary circumstances shall at the time be owned, directly or indirectly, by such Person or (ii) any other Person of which at least a majority of the voting interest under ordinary circumstances is at the time, directly or indirectly, owned by such Person. Notwithstanding anything in this Indenture to the contrary, all references to the Company and its consolidated Subsidiaries or to financial information prepared on a consolidated basis in accordance with GAAP shall be deemed to include the Company and its Subsidiaries as to which financial statements are prepared on a combined basis in accordance with GAAP and to financial information prepared on such a combined basis. Notwithstanding anything in this Indenture to the contrary, an Unrestricted Subsidiary shall not be deemed to be a Subsidiary for purposes of this Indenture. "TAX SHARING AGREEMENT" means the Tax Sharing Agreement between CRBC and Chancellor Broadcasting, as in effect on the 9-3/8% Notes Issue Date. 14 21 "TIA" means the Trust Indenture Act of 1939 (15 U.S.C. ss.ss. 77aaa-77bbbb), as amended, as in effect on the date on which this Indenture is qualified under the TIA, except as otherwise provided in Section 9.03. "TRUST OFFICER" means (a) any officer within the corporate trust department of the Trustee, including any vice president, assistant vice president, assistant secretary, assistant treasurer, trust officer or any other officer of the Trustee who customarily performs functions similar to those performed by the Persons who at the time shall be such officers, respectively, or to whom any corporate trust matter is referred because of such person's knowledge of and familiarity with the particular subject and (b) who shall have direct responsibility for the administration of this Indenture. "TRUSTEE" means the party named as such in this Indenture until a successor replaces it in accordance with the provisions of this Indenture and thereafter means such successor. "UNRESTRICTED DEFINITIVE SECURITY" means one or more Definitive Securities that do not bear and are not required to bear the Private Placement Legend. "UNRESTRICTED GLOBAL SECURITY" means a permanent global Security in the form of Exhibit A-1 attached hereto that bears the Global Security Legend and that has the "Schedule of Exchanges of Interests in the Global Security" attached thereto, and that is deposited with or on behalf of and registered in the name of the Depositary, representing a series of Securities that do not bear the Private Placement Legend. "UNRESTRICTED SUBSIDIARY" means a Subsidiary of the Company created after the 9-3/8% Notes Issue Date and so designated by a resolution adopted by the Board of Directors of the Company, provided that (a) neither the Company nor any of its other Subsidiaries (other than Unrestricted Subsidiaries) (1) provides any credit support for any Indebtedness of such Subsidiary (including any undertaking, agreement or instrument evidencing such Indebtedness) or (2) is directly or indirectly liable for any Indebtedness of such Subsidiary, (b) the creditors with respect to Indebtedness for borrowed money of such Subsidiary, having a principal amount in excess of $5,000,000, have agreed in writing that they have no recourse, direct or indirect, to the Company or any other Subsidiary of the Company (other than Unrestricted Subsidiaries), including, without limitation, recourse with respect to the payment of principal of or interest on any Indebtedness of such Subsidiary and (c) at the time of designation of such Subsidiary such Subsidiary has no property or assets (other than de minimis assets resulting from the initial capitalization of such Subsidiary). Any such designation by the Board of Directors of the Company shall be evidenced to the Trustee by the filing with the Trustee of a certified copy of the resolution of the Company's Board of Directors giving effect to such designation and an Officers' Certificate certifying that such designation complied with the foregoing conditions. Until otherwise designated by the Board of Directors of the Company, National Cable Communications, L.P., a Delaware limited partnership, shall be an Unrestricted Subsidiary. "U.S. GOVERNMENT OBLIGATIONS" has the meaning provided in Section 8.01. "U.S. LEGAL TENDER" means such coin or currency of the United States of America as at the time of payment shall be legal tender for the payment of public and private debts. "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. 15 22 "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 in the election of directors are owned by such Person or any Wholly-Owned Subsidiary of such Person. SECTION 1.02. INCORPORATION BY REFERENCE OF TIA. Whenever this Indenture refers to a provision of the TIA, such provision is incorporated by reference in and made a part of, this Indenture. The following TIA terms used in this Indenture have the following meanings: "COMMISSION" means the SEC. "INDENTURE SECURITIES" means the Securities. "INDENTURE SECURITY HOLDER" means a Holder or a Securityholder. "INDENTURE TO BE QUALIFIED" means this Indenture. "INDENTURE TRUSTEE" or "INSTITUTIONAL TRUSTEE" means the Trustee. "OBLIGOR" on the indenture securities means the Company or any other obligor on the Company or any other obligor on the Securities. All other TIA terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by SEC rule and not otherwise defined herein have the meanings assigned to them therein. SECTION 1.03. RULES OF CONSTRUCTION. Unless the context otherwise requires: (1) a term has the meaning assigned to it; (2) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP as in effect on the 9-3/8% Notes Issue Date; (3) "OR" is not exclusive; (4) words in the singular include the plural, and words in the plural include the singular; (5) "HEREIN," "HEREOF" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision; and (6) all references herein and in the Securities to "INTEREST" on the Securities shall be deemed to include "ADDITIONAL INTEREST" due and payable pursuant to the Registration Rights Agreement. 16 23 ARTICLE 2. THE SECURITIES SECTION 2.01. FORM AND DATING. (a) General. The Securities and the Trustee's certificate of authentication shall be substantially in the form of Exhibits A-1 and A-2 hereto. The Securities may have notations, legends or endorsements required by law, stock exchange rule or usage. Each Security shall be dated the date of its authentication. The Securities shall be in denominations of $1,000 and integral multiples thereof. The terms and provisions contained in the Securities shall constitute, and are hereby expressly made, a part of this Indenture and the Company, the Guarantors and the Trustee, by their execution and delivery of this Indenture, expressly agree to such terms and provisions and to be bound thereby. However, to the extent any provision of any Security conflicts with the express provisions of this Indenture, the provisions of this Indenture shall govern and be controlling. (b) Global Securities. Securities issued in global form shall be substantially in the form of Exhibits A-1 or A-2 attached hereto (including the Global Security Legend thereon and the "Schedule of Exchanges of Interests in the Global Security" attached thereto). Securities issued in definitive form shall be substantially in the form of Exhibit A-1 attached hereto (but without the Global Security Legend thereon and without the "Schedule of Exchanges of Interests in the Global Security" attached thereto). Each Global Security shall represent such of the outstanding Securities as shall be specified therein and each shall provide that it shall represent the aggregate principal amount of outstanding Securities from time to time endorsed thereon and that the aggregate principal amount of outstanding Securities represented thereby may from time to time be reduced or increased, as appropriate, to reflect exchanges and redemptions. Any endorsement of a Global Security to reflect the amount of any increase or decrease in the aggregate principal amount of outstanding Securities represented thereby shall be made by the Trustee or the Custodian, at the direction of the Trustee, in accordance with instructions given by the Holder thereof as required by Section 2.06 hereof. (c) Temporary Global Securities. Securities offered and sold in reliance on Regulation S shall be issued initially in the form of the Regulation S Temporary Global Security, which shall be deposited on behalf of the purchasers of the Securities represented thereby with the Trustee, at its Corporate Trust office, as custodian for the Depositary, and registered in the name of the Depositary or the nominee of the Depositary for the accounts of designated agents holding on behalf of Euroclear or Cedel Bank, duly executed by the Company and authenticated by the Trustee as hereinafter provided. The Restricted Period shall be terminated upon the receipt by the Trustee of (i) a written certificate from the Depositary, together with copies of certificates from Euroclear and Cedel Bank certifying that they have received certification of non-United States beneficial ownership of 100% of the aggregate principal amount of the Regulation S Temporary Global Security (except to the extent of any beneficial owners thereof who acquired an interest therein during the Restricted Period pursuant to another exemption from registration under the Securities Act and who will take delivery of a beneficial ownership interest in a 144A Global Security bearing a Private Placement Legend, all as contemplated by Section 2.06(a)(ii) hereof), and (ii) an Officers' Certificate from the Company. Following the termination of the Restricted Period, beneficial interests in the Regulation S Temporary Global Security shall be exchanged for beneficial interests in Regulation S Permanent Global Securities pursuant to the Applicable Procedures. Simultaneously with the authentication of Regulation S Permanent Global Securities, the Trustee shall cancel the Regulation S Temporary Global Security upon written order of the Company signed by an Officer. The aggregate principal amount of the Regulation S Temporary Global Security and the Regulation S Permanent Global Securities may from time to time be increased or decreased by adjustments made on the records of the Trustee and the Depositary or its nominee, as the case may be, in connection with transfers of interests as hereinafter provided. 17 24 (d) Euroclear and Cedel Procedures Applicable. The provisions of the "Operating Procedures of the Euroclear System" and "Terms and Conditions Governing Use of Euroclear" and the "General Terms and Conditions of Cedel Bank" and "Customer Handbook" of Cedel Bank shall be applicable to transfers of beneficial interests in the Regulation S Temporary Global Security and the Regulation S Permanent Global Securities that are held by Participants through Euroclear or Cedel Bank. SECTION 2.02. EXECUTION AND AUTHENTICATION. An Officer shall sign the Securities for the Company by manual or facsimile signature. Each Guarantor shall execute a Guarantee in the manner set forth in Section 11.02. The Company's seal shall be reproduced on the Securities and may be in facsimile form. If an Officer whose signature is on a Security no longer holds that office at the time a Security is authenticated, the Security shall nevertheless be valid. A Security shall not be valid until authenticated by the manual signature of the Trustee. The signature shall be conclusive evidence that the Security has been authenticated under this Indenture. The Trustee shall, upon a written order of the Company signed by an Officer (an "Authentication Order"), authenticate Securities for original issue up to the aggregate principal amount stated in paragraph 4 of the Securities. The aggregate principal amount of Securities outstanding at any time may not exceed such amount except as provided in Section 2.07 hereof. The Trustee may appoint an authenticating agent acceptable to the Company to authenticate Securities. An authenticating agent may authenticate Securities whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent has the same rights as an Agent to deal with Holders or an Affiliate of the Company. SECTION 2.03. REGISTRAR AND PAYING AGENT. The Company shall maintain an office or agency where Securities may be presented for registration of transfer or for exchange ("REGISTRAR") and an office or agency where Securities may be presented for payment ("PAYING AGENT"). The Registrar shall keep a register of the Securities and of their transfer and exchange. The Company may appoint one or more co-registrars and one or more additional paying agents. The term "Registrar" includes any co-registrar and the term "Paying Agent" includes any additional paying agent. The Company may change any Paying Agent or Registrar without notice to any Holder. The Company shall notify the Trustee in writing of the name and address of any Agent not a party to this Indenture. If the Company fails to appoint or maintain another entity as Registrar or Paying Agent, the Trustee shall act as such. The Company or any of its Subsidiaries may act as Paying Agent or Registrar. The Company initially appoints The Depository Trust Company ("DTC") to act as Depositary with respect to the Global Securities. The Company initially appoints the Trustee to act as the Registrar and Paying Agent and to act as Custodian with respect to the Global Securities. 18 25 The Company shall, prior to the Record Date, notify the Paying Agent of any wire transfer instructions for payments that it receives from Holders. SECTION 2.04. PAYING AGENT TO HOLD MONEY IN TRUST. The Company shall require each Paying Agent other than the Trustee to agree in writing that the Paying Agent will hold in trust for the benefit of Holders or the Trustee all money held by the Paying Agent for the payment of principal, premium, if any, or interest on the Securities, and will notify the Trustee of any default by the Company in making any such payment. While any such default continues, the Trustee may require a Paying Agent to pay all money held by it to the Trustee. The Company at any time may require a Paying Agent to pay all money held by it to the Trustee. Upon payment over to the Trustee, the Paying Agent (if other than the Company or a Subsidiary) shall have no further liability for the money. If the Company or a Subsidiary acts as Paying Agent, it shall segregate and hold in a separate trust fund for the benefit of the Holders all money held by it as Paying Agent. Upon any bankruptcy or reorganization proceedings relating to the Company, the Trustee shall serve as Paying Agent for the Securities. SECTION 2.05. HOLDER LISTS. The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of all Holders and shall otherwise comply with TIA ss. 312(a). If the Trustee is not the Registrar, the Company shall furnish to the Trustee five (5) Business Days before each interest payment date and at such other times as the Trustee may request in writing, a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of the Holders of Securities and the Company shall otherwise comply with TIA ss. 312(a). SECTION 2.06. TRANSFER AND EXCHANGE. (a) Transfer and Exchange of Global Securities. A Global Security may not be transferred as a whole except by the Depositary to a nominee of the Depositary, by a nominee of the Depositary to the Depositary or to another nominee of the Depositary, or by the Depositary or any such nominee to a successor Depositary or a nominee of such successor Depositary. All Global Securities will be exchanged by the Company for Definitive Securities if (i) the Company delivers to the Trustee notice from the Depositary that it is unwilling or unable to continue to act as Depositary or that it is no longer a clearing agency registered under the Exchange Act and, in either case, a successor Depositary is not appointed by the Company within 120 days after the date of such notice from the Depositary or (ii) the Company in its sole discretion determines that the Global Securities (in whole but not in part) should be exchanged for Definitive Securities and delivers a written notice to such effect to the Trustee; provided that in no event shall the Regulation S Temporary Global Security be exchanged by the Company for Definitive Securities prior to (x) the expiration of the Restricted Period and (y) the receipt by the Registrar of any certificates required pursuant to Rule 903(c)(3)(ii)(B) under the Securities Act and provided further, there shall be no continuing Default or Event of Default. Upon the occurrence of either of the preceding events in (i) or (ii) above, Definitive Securities shall be registered in such names as the Depositary shall instruct the Trustee, in writing. Global Securities also may be exchanged or replaced, in whole or in part, as provided in Sections 2.07 and 2.10 hereof. Every Security executed, authenticated and delivered in exchange for, or in lieu of, a Global Security or any portion thereof, pursuant to this Section 2.06 or Section 2.07 or 2.10 hereof, shall be executed, authenticated and delivered in the form of, and shall be, a Global Security. A Global Security may not be exchanged for another Security other than as provided in this Section 2.06(a); however, beneficial interests in a Global Security may be transferred and exchanged as provided in Section 2.06(b),(c) or (f) hereof. 19 26 (b) Transfer and Exchange of Beneficial Interests in the Global Securities. The transfer and exchange of beneficial interests in the Global Securities shall be effected through the Depositary, in accordance with the provisions of this Indenture and the Applicable Procedures. Beneficial interests in the Restricted Global Securities shall be subject to restrictions on transfer comparable to those set forth herein to the extent required by the Securities Act. Transfers of beneficial interests in the Global Securities also shall require compliance with either subparagraph (i) or (ii) below, as applicable, as well as one or more of the other following subparagraphs, as applicable: (i) Transfer of Beneficial Interests in the Same Global Security. Beneficial interests in any Restricted Global Security may be transferred to Persons who take delivery thereof in the form of a beneficial interest in the same Restricted Global Security in accordance with the transfer restrictions set forth in the Private Placement Legend; provided, however, that prior to the expiration of the Restricted Period, transfers of beneficial interests in the Temporary Regulation S Global Security may not be made to a U.S. Person or for the account or benefit of a U.S. Person (other than an Initial Purchaser). Beneficial interests in any Unrestricted Global Security may be transferred to Persons who take delivery thereof in the form of a beneficial interest in an Unrestricted Global Security. No written orders or instructions shall be required to be delivered to the Registrar to effect the transfers described in this Section 2.06(b)(i). (ii) All Other Transfers and Exchanges of Beneficial Interests in Global Securities. In connection with all transfers and exchanges of beneficial interests that are not subject to Section 2.06(b)(i) above, the transferor of such beneficial interest must deliver to the Registrar either (A) (1) a written order from a Participant or an Indirect Participant given to the Depositary in accordance with the Applicable Procedures directing the Depositary to credit or cause to be credited a beneficial interest in another Global Security in an amount equal to the beneficial interest to be transferred or exchanged and (2) instructions given in accordance with the Applicable Procedures containing information regarding the Participant account to be credited with such increase or (B) (1) a written order from a Participant or an Indirect Participant given to the Depositary in accordance with the Applicable Procedures directing the Depositary to cause to be issued a Definitive Security in an amount equal to the beneficial interest to be transferred or exchanged and (2) instructions given by the Depositary to the Registrar containing information regarding the Person in whose name such Definitive Security shall be registered to effect the transfer or exchange referred to in (1) above; provided that in no event shall Definitive Securities be issued upon the transfer or exchange of beneficial interests in the Regulation S Temporary Global Security prior to (x) the expiration of the Restricted Period and (y) the receipt by the Registrar of any certificates required pursuant to Rule 903 under the Securities Act. Upon consummation of an Exchange Offer by the Company in accordance with Section 2.06(f) hereof, the requirements of this Section 2.06(b)(ii) shall be deemed to have been satisfied upon receipt by the Registrar of the instructions contained in the Letter of Transmittal delivered by the Holder of such beneficial interests in the Restricted Global Securities. Upon satisfaction of all of the requirements for transfer or exchange of beneficial interests in Global Securities contained in this Indenture and the Securities or otherwise applicable under the Securities Act, the Trustee shall adjust the principal amount of the relevant Global Securities pursuant to Section 2.06(h) hereof. (iii) Transfer of Beneficial Interests to Another Restricted Global Security. A beneficial interest in any Restricted Global Security may be transferred to a Person who takes delivery thereof in the form of a beneficial interest in another Restricted Global Security if the transfer complies with the requirements of Section 2.06(b)(ii) above and the Registrar receives the following: 20 27 (A) if the transferee will take delivery in the form of a beneficial interest in the 144A Global Security, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (1) thereof; and (B) if the transferee will take delivery in the form of a beneficial interest in the Regulation S Temporary Global Security or the Regulation S Global Security, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (2) thereof; (iv) Transfer and Exchange of Beneficial Interests in a Restricted Global Security for Beneficial Interests in the Unrestricted Global Security. A beneficial interest in any Restricted Global Security may be exchanged by any holder thereof for a beneficial interest in an Unrestricted Global Security or transferred to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Security if the exchange or transfer complies with the requirements of Section 2.06(b)(ii) above and: (A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the holder of the beneficial interest to be transferred, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (1) a broker-dealer, (2) a Person participating in the distribution of the Exchange Securities or (3) a Person who is an affiliate (as defined in Rule 144) of the Company; (B) such transfer is effected pursuant to the Shelf Registration in accordance with the Registration Rights Agreement; (C) such transfer is effected by a Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or (D) the Registrar receives the following: (1) if the holder of such beneficial interest in a Restricted Global Security proposes to exchange such beneficial interest for a beneficial interest in an Unrestricted Global Security, a certificate from such holder in the form of Exhibit C hereto, including the certifications in item (1)(a) thereof; or (2) if the holder of such beneficial interest in a Restricted Global Security proposes to transfer such beneficial interest to a Person who shall take delivery thereof in the form of a beneficial interest in an Unrestricted Global Security, a certificate from such holder in the form of Exhibit B hereto, including the certifications in item (4) thereof; 21 28 and, in each such case set forth in this subparagraph (D), an Opinion of Counsel in form reasonably acceptable to the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act. If any such transfer is effected pursuant to subparagraph (B) or (D) above at a time when an Unrestricted Global Security has not yet been issued, the Company shall issue and, upon receipt of an Authentication Order in accordance with Section 2.02 hereof, the Trustee shall authenticate one or more Unrestricted Global Securities in an aggregate principal amount equal to the aggregate principal amount of beneficial interests transferred pursuant to subparagraph (B) or (D) above. Beneficial interests in an Unrestricted Global Security cannot be exchanged for, or transferred to Persons who take delivery thereof in the form of, a beneficial interest in a Restricted Global Security. (c) Transfer or Exchange of Beneficial Interests for Definitive Securities. (i) Beneficial Interests in Restricted Global Securities to Restricted Definitive Securities. If any holder of a beneficial interest in a Restricted Global Security proposes to exchange such beneficial interest for a Restricted Definitive Security or to transfer such beneficial interest to a Person who takes delivery thereof in the form of a Restricted Definitive Security, then, upon receipt by the Registrar of the following documentation: (A) if the holder of such beneficial interest in a Restricted Global Security proposes to exchange such beneficial interest for a Restricted Definitive Security, a certificate from such holder in the form of Exhibit C hereto, including the certifications in item (2)(a) thereof; (B) if such beneficial interest is being transferred to a QIB in accordance with Rule 144A under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (1) thereof; (C) if such beneficial interest is being transferred to a Non-U.S. Person in an offshore transaction in accordance with Rule 903 or Rule 904 under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (2) thereof; (D) if such beneficial interest is being transferred pursuant to an exemption from the registration requirements of the Securities Act in accordance with Rule 144 under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(a) thereof; (E) if such beneficial interest is being transferred to an Institutional Accredited Investor in reliance on an exemption from the registration requirements of the Securities Act other than those listed in subparagraphs (B) through (D) above, a certificate to the effect set forth in Exhibit B hereto, including the certifications, certificates and Opinion of Counsel required by item (3)(d) thereof: 22 29 (F) if such beneficial interest is being transferred to the Company or any of its Subsidiaries, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(b) thereof; or (G) if such beneficial interest is being transferred pursuant to an effective registration statement under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(c) thereof, the Trustee shall cause the aggregate principal amount of the applicable Global Security to be reduced accordingly pursuant to Section 2.06(h) hereof, and the Company shall execute and the Trustee shall authenticate and deliver to the Person designated in the instructions a Definitive Security in the appropriate principal amount. Any Definitive Security issued in exchange for a beneficial interest in a Restricted Global Security pursuant to this Section 2.06(c) shall be registered in such name or names and in such authorized denomination or denominations as the holder of such beneficial interest shall instruct the Registrar through instructions from the Depositary and the Participant or Indirect Participant. The Trustee shall deliver such Definitive Securities to the Persons in whose names such Securities are so registered. Any Definitive Security issued in exchange for a beneficial interest in a Restricted Global Security pursuant to this Section 2.06(c)(i) shall bear the Private Placement Legend and shall be subject to all restrictions on transfer contained therein. (ii) Notwithstanding Sections 2.06(c)(i)(A) and (C) hereof, a beneficial interest in the Regulation S Temporary Global Security may not be exchanged for a Definitive Security or transferred to a Person who takes delivery thereof in the form of a Definitive Security prior to (x) the expiration of the Restricted Period and (y) the receipt by the Registrar of any certificates required pursuant to Rule 903(c)(3)(ii)(B) under the Securities Act, except in the case of a transfer pursuant to an exemption from the registration requirements of the Securities Act other than Rule 903 or Rule 904. (iii) Beneficial Interests in Restricted Global Securities to Unrestricted Definitive Securities. A holder of a beneficial interest in a Restricted Global Security may exchange such beneficial interest for an Unrestricted Definitive Security or may transfer such beneficial interest to a Person who takes delivery thereof in the form of an Unrestricted Definitive Security only if: (A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the holder of such beneficial interest, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (1) a broker-dealer, (2) a Person participating in the distribution of the Exchange Securities or (3) a Person who is an affiliate (as defined in Rule 144) of the Company; (B) such transfer is effected pursuant to the Shelf Registration in accordance with the Registration Rights Agreement; (C) such transfer is effected by a Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or 23 30 (D) the Registrar receives the following: (1) if the holder of such beneficial interest in a Restricted Global Security proposes to exchange such beneficial interest for a Definitive Security that does not bear the Private Placement Legend, a certificate from such holder in the form of Exhibit C hereto, including the certifications in item (1)(b) thereof; or (2) if the holder of such beneficial interest in a Restricted Global Security proposes to transfer such beneficial interest to a Person who shall take delivery thereof in the form of a Definitive Security that does not bear the Private Placement Legend, a certificate from such holder in the form of Exhibit B hereto, including the certifications in item (4) thereof; and, in each such case set forth in this subparagraph (D) an Opinion of Counsel in form reasonably acceptable to the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act. (iv) Beneficial Interests in Unrestricted Global Securities to Unrestricted Definitive Securities. If any holder of a beneficial interest in an Unrestricted Global Security proposes to exchange such beneficial interest for a Definitive Security or to transfer such beneficial interest to a Person who takes delivery thereof in the form of a Definitive Security, then, upon satisfaction of the conditions set forth in Section 2.06(b)(ii) hereof, the Trustee shall cause the aggregate principal amount of the applicable Global Security to be reduced accordingly pursuant to Section 2.06(h) hereof, and the Company shall execute and the Trustee shall authenticate and deliver to the Person designated in the instructions a Definitive Security in the appropriate principal amount. Any Definitive Security issued in exchange for a beneficial interest pursuant to this Section 2.06(c)(iv) shall be registered in such name or names and in such authorized denomination or denominations as the holder of such beneficial interest shall instruct the Registrar through instructions from the Depositary and the Participant or Indirect Participant. The Trustee shall deliver such Definitive Securities to the Persons in whose names such Securities are so registered. Any Definitive Security issued in exchange for a beneficial interest pursuant to this Section 2.06(c)(iv) shall not bear the Private Placement Legend. (d) Transfer and Exchange of Definitive Securities for Beneficial Interests in Global Securities. (i) Restricted Definitive Securities to Beneficial Interests in Restricted Global Securities. If any Holder of a Restricted Definitive Security proposes to exchange such Security for a beneficial interest in a Restricted Global Security or to transfer such Restricted Definitive Securities to a Person who takes delivery thereof in the form of a beneficial interest in a Restricted Global Security, then, upon receipt by the Registrar of the following documentation: (A) if the Holder of such Restricted Definitive Security proposes to exchange such Security for a beneficial interest in a Restricted Global Security, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (2)(b) thereof; 24 31 (B) if such Restricted Definitive Security is being transferred to a QIB in accordance with Rule 144A under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (1) thereof; (C) if such Restricted Definitive Security is being transferred to a Non-U.S. Person in an offshore transaction in accordance with Rule 903 or Rule 904 under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (2) thereof; (D) if such Restricted Definitive Security is being transferred pursuant to an exemption from the registration requirements of the Securities Act in accordance with Rule 144 under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(a) thereof; (E) if such Restricted Definitive Security is being transferred to an Institutional Accredited Investor in reliance on an exemption from the registration requirements of the Securities Act other than those listed in subparagraphs (B) through (D) above, a certificate to the effect set forth in Exhibit B hereto, including the certifications, certificates and Opinion of Counsel required by item (3)(d) thereof; (F) if such Restricted Definitive Security is being transferred to the Company or any of its Subsidiaries, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(b) thereof; or (G) if such Restricted Definitive Security is being transferred pursuant to an effective registration statement under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(c) thereof, the Trustee shall cancel the Restricted Definitive Security, and increase or cause to be increased the aggregate principal amount of, in the case of clause (A) above, the appropriate Restricted Global Security, in the case of clause (B) above, the 144A Global Security, and in the case of clause (c) above, the Regulation S Global Security. (ii) Restricted Definitive Securities to Beneficial Interests in Unrestricted Global Securities. A Holder of a Restricted Definitive Security may exchange such Security for a beneficial interest in an Unrestricted Global Security or transfer such Restricted Definitive Security to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Security only if: (A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the Holder, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (1) a broker-dealer, (2) a Person participating in the distribution of the Exchange Securities or (3) a Person who is an affiliate (as defined in Rule 144) of the Company; 25 32 (B) such transfer is effected pursuant to the Shelf Registration in accordance with the Registration Rights Agreement; (C) such transfer is effected by a Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or (D) the Registrar receives the following: (1) if the Holder of such Definitive Securities proposes to exchange such Securities for a beneficial interest in the Unrestricted Global Security, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (1)(c) thereof; or (2) if the Holder of such Definitive Securities proposes to transfer such Securities to a Person who shall take delivery thereof in the form of a beneficial interest in the Unrestricted Global Security, a certificate from such Holder in the form of Exhibit B hereto, including the certifications in item (4) thereof; and, in each such case set forth in this subparagraph (D) an Opinion of Counsel in form reasonably acceptable to the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act. Upon satisfaction of the conditions of any of the subparagraphs in this Section 2.06(d)(ii), the Trustee shall cancel the Definitive Securities and increase or cause to be increased the aggregate principal amount of the Unrestricted Global Security. (iii) Unrestricted Definitive Securities to Beneficial Interests in Unrestricted Global Securities. A Holder of an Unrestricted Definitive Security may exchange such Security for a beneficial interest in an Unrestricted Global Security or transfer such Definitive Securities to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Security at any time. Upon receipt of a request for such an exchange or transfer, the Trustee shall cancel the applicable Unrestricted Definitive Security and increase or cause to be increased the aggregate principal amount of one of the Unrestricted Global Securities. If any such exchange or transfer from a Definitive Security to a beneficial interest is effected pursuant to subparagraphs (ii)(B), (ii)(D) or (iii) above at a time when an Unrestricted Global Security has not yet been issued, the Company shall issue and, upon receipt of an Authentication Order in accordance with Section 2.02 hereof, the Trustee shall authenticate one or more Unrestricted Global Securities in an aggregate principal amount equal to the principal amount of Definitive Securities so transferred. 26 33 (e) Transfer and Exchange of Definitive Securities for Definitive Securities. Upon request by a Holder of Definitive Securities and such Holder's compliance with the provisions of this Section 2.06(e), the Registrar shall register the transfer or exchange of Definitive Securities. Prior to such registration of transfer or exchange, the requesting Holder shall present or surrender to the Registrar the Definitive Securities duly endorsed or accompanied by a written instruction of transfer in form satisfactory to the Registrar duly executed by such Holder or by its attorney, duly authorized in writing. In addition, the requesting Holder shall provide any additional certifications, documents and information, as applicable, required pursuant to the following provisions of this Section 2.06(e). (i) Restricted Definitive Securities to Restricted Definitive Securities. Any Restricted Definitive Security may be transferred to and registered in the name of Persons who take delivery thereof in the form of a Restricted Definitive Security if the Registrar receives the following: (A) if the transfer will be made pursuant to Rule 144A under the Securities Act, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (1) thereof; (B) if the transfer will be made pursuant to Rule 903 or Rule 904, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (2) thereof; and (C) if the transfer will be made pursuant to any other exemption from the registration requirements of the Securities Act, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications, certificates and Opinion of Counsel required by item (3)(d) thereof. (ii) Restricted Definitive Securities to Unrestricted Definitive Securities. Any Restricted Definitive Security may be exchanged by the Holder thereof for an Unrestricted Definitive Security or transferred to a Person or Persons who take delivery thereof in the form of an Unrestricted Definitive Security if: (A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the Holder, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (1) a broker-dealer, (2) a Person participating in the distribution of the Exchange Securities or (3) a Person who is an affiliate (as defined in Rule 144) of the Company; (B) any such transfer is effected pursuant to the Shelf Registration in accordance with the Registration Rights Agreement; (C) any such transfer is effected by a Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or (D) the Registrar receives the following: (1) if the Holder of such Restricted Definitive Securities proposes to exchange such Securities for an Unrestricted Definitive Security, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (1)(d) thereof; or 27 34 (2) if the Holder of such Restricted Definitive Securities proposes to transfer such Securities to a Person who shall take delivery thereof in the form of an Unrestricted Definitive Security, a certificate from such Holder in the form of Exhibit B hereto, including the certifications in item (4) thereof; and, in each such case set forth in this subparagraph (D), Opinion of Counsel in form reasonably acceptable to the Company to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act. (iii) Unrestricted Definitive Securities to Unrestricted Definitive Securities. A Holder of Unrestricted Definitive Securities may transfer such Securities to a Person who takes delivery thereof in the form of an Unrestricted Definitive Security. Upon receipt of a request to register such a transfer, the Registrar shall register the Unrestricted Definitive Securities pursuant to the instructions from the Holder thereof. (f) Exchange Offer. Upon the occurrence of the Exchange Offer in accordance with the Registration Rights Agreement, the Company shall issue and, upon receipt of an Authentication Order in accordance with Section 2.02, the Trustee shall authenticate (i) one or more Unrestricted Global Securities in an aggregate principal amount equal to the principal amount of the beneficial interests in the Restricted Global Securities tendered for acceptance by Persons that certify in the applicable Letters of Transmittal that (x) they are not broker-dealers, (y) they are not participating in a distribution of the Exchange Securities and (z) they are not affiliates (as defined in Rule 144) of the Company, and accepted for exchange in the Exchange Offer and (ii) Definitive Securities in an aggregate principal amount equal to the principal amount of the Restricted Definitive Securities accepted for exchange in the Exchange Offer. Concurrently with the issuance of such Securities, the Trustee shall cause the aggregate principal amount of the applicable Restricted Global Securities to be reduced accordingly, and the Company shall execute and the Trustee shall authenticate and deliver to the Persons designated by the Holders of Definitive Securities so accepted Definitive Securities in the appropriate principal amount. (g) Legends. The following legends shall appear on the face of all Global Securities and Definitive Securities issued under this Indenture unless specifically stated otherwise in the applicable provisions of this Indenture. (i) Private Placement Legend. (A) Except as permitted by subparagraph (B) below, each Global Security and each Definitive Security (and all Securities issued in exchange therefor or substitution thereof) shall bear the legend in substantially the following form: "THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE ACT) (B) IT IS AN "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a) (1), (2), (3) OR (7) UNDER THE ACT) OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING 28 35 THIS SECURITY IN AN OFFSHORE TRANSACTION, (2) AGREES THAT IT WILL NOT WITHIN TWO YEARS AFTER THE ORIGINAL ISSUANCE OF THIS SECURITY RESELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO THE ISSUER OR ANY SUBSIDIARY THEREOF, (B) INSIDE THE UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE ACT, (C) INSIDE THE UNITED STATES TO AN ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES (OR HAS HAD FURNISHED ON ITS BEHALF BY A U.S. BROKER-DEALER) TO THE TRANSFER AGENT A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS SECURITY (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRANSFER AGENT), (D) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE ACT, (E) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE ACT (IF AVAILABLE), OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS SECURITY WITHIN TWO YEARS AFTER THE ORIGINAL ISSUANCE OF THIS SECURITY, IF THE PROPOSED TRANSFEREE IS AN ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE TRANSFER, FURNISH TO THE TRANSFER AGENT AND THE COMPANY SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS EITHER OF THEM MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE ACT. AS USED HEREIN, THE TERMS "OFF-SHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANING GIVEN TO THEM BY REGULATION S UNDER THE ACT." (B) Notwithstanding the foregoing, any Global Security or Definitive Security issued pursuant to subparagraphs (b)(iv), (c)(ii), (c)(iii), (c)(iv), (d)(ii), (d)(iii), (e)(ii), (e)(iii) or (f) to this Section 2.06 (and all Securities issued in exchange therefor or substitution thereof) shall not bear the Private Placement Legend. (ii) Global Security Legend. Each Global Security shall bear a legend in substantially the following form: "THIS GLOBAL SECURITY IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE GOVERNING THIS SECURITY) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO THE INDENTURE, (II) THIS GLOBAL SECURITY MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE INDENTURE, (III) THIS GLOBAL SECURITY MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL SECURITY MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE COMPANY." 29 36 (iii) Regulation S Temporary Global Security Legend. The Regulation S Temporary Global Security shall bear a legend in substantially the following form: "THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL SECURITY, AND THE CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR CERTIFICATED SECURITIES, ARE AS SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN)." (h) Cancellation and/or Adjustment of Global Securities. At such time as all beneficial interests in a particular Global Security have been exchanged for Definitive Securities or a particular Global Security has been redeemed, repurchased or cancelled in whole and not in part, each such Global Security shall be returned to or retained and cancelled by the Trustee in accordance with Section 2.11 hereof. At any time prior to such cancellation, if any beneficial interest in a Global Security is exchanged for or transferred to a Person who will take delivery thereof in the form of a beneficial interest in another Global Security or for Definitive Securities, the principal amount of Securities represented by such Global Security shall be reduced accordingly and an endorsement shall be made on such Global Security by the Trustee or by the Depositary at the direction of the Trustee to reflect such reduction; and if the beneficial interest is being exchanged for or transferred to a Person who will take delivery thereof in the form of a beneficial interest in another Global Security, such other Global Security shall be increased accordingly and an endorsement shall be made on such Global Security by the Trustee or by the Depositary at the direction of the Trustee to reflect such increase. (i) General Provisions Relating to Transfers and Exchanges. (i) To permit registrations of transfers and exchanges, the Company shall execute and the Trustee shall authenticate Global Securities and Definitive Securities upon the Company's order or at the Registrar's request. (ii) No service charge shall be made to a holder of a beneficial interest in a Global Security or to a Holder of a Definitive Security for any registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any transfer tax or similar governmental charge payable in connection therewith (other than any such transfer taxes or similar governmental charge payable upon exchange or transfer pursuant to Sections 2.10, 3.06, 3.09, 4.10, 4.15 and 9.05 hereof). (iii) The Registrar shall not be required to register the transfer of or exchange any Security selected for redemption in whole or in part, except the unredeemed portion of any Security being redeemed in part. (iv) All Global Securities and Definitive Securities issued upon any registration of transfer or exchange of Global Securities or Definitive Securities shall be the valid obligations of the Company, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Global Securities or Definitive Securities surrendered upon such registration of transfer or exchange. (v) The Registrar shall not be required (A) to issue, to register the transfer of or to exchange any Securities during a period beginning at the opening of business 15 days before the day of any selection of Securities for redemption under Section 3.02 hereof and ending at the close of business on the day of selection, (B) to register the transfer of or to exchange any Security so selected for redemption in whole or in part, except the unredeemed portion of any Security being redeemed in part or (c) to register the transfer of or to exchange a Security between a record date and the next succeeding Interest Payment Date. 30 37 (vi) Prior to due presentment for the registration of a transfer of any Security, the Trustee, any Agent and the Company may deem and treat the Person in whose name any Security is registered as the absolute owner of such Security for the purpose of receiving payment of principal of and interest on such Securities and for all other purposes, and none of the Trustee, any Agent or the Company shall be affected by notice to the contrary. (vii) The Trustee shall authenticate Global Securities and Definitive Securities in accordance with the provisions of Section 2.02 hereof. (viii) All certifications, certificates and Opinions of Counsel required to be submitted to the Registrar pursuant to this Section 2.06 to effect a registration of transfer or exchange may be submitted by facsimile. SECTION 2.07. REPLACEMENT SECURITIES If a mutilated Security is surrendered to the Trustee or if the Holder of a Security claims that the Security has been lost, destroyed or wrongfully taken, the Company shall issue and the Trustee, shall authenticate a replacement Security if the Trustee's requirements are met. If required by the Trustee or the Company, such Holder must provide an indemnity bond or other indemnity sufficient in the judgment of the Company and the Trustee to protect the Company, the Trustee or, any Agent from any loss which any of them may suffer if a Security is replaced. The Company may charge such Holder for its reasonable, out of pocket expenses in replacing a Security, including reasonable fees and expenses of counsel. Every replacement Security shall constitute an additional obligation of the Company. SECTION 2.08. OUTSTANDING SECURITIES. Securities outstanding at any time are all the Securities that have been authenticated by the Trustee except those cancelled by it, those delivered to it for cancellation, and those described in this Section as not outstanding. A Security does not cease to be outstanding because the Company or any of its Affiliates holds the Security. If a Security is replaced pursuant to Section 2.07 (other than a mutilated Security surrendered for replacement), it ceases to be outstanding unless the Trustee receives proof satisfactory to it that the replaced Security is held by a bona fide purchaser. A mutilated Security ceases to be outstanding upon surrender of such Security and replacement thereof pursuant to Section 2.07. If on a Redemption Date or the Maturity Date the Paying Agent holds U.S. Legal Tender or U.S. Government Obligations sufficient to pay all of the principal and interest due on the Securities payable on that date and is not prohibited from paying such money to the Holders thereof pursuant to the terms of this Indenture, then on and after that date such Securities cease to be outstanding and interest on them ceases to accrue. 