-----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, SjCrFiqgtehYxVLvkjfUgO1BDD/uYGGhqxE/A5mYQj7dtoi/7j1SKHjEtqvdTKFK yrA6qhDUj5tV7XKEh3Hvyw== 0000950134-97-007134.txt : 19971002 0000950134-97-007134.hdr.sgml : 19971002 ACCESSION NUMBER: 0000950134-97-007134 CONFORMED SUBMISSION TYPE: S-3 PUBLIC DOCUMENT COUNT: 15 FILED AS OF DATE: 19971001 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHANCELLOR MEDIA CORP/ CENTRAL INDEX KEY: 0000894972 STANDARD INDUSTRIAL CLASSIFICATION: RADIO BROADCASTING STATIONS [4832] IRS NUMBER: 752451687 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-3 SEC ACT: SEC FILE NUMBER: 333-36855 FILM NUMBER: 97688935 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: CHANCELLOR MEDIA CORP DATE OF NAME CHANGE: 19970905 FORMER COMPANY: FORMER CONFORMED NAME: EVERGREEN MEDIA CORP DATE OF NAME CHANGE: 19930326 S-3 1 FORM S-3 1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 1, 1997 REGISTRATION NO. 333- ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 --------------------- FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 --------------------- CHANCELLOR MEDIA CORPORATION (Exact name of registrant as specified in its charter) --------------------- DELAWARE 4832 75-2247099 (State or other jurisdiction (Primary Standard Industrial (IRS Employer of incorporation or organization) Classification Code Number) Identification Number)
--------------------- SCOTT K. GINSBURG CHIEF EXECUTIVE OFFICER 433 EAST LAS COLINAS BOULEVARD 433 EAST LAS COLINAS BOULEVARD IRVING, TEXAS 75039 IRVING, TEXAS 75039 (972) 869-9020 (972) 869-9020 (Address, including zip code, and telephone number, (Name, address, including zip code, telephone including area code, of registrant's principal executive offices) number, including area code, of agent for service)
--------------------- Copies to JOHN D. WATSON, JR., ESQ. LATHAM & WATKINS 1001 PENNSYLVANIA AVENUE, N.W., SUITE 1300 WASHINGTON, D.C. 20004-2505 (202) 637-2200 --------------------- APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after the effective date of this Registration Statement. If the only securities being registered on this form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. [ ] If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box. [X] 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(c) 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 delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [ ] CALCULATION OF REGISTRATION FEE
================================================================================================================================ PROPOSED MAXIMUM PROPOSED MAXIMUM TITLE OF SECURITIES AMOUNT TO BE AGGREGATE PRICE AGGREGATE OFFERING AMOUNT OF TO BE REGISTERED REGISTERED PER UNIT PRICE(1) REGISTRATION FEE(1) - -------------------------------------------------------------------------------------------------------------------------------- $3.00 Convertible Exchangeable Preferred Stock, par value $.01 per share.......... 5,990,000 shares $50.00 $299,500,000 $90,757.58 - ------------------------------------------------------------------------------------------------------------------------------ 6% Convertible Subordinated Exchange Debentures due 2012...................... --(2) $ -- $ -- $ -- (2) - ------------------------------------------------------------------------------------------------------------------------------ Common Stock, par value $.01 per share..... 5,990,000 shares(3) $ -- $ -- $ -- (3) ==============================================================================================================================
(1) Estimated solely for the purpose of calculating the registration fee in accordance with Rule 457(c) of the Securities Act. (2) Represents the 6% Convertible Subordinated Exchange Debentures due 2012 issuable upon exchange of the $3.00 Convertible Exchangeable Preferred Stock from time to time. Pursuant to Rule 457(i) of the Securities Act, no registration fee is required to be paid with respect to the 6% Convertible Subordinated Exchange Debentures due 2012 because no separate consideration will be received in the event that the 6% Convertible Subordinated Exchange Debentures due 2012 are issued by the registrant in exchange for the $3.00 Convertible Exchangeable Preferred Stock. Based upon the current exchange price of $50.00 principal amount of 6% Convertible Subordinated Exchange Debentures due 2012 for each share of $3.00 Convertible Exchangeable Preferred Stock, a maximum of $299,500,000 aggregate principal amount of 6% Convertible Subordinated Exchange Debentures due 2012 may be issued upon exchange of the $3.00 Convertible Exchangeable Preferred Stock. (3) Represents the shares of Common Stock issuable upon conversion of the $3.00 Convertible Exchangeable Preferred Stock or the Exchange Debentures from time to time. Pursuant to Rule 457(i) of the Securities Act, no registration fee is required to be paid with respect to such shares of Common Stock because no separate consideration will be received in the event that shares of Common Stock are issued by the registrant upon conversion of the $3.00 Convertible Exchangeable Preferred Stock or the Exchange Debentures. Based upon the current conversion price of $50.00 per share of $3.00 Convertible Exchangeable Preferred Stock, which is subject to adjustment in certain circumstances, a maximum of 5,990,000 shares of Common Stock may be issued upon conversion of the $3.00 Convertible Exchangeable Preferred Stock or the Exchange Debentures. THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT 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 INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. SUBJECT TO COMPLETION, DATED OCTOBER 1, 1997 PROSPECTUS 5,990,000 SHARES CHANCELLOR MEDIA CORPORATION (FORMERLY KNOWN AS EVERGREEN MEDIA CORPORATION) $3.00 CONVERTIBLE EXCHANGEABLE PREFERRED STOCK LIQUIDATION PREFERENCE $50.00 PER SHARE ------------------------------ This Prospectus relates to the resale of shares of the $3.00 Convertible Exchangeable Preferred Stock, par value $.01 per share (the "$3.00 Convertible Preferred Stock"), of Chancellor Media Corporation, a Delaware corporation formerly known as Evergreen Media Corporation ("Chancellor Media" and, together with its subsidiaries, the "Company"), the 6% Convertible Subordinated Exchange Debentures due 2012 (the "Exchange Debentures") issuable upon exchange of the $3.00 Convertible Preferred Stock, and the shares of the Common Stock, par value $.01 per share (the "Common Stock" and, together with the $3.00 Convertible Preferred Stock and the Exchange Debentures, the "Securities"), of Chancellor Media issuable upon conversion of the $3