31 38 SECTION 2.09. TREASURY SECURITIES. In determining whether the Holders of the required principal amount of Securities have concurred in any direction, waiver, consent or notice, Securities owned by the Company or an Affiliate shall be considered as though they are not outstanding, except that for the purposes of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Securities which the Trustee knows are so owned shall be so considered. The Company shall notify the Trustee, in writing, when it or any of its Affiliates repurchases or otherwise acquires Securities, of the aggregate principal amount of such Securities so repurchased or otherwise acquired. SECTION 2.10. TEMPORARY SECURITIES Until certificates representing Securities are ready for delivery, the Company may prepare and the Trustee shall authenticate Temporary Securities upon receipt of a written order of the Company in the form of an Officers' Certificate. The Officers' Certificate shall specify the amount of, Temporary Securities to be authenticated and the date on which the Temporary Securities are to be authenticated. Temporary Securities shall be substantially in the form of certificated Securities but may have variations that the Company considers appropriate for temporary Securities and as shall be reasonably acceptable to the Trustee. Without unreasonable delay, the Company shall prepare and execute, and the Trustee shall authenticate upon receipt of a written Authentication Order definitive Securities in exchange for Temporary Securities. SECTION 2.11. CANCELLATION. The Company at any time may deliver Securities to the Trustee for cancellation. The Registrar and Paying Agent shall forward to the Trustee any Securities surrendered to them for transfer, exchange or payment. The Trustee, or at the direction of the Trustee, the Registrar or the Paying Agent, and no one else, shall cancel and, at the written direction of the Company, shall dispose of all Securities surrendered for transfer exchange, payment or cancellation. Subject to Section 2.07, the Company may not issue new Securities to replace Securities that the Company has paid or delivered to the Trustee for cancellation. If the Company shall acquire any of the Securities, such acquisition shall not operate as a redemption or satisfaction of the Indebtedness represented by such Securities unless and until the same are surrendered to the Trustee for cancellation pursuant to this Section 2.11. SECTION 2.12. DEFAULTED INTEREST. If the Company defaults in a payment of interest on the Securities, it shall pay the defaulted interest, plus (to the extent lawful) any, interest payable on the defaulted interest, to the Persons who are Holders on a subsequent special record date, which date shall be the fifteenth day next preceding the date fixed by the Company for the payment of defaulted interest or the next succeeding Business Day if such date is not a Business Day. At least 15 days before the subsequent special record date, the Company shall mail to each Holder, with a copy to the Trustee, a notice that states the subsequent special record date, the payment date and the amount of defaulted interest, and interest payable on such defaulted interest, if any, to be paid. SECTION 2.13. CUSIP NUMBER. The Company in issuing the Securities may use a "CUSIP" number, and if so, the Trustee shall use the CUSIP number in notices of redemption or exchange as a convenience to Holders; provided that no representation is hereby deemed to be made by the Trustee as to the correctness or accuracy of the CUSIP number printed in the notice or on the Securities, and that reliance may be placed only on the other identification numbers printed on the Securities. The Company will promptly notify the Trustee of any change in the CUSIP numbers. 32 39 SECTION 2.14. DEPOSIT OF MONEYS. Prior to 10:00 a.m. New York City time on each Interest Payment Date and Maturity Date, the Company shall have deposited with the Paying Agent in immediately available funds money sufficient to make cash payments, if any, due on such Interest Payment Date or Maturity Date, as the case may be, in a timely manner which permits the Paying Agent to remit payment to the Holders on such Interest Payment Date or Maturity Date, as the case may be. ARTICLE 3. REDEMPTION SECTION 3.01. NOTICES TO TRUSTEE. If the Company elects to redeem Securities pursuant to paragraph 6 of the Securities, it shall notify the Trustee and the Paying Agent in writing of the Redemption Date and the principal amount of the Securities to be redeemed and whether it wants the Trustee to give notice of redemption to the Holders (at the Company's expense) at least 30 days (unless a shorter notice shall be satisfactory to the Trustee) but not more than 90 days before the Redemption Date. Any such notice may be cancelled at any time prior to notice of such redemption being mailed to any Holder and shall thereby be void and of no effect. SECTION 3.02. SELECTION OF SECURITIES TO BE REDEEMED. If fewer than all of the Securities are to be redeemed, the Trustee shall select the Securities to be redeemed in compliance with the requirements of the principal national securities exchange, if any, on which the Securities being redeemed are listed, or, if the Securities are not listed on a national securities exchange, on a pro rata basis, by lot or in such other fair and reasonable manner chosen at the discretion of the Trustee; provided, however, that a redemption pursuant to the provisions of paragraph 6(b) of the Securities shall be made on a pro rata basis. The Trustee shall make the selection from the Securities outstanding and not previously called for redemption and shall promptly notify the Company in writing of the Securities selected for redemption and, in the case of any Security selected for partial redemption, the principal amount thereof to be redeemed. Securities in denominations of $1,000 or less may be redeemed only in whole. The Trustee may select for redemption portions (equal to $1,000 or any integral multiple thereof) of the principal of Securities that have denominations larger than $1,000. Provisions of this Indenture that apply to Securities called for redemption also apply to portions of Securities called for redemption. SECTION 3.03. NOTICE OF REDEMPTION. At least 30 days but not more than 60 days before a Redemption Date, the Company shall mail or cause to be mailed a notice of redemption by first-class mail to each Holder whose Securities are to be redeemed, with a copy to the Trustee. At the Company's request, the Trustee shall give the notice of redemption in the Company's name and at the Company's expense. Each notice for redemption shall identify the Securities to be redeemed (including CUSIP numbers) and shall state: (1) the Redemption Date; 33 40 (2) the redemption price and the amount of accrued interest, if any, to be paid (the "REDEMPTION PRICE"); (3) the paragraph of the Securities pursuant to which the Securities are being redeemed; (4) the name and address of the Paying Agent; (5) that Securities called for redemption must be surrendered to the Paying Agent to collect the Redemption Price; (6) that, unless the Company defaults in making the redemption payment, interest on Securities called for redemption ceases to accrue on and after the Redemption Date, and the only remaining right of the Holders of such Securities is to receive payment of the Redemption Price upon surrender to the Paying Agent of the Securities redeemed; (7) if any Security is being redeemed in part, the portion of the principal amount of such Security to be redeemed and that, after the Redemption Date, and upon surrender of such Security, a new Security or Securities in the aggregate principal amount equal to the unredeemed portion thereof will be issued; and (8) if fewer than all the Securities are to be redeemed, the identification of the particular Securities (or portion thereof) to be redeemed, as well as the aggregate principal amount of Securities to be redeemed and the aggregate principal amount of Securities to be outstanding after such partial redemption. SECTION 3.04. EFFECT OF NOTICE OF REDEMPTION. Once notice of redemption is mailed in accordance with Section 3.03, Securities called for redemption become due and payable on the Redemption Date and at the Redemption Price. Upon surrender to the Trustee or Paying Agent, such Securities called for redemption shall be paid at the Redemption Price. SECTION 3.05. DEPOSIT OF REDEMPTION PRICE. On or before the Redemption Date, the Company shall deposit with the Paying Agent U.S. Legal Tender sufficient to pay the Redemption Price of all Securities to be redeemed on that date. The Paying Agent shall promptly return to the Company any U.S. Legal Tender so deposited which is not required for that purpose, except with respect to monies owed as obligations to the Trustee pursuant to Article Seven. If the Company complies with the preceding paragraph, then, unless the Company defaults in the payment of such Redemption Price, interest on the Securities to be redeemed will cease to accrue on and after the applicable Redemption Date, whether or not such Securities are presented for payment. SECTION 3.06. SECURITIES REDEEMED IN PART. Upon surrender of a Security that is to be redeemed in part, the Trustee shall authenticate for the Holder a new Security or Securities equal in principal amount to the unredeemed portion of the Security surrendered. 34 41 ARTICLE 4. COVENANTS SECTION 4.01. PAYMENT OF SECURITIES. The Company shall pay the principal of and interest on the Securities on the dates and in the manner provided in the Securities. An installment of principal of or interest on the Securities shall be considered paid on the date it is due if the Trustee or Paying Agent holds on that date U.S. Legal Tender designated for and sufficient to pay the installment. Interest will be computed on the basis of a 360-day year comprised of twelve 30-day months. Notwithstanding anything to the contrary contained in this Indenture, the Company may, to the extent it is required to do so by law, deduct or withhold income or other similar taxes imposed by the United States of America from principal or interest payments hereunder. SECTION 4.02. MAINTENANCE OF OFFICE OR AGENCY. The Company shall maintain the office or agency required under Section 2.03. The Company shall give prior notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the address of the Trustee set forth in Section 13.02. SECTION 4.03. LIMITATION ON RESTRICTED PAYMENTS. Neither the Company nor any of its Subsidiaries will, directly or indirectly, (a) declare or pay any dividend or make any distribution (other than dividends or distributions payable in Qualified Capital Stock of the Company) on shares of the Company's Capital Stock, (b) purchase, redeem or otherwise acquire or retire for value any Capital Stock of the Company or any warrants, rights or options to acquire shares of any class of such Capital Stock, other than the exchange of such Capital Stock or any warrants, rights or options to acquire shares of any class of such Capital Stock for Qualified Capital Stock or warrants, rights or options to acquire Qualified Capital Stock, (c) make any principal payment on, purchase, defease, redeem, prepay, decrease or otherwise acquire or retire for value, prior to any scheduled final maturity, scheduled repayment or scheduled sinking fund payment, any Indebtedness of the Company or its Subsidiaries that is subordinate or junior in right of payment to the Securities, or (d) make any Investment (other than Permitted Investments) (each of the foregoing prohibited actions set forth in clauses (a), (b), (c) and (d) being referred to as a "RESTRICTED Payment"), if, at the time of such Restricted Payment or immediately after giving effect thereto, (i) a Default or an Event of Default has occurred and is continuing, (ii) the Company is not able to incur at least $1.00 of additional Indebtedness (other than Permitted Indebtedness) in compliance with Section 4.12, or (iii) the aggregate amount of Restricted Payments made by the Company on or after the Merger Date, together with the aggregate amount of Restricted Payments made by CRBC subsequent to the 9-3/8% Notes Issue Date and through September 4, 1997 (the amount expended for such purposes, if other than in cash, being the fair market value of such property as determined by the respective Board of Directors in good faith) exceeds the sum of: (A) (x) 100% of the aggregate Consolidated EBITDA of CRBC from the 9-3/8% Notes Issue Date through September 4, 1997, plus 100% of the aggregate Consolidated EBITDA of the Company from and after the Merger 35 42 Date (or, in the event that either such Consolidated EBITDA shall be a deficit, minus 100% of such deficit), to the most recent date for which financial information is available to the Company, taken as one accounting period, less (y) 1.4 times Consolidated Interest Expense for the same entities and for the same periods, plus (B) 100% of the aggregate net proceeds, including the fair market value of property other than cash as determined by the Board of Directors in good faith, received by the Company from any Person (other than a Subsidiary of the Company) from the issuance and sale on or subsequent to the Merger Date of Qualified Capital Stock of the Company, plus 100% of the aggregate net proceeds, including the fair market value of property other than cash as previously determined by the board of directors of CRBC in good faith, previously received by CRBC from any Person (other than a Subsidiary of CRBC) from the issuance and sale on or subsequent to the 9-3/8% Notes Issue Date of Qualified Capital Stock of CRBC (excluding any net proceeds from issuances and sales financed directly or indirectly using funds borrowed from the Company or any Subsidiary of the Company or from CRBC or any Subsidiary of CRBC, respectively, 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 Company or CRBC, respectively, upon such conversion or exchange), plus (C) without duplication of any amount included in clause (iii)(B) above, 100% of the aggregate net proceeds, including the fair market value of property other than cash (valued as provided in clause (iii)(B) above), received by the Company as a capital contribution on or subsequent to the Merger Date, plus 100% of the aggregate net proceeds, including the fair market value of property other than cash (valued as provided in clause (iii)(B) above), previously received by CRBC as a capital contribution on or subsequent to the 9-3/8% Notes Issue Date (excluding the net proceeds from one or more Public Equity Offerings by Chancellor Media or CMHC to the extent used to redeem the Securities on or after the date of the Indenture). Notwithstanding the foregoing, the provisions of this Section 4.03 shall not prohibit: (1) the payment of any dividend or the making of any distribution within 60 days after the date of its declaration if the dividend or distribution would have been permitted on the date of declaration; (2) the acquisition of Capital Stock or warrants, options or other rights to acquire Capital Stock either (i) solely in exchange for shares of Qualified Capital Stock or warrants, options or other rights to acquire Qualified Capital Stock, or (ii) through the application of the net proceeds of a substantially concurrent sale for cash (other than to a Subsidiary of the Company) of shares of Qualified Capital Stock or warrants, options or other rights to acquire Qualified Capital Stock; (3) the acquisition of Indebtedness of the Company that is subordinate or junior in right of payment to the Securities, either (i) solely in exchange for shares of Qualified Capital Stock (or warrants, options or other rights to acquire Qualified Capital Stock) or for Indebtedness of the Company which is subordinate or junior in right of payment to the Securities, at least to the extent that the 36 43 Indebtedness being acquired is subordinated to the Securities and has a Weighted Average Life to Maturity no less than that of the Indebtedness being acquired or (ii) through the application of the net proceeds of a substantially concurrent sale for cash (other than to a Subsidiary of the Company) of shares of Qualified Capital Stock (or warrants, options or other rights to acquire Qualified Capital Stock) or Indebtedness of the Company which is subordinate or junior in right of payment to the Securities, at least to the extent that the Indebtedness being acquired is subordinated to the Securities and has a Weighted Average Life to Maturity no less than that of the Indebtedness being refinanced; (4) payments by CRBC to fund the operating expenses of Chancellor Broadcasting from the 9-3/8% Notes Issue Date through September 4, 1997 and by the Company to fund the operating expenses of CMHC from and after the Merger Date, in each case in an amount not to exceed $500,000 per annum; (5) payments by CRBC to Chancellor Broadcasting from the 9-3/8% Notes Issue Date through September 4, 1997 and by the Company to CMHC from and after the Merger Date, respectively, in each case to make payments pursuant to (a) the Financial Monitoring and Oversight Agreements or (b) the Tax Sharing Agreement; (6) payments by (a) CRBC to repurchase or to enable Chancellor Broadcasting to repurchase Capital Stock or other securities of Chancellor Broadcasting from employees of Chancellor Broadcasting or CRBC, in each case, from the 9-3/8% Notes Issue Date through September 4, 1997, and (b) by the Company to repurchase or to enable CMHC to repurchase Capital Stock or other securities of CMHC from employees of CMHC or the Company, in each case, after the Merger Date, in an aggregate amount not to exceed $5,000,000; (7) payments by CRBC to Chancellor Broadcasting from the 9-3/8% Notes Issue Date through September 4, 1997, or by the Company to CMHC from and after the Merger Date, in each case, to enable Chancellor Broadcasting or CMHC, respectively, to redeem or repurchase stock purchase or similar rights in an aggregate amount not to exceed $500,000; (8) payments, not to exceed $100,000 in the aggregate, by CRBC to Chancellor Broadcasting from the 9-3/8% Notes Issue Date through September 4, 1997, together with payments by the Company to CMHC after the Merger Date, in each case to enable Chancellor Broadcasting or CMHC, respectively, to make cash payments to holders of its Capital Stock in lieu of the issuance of fractional shares of its Capital Stock; and (9) payments made pursuant to any merger, consolidated sale of assets effected in accordance with Section 5.01; provided, however, that no such payment may be made pursuant to this clause (9) unless, after giving effect to such transaction (and the incurrence of any Indebtedness in connection therewith and the use of the proceeds thereof), the Company would be able to incur $1.00 of additional Indebtedness (other than Permitted Indebtedness) pursuant to Section 4.12 such that after incurring that $1.00 of additional Indebtedness, the Leverage Ratio would be less than 5.5 to 1; provided, however, that in the case of clauses 5(a), (6), (7), (8) and (9), no Default or Event of Default shall have occurred or be continuing at the time of such payment or as a result thereof. In determining the aggregate amount of Restricted Payments made by the Company on or subsequent to the Merger Date and the aggregate amount of Restricted Payments made by CRBC subsequent to the 9-3/8% Notes Issue Date and through September 4, 1997, amounts expended pursuant to clauses (1), (2), (3) (but only to the extent that Indebtedness is acquired in exchange for, or with the net proceeds from, the issuance of Qualified Capital Stock or warrants, options or other rights to acquire 37 44 Qualified Capital Stock), (5)(a), (6), (7), (8) and (9) (including any amounts previously expended by CRBC pursuant to clauses (1), (2), (3) (but only to the extent that Indebtedness is acquired in exchange for, or with the net proceeds from, the issuance of Qualified Capital Stock or warrants, options or other rights to acquire Qualified Capital Stock), (5)(a), (6), (7), (8) and (9) under Section 4.03 of the 9-3/8% Notes Indenture) shall be included in such calculation. Prior to any Restricted Payment under the first paragraph of this Section 4.03, the Company shall deliver to the Trustee an Officers' Certificate setting forth the computation by which the amount available for Restricted Payments pursuant to such paragraph was determined. The Trustee shall have no duty or responsibility to determine the accuracy or correctness of this computation and shall be fully protected in relying on such Officers' Certificate. SECTION 4.04. CORPORATE EXISTENCE. Except as otherwise permitted by Article Five, the Company shall do or cause to be done all things reasonably necessary to preserve and keep in full force and effect its corporate or other existence and the corporate or other existence of each of its Significant Subsidiaries in accordance with the respective organizational documents of each such Significant Subsidiary and the material rights (charter and statutory) and franchises of the Company and each such Significant Subsidiary; provided, however, that the Company shall not be required to preserve, with respect to itself, any material right or franchise and, with respect to any of its Significant Subsidiaries, any such existence, material right or franchise, if the Board of Directors of the Company or such Significant Subsidiary, as the case may be, shall determine that the preservation thereof is no longer reasonably necessary or desirable in the conduct of the business of the Company or any such Significant Subsidiary. SECTION 4.05. PAYMENT OF TAXES AND OTHER CLAIMS. The Company shall pay or discharge or cause to be paid or discharged, before the same shall become delinquent, (i) all material taxes, assessments and governmental charges (including withholding taxes and any penalties, interest and additions to taxes) levied or imposed upon it or any of its Subsidiaries or properties of it or any of its Subsidiaries and (ii) all material lawful claims for labor, materials, supplies and services that, if unpaid, might by law become a Lien upon the property of it or any of its Subsidiaries; provided, however, that there shall not be required to be paid or discharged any such tax, assessment or charge, the amount, applicability or validity of which is being contested in good faith by appropriate proceedings and for which adequate provision has been made or where the failure to effect such payment or discharge is not adverse in any material respect to the Holders. SECTION 4.06. MAINTENANCE OF PROPERTIES AND INSURANCE. (a) The Company shall, and shall cause each of its Subsidiaries to, maintain its material properties in normal condition (subject to ordinary wear and tear) and make all reasonably necessary repairs, renewals or replacements thereto as in the judgment of the Company may be reasonably necessary to the conduct of the business of the Company and its Subsidiaries; provided, however, that nothing in this Section 4.06 shall prevent the Company or any of its Subsidiaries from discontinuing the operation and maintenance of any of its properties, if such properties are, in the reasonable and good faith judgment of the Board of Directors of the Company or the Subsidiary, as the case may be, no longer reasonably necessary in the conduct of their respective business. (b) The Company shall provide or cause to be provided, for itself and each of its Subsidiaries, insurance (including appropriate self-insurance) against loss or damage of the kinds that, in the reasonable, good faith opinion of the Company, are reasonably adequate and appropriate for the conduct of the business of the Company and such Subsidiaries. 38 45 SECTION 4.07. COMPLIANCE CERTIFICATE; NOTICE OF DEFAULT. (a) The Company shall deliver to the Trustee, within 120 days after the end of the Company's fiscal year, an Officers' Certificate (signed by the principal executive officer, principal financial officer or principal accounting officer) stating that a review of its activities and the activities of its Subsidiaries during the preceding fiscal year has been made under the supervision of the signing Officers with a view to determining whether it has kept, observed, performed and fulfilled its obligations under this Indenture and further stating, as to each such Officer signing such certificate, that to the best of his knowledge the Company during such preceding fiscal year has kept, observed, performed and fulfilled each and every such obligation and no Default or Event of Default occurred during such year and at the date of such certificate there is no Default or Event of Default that has occurred and is continuing or, if such signers do know of such Default or Event of Default, the certificate shall describe the Default or Event of Default and its status with particularity. The Officers' Certificate shall also notify the Trustee should the Company elect to change the manner in which it fixes its fiscal year end. (b) The copy of the annual report on Form 10-K of the Company as filed with the SEC or the annual financial statements delivered to the Trustee pursuant to Section 4.09 shall be accompanied by a written report of the Company's independent accountants that in conducting their audit of the financial statements which are a part of such annual report or such annual financial statements nothing has come to their attention that would lead them to believe that the Company has violated any provisions of Article Four, Five or Six insofar as they relate to accounting matters or, if any such violation has occurred, specifying the nature and period of existence thereof, it being understood that such accountants shall not be liable directly or indirectly to any Person for any failure to obtain knowledge of any such violation. (c) (i) If any Default or Event of Default has occurred and is continuing or (ii) if any Holder seeks to exercise any remedy hereunder with respect to a claimed Default under this Indenture or the Securities, the Company shall deliver to the Trustee by registered or certified mail or by telegram or facsimile transmission followed by hard copy by registered or certified mail an Officers' Certificate specifying such event, notice or other action as soon as possible and in any event within five Business Days of its becoming aware of such occurrence. SECTION 4.08. COMPLIANCE WITH LAWS. The Company shall comply, and shall cause each of its Subsidiaries to comply, with all applicable statutes, rules, regulations, orders and restrictions of the United States of America, all states and municipalities thereof, and of any governmental department, commission, board, regulatory authority, bureau, agency and instrumentality of the foregoing, in respect of the conduct of their respective businesses and the ownership of their respective properties, except for such noncompliances as are not in the aggregate reasonably likely to have a material adverse effect on the financial condition or results of operations of the Company and its Subsidiaries taken as a whole. SECTION 4.09. SEC REPORTS. The Company shall file with the Trustee and provided to the Securityholders, within 15 days after it files them with the SEC, 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 SEC may by rules and regulations prescribe) which the Company files with the SEC pursuant to Section 13 or 15(d) of the Exchange Act. 39 46 In the event that the Company is no longer required to furnish such reports to its securityholders pursuant to the Exchange Act, the Company will cause its consolidated financial statements, comparable to those which would have been required to appear in annual or quarterly reports, to be delivered to the Holders of the Securities. The Company shall also comply with the other provisions of TIA ss.314(a). Delivery of such reports, information and documents to the Trustee is for informational purposes only and the Trustee's receipt of such shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Company's compliance with any of its covenants hereunder (as to which the Trustee is entitled to rely exclusively on Officers' Certificates). SECTION 4.10. WAIVER OF STAY, EXTENSION OR USURY LAWS. The Company covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law or any usury law or other law that would prohibit or forgive the Company from paying all or any portion of the principal of or interest on the Securities as contemplated herein, wherever enacted, now or at any time hereafter in force, or which may affect the obligations or the performance of this Indenture; and (to the extent that it may lawfully do so) the Company hereby expressly waives all benefit or advantage of any such law, and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted. SECTION 4.11. LIMITATION ON TRANSACTIONS WITH AFFILIATES. Neither the Company nor any of its Subsidiaries will, directly or indirectly enter into or permit to exist any transaction (including, without limitation, the purchase, sale, lease or exchange of any property or the rendering of any service) with or for the benefit of any of its Affiliates (other than transactions between the Company and a Wholly-Owned Subsidiary of the Company or among Wholly-Owned Subsidiaries of the Company) (an "AFFILIATE TRANSACTION"), other than Affiliate Transactions on terms that are no less favorable than those that might reasonably have been obtained in a comparable transaction on an arm's-length basis from a Person that is not an Affiliate; provided, however, that for a transaction or series of related transactions involving value of $1,000,000 or more, such determination shall be made in good faith by a majority of the members of the Board of Directors of the Company and by a majority of the disinterested members of the Board of Directors of the Company, if any; provided, further, that for a transaction or series of related transactions involving value of $5,000,000 or more, the Board of Directors of the Company has received an opinion from a nationally recognized investment banking firm that such Affiliate Transaction is fair, from a financial point of view, to the Company or such Subsidiary. The foregoing restrictions will not apply to reasonable and customary directors' fees, indemnification and similar arrangements and payments thereunder, or to any obligations of the Company under the Financial Monitoring and Oversight Agreements, the Tax Sharing Agreement or any employment agreement with any officer of the Company (provided that each amendment of any of the foregoing agreements shall be subject to the limitations of this Section 4.11). SECTION 4.12. LIMITATION ON INCURRENCE OF ADDITIONAL INDEBTEDNESS. Neither the Company 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 limitations, the Company or any Subsidiary may incur Indebtedness if on the date of the incurrence of such Indebtedness, after giving effect to the incurrence of such Indebtedness and the receipt and application of the proceeds thereof, the Company's Leverage Ratio is less than 7.0 to 1. 40 47 SECTION 4.13. LIMITATION ON DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES. Neither the Company nor any of its Subsidiaries shall, directly or indirectly, create or otherwise cause or permit to exist or become effective any encumbrance or restriction on the ability of any Subsidiary to (a) pay dividends or make any other distributions on its Capital Stock; (b) make loans or advances or pay any Indebtedness or other obligation owed to the Company or any of its Subsidiaries; or (c) transfer any of its property or assets to the Company, except for such encumbrances or restrictions existing under or by reason of: (1) applicable law, (2) this Indenture, (3) customary non-assignment provisions of any lease governing a leasehold interest of the Company or any Subsidiary, (4) any instrument governing Acquired Indebtedness, which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person, or the property or assets of the Person, so acquired, (5) agreements permitted under the 9-3/8% Notes Indenture, the 8-3/4% Notes Indenture, the 10-1/2% Notes Indenture, the 8-1/8% Notes Indenture and the 9% Notes Indenture existing on the Issue Date (including the Credit Agreement and the Senior Credit Facility, as applicable), as such agreements are from time to time in effect; provided, however, that any amendments or modifications of such agreements which affect the encumbrances or restrictions of the types subject to this Section 4.13 shall not result in such encumbrances or restrictions being less favorable to the Company in any material respect, as determined in good faith by the Board of Directors of the Company, than the provisions as in effect before giving effect to the respective amendment or modification, (6) an agreement effecting a refinancing, replacement or substitution of Indebtedness issued, assumed or incurred pursuant to an agreement referred to in clause (2), (4) or (5) above or any other agreement evidencing Indebtedness permitted under this Indenture; provided, however, that the provisions relating to such encumbrance or restriction contained in any such refinancing, replacement or substitution agreement or any such other agreement are not less favorable to the Company in all material respects as determined in good faith by the Board of Directors of the Company than the provisions relating to such encumbrance or restriction contained in agreements referred to in such clause (2), (4) or (5), or (7) restrictions on the transfer of assets subject to any Lien permitted under this Indenture imposed by the holder of such Lien. SECTION 4.14. [INTENTIONALLY OMITTED] SECTION 4.15. CHANGE OF CONTROL. (a) In the event of a Change of Control, the Company shall be obligated to make an offer to repurchase all outstanding Securities pursuant to the offer described in paragraph (b) below (the "CHANGE OF CONTROL OFFER"), at a purchase price equal to 101% of the principal amount thereof plus accrued interest, if any, to the date of repurchase. (b) Within 30 days following the date upon which a Change of Control occurs (the "CHANGE OF CONTROL DATE"), the Company shall send, by first class mail, a notice to each Holder of Securities, with a copy to the Trustee, 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 Securities pursuant to the Change of Control Offer. Such notice shall state: (1) that the Change of Control Offer is being made pursuant to this Section 4.15 and that all Securities validly tendered and not withdrawn will be accepted for payment; (2) the purchase price (including the amount of accrued interest, 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"); 41 48 (3) that any Security not tendered will continue to accrue interest; (4) that, unless the Company defaults in making payment therefor, any Security accepted for payment pursuant to the Change of Control Offer shall cease to accrue interest after the Change of Control Payment Date; (5) that Holders electing to have a Security purchased pursuant to a Change of Control Offer will be required to surrender the Security, properly endorsed for transfer together with such customary documents as the Company reasonably may request, to the Paying Agent at the address specified in the notice prior to the close of business on the Business Day prior to the Change of Control Payment Date; (6) that Holders will be entitled to withdraw their election if the Paying Agent receives, not later than five Business Days prior to the Change of Control Payment Date, a telegram, facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Securities the Holder delivered for purchase and a statement that such Holder is withdrawing his election to have such Security purchased; (7) that Holders whose Securities are purchased only in part will be issued new Securities in a principal amount equal to the unpurchased portion of the Securities surrendered; and (8) the circumstances and relevant facts regarding such Change of Control. (c) on or before the Change of Control Payment Date, the Company shall (i) accept for payment Securities or portions thereof (in integral multiples of $1,000) validly tendered pursuant to the Change of Control Offer, (ii) deposit with the Paying Agent U.S. Legal Tender sufficient to pay the purchase price of all Securities so tendered and (iii) deliver to the Trustee Securities so accepted together with an Officers' Certificate stating the Securities or portions thereof being purchased by the Company. The Paying Agent shall promptly mail to the Holders of Securities so accepted payment in an amount equal to the purchase price out of the funds deposited with the Paying Agent in accordance with the preceding sentence. The Trustee shall promptly authenticate and mail to such Holders new Securities equal in principal amount to any unpurchased portion of the Securities surrendered. Upon the payment of the purchase price for the Securities accepted for purchase, the Trustee shall return the Securities purchased to the Company for cancellation. Any amounts remaining after the purchase of Securities pursuant to a Change of Control Offer shall be returned by the Trustee to the Company. (d) The Company will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with the purchase of the Securities pursuant to a Change of Control Offer. To the extent the provisions of any such rule conflict with the provisions of this Indenture relating to a Change of Control Offer, the Company shall comply with the provisions of such rule and be deemed not to have breached its obligations relating to such Change of Control Offer by virtue thereof. 42 49 SECTION 4.16. LIMITATION ON ASSET SALES. (a) Neither the Company nor any of its Subsidiaries will consummate an Asset Sale unless (i) the Company or the applicable Subsidiary, as the case may be, receives consideration at the time of such Asset Sale at least equal to the fair market value of the assets sold or otherwise disposed of (as determined in good faith by management of the Company or, if such Asset Sale involves consideration in excess of $2,500,000, by the Board of Directors of the Company, as evidenced by a board resolution), (ii) at least 75% of the consideration received by the Company or the Subsidiary, as the case may be, from such Asset Sale is cash or Cash Equivalents (other than in the case where the Company is exchanging all or substantially all the assets of one or more broadcast businesses operated by the Company (including by way of the transfer of the capital stock) for all or substantially all the assets (including by way of the transfer of the capital stock) constituting one or more broadcast businesses operated by another Person, in which event the foregoing requirement with respect to the receipt of cash or Cash Equivalents shall not apply) and is received at the time of such disposition and (iii) upon the consummation of an Asset Sale, the Company applies or causes such Subsidiary to apply, such Net Cash Proceeds within 180 days of receipt thereof either (A) to repay the principal of the Senior Credit Facility or other Indebtedness ranking equal in right of payment to the Senior Credit Facility (but not including the Notes) (and, to the extent repayment of any such Indebtedness relates to principal under a revolving credit or similar facility, to obtain a corresponding reduction in the commitments thereunder), (B) to reinvest, or to be contractually committed to reinvest pursuant to a binding agreement, in Productive Assets and, in the latter case, to have so reinvested within 360 days of the date of receipt of such Net Cash Proceeds, or (C) to purchase Securities (pro rata among the holders of Securities tendered to the Company for purchase, based upon the aggregate principal amount of the Securities so tendered) tendered to the Company for purchase at a price equal to 100% of the principal amount thereof, plus accrued interest thereon to the date of purchase, pursuant to an offer to purchase made by the Company as set forth below (a "NET PROCEEDS OFFER"); provided, however, that if at any time any non-cash consideration received by the Company or any Subsidiary of the Company, as the case may be, in connection with any Asset Sale is converted into or sold or otherwise disposed of for cash, then such conversion or disposition shall be deemed to constitute an Asset Sale hereunder and the Net Cash Proceeds thereof shall be applied in accordance with clause (iii) above; provided, further that the Company may defer making a Net Proceeds Offer until the aggregate Net Cash Proceeds from Asset Sales to be applied equals or exceeds $5,000,000. In the event of a transaction effected in accordance with Section 5.01 which involves less than all of the property or assets of the Company, only property or assets not included in such transaction shall be deemed to have been transferred in an Asset Sale. (b) Subject to the deferral right set forth in the final proviso of paragraph (a), each notice of a Net Proceeds Offer pursuant to this Section 4.16 shall be mailed, by first class mail, by the Company to Holders of the Securities as shown on the applicable register of Holders of the Securities not more than 180 days after the relevant Asset Sale or, in the event the Company or a Subsidiary has entered into a binding agreement as provided in (B) above, within 180 days following the termination of such agreement but in no event later than 360 days after the relevant Asset Sale, with a copy to the Trustee. The notice shall contain all instructions and materials necessary to enable such Holders to tender Securities pursuant to the Net Proceeds Offer and shall state the following terms: (1) that the Net Proceeds Offer is being made pursuant to Section 4.16 and that Holders of Securities may elect to tender their Securities in denominations of less than $1,000 and that all Securities validly tendered will be accepted for payment; provided, however, that if the aggregate principal amount of Securities tendered in a Net Proceeds Offer plus accrued interest at the expiration of such offer exceeds the aggregate amount of the Net Proceeds Offer, the Company shall select the Securities to be purchased on a pro rata basis (based upon the principal amount tendered); 43 50 (2) the purchase price (including the amount of accrued interest) 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 "PROCEEDS PURCHASE DATE"); (3) that any Security not tendered will continue to accrue interest; (4) that, unless the Company defaults in making payment therefor, any Security accepted for payment pursuant to the Net Proceeds Offer shall cease to accrue interest after the Proceeds Purchase Date; (5) that Holders electing to have a Security purchased pursuant to a Net Proceeds Offer will be required to surrender the Security, properly endorsed for transfer together with such other customary documents as the Company reasonably may request, to the Paying Agent at the address specified in the notice prior to the close of business on the Business Day prior to the Proceeds Purchase Date; (6) that Holders will be entitled to withdraw their election if the Paying Agent receives, not later than five Business Days prior to the Proceeds Purchase Date, a telegram, facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Securities the Holder delivered for purchase and a statement that such Holder is withdrawing his election to have such Security purchased; (7) that Holders whose Securities are purchased only in part will be issued new Securities in a principal amount equal to the unpurchased portion of the Securities surrendered; and (8) the circumstances and relevant facts regarding such Net Proceeds Offer. (c) On or before the Proceeds Purchase Date, the Company shall (i) accept for payment Securities or portions thereof validly tendered pursuant to the Net Proceeds Offer, (ii) deposit with the Paying Agent U.S. Legal Tender sufficient to pay the purchase price of all Securities so tendered and (iii) deliver to the Trustee Securities so accepted together with an Officers' Certificate stating the Securities or portions thereof being purchased by the Company. The Paying Agent shall promptly mail to the Holders of Securities so accepted payment in an amount equal to the purchase price out of funds deposited with the Paying Agent in accordance with the preceding sentence. The Trustee shall promptly authenticate and mail to such Holders new Securities equal in principal amount to any unpurchased portion of the Securities surrendered. Upon payment of the purchase price for the Securities accepted for purchase, the Trustee shall return the Securities purchased to the Company for cancellation. Any Securities not so accepted shall be promptly mailed by the Company to the Holder thereof. (d) If the aggregate principal amount of Securities validly tendered pursuant to any Net Proceeds Offer is less than the amount of Net Cash Proceeds subject to such Net Proceeds Offer, the Company may use any remaining portion of such Net Cash Proceeds not required to fund the repurchase of tendered Securities for purposes otherwise permitted by this Indenture. Upon the consummation of any Net Proceeds Offer, the amount of Net Cash Proceeds subject to any future Net Proceeds Offer from the Asset Sales giving rise to such Net Cash Proceeds shall be deemed to be zero. 44 51 (e) The Company will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with their purchase of Securities pursuant to a Net Proceeds Offer. To the extent the provisions of any such rule conflict with the provisions of this Indenture relating to a Net Proceeds Offer, the Company shall comply with the provisions of such rule and be deemed not to have breached its obligations relating to such Net Proceeds Offer by virtue thereof. SECTION 4.17. LIMITATION ON PREFERRED STOCK OF SUBSIDIARIES. The Company shall not permit any of its Subsidiaries to issue any Preferred Stock (other than to the Company or to a Wholly-Owned Subsidiary of the Company) or permit any Person (other than the Company or a Wholly-Owned Subsidiary of the Company) to own any Preferred Stock of a Subsidiary (other than Acquired Preferred Stock; provided that at the time the issuer of such Acquired Preferred Stock becomes a Subsidiary of the Company or merges with the Company or any of its Subsidiaries, and after giving effect to such transaction, the Company shall be able to incur $1.00 of additional Indebtedness (other than Permitted Indebtedness) in compliance with Section 4.12). SECTION 4.18. LIMITATION ON LIENS. Neither the Company nor any of its Subsidiaries shall create, incur, assume or suffer to exist any Liens upon any of their respective assets, except for (a) Permitted Liens, (b) Liens to secure the Senior Credit Facility or any other Indebtedness ranking equal in right of payment to the Senior Credit Facility or guarantees of the foregoing permitted under this Indenture, (c) Liens permitted under the 9-3/8% Notes Indenture, the 8-3/4% Notes Indenture, the 10-1/2% Notes Indenture, the 8-1/8% Notes Indenture and the 9% Notes Indenture existing on the Issue Date, (d) Liens in favor of the Trustee, and (e) any Lien to secure the replacement, refunding, extension or renewal, in whole or in part, of any Indebtedness described in the foregoing clauses; provided that, to the extent any such clause limits the amount secured or the asset subject to such Liens, no extension or renewal will increase the assets subject to such Liens or the amount secured thereby beyond the assets or amounts set forth in such clauses. SECTION 4.19. GUARANTEES OF CERTAIN INDEBTEDNESS. The Company shall not permit any of its Subsidiaries, directly or indirectly, to incur, guarantee or secure through the granting of Liens, the payment of any Indebtedness under the Senior Credit Facility or any refunding or refinancing thereof, in each case, unless such Subsidiary, the Company and the Trustee execute and deliver a supplemental indenture pursuant to which such Subsidiary becomes a Guarantor of the Securities and which evidences such Subsidiary's Guarantee of the Securities, such Guarantee to be a senior unsecured obligation of such Subsidiary. Neither the Company nor any such Guarantor shall be required to make a notation on the Securities or its Guarantee to reflect any such subsequent Guarantee. Nothing in this Section 4.19 shall be construed to permit any Subsidiary of the Company to incur Indebtedness otherwise prohibited by Section 4.12. SECTION 4.20. LIMITATION ON SALE AND LEASEBACK TRANSACTION. Neither the Company nor any of its Subsidiaries shall enter into any Sale and Leaseback Transaction, except that the Company or any Subsidiary may enter into a Sale and Leaseback Transaction if, immediately prior thereto, and after giving effect to such Sale and Leaseback Transaction (the Indebtedness thereunder being equivalent to the Attributable Value thereof) the Company could incur at least $1.00 of additional Indebtedness (other than Permitted Indebtedness) in compliance with Section 4.12. 45 52 SECTION 4.21. LIMITATION ON LINE OF BUSINESS. For so long as any Securities are outstanding, the Company and its Subsidiaries shall engage solely in the ownership and operation of broadcast businesses or businesses related thereto, including, without limitation, media representation, sale of advertising and such other activities as are incidental or similar or related thereto. SECTION 4.22. LIMITATION ON ASSET SWAPS. Neither the Company nor any of its Subsidiaries shall engage in any Asset Swaps, unless: (i) at the time of entering into the agreement to swap assets and immediately after giving effect to the proposed Asset Swap, no Default or Event of Default shall have occurred and be continuing or would occur as a consequence thereof; (ii) the Company would, after giving pro forma effect to the proposed Asset Swap, have been permitted to incur at least $1.00 of additional Indebtedness (other than Permitted Indebtedness) in compliance with Section 4.12; (iii) the respective fair market values of the assets being purchased and sold by the Company or any of its Subsidiaries (as determined in good faith by the management of the Company or, if such Asset Swap includes consideration in excess of $2,500,000 by the Board of Directors, as evidenced by a Board Resolution delivered to the Trustee) are substantially the same at the time of entering into the agreement to swap assets; and (iv) at the time of the consummation of the proposed Asset Swap, the percentage of any decline in the fair market value (determined as aforesaid) of the asset or assets being acquired by the Company and its Subsidiaries shall not be significantly greater than the percentage of any decline in the fair market value (determined as aforesaid) of the assets being disposed of by the Company, calculated from the time the agreement to swap assets was entered into; provided, however, that this Section 4.22 shall not apply to any of the Pending Transactions. ARTICLE 5. SUCCESSOR CORPORATION SECTION 5.01. WHEN COMPANY MAY MERGE, ETC. (a) The Company shall not, in a single transaction or through a series of related transactions, consolidate with or merge with or into, or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its assets to, another Person or adopt a plan of liquidation, unless: (1) either (A) the Company shall be the survivor of such merger or consolidation or (B) the surviving or transferee Person is a corporation, partnership or trust organized and existing under the laws of the United States, any State thereof or the District of Columbia and such surviving or transferee Person shall expressly assume by supplemental indenture all the obligations of the Company under the Securities and this Indenture; (2) immediately after giving effect to such transaction and the use of the proceeds therefrom (on a pro forma basis, including any Indebtedness incurred or anticipated to be incurred in connection with such transaction), the Company or the surviving or transferee Person is able to incur $1.00 of additional Indebtedness (other than Permitted Indebtedness) in compliance with Section 4.12; 46 53 (3) immediately after giving effect to such transaction (including any Indebtedness incurred or anticipated to be incurred in connection with the transaction) no Default or Event of Default shall have occurred and be continuing; and (4) the Company has delivered to the Trustee an Officers' Certificate and Opinion of Counsel, each stating that such consolidation, merger or transfer complies with this Indenture, that the surviving or transferee Person agrees by supplemental indenture to be bound hereby, and that all conditions precedent in this Indenture relating to such transaction have been satisfied. (b) For purposes of the foregoing, the transfer (by lease, assignment, sale or otherwise, in a single transaction or series of related transactions) of all or substantially all of the properties and assets of one or more Subsidiaries, the Capital Stock of which constitutes all or substantially all of the properties and assets of the Company, shall be deemed to be the transfer of all or substantially all of the properties and assets of the Company. SECTION 5.02. SUCCESSOR CORPORATION SUBSTITUTED. Upon any consolidation or merger, or any transfer of assets in accordance with Section 5.01, the successor Person formed by such consolidation or into which the Company is merged or to which such transfer is made shall succeed to, and be substituted for, and may exercise every right and power of, the Company under this Indenture with the same effect as if such successor Person had been named as the Company herein. When a successor corporation assumes all of the obligations of the Company hereunder and under the Securities and agrees to be bound hereby and thereby, the predecessor shall be released from such obligations. ARTICLE 6. DEFAULT AND REMEDIES SECTION 6.01. EVENTS OF DEFAULT. An "EVENT OF DEFAULT" occurs if: (1) the Company defaults in the payment of interest on the Securities when the same becomes due and payable and the Default continues for a period of 30 days; or (2) the Company defaults in the payment of the principal of any Securities when the same becomes due and payable, at maturity, upon redemption or otherwise; or (3) the Company fails to observe or perform any other covenant or agreement contained in the Securities or this Indenture and the Default continues for a period of 30 days after written notice thereof specifying such Default has been given to the Company by the Trustee or the Holders of at least 25% in aggregate principal amount of the outstanding Securities; or (4) there shall be a default under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by the Company or any of its Subsidiaries (or the payment of which is guaranteed by the Company or any of its Subsidiaries), whether such Indebtedness or guarantee exists on the date hereof or 47 54 is created after the date hereof, which Default (a) is caused by a failure to pay principal of or premium or interest on such Indebtedness prior to the expiration of any grace period provided in such Indebtedness (a "Payment Default") or (b) results in the acceleration of such Indebtedness prior to its express maturity and, in each case, the principal amount of such Indebtedness, together with the principal amount of any other such Indebtedness under which there has been a Payment Default or the maturity of which has been so accelerated, aggregates $5,000,000 or more; or (5) one or more judgments in an aggregate amount in excess of $5,000,000 (which are not covered by insurance as to which the insurer has not disclaimed coverage) shall have been rendered against the Company or any of its Significant Subsidiaries and such judgments remain undischarged or unstayed for a period of 60 days after such judgment or judgments become final and non-appealable; or (6) The Company or any Significant Subsidiary (A) commences a voluntary case or proceeding under any Bankruptcy Law with respect to itself, (B) consents to the entry of a judgment, decree or order for relief against it in an involuntary case or proceeding under any Bankruptcy Law, (C) consents to the appointment of a Custodian of it or for substantially all of its property, (D) consents to or acquiesces in the institution of a bankruptcy or an insolvency proceeding against it or (E) makes a general assignment for the benefit of its creditors; or (7) a court of competent jurisdiction enters a judgment, decree or order for relief in respect of the Company or any Significant Subsidiary in an involuntary case or proceeding under any Bankruptcy Law, which shall (A) approve as properly filed a petition seeking reorganization, arrangement, adjustment or composition in respect of the Company or any Significant Subsidiary, (B) appoint a Custodian of the Company or any Significant Subsidiary or for substantially all of its property or (C) order the winding-up or liquidation of its affairs; and such judgment, decree or order shall remain unstayed and in effect for a period of 60 consecutive days. SECTION 6.02. ACCELERATION. If an Event of Default (other than an Event of Default specified in Section 6.01(6) or (7) with respect to the Company) occurs and is continuing and has not been waived pursuant to Section 6.04, the Trustee may, by notice to the Company, or the Holders of at least 25% in aggregate principal amount of the Securities then outstanding may, by written notice to the Company and the Trustee, and the Trustee shall, upon the request of such Holders, declare the aggregate principal amount of the Securities outstanding, together with accrued but unpaid interest, if any, on all Securities to be due and payable by notice in writing to the Company and the Trustee specifying the respective Event of Default and that it is a "notice of acceleration" (the "ACCELERATION NOTICE"), and the same shall become immediately due and payable. If an Event of Default specified in Section 6.01(6) or (7) occurs and is continuing with respect to the Company, all unpaid principal and accrued interest on the Securities then outstanding shall ipso facto become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Securityholder. The Holders of a majority in principal amount of the Securities then outstanding (by notice to the Trustee) may rescind and cancel a declaration of acceleration and its consequences if (i) the rescission would not conflict with any judgment or decree of a court of competent jurisdiction, (ii) all existing Events of Default have been cured or waived, except non-payment of the principal or interest on the Securities which have become due solely by such declaration of acceleration, (iii) to the extent the payment of such interest is lawful, interest (at the same rate as specified in the Securities) on overdue installments of interest and overdue payments of principal, which has become due otherwise than by such declaration of acceleration, has been paid, (iv) the Company has paid the Trustee its reasonable compensation and reimbursed the Trustee for its expenses, disbursements and advances and (v) in the event of the cure or waiver of a Default or Event of Default of the type described in Sections 6.01(6) and (7), the Trustee shall have received an Officers' Certificate and an Opinion of Counsel that such Default or Event of Default has been cured or waived and the Trustee shall be entitled to conclusively rely upon such Officers' Certificate and Opinion of Counsel. No such rescission shall affect any subsequent Default or impair any right consequent thereto. 48 55 SECTION 6.03. OTHER REMEDIES. If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy by proceeding at law or in equity to collect the payment of principal of or interest on the Securities or to enforce the performance of any provision of the Securities or this Indenture. The Trustee may maintain a proceeding even if it does not possess any of the Securities or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Securityholder in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. No remedy is exclusive of any other remedy. All available remedies are cumulative to the extent permitted by law. SECTION 6.04. WAIVER OF PAST DEFAULTS. Subject to Sections 6.07 and 9.02, the Holders of a majority in principal amount of the outstanding Securities by notice to the Trustee may waive an existing Default or Event of Default and its consequences, except a Default in the payment of principal of or interest on any Security as specified in clauses (1) and (2) of Section 6.01. SECTION 6.05. CONTROL BY MAJORITY. The Holders of a majority in principal amount of the outstanding Securities may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on it, including, without limitation, any remedies provided for in Section 6.03. Subject to Section 7.01, however, the Trustee may, in its discretion, refuse to follow any direction that conflicts with any law or this Indenture, that the Trustee determines may be unduly prejudicial to the rights of another Securityholder, or that may involve the Trustee in personal liability; provided that the Trustee may take any other action deemed proper by the Trustee, in its discretion, which is not inconsistent with such direction. SECTION 6.06. LIMITATION ON SUITS. A Securityholder may not pursue any remedy with respect to this Indenture or the Securities unless: (1) the Holder gives to the Trustee notice of a continuing Event of Default; (2) Holders of at least 25% in principal amount of the outstanding Securities make a written request to the Trustee to pursue the remedy; (3) such Holders offer to the Trustee reasonably satisfactory to the Trustee indemnity or security against any loss, liability or expense to be incurred in compliance with such request; (4) the Trustee does not comply with the request within 45 days after receipt of the request and the offer of satisfactory indemnity or security; and 49 56 (5) during such 45-day period the Holders of a majority in principal amount of the outstanding Securities do not give the Trustee a direction which, in the opinion of the Trustee, is inconsistent with the request. A Securityholder may not use this Indenture to prejudice the rights of another Securityholder or to obtain a preference or priority over such other Securityholder. SECTION 6.07. RIGHTS OF HOLDERS TO RECEIVE PAYMENT. Notwithstanding any other provision of this Indenture, the right of any Holder to receive payment of principal of and interest on a Security, on or after the respective due dates expressed in such Security, or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such Holder. SECTION 6.08. COLLECTION SUIT BY TRUSTEE. If an Event of Default in payment of principal or interest specified in clause (1) or (2) of Section 6.01 occurs and is continuing, the Trustee may recover judgment in its own name and as trustee of an express trust against the Company or any other obligor on the Securities for the whole amount of principal and accrued interest remaining unpaid, together with interest on overdue principal and, to the extent that payment of such interest is lawful, interest on overdue installments of interest at the rate set forth in the Securities and such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel. SECTION 6.09. TRUSTEE MAY FILE PROOFS OF CLAIM. The Trustee may file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, taxes, disbursements and advances of the Trustee, its agents and counsel) and the Securityholders allowed in any judicial proceedings relating to the Company or any other obligor upon the Securities, any of their respective creditors or any of their respective property, and shall be entitled and empowered to collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same, and any Custodian in any such judicial proceedings is hereby authorized by each Securityholder to make such payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Securityholders, to pay to the Trustee any amount due to it for the reasonable compensation, expenses, taxes, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.07. The Company's payment obligations under this Section 6.09 shall be secured in accordance with the provisions of Section 7.07. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Securityholder any plan of reorganization, arrangement, adjustment or composition affecting the Securities or the rights of any Holder thereof, or to authorize the Trustee to vote in respect of the claim of any Securityholder in any such proceeding. SECTION 6.10. PRIORITIES. If the Trustee collects any money pursuant to this Article Six, it shall pay out the money in the following order: First: to the Trustee for amounts due under Sections 6.09 and 7.07; 50 57 Second: if the Holders are forced to proceed against the Company directly without the Trustee, to Holders for their collection costs; Third: to Holders for amounts due and unpaid on the Securities for principal and interest, ratably, without preference or priority of any kind, according to the amounts due and payable on the Securities for principal and interest, respectively; and Fourth: to the Company or any other obligor on the Securities, as their interests may appear, or as a court of competent jurisdiction may direct. The Trustee, upon prior notice to the Company, may fix a record date and payment date for any payment to Securityholders pursuant to this Section 6.10. SECTION 6.11. UNDERTAKING FOR COSTS. In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees and expenses, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section 6.11 does not apply to a suit by the Trustee, a suit by a Holder pursuant to Section 6.07, or a suit by a Holder or Holders of more than 10% in principal amount of the outstanding Securities. ARTICLE 7. TRUSTEE SECTION 7.01. DUTIES OF TRUSTEE. (a) If a Default or an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture and use the same degree of care and skill in its exercise thereof as a prudent Person would exercise or use under the circumstances in the conduct of its own affairs. (b) Except during the continuance of a Default or an Event of Default: (1) The Trustee need perform only those duties as are specifically set forth in this Indenture or the TIA and no duties, covenants, responsibilities or obligations shall be implied in this Indenture that are adverse to the Trustee. (2) In the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates (including Officers' Certificates) or opinions (including Opinions of Counsel) furnished to the Trustee and conforming to the requirements of this Indenture. However, as to any certificates or opinions which are required by any provision of this Indenture to be delivered or provided to the Trustee, the Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture (but need not confirm or investigate the accuracy of mathematical calculations or other facts stated therein). 52 58 (c) Notwithstanding anything to the contrary herein contained, the Trustee may not be relieved from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: (1) This paragraph does not limit the effect of paragraph (b) of this Section 7.01. (2) The Trustee shall not be liable for any error of judgment made in good faith by a Trust Officer, unless it is proved that the Trustee was negligent in ascertaining the pertinent facts. (3) The Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.02, 6.04 or 6.05. (d) No provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability or the performance of any of its duties hereunder or in the exercise of any of its rights or powers if it shall have reasonable grounds for believing that repayment indemnity against such risk or of such funds or adequate ability is not reasonably assured to it. (e) Every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b), (c) and (d) of this Section 7.01. (f) The Trustee shall not be liable for interest on any money or assets received by it except as the Trustee may agree in writing with the Company. Assets held in trust by the Trustee need not be segregated from other assets except to the extent required by law. (g) In the absence of bad faith, negligence or willful misconduct on the part of the Trustee, the Trustee shall not be responsible for the application of any money by any Paying Agent other than the Trustee. SECTION 7.02. RIGHTS OF TRUSTEES. Subject to Section 7.01: (a) The Trustee may conclusively rely and shall be fully protected in acting or refraining from acting upon any document believed by it to be genuine and to have been signed or presented by the proper Person. The Trustee need not investigate any fact or matter stated in the document. (b) Before the Trustee acts or refrains from acting, it may consult with counsel and may require an Officers' Certificate or an Opinion of Counsel, which shall conform to Sections 13.04 and 13.05. The Trustee shall not be liable for and shall be fully protected in respect of any action it takes or omits to take in good faith in reliance on such Officers' Certificate or Opinion of Counsel. (c) The Trustee may act through its attorneys and agents and shall not be responsible for the misconduct or negligence of any agent or attorney appointed with due care. (d) The Trustee shall not be liable for any action that it takes or omits to take in good faith which it reasonably believes to be authorized or within its rights or powers conferred upon it by this Indenture. 52 59 (e) The Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate (including any Officers' Certificate), statement, instrument, opinion (including any Opinion of Counsel), notice, request, direction, consent, order, bond, debenture, or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled, upon reasonable notice to the Company, to examine the books, records, and premises of the Company, personally or by agent or attorney at the sole cost of the Company and shall incur no liability or additional liability of any kind by reason of such inquiry or investigation. (f) The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request, order or direction of any of the Holders of the Securities pursuant to the provisions of this Indenture, unless such Holders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which may be incurred by it in compliance with such request, order or direction. (g) The Trustee may consult with counsel of its selection and the advice or opinion of counsel with respect to legal matters relating to this Indenture and the Securities shall be full and complete authorization and protection from liability with respect to any action taken, omitted or suffered by it hereunder in good faith and in accordance with the advice or opinion of such counsel. SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE. The Trustee in its individual or any other capacity may become the owner or pledgee of Securities and may otherwise deal with the Company, any Subsidiary or Unrestricted Subsidiary, or their respective Affiliates, with the same rights it would have if it were not Trustee. Any Agent may do the same with like rights. However, the Trustee must comply with Sections 7.10 and 7.11. SECTION 7.04. TRUSTEE'S DISCLAIMER. The Trustee makes no representation as to the validity or adequacy of this Indenture or the Securities, and it shall not be accountable for the Company's use of the proceeds from the Securities, and the recitals contained herein and in the Securities shall be taken as the statements of the Company and the Trustee shall not be responsible for any statement of the Company in this Indenture or the Securities other than the Trustee's certificate of authentication. SECTION 7.05. NOTICE OF DEFAULT. If a Default or an Event of Default occurs and is continuing and if it is known to the Trustee, the Trustee shall mail to each Securityholder, as their name and address appears in the security register, notice of the uncured Default or Event of Default within 60 days after such Default or Event of Default occurs. Except in the case of a Default or an Event of Default in payment of principal of, or interest on, any Security, including an accelerated payment and the failure to make payment on the Change of Control Payment Date pursuant to a Change of Control Offer or on the Proceeds Purchase Date pursuant to a Net Proceeds Offer and, except in the case of a failure to comply with Article Five, the Trustee may withhold the notice if and so long as its Board of Directors, the executive .committee of its Board of Directors or a committee of its directors and/or Trust Officers in good faith determines that withholding the notice is in the interest of the Securityholders. The Trustee shall not be deemed to have knowledge of a Default or Event of Default other than (i) any Event of Default occurring pursuant to Section 6.01(l) or 6.01(2) or (ii) any Default or Event of Default of which a Trust Officer shall have received written notification and such notice references the Securities and the Indenture or obtained actual knowledge. 53 60 SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS. Within 60 days after each May 15 of each year beginning with May 15, 1999, the Trustee shall, to the extent that any of the events described in TIA ss.313(a) occurred within the previous twelve months, but not otherwise, mail to each Securityholder a brief report dated as of such date that complies with TIA ss.313(a). The Trustee also shall comply with TIA ss.313 (b) and 313 (c) A copy of each report at the time of its mailing to Securityholders shall be mailed to the Company and filed with the SEC and each stock exchange, if any, on which the Securities are listed. The Company shall promptly notify the Trustee if the Securities become listed on any stock exchange and the Trustee shall comply with TIA ss.313(d). SECTION 7.07. COMPENSATION AND INDEMNITY. The Company shall pay to the Trustee from time to time such compensation as may be agreed upon in writing by the Company and the Trustee. The Trustee's compensation shall not be limited by any law on compensation of a trustee of an express trust. The Company shall reimburse the Trustee upon request for all reasonable out-of-pocket expenses, disbursements and advances incurred or made by it in connection with the performance of its duties and the discharge of its obligations under this Indenture. Such expenses shall include the reasonable fees and expenses of the Trustee's agents and counsel. The Company shall indemnify the Trustee and its agents, employees, officers, stockholders and directors for, and hold them harmless against, any and all loss, liability, damage, claim or expense incurred by them except for such actions to the extent caused by any negligence, bad faith or willful misconduct on their part, arising out of or in connection with the acceptance or administration of this trust including the reasonable costs and expenses of defending themselves against any claim or liability in connection with the exercise or performance of any of their rights, powers or duties hereunder. The Trustee shall notify the Company promptly of any claim asserted against the Trustee for which it may seek indemnity. The Company shall defend the claim and the Trustee shall cooperate in the defense. The Trustee may have separate counsel and the Company shall pay the reasonable fees and expenses of such counsel; provided that the Company will not be required to pay such fees and expenses if it assumes the Trustee's defense and there is no conflict of interest between the Company and the Trustee in connection with such defense as reasonably determined by the Trustee. The Company need not pay for any settlement made without its written consent. The Company need not reimburse any expense or indemnify against any loss or liability to the extent incurred by the Trustee through its negligence, bad faith or willful misconduct. To secure the Company's payment obligations in this Section 7.07, the Trustee shall have a lien prior to the Securities on all assets or money held or collected by the Trustee, in its capacity as Trustee, except assets or money held in trust to pay principal of or interest on particular Securities. When the Trustee incurs expenses or renders services after an Event of Default specified in Section 6.01(6) or (7) occurs, such expenses and the compensation for such services shall be paid to the extent allowed under any Bankruptcy Law. The provisions of this Section 7.07 shall survive termination of this Indenture. 54 61 SECTION 7.08. REPLACEMENT OF TRUSTEE. The Trustee may resign by so notifying the Company. The Holders of a majority in principal amount of the outstanding Securities may remove the Trustee by so notifying the Company and the Trustee and may appoint a successor trustee. The Company may remove the Trustee if: (1) the Trustee fails to comply with Section 7.10; (2) the Trustee is adjudged bankrupt or insolvent; (3) a receiver or other public officer takes charge of the Trustee or its property; or (4) the Trustee becomes incapable of acting. If the trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, the Company shall notify each Holder of such event and shall promptly appoint a successor Trustee. Within one year after the successor Trustee takes office, the Holders of a majority in principal amount of the Securities may appoint a successor Trustee to replace the successor Trustee appointed by the Company. A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Promptly after that, the retiring Trustee shall transfer all property held by it as Trustee to the successor Trustee, subject to the lien provided in Section 7.07, the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. A successor Trustee shall mail notice of its succession to each Securityholder. If a successor Trustee does not take office within 60 days after the retiring Trustee resigns or is removed, the retiring Trustee (at the expense of the Company), the Company or the Holders of at least 10% in principal amount of the outstanding Securities may petition any court of competent jurisdiction for the appointment of a successor Trustee. If the Trustee fails to comply with Section 7.10, any Securityholder may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. Notwithstanding replacement of the Trustee pursuant to this Section 7.08, the Company's obligations under Section 7.07 shall continue for the benefit of the retiring Trustee. SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER, ETC. If the Trustee consolidates with, merges or converts into, or transfers all or substantially all of its corporate trust business to, another corporation, the resulting, surviving or transferee corporation without any further act shall, if such resulting, surviving or transferee corporation is otherwise eligible hereunder, be the successor Trustee; provided that such corporation shall be otherwise qualified and eligible under this Article Seven. SECTION 7.10. ELIGIBILITY; DISQUALIFICATION. This Indenture shall always have a Trustee who satisfies the requirement of TIA ss.ss.310(a)(1) and 310(a)(2). The Trustee (or in the case of a corporation included in a bank holding company system, the related bank holding company) shall have a combined capital and surplus of at least 55 62 $100,000,000 as set forth in its most recent published annual report of condition. In addition, if the Trustee is a corporation included in a bank holding company system, the Trustee, independently of such bank holding company, shall meet the capital requirements of TIA ss.ss.310(a)(2). The Trustee shall comply with TIA ss.310(b); provided, however, that there shall be excluded from the operation of TIA ss.310(b)(1) any indenture or indentures under which other securities, or certificates of interest or participation in other securities, of the Company are outstanding, if the requirements for such exclusion set forth in TIA ss.310(b)(1) are met. The provisions of TIA ss.310 shall apply to the Company and any other obligor of the Securities. SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST THE COMPANY. The Trustee shall comply with TIA ss.311(a), excluding any creditor relationship listed in TIA ss.311(b). A Trustee who has resigned or been removed shall be subject to TIA ss.311(a) to the extent indicated therein. The provisions of TIA ss.311 shall apply to the Company and any other obligor of the Securities. ARTICLE 8. DISCHARGE OF INDENTURE; DEFEASANCE SECTION 8.01. TERMINATION OF THE COMPANY'S OBLIGATIONS. This Indenture shall cease to be of further effect and the obligations of the Company under the Securities and this Indenture shall terminate (except that the obligations under Sections 7.07, 8.04 and 8.05 shall survive the effect of this Article Eight) when all outstanding Securities theretofore authenticated and issued have been delivered to the Trustee for cancellation and the Company has paid all sums payable by it hereunder. In addition, at the Company's option, either (a) the Company shall be deemed to have been Discharged from any and all obligations with respect to the Securities (except for certain obligations of the Company to register the transfer or exchange of such Securities, replace stolen, lost or mutilated Securities, maintain paying agencies and hold moneys for payment in trust) after the applicable conditions set forth below have been satisfied or (b) the Company shall cease to be under any obligation to comply with any term, provision or condition set forth in Article Four (except that the Company's obligations under Sections 4.01 and 4.02 shall survive) and Section 5.01 after the applicable conditions set forth below have been satisfied: (1) The Company shall have deposited or caused to be deposited irrevocably with the Trustee as trust funds in trust, specifically pledged as security for, and dedicated solely to, the benefit of the Holders of the Securities U.S. Legal Tender or U.S. Government Obligations or a combination thereof which, through the payment of interest thereon and principal in respect thereof in accordance with their terms, will be sufficient, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, to pay all the principal of and interest on the Securities on the dates such installments of interest or principal are due in accordance with the terms of such Securities, as well as the Trustee's fees and expenses; provided that no deposits made pursuant to this Section 8.01(l) shall cause the Trustee to have a conflicting interest as defined in and for purposes of the TIA; provided, further, that from and after the time of deposit, the Funds deposited shall not be subject to the rights of holders of Senior Indebtedness pursuant to the provisions of Article Ten; and provided, further, that, as confirmed by an Opinion of Counsel, no such deposit shall result in the Company, the Trustee or the trust becoming or being deemed to be an "investment company" under the Investment Company Act of 1940; 56 63 (2) The Company shall have delivered to the Trustee an Opinion of Counsel or a private letter ruling issued to the Company by the IRS to the effect that the Holders of the Securities will not recognize income, gain or loss for federal income tax purposes as a result of the deposit and related defeasance and will be subject to federal income tax on the same amount and in the same manner and at the same times as would have been the case if such option had not been exercised and, in the case of an Opinion of Counsel furnished in connection with a Discharge pursuant to the foregoing, accompanied by a private letter ruling issued to the Company by the IRS to such effect; (3) No Event of Default or Default with respect to the Securities shall have occurred and be continuing on the date of such deposit after giving effect to such deposit; (4) The Company shall have delivered to the Trustee an Opinion of Counsel, subject to certain qualifications, to the effect that (i) the Funds will not be subject to any rights of any other holders of Indebtedness of the Company, and (ii) the Funds so deposited will not be subject to avoidance under applicable Bankruptcy Law; (5) The Company shall have paid or duly provided for payment of all amounts then due to the Trustee pursuant to Section 7.07; (6) No such deposit will result in a Default under this Indenture or a breach or violation of, or constitute a default under, any other instrument or agreement (including, without limitation, the Senior Credit Facility) to which the Company or any of its Subsidiaries is a party or by which it or its property is bound; and (7) An Officers' Certificate and an Opinion of Counsel to the effect that all conditions precedent to the defeasance have been complied with. Notwithstanding the foregoing, the Opinion of Counsel required by subparagraph 2 above need not be delivered if all Securities not theretofore delivered to the Trustee for cancellation (i) have become due and payable, (ii) will become due and payable on the Maturity Date within one year, or (iii) are to be called for redemption within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption by the Trustee in the name, and at the expense, of the Company. "DISCHARGED" means that the Company shall be deemed to have paid and discharged the entire indebtedness represented by, and obligations under, the Securities and to have satisfied all the obligations under this Indenture relating to the Securities (and the Trustee, at the expense of the Company, shall execute proper instruments acknowledging the same upon compliance by the Company with the provisions of this Section), except (i) the rights of the Holders of Securities to receive, from the trust fund described in clause (1) above, payment of the principal of and the interest on such Securities when such payments are due, (ii) the Company's obligations with respect to the Securities under Sections 2.03 through 2.07, 7.07 and 7.08 and (iii) the rights, powers, trusts, duties and immunities of the Trustee hereunder. "FUNDS" means the aggregate amount of U.S. Legal Tender and/or U.S. Government Obligations deposited with the Trustee pursuant to this Article Eight. "U.S. GOVERNMENT OBLIGATIONS" means direct obligations of, and obligations guaranteed by, the United States of America for the payment of which the full faith and credit of the United States of America is pledged. 57 64 SECTION 8.02. ACKNOWLEDGMENT OF DISCHARGE BY TRUSTEE. Subject to Section 8.05, after (i) the conditions of Section 8.01, have been satisfied and (ii) the Company has delivered to the Trustee an Opinion of Counsel, stating that all conditions precedent referred to in clause (i) above relating to the satisfaction and discharge of this Indenture have been complied with, the Trustee upon written request of the Company shall acknowledge in writing the discharge of the Company's obligations under this Indenture except for those surviving obligations specified in this Article Eight. SECTION 8.03. APPLICATION OF TRUST MONEY. The Trustee shall hold in trust Funds deposited with it pursuant to Section 8.01. It shall apply the Funds through the Paying Agent and in accordance with this Indenture to the payment of principal and accrued and unpaid interest on the Securities. The Company shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the U.S. Government Obligations deposited pursuant to Section 8.01 or the principal and interest received in respect thereof other than any such tax, fee or other charge which by law is for the account of the Holders of outstanding Securities. SECTION 8.04. REPAYMENT TO THE COMPANY. The Trustee and the Paying Agent shall promptly pay to the Company, upon the Company's written request, any Funds held by them for the payment of principal or interest that remains unclaimed for one year; provided, however, that the Trustee or such Paying Agent may, at the expense of the Company, cause to be published once in a newspaper of general circulation in the City of New York or mailed to each Holder, notice that such Funds remain unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such publication or mailing, any unclaimed balance of such Funds then remaining will be repaid to the Company. After payment to the Company, Holders entitled to the Funds must look to the Company for payment as general creditors unless an applicable abandoned property law designates another Person and all liability of the Trustee and Paying Agent with respect to such Funds shall cease. SECTION 8.05. REINSTATEMENT. If the Trustee or Paying Agent is unable to apply any Funds by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, the Company's obligations under this Indenture and the Securities shall be revived and reinstated as though no deposit had occurred pursuant to Section 8.01 until such time as the Trustee or Paying Agent is permitted to apply all such Funds in accordance with Section 8.01; provided, however, that if the Company has made any payment of interest on or principal of any Securities because of the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Securities to receive such payment from Funds held by the Trustee or Paying Agent. ARTICLE 9. AMENDMENTS, SUPPLEMENTS AND WAIVERS SECTION 9.01. WITHOUT CONSENT OF HOLDER. The Company, when authorized by a Board Resolution, and the Trustee, together, may amend or supplement this Indenture or the Securities without notice to or consent of any Securityholder: 59 65 (1) to cure any ambiguity, defect or inconsistency; (2) to comply with Article Five; (3) to provide for uncertificated Securities in addition to or in place of certificated Securities; or (4) to make any other change that does not adversely affect in any material respect the rights of any Securityholders hereunder; provided that the Company has delivered to the Trustee an Opinion of Counsel and an Officers' Certificate, each stating that such amendment or supplement complies with the provisions of this Section 9.01. SECTION 9.02. WITH CONSENT OF HOLDERS. Subject to Section 6.07, the Company, when authorized by a Board Resolution, and the Trustee, together, with the written consent of the Holder or Holders of at least a majority in principal amount of the outstanding Securities may amend or supplement this Indenture or the Securities, without notice to any other Securityholders. Subject to Sections 6.04 and 6.07, the Holder or Holders of a majority in aggregate principal amount of the outstanding Securities may waive compliance by the Company with any provision of this Indenture or the Securities without notice to any other Securityholder. No amendment, supplement or waiver, including a waiver pursuant to Section 6.04, shall, directly or indirectly, without the consent of each Holder of each Security affected thereby: (1) reduce the amount of Securities whose Holders must consent to an amendment; (2) reduce the rate of or change the time for payment of interest, including defaulted interest, on any Securities; (3) reduce the principal of or change the fixed maturity of any Securities, or change the date on which any Securities may be subject to redemption or repurchase, or reduce the redemption or repurchase price therefor; (4) make any Securities payable in money other than that stated in the Securities; (5) make any change in provisions of this Indenture protecting the right of each Holder of a Security to receive payment of principal of and interest on such Security on or after the due date thereof or to bring suit to enforce such payment or permitting Holders of a majority in principal amount of Securities to waive Defaults or Events of Default; or (6) after the Company's obligation to purchase the Securities arises under Section 4.15 or 4.16, amend, modify or change the obligation of the Company to consummate a Change of Control Offer or a Net Proceeds Offer or waive any default in the performance thereof or modify any of the provisions or definitions with respect to any such offers. It shall not be necessary for the consent of the Holders under this Section 9.02 to approve the particular form of any proposed amendment, supplement or waiver, but it shall be sufficient if such consent approves the substance thereof. After an amendment, supplement or waiver under this Section 9.02 becomes effective (as provided in Section 9.04), the Company shall mail to the Holders affected thereby a notice briefly describing the amendment, supplement or waiver. Any failure of the Company to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such supplemental indenture. 60 66 SECTION 9.03. COMPLIANCE WITH TIA. Every amendment, waiver or supplement of this Indenture or the Securities shall comply with the TIA as then in effect. SECTION 9.04. REVOCATION AND EFFECT OF CONSENTS. Until an amendment, waiver or supplement becomes effective, a consent to it by a Holder is a continuing consent by the Holder and every subsequent Holder of a Security or portion of a Security that evidences the same debt as the consenting Holder's Security, even if notation of the consent is not made on any Security. Subject to the following paragraph, any such Holder or subsequent Holder may revoke the consent as to his Security or portion of his Security by notice to the Trustee or the Company received before the date on which the Trustee receives an Officers' Certificate certifying that the Holders of the requisite principal amount of Securities have consented (and not theretofore revoked such consent) to the amendment, supplement or waiver (at which time such amendment, supplement or waiver shall become effective). The Company may, but shall not be obligated to, fix a record date for the purpose of determining the Holders entitled to consent to any amendment, supplement or waiver. If a record date is fixed, then notwithstanding the last sentence of the immediately preceding paragraph, those Persons who were Holders at such record date (or their duly designated proxies), and only those Persons, shall be entitled to revoke any consent previously given, whether or not such Persons continue to be Holders after such record date. No such consent shall be valid or effective for more than 120 days after such record date. After an amendment, supplement or waiver becomes effective, it shall bind every Securityholder, unless it makes a change described in any of clauses (1) through (6) of Section 9.02, in which case, the amendment, supplement or waiver shall bind only each Holder of a Security who has consented to it and every subsequent Holder of a Security or portion of a Security that evidences the same debt as the consenting Holder's Security; provided that any such waiver shall not impair or affect the right of any Holder to receive payment of principal of and interest on a Security, on or after the respective due dates expressed in such Security, or to bring suit for the enforcement of any such payment on or after such respective dates without the consent of such Holder. SECTION 9.05. NOTATION ON OR EXCHANGE OF SECURITIES. If an amendment, supplement or waiver changes the terms of a Security, the Trustee may require the Holder of the Security to deliver it to the Trustee. The Trustee may place an appropriate notation on the Security about the changed terms and return it to the Holder. Alternatively, if the Company or the Trustee so determines, the Company in exchange for the Security shall issue and the Trustee shall authenticate a new Security that reflects the changed terms. SECTION 9.06. TRUSTEE TO SIGN AMENDMENTS, ETC. The Trustee shall execute any amendment, supplement or waiver authorized pursuant to and adopted in accordance with this Article Nine; provided that the Trustee may, but shall not be obligated to, execute any such amendment, supplement or waiver which affects the Trustee's own rights, 60 67 duties or immunities under this Indenture. The Trustee shall be entitled to receive, and shall be fully protected in relying upon, an Opinion of Counsel and an Officers' Certificate each stating that the execution of any amendment, supplement or waiver authorized pursuant to this Article Nine is authorized or permitted by this Indenture. Such Opinion of Counsel shall not be an expense of the Trustee. ARTICLE 10. [INTENTIONALLY OMITTED] ARTICLE 11. GUARANTEES OF THE SECURITIES SECTION 11.01. GUARANTEES. Subject to the provisions of this Article Eleven, each Guarantor hereby jointly and severally unconditionally guarantees to each Holder of a Security authenticated and made available for delivery by the Trustee and to the Trustee and its successors and assigns, irrespective of the validity and enforceability of this Indenture, the Securities or the obligations of the Company or any other Guarantors to the Holders or the Trustee hereunder, that: (a) the principal of and interest on the Securities will be duly and punctually paid in full when due, whether at maturity, by acceleration or otherwise, and interest on the overdue principal and (to the extent permitted by law) interest, if any, on the Securities and all other Obligations on the Securities will be promptly paid in full or performed, all in accordance with the terms hereof and thereof; and (b) in case of any extension of time of payment or renewal of any Securities or any of such other Obligations on the Securities, the same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at final stated maturity, by acceleration or otherwise. Failing payment when due of any amount so guaranteed, for whatever reason, each Guarantor will be obligated to pay the same immediately. An Event of Default under this Indenture or the Securities shall constitute an event of default under the Guarantees, and shall entitle the Holders of Securities to accelerate the obligations of the Guarantors hereunder in the same manner and to the same extent as the Obligations of the Company on the Securities. Each of the Guarantors hereby agrees that its obligations hereunder shall be unconditional, irrespective of the validity, regularly or enforceability of the Securities or this Indenture, the absence of any action to enforce the same, any waiver or consent by any Holder of the Securities with respect to any provisions hereof or thereof, any release of any other Guarantor, the recovery of any judgment against the Company, any action to enforce the same, whether or not a Guarantee is affixed to any particular Security, or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a guarantor. Each of the Guarantors hereby waives the benefit of diligence, presentment, demand of payment, filing of claims with a court in the event of insolvency or bankruptcy of the Company, any right to require a proceeding first against the Company, protest, notice and all demands whatsoever and covenants that its Guarantee will not be discharged except by complete performance of the obligations contained in the Securities, this Indenture and the Guarantee. If any Holder or the Trustee is required by any court or otherwise to return to the Company or to any Guarantor, or any custodian, trustee, liquidator or other similar official acting in relation to the Company or such Guarantor, any amount paid by the Company or such Guarantor to the Trustee or such Holder, the Guarantees, to the extent theretofore discharged, shall be reinstated in full force and effect. Each Guarantor further agrees that, as between it, on the one hand, and the Holders of Securities and the Trustee, on the other hand, (a) subject to this Article Eleven, the maturity of the obligations guaranteed hereby may be accelerated as provided in Section 6.02 for the purposes of the Guarantees, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the obligations guaranteed hereby, and (b) in the event of any acceleration of such obligations as provided in Section 6.02, such obligations (whether or not due and payable) shall forthwith become due and payable by the Guarantors for the purpose of the Guarantees. 62 68 The Guarantees shall remain in full force and effect and continue to be effective should any petition be filed by or against the Company for liquidation or reorganization, should the Company become insolvent or make an assignment for the benefit of creditors or should a receiver or trustee be appointed for all or any significant part of the Company's assets, and shall, to the fullest extent permitted by law, continue to be effective or be reinstated, as the case may be, if at any time payment and performance of the Securities are, pursuant to applicable law, rescinded or reduced in amount, or must otherwise be restored or returned by any obligee on the Securities, whether as a "voidable preference," "fraudulent transfer" or otherwise, all as though such payment or performance had not been made. In the event that any payment, or any part thereof, is rescinded, reduced, restored or returned, the Securities shall, to the fullest extent permitted by law, be reinstated and deemed reduced only by such amount paid and not so rescinded, reduced, restored or returned. No stockholder, officer, director, employer or incorporator, past, present or future, of any Guarantor, as such, shall have any personal liability under the Guarantees by reason of his, her or its status as such stockholder, officer, director, employer or incorporator. The Guarantors shall have the right to seek contribution from any non-paying Guarantor so long as the exercise of such right does not impair the rights of the Holders under the Guarantees. Each Guarantor, and by its acceptance hereof each Holder, hereby confirms that it is the intention of all such parties that in no event shall any Guarantor's obligations under its Guarantee be subject to avoidance under any applicable fraudulent conveyance or similar law of any relevant jurisdiction. Therefore, in the event that the Guarantees would, but for this sentence, be subject to avoidance, then the liability of the Guarantors under the Guarantees shall be reduced to the extent necessary such that such Guarantees shall not be subject to avoidance under the applicable fraudulent conveyance or similar law. Subject to the preceding limitation on liability, the Guarantee of each Guarantor constitutes a guarantee of payment in full when due and not merely a guarantee of collectability. SECTION 11.02. EXECUTION AND DELIVERY OF THE GUARANTEES. To further evidence the Guarantees set forth in Section 11.01, each Guarantor hereby agrees that a notation of such Guarantees, substantially in the form included in Exhibit A-1 and Exhibit A-2 hereto, shall be endorsed on each Security authenticated and made available for delivery by the Trustee. The validity and enforceability of any Guarantee shall not be affected by the fact that it is not affixed to any particular Security. Each of the Guarantors hereby agrees that its Guarantee set forth in Section 11.01 shall remain in full force and effect notwithstanding any failure to endorse on each Security a notation of such Guarantee. If an Officer of a Guarantor whose signature is on this Indenture or a Security no longer holds that office at the time the Trustee authenticates such Security or at any time thereafter, such Guarantor's Guarantee of such Security shall be valid nevertheless. The delivery of any Security by the Trustee, after the authentication thereof hereunder, shall constitute due delivery of any Guarantee set forth in this Indenture on behalf of the Guarantor. 62 69 SECTION 11.03. ADDITIONAL GUARANTORS. Any Person may become a Guarantor by executing and delivering to the Trustee (a) a supplemental indenture, in form and substance satisfactory to the Trustee, which subjects such Person to the provisions of this Indenture as a Guarantor, and (b) an Opinion of Counsel to the effect that such supplemental indenture has been duly authorized and executed by such Person and constitutes the legal, valid, binding and enforceable obligation of such Person (subject to such customary exceptions concerning fraudulent conveyance laws, creditors' rights and equitable principles as may be acceptable to the Trustee in its discretion) SECTION 11.04. LIMITATION OF GUARANTORS' LIABILITY. The obligations of each Guarantor are limited to the maximum amount as will, after giving effect to all other contingent and fixed liabilities of such Guarantor (including, without limitation, any guarantees under the Senior Credit Facility) and after giving effect to any collections from or payments made by or on behalf of any other Guarantor in respect of the obligations of such other Guarantor under its Guarantee or pursuant to Section 11.06, result in the obligations of such Guarantor under the Guarantees not constituting a fraudulent conveyance or fraudulent transfer under federal or state law. Each Guarantor that makes a payment or distribution under the Guarantees shall be entitled to a contribution from each other Guarantor in a pro rata amount based on the Adjusted Net Assets of each Guarantor. SECTION 11.05. GUARANTORS MAY CONSOLIDATE, ETC., ON CERTAIN TERMS. (a) Nothing contained in this Indenture or in any of the Securities shall prevent any consolidation or merger of a Guarantor with or into the Company or another Guarantor or shall prevent any sale or conveyance of the property of a Guarantor, as an entirety or substantially as an entirety, to the Company or another Guarantor. Upon any such consolidation, merger, sale or conveyance, the Guarantee given by such Guarantor shall no longer have any force or effect. (b) Nothing contained in this Indenture or in any of the Securities shall prevent any consolidation or merger of a Guarantor with or into a Person (provided such Person is a corporation, partnership or trust) other than the Company or another Guarantor or shall prevent any sale or conveyance of the property of a Guarantor as an entirety or substantially as an entirety to any such Person (whether or not an Affiliate of the Guarantor). Upon the sale or disposition of a Guarantor (or all or substantially all of its assets) to a Person which is not a Subsidiary of the Company, which is otherwise in compliance with this Indenture (including Section 4.16), such Guarantor shall be deemed released from all its obligations under this Indenture and its Guarantee and such Guarantee shall terminate; provided, however, that any such termination shall occur only to the extent that all obligations of such Guarantor under the Senior Credit Facility, and all its guarantees of, and under all of its pledges of assets or other security interests which secure, Indebtedness of the Company shall also terminate upon such release, sale or transfer. (c) The Trustee shall, at the Company's expense, deliver an appropriate instrument evidencing such release upon receipt of a request by the Company accompanied by an Officers' Certificate certifying as to the compliance with this Section 11.05. Any Guarantor not so released remains liable for the full amount of principal and interest on the Securities as provided in this Article Eleven. 63 70 SECTION 11.06. CONTRIBUTION. In order to provide for just and equitable contribution among the Guarantors, the Guarantors agree, inter alia, that in the event any payment or distribution is made by any Guarantor (a "FUNDING GUARANTOR") under the Guarantees, such Funding Guarantor shall be entitled to a contribution from all other Guarantors in a pro rata amount based on the Adjusted Net Assets of each Guarantor (including the Funding Guarantor) for all payments, damages and expenses incurred by that Funding Guarantor in discharging the Company obligations with respect to the Securities or any other Guarantor's obligations with respect to the Guarantees. SECTION 11.07. WAIVER OF SUBROGATION. Each Guarantor hereby irrevocably waives any claim or other rights which it may now or hereafter acquire against the Company that arise from the existence, payment, performance or enforcement of such Guarantor's obligations under the Guarantees and this Indenture, including, without limitation, any right of subrogation, reimbursement, exoneration or indemnification, and any right to participate in any claim or remedy of any Holder of Securities against the Company, whether or not such claim, remedy or right arises in equity, or under contract, statute or common law, including, without limitation, the right to take or receive from the Company, directly or indirectly, in cash or other property or by set-off or in any other manner, payment or security on account of such claim or other rights. If any amount shall be paid to any Guarantor in violation of the preceding sentence and the Securities shall not have been paid in full, such amount shall have been deemed to have been paid to such Guarantor for the benefit of, and held in trust for the benefit of, the Holders of the Securities, and shall forthwith be paid to the Trustee for the benefit of such Holders to be credited and applied upon the Securities, whether matured or unmatured, in accordance with the terms of this Indenture. Each Guarantor acknowledges that it will receive direct or indirect benefits from the financing arrangements contemplated by this Indenture and that the waiver set forth in this Section 11.07 is knowingly made in contemplation of such benefits. ARTICLE 12. [INTENTIONALLY OMITTED] ARTICLE 13. MISCELLANEOUS SECTION 13.01. TIA CONTROLS. If any provision of this Indenture limits, qualifies, or conflicts with another provision which is required to be included in this Indenture by the TIA, the required provision shall control. SECTION 13.02. NOTICES. Any notices or other communications required or permitted hereunder shall be in writing, and shall be sufficiently given if made by hand delivery, by telecopier or registered or certified mail, postage prepaid, return receipt requested, addressed as follows: 64 71 if to the Company: 300 Crescent Court Suite 600 Dallas, Texas 75201 Attention: Chief Financial Officer if to the Trustee: The Bank of New York 101 Barclay Street, Floor 21W New York, New York 10286 Attention: Corporate Trust Trustee Administration The Company and the Trustee by written notice to each other may designate additional or different addresses for notices. Any notice or communication to the Company or the Trustee shall be deemed to have been given or made as of the date so delivered if personally delivered; when receipt is acknowledged, if faxed; and five (5) calendar days after mailing if sent by registered or certified mail, postage prepaid (except that a notice of change of address shall not be deemed to have been given until actually received by the addressee). Any notice or communication mailed to a Securityholder shall be mailed to him by first class mail or other equivalent means at his address as it appears on the registration books of the Registrar and shall be sufficiently given to him if so mailed within the time prescribed. Failure to mail a notice or communication to a Securityholder or any defect in it shall not affect its sufficiency with respect to other Securityholders. If a notice or communication is mailed in the manner provided above, it is duly given, whether or not the addressee receives it. SECTION 13.03. COMMUNICATIONS BY HOLDERS WITH OTHER HOLDERS. Securityholders may communicate pursuant to TIA ss.312(b) with other Securityholders with respect to their rights under this Indenture or the Securities. The Company, the Trustee, the Registrar and any other Person shall have the protection of TIA ss.312(c). SECTION 13.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT. Except with respect to the issuance of the series of Securities on the date of this Indenture, upon any request or application by the Company to the Trustee to take any action under this Indenture, the Company shall furnish to the Trustee: (1) an Officers' Certificate, in form and substance satisfactory to the Trustee, stating that, in the opinion of the signers, all conditions precedent to be performed by the Company, if any, provided for in this Indenture relating to the proposed action have been complied with; and (2) an Opinion of Counsel stating that, in the opinion of such counsel, all such conditions precedent to be performed by the Company, of any, provided for in this Indenture relating to the proposed action have been complied with. 65 72 SECTION 13.05. STATEMENTS REQUIRED IN CERTIFICATE. Each certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture, other than the Officers' Certificate required by Section 4.07, shall include: (1) a statement that the Person making such certificate or opinion has read such covenant or condition; (2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based;. (3) a statement that, in the opinion of such Person, he has made such examination or investigation as is reasonably necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and (4) a statement as to whether or not, in the opinion of each such Person, such condition or covenant has been complied with. SECTION 13.06. RULES BY TRUSTEE, PAYING AGENT, REGISTRAR. The Trustee may make reasonable rules in accordance with the Trustee's customary practices for action by or at a meeting of Securityholders. The Paying Agent or Registrar may make reasonable rules for its functions. SECTION 13.07. LEGAL HOLIDAYS. A "LEGAL HOLIDAY" used with respect to a particular place of payment is a Saturday, a Sunday or a day on which banking institutions in New York, New York, or at such place of payment are not required to be open. If a payment date is a Legal Holiday at such place, payment may be made at such place on the next succeeding day that is not a Legal Holiday, and no interest shall accrue for the intervening period. SECTION 13.08. GOVERNING LAW. THIS INDENTURE AND THE NOTES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS. SECTION 13.09. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS. This Indenture may not be used to interpret another indenture, loan or debt agreement of the Company or any of its Subsidiaries. Any such indenture, loan or debt agreement may not be used to interpret this Indenture. SECTION 13.10. NO RECOURSE AGAINST OTHERS. A past, present or future director, officer, employee, stockholder or incorporator, as such, of the Company shall not have any liability for any obligations of the Company under the Securities or this Indenture or for any claim based on, in respect of or by reason of such obligations or their creations. Each Securityholder by accepting a Security waives and releases all such liability. Such waiver and release are part of the consideration for the issuance of the Securities. 66 73 SECTION 13.11. SUCCESSORS. All agreements of the Company in this Indenture and the Securities shall bind its successors. All agreements of the Trustee in this Indenture shall bind its successors. SECTION 13.12. DUPLICATE ORIGINALS. All parties may sign any number of copies of this Indenture. Each signed copy shall be an original, but all of them together shall represent the same agreement. SECTION 13.13. SEVERABILITY. In case any one or more of the provisions in this Indenture or in the Securities shall be held invalid, illegal or unenforceable, in any respect for any reason, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions shall not in any way be affected or impaired thereby, it being intended that all of the provisions hereof shall be enforceable to the full extent permitted by law. SIGNATURES IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed all as of the date first written above. 67 74 The Company CHANCELLOR MEDIA CORPORATION OF LOS ANGELES By: /s/ OMAR CHOUCAIR --------------------------------------------- Name: Omar Choucair Title: Vice President and Assistant Secretary The Guarantors: On Behalf of the Subsidiary Guarantors Listed on Schedule I here By: /s/ OMAR CHOUCAIR --------------------------------------------- Name: Omar Choucair Title: Vice President and Assistant Secretary The Trustee: THE BANK OF NEW YORK By: /s/ REMO REALE ----------------------------------------- Name: Remo J. Reale Title: Assistant Vice President 68 75 SCHEDULE I CERTAIN SUBSIDIARIES OF CHANCELLOR MEDIA CORPORATION OF LOS ANGELES (ALL SUBSIDIARIES ARE DELAWARE CORPORATIONS EXCEPT AS EXPRESSLY INDICATED) 1. Chancellor Media Corporation of The Lone Star State 2. KZPS/KDGE License Corp. 3. Chancellor Media Corporation of California 4. KIOI License Corp. 5. Chancellor Media Corporation of Illinois 6. Chancellor Media Illinois License Corp. 7. Chancellor Media Corporation of Dade County 8. WVCG License Corp. 9. Chancellor Media Corporation of Massachusetts 10. Chancellor Media Pennsylvania License Corp. 11. Chancellor Media Corporation of Miami 12. WEDR License Corp. 13. Chancellor Media of Houston Limited Partnership 14. Chancellor Media Corporation of Houston 15. Chancellor Media Corporation of the Keystone State 16. Chancellor Media Corporation of New York 17. Chancellor Media Corporation of Charlotte 18. WIOQ License Corp. 19. Chancellor Media Corporation of Washington, D.C. 20. Chancellor Media Corporation of St. Louis 21. Chancellor Media Corporation of Michigan 22. Chancellor Media / WAXQ Inc. 23. WAXQ License Corp. 24. Chancellor Media / KCMG Inc. 25. Chancellor Media / Riverside Broadcasting Co., Inc. 26. WLTW License Corp. 27. Chancellor Media Corporation of the Capital City 28. Chancellor Media D.C. License Corp. 29. Chancellor Media Licensee Company 30. Chancellor Media/Trefoil Communications, Inc. 31. Chancellor Media/Shamrock Broadcasting, Inc. 32. Chancellor Media/Shamrock Radio Licenses, Inc. 33. Chancellor Media/Shamrock Broadcasting Licenses of Denver, Inc. 34. Chancellor Media/Shamrock Broadcasting of Texas, Inc (a Texas corporation) 35. Chancellor Media/Shamrock Radio Licenses, LLC 36. Chancellor Media Outdoor Corporation 37. Chancellor Media Nevada Sign Corporation 38. Chancellor Media MW Sign Corporation 39. Chancellor Media Martin Corporation 40. Western Poster Service, Inc. (a Texas corporation) 41. The AMFM Radio Networks, Inc. 42. Chancellor Media Air Services Corporation 43. Chancellor Media Whiteco Outdoor Corporation 44. Chancellor Merger Corp. S-1 76 45. Broadcast Architecture, Inc. (a Massachusetts corporation) 46. Martin Media (a California limited partnership) 47. Dowling Company Incorporated (a Virginia corporation) 48. Nevada Outdoor Systems, Inc. (a Nevada corporation) 49. MW Sign Corp. (a California corporation) 50. Martin & MacFarlane, Inc. (a California corporation) 51. Katz Media Corporation 52. Katz Communications, Inc. 53. Katz Millennium Marketing, Inc. 54. Amcast Radio Sales, Inc. 55. Christal Radio Sales, Inc. 56. Eastman Radio Sales, Inc. 57. Seltel Inc. 58. Katz Cable Corporation 59. The National Payroll Company, Inc. 60. Chancellor Media Radio Licenses, LLC 61. KLOL License Limited Partnership 62. WTOP License Limited Partnership 63. Radio 100, L.L.C. 64. Revolution Outdoor Advertising, Inc. 65. Hardin Development Corporation 66. Parsons Development Company S-2 77 EXHIBIT A-1 (Face of Security) =============================================================================== CUSIP: ----------- 8% [Series A] [Series B] Senior Notes due 2008 No.: $ ----------- Chancellor Media Corporation of Los Angeles promises to pay to ------------------------------------------------------------- or registered assigns, the principal sum of ----------------------------------------------------------- Dollars on , 2008. ---------------- Interest Payment Dates: , and ------------- Record Dates: , and ------------- ------------------ DATED: , 199_ ------------ CHANCELLOR MEDIA CORPORATION OF LOS ANGELES BY: ---------------------------------- Name: Title: This is one of the [Global] Securities referred to in the within-mentioned Indenture: The Bank of New York, as Trustee By: -------------------------- Authorized Signatory =============================================================================== A1-1 78 (REVERSE OF SECURITY) 8% SENIOR NOTES DUE 2008 [INSERT THE GLOBAL NOTE LEGEND, IF APPLICABLE PURSUANT TO THE PROVISIONS OF THE INDENTURE] [INSERT THE PRIVATE PLACEMENT LEGEND, IF APPLICABLE PURSUANT TO THE PROVISIONS OF THE INDENTURE] 1. Interest. CHANCELLOR MEDIA CORPORATION OF LOS ANGELES, a Delaware corporation (the "COMPANY"), promises to pay interest on the principal amount of this Security at the rate per annum shown above. Interest on the Securities will accrue from the most recent date on which interest has been paid or, if no interest has been paid, from November 17, 1998. The Company will pay interest semi-annually in arrears on each Interest Payment Date, commencing May 1, 1999. Interest will be computed on the basis of a 360-day year of twelve 30-day months. The Company shall pay interest on overdue principal and on overdue installments of interest from time to time on demand at the rate borne by the Securities to the extent lawful. 2. Method of Payment. The Company shall pay interest on the Securities (except defaulted interest) to the Persons who are the registered Holders at the close of business on the Record Date immediately preceding the Interest Payment Date even if the Securities are cancelled on registration of transfer or registration of exchange after such Record Date. Holders must surrender Securities to a Paying Agent to collect principal payments. The Company shall pay principal and interest in money of the United States that at the time of payment is legal tender for payment of public and private debts ("U.S. LEGAL TENDER"). However, the Company may pay principal and interest by its check payable in such U.S. Legal Tender. The Company may deliver any such interest payment to the Paying Agent or to a Holder at the Holder's registered address. 3. Paying Agent and Registrar. Initially, The Bank of New York (the "TRUSTEE") will act as Paying Agent and Registrar. The Company may change any Paying Agent, Registrar or Co-Registrar without notice to the Holders. The Company or any of its Subsidiaries may, subject to certain exceptions, act as Registrar or Co-Registrar. 4. Indenture and Guarantees. The Company issued the Securities under an indenture, dated as of November 17, 1998 (the "INDENTURE"), among the Company, the Guarantors and the Trustee. This Security is one of a duly authorized issue of Securities of the Company designated as its 8% Senior Notes due 2008 (the "SECURITIES"), limited (except as otherwise provided in the Indenture) in aggregate principal amount to $750,000,000, which may be issued under the Indenture. The terms of the Securities include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C. 77aaa-77bbbb) (the "TIA"), as in effect on the date of the Indenture. Notwithstanding anything to the contrary herein, the Securities are subject to all such terms, and Holders of Securities are referred to the Indenture and the TIA for a statement of them. The Securities are general unsecured obligations of the Company. Payment on each Security is guaranteed on a senior basis, jointly and severally, by the Guarantors pursuant to Article Eleven of the Indenture. 5. [Intentionally Omitted.] 6. Optional Redemption. (a) The Securities will be redeemable, at the Company's option, in whole at any time or in part from time to time, upon not less than 30 nor more than 60 days prior notice mailed by first class mail to each holder's registered address, at a redemption price equal to 100% of the principal amount thereof plus the Applicable Premium (as defined below) as of, and accrued and unpaid interest, if any, to the date of redemption (the "REDEMPTION DATE") (subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date in respect of then outstanding Securities). A1-2 79 "APPLICABLE PREMIUM" means, with respect to a Security at any Redemption Date, (a) the present value of all remaining required interest and principal payments due on such Security assuming a Redemption Date of November 1, 2008, computed using a discount rate equal to the Treasury Rate (as defined below) plus 50 basis points minus (b) the then outstanding principal amount of such Security minus (c) accrued interest paid on the Redemption Date. "TREASURY RATE" means the yield to maturity at the time of computation of United States Treasury securities with a constant maturity (as compiled and published in the most recent Federal Reserve Statistical Release H.15(519) ("STATISTICAL RELEASE") which has become publicly available at least two business days prior to the Redemption Date (or, if such Statistical Release is no longer published, any publicly available source of similar market data)) most nearly equal to the period from the Redemption Date to November 1, 2008; provided, however, that if the period from the Redemption Date to November 1, 2008 is not equal to the constant maturity of a United States Treasury security for which a weekly average yield is given, the Treasury Rate shall be obtained by linear interpolation (calculated to the nearest one-twelfth of a year) from the weekly average yields of United States Treasury securities for which such yields are given, except that if the period from the Redemption Date to November 1, 2008 is less than one year, the weekly average yield on actually traded United States Treasury securities adjusted to a constant maturity of one year shall be used. (b) In addition, on or prior to November 1, 2001, the Company may, at its option, use the net cash proceeds of one or more Public Equity Offerings to redeem the Securities, in part, at a redemption price of 108.0% of the principal amount thereof, plus accrued and unpaid interest thereon to the date of redemption; provided, however, that after any such redemption the aggregate principal amount of the Securities outstanding must equal at least 75% of the aggregate principal amount of the Securities originally issued (that is, $562.5 million). 7. Notice of Redemption. Notice of redemption will be mailed at least 30 days but not more than 60 days before the Redemption Date to each Holder of Securities to be redeemed at such Holder's registered address. In order to effect a redemption with the proceeds of a Public Equity Offering, the Company shall send the redemption notice in the manner specified in the Indenture not later than 30 days after the consummation of such Public Equity Offering and effect such redemption not later than 90 days after the consummation of such Public Equity Offering. Securities in denominations larger than $1,000 may be redeemed in part. 8. Change of Control Offer. In the event of a Change of Control, upon the satisfaction of the conditions set forth in the Indenture, the Company shall be required to offer to repurchase all of the then outstanding Securities pursuant to a Change of Control Offer at a purchase price equal to 101% of the principal amount thereof plus accrued and unpaid interest, if any, to the date of repurchase. Holders of Securities which are the subject of such an offer to repurchase shall receive an offer to repurchase and may elect to have such Securities repurchased in accordance with the provisions of the Indenture pursuant to and in accordance with the terms of the Indenture. 9. Limitation on Disposition of Assets. Under certain circumstances, the Company is required to apply the net proceeds from Asset Sales to offer to repurchase Securities at a price equal to 100% of the aggregate principal amount thereof, plus accrued and unpaid interest to the date of repurchase. A1-3 80 10. Denominations; Transfer; Exchange. The Securities are in registered form, without coupons, in denominations of $1,000 and integral multiples of $1,000. A Holder shall register the transfer of or exchange Securities in accordance with the Indenture. The Registrar may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and to pay certain transfer taxes or similar governmental charges payable in connection therewith as permitted by the Indenture. The Registrar need not register the transfer of or exchange any Securities during a period beginning 15 days before the mailing of a redemption notice for any Securities or portions thereof selected for redemption. 11. Persons Deemed Owners. The registered Holder of a Security shall be treated as the owner of it for all purposes. 12. Unclaimed Money. If money for the payment of principal or interest remains unclaimed for one year, the Trustee and the Paying Agent will pay the money back to the Company. After that, all liability of the Trustee and such Paying Agent with respect to such money shall cease. 13. Discharge Prior to Redemption or Maturity. if the Company at any time deposits with the Trustee U.S. Legal Tender or U.S. Government Obligations sufficient to pay the principal of and interest on the Securities to redemption or maturity and complies with the other provisions of the Indenture relating thereto, the Company will be discharged from certain provisions of the Indenture and the Securities (including certain covenants, but excluding its obligation to pay the principal of and interest on the Securities). 14. Amendment; Supplement; Waiver. Subject to certain exceptions, the Indenture or the Securities may be amended or supplemented with the written consent of the Holders of at least a majority in aggregate principal amount of the Securities then outstanding, and any existing Default or Event of Default or noncompliance with any provision may be waived with the written consent of the Holders of a majority in aggregate principal amount of the Securities then outstanding. Without notice to or consent of any Holder, the parties thereto may amend or supplement the Indenture or the Securities to, among other things, cure any ambiguity, defect or inconsistency, provide for uncertificated Securities in addition to or in place of certificated Securities, or comply with Article Five of the Indenture, or make any other change that does not adversely affect in any material respect the rights of any Holder of a Security. 15. Restrictive Covenants. The Indenture imposes certain limitations on the ability of the Company and its Subsidiaries to, among other things, incur additional Indebtedness, make payments in respect of its Capital Stock or certain Indebtedness, engage in certain Asset Swaps, enter into transactions with Affiliates, create dividend or other payment restrictions affecting Subsidiaries and merge or consolidate with any other Person, sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its assets or adopt a plan of liquidation. Such limitations are subject to a number of important qualifications and exceptions. The Company must annually report to the Trustee on compliance with such limitations. 16. Successors. When a successor assumes, in accordance with the Indenture, all the obligations of its predecessor under the Securities and the Indenture, the predecessor will be released from those obligations. 17. Defaults and Remedies. If an Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in aggregate principal amount of Securities then outstanding may declare all the Securities to be due and payable in the manner, at the time and with the effect provided in the Indenture. Holders of Securities may not enforce the Indenture or the Securities except as provided A1-4 81 in the Indenture. The Trustee is not obligated to enforce the Indenture or the Securities unless it has been offered indemnity or security reasonably satisfactory to it. The Indenture permits, subject to certain limitations therein provided, Holders of a majority in aggregate principal amount of the Securities then outstanding to direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders of Securities notice of any continuing Default or Event of Default (except a Default in payment of principal or interest) if it determines in good faith that withholding notice is in their interest. 18. Trustee Dealings. The Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Securities and may otherwise deal with the Company, its Subsidiaries, Unrestricted Subsidiaries or their respective Affiliates as if it were not the Trustee. 19. No Recourse Against Others. No past, present or future stockholder, director, officer, employee or incorporator, as such, of the Company shall have any liability for any obligation of the Company under the Securities or the Indenture or for any claim based on, in respect of or by reason of, such obligations or their creation. Each Holder of a Security by accepting a Security waives and releases all such liability. The waiver and release are part of the consideration for the issuance of the Securities. 20. Authentication. This Security shall not be valid until the Trustee or authenticating agent manually signs the certificate of authentication on this Security. 21. Governing Law. The laws of the State of New York shall govern this Security and the Indenture, without regard to principles of conflict of laws. 22. Abbreviations and Defined Terms. Customary abbreviations may be used in the name of a Holder of a Security or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST Custodian), and U/G/M/A (= Uniform Gifts to Minors Act). 23. CUSIP Numbers. Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company has caused CUSIP numbers to be printed on the Securities as a convenience to the Holders of the Securities. No representation is made as to the accuracy of such numbers as printed on the Securities and reliance may be placed only on the other identification numbers printed hereon. 24. Registration Rights. Pursuant to the Registration Rights Agreement, the Company will be obligated to consummate an exchange offer pursuant to which, subject to the terms and conditions of the Registration Rights Agreement, the Holder of this Security shall have the right to exchange this Security for Securities of a separate series issued under the Indenture (or a trust indenture substantially identical to the Indenture in accordance with the terms of the Registration Rights Agreement) which have been registered under the Securities Act, in like principal amount and having identical terms as this Security. The Holders of the Securities shall be entitled to receive certain additional interest payments in the event such exchange offer is not consummated and upon certain other conditions, all pursuant to and in accordance with the terms of the Registration Rights Agreement. 25. Indenture. Each Holder, by accepting a Security, agrees to be bound by all of the terms and provisions of the Indenture, as the same may be amended from time to time. Capitalized terms used herein and not defined herein have the meanings ascribed thereto in the Indenture. The Company will furnish to any Holder of a Security upon written request and without charge a copy of the Indenture, which has the text of this Security in larger type. Requests may be made to: CHANCELLOR MEDIA CORPORATION OF LOS ANGELES, 300 Crescent Court, Suite 600, Dallas, Texas 75201. A1-5 82 GUARANTEE The Guarantors (as defined in the Indenture referred to in the Security upon which this notation is endorsed and each hereinafter referred to as a "GUARANTOR," which term includes any successor person under the Indenture) have unconditionally guaranteed on a senior basis (such guarantee by each Guarantor being referred to herein as the "GUARANTEE") (i) the due and punctual payment of the principal of and interest on the Securities, whether at maturity, by acceleration or otherwise, the due and punctual payment of interest on the overdue principal and interest, if any, on the Securities, to the extent lawful, and the due and punctual performance of all other obligations of the Company to the Holders or the Trustee all in accordance with the terms set forth in Article Ten of the Indenture and (ii) in case of any extension of time of payment or renewal of any Securities or any of such other obligations, that the same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise. No stockholder, officer, director or incorporator, as such, past, present or future, of any Guarantor shall have any liability under the Guarantee by reason of his or its status as such stockholder, officer, director or incorporator. The Guarantees shall not be valid or obligatory for any purpose until the certificate of authentication on the Securities upon which the Guarantees are noted shall have been executed by the Trustee under the Indenture by the manual signature of one of its authorized officers. GUARANTORS: On Behalf of the Subsidiary Guarantors Listed on Exhibit A hereto By: ---------------------------------------- Name: Omar Choucair Title: Vice President A1-6 83 Exhibit A CERTAIN SUBSIDIARIES OF CHANCELLOR MEDIA CORPORATION OF LOS ANGELES (ALL SUBSIDIARIES ARE DELAWARE CORPORATIONS EXCEPT AS EXPRESSLY INDICATED) 1. Chancellor Media Corporation of The Lone Star State 2. KZPS/KDGE License Corp. 3. Chancellor Media Corporation of California 4. KIOI License Corp. 5. Chancellor Media Corporation of Illinois 6. Chancellor Media Illinois License Corp. 7. Chancellor Media Corporation of Dade County 8. WVCG License Corp. 9. Chancellor Media Corporation of Massachusetts 10. Chancellor Media Pennsylvania License Corp. 11. Chancellor Media Corporation of Miami 12. WEDR License Corp. 13. Chancellor Media of Houston Limited Partnership 14. Chancellor Media Corporation of Houston 15. Chancellor Media Corporation of the Keystone State 16. Chancellor Media Corporation of New York 17. Chancellor Media Corporation of Charlotte 18. WIOQ License Corp. 19. Chancellor Media Corporation of Washington, D.C. 20. Chancellor Media Corporation of St. Louis 21. Chancellor Media Corporation of Michigan 22. Chancellor Media / WAXQ Inc. 23. WAXQ License Corp. 24. Chancellor Media / KCMG Inc. 25. Chancellor Media / Riverside Broadcasting Co., Inc. 26. WLTW License Corp. 27. Chancellor Media Corporation of the Capital City 28. Chancellor Media D.C. License Corp. 29. Chancellor Media Licensee Company 30. Chancellor Media/Trefoil Communications, Inc. 31. Chancellor Media/Shamrock Broadcasting, Inc. 32. Chancellor Media/Shamrock Radio Licenses, Inc. 33. Chancellor Media/Shamrock Broadcasting Licenses of Denver, Inc. 34. Chancellor Media/Shamrock Broadcasting of Texas, Inc (a Texas corporation) 35. Chancellor Media/Shamrock Radio Licenses, LLC 36. Chancellor Media Outdoor Corporation 37. Chancellor Media Nevada Sign Corporation 38. Chancellor Media MW Sign Corporation 39. Chancellor Media Martin Corporation 40. Western Poster Service, Inc. (a Texas corporation) 41. The AMFM Radio Networks, Inc. 42. Chancellor Media Air Services Corporation 43. Chancellor Media Whiteco Outdoor Corporation 44. Chancellor Merger Corp. A1-7 84 45. Broadcast Architecture, Inc. (a Massachusetts corporation) 46. Martin Media (a California limited partnership) 47. Dowling Company Incorporated (a Virginia corporation) 48. Nevada Outdoor Systems, Inc. (a Nevada corporation) 49. MW Sign Corp. (a California corporation) 50. Martin & MacFarlane, Inc. (a California corporation) 51. Katz Media Corporation 52. Katz Communications, Inc. 53. Katz Millennium Marketing, Inc. 54. Amcast Radio Sales, Inc. 55. Christal Radio Sales, Inc. 56. Eastman Radio Sales, Inc. 57. Seltel Inc. 58. Katz Cable Corporation 59. The National Payroll Company, Inc. 60. Chancellor Media Radio Licenses, LLC 61. KLOL License Limited Partnership 62. WTOP License Limited Partnership 63. Radio 100, L.L.C. 64. Revolution Outdoor Advertising, Inc. 65. Hardin Development Corporation 66. Parsons Development Company A1-8 85 ASSIGNMENT FORM To assign this Security, fill in the form below: (I) or (we) assign and transfer this Security to - ------------------------------------------------------------------------------- (Insert assignee's soc. sec. or tax I.D. no.) - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- (Print or type assignee's name, address and zip code) and irrevocably appoint -------------------------------------------------------- to transfer this Security on the books of the Company. The agent may substitute another to act for him. - ------------------------------------------------------------------------------- Date: Your Signature: ----------------------- (Sign exactly as your name appears on the face of this Security) SIGNATURE GUARANTEE. - ------------------------------ Participant in a Recognized Signature Guarantee Medallion Program A1-9 86 OPTION OF HOLDER TO ELECT PURCHASE If you want to elect to have this Security purchased by the Company pursuant to Section 4.15 or 4.16 of the Indenture, check the box below: [ ] Section 4.15 [ ] Section 4.16 If you want to elect to have only part of the Security purchased by the Company pursuant to Section 4.15 or Section 4.16 of the Indenture, state the amount you elect to have purchased: $________ Date: Your Signature: ----------------- ---------------------------- (Sign exactly as your name appears on the Note) Tax Identification No: ---------------------- SIGNATURE GUARANTEE. - ------------------------------ Participant in a Recognized Signature Guarantee Medallion Program A1-10 87 SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL SECURITY1/ The following exchanges of a part of this Global Security for an interest in another Global Security or for a Definitive Security, or exchanges of a part of another Global Security or Definitive Security for an interest in this Global Security, have been made:
Amount of decrease in Amount of Principal Amount of Signature of Principal increase in of this authorized Amount of Principal Global Security officer of this Global Amount of following such Trustee or Date of Exchange Security this Global Security decrease (or increase) Custodian - ------------------- ----------- -------------------- ---------------------- ------------
- ----------------------- 11 This should be included only if the Security is issued in global form. A1-11 88 EXHIBIT A-2 (Face of Regulation S Temporary Global Security) =============================================================================== CUSIP: ------------ 8% [Series A] [Series B] Senior Notes due 2008 No. $ ----- ------------ Chancellor Media Corporation of Los Angeles promises to pay to ------------------------------------------------------------- or registered assigns, the principal sum of ----------------------------------------------------------- Dollars on , 2008. ---------------- Interest Payment Dates: , and ------------- ------------- Record Dates: , and -------------- ------------- DATED: , 199 -------------------- CHANCELLOR MEDIA CORPORATION OF LOS ANGELES By: --------------------------------- Name: Title: This is one of the [Global] Securities referred to in the within-mentioned Indenture: The Bank of New York, as Trustee By: ------------------------ Authorized Signatory =============================================================================== A2-1 89 (REVERSE OF REGULATION S TEMPORARY GLOBAL SECURITY) 8% SENIOR NOTES DUE 2008 THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL SECURITY, AND THE CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR CERTIFICATED SECURITIES, ARE AS SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN). THIS GLOBAL SECURITY IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE GOVERNING THIS SECURITY) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO THE INDENTURE, (II) THIS GLOBAL SECURITY MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE INDENTURE, (III) THIS GLOBAL SECURITY MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL SECURITY MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE COMPANY. THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE ACT) (B) IT IS AN "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a) (1), (2), (3) OR (7) UNDER THE ACT) OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION, (2) AGREES THAT IT WILL NOT WITHIN TWO YEARS AFTER THE ORIGINAL ISSUANCE OF THIS SECURITY RESELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO THE ISSUER OR ANY SUBSIDIARY THEREOF, (B) INSIDE THE UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE ACT, (C) INSIDE THE UNITED STATES TO AN ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES (OR HAS HAD FURNISHED ON ITS BEHALF BY A U.S. BROKER-DEALER) TO THE TRANSFER AGENT A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS SECURITY (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRANSFER AGENT), (D) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE ACT, (E) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE ACT (IF AVAILABLE), OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS SECURITY WITHIN TWO YEARS AFTER THE ORIGINAL ISSUANCE OF THIS SECURITY, IF THE PROPOSED TRANSFEREE IS AN ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE TRANSFER, FURNISH TO THE TRANSFER AGENT AND THE COMPANY SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS EITHER OF THEM MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE ACT. AS USED HEREIN, THE TERMS "OFF-SHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANING GIVEN TO THEM BY REGULATION S UNDER THE ACT. A2-2 90 CHANCELLOR MEDIA CORPORATION OF LOS ANGELES, a Delaware corporation (the "COMPANY"), promises to pay interest on the principal amount of this Security at the rate per annum shown above. Interest on the Securities will accrue from the most recent date on which interest has been paid or, if no interest has been paid, from November 17, 1998. The Company will pay interest semi-annually in arrears on each Interest Payment Date, commencing May 1, 1999. Interest will be computed on the basis of a 360-day year of twelve 30-day months. The Company shall pay interest on overdue principal and on overdue installments of interest from time to time on demand at the rate borne by the Securities to the extent lawful. 2. Method of Payment. The Company shall pay interest on the Securities (except defaulted interest) to the Persons who are the registered Holders at the close of business on the Record Date immediately preceding the Interest Payment Date even if the Securities are cancelled on registration of transfer or registration of exchange after such Record Date. Holders must surrender Securities to a Paying Agent to collect principal payments. The Company shall pay principal and interest in money of the United States that at the time of payment is legal tender for payment of public and private debts ("U.S. LEGAL TENDER"). However, the Company may pay principal and interest by its check payable in such U.S. Legal Tender. The Company may deliver any such interest payment to the Paying Agent or to a Holder at the Holder's registered address. 3. Paying Agent and Registrar. Initially, The Bank of New York (the "TRUSTEE") will act as Paying Agent and Registrar. The Company may change any Paying Agent, Registrar or Co-Registrar without notice to the Holders. The Company or any of its Subsidiaries may, subject to certain exceptions, act as Registrar or Co-Registrar. 4. Indenture and Guaranty. The Company issued the Securities under an Indenture, dated as of November 17, 1998 (the "INDENTURE"), among the Company, the Guarantors and the Trustee. This Security is one of a duly authorized issue of Securities of the Company designated as its 8% Senior Notes due 2008 (the "SECURITIES"), limited (except as otherwise provided in the Indenture) in aggregate principal amount to $750,000,000, which may be issued under the Indenture. The terms of the Securities include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C. 77aaa-77bbbb) (the "TIA"), as in effect on the date of the Indenture. Notwithstanding anything to the contrary herein, the Securities are subject to all such terms, and Holders of Securities are referred to the Indenture and the TIA for a statement of them. The Securities are general unsecured obligations of the Company. Payment on each Security is guaranteed on a senior basis, jointly and severally, by the Guarantors pursuant to Article Eleven of the Indenture. 5. [Intentionally Omitted.] 6. Optional Redemption. (a) The Securities will be redeemable, at the Company's option, in whole at any time or in part from time to time, upon not less than 30 nor more than 60 days prior notice mailed by first class mail to each holder's registered address, at a redemption price equal to 100% of the principal amount thereof plus the Applicable Premium (as defined below) as of, and accrued and unpaid interest, if any, to the date of redemption (the "REDEMPTION DATE") (subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date in respect of then outstanding securities). A2-3 91 "APPLICABLE PREMIUM" means, with respect to a Security at any Redemption Date, (a) the present value of all remaining required interest and principal payments due on such Security assuming a Redemption Date of November 1, 2008, computed using a discount rate equal to the Treasury Rate (as defined below) plus 50 basis points minus (b) the then outstanding principal amount of such Security minus (c) accrued interest paid on the Redemption Date. "TREASURY RATE" means the yield to maturity at the time of computation of United States Treasury securities with a constant maturity (as compiled and published in the most recent Federal Reserve Statistical Release H.15(519) ("STATISTICAL RELEASE") which has become publicly available at least two business days prior to the Redemption Date (or, if such Statistical Release is no longer published, any publicly available source of similar market data)) most nearly equal to the period from the Redemption Date to November 1, 2008; provided, however, that if the period from the Redemption Date to November 1, 2008 is not equal to the constant maturity of a United States Treasury security for which a weekly average yield is given, the Treasury Rate shall be obtained by linear interpolation (calculated to the nearest one-twelfth of a year) from the weekly average yields of United States Treasury securities for which such yields are given, except that if the period from the Redemption Date to November 1, 2008 is less than one year, the weekly average yield on actually traded United States Treasury securities adjusted to a constant maturity of one year shall be used. (b) In addition, on or prior to November 1, 2001, the Company may, at its option, use the net cash proceeds of one or more Public Equity Offerings to redeem the Securities, in part, at a redemption price of 108.0% of the principal amount thereof, plus accrued and unpaid interest thereon to the date of redemption; provided, however, that after any such redemption the aggregate principal amount of the Securities outstanding must equal at least 75% of the aggregate principal amount of the Securities originally issued (that is, $562.5 million). 7. Notice of Redemption. Notice of redemption will be mailed at least 30 days but not more than 60 days before the Redemption Date to each Holder of Securities to be redeemed at such Holder's registered address. In order to effect a redemption with the proceeds of a Public Equity Offering, the Company shall send the redemption notice in the manner specified in the Indenture not later than 30 days after the consummation of such Public Equity Offering and effect such redemption within 90 days after the consummation of such Public Equity Offering. Securities in denominations larger than $1,000 may be redeemed in part. 8. Change of Control Offer. In the event of a Change of Control, upon the satisfaction of the conditions set forth in the Indenture, the Company shall be required to offer to repurchase all of the then outstanding Securities pursuant to a Change of Control Offer at a purchase price equal to 101% of the principal amount thereof plus accrued and unpaid interest, if any, to the date of repurchase. Holders of Securities which are the subject of such an offer to repurchase shall receive an offer to repurchase and may elect to have such Securities repurchased in accordance with the provisions of the Indenture pursuant to and in accordance with the terms of the Indenture. 9. Limitation on Disposition of Assets. Under certain circumstances, the Company is required to apply the net proceeds from Asset Sales to offer to repurchase Securities at a price equal to 100% of the aggregate principal amount thereof, plus accrued and unpaid interest to the date of repurchase. 10. Denominations; Transfer; Exchange. The Securities are in registered form, without coupons, in denominations of $1,000 and integral multiples of $1,000. A Holder shall register the transfer of or exchange Securities in accordance with the Indenture. The Registrar may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and to pay certain transfer taxes or similar governmental charges payable in connection therewith as permitted by the Indenture. The Registrar need not register the transfer of or exchange any Securities during a period beginning 15 days before the mailing of a redemption notice for any Securities or portions thereof selected for redemption. A2-4 92 11. Persons Deemed Owners. The registered Holder of a Security shall be treated as the owner of it for all purposes. 12. Unclaimed Money. If money for the payment of principal or interest remains unclaimed for one year, the Trustee and the Paying Agent will pay the money back to the Company. After that, all liability of the Trustee and such Paying Agent with respect to such money shall cease. 13. Discharge Prior to Redemption or Maturity. if the Company at any time deposits with the Trustee U.S. Legal Tender or U.S. Government Obligations sufficient to pay the principal of and interest on the Securities to redemption or maturity and complies with the other provisions of the Indenture relating thereto., the Company will be discharged from certain provisions of the Indenture and the Securities (including certain covenants, but excluding its obligation to pay the principal of and interest on the Securities). 14. Amendment; Supplement; Waiver. Subject to certain exceptions, the Indenture or the Securities may be amended or supplemented with the written consent of the Holders of at least a majority in aggregate principal amount of the Securities then outstanding, and any existing Default or Event of Default or noncompliance with any provision may be waived with the written consent of the Holders of a majority in aggregate principal amount of the Securities then outstanding. Without notice to or consent of any Holder, the parties thereto may amend or supplement the Indenture or the Securities to, among other things, cure any ambiguity, defect or inconsistency, provide for uncertificated Securities in addition to or in place of certificated Securities, or comply with Article Five of the Indenture, or make any other change that does not adversely affect in any material respect the rights of any Holder of a Security. 15. Restrictive Covenants. The Indenture imposes certain limitations on the ability of the Company and its Subsidiaries to, among other things, incur additional Indebtedness, make payments in respect of its Capital Stock or certain Indebtedness, engage in certain Asset Swaps, enter into transactions with Affiliates, create dividend or other payment restrictions affecting Subsidiaries and merge or consolidate with any other Person, sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its assets or adopt a plan of liquidation. Such limitations are subject to a number of important qualifications and exceptions. The Company must annually report to the Trustee on compliance with such limitations. 16. Successors. When a successor assumes, in accordance with the Indenture, all the obligations of its predecessor under the Securities and the Indenture, the predecessor will be released from those obligations. 17. Defaults and Remedies. If an Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in aggregate principal amount of Securities then outstanding may declare the Securities to be due and payable in the manner, at the time and with the effect provided in the Indenture. Holders of Securities may not enforce the Indenture or the Securities except as provided in the Indenture. The Trustee is not obligated to enforce the Indenture or the Securities unless it has been offered indemnity or security reasonably satisfactory to it. The Indenture permits, subject to certain limitations therein provided, Holders of a majority in aggregate principal amount of the Securities then outstanding to direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders of Securities notice of any continuing Default or Event of Default (except a Default in payment of principal or interest) if it determines in good faith that withholding notice is in their interest. A2-5 93 18. Trustee Dealings with Company. The Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Securities and may otherwise deal with the Company, its Subsidiaries, Unrestricted Subsidiaries or their respective Affiliates as if it were not the Trustee. 19. No Recourse Against Others. No past, present or future stockholder, director, officer, employee or incorporator, as such, of the Company shall have any liability for any obligation of the Company under the Securities or the Indenture or for any claim based on, in respect of or by reason of, such obligations or their creation. Each Holder of a Security by accepting a Security waives and releases all such liability. The waiver and release are part of the consideration for the issuance of the Securities. 20. Authentication. This Security shall not be valid until the Trustee or authenticating agent manually signs the certificate of authentication on this Security. 21. Governing Law. The laws of the State of New York shall govern this Security and the Indenture, without regard to principles of conflict of laws. 22. Abbreviations and Defined Terms. Customary abbreviations may be used in the name of a Holder of a Security or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST Custodian), and U/G/M/A (= Uniform Gifts to Minors Act). 23. CUSIP Number. Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company has caused CUSIP numbers to be printed on the Securities as a convenience to the Holders of the Securities. No representation is made as to the accuracy of such numbers as printed on the Securities and reliance may be placed only on the other identification numbers printed hereon. 24. Indenture. Each Holder, by accepting a Security, agrees to be bound by all of the terms and provisions of the Indenture, as the same may be amended from time to time. Capitalized terms used herein and not defined herein have the meanings ascribed thereto in the Indenture. The Company will furnish to any Holder of a Security upon written request and without charge a copy of the Indenture, which has the text of this Security in larger type. Requests may be made to: CHANCELLOR MEDIA CORPORATION OF LOS ANGELES, 300 Crescent Court, Suite 600, Dallas, Texas 75201. A2-6 94 GUARANTEE The Guarantors (as defined in the Indenture referred to in the Security upon which this notation is endorsed and each hereinafter referred to as a "GUARANTOR," which term includes any successor person under the Indenture) have unconditionally guaranteed on a senior basis (such guarantee by each Guarantor being referred to herein as the "GUARANTEE") (i) the due and punctual payment of the principal of and interest on the Securities, whether at maturity, by acceleration or otherwise, the due and punctual payment of interest on the overdue principal and interest, if any, on the Securities, to the extent lawful, and the due and punctual performance of all other obligations of the Company to the Holders or the Trustee all in accordance with the terms set forth in Article Ten of the Indenture and (ii) in case of any extension of time of payment or renewal of any Securities or any of such other obligations, that the same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise. No stockholder, officer, director or incorporator, as such, past, present or future, of any Guarantor shall have any liability under the Guarantee by reason of his or its status as such stockholder, officer, director or incorporator. The Guarantees shall not be valid or obligatory for any purpose until the certificate of authentication on the Securities upon which the Guarantees are noted shall have been executed by the Trustee under the Indenture by the manual signature of one of its authorized officers. GUARANTORS: On Behalf of the Subsidiary Guarantors Listed on Exhibit A hereto By: ------------------------------------------ Name: Omar Choucair Title: Vice President A2-7 95 Exhibit A CERTAIN SUBSIDIARIES OF CHANCELLOR MEDIA CORPORATION OF LOS ANGELES (ALL SUBSIDIARIES ARE DELAWARE CORPORATIONS EXCEPT AS EXPRESSLY INDICATED) 1. Chancellor Media Corporation of The Lone Star State 2. KZPS/KDGE License Corp. 3. Chancellor Media Corporation of California 4. KIOI License Corp. 5. Chancellor Media Corporation of Illinois 6. Chancellor Media Illinois License Corp. 7. Chancellor Media Corporation of Dade County 8. WVCG License Corp. 9. Chancellor Media Corporation of Massachusetts 10. Chancellor Media Pennsylvania License Corp. 11. Chancellor Media Corporation of Miami 12. WEDR License Corp. 13. Chancellor Media of Houston Limited Partnership 14. Chancellor Media Corporation of Houston 15. Chancellor Media Corporation of the Keystone State 16. Chancellor Media Corporation of New York 17. Chancellor Media Corporation of Charlotte 18. WIOQ License Corp. 19. Chancellor Media Corporation of Washington, D.C. 20. Chancellor Media Corporation of St. Louis 21. Chancellor Media Corporation of Michigan 22. Chancellor Media / WAXQ Inc. 23. WAXQ License Corp. 24. Chancellor Media / KCMG Inc. 25. Chancellor Media / Riverside Broadcasting Co., Inc. 26. WLTW License Corp. 27. Chancellor Media Corporation of the Capital City 28. Chancellor Media D.C. License Corp. 29. Chancellor Media Licensee Company 30. Chancellor Media/Trefoil Communications, Inc. 31. Chancellor Media/Shamrock Broadcasting, Inc. 32. Chancellor Media/Shamrock Radio Licenses, Inc. 33. Chancellor Media/Shamrock Broadcasting Licenses of Denver, Inc. 34. Chancellor Media/Shamrock Broadcasting of Texas, Inc (a Texas corporation) 35. Chancellor Media/Shamrock Radio Licenses, LLC 36. Chancellor Media Outdoor Corporation 37. Chancellor Media Nevada Sign Corporation 38. Chancellor Media MW Sign Corporation 39. Chancellor Media Martin Corporation 40. Western Poster Service, Inc. (a Texas corporation) 41. The AMFM Radio Networks, Inc. 42. Chancellor Media Air Services Corporation 43. Chancellor Media Whiteco Outdoor Corporation 44. Chancellor Merger Corp. A2-8 96 45. Broadcast Architecture, Inc. (a Massachusetts corporation) 46. Martin Media (a California corporation) 47. Dowling Company Incorporated (a Virginia corporation) 48. Nevada Outdoor Systems, Inc. (a Nevada corporation) 49. MW Sign Corp. (a California corporation) 50. Martin & MacFarlane, Inc. (a California limited partnership) 51. Katz Media Corporation 52. Katz Communications, Inc. 53. Katz Millennium Marketing, Inc. 54. Amcast Radio Sales, Inc. 55. Christal Radio Sales, Inc. 56. Eastman Radio Sales, Inc. 57. Seltel Inc. 58. Katz Cable Corporation 59. The National Payroll Company, Inc. 60. Chancellor Media Radio Licenses, LLC 61. KLOL License Limited Partnership 62. WTOP License Limited Partnership 63. Radio 100, L.L.C. 64. Revolution Outdoor Advertising, Inc. 65. Hardin Development Corporation 66. Parsons Development Company A2-9 97 ASSIGNMENT FORM To assign this Security, fill in the form below: (I) or (we) assign and transfer this Security to - ------------------------------------------------------------------------------- (Insert assignee's soc. sec. or tax I.D. no.) - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- (Print or type assignee's name, address and zip code) and irrevocably appoint -------------------------------------------------------- to transfer this Security on the books of the Company. The agent may substitute another to act for him. Date: --------------------- Your Signature: ---------------------- (Sign exactly as your name appears on the face of this Security) SIGNATURE GUARANTEE. - ------------------------------ Participant in a Recognized Signature Guarantee Medallion Program A2-10 98 OPTION OF HOLDER TO ELECT PURCHASE If you want to elect to have this Security purchased by the Company pursuant to Section 4.15 or 4.16 of the Indenture, check the box below: [ ] Section 4.15 [ ] Section 4.16 If you want to elect to have only part of the Security purchased by the Company pursuant to Section 4.15 or Section 4.16 of the Indenture, state the amount you elect to have purchased: $________ Date: Your Signature: ----------------- ---------------------------- (Sign exactly as your name appears on the Note) Tax Identification No: ---------------------- SIGNATURE GUARANTEE. - ------------------------------ Participant in a Recognized Signature Guarantee Medallion Program A2-11 99 SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL SECURITY1/ The following exchanges of a part of this Global Security for an interest in another Global Security or for a Definitive Security, or exchanges of a part of another Global Security or Definitive Security for an interest in this Global Security, have been made:
Amount of decrease in Amount of Principal Amount of Signature of Principal increase in of this authorized Amount of Principal Global Security officer of this Global Amount of following such Trustee or Date of Exchange Security this Global Security decrease (or increase) Custodian - ------------------- ----------- -------------------- ---------------------- ------------
- ----------------------- 33 This should be included only if the Security is issued in global form. A2-12 100 EXHIBIT B FORM OF CERTIFICATE OF TRANSFER Chancellor Media Corporation of Los Angeles 300 Crescent Court Suite 600 Dallas, Texas 75201 The Bank of New York 101 Barclay Street, Floor 21W New York, New York 10286 Attn: Corporate Trust Trustee Administration Re: 8% Series __ Senior Notes due 2008 Reference is hereby made to the Indenture, dated as of November 17, 1998 (the "INDENTURE"), among Chancellor Media Corporation of Los Angeles, as issuer (the "COMPANY"), the guarantors named therein and The Bank of New York, as trustee. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture. ______________, (the "TRANSFEROR") owns and proposes to transfer the Security[ies] or interest in such Security[ies] specified in Annex A hereto, in the principal amount of $___________ in such Security[ies] or interests (the "TRANSFER"), to __________ (the "TRANSFEREE"), as further specified in Annex A hereto. In connection with the Transfer, the Transferor hereby certifies that it has advised the transferee of the transfer restrictions applicable to the Security[ies] and: [CHECK ALL THAT APPLY] 1. [ ] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN THE 144A GLOBAL SECURITY OR A DEFINITIVE SECURITY PURSUANT TO RULE 144A. The Transfer is being effected pursuant to and in accordance with Rule 144A under the United States Securities Act of 1933, as amended (the "SECURITIES ACT"), and, accordingly, the Transferor hereby further certifies that the beneficial interest or Definitive Security is being transferred to a Person that the Transferor reasonably believed and believes is purchasing the beneficial interest or Definitive Security for its own account, or for one or more accounts with respect to which such Person exercises sole investment discretion, and such Person and each such account is a "qualified institutional buyer" within the meaning of Rule 144A in a transaction meeting the requirements of Rule 144A and such Transfer is in compliance with any applicable blue sky securities laws of any state of the United States. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Security will be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the 144A Global Security and/or the Definitive Security and in the Indenture and the Securities Act. 2. [ ] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN THE TEMPORARY REGULATION S GLOBAL SECURITY, THE REGULATION S GLOBAL SECURITY OR A DEFINITIVE SECURITY PURSUANT TO REGULATION S. The Transfer is being effected pursuant to and in accordance with Rule 903 or Rule 904 under the Securities Act and, accordingly, the Transferor hereby further certifies that (i) the Transfer is not being made to a person in the United States and (x) at the time the buy order was originated, the Transferee was outside the United States or such Transferor and any Person acting on its behalf B-1 101 reasonably believed and believes that the Transferee was outside the United States or (y) the transaction was executed in, on or through the facilities of a designated offshore securities market and neither such Transferor nor any Person acting on its behalf knows that the transaction was prearranged with a buyer in the United States, (ii) no directed selling efforts have been made in contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation S under the Securities Act, (iii) the transaction is not part of a plan or scheme to evade the registration requirements of the Securities Act and (iv) if the proposed transfer is being made prior to the expiration of the Restricted Period, the transfer is not being made to a U.S. Person or for the account or benefit of a U.S. Person (other than an initial purchaser). Upon consummation of the proposed transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Security will be subject to the restrictions on Transfer enumerated in the Private Placement Legend printed on the Regulation S Global Security, the Temporary Regulation S Global Security and/or the Definitive Security and in the Indenture and the Securities Act. 3. [ ] CHECK AND COMPLETE IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN THE GLOBAL SECURITY OR A DEFINITIVE SECURITY PURSUANT TO ANY PROVISION OF THE SECURITIES ACT OTHER THAN RULE 144A OR REGULATION S. The Transfer is being effected in compliance with the transfer restrictions applicable to beneficial interests in Restricted Global Securities and Restricted Definitive Securities and pursuant to and in accordance with the Securities Act and any applicable blue sky securities laws of any state of the United States, and accordingly the Transferor hereby further certifies that (check one): (a) [ ] such Transfer is being effected pursuant to and in accordance with Rule 144 under the Securities Act; or (b) [ ] such Transfer is being effected to the Company or a subsidiary thereof; or (c) [ ] such Transfer is being effected pursuant to an effective registration statement under the Securities Act and in compliance with the prospectus delivery requirements of the Securities Act; or (d) [ ] such Transfer is being effected to an Institutional Accredited Investor and pursuant to an exemption from the registration requirements of the Securities Act other than Rule 144A, Rule 144 or Rule 904, and the Transferor hereby further certifies that it has not engaged in any general solicitation within the meaning of Regulation D under the Securities Act and the Transfer complies with the transfer restrictions applicable to beneficial interests in a Restricted Global Security or Restricted Definitive Securities and the requirements of the exemption claimed, which certification is supported by (1) a certificate executed by the Transferee in the form of Exhibit D to the Indenture and (2) if such Transfer is in respect of a principal amount of Securities at the time of transfer of less than $250,000, an Opinion of Counsel provided by the Transferor or the Transferee (a copy of which the Transferor has attached to this certification), to the effect that such Transfer is in compliance with the Securities Act. Upon consummation of the proposed transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Security will be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Global Security and/or the Definitive Securities and in the Indenture and the Securities Act. B-2 102 4. [ ] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL SECURITY OR OF AN UNRESTRICTED DEFINITIVE SECURITY. (a) [ ] CHECK IF TRANSFER IS PURSUANT TO RULE 144. (i) The Transfer is being effected pursuant to and in accordance with Rule 144 under the Securities Act and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any state of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Security will no longer be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Securities, on Restricted Definitive Securities and in the Indenture. (b) [ ] CHECK IF TRANSFER IS PURSUANT TO REGULATION S. (i) The Transfer is being effected pursuant to and in accordance with Rule 903 or Rule 904 under the Securities Act and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any state of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Security will no longer be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Securities, on Restricted Definitive Securities and in the Indenture. (c) [ ] CHECK IF TRANSFER IS PURSUANT TO OTHER EXEMPTION. (i) The Transfer is being effected pursuant to and in compliance with an exemption from the registration requirements of the Securities Act other than Rule 144, Rule 903 or Rule 904 and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any State of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Security will not be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Securities or Restricted Definitive Securities and in the Indenture. This certificate and the statements contained herein are made for your benefit and the benefit of the Company. -------------------------------------------- [Insert Name of Transferor] By: ----------------------------------------- Name: Title: Dated: , ------------ ----- B-3 103 ANNEX A TO CERTIFICATE OF TRANSFER 1. The Transferor owns and proposes to transfer the following: [CHECK ONE OF (a) OR (b)] (a) [ ] a beneficial interest in the: (i) [ ] 144A Global Security (CUSIP ), or (ii) [ ] Regulation S Global Security (CUSIP ), or (b) [ ] a Restricted Definitive Security. 2. After the Transfer the Transferee will hold: [CHECK ONE] (a) [ ] a beneficial interest in the: (i) [ ] 144A Global Security (CUSIP ), or (ii) [ ] Regulation S Global Security (CUSIP ), or (iii) [ ] Unrestricted Global Security (CUSIP ); or (b) [ ] a Restricted Definitive Security; or (c) [ ] an Unrestricted Definitive Security, in accordance with the terms of the Indenture. B-4 104 EXHIBIT C FORM OF CERTIFICATE OF EXCHANGE Chancellor Media Corporation of Los Angeles 300 Crescent Court Suite 600 Dallas, Texas 75201 The Bank of New York 101 Barclay Street, Floor 21W New York, New York 10286 Attn: Corporate Trust Trustee Administration Re: 8% Series Senior Notes due 2008 (CUSIP______________) Reference is hereby made to the Indenture, dated as of November 17, 1998 (the "INDENTURE"), among Chancellor Media Corporation of Los Angeles, as issuer (the "COMPANY"), the guarantors named therein and The Bank of New York, as trustee. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture. ____________, (the "OWNER") owns and proposes to exchange the Security[ies] or interest in such Security[ies] specified herein, in the principal amount of $____________ in such Security[ies] or interests (the "EXCHANGE"). In connection with the Exchange, the Owner hereby certifies that: 1. EXCHANGE OF RESTRICTED DEFINITIVE SECURITIES OR BENEFICIAL INTERESTS IN A RESTRICTED GLOBAL SECURITY FOR UNRESTRICTED DEFINITIVE SECURITIES OR BENEFICIAL INTERESTS IN AN UNRESTRICTED GLOBAL SECURITY (a) [ ] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED GLOBAL SECURITY TO BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL SECURITY. In connection with the Exchange of the Owner's beneficial interest in a Restricted Global Security for a beneficial interest in an Unrestricted Global Security in an equal principal amount, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Global Securities and pursuant to and in accordance with the United States Securities Act of 1933, as amended (the "SECURITIES ACT"), (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the beneficial interest in an Unrestricted Global Security is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. (b) [ ] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED GLOBAL SECURITY TO UNRESTRICTED DEFINITIVE SECURITY. In connection with the Exchange of the Owner's beneficial interest in a Restricted Global Security for an Unrestricted Definitive Security, the Owner C-1 105 hereby certifies (i) the Definitive Security is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Restricted Global Securities and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the Definitive Security is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. (c) [ ] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE SECURITY TO BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL SECURITY. In connection with the Owner's Exchange of a Restricted Definitive Security for a beneficial interest in an Unrestricted Global Security, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to Restricted Definitive Securities and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the beneficial interest is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. (d) [ ] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE SECURITY TO UNRESTRICTED DEFINITIVE SECURITY. In connection with the Owner's Exchange of a Restricted Definitive Security for an Unrestricted Definitive Security, the Owner hereby certifies (i) the Unrestricted Definitive Security is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to Restricted Definitive Securities and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the Unrestricted Definitive Security is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. 2. EXCHANGE OF RESTRICTED DEFINITIVE SECURITIES OR BENEFICIAL INTERESTS IN RESTRICTED GLOBAL SECURITIES FOR RESTRICTED DEFINITIVE SECURITIES OR BENEFICIAL INTERESTS IN RESTRICTED GLOBAL SECURITIES (a) [ ] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED GLOBAL SECURITY TO RESTRICTED DEFINITIVE SECURITY. In connection with the Exchange of the Owner's beneficial interest in a Restricted Global Security for a Restricted Definitive Security with an equal principal amount, the Owner hereby certifies that the Restricted Definitive Security is being acquired for the Owner's own account without transfer. Upon consummation of the proposed Exchange in accordance with the terms of the Indenture, the Restricted Definitive Security issued will continue to be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Definitive Security and in the Indenture and the Securities Act. (b) [ ] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE SECURITY TO BENEFICIAL INTEREST IN A RESTRICTED GLOBAL SECURITY. In connection with the Exchange of the Owner's Restricted Definitive Security for a beneficial interest in the [CHECK ONE] __144A Global Security, __ Regulation S Global Security with an equal principal amount, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner's own account without transfer and (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Restricted Global Securities and pursuant to and in accordance with the Securities Act, and in compliance with any applicable blue sky securities laws of any state of the United States. Upon consummation of the proposed Exchange in accordance with the terms of the Indenture, the beneficial interest issued will be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the relevant Restricted Global Security and in the Indenture and the Securities Act. C-2 106 This certificate and the statements contained herein are made for your benefit and the benefit of the Company. ---------------------------------- [Insert Name of Owner] By: ------------------------------- Name: Title: Dated: , ------------ ------ C-3 107 EXHIBIT D FORM OF CERTIFICATE FROM ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR Chancellor Media Corporation of Los Angeles 300 Crescent Court Suite 600 Dallas, Texas 75201 The Bank of New York 101 Barclay Street, Floor 21W New York, New York 10286 Attn: Corporate Trust Trustee Administration Re: 8% Series Senior Notes due 2008 Reference is hereby made to the Indenture, dated as of November 17, 1998 (the "INDENTURE"), among Chancellor Media Corporation of Los Angeles, as issuer (the "COMPANY"), the guarantors named therein and The Bank of New York, as trustee. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture. In connection with our proposed purchase of $____________ aggregate principal amount of: (a) [ ] a beneficial interest in a Global Security, or (b) [ ] a Definitive Security, we confirm that: 1. We understand that any subsequent transfer of the Securities or any interest therein is subject to certain restrictions and conditions set forth in the Indenture and the undersigned agrees to be bound by, and not to resell, pledge or otherwise transfer the Securities or any interest therein except in compliance with, such restrictions and conditions and the United States Securities Act of 1933, as amended (the "SECURITIES ACT"). 2. We understand that the offer and sale of the Securities have not been registered under the Securities Act, and that the Securities and any interest therein may not be offered or sold except as permitted in the following sentence. We agree, on our own behalf and on behalf of any accounts for which we are acting as hereinafter stated, that if we should sell the Securities or any interest therein, we will do so only (A) to the Company or any subsidiary thereof, (B) in accordance with Rule 144A under the Securities Act to a "qualified institutional buyer" (as defined therein), (c) to an institutional "accredited investor" (as defined below) that, prior to such transfer, furnishes (or has furnished on its behalf by a U.S. broker-dealer) to you and to the Company a signed letter substantially in the form of this letter and, if such transfer is in respect of a principal amount of Securities, at the time of transfer, of less than $250,000, an Opinion of Counsel in form reasonably acceptable to the Company to the effect that such transfer is in compliance with the Securities Act, (D) outside the United States in accordance with Rule 904 of Regulation S under the Securities Act, (E) pursuant to the provisions of Rule 144(k) under the Securities Act or (F) pursuant to an effective registration statement under the D-1 108 Securities Act, and we further agree to provide to any person purchasing the Definitive Security or beneficial interest in a Global Security from us in a transaction meeting the requirements of clauses (A) through (E) of this paragraph a notice advising such purchaser that resales thereof are restricted as stated herein. 3. We understand that, on any proposed resale of the Securities or beneficial interest therein, we will be required to furnish to you and the Company such certifications, legal opinions and other information as you and the Company may reasonably require to confirm that the proposed sale complies with the foregoing restrictions. We further understand that the Securities purchased by us will bear a legend to the foregoing effect. 4. We are an institutional "accredited investor" (as defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and have such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of our investment in the Securities, and we and any accounts for which we are acting are each able to bear the economic risk of our or its investment. 5. We are acquiring the Securities or beneficial interest therein purchased by us for our own account or for one or more accounts (each of which is an institutional "accredited investor") as to each of which we exercise sole investment discretion. You and the Company are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby. ----------------------------------------- [Insert Name of Accredited Investor] By: --------------------------------------- Name: Title: Dated: , ------------ ------- D-2 EX-4.46 5 PURCHASE AGREEMENT DATED NOVEMBER 12, 1998 1 EXHIBIT 4.46 CHANCELLOR MEDIA CORPORATION OF LOS ANGELES $750,000,000 8% Senior Notes due 2008 PURCHASE AGREEMENT November 12, 1998 BT ALEX. BROWN INCORPORATED CHASE SECURITIES INC. MORGAN STANLEY & CO. INCORPORATED SALOMON SMITH BARNEY INC. c/o BT Alex. Brown Incorporation 130 Liberty Street New York, New York 10005 Ladies and Gentlemen: Chancellor Media Corporation of Los Angeles (the "COMPANY"), a Delaware corporation, and each subsidiary guarantor named on the signature page hereto (the "GUARANTORS" and together with the Company, the "ISSUERS"), hereby confirm their agreement with you (the "INITIAL PURCHASERS"), as set forth below. 1. The Securities. Subject to the terms and conditions herein contained, the Company proposes to issue and sell to the Initial Purchasers $750,000,000 in aggregate principal amount of its 8% Senior Notes due 2008, Series A (the "NOTES" and, together with the guarantee of each Guarantor (the "GUARANTEE"), the "SECURITIES"). The Notes are to be issued under an indenture (the "INDENTURE") to be dated as of November 17, 1998 by and among the Company, the Guarantors and The Bank of New York, as trustee (the "TRUSTEE"). The Notes will be offered and sold to the Initial Purchasers without being registered under the Securities Act of 1933, as amended (the "ACT"), in reliance on exemptions therefrom. In connection with the sale of the Notes, the Company has prepared an offering memorandum dated November 12, 1998 (the "OFFERING MEMORANDUM") setting forth or including a description of the terms of the Notes, the terms of the offering of the Notes, a description of the Company and any material developments relating to the Company occurring after the date of the most recent historical financial statements included therein. The Initial Purchasers and their direct and indirect transferees of the Notes will be entitled to the benefits of the Registration Rights Agreement, substantially in the form attached hereto as Exhibit A (the "REGISTRATION RIGHTS AGREEMENT"), pursuant to which the Company has agreed, among other things, to file with the Securities and Exchange Commission (the "COMMISSION") under the circumstances set forth therein (i) a registration statement (the "REGISTRATION STATEMENT") under the Act relating to the Company's 8% Senior Notes due 2008, Series B (the "EXCHANGE NOTES"), to be offered in exchange for the Notes or (ii) a shelf registration statement pursuant to Rule 415 under the Act relating to 2 the resale of the Notes by holders thereof or, if applicable, relating to the resale of debt securities of the Company substantially identical to the Exchange Notes (the "PRIVATE EXCHANGE NOTES") by the Initial Purchasers pursuant to an exchange of the Notes for Private Exchange Notes. 2. Representations and Warranties of each of the Issuers. Each of the Issuers represents and warrants to and agrees with the Initial Purchasers that: (a) The Offering Memorandum and any amendment or supplement thereto as of the date thereof does not and as of the Closing Date (as defined in Section 3 below) will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, except that the representations and warranties set forth in this Section 2(a) do not apply to statements or omissions made in reliance upon and in conformity with information relating to the Initial Purchasers furnished to the Company in writing by or on behalf of such Initial Purchasers expressly for use in the Offering Memorandum or any amendment or supplement thereto. (b) Each of the Issuers has been duly organized, is validly existing and is in good standing under the laws of its jurisdiction of organization, with all requisite power and authority to own its properties and conduct its businesses as now conducted as described in the Offering Memorandum, and is duly qualified to do business and is in good standing in all other jurisdictions where the ownership or leasing of its properties or the conduct of its businesses requires such qualification, except where the failure to be so qualified would not have a material adverse effect on the business, prospects, condition (financial or other) or results of operations of the Issuers, taken as a whole (a "MATERIAL ADVERSE EFFECT"). As of the Closing Date, the Company will have the authorized, issued and outstanding capitalization set forth in the Offering Memorandum under the caption "Description of Capital Stock"; the outstanding shares of capital stock of each of the Issuers have been duly authorized and validly issued, are fully paid and nonassessable and were not issued in violation of any preemptive or similar rights; and except (i) as disclosed in the Offering Memorandum under the caption "Description of Certain Indebtedness--Senior Credit Facility" and (ii) for Western Poster Service, Inc., a Texas corporation, approximately 73.4% of whose capital stock is owned by the Company, all of the outstanding shares of capital stock of each of the Guarantors are owned (directly or indirectly) by the Company, free and clear of all liens, encumbrances, equities and claims or restrictions on transferability (other than those imposed by the Act and the securities or blue sky laws of certain jurisdictions) or voting. The Company does not own, directly or indirectly, any shares of stock or any other equity or long-term debt securities or have any equity interest in any firm, partnership, joint venture or other entity other than interests in its subsidiaries or as described in the Offering Memorandum. (c) No holder of securities of the Issuers will be entitled to have such securities registered under the registration statements required to be filed by any of the Issuers pursuant to the Registration Rights Agreement, other than as expressly permitted thereby. (d) The Company has all requisite corporate power and authority to execute, deliver and perform each of its obligations under the Notes, the Exchange Notes and the Private Exchange Notes. The Notes, when issued, will be in the form contemplated by the Indenture and conform in all material respects to the description thereof in the Offering Memorandum. The Notes, the Exchange Notes and the Private Exchange Notes have each been duly authorized by the Company and, when executed by the Company and authenticated by the Trustee in accordance with the provisions of the Indenture and, in the case of the Notes, delivered to and paid for by the Initial Purchasers in accordance with the terms of this Agreement, will be entitled to the benefits of the Indenture and will constitute valid and legally binding obligations of the Company, enforceable against the Company in accordance with their terms, except that the enforcement thereof may be subject to (i) bankruptcy, 2 3 insolvency, reorganization, fraudulent conveyance, moratorium or other similar laws now or hereafter in effect relating to creditors, rights generally, and (ii) general principles of equity and the discretion of the court before which any proceeding therefor may be brought (regardless of whether such enforcement is considered in a proceeding in equity or at law), and except insofar as the usury waiver contained therein may be unenforceable. Each of the Issuers has all requisite power and authority to execute, deliver and perform its respective obligations under the Indenture; the Indenture has been duly authorized by the Issuers and, when executed and delivered by the Issuers (assuming the due authorization, execution and delivery by the Trustee), will constitute a valid and legally binding obligation of the Issuers, enforceable against the Issuers in accordance with its terms, except that the enforcement thereof may be subject to (i) bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or other similar laws now or hereafter in effect relating to creditors, rights generally and (ii) general principles of equity and the discretion of the court before which any proceeding therefor may be brought (regardless of whether such enforcement is considered in a proceeding in equity or at law), and except insofar as the usury waiver contained therein may be unenforceable. (e) The Guarantees have been duly authorized by each Guarantor and, when executed by the Guarantors and authenticated by the Trustee in accordance with the provisions of the Indenture will, upon the execution, authentication and delivery of the Notes and payment therefor in accordance with the terms of this Agreement, be entitled to the benefits of the Indenture and will constitute a valid and legally binding obligation of the Guarantors enforceable in accordance with its terms, except that the enforcement thereof may be subject to (i) bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or other similar laws now or hereafter in effect relating to creditor's rights and remedies generally and (ii) general principles of equity and the discretion of the court before which any proceeding therefor may be brought (regardless of whether such enforcement is considered in a proceeding in equity or at law), and except insofar as the usury waiver contained therein may be unenforceable. (f) Each of the Issuers has all requisite corporate power and authority to execute and deliver this Agreement, to issue and deliver the Securities and to consummate the transactions contemplated hereby. This Agreement has been duly authorized, executed and delivered by each of the Issuers. No consent, approval, authorization or order of any court or governmental agency or body (including, without limitation, the Federal Communications Commission (the "FCC")) is required for the performance of this Agreement, the Notes, the Guarantees, the Indenture or any of the transactions contemplated hereby by any of the Issuers, to the extent a party thereto, except such as have been obtained and such as may be required under state securities or blue sky laws in connection with the purchase and initial resale of the Securities by the Initial Purchasers and except as contemplated by the Registration Rights Agreement. None of the Issuers is (i) in violation of its certificate of incorporation or bylaws (or similar organizational document), (ii) in violation of any statute, judgment, decree, order, rule or regulation applicable to any of the Issuers, which violation would have a Material Adverse Effect, or (iii) in default in the performance or observance of any obligation, agreement, covenant or condition contained in any indenture, mortgage, deed of trust, loan agreement, note, lease, license, franchise agreement, permit, certificate, contract or other agreement or instrument to which any of the Issuers is a party or to which the Company or the Guarantors is subject, which violation or default would have a Material Adverse Effect. (g) Each of the Issuers has all requisite corporate power and authority to enter into the Registration Rights Agreement. The Registration Rights Agreement has been duly authorized by each of the Issuers and, when executed and delivered by the Issuers, will constitute a valid and legally binding obligation of the Issuers, enforceable against each of the Issuers in accordance with its terms, except that (A) the enforcement thereof may be subject to (i) bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or other similar laws now or hereafter in effect 3 4 relating to creditors, rights generally and (ii) general principles of equity and the discretion of the court before which any proceeding therefor may be brought (regardless of whether such enforcement is considered in a proceeding in equity or at law) and (B) any rights to indemnity or contribution thereunder may be limited by federal and state securities laws and public policy considerations. (h) The execution, delivery and performance by the Company and the Guarantors of this Agreement, the Notes, the Guarantees, the Indenture and the Registration Rights Agreement and the consummation by the Issuers of the transactions contemplated hereby and thereby will not conflict with or constitute or result in a breach or violation by the Company of any of (i) the terms or provisions of, or constitute a default by any Issuer under, any contract, indenture, mortgage, deed of trust, loan agreement, note, lease, license, franchise agreement or other agreement or instrument to which any Issuer is a party or to which any of them or their respective properties is subject (each a "CONTRACT" or collectively, the "CONTRACTS"), which conflict, breach, violation or default would have a Material Adverse Effect, (ii) the certificate of incorporation or bylaws (or similar organizational document) of any Issuer, as the same will be in effect on the Closing Date, or (iii) (assuming compliance with all applicable state securities and blue sky laws and assuming the accuracy of the representations and warranties of the Initial Purchasers in Section 8 hereof) any statute, judgment, decree, order, rule or regulation of any court or governmental agency or other body applicable to any Issuer or any of their properties, which conflict, breach, violation or default would have a Material Adverse Effect. (i) The audited consolidated financial statements of the Company and its consolidated subsidiaries included in the Offering Memorandum present fairly, in all material respects, the consolidated financial position, results of operations and cash flows of the Company and its consolidated subsidiaries at the dates and for the periods to which they relate and have been prepared in accordance with generally accepted accounting principles applied on a consistent basis, except as otherwise stated therein. The unaudited consolidated financial statements and the related notes included in the Offering Memorandum present fairly, in all material respects, the consolidated financial position, results of operations and cash flows of the Company and its consolidated subsidiaries at the dates and for the periods to which they relate, subject to year-end audit adjustments and the more detailed note requirements for audited statements, and have been prepared in accordance with generally accepted accounting principles applied on a consistent basis, except as otherwise stated therein. To the Company's knowledge, PricewaterhouseCoopers, LLP, KPMG Peat Marwick LLP, Arthur Andersen LLP and BDO Seidman LLP which have examined certain of such consolidated financial statements as set forth in its reports included in the Offering Memorandum are independent public accountants under Rule 101 of the AICPA's Code of Professional Conduct, and its rulings and interpretations. (j) The pro forma consolidated financial information (including the notes thereto) included in the Offering Memorandum (A) presents the information shown therein under the applicable requirements of Regulation S-X promulgated under the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"); (B) has been prepared in accordance with the applicable requirements of Regulation S-X promulgated under the Exchange Act; (C) has been prepared in accordance with the Commission's rules and guidelines with respect to pro forma financial statements; and (D) has been properly computed on the bases described therein. The assumptions used in the preparation of the pro forma financial statements and other pro forma condensed consolidated financial information included in the Offering Memorandum are reasonable and the adjustments used therein are reasonably appropriate to give effect to the transactions or circumstances referred to therein. (k) Except as described in the Offering Memorandum, there is not pending or, to the knowledge of any Issuer, threatened, any action, suit, proceeding, inquiry or investigation to which any Issuer is a party, or to which the property of any Issuer or any Guarantor is subject, before or 4 5 brought by any court or governmental agency or body (including, without limitation, the FCC), that would have a Material Adverse Effect. (l) Each of the Issuers owns or possesses licenses or other rights to use all material patents, trademarks, service marks, trade names, copyrights and know-how necessary to conduct the businesses now or proposed to be operated by it as described in the Offering Memorandum, and none of the Issuers has received any notice of infringement of or conflict with (or knows of any such infringement of or conflict with) asserted rights of others with respect to any patents, trademarks, service marks, trade names, copyrights or know-how which, if such assertion of infringement or conflict were sustained, would have a Material Adverse Effect. (m) Each of the Issuers has obtained, or has applied for, all licenses, permits, franchises and other governmental authorizations necessary to conduct the businesses now or proposed to be operated by it as described in the Offering Memorandum, the lack of which would have a Material Adverse Effect. (n) Subsequent to the respective dates as of which information is given in the Offering Memorandum and except as described therein or contemplated thereby, (i) none of the Issuers has incurred any material liabilities or obligations, direct or contingent, or entered into any material transactions, not in the ordinary course of business and (ii) the Company has not purchased any of its outstanding capital stock, nor declared, paid or otherwise made any dividend or distribution of any kind on its capital stock. (o) Except as described in the Offering Memorandum, none of the Issuers is in default under any Contract, has received a notice or claim of any such default or has knowledge of any breach of any Contract by the other party or parties thereto, except such defaults or breaches as would not have a Material Adverse Effect. (p) Each of the Issuers has filed all necessary federal, state and foreign income and franchise tax returns, except where the failure to so file such returns would not have a Material Adverse Effect, and each has paid all taxes shown as due thereon; and other than tax deficiencies which any Issuer is contesting in good faith and for which adequate reserves have been provided, there is no tax deficiency that has been asserted against any Issuer that would have a Material Adverse Effect. (q) None of the Issuers nor any agent acting on their behalf has taken or will take any action that might cause this Agreement or the issuance and sale of the Securities to violate Regulation T, U or X of the Board of Governors of the Federal Reserve System, in each case as in effect, or as the same may hereafter be in effect, on the Closing Date. (r) Each of the Issuers has good and marketable title to all real property and good title to all personal property described in the Offering Memorandum as being owned by it and good and marketable title to a leasehold estate in the real and personal property described in the Offering Memorandum as being leased by it (except for those leases of real property in which the Company has good title and that would be marketable but for the requirement that the landlord consent to an assignment or sublease of the lease), free and clear of all liens, charges, encumbrances or restrictions, except, in each case, as described in the Offering Memorandum or to the extent the failure to have such title or the existence of such liens, charges, encumbrances or restrictions would not have a Material Adverse Effect. 5 6 (s) Except for the Company's existing credit agreement and except as described in the Offering Memorandum, there are no consensual encumbrances or restrictions on the ability of the Guarantors (i) to pay dividends or make any other distributions on its capital stock or to pay any indebtedness owed to the Company; (ii) to make any loans or advances to, or investments in, the Company; or (iii) to transfer any of its property or assets to the Company or the Guarantors or any other subsidiary of the Company or the Guarantors. (t) None of the Issuers is an "investment company" or "promoter" or "principal underwriter" for an "investment company," as such terms are defined in the Investment Company Act of 1940, as amended, and the rules and regulations thereunder. (u) None of the Issuers nor, to their knowledge, any of their directors, officers or controlling persons has taken, directly or indirectly, any action designed, or that might reasonably be expected, to cause or result, under the Act or otherwise, in, or that has constituted, stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Notes. (v) Each of the Issuers is in compliance with all provisions of Section 517.075 of Florida Statutes, as amended, relating to issuers doing business with Cuba. (w) The Notes, the Guarantees, the Exchange Notes, the Private Exchange Notes, the Indenture and the Registration Rights Agreement conform in all material respects to the descriptions thereof in the Offering Memorandum. (x) None of the Issuers nor any of their respective Affiliates (as defined in Rule 501(b) of Regulation D under the Act) has directly, or through any agent, (i) sold, offered for sale, solicited offers to buy or otherwise negotiated in respect of, any "security" (as defined in the Act) that is or could be integrated with the sale of the Notes in a manner that would require the registration under the Act of the Notes or (ii) engaged in any form of general solicitation or general advertising (as those terms are used in Regulation D under the Act) in connection with the offering of the Notes or in any manner involving a public offering within the meaning of Section 4(2) of the Act. Assuming the accuracy of the representations and warranties of the Initial Purchasers in Section 8 hereof, the Company has not been informed by counsel that it is necessary in connection with the offer, sale and delivery of the Notes to the Initial Purchasers in the manner contemplated by this Agreement to register any of the Notes under the Act or to qualify the Indenture under the Trust Indenture Act of 1939, as amended (the "TIA"). (y) No securities of the Company or any subsidiary are of the same class (within the meaning of Rule 144A under the Act) as the Notes and listed on a national securities exchange registered under Section 6 of the Exchange Act, or quoted in a U.S. automated inter-dealer quotation system. (z) The statistical and market-related data included in the Offering Memorandum are based on or derived from sources that the Company believes to be reliable and accurate in all material respects. Any certificate signed by any officer of the Company or any subsidiary and delivered to the Initial Purchasers or to counsel for the Initial Purchasers shall be deemed a representation and warranty by the Company to the Initial Purchasers as to the matters covered thereby. 3. Purchase, Sale and Delivery of the Securities. On the basis of the representations, warranties, agreements and covenants herein contained and subject to the terms and 6 7 conditions herein set forth, the Issuers agree to issue and sell to the Initial Purchasers, and the Initial Purchasers agree to purchase from the Issuers, all of the Notes at 97.50% of their principal amount. One or more certificates in definitive form for the Notes that the Initial Purchasers have agreed to purchase hereunder, and in such denomination or denominations and registered in such name or names as the Initial Purchasers request upon notice to the Company at least 24 hours prior to the Closing Date, shall be delivered by or on behalf of the Issuers to the Initial Purchasers, against payment by or on behalf of the Initial Purchasers of the purchase price therefore by wire transfer (same day funds) to such account or accounts as the Company shall specify prior to the Closing Date, or by such means as the parties hereto shall agree prior to the Closing Date. Such delivery of and payment for the Notes shall be made at the offices of Weil, Gotshal & Manges LLP, 100 Crescent Court, Suite 1300, Dallas, Texas 75201, at 9:00 A.M., New York time, on November 17, 1998, or at such other place, time or date as the Initial Purchasers, on the one hand, and the Company, on the other hand, may agree upon, such time and date of delivery against payment being herein referred to as the "CLOSING DATE." The Company will make such certificate or certificates for the Notes available for checking and packaging by the Initial Purchasers at the offices of BT Alex. Brown Incorporated in New York, New York, or at such other place as BT Alex. Brown Incorporated may designate, prior to or on the Closing Date. 4. Offering by the Initial Purchasers. The Initial Purchasers propose to make an offering of the Notes at the price and upon the terms set forth in the Offering Memorandum, as soon as practicable after this Agreement is entered into and as in the judgment of the Initial Purchasers is advisable. 5. Covenants of the Issuers. Each of the Issuers, jointly and severally, covenants and agrees with the Initial Purchasers that: (a) None of the Issuers will amend or supplement the Offering Memorandum or any amendment or supplement thereto of which the Initial Purchasers shall not previously have been advised and furnished a copy for a reasonable period of time prior to the proposed amendment or supplement and as to which the Initial Purchasers shall not have given their consent, which will not be unreasonably withheld. The Issuers will promptly, upon the reasonable request of the Initial Purchasers or counsel for the Initial Purchasers, make any amendments or supplements to the Offering Memorandum that may be necessary or advisable in connection with the resale of the Notes by the Initial Purchasers. (b) Each of the Issuers will cooperate with the Initial Purchasers in arranging for the qualification of the Notes for offering and sale under the securities or blue sky laws of which jurisdictions as the Initial Purchasers may designate and will continue such qualifications in effect for as long as may be reasonably necessary to complete the resale of the Notes; provided, however, that in connection therewith, none of the Issuers shall be required to qualify as a foreign corporation or to execute a general consent to service of process in any jurisdiction or subject itself to taxation in any such jurisdiction where it is not so subject. (c) If, at any time prior to the completion of the distribution by the Initial Purchasers of the Securities, any event occurs or information becomes known as a result of which the Offering Memorandum as then amended or supplemented would include any untrue statement of a material fact, or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, or if for any other reason it is necessary at any time to amend or supplement the Offering Memorandum to comply with applicable law, the Issuers will promptly notify the Initial Purchasers thereof and will prepare, at the expense of the Issuers, an amendment or supplement to the Offering Memorandum that corrects such statement or omission or effects such compliance. 7 8 (d) Each of the Issuers will, without charge, provide to the Initial Purchasers and to counsel for the Initial Purchasers as many copies of the Offering Memorandum or any amendment or supplement thereto as the Initial Purchasers may reasonably request. (e) The Company will apply the net proceeds from the sale of the Notes substantially as set forth under "Use of Proceeds" in the Offering Memorandum. (f) For so long as the Securities remain outstanding (but in no event longer than five years), the Issuers will furnish to the Initial Purchasers copies of all reports and other communications (financial or otherwise) furnished by the Issuers to the Trustee or to the holders of the Securities and, as soon as available, copies of any reports or financial statements furnished to or filed by the Company with the Commission or any national securities exchange on which any class of securities of the Company may be listed. (g) Prior to the Closing Date, the Issuers will furnish to the Initial Purchasers, as soon as they have been prepared, a copy of any unaudited interim financial statements of the Company for any period subsequent to the period covered by the most recent financial statements appearing in the Offering Memorandum. (h) None of the Issuers nor any of their respective Affiliates will sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any "security" (as defined in the Act) that could be integrated with the sale of the Notes in a manner which would require the registration under the Act of the Notes. (i) The Issuers will not engage in any form of general solicitation or general advertising (as those terms are used in Regulation D under the Act) in connection with the offering of the Notes or in any manner involving a public offering within the meaning of Section 4(2) of the Act. (j) The Issuers will use their reasonable best efforts to (i) assist the Initial Purchasers in permitting the Notes to be designated PORTAL securities in accordance with the rules and regulations adopted by the NASD relating to trading in the Private Offerings, Resales and Trading through Automated Linkages system (the "PORTAL System") and (ii) permit the Notes to be eligible for clearance and settlement through The Depository Trust Company. 6. Expenses. The Issuers, jointly and severally, agree to pay the following costs and expenses and all other costs and expenses incident to the performance of their respective obligations under this Agreement, whether or not the transactions contemplated herein are consummated or this Agreement is terminated pursuant to Section 11 hereof, including all costs and expenses incident to (i) the printing, word processing or other production of documents with respect to the transactions contemplated hereby, including any costs of printing the Offering Memorandum and any amendment or supplement thereto, and any blue sky memoranda, (ii) all arrangements relating to the delivery to the Initial Purchasers of copies of the foregoing documents, (iii) the fees and disbursements of the counsel, the accountants and any other experts or advisors retained by the Issuers, (iv) preparation (including printing), issuance and delivery to the Initial Purchasers of the Securities (including Trustee's fees), (v) the qualification of the Notes under state securities and blue sky laws, including filing fees and reasonable fees and disbursements of counsel for the Initial Purchasers relating thereto, (vi) fees and expenses of the Trustee, including reasonable fees and expenses of counsel for the Trustee, and (vii) all expenses and listing fees incurred in connection with the application for quotation of the Notes on the PORTAL System. If the sale of the Securities provided for herein is not consummated because any condition to the obligations of the Initial Purchasers set forth in Section 7 hereof is not satisfied, because this Agreement is terminated or because of any failure, refusal or inability on the part of the Issuers to 8 9 perform all obligations and satisfy all conditions on their part to be performed or satisfied hereunder (other than solely by reason of a default by the Initial Purchasers of its obligations hereunder after all conditions hereunder have been satisfied in accordance herewith), the Issuers agree to promptly reimburse the Initial Purchasers upon demand for all reasonable out-of-pocket expenses (including reasonable fees and disbursements of Latham & Watkins, counsel for the Initial Purchasers) that shall have been incurred by the Initial Purchasers in connection with the proposed purchase and sale of the Notes. 7. Conditions of the Initial Purchasers' Obligations. The obligation of the Initial Purchasers to purchase and pay for the Securities shall, in its sole discretion, be subject to the following conditions on or prior to the Closing Date: (a) The Initial Purchasers shall have received the opinion in form and substance satisfactory to the Initial Purchasers, dated the Closing Date, of Weil, Gotshal & Manges LLP, counsel for the Issuers, substantially in the form of Exhibit B hereto. In rendering such opinion, Weil, Gotshal & Manges LLP shall have received and may rely upon such certificates and other documents and information as it may reasonably request to pass upon such matters. (b) The Initial Purchasers shall have received an opinion or opinions, dated the Closing Date, of Latham & Watkins, counsel for the Initial Purchasers, with respect to certain legal matters relating to this Agreement and certain FCC regulatory matters, and such other related matters as the Initial Purchasers may require. In rendering such opinion or opinions, Latham & Watkins shall have received and may rely upon such certificates and other documents and information as they may reasonably request to pass upon such matters. In addition, in rendering their opinion or opinions, Latham & Watkins may state that their opinion or opinions is limited to matters of New York, California, Delaware corporate and federal law. (c) The Initial Purchasers shall have received customary comfort letters from PricewaterhouseCoopers, LLP, Arthur Andersen LLP, KPMG Peat Marwick LLP and BDO Seidman LLP, dated on or prior to the Closing Date, in each case addressed to the Initial Purchasers, in form and substance reasonably satisfactory to the Initial Purchasers and counsel for the Initial Purchasers. (d) The representations and warranties of the Issuers contained in this Agreement shall be true and correct in all material respects as of the date hereof and as of the Closing Date; the Issuers shall have complied in all material respects with all covenants and agreements and satisfied all conditions on its part to be performed or satisfied hereunder at or prior to the Closing Date; and subsequent to the date of the most recent financial statements in the Offering Memorandum, there shall have been no material adverse change in the business, condition (financial or other), results of operations or prospects of the Issuers, taken as a whole, except as set forth in, or contemplated by, the Offering Memorandum. (e) The issuance and sale of the Securities by the Issuers hereunder shall not be enjoined (temporarily or permanently) on the Closing Date and no restraining order or other injunctive order shall have been issued or any action, suit or proceeding shall have been commenced with respect to this Agreement or any other transactions hereby, before any court or governmental authority (including, without limitation, the FCC). (f) Subsequent to the date as of which information is given in the Offering Memorandum, except as described in or as contemplated by the Offering Memorandum, none of the Issuers shall have incurred any liabilities or obligations, direct or contingent (other than in the ordinary 9 10 course of business) that are material to the Issuers, taken as a whole, or entered into any transactions not in the ordinary course of business that are material to the business, condition (financial or other), results of operations or prospects of the Issuers, taken as a whole, and, other than as contemplated by the Offering Memorandum, there shall not have been any change in the capital stock or long-term indebtedness of any Issuer that is material to the business, condition (financial or other), results of operations or prospects of the Issuers, taken as a whole. (g) Subsequent to the date as of which information is given in the Offering Memorandum, the conduct of the business and operations of the Company or any of its subsidiaries has not been interfered with by strike, fire, flood, hurricane, accident or other calamity (whether or not insured) or by any court or governmental action, order or decree, and, except as otherwise stated therein, the properties of the Company or any of its subsidiaries have not sustained any loss or damage (whether or not insured) as a result of any such occurrence, except any such interference, loss or damage which would not have a Material Adverse Effect. (h) The Initial Purchasers shall have received a certificate of the Company, dated the Closing Date, signed on behalf of the Company by its Vice President and Assistant Secretary of the Company, to the effect that: (i) The representations and warranties of the Issuers in this Agreement are true and correct in all material respects as if made on and as of the Closing Date (other than to the extent any such representation or warranty is expressly made to a certain date), and each Issuer has performed in all material respects all covenants and agreements and satisfied, in all material respects, all conditions on their part to be performed or satisfied hereunder, to the extent a party thereto, at or prior to the Closing Date; (ii) At the Closing Date, since the date hereof or since the date of the most recent financial statements in the Offering Memorandum, except as described in the Offering Memorandum, no event or events have occurred, nor has any information become known that, individually or in the aggregate, would have a Material Adverse Effect; (iii) The issuance and sale of the Securities by the Issuers hereunder has not been enjoined (temporarily or permanently) by any court or governmental agency or body (including without limitation, the FCC); and (iv) Subsequent to the respective dates as of which information is given in the Offering Memorandum, except in each case as described in or as contemplated by the Offering Memorandum, none of the Issuers has incurred any liabilities or obligations, direct or contingent, that are material to the Issuers, taken as a whole, or entered into any transactions that, individually or in the aggregate, would have a Material Adverse Effect; and there has been no change in the capital stock or long-term indebtedness of the Issuers that individually or in the aggregate would have a Material Adverse Effect. (i) On the Closing Date, the Initial Purchasers shall have received the Registration Rights Agreement executed by the Issuers and such agreement shall be in full force and effect on the Closing Date. (j) On or before the Closing Date, the Initial Purchasers and counsel for the Initial Purchasers shall have received such further documents, opinions, certificates and schedules or 10 11 instruments relating to the business, corporate, legal and financial affairs of the Issuers as they shall have heretofore reasonably requested from the Issuers. All such opinions, certificates, letters, schedules, documents or instruments delivered pursuant to this Agreement will comply with the provisions hereof only if they are reasonably satisfactory in all material respects to the Initial Purchasers and counsel for the Initial Purchasers. The Company shall furnish to the Initial Purchasers such conformed copies of such opinions, certificates, letters, schedules, documents and instruments in such quantities as the Initial Purchasers shall reasonably request. 8. Offering of Notes; Restrictions on Transfer. (a) Each of the Initial Purchasers represents and warrants that it is a "qualified institutional buyer" as defined in Rule 144A promulgated under the Act ("QIB"). The Initial Purchasers agrees with the Issuers that (i) it has not and will not solicit offers for, or offer or sell, the Securities by any form of general solicitation or general advertising (as those terms are used in Regulation D under the Act) or in any manner involving a public offering within the meaning of Section 4(2) of the Act; and (ii) it has and will solicit offers for the Securities only from, and will offer the Securities only to (A) in the case of offers inside the United States, persons whom it reasonably believes to be QIBs or, if any such person is buying for one or more institutional accounts for which such person is acting as fiduciary or agent, only when such person has represented to it that each such account is a QIB, to whom notice has been given that such sale or delivery is being made in reliance on Rule 144A, and, in each case, in transactions under Rule 144A and (B) in the case of offers outside the United States, to persons other than U.S. persons ("FOREIGN PURCHASERS," which term shall include dealers or other professional fiduciaries in the United States acting on a discretionary basis for foreign beneficial owners (other than an estate or trust)); provided, however, that, in the case of this clause (B), in purchasing such Securities such persons are deemed to have represented and agreed as provided under the caption "Notice to Investors" contained in the Offering Memorandum (each such entity referenced in this clause (ii), an "ELIGIBLE PURCHASER"). (b) Each of the Initial Purchasers represents and warrants (as to itself only) with respect to offers and sales outside the United States that (i) it has complied and will comply with all applicable laws and regulations in each jurisdiction in which it acquires, offers, sells or delivers Securities or has in its possession or distributes the Offering Memorandum or any such other material, in all cases at its own expense; (ii) the Securities have not been and will not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons except in accordance with Regulation S under the Act or pursuant to an exemption from the registration requirements of the Act; (iii) it has offered the Securities and will offer and sell the Securities (A) as part of its distribution at any time and (B) otherwise until 40 days after the later of the commencement of the offering and the Closing Date, only in accordance with Rule 903 of Regulation S and, accordingly, neither it nor any persons acting on its behalf have engaged or will engage in any directed selling efforts (within the meaning of Regulation S) with respect to the Securities, and any such persons have complied and will comply with the offering restrictions requirement of Regulation S; and (iv) it agrees that, at or prior to confirmation of sales of the Securities, it will have sent to each distributor, dealer or person receiving a selling concession, fee or other remuneration that purchases Notes from it during the restricted period a confirmation or notice to substantially the following effect: "The Securities covered hereby have not been registered under the United States Securities Act of 1933 (the "SECURITIES ACT") and may not be offered and sold within the United States or to, or for the account or benefit of, U.S. persons (i) as part of the distribution of the Securities at any time or (ii) otherwise until 40 days after the later of 11 12 the commencement of the offering and the closing date of the offering, except in either case in accordance with Regulation S (or Rule 144A if available) under the Securities Act. Terms used above have the meaning given to them in Regulation S." Terms used in this Section 8(b) and not defined in this Agreement have the meanings given to them in Regulation S. (c) Each of the Initial Purchasers represents and warrants (as to itself only) that the source of funds being used by it to acquire the Securities does not include the assets of any "employee benefit plan" (within the meaning of Section 3 of the Employee Retirement Income Security Act of 1974, as amended, including the regulations and published interpretations thereunder ("ERISA")) or any "plan" (within the meaning of Section 4975 of the Internal Revenue Code of 1986, as amended, including the regulations and published interpretations thereunder (the "CODE")). 9. Indemnification and Contribution. (a) The Issuers agree, jointly and severally, to indemnify and hold harmless each Initial Purchaser, and each person, if any, who controls any Initial Purchaser within the meaning of Section 15 of the Act or Section 20 of the Exchange Act, against any losses, claims, damages or liabilities to which any of the Initial Purchasers or such controlling person may become subject under the Act, the Exchange Act or otherwise, insofar as any such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon: (i) any untrue statement or alleged untrue statement of any material fact contained in the Offering Memorandum or any amendment or supplement thereto or any application or other document, or any amendment or supplement thereto, executed by the Issuers or based upon written information furnished by or on behalf of the Issuers filed in any jurisdiction in order to qualify the Securities under the securities or blue sky laws thereof or filed with any securities association or securities exchange (each an "APPLICATION"); or (ii) the omission or alleged omission to state, in the Offering Memorandum or any amendment or supplement thereto or any Application, a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse, as incurred, the Initial Purchasers and each such controlling person for any legal or other expenses incurred by the Initial Purchasers or such controlling person in connection with investigating, defending against or appearing as a third-party witness in connection with any such loss, claim, damage, liability or action; provided, however, the Issuers will not be liable in any such case to the extent that any such loss, claim, damage, or liability arises out of or is based upon any untrue statement or alleged untrue statement or omission or alleged omission made in the Offering Memorandum or any amendment or supplement thereto or any Application in reliance upon and in conformity with written information concerning the Initial Purchasers furnished to the Issuers by or on behalf of each Initial Purchasers through BT Alex. Brown Incorporated specifically for use therein. This indemnity agreement will be in addition to any liability that the Issuers may otherwise have to the indemnified parties. The Issuers shall not be liable under this Section 9 for any settlement of any claim or action effected without its prior written consent, which shall not be unreasonably withheld. The Initial Purchasers shall not, without the prior written consent of the Company, effect any settlement or compromise of any pending or threatened proceeding in respect of which any Issuer is or could have been a party, or indemnity could have been sought hereunder by any Issuer, unless such 12 13 settlement (A) includes an unconditional written release of such Issuer, in form and substance reasonably satisfactory to the Company, from all liability on claims that are the subject matter of such proceeding and (B) does not include any statement as to an admission of fault, culpability or failure to act by or on behalf of such Issuer. (b) Each of the Initial Purchasers agrees, severally and not jointly, to indemnify and hold harmless each of the Issuers, their respective directors, officers and each person, if any, who controls any Issuer within the meaning of Section 15 of the Act or Section 20 of the Exchange Act against any losses, claims, damages or liabilities to which the Issuers or any such director, officer or controlling person may become subject under the Act, the Exchange Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon (i) any untrue statement or alleged untrue statement of any material fact contained in any Offering Memorandum or any amendment or supplement thereto or any Application, or (ii) the omission or the alleged omission to state therein a material fact required to be stated in any Offering Memorandum or any amendment or supplement thereto or any Application, or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with written information concerning such Initial Purchasers through BT Alex. Brown Incorporated, furnished to the Issuers by or on behalf of such Initial Purchasers specifically for use therein; and subject to the limitation set forth immediately preceding this clause, will reimburse, as incurred, any legal or other expenses incurred by the Issuers or any such director, officer or controlling person in connection with investigating or defending against or appearing as a third party witness in connection with any such loss, claim, damage, liability or action in respect thereof. This indemnity agreement will be in addition to any liability that the Initial Purchasers may otherwise have to the indemnified parties. The Initial Purchasers shall not be liable under this Section 9 for any settlement of any claim or action effected without its consent, which shall not be unreasonably withheld. None of the Issuers shall without the prior written consent of the Initial Purchasers, effect any settlement or compromise of any pending or threatened proceeding in respect of which any Initial Purchasers are or could have been a party, or indemnity could have been sought hereunder by any Initial Purchasers, unless such settlement (A) includes an unconditional written release of the Initial Purchasers, in form and substance reasonably satisfactory to the Initial Purchasers, from all liability on claims that are the subject matter of such proceeding and (B) does not include any statement as to an admission of fault, culpability or failure to act by or on behalf of any Initial Purchasers. (c) Promptly after receipt by an indemnified party under paragraphs (a) or (b) of this Section 9 of notice of the commencement of any action for which such indemnified party is entitled to indemnification under this Section 9, such indemnified party will, if a claim in respect thereof is to be made against the indemnifying party under this Section 9, notify the indemnifying party of the commencement thereof in writing; but the omission to so notify the indemnifying party (i) will not relieve it from any liability under paragraph (a) or (b) above unless and to the extent such failure results in the forfeiture by the indemnifying party of substantial rights and defenses and (ii) will not, in any event, relieve the indemnifying party from any obligations to any indemnified party other than the indemnification obligation provided in paragraphs (a) and (b) above. In case any such action is brought against any indemnified party, and it notifies the indemnifying party of the commencement thereof, the indemnifying party will be entitled to participate therein and, to the extent that it may wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel reasonably satisfactory to such indemnified party; provided, however, that if (i) the use of counsel chosen by the indemnifying party to represent the indemnified party would present such counsel with a conflict of interest, or (ii) the indemnifying party shall not have employed counsel reasonably satisfactory to the indemnified party to represent the indemnified party within a reasonable time after receipt by the 13 14 indemnifying party of notice of the institution of such action, then, in each such case, the indemnifying party shall not have the right to direct the defense of such action on behalf of such indemnified party or parties and such indemnified party or parties shall have the right to select separate counsel to defend such action on behalf of such indemnified party or parties. After notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof and approval by such indemnified party of counsel appointed to defend such action, the indemnifying party will not be liable to such indemnified party under this Section 9 for any legal or other expenses, other than reasonable costs of investigation, subsequently incurred by such indemnified party in connection with the defense thereof, unless (i) the indemnified party shall have employed separate counsel in accordance with the proviso to the immediately preceding sentence (it being understood, however, that in connection with such action the indemnifying party shall not be liable for the expenses of more than one separate counsel (in addition to local counsel) in any one action or separate but substantially similar actions in the same jurisdiction arising out of the same general allegations or circumstances, designated by the Initial Purchasers in the case of paragraph (a) of this Section 9 or the Company or any Guarantor in the case of paragraph (b) of this Section 9, representing the indemnified parties under such paragraph (a) or paragraph (b), as the case may be, who are parties to such action or actions) or (ii) the indemnifying party has authorized in writing the employment of counsel for the indemnified party at the expense of the indemnifying party. After such notice from the indemnifying party to such indemnified party, the indemnifying party will not be liable for the costs and expenses of any settlement of such action effected by such indemnified party without the prior written consent of the indemnifying party (which consent shall not be unreasonably withheld), unless such indemnified party waived in writing its rights under this Section 9, in which case the indemnified party may effect such a settlement without such consent. (d) In circumstances in which the indemnity agreement provided for in the preceding paragraphs of this Section 9 is available by its terms, but is held to be unenforceable, each indemnifying party, in order to provide for just and equitable contribution, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages or liabilities (or actions in respect thereof) in such proportion as is appropriate to reflect the relative fault of the indemnifying party or parties on the one hand and the indemnified party on the other in connection with the statements or omissions or alleged statements or omissions that resulted in such losses, claims, damages or liabilities (or actions in respect thereof). The relative fault of the parties shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Issuers on the one hand, or the Initial Purchasers on the other, the parties, relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission or alleged statement or omission, and any other equitable considerations appropriate in the circumstances. The Issuers and the Initial Purchasers agree that it would not be just and equitable if the amount of such contribution were determined by pro rata or per capita allocation or by any other method of allocation that does not take into account the equitable considerations referred to in the first sentence of this paragraph (d). Notwithstanding any other provision of this paragraph (d), the Initial Purchasers shall not be obligated to make contributions hereunder that in the aggregate exceed the amount by which proceeds received by the Initial Purchasers under this Agreement exceeds the aggregate amount of any damages that the Initial Purchasers have otherwise been required to pay by reason of the untrue or alleged untrue statements or the omissions or alleged omissions to state a material fact, and no person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this paragraph (d), each person, if any, who controls the Initial Purchasers within the meaning of Section 15 of the Act or Section 20 of the Exchange Act shall have the same rights to contribution as the Initial Purchasers, and each director and officer of each Issuer and each person, if any, who controls any Issuer within the meaning of Section 15 of the Act or Section 20 of the Exchange Act, shall have the same rights to contribution as the Issuers. 14 15 10. Survival Clause. The respective representations, warranties, agreements, covenants, indemnities and other statements of the Issuers, their respective officers and the Initial Purchasers set forth in this Agreement or made by or on behalf of it pursuant to this Agreement shall remain in full force and effect, regardless of (a) any investigation made by or on behalf of the Issuers, any of their respective officers or directors, the Initial Purchasers or any controlling person referred to in Section 9 hereof and (b) delivery of and payment for the Securities. The respective agreements, covenants, indemnities and other statements set forth in Sections 6 and 9 shall remain in full force and effect, regardless of any termination or cancellation of this Agreement. 11. Termination. (a) This Agreement may be terminated in the sole discretion of the Initial Purchasers by notice to the Issuers given on or prior to the Closing Date in the event that the Issuers shall have failed, refused or been unable to perform all obligations and satisfy all conditions on their part to be performed or satisfied hereunder at or prior thereto or, if at or prior to the Closing Date: (i) trading in securities generally on the New York Stock Exchange, American Stock Exchange or the National Market tier of the NASDAQ Stock Market shall have been suspended or materially limited; (ii) trading in the Chancellor Media Corporation's Common Stock on the National Market tier of the NASDAQ Stock Market shall have been suspended or materially limited; (iii) a general moratorium on commercial banking activities in New York shall have been declared by either federal, state or other governmental authorities; (iv) there shall have occurred an outbreak or escalation of hostilities or other international or domestic calamity, crisis or change in political, financial or economic conditions, the effect of which on or markets of the United States is such as to make it, in the sole judgment of the Initial Purchasers, impracticable or inadvisable to commence or continue the offering or the delivery of the Securities as contemplated by the Offering Memorandum; or (v) any securities of the Company shall have been downgraded or placed on any "watch list" for possible downgrading by any nationally recognized statistical rating organization; provided however, that the condition set forth in this subsection 12(a)(v) shall not apply to the November 12, 1998 downgrade to B1 from Ba3 announced by Moody's Investor Service of the Company's (i) $200 million of 8.75% Senior Subordinated Notes due 2007, (ii) $200 million of 9-3/8% Senior Subordinated Notes due 2004, (iii) $500 million of 8.125% Senior Subordinated Notes due 2007 and (iv) $100 million of 10.5% Senior Subordinated Notes due 2007. (b) Termination of this Agreement pursuant to this Section 11 shall be without liability of any party to any other party except as provided in Section 10 hereof. 12. Information Supplied by the Initial Purchasers. The statements set forth in the last paragraph on the cover page of the Offering Memorandum concerning delivery of the Notes and the last two paragraphs under the caption "Private Placement" in the Offering Memorandum (to the extent 15 16 such statements relate to the Initial Purchasers) constitute the only information furnished on behalf of the Initial Purchasers to the Issuers for the purposes of Sections 2(a) and 9 hereof. 13. Notices. All communications hereunder shall be in writing and, if sent to the Initial Purchasers, shall be mailed, delivered or telecopied to BT Alex. Brown Incorporated, 130 Liberty Street, New York, New York 10005, Attention: Corporate Finance Department; if sent to the Issuers, shall be mailed, delivered or telecopied to the Issuers at Chancellor Media Corporation of Los Angeles, 300 Crescent Court, Suite 600, Dallas, Texas 75201, Attention: President. All such notices and communications shall be deemed to have been duly given: when delivered by hand, if personally delivered; five business days after being deposited in the mail, postage prepaid, if mailed; and one business day after being timely delivered to a next-day air courier; and when receipt is acknowledged by addressee, if telecopied. 14. Successors. This Agreement shall inure to the benefit of and be binding upon the Initial Purchasers, each of the Issuers and their respective successors and legal representatives, and nothing expressed or mentioned in this Agreement is intended or shall be construed to give any other person any legal or equitable right, remedy or claim under or in respect of this Agreement, or any provisions herein contained; this Agreement and all conditions and provisions hereof being intended to be and being for the sole and exclusive benefit of such persons and for the benefit of no other person except that (i) the indemnities of the Issuers contained in Section 9 of this Agreement shall also be for the benefit of any person or persons who control the Initial Purchasers within the meaning of Section 15 of the Act or Section 20 of the Exchange Act and (ii) the indemnities of the Initial Purchasers contained in Section 9 of this Agreement shall also be for the benefit of the directors of the Issuers, their respective officers and any person or persons who control the Issuers within the meaning of Section 15 of the Act or Section 20 of the Exchange Act. No purchaser of Notes from the Initial Purchasers will be deemed a successor because of such purchase. 15. APPLICABLE LAW. THE VALIDITY AND INTERPRETATION OF THIS AGREEMENT, AND THE TERMS AND CONDITIONS SET FORTH HEREIN SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED WHOLLY THEREIN, WITHOUT GIVING EFFECT TO ANY PROVISIONS THEREOF RELATING TO CONFLICTS OF LAW. 16. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 16 17 If the foregoing correctly sets forth our understanding, please indicate your acceptance thereof in the space provided below for that purpose, whereupon this letter shall constitute a binding agreement between the Company, the Guarantors and the Initial Purchasers. Very truly yours, The Company CHANCELLOR MEDIA CORPORATION OF LOS ANGELES By: /s/ OMAR CHOUCAIR ------------------------------------------ Name: Omar Choucair Title: Vice President and Assistant Secretary The Guarantors: On behalf of the Subsidiary Guarantors listed on Schedule A hereto: By: /s/ OMAR CHOUCAIR ------------------------------------------ Name: Omar Choucair Title: Vice President and Assistant Secretary 17 18 Confirmed and Accepted: THE INITIAL PURCHASERS: BT ALEX. BROWN INCORPORATED CHASE SECURITIES INC. MORGAN STANLEY & Co. INCORPORATED SALOMON SMITH BARNEY INC. By: BT ALEX. BROWN INCORPORATED By: /s/ DAVID T. JACOBS -------------------------------- Name: David T. Jacobs Title: Vice President 18 19 SCHEDULE A CERTAIN SUBSIDIARIES OF CHANCELLOR MEDIA CORPORATION OF LOS ANGELES (all subsidiaries are Delaware corporations except as expressly indicated) 1. Chancellor Media Corporation Of The Lone Star State 2. KZPS/KDGE License Corp. 3. Chancellor Media Corporation of California 4. KIOI License Corp. 5. Chancellor Media Corporation of Illinois 6. Chancellor Media Illinois License Corp. 7. Chancellor Media Corporation of Dade County 8. WVCG License Corp. 9. Chancellor Media Corporation of Massachusetts 10. Chancellor Media Pennsylvania License Corp. 11. Chancellor Media Corporation of Miami 12. WEDR License Corp. 13. Chancellor Media of Houston Limited Partnership 14. Chancellor Media Corporation of Houston 15. Chancellor Media Corporation of the Keystone State 16. Chancellor Media Corporation of New York 17. Chancellor Media Corporation of Charlotte 18. WIOQ License Corp. 19. Chancellor Media Corporation of Washington, D.C. 20. Chancellor Media Corporation of St. Louis 21. Chancellor Media Corporation of Michigan 22. Chancellor Media / WAXQ Inc. 23. WAXQ License Corp. 24. Chancellor Media / KCMG Inc. 25. Chancellor Media / Riverside Broadcasting Co., Inc. 26. WLTW License Corp. 27. Chancellor Media Corporation of the Capital City 28. Chancellor Media D.C. License Corp. 29. Chancellor Media Licensee Company 30. Chancellor Media/Trefoil Communications, Inc. 31. Chancellor Media/Shamrock Broadcasting, Inc. 32. Chancellor Media/Shamrock Radio Licenses, Inc. 33. Chancellor Media/Shamrock Broadcasting Licenses of Denver, Inc. 34. Chancellor Media/Shamrock Broadcasting of Texas, Inc (a Texas corporation) 35. Chancellor Media/Shamrock Radio Licenses, LLC 36. Chancellor Media Outdoor Corporation 37. Chancellor Media Nevada Sign Corporation 38. Chancellor Media MW Sign Corporation 39. Chancellor Media Martin Corporation 40. Western Poster Service, Inc. (a Texas corporation) 41. The AMFM Radio Networks, Inc. 42. Chancellor Media Air Services Corporation 43. Chancellor Media Whiteco Outdoor Corporation 44. Chancellor Merger Corp. S-1 20 45. Broadcast Architecture, Inc. (a Massachusetts corporation) 46. Martin Media (a California limited partnership) 47. Dowling Company Incorporated (a Virginia corporation) 48. Nevada Outdoor Systems, Inc. (a Nevada corporation) 49. MW Sign Corp. (a California corporation) 50. Martin & MacFarlane, Inc. (a California corporation) 51. Katz Media Corporation 52. Katz Communications, Inc. 53. Katz Millennium Marketing, Inc. 54. Amcast Radio Sales, Inc. 55. Christal Radio Sales, Inc. 56. Eastman Radio Sales, Inc. 57. Seltel Inc. 58. Katz Cable Corporation 59. The National Payroll Company, Inc. 60. Chancellor Media Radio Licenses, LLC 61. KLOL License Limited Partnership 62. WTOP License Limited Partnership 63. Radio 100, L.L.C. 64. Revolution Outdoor Advertising, Inc. 65. Hardin Development Corporation 66. Parsons Development Company S-2 21 EXHIBIT A REGISTRATION RIGHTS AGREEMENT A-1 22 EXHIBIT B OPINION OF WEIL, GOTSHAL & MANGES LLP EX-4.47 6 REGISTRATION RIGHTS AGREEMENT 1 EXHIBIT 4.47 =============================================================================== $750,000,000 8% SENIOR NOTES DUE 2008 REGISTRATION RIGHTS AGREEMENT Dated as of November 17, 1998 Among CHANCELLOR MEDIA CORPORATION OF LOS ANGELES as Issuer THE GUARANTORS NAMED HEREIN and BT ALEX. BROWN INCORPORATED CHASE SECURITIES INC. MORGAN STANLEY & CO. INCORPORATED SALOMON SMITH BARNEY INC. as Initial Purchasers =============================================================================== 2 REGISTRATION RIGHTS AGREEMENT This Registration Rights Agreement (this "AGREEMENT"), dated as of November 17, 1998, is being entered into among Chancellor Media Corporation of Los Angeles, a Delaware corporation (the "COMPANY"), each of the subsidiaries of the Company listed on the signature pages hereto (the "GUARANTORS" and, together with the Company, the "ISSUERS") and BT Alex. Brown Incorporated, Chase Securities Inc., Morgan Stanley & Co. Incorporated and Salomon Smith Barney Inc. (the "INITIAL PURCHASERS"). This Agreement is being entered into in connection with the Purchase Agreement, dated as of November 12, 1998, among the Company, the Guarantors and the Initial Purchasers (the "PURCHASE AGREEMENT"), which provides for the sale by the Company to the Initial Purchasers of $750,000,000 aggregate principal amount of the Company's 8% Senior Notes Due 2008 (the "NOTES"). In order to induce the Initial Purchasers to enter into the Purchase Agreement, the Issuers have agreed to provide the registration rights set forth in this Agreement for the benefit of the Initial Purchasers and their direct and indirect transferees. The execution and delivery of this Agreement is a condition to the obligation of the Initial Purchasers to purchase the Notes under the Purchase Agreement. The parties hereby agree as follows: 1. Definitions As used in this Agreement, the following terms shall have the following meanings: ADDITIONAL INTEREST: See Section 4(a) hereof. ADVICE: See the last paragraph of Section 5 hereof. AGREEMENT: See the first introductory paragraph hereto. APPLICABLE PERIOD: See Section 2(b) hereof. CLOSING DATE: The Closing Date as defined in the Purchase Agreement. COMPANY: See the first introductory paragraph hereto. EFFECTIVENESS DATE: The 180th day after the Issue Date. EFFECTIVENESS PERIOD: See Section 3(a) hereof. EVENT DATE: See Section 4(b) hereof. EXCHANGE ACT: The Securities Exchange Act of 1934, as amended, and the rules and regulations of the SEC promulgated thereunder. EXCHANGE NOTES: See Section 2(a) hereof. EXCHANGE OFFER: See Section 2(a) hereof. EXCHANGE REGISTRATION STATEMENT: See Section 2(a) hereof. FILING DATE: The 90th day after the Issue Date. GUARANTORS: See the first introductory paragraph hereto. 3 HOLDER: Any holder of a Registrable Note or Registrable Notes. INDEMNIFIED PERSON: See Section 7(c) hereof. INDEMNIFYING PERSON: See Section 7(c) hereof. INDENTURE: The Indenture, dated as of November 17, 1998 among the Company, the Guarantors and The Bank of New York, as trustee, pursuant to which the Notes are being issued, as amended or supplemented from time to time in accordance with the terms thereof. INITIAL PURCHASERS: See the first introductory paragraph hereto. INSPECTORS: See Section 5(o) hereof. ISSUE DATE: The date on which the Notes were sold to the Initial Purchasers pursuant to the Purchase Agreement. ISSUERS: See the first introductory paragraph hereto. NASD: See Section 5(t) hereof. NOTES: See the second introductory paragraph hereto. PARTICIPANT: See Section 7(a) hereof. PARTICIPATING BROKER-DEALER: See Section 2(b) hereof. PERSON: An individual, corporation, partnership, limited liability company, trust, or joint venture, or a governmental agency or political subdivision thereof or other legal entity. PRIVATE EXCHANGE: See Section 2(b) hereof. PRIVATE EXCHANGE NOTES: See Section 2(b) hereof. PROSPECTUS: The prospectus included in any Registration Statement (including, without limitation, any prospectus subject to completion and a prospectus that includes any information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A promulgated under the Securities Act), as amended or supplemented by any prospectus supplement, and all other amendments and supplements to the Prospectus, with respect to the terms of the offering of any portion of the Registrable Notes covered by such Registration Statement including post-effective amendments, and all material incorporated by reference or deemed to be incorporated by reference in such Prospectus. PURCHASE AGREEMENT: See the second introductory paragraph hereto. RECORDS: See Section 5(o) hereof. REGISTRABLE NOTES: Each Note upon original issuance of the Notes and at all times subsequent thereto, each Exchange Note as to which Section 2(c)(v) hereof is applicable upon original issuance and at all times subsequent thereto and each Private Exchange Note upon original issuance thereof and at all times subsequent thereto, until in the case of any such Note, Exchange Note or Private Exchange Note, as the case may be, the earliest to occur of (i) a Registration Statement (other than, with respect to any Exchange Note as to which Section 2(c)(v) hereof is applicable, the Exchange Registration Statement) covering such Note, Exchange Note or Private Exchange Note, as the case may be, has been 2 4 declared effective by the SEC and such Note (unless such Note was not tendered for exchange by the Holder thereof), Exchange Note or Private Exchange Note, as the case may be, has been disposed of in accordance with such effective Registration Statement, (ii) such Note, Exchange Note or Private Exchange Note, as the case may be, is sold in compliance with Rule 144 or may be sold pursuant to Rule 144(k), (iii) such note has been exchanged for an Exchange Note or Exchange Notes pursuant to an Exchange Offer and is entitled to be resold without complying with the prospectus delivery requirements of the Securities Act (iv) such Note, Exchange Note or Private Exchange Note, as the case may be, ceases to be outstanding for purposes of the Indenture. REGISTRATION STATEMENT: Any registration statement of the Company and the Guarantors, including, but not limited to, the Exchange Registration Statement and any registration statement filed with the SEC pursuant to the provisions of this Agreement, including post-effective amendments, all exhibits, and all material incorporated by reference or deemed to be incorporated by reference in such registration statement. RULE 144: Rule 144 promulgated under the Securities Act, as such Rule may be amended from time to time, or any similar rule (other than Rule 144A) or regulation hereafter adopted by the SEC providing for offers and sales of securities made in compliance therewith resulting in offers and sales by subsequent holders that are not affiliates of an issuer of such securities being free of the registration and prospectus delivery requirements of the Securities Act. RULE 144A: Rule 144A promulgated under the Securities Act, as such Rule may be amended from time to time, or any similar rule (other than Rule 144) or regulation hereafter adopted by the SEC. RULE 415: Rule 415 promulgated under the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the SEC. SEC: The Securities and Exchange Commission. SECURITIES ACT: The Securities Act of 1933, as amended, and the rules and regulations of the SEC promulgated thereunder. SHELF NOTICE: See Section 2(c) hereof. SHELF REGISTRATION: See Section 3(a) hereof. TIA: The Trust Indenture Act of 1939, as amended. TRUSTEE: The trustee under the Indenture and, if existent, the trustee under any indenture governing the Exchange Notes and Private Exchange Notes (if any). UNDERWRITTEN REGISTRATION OR UNDERWRITTEN OFFERING: A registration in which securities of the Company are sold to an underwriter for reoffering to the public. 2. Exchange Offer (a) The Company agrees to file with the SEC no later than the Filing Date an offer to exchange (the "EXCHANGE OFFER") any and all of the Registrable Notes (other than the Private Exchange Notes, if any) for a like aggregate principal amount of debt securities of the Company that are identical in all material respects to the Notes (the "EXCHANGE NOTES") (and that are entitled to the benefits of the Indenture or a trust indenture that is identical in all material respects to the Indenture (other than such changes to the Indenture or any such identical trust indenture as are necessary to comply with any requirements of the SEC to effect or maintain the qualification thereof under the TIA) and that, 3 5 in either case, has been qualified under the TIA), except that the Exchange Notes (other than Private Exchange Notes, if any) shall have been registered pursuant to an effective Registration Statement under the Securities Act and shall contain no restrictive legend thereon. The Exchange Offer shall be registered under the Securities Act on an appropriate form (the "EXCHANGE REGISTRATION STATEMENT") and shall comply with all applicable tender offer rules and regulations under the Exchange Act. The Issuers agree to use their reasonable best efforts to (x) cause the Exchange Registration Statement to be declared effective under the Securities Act on or before the Effectiveness Date; (y) keep the Exchange Offer open for at least 20 business days (or longer if required by applicable law) after the date that notice of the Exchange Offer is mailed to Holders; and (z) consummate the Exchange Offer on or before the 225th day following the Issue Date. If after such Exchange Registration Statement is declared effective by the SEC, the Exchange Offer or the issuance of the Exchange Notes thereunder is interfered with by any stop order, injunction or other order or requirement of the SEC or any other governmental agency or court, such Exchange Registration Statement shall be deemed not to have become effective for purposes of this Agreement. Each Holder who participates in the Exchange Offer will be required to represent that any Exchange Notes received by it will be acquired in the ordinary course of its business, that at the time of the consummation of the Exchange Offer such Holder will have no arrangement or understanding with any Person to participate in the distribution of the Exchange Notes in violation of the provisions of the Securities Act and that such Holder is not an affiliate of the Company or any Guarantor within the meaning of the Securities Act and is not acting on behalf of any persons or entities who could not truthfully make the foregoing representations. In addition, each broker-dealer that desires to participate in the Exchange Offer and to receive Exchange Notes will be required to represent that the Notes being tendered by such broker-dealer were acquired in ordinary trading or market-making activities and not in transactions directly with any Issuer or an Affiliate thereof (a "PARTICIPATING BROKER-DEALER"). A broker-dealer that is not able to make the foregoing representation will not be permitted to participate in the Exchange Offer. Upon consummation of the Exchange Offer in accordance with this Section 2, the provisions of this Agreement shall continue to apply mutatis mutandis, solely with respect to Registrable Notes that are Private Exchange Notes and Exchange Notes as to which clause 2(c) hereof applies, the Company shall have no further obligation to register Registrable Notes (other than Private Exchange Notes and other than in respect of any Exchange Notes as to which clause 2(c)(v) hereof applies) pursuant to Section 3 hereof. No securities other than the Exchange Notes shall be included in the Exchange Registration Statement. (b) The Company shall include within the Prospectus contained in the Exchange Registration Statement a section entitled "Plan of Distribution," reasonably acceptable to the Initial Purchasers, which shall contain a summary statement of the publicly, disseminated positions taken or policies made by the Staff of the SEC with respect to the potential "underwriter" status of any broker-dealer that is the beneficial owner (as defined in Rule 13d-3 under the Exchange Act) of Exchange Notes received by such broker-dealer. Such "Plan of Distribution" section shall also expressly permit the use of the Prospectus by all Persons subject to the prospectus delivery requirements of the Securities Act, including all Participating Broker-Dealers, and include a statement describing the means by which Participating Broker-Dealers may resell the Exchange Notes. The Issuers shall use their reasonable best efforts to keep the Exchange Registration Statement effective and to amend and supplement the Prospectus contained therein, in order to permit such Prospectus to be lawfully delivered by all Persons subject to the prospectus delivery requirements of the Securities Act for such period of time as is necessary to comply with applicable law in connection with any resale of the Exchange Notes; provided, however, that such period shall not exceed 180 days after the consummation of the Exchange Offer (or such longer period if extended pursuant to the last paragraph of Section 5 hereof) (the "APPLICABLE PERIOD"). 4 6 If, prior to consummation of the Exchange Offer, any Initial Purchaser holds any Notes acquired by it and having, or that are reasonably likely to be determined to have, the status of an unsold allotment in the initial distribution, the Issuers shall, upon the request of such Initial Purchaser, simultaneously with the delivery of the Exchange Notes in the Exchange Offer, issue and deliver to such Initial Purchaser in exchange (the "PRIVATE EXCHANGE") for such Notes held by the Initial Purchaser a like principal amount of debt securities of the Company that are identical in all material respects to the Exchange Notes (the "PRIVATE EXCHANGE NOTES") (and that are issued pursuant to the same Indenture as the Exchange Notes or an indenture identical to the Indenture in all material respects as permitted by the last paragraph of this Section 2(b)) except for the placement of a restrictive legend on such Private Exchange Notes. The Private Exchange Notes shall bear the same CUSIP number as the Exchange Notes. Interest on the Exchange Notes and the Private Exchange Notes will accrue from the last interest payment date on which interest was paid on the Notes surrendered in exchange therefor or, if no interest has been paid on the Notes, from the Issue Date. In connection with the Exchange offer, the Issuers shall: (1) mail to each Holder a copy of the Prospectus forming part of the Exchange Registration Statement, together with an appropriate letter of transmittal and related documents; (2) utilize the services of a depositary for the Exchange Offer with an address in the Borough of Manhattan, The City of New York; (3) permit Holders to withdraw tendered Notes at any time prior to the close of business, New York time, on the last business day on which the Exchange Offer shall remain open; and (4) otherwise comply in all material respects with all applicable laws, rules and regulations. As soon as practicable after the close of the Exchange Offer or the Private Exchange, as the case may be, the Issuers shall: (1) accept for exchange all Notes tendered and not validly withdrawn pursuant to the Exchange Offer or the Private Exchange; (2) deliver to the Trustee for cancellation all Notes so accepted for exchange; and (3) cause the Trustee to authenticate and deliver promptly to each Holder of Notes, Exchange Notes or Private Exchange Notes, as the case may be, equal in principal amount to the Notes of such Holder so accepted for exchange. The Exchange Notes and the Private Exchange Notes may be issued under (i) the Indenture or (ii) an indenture identical in all material respects to the Indenture, which in either event shall provide that (1) the Exchange Notes shall not be subject to the transfer restrictions set forth in the Indenture and (2) the Private Exchange Notes shall be subject to the transfer restrictions set forth in the Indenture. The Indenture or such indenture shall provide that the Exchange Notes, the Private Exchange Notes and the Notes shall vote and consent together on all matters as one class and that none of the Exchange Notes, the Private Exchange Notes or the Notes will have the right to vote or consent as a separate class on any matter. (c) If, (i) because of any change in law or in currently prevailing interpretations of the Staff of the SEC, the Company is not permitted to effect an Exchange offer, (ii) the Exchange Offer 5 7 is not consummated within 225 days of the Issue Date, (iii) any holder of Private Exchange Notes so requests at any time after the consummation of the Private Exchange, (iv) the Holders of not less than a majority in aggregate principal amount of the Registrable Notes determine that the interests of the Holders would be materially adversely affected by consummation of the Exchange Offer or (v) in the case of any Holder that participates in the Exchange Offer, such Holder does not receive Exchange Notes on the date of the exchange that may be sold without restriction under state and federal securities laws (other than due solely to the status of such Holder as an affiliate of the Issuers or as an "underwriter" within the meaning of the Securities Act), then the Company shall promptly deliver to the Holders and the Trustee written notice thereof (the "SHELF NOTICE") to the Trustee and in the case of clauses (i), (ii) and (iv), all Holders, in the case of clause (iii), the Holders of the Private Exchange Notes and in the case of clause (v), the affected Holder, and shall file a Shelf Registration pursuant to Section 3 hereof. 3. Shelf Registration If a Shelf Notice is delivered as contemplated by Section 2(c) hereof, then: (a) Shelf Registration. The Issuers shall as promptly as reasonably practicable file with the SEC a Registration Statement for an offering to be made on a continuous basis pursuant to Rule 415 covering all of the Registrable Notes (the "SHELF REGISTRATION"). If the Issuers shall not have yet filed an Exchange Registration Statement, the Company shall use its reasonable best efforts to file with the SEC the Shelf Registration on or prior to the Filing Date. The Shelf Registration shall be on Form S-1 or another appropriate form permitting registration of such Registrable Notes for resale by Holders in the manner or manners designated by them (including, without limitation, one or more underwritten offerings). The Issuers shall not permit any securities other than the Registrable Notes to be included in the Shelf Registration. The Issuers shall use their reasonable best efforts to cause the Shelf Registration to be declared effective under the Securities Act on or prior to the Effectiveness Date (or, in the case of a Shelf Registration pursuant to Shelf Notice delivered less than 90 days before the Effectiveness Date, on or prior to the 90th day following the Shelf Notice (the "SHELF EFFECTIVENESS DATE")) and to keep the Shelf Registration continuously effective under the Securities Act until the date that is two years from the Issue Date, subject to extension pursuant to the last paragraph of Section 5 hereof (the "EFFECTIVENESS PERIOD"), or such shorter period ending when all Registrable Notes covered by the Shelf Registration have been sold in the manner set forth and as contemplated in the Shelf Registration. (b) Withdrawal of Stop Orders. If the Shelf Registration ceases to be effective for any reason at any time during the Effectiveness Period (other than because of the sale of all of the securities registered thereunder), the Issuers shall use their respective best efforts to obtain the prompt withdrawal of any order suspending the effectiveness thereof. (c) Supplements and Amendments. The Issuers shall promptly supplement and amend the Shelf Registration if required by the rules, regulations or instructions applicable to the registration form used for such Shelf Registration, if required by the Securities Act, or if reasonably requested by the Holders of a majority in aggregate principal amount of the Registrable Notes covered by such Registration Statement or by any underwriter of such Registrable Notes. 4. Additional Interest (a) The Issuers and the Initial Purchasers agree that the Holders of Registrable Notes will suffer damages if the Issuers fail to fulfill their obligations under Section 2 or Section 3 hereof and that it would not be feasible to ascertain the extent of such damages with precision. Accordingly, the 6 8 Issuers agree to pay, as liquidated damages, additional interest on the Notes ("ADDITIONAL INTEREST") under the circumstances and to the extent set forth below: (i) if neither the Exchange Registration Statement nor the Shelf Registration has been filed on or prior to the Filing Date (or, in the case of a Shelf Registration pursuant to a Shelf Notice delivered less than 45 days prior to the Filing Date, on or prior to the 45th day following such Shelf Notice (the "SHELF FILING DATE")), then, commencing on the 91st day after the Issue Date (or, if applicable, on the 1st day after the Shelf Filing Date), Additional Interest shall accrue on the Notes over and above the stated interest at a rate of 0.50% per annum for the first 90 days immediately following the Filing Date (or, if applicable, the first 90 days following the Shelf Filing Date), such Additional Interest rate increasing by an additional 0.50% per annum at the beginning of each subsequent 90-day period; (ii) if neither the Exchange Registration Statement nor the Shelf Registration is declared effective by the SEC on or prior to the Effectiveness Date (or, if applicable, the Shelf Effectiveness Date), then, commencing on the 181st day after the Issue Date (or, if applicable, the 1st day after the Shelf Effectiveness Date), Additional Interest shall accrue on the Notes included or that should have been included in such Registration Statement over and above the stated interest at a rate of 0.50% per annum for the first 90 days immediately following the Effectiveness Date (or, if applicable, the first 90 days following the Shelf Effectiveness Date), such Additional Interest rate increasing by an additional 0.50% per annum at the beginning of each subsequent 90-day period; and (iii) if (A) the Company has not exchanged Exchange Notes for all Notes validly tendered in accordance with the terms of the Exchange Offer on or prior to the 225th day after the Issue Date or (B) the Exchange Registration Statement ceases to be effective at any time prior to the time that the Exchange Offer is consummated or (C) if applicable, the Shelf Registration has been declared effective and such Shelf Registration ceases to be effective at any time during the Effectiveness Period, then Additional Interest shall accrue (over and above any interest otherwise payable on such Notes) at a rate of 0.50% per annum on (x) the 226th day after the Issue Date with respect to the Notes validly tendered and not exchanged by the Company, in the case of (A) above, or (y) the day the Exchange Registration Statement ceases to be effective in the case of (B) above, or (z) the day such Shelf Registration ceases to be effective, in the case of (C) above, such Additional Interest rate increasing by an additional 0.50% per annum at the beginning of each such subsequent 90-day period (it being understood and agreed that, notwithstanding any provision to the contrary, so long as any Note that is the subject of a Shelf Notice is then covered by an effective Shelf Registration, no Additional Interest shall accrue on such Note); provided, however, that the Additional Interest rate on any affected Note may not exceed at any one time in the aggregate 1.0% per annum; and provided, further, that (1) upon the filing of the Exchange Registration Statement or a Shelf Registration (in the case of clause (i) of this Section 4(a)), (2) upon the effectiveness of the Exchange Registration Statement or the Shelf Registration (in the case of clause (ii) of this Section 4(a)), or (3) upon the exchange of Exchange Notes for all Notes tendered and not validly withdrawn (in the case of clause (iii)(A) of this Section 4(a)), or upon the effectiveness of the Exchange Registration Statement that had ceased to remain effective (in the case of (iii)(B) of this Section 4(a)), or upon the effectiveness of the Shelf Registration that had ceased to remain effective (in the case of (iii)(C) of this Section 4(a)), Additional Interest on the affected Notes as a result of such clause (or the relevant subclause thereof), as the case may be, shall cease to accrue. (b) The Issuers shall notify the Trustee within one business day after each and every date on which an event occurs in respect of which Additional Interest is required to be paid (an "EVENT DATE"). Any amounts of Additional Interest due pursuant to clauses (a)(i), (a)(ii) or (a)(iii) of this Section 4 shall be payable to the Holders of affected Notes as of the relevant record date in cash semi-annually on the same original interest payment dates as the Notes (as set forth in the Indenture) commencing with the first such date occurring after any such Additional Interest commences to accrue. 7 9 The amount of Additional Interest will be determined by multiplying the applicable Additional Interest rate by the principal amount of the affected Registrable Notes of such Holders, multiplied by a fraction, the numerator of which is the number of days such Additional Interest rate was applicable during such period (determined on the basis of a 360-day year comprised of twelve 30-day months and, in the case of a partial month, the actual number of days elapsed), and the denominator of which is 360. 5. Registration Procedures In connection with the filing of any Registration Statement pursuant to Sections 2 or 3 hereof, the Issuers shall effect such registrations to permit the sale of the securities covered thereby in accordance with the intended method or methods of disposition thereof, and pursuant thereto and in connection with any Registration Statement filed by the Issuers hereunder, the Issuers shall: (a) Prepare and file with the SEC on or prior to the Filing Date (or, if applicable, the Shelf Filing Date) a Registration Statement or Registration Statements as prescribed by Sections 2 or 3 hereof and use their reasonable best efforts to cause each such Registration Statement to become effective and remain effective as provided herein; provided, however, that, if (1) such filing is made pursuant to Section 3 hereof, or (2) a Prospectus contained in an Exchange Registration Statement filed pursuant to Section 2 hereof is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period, before filing any Registration Statement or Prospectus or any amendments or supplements thereto, the Issuers shall furnish to and afford the Holders of the Registrable Notes covered by such Registration Statement (in the case of a Registration Statement filed pursuant to Section 3 hereof) or each such Participating Broker-Dealer (in the case where a Prospectus contained in an Exchange Registration Statement filed pursuant to Section 2 hereof is required to be delivered by Participating Broker-Dealers), as the case may be, their counsel and the managing underwriters, if any, a reasonable opportunity to review copies of all such documents (including copies of any documents to be incorporated by reference therein and all exhibits thereto) proposed to be filed (in each case at least five business days prior to such filing). The Issuers shall not file any Registration Statement or Prospectus or any amendments or supplements thereto if the Holders of a majority in aggregate principal amount of the Registrable Notes covered by such Registration Statement, or any such Participating Broker-Dealer, as the case may be, their counsel, or the managing underwriters, if any, shall reasonably object. (b) Prepare and file with the SEC such amendments and post-effective amendments to each Shelf Registration or Exchange Registration Statement, as the case may be, as may be necessary to keep such Registration Statement continuously effective for the Effectiveness Period or the Applicable Period or until consummation of the Exchange Offer, as the case may be, cause the related Prospectus to be supplemented by any Prospectus supplement required by applicable law and, as so supplemented, to be filed pursuant to Rule 424 (or any similar provisions then in force) promulgated under the Securities Act; and comply with the provisions of the Securities Act and the Exchange Act applicable to them with respect to the disposition of all securities covered by such Registration Statement as so amended or in such Prospectus as so supplemented and with respect to the subsequent resale of any securities being sold by a Participating Broker-Dealer covered by any such Prospectus; the Issuers shall be deemed not to have used their best efforts to keep a Registration Statement effective during the Applicable Period or Effectiveness Period, as applicable, if they voluntarily take any action that would result in selling Holders of the Registrable Notes covered thereby or Participating Broker-Dealers seeking to sell Exchange Notes not being able to sell such Registrable Notes or such Exchange Notes during that period, unless such action is required by applicable law or unless the Issuers comply with this Agreement, including without limitation, the provisions of paragraph 5(k) hereof and the last paragraph of this Section 5; provided, however, that the foregoing shall not apply to actions taken by the Issuers in good faith and for valid business reasons (not including avoidance of their obligations hereunder), including without limitation, the acquisition or divestiture of assets, so long as the Issuers, within 90 days thereafter comply with the requirements of Section 5(k). Any such period during which the Issuers fail 8 10 to keep the Registration Statement effective and usable for offers and sales of Registrable Notes or Exchange Notes during the Applicable Period or Effectiveness Period, as applicable, is referred to as a "Suspension Period." A Suspension Period shall commence on and include the date that the Issuers give notice that the Registration Statement is no longer effective or the prospectus included therein is no longer usable for offers and sales of Registrable Notes or Exchange Notes and shall end on the date when each Holder of Registrable Notes or Exchange Notes covered by such Registration Statement either receives copies of the amended or supplemental prospectus contemplated by Section 5(k) or is advised in writing by the Issuers that the use of the prospectus may be resumed. If one or more Suspension Periods occur, the Applicable Period or Effectiveness Period, as applicable, shall be extended by the aggregate number of days included in each such Suspension Period (c) If (1) a Shelf Registration is filed pursuant to Section 3 hereof, or (2) a Prospectus contained in an Exchange Registration Statement filed pursuant to Section 2 hereof is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period, notify the selling Holders of Registrable Notes, or each such Participating Broker-Dealer, as the case may be, their counsel and the managing underwriters, if any, promptly (but in any event within two business days), and confirm such notice in writing, (i) when a Prospectus or any Prospectus supplement or post-effective amendment has been filed, and, with respect to a Registration Statement or any post-effective amendment, when the same has become effective under the Securities Act (including in such notice a written statement that any Holder may, upon request, obtain, at the sole expense of the Issuers, one conformed copy of such Registration Statement or post-effective amendment, including financial statements and schedules, documents incorporated or deemed to be incorporated by reference and exhibits), (ii) of the issuance by the SEC of any stop order suspending the effectiveness of a Registration Statement or of any order preventing or suspending the use of any preliminary prospectus or the initiation of any proceedings for that purpose, (iii) if at any time when a prospectus is required by the Securities Act to be delivered in connection with sales of the Registrable Notes or resales of Exchange Notes by Participating Broker-Dealers upon written notice by any such Participating Broker-Dealer of a resale the representations and warranties of the Company contained in any agreement (including any underwriting agreement), contemplated by Section 5(n) hereof cease to be true and correct, (iv) of the receipt by the Company of any notification with respect to the suspension of the qualification or exemption from qualification of a Registration Statement or any of the Registrable Notes or the Exchange Notes to be sold by any Participating Broker-Dealer for offer or sale in any jurisdiction, or the initiation or threatening of any proceeding for such purpose, (v) of the happening of any event, the existence of any condition or any information becoming known that makes any statement made in such Registration Statement or related Prospectus or any document incorporated or deemed to be incorporated therein by reference untrue in any material respect or that requires the making of any changes in or amendments or supplements to such Registration Statement, Prospectus or documents so that, in the case of the Registration Statement, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, and that in the case of the Prospectus, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading and (vi) of the determination by the Issuers that a post-effective amendment to a Registration Statement would be appropriate. (d) Use their reasonable best efforts to prevent the issuance of any order suspending the effectiveness of a Registration Statement or of any order preventing or suspending the use of a Prospectus or suspending the qualification (or exemption from qualification) of any of the Registrable Notes or the Exchange Notes for sale in any jurisdiction, and, if any such order is issued, to use its reasonable best efforts to obtain the withdrawal of any such order at the earliest possible moment. (e) If a Shelf Registration is filed pursuant to Section 3 and if requested by the managing underwriter or underwriters, if any, or the Holders of a majority in aggregate principal amount 9 11 of the Registrable Notes being sold in connection with an underwritten offering, (i) promptly incorporate in a prospectus supplement or post-effective amendment such information as the managing underwriter or underwriters, if any, such Holders, or counsel for any of them, reasonably request to be included therein, and (ii) make all required filings of such prospectus supplement or such post-effective amendment as soon as practicable after the Issuers have received notification of the matters to be incorporated in such prospectus supplement or post-effective amendment. (f) If (1) a Shelf Registration is filed pursuant to Section 3 hereof, or (2) a Prospectus contained in an Exchange Registration Statement filed pursuant to Section 2 hereof is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period, furnish to each selling Holder of Registrable Notes and to each such Participating Broker-Dealer who so requests and to their respective counsel and each managing underwriter, if any, at the sole expense of the Issuers, one conformed copy of the Registration Statement or Registration Statements and each post-effective amendment thereto, including financial statements and schedules, and, if requested, all documents incorporated or deemed to be incorporated therein by reference and all exhibits. (g) If (1) a Shelf Registration is filed pursuant to Section 3 hereof, or (2) a Prospectus contained in an Exchange Registration Statement filed pursuant to Section 2 hereof is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period, deliver to each selling Holder of Registrable Notes, or each such Participating Broker-Dealer, as the case may be, their respective counsel, and the underwriters, if any, at the sole expense of the Company, as many copies of the Prospectus or Prospectuses (including each form of preliminary prospectus) and each amendment or supplement thereto and any documents incorporated by reference therein as such Persons may reasonably request; and, subject to the last paragraph of this Section 5, the Issuers hereby consent to the use of such Prospectus and each amendment or supplement thereto by each of the selling Holders of Registrable Notes or each such Participating Broker-Dealer, as the case may be, and the underwriters or agents, if any, and dealers if any, in connection with the offering and sale of the Registrable Notes covered by, or the sale by Participating Broker-Dealers of the Exchange Notes pursuant to, such Prospectus and any amendment or supplement thereto. (h) Prior to any public offering of Registrable Notes or any delivery of a Prospectus contained in the Exchange Registration Statement by any Participating Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period, use their reasonable best efforts to register or qualify such Registrable Notes (and to cooperate with selling Holders of Registrable Notes or each such Participating Broker-Dealer, as the case may be, the managing underwriter or underwriters, if any, and their respective counsel in connection with the registration or qualification (or exemption from such registration or qualification) of such Registrable Notes) for offer and sale under the securities or Blue Sky laws of such jurisdictions within the United States as any sealing Holder, Participating Broker-Dealer, or the managing underwriter or underwriters reasonably request in writing; provided, however, that where Exchange Notes held by Participating Broker-Dealers or Registrable Notes are offered other than through an underwritten offering, the Issuers agree to cause their counsel to perform Blue Sky investigations and file registrations and qualifications required to be filed pursuant to this Section 5(h); keep each such registration or qualification (or exemption therefrom) effective during the period such Registration Statement is required to be kept effective and do any and all other acts or things reasonably necessary or advisable to enable the disposition in such jurisdictions of the Exchange Notes held by Participating Broker-Dealers or the Registrable Notes covered by the applicable Registration Statement; provided, however, that none of the Issuers shall be required to (A) qualify generally to do business in any jurisdiction where any such Issuer is not then so qualified, (B) take any action that would subject any such Issuer to general service of process in any such jurisdiction where any such Issuer is not then so subject or (C) become subject to taxation in any such jurisdiction where any such Issuer is not then so subject. 10 12 (i) If a Shelf Registration is filed pursuant to Section 3 hereof, cooperate with the selling Holders of Registrable Notes and the managing underwriter or underwriters, if any, to facilitate the timely preparation and delivery of certificates representing Registrable Notes to be sold, which certificates shall not bear any restrictive legends and shall be in a form eligible for deposit with The Depository Trust Company; and enable such Registrable Notes to be in such denominations and registered in such names as the managing underwriter or underwriters, if any, or Holders may reasonably request. (j) Use their reasonable best efforts to cause the Registrable Notes covered by the Registration Statement to be registered with or approved by such other governmental agencies or authorities as may be necessary to enable the Holders thereof or the underwriter or underwriters, if any, to dispose of such Registrable Notes, except as may be required solely as a consequence of the nature of a selling Holder's business, in which case the Issuers will cooperate in all reasonable respects (at the sole expense of such Holder) with the filing of such Registration Statement and the granting of such approvals. (k) If (1) a Shelf Registration is filed pursuant to Section 3 hereof, or (2) a Prospectus contained in an Exchange Registration Statement filed pursuant to Section 2 hereof is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period, (A) upon the occurrence of any event contemplated by paragraph 5(c)(v) or 5(c)(vi) hereof or (B) a Suspension Period remains in effect more than 90 days after the occurrence thereof, as promptly as practicable prepare and (subject to Section 5(a) hereof) file with the SEC, at the sole expense of the Issuers, a supplement or post-effective amendment to the Registration Statement or a supplement to the related Prospectus or any document incorporated or deemed to be incorporated therein by reference, or file any other required document so that, as thereafter delivered to the purchasers of the Registrable Notes being sold thereunder or to the purchasers of the Exchange Notes to whom such Prospectus will be delivered by a Participating Broker-Dealer, any such Prospectus will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. (l) Use their reasonable best efforts to cause the Registrable Notes covered by a Registration Statement or the Exchange Notes, as the case may be, to be rated with the appropriate rating agencies, if so requested by the Holders of a majority in aggregate principal amount of Registrable Notes covered by such Registration Statement or the Exchange Notes, as the case may be, or the managing underwriter or underwriters, if any. (m) Prior to the effective date of the first Registration Statement relating to the Registrable Notes, (i) provide the Trustee with certificates for the Registrable Notes or Exchange Notes, as the case may be, in a form eligible for deposit with The Depository Trust Company and (ii) provide a CUSIP number for the Registrable Notes or Exchange Notes, as the case may be. (n) In connection with any underwritten offering of Registrable Notes pursuant to a Shelf Registration, enter into an underwriting agreement as is customary in underwritten offerings of debt securities similar to the Notes and take all such other actions as are reasonably requested by the managing underwriter or underwriters in order to expedite or facilitate the registration or the disposition of such Registrable Notes and, in such connection, (i) make such representations and warranties to, and covenants with, the underwriters with respect to the business of the Issuers (including any acquired business, properties or entities, if applicable) and the Registration Statement, Prospectus and documents, if any, incorporated or deemed to be incorporated by reference therein, in each case, as are customarily made by issuers to underwriters in underwritten offerings of debt securities similar to the Notes, and confirm the same in writing if and when requested; (ii) obtain the written opinion of counsel to the Issuers and written updates thereof in form, scope and substance reasonably satisfactory to the managing 11 13 underwriter or underwriters, addressed to the underwriters covering the matters customarily covered in opinions requested in underwritten offerings of debt securities similar to the Notes and such other matters as may be reasonably requested by the managing underwriter or underwriters; (iii) obtain "cold comfort" letters and updates thereof in form, scope and substance reasonably satisfactory to the managing underwriter or underwriters from the independent certified public accountants of the Issuers (and, if necessary, any other independent certified public accountants of any subsidiary of the Issuers or of any business acquired by the Company for which financial statements and financial data are, or are required to be, included or incorporated by reference in the Registration Statement), addressed to each of the underwriters, such letters to be in customary form and covering matters of the type customarily covered in "cold comfort" letters in connection with underwritten offerings of debt securities similar to the Notes and such other matters as reasonably requested by the managing underwriter or underwriters; and (iv) if an underwriting agreement is entered into, the same shall contain indemnification provisions and procedures no less favorable than those set forth in Section 7 hereof (or such other provisions and procedures acceptable to Holders of a majority in aggregate principal amount of Registrable Notes covered by such Registration Statement and the managing underwriter or underwriters or agents) with respect to all parties to be indemnified pursuant to said Section 7. The above shall be done at each closing under such underwriting agreement or as and to the extent required thereunder. (o) If (1) a Shelf Registration is filed pursuant to Section 3 hereof, or (2) a Prospectus contained in an Exchange Registration Statement filed pursuant to Section 2 hereof is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period, make available for inspection by any selling Holder of such Registrable Notes being sold, or each such Participating Broker-Dealer, as the case may be, any underwriter participating in any such disposition of Registrable Notes, if any, and any attorney, accountant or other agent retained by any such selling Holder or each such Participating Broker-Dealer, as the case may be, or underwriter (collectively, the "INSPECTORS"), at the offices where normally kept, during reasonable business hours, all financial and other records, pertinent corporate documents and instruments of the Issuers and their subsidiaries (collectively, the "RECORDS") as shall be reasonably necessary to enable them to exercise any applicable due diligence responsibilities, and cause the respective officers, directors and employees of the Issuers and their subsidiaries to supply all information reasonably requested by any such Inspector in connection with such Registration Statement. Records that the Issuers determine, in good faith, to be confidential and any Records that it notifies the Inspectors are confidential shall not be disclosed by the Inspectors unless (i) the disclosure of such Records is necessary to avoid or correct a misstatement or omission in such Registration Statement, (ii) the release of such Records is ordered pursuant to a subpoena or other final order from a court of competent jurisdiction, (iii) disclosure of such information is, in the reasonable, good faith opinion of counsel for any Inspector, necessary in connection with any action, claim, suit or proceeding, directly or indirectly, involving such Inspector and arising out of, based upon, relating to, or involving this Agreement, or any transactions contemplated hereby or arising hereunder, or (iv) the information in such Records has been made generally available to the public other than in violation of any obligation of confidentiality, hereunder or otherwise. Each selling Holder of such Registrable Securities and each such Participating Broker-Dealer will be required to agree that information obtained by it as a result of such inspections shall be deemed confidential and shall not be used by it for any purpose other than the sale or exchange of Notes pursuant to an Exchange Offer or Shelf Registration. Each selling Holder of such Registrable Notes and each such Participating Broker-Dealer will be required to further agree that it will, upon learning that disclosure of such Records is sought in a court of competent jurisdiction, promptly give notice to the Issuers and allow the Issuers to undertake appropriate action to prevent disclosure of the Records deemed confidential at the Issuers sole expense. (p) Provide an indenture trustee for the Registrable Notes or the Exchange Notes, as the case may be, and cause the Indenture or the trust indenture provided for in Section 2(a) hereof, as the case may be, to be qualified under the TIA not later than the effective date of the Exchange Offer or first Registration Statement relating to the Registrable Notes; and in connection therewith, cooperate with the 12 14 trustee under any such indenture and the Holders of the Registrable Notes, to effect such changes to such indenture as may be required for such indenture to be so qualified in accordance with the terms of the TIA; and execute, and use their reasonable best efforts to cause such trustee to execute, all documents as may be required to effect such changes, and all other forms and documents required to be filed with the SEC to enable such indenture to be so qualified in a timely manner. (q) Comply with all applicable rules and regulations of the SEC and make generally available to its securityholders earning statements satisfying the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder (or any similar rule promulgated under the Securities Act) no later than 45 days after the end of any 12-month period (or 90 days after the end of any 12-month period if such period is a fiscal year) (i) commencing at the end of any fiscal quarter in which Registrable Notes are sold to underwriters in a firm commitment or best efforts underwritten offering and (ii) if not sold to underwriters in such an offering, commencing on the first day of the first fiscal quarter of the Company after the effective date of a Registration Statement, which statements shall cover said 12-month periods. (r) If an Exchange Offer or a Private Exchange is to be consummated, upon delivery of the Registrable Notes by Holders to the Company (or to such other Person as directed by the Issuers) in exchange for the Exchange Notes or the Private Exchange Notes, as the case may be, the Issuers shall mark, or cause to be marked, on such Registrable Notes that such Registrable Notes are being cancelled in exchange for the Exchange Notes or the Private Exchange Notes, as the case may be; in no event shall such Registrable Notes be marked as paid or otherwise satisfied. (s) Reasonably cooperate with each seller of Registrable Notes covered by any Registration Statement and each underwriter, if any, participating in the disposition of such Registrable Notes and their respective counsel in connection with any filings required to be made with the National Association of Securities Dealers, Inc. (the "NASD"). (t) Use their reasonable best efforts to take all other steps necessary or advisable to effect the registration of the Registrable Notes covered by a Registration Statement contemplated hereby. The Company may require each seller of Registrable Notes as to which any Registration is being effected to furnish to the Issuers such information regarding such seller and the distribution of such Registrable Notes as the Issuers may, from time to time, reasonably request and, in such event, shall have no further obligation. The Issuers may exclude from such registration the Registrable Notes of any seller who unreasonably fails to furnish such information within a reasonable time after receiving such request. Each seller as to which any Shelf Registration is being effected agrees to furnish promptly to the Issuers all information required to be disclosed in order to make the information previously furnished to the Issuers by such seller not materially misleading. Each Holder of Registrable Notes and each Participating Broker-Dealer agrees by acquisition of such Registrable Notes or Exchange Notes to be sold by such Participating Broker-Dealer, as the case may be, that, upon actual receipt of any notice from the Issuers of (A) the happening of any event of the kind described in Section 5(c)(ii), 5(c)(iv), 5(c)(v) or 5(c)(vi) hereof or (B) a Suspension Period under Section 5(b), such Holder will forthwith discontinue disposition of such Registrable Notes covered by such Registration Statement or Prospectus or Exchange Notes to be sold by such Holder or Participating Broker-Dealer, as the case may be, until such Holder's or Participating Broker-Dealer's-receipt of the copies of the supplemented or amended Prospectus contemplated by Section 5(k) hereof, or until it is advised in writing (the "ADVICE") by the Issuers that the use of the applicable Prospectus may be resumed and has received copies of any amendments or supplements thereto. In the event the Issuers shall give any such notice, each of the Effectiveness Period and the Applicable Period shall be extended by the number of days during such periods from and including the date of the giving of such notice to and including the date when each seller of Registrable Notes covered by such Registration Statement or Exchange Notes to be sold by such Participating Broker-Dealer, as the case may be, shall have received 13 15 (x) the copies of the supplemented or amended Prospectus contemplated by Section 5(k) hereof or (y) the Advice. 6. Registration Expenses (a) Except as otherwise set forth herein, all fees and expenses incident to the performance of or compliance with this Agreement by the Issuers shall be borne by the issuers whether or not the Exchange Offer or a Shelf Registration is filed or becomes effective, including, without limitation, (i) all registration and filing fees (including, without limitation, (A) fees with respect to filings required to be made with the NASD in connection with an underwritten offering and (B) fees and expenses of compliance with state securities or Blue Sky laws (including, without limitation, reasonable fees and disbursements of counsel in connection with Blue Sky qualifications of the Registrable Notes or Exchange Notes and determination of the eligibility of the Registrable Notes or Exchange Notes for investment under the laws of such jurisdictions (x) where the holders of Registrable Notes are located, in the case of the Exchange Notes, or (y) as provided in Section 5(h) hereof, in the case of Registrable Notes or Exchange Notes to be sold by a Participating Broker-Dealer during the Applicable Period)), (ii) printing expenses, including, without limitation, expenses of printing certificates for Registrable Notes or Exchange Notes in a form eligible for deposit with The Depository Trust Company and of printing prospectuses if the printing of prospectuses is requested by the managing underwriter or underwriters, if any, by the Holders of a majority in aggregate principal amount of the Registrable Notes included in any Registration Statement or sold by any Participating Broker-Dealer, as the case may be, (iii) messenger, telephone and delivery expenses, (iv) fees and disbursements of counsel for the Issuers and reasonable fees and disbursements of special counsel for the sellers of Registrable Notes (subject to the provisions of Section 6(b) hereof), (v) fees and disbursements of all independent certified public accountants referred to in Section 5(n)(iii) hereof (including, without limitation, the expenses of any special audit and "cold comfort" letters required by or incident to such performance), (vi) rating agency fees, if-any, and any fees associated with making the Registrable Notes or Exchange Notes eligible for trading through The Depository Trust Company, (vii) Securities Act liability insurance, if the Company desires such insurance, (viii) fees and expenses of all other Persons retained by the Issuers, (ix) internal expenses of the Issuers (including, without limitation, all salaries and expenses of officers and employees of the Issuers performing legal or accounting duties), (x) the expense of any annual audit, (xi) the fees and expenses incurred in connection with the listing of the securities to be registered on any securities exchange, if applicable and (xii) the expenses relating to printing, word processing and distributing all Registration Statements, underwriting agreements, securities sales agreements, indentures and any other documents necessary in order to comply with this Agreement. (b) The Issuers shall (i) reimburse the Holders of the Registrable Notes being registered in a Shelf Registration for the reasonable fees and disbursements of not more than one counsel (in addition to appropriate local counsel) chosen by the Holders of a majority in aggregate principal amount of the Registrable Notes to be included in such Registration Statement and (ii) reimburse out-of-pocket expenses (other than legal expenses or selling commissions or discounts) of Holders of Registrable Notes incurred in connection with the registration and sale of the Registrable Notes pursuant to a Shelf Registration or in connection with the exchange of Registrable Notes pursuant to the Exchange Offer. 7. Indemnification (a) The Issuers agree, jointly and severally, to indemnify and hold harmless each Holder of Registrable Notes offered pursuant to a Shelf Registration Statement and each Participating Broker-Dealer selling Exchange Notes during the Applicable Period, the affiliates, directors, officers, agents, representatives and employees of each such Person or its affiliates, and each other Person, if any, who controls any such Person or its affiliates within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act (each, a "PARTICIPANT") against any and all losses, claims, 14 16 damages and liabilities (including, without limitation, the reasonable legal fees and other expenses actually incurred in connection with any suit, action or proceeding or any claim asserted) caused by, arising out of or based upon (i) any untrue statement or alleged untrue statement of any material fact contained in any Registration Statement pursuant to which the offering of such Registrable Notes or Exchange Notes, as the case may be, is registered (or any amendment thereto) or related Prospectus (or any amendments or supplements thereto) or any related preliminary prospectus, or (ii) the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; and will reimburse, as incurred, each Participant and each such controlling person for any legal or other expenses incurred by the Participant or such controlling person in connection with investigating, defending against or appearing as a third-party witness in connection with any such loss, claim, damage, liability or action; provided, however, that the Issuers will not be required to indemnify a Participant if (i) such losses, claims, damages or liabilities are caused by any untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with information relating to any Participant furnished to the Issuers in writing by or on behalf of such Participant expressly for use therein or (ii) if such Participant sold to the person asserting the claim the Registrable Notes or Exchange Notes that are the subject of such claim and such untrue statement or omission or alleged untrue statement or omission was contained or made in any preliminary prospectus and corrected in the Prospectus or any amendment or supplement thereto, and the Prospectus does not contain any other untrue statement or omission or alleged untrue statement or omission of a material fact that was the subject matter of the related proceeding and it is established by the Issuers in the related proceeding that such Participant failed to deliver or provide a copy of the Prospectus (as amended or supplemented) to such Person with or prior to the confirmation of the sale of such Registrable Notes or Exchange Notes sold to such Person unless such failure to deliver or provide a copy of the Prospectus (as amended or supplemented) was a result of noncompliance by the Issuers with Section 5 of this Agreement. (b) Each Participant agrees, severally and not jointly, to indemnify and hold harmless each of the Issuers, their directors and officers and each Person who controls each of the Issuers within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act to the same extent as the foregoing indemnity from the Issuers to each Participant, but only (i) with reference to information relating to such Participant furnished to the Issuers in writing by or on behalf of such Participant expressly for use in any Registration Statement or Prospectus, any amendment or supplement thereto or any preliminary prospectus or (ii) with respect to any untrue statement or representation made by such Participant in writing to the Company. The liability or any Participant under this paragraph shall in no event exceed the proceeds received by such Participant from sales of Registrable Notes or Exchange Notes giving rise to such obligations. (c) If any suit, action, proceeding (including any governmental or regulatory investigation), claim or demand shall be brought or asserted against any Person in respect of which indemnity may be sought pursuant to either of the two preceding paragraphs, such Person (the "INDEMNIFIED PERSON") shall promptly notify the Person against whom such indemnity may be sought (the "INDEMNIFYING PERSON") in writing, and the Indemnifying Person, upon request of the Indemnified Person, shall retain counsel reasonably satisfactory to the Indemnified Person to represent the Indemnified Person and any others the Indemnifying Person may reasonably designate in such proceeding and shall pay the reasonable fees and expenses actually incurred by such counsel related to such proceeding; provided, however, that the failure to so notify the Indemnifying Person shall not relieve it of any obligation or liability that it may have hereunder or otherwise (unless and only to the extent that such failure directly results in the forfeiture of any substantial rights or defenses by the 15 17 Indemnifying Person and the Indemnifying Person was not otherwise aware of such action or claim). In any such proceeding, any Indemnified Person shall have the right to retain its own counsel, but the reasonable fees and expenses of such counsel shall be at the expense of such Indemnified Person unless (i) the Indemnifying Person and the Indemnified Person shall have mutually agreed in writing to the contrary, (ii) the Indemnifying Person shall have failed within a reasonable period of time to retain counsel reasonably satisfactory to the Indemnified Person or (iii) the named parties in any such proceeding (including any impleaded parties) include both the Indemnifying Person and the Indemnified Person and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. It is understood that, unless there exists a conflict among Indemnified Persons, the Indemnifying Person shall not, in connection with any one such proceeding or separate but substantially similar related proceeding in the same jurisdiction arising out of the same general allegations, be liable for the fees and expenses of more than one separate firm (in addition to any local counsel) for all Indemnified Persons and that all such fees and expenses shall be reimbursed promptly as they are incurred. Any such separate firm for the Participants and such control Persons of Participants shall be designated in writing by Participants who sold a majority in interest of Registrable Notes and Exchange Notes sold by all such Participants and any such separate firm for the Issuers, its directors, its officers and such control Persons of the Issuers shall be designated in writing by the Issuers. The Indemnifying Person shall not be liable for any settlement of any proceeding effected without its prior written consent, but if settled with such consent or if there be a final non-appealable judgment for the plaintiff for which the Indemnified Person is entitled to indemnification pursuant to this Agreement, the indemnifying Person agrees to indemnify and hold harmless each Indemnified Person from and against any loss or liability by reason of such settlement or judgment. Notwithstanding the foregoing sentence, if at any time an Indemnified Person shall have requested an Indemnifying Person to reimburse the Indemnified Person for reasonable fees and expenses actually incurred by counsel as contemplated by the third sentence of this paragraph, the indemnifying Person agrees that it shall be liable for any settlement of any proceeding effected without its written consent if (i) such settlement is entered into more than 30 days after receipt by such Indemnifying Person of the aforesaid request and (ii) such Indemnifying Person shall not have reimbursed the Indemnified Person in accordance with such request prior to the date of such settlement; provided, however, that the Indemnifying Person shall not be liable for any settlement effected without its consent pursuant to this sentence if the Indemnifying Person is contesting, in good faith, the request for reimbursement. No Indemnifying Person shall, without the prior written consent of the Indemnified Person, effect any settlement or compromise of any pending or threatened proceeding in respect of which any Indemnified Person is or could have been a party, and indemnity could have been sought hereunder by such Indemnified Person, unless such settlement (A) includes an unconditional written release of such Indemnified Person, in form and substance reasonably satisfactory to such Indemnified Person, from all liability-on claims that are the subject matter of such proceeding and (B) does not include any statement as to an admission of fault, culpability or failure to act by or on behalf of any Indemnified Person. (d) If the indemnification provided for in the first and second paragraphs of this Section 7 is for any reason available by its terms, but is held to be unenforceable, then each Indemnifying Person under such paragraphs, in lieu of indemnifying such Indemnified Person thereunder and in order to provide for just and equitable contribution, shall contribute to the amount paid or payable by such Indemnified Person as a result of such losses, claims, damages or liabilities in such proportion as is appropriate to reflect the relative fault of the Indemnifying Person or Persons on the one hand and the Indemnified Person or Persons on the other in connection with the statements or omissions or alleged statements or omissions that resulted in such losses, claims, damages or liabilities (or actions in respect thereof). The relative fault of the parties shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Issuers on the one hand or such Participant or such other Indemnified Person, as the case may be, on the other, the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission, and any other equitable considerations appropriate in the circumstances. 16 18 (e) The parties agree that it would not be just and equitable if contribution pursuant to this Section 7 were determined by pro rata allocation (even if the Participants were treated as one entity for such purpose) or by any other method of allocation that does not take account of the equitable considerations referred to in the immediately preceding paragraph. The amount paid or payable by an Indemnified Person as a result of the losses, claims, damages and liabilities referred to in the immediately preceding paragraph shall be deemed to include, subject to the limitations set forth above, any reasonable legal or other expenses actually incurred by such Indemnified Person in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 7, in no event shall a Participant be required to contribute any amount in excess of the amount by which proceeds received by such Participant from sales of Registrable Notes or Exchange Notes, as the case may be, exceeds the amount of any damages that such Participant has otherwise been required to pay or has paid by reason of such untrue or alleged untrue statement or omission or alleged omission. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. (f) The indemnity and contribution agreements contained in this Section 7 will be in addition to any liability that the Indemnifying Persons may otherwise have to the Indemnified Persons referred to above. 8. Rule 144 and 144A Each of the Issuers covenants that it will file the reports required to be filed by it under the Securities Act and the Exchange Act and the rules and regulations adopted by the SEC thereunder in a timely manner in accordance with the requirements of the Securities Act and the Exchange Act and, if at any time the Issuers are not required to file such reports, it will, upon the request of any Holder of Registrable Notes, make publicly available annual reports and such information, documents and other reports of the type specified in Sections 13 and 15(d) of the Exchange Act. Each of the Issuers further covenants for so long as any Registrable Notes remain outstanding, to make available to any Holder or beneficial owner of Registrable Notes in connection with any sale thereof and any prospective purchaser of such Registrable Notes from such Holder or beneficial owner the information required by Rule 144A(d)(4) under the Securities Act in order to permit resales of such Registrable Notes pursuant to Rule 144A. 9. Underwritten Registrations If any of the Registrable Notes covered by any Shelf Registration are to be sold in an underwritten offering, the investment banker or investment bankers and manager or managers that will manage the offering will be selected by the Holders of a majority in Aggregate principal amount of such Registrable Notes included in such offering and reasonably acceptable to the Issuers. No Holder of Registrable Notes may participate in any underwritten registration hereunder unless such Holder (a) agrees to sell such Holder's Registrable Notes on the basis provided in any underwriting arrangements approved by the Persons entitled hereunder to approve such arrangements and (b) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents required under the terms of such underwriting arrangements. 10. Miscellaneous (a) No Inconsistent Agreements. None of the Issuers has entered, as of the date hereof, and none of the Issuers will, after the date of this Agreement, enter into any agreement with respect to any of its securities that is inconsistent with the rights granted to the Holders of Registrable Notes in this Agreement or otherwise conflicts with the provisions hereof. None of the Issuers has 17 19 entered and none of the Issuers will enter into any agreement with respect to any of its securities that will grant to any Person piggyback registration rights with respect to a Registration Statement. (b) Adjustments Affecting Registrable Notes. None of the Issuers will, directly or indirectly, take any action with respect to the Registrable Notes as a class that would adversely affect the ability of the Holders of Registrable Notes to include such Registrable Notes in a registration undertaken pursuant to this Agreement. (c) Amendments and Waivers. The provisions of this Agreement may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, otherwise than with the prior written consent of the Holders of not less than a majority in aggregate principal amount of the then outstanding Registrable Notes. Notwithstanding the foregoing, a waiver or consent to depart from the provisions hereof with respect to a matter that relates exclusively to the rights of Holders of Registrable Notes whose securities are being sold pursuant to a Registration Statement and that does not directly or indirectly affect, impair, limit or compromise the rights of other Holders of Registrable Notes may be given by Holders of at least a majority in aggregate principal amount of the Registrable Notes being sold by such Holders pursuant to such Registration Statement; provided, however, that the provisions of this sentence may not be amended, modified or supplemented except in accordance with the provisions of the immediately preceding sentence. (d) Notices. All notices and other communications (including without limitation any notices or other communications to the Trustee) provided for or permitted hereunder shall be made in writing by hand-delivery, registered first-class mail, next-day air courier or facsimile: 1. if to a Holder of the Registrable Notes or any Participating Broker-Dealer, at the most current address of such Holder or Participating Broker-Dealer, as the case may be, set forth on the records of the registrar under the Indenture, with a copy in like manner to the Initial Purchasers as follows: BT Alex. Brown Incorporated Chase Securities Inc. Morgan Stanley & Co. Incorporated Salomon Smith Barney Inc. c/o BT Alex. Brown Incorporated 130 Liberty Street New York, New York Facsimile No: (212) 250-7200 Attention: Corporate Finance Department with a copy to: Latham & Watkins 1001 Pennsylvania Avenue,. N.W. Suite 1300 Washington, D.C. 20004-2505 Facsimile No: (202) 637-2201 Attention: John D. Watson, Jr., Esq. 2. if to the Initial Purchasers, at the addresses specified in Section 10(d)(1); 18 20 3. if to the Company, as follows: Chancellor Media Corporation of Los Angeles 300 Crescent Court Suite 600 Dallas, Texas 75201 Facsimile No: (214) 922-8701 Attention: Matthew E. Devine, Chief Financial Officer with copies to: Weil, Gotshal & Manges LLP 100 Crescent Court Suite 1300 Dallas, Texas 75201 Facsimile No: (214) 746-7777 Attention: Michael A. Saslaw, Esq. All such notices and communications shall be deemed to have been duly given: when delivered by hand, if personally delivered; five business days after being deposited in the mail, postage prepaid, if mailed; one business day after being timely delivered to a next-day air courier; and when receipt is acknowledged by the addressee, if sent by facsimile. Copies of all such notices, demands or other communications shall be concurrently delivered by the Person giving the same to the Trustee at the address and in the manner specified in such Indenture. (e) Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties hereto; provided, however, that this Agreement shall not inure to the benefit of or be binding upon a successor or assign of a Holder unless and to the extent such successor or assign holds Registrable Notes. (f) Counterparts. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. (g) Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. (h) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE AND PERFORMED WHOLLY WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. (i) Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their best efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, .provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable. (j) Notes Held by the Issuers or their Affiliates. Whenever the consent or approval of Holders of a specified percentage of Registrable Notes is required hereunder, Registrable Notes held by the Issuers or their affiliates (as such term is defined in Rule 405 under the Securities Act) shall not be 19 21 counted in determining whether such consent or approval was given by the Holders of such required percentage. (g) Third Party Beneficiaries. Holders of Registrable Notes and Participating Broker-Dealers are intended third party beneficiaries of this Agreement and this Agreement may be enforced by such Persons. (h) Entire Agreement. This Agreement, together with the Purchase Agreement and the Indenture, is intended by the parties as a final and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein and therein and any and all prior oral or written agreements, representations, or warranties, contracts, understandings, correspondence, conversations and memoranda between the Initial Purchasers on the one hand and the Issuers on the other, or between or among any agents, representatives, parents, subsidiaries, affiliates, predecessors in interest or successors in interest with respect to the subject matter hereof and thereof are merged herein and replaced hereby. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. THE COMPANY CHANCELLOR MEDIA CORPORATION OF LOS ANGELES By: /s/ OMAR CHOUCAIR ------------------------------------------ Name: Omar Choucair Title: Vice President and Assistant Secretary THE GUARANTORS: On behalf of the Subsidiary Guarantors listed on Exhibit A hereto: By: /s/ OMAR CHOUCAIR ------------------------------------------ Name: Omar Choucair Title: Vice President and Assistant Secretary 20 22 The foregoing Agreement is hereby confirmed and accepted as of the date first above written. BT ALEX. BROWN INCORPORATED CHASE SECURITIES INC. MORGAN STANLEY & Co. INCORPORATED SALOMON SMITH BARNEY INC. By: BT ALEX. BROWN INCORPORATED By: /s/ DAVID T. JACOBS --------------------------------- Name: David T. Jacobs Title: Vice President 21 23 EXHIBIT A CERTAIN SUBSIDIARIES OF CHANCELLOR MEDIA CORPORATION OF LOS ANGELES (all subsidiaries are Delaware corporations except as expressly indicated) 1. Chancellor Media Corporation Of The Lone Star State 2. KZPS/KDGE License Corp. 3. Chancellor Media Corporation of California 4. KIOI License Corp. 5. Chancellor Media Corporation of Illinois 6. Chancellor Media Illinois License Corp. 7. Chancellor Media Corporation of Dade County 8. WVCG License Corp. 9. Chancellor Media Corporation of Massachusetts 10. Chancellor Media Pennsylvania License Corp. 11. Chancellor Media Corporation of Miami 12. WEDR License Corp. 13. Chancellor Media of Houston Limited Partnership 14. Chancellor Media Corporation of Houston 15. Chancellor Media Corporation of the Keystone State 16. Chancellor Media Corporation of New York 17. Chancellor Media Corporation of Charlotte 18. WIOQ License Corp. 19. Chancellor Media Corporation of Washington, D.C. 20. Chancellor Media Corporation of St. Louis 21. Chancellor Media Corporation of Michigan 22. Chancellor Media / WAXQ Inc. 23. WAXQ License Corp. 24. Chancellor Media / KCMG Inc. 25. Chancellor Media / Riverside Broadcasting Co., Inc. 26. WLTW License Corp. 27. Chancellor Media Corporation of the Capital City 28. Chancellor Media D.C. License Corp. 29. Chancellor Media Licensee Company 30. Chancellor Media/Trefoil Communications, Inc. 31. Chancellor Media/Shamrock Broadcasting, Inc. 32. Chancellor Media/Shamrock Radio Licenses, Inc. 33. Chancellor Media/Shamrock Broadcasting Licenses of Denver, Inc. 34. Chancellor Media/Shamrock Broadcasting of Texas, Inc (a Texas corporation) 35. Chancellor Media/Shamrock Radio Licenses, LLC 36. Chancellor Media Outdoor Corporation 37. Chancellor Media Nevada Sign Corporation 38. Chancellor Media MW Sign Corporation 39. Chancellor Media Martin Corporation 40. Western Poster Service, Inc. (a Texas corporation) 41. The AMFM Radio Networks, Inc. 42. Chancellor Media Air Services Corporation 43. Chancellor Media Whiteco Outdoor Corporation 24 44. Chancellor Merger Corp. 45. Broadcast Architecture, Inc. (a Massachusetts corporation) 46. Martin Media (a California limited partnership) 47. Dowling Company Incorporated (a Virginia corporation) 48. Nevada Outdoor Systems, Inc. (a Nevada corporation) 49. MW Sign Corp. (a California corporation) 50. Martin & MacFarlane, Inc. (a California corporation) 51. Katz Media Corporation 52. Katz Communications, Inc. 53. Katz Millennium Marketing, Inc. 54. Amcast Radio Sales, Inc. 55. Christal Radio Sales, Inc. 56. Eastman Radio Sales, Inc. 57. Seltel Inc. 58. Katz Cable Corporation 59. The National Payroll Company, Inc. 60. Chancellor Media Radio Licenses, LLC 61. KLOL License Limited Partnership 62. WTOP License Limited Partnership 63. Radio 100, L.L.C. 64. Revolution Outdoor Advertising, Inc. 65. Hardin Development Corporation 66. Parsons Development Company EX-23.2 7 CONSENT OF PRICEWATERHOUSECOOPERS LLP 1 EXHIBIT 23.2 CONSENT OF INDEPENDENT ACCOUNTANTS The Board of Directors Chancellor Media Corporation of Los Angeles: We consent to the inclusion in this Registration Statement on Form S-4 of Chancellor Media Corporation of Los Angeles of our reports dated February 10, 1998, except for Notes 2(b) paragraphs 1 and 3-5 as to which the date is February 20, 1998 and 9(a) as to which the date is March 13, 1998, on our audits of the consolidated financial statements and financial statement schedule of Chancellor Media Corporation of Los Angeles and Subsidiaries as of December 31, 1997 and for the year then ended. We also consent to the reference to our firm under the captions "Experts". PRICEWATERHOUSECOOPERS LLP Dallas, Texas December 8, 1998 EX-23.3 8 CONSENT OF KPMG PEAT MARWICK LLP 1 EXHIBIT 23.3 INDEPENDENT AUDITORS' CONSENT The Board of Directors Chancellor Media Corporation of Los Angeles: We consent to the use of our reports included herein and to the reference to our firm under the heading "Experts." KPMG Peat Marwick LLP Dallas, Texas December 8, 1998 EX-23.4 9 CONSENT OF PRICEWATERHOUSECOOPERS LLP 1 EXHIBIT 23.4 CONSENT OF INDEPENDENT ACCOUNTANTS The Board of Directors Chancellor Media Corporation of Los Angeles: We consent to the inclusion in this Registration Statement on Form S-4 of Chancellor Media Corporation of Los Angeles of our report dated February 13, 1997, except for Note 15 as to which the date is February 19, 1997, on our audits of the consolidated financial statements of Chancellor Radio Broadcasting Company and Subsidiaries as of December 31, 1995 and 1996 and for each of the three years in the period ended December 31, 1996. We also consent to the reference to our firm under the caption "Experts". PRICEWATERHOUSECOOPERS LLP Dallas, Texas December 8, 1998 EX-23.5 10 CONSENT OF KMPG PEAT MARWICK LLP 1 EXHIBIT 23.5 INDEPENDENT AUDITORS' CONSENT The Board of Directors Chancellor Media Corporation of Los Angeles: We consent to the use of our report included herein and to the reference to our firm under the heading "Experts." KPMG Peat Marwick LLP St. Petersburg, Florida December 8, 1998 EX-23.6 11 CONSENT OF ARTHUR ANDERSEN LLP 1 EXHIBIT 23.6 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS The Board of Directors Chancellor Media Corporation of Los Angeles: As independent public accountants, we hereby consent to the use of our report dated March 31, 1997 (and to all references to our Firm) included in this Registration Statement on Form S-4 of Chancellor Media Corporation of Los Angeles. Arthur Andersen LLP Washington, D.C. December 8, 1998 EX-23.7 12 CONSENT OF BDO SEIDMAN, LLP 1 EXHIBIT 23.7 CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS The Board of Directors Chancellor Media Corporation of Los Angeles: We hereby consent to the use in the Prospectus constituting a part of Chancellor Media Corporation of Los Angeles' Registration Statement on Form S-4 of our report dated September 17, 1998, relating to the financial statements of the Outdoor Advertising Division of Whiteco Industries, Inc., which are contained in the Prospectus. We also consent to the reference to us under the caption "Experts" in the Prospectus. BDO Seidman, LLP Chicago, Illinois December 8, 1998 EX-25.1 13 FORM T-1 STATEMENT OF ELIGIBILITY OF TRUSTEE 1 EXHIBIT 25.1 ================================================================================ FORM T-1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(b)(2) |__| THE BANK OF NEW YORK (Exact name of trustee as specified in its charter) New York 13-5160382 (State of incorporation (I.R.S. employer if not a U.S. national bank) identification no.) One Wall Street, New York, N.Y. 10286 (Address of principal executive offices) (Zip code) ---------- CHANCELLOR MEDIA CORPORATION OF LOS ANGELES (Exact name of obligor as specified in its charter) Delaware 75-2451687 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) Table of Co-Registrants ----------------------- Chancellor Media Corporation of Delaware 99-0248294 the Lone Star State KZPS/KDGE License Corp. Delaware 75-2449662 Chancellor Media Corporation of Delaware 59-2312787 California KIOI License Corp. Delaware 75-2449654 Chancellor Media Corporation of Delaware 75-2490925 Illinois Chancellor Media Illinois License Corp. Delaware 75-2528716 Chancellor Media Corporation of Delaware 59-2312792 Dade County WVCG License Corp. Delaware 75-2449668
2 Chancellor Media Corporation of Delaware 04-3216274 Massachusetts Chancellor Media Pennsylvania Delaware 04-3221375 License Corp. Chancellor Media Corporation of Delaware 04-3216285 Miami WEDR License Corp. Delaware 04-3216278 Chancellor Media Corporation of Delaware 75-2486577 Houston Limited Partnership Chancellor Media Corporation of Delaware 75-2486583 Houston Chancellor Media Corporation of Delaware 04-3221374 the Keystone State Chancellor Media Corporation of Delaware 54-1475267 New York Chancellor Media Corporation of Delaware 62-1364794 Charlotte WIOQ License Corp. Delaware 36-3906002 Chancellor Media Corporation of Delaware 75-2432561 Washington, D.C. Chancellor Media Corporation of Delaware 75-2449637 St. Louis Chancellor Media Corporation of Delaware 75-2666017 Michigan Chancellor Media/WAXQ Inc. Delaware 13-3387794 WAXQ License Corp. Delaware 75-2788524 Chancellor Media/KCMG Inc. Delaware 13-3930133 Chancellor Media/Riverside Delaware 13-2688382 Broadcasting Co., Inc. WLTW License Corp. Delaware 75-2788528 Chancellor Media Corporation of Delaware 75-2647157 the Capital City Chancellor Media D.C. License Corp. Delaware 75-2647158 Chancellor Media Licensee Company Delaware 75-2544625 Chancellor Media/Trefoil Communications, Inc. Delaware 95-3278846 Chancellor Media/Shamrock Broadcasting, Inc. Delaware 95-4068583 Chancellor Media/Shamrock Radio Licenses, Inc. Delaware 95-4501833 Chancellor Media/Shamrock Broadcasting Delaware 75-2688376 Licenses of Denver, Inc. Chancellor Media/Shamrock Broadcasting Texas 71-0527506 of Texas, Inc. Chancellor Media/Shamrock Radio Licenses, LLC Delaware 75-2779594 Chancellor Media Outdoor Corporation Delaware 75-2779605 Chancellor Media Nevada Sign Corporation Delaware 75-2788530 Chancellor Media MW Sign Corporation Delaware 75-2779602 Chancellor Media Martin Corporation Delaware 75-2779598 Western Poster Service, Inc. Texas 75-2084318 The AMFM Radio Networks, Inc. Delaware 52-2100851 Chancellor Media Air Services Corporation Delaware 75-2771440 Chancellor Media Whiteco Outdoor Corporation Delaware 75-2783296 Chancellor Merger Corp. Delaware 75-2771441 Broadcast Architecture, Inc. Massachusetts 04-3096275 Martin Media California 77-0058488 Dowling Company Incorporated Virginia 54-0787845 Nevada Outdoor Systems, Inc. Nevada 88-0267411 MW Sign Corp. California 95-4334859
-2- 3 Martin & MacFarlane, Inc. California 95-2743749 Katz Media Corporation Delaware 13-3779266 Katz Communications, Inc. Delaware 13-0904500 Katz Millennium Marketing, Inc. Delaware 13-3894491 Amcast Radio Sales, Inc. Delaware 13-3406436 Christal Radio Sales, Inc. Delaware 13-2618663 Eastman Radio Sales, Inc. Delaware 13-3581043 Seltel Inc. Delaware 06-0963166 Katz Cable Corporation Delaware 13-3814104 The National Payroll Company, Inc. Delaware 13-3744365 Chancellor Media Radio Licenses, LLC Delaware 75-2779589 KLOL License Limited Partnership Delaware 75-2486580 WTOP License Limited Partnership Delaware 75-2528718 Radio 100, L.L.C. Delaware 75-2759570
300 Crescent Court, Suite 600 Dallas, Texas 75201 (Address of principal executive offices) (Zip code) ---------- 9% Senior Subordinated Notes Due 2008 (Title of the indenture securities) ================================================================================ 4 1. GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE: (a) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO WHICH IT IS SUBJECT. - -------------------------------------------------------------------------------- Name Address - -------------------------------------------------------------------------------- Superintendent of Banks of the State of 2 Rector Street, New York, New York N.Y. 10006, and Albany, N.Y. 12203 Federal Reserve Bank of New York 33 Liberty Plaza, New York, N.Y. 10045 Federal Deposit Insurance Corporation Washington, D.C. 20429 New York Clearing House Association New York, New York 10005 (B) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS. Yes. 2. AFFILIATIONS WITH OBLIGOR. IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH AFFILIATION. None. 16. LIST OF EXHIBITS. EXHIBITS IDENTIFIED IN PARENTHESES BELOW, ON FILE WITH THE COMMISSION, ARE INCORPORATED HEREIN BY REFERENCE AS AN EXHIBIT HERETO, PURSUANT TO RULE 7A-29 UNDER THE TRUST INDENTURE ACT OF 1939 (THE "ACT") AND 17 C.F.R. 229.10(d). 1. A copy of the Organization Certificate of The Bank of New York (formerly Irving Trust Company) as now in effect, which contains the authority to commence business and a grant of powers to exercise corporate trust powers. (Exhibit 1 to Amendment No. 1 to Form T-1 filed with Registration Statement No. 33-6215, Exhibits 1a and 1b to Form T-1 filed with Registration Statement No. 33-21672 and Exhibit 1 to Form T-1 filed with Registration Statement No. 33-29637.) 4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form T-1 filed with Registration Statement No. 33-31019.) 6. The consent of the Trustee required by Section 321(b) of the Act. (Exhibit 6 to Form T-1 filed with Registration Statement No. 33-44051.) 7. A copy of the latest report of condition of the Trustee published pursuant to law or to the requirements of its supervising or examining authority. -4- 5 SIGNATURE Pursuant to the requirements of the Act, the Trustee, The Bank of New York, a corporation organized and existing under the laws of the State of New York, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in The City of New York, and State of New York, on the 17th day of November, 1998. THE BANK OF NEW YORK By: /s/THOMAS C. KNIGHT ---------------------------------- Name: THOMAS C. KNIGHT Title: ASSISTANT VICE PRESIDENT -----END PRIVACY-ENHANCED MESSAGE-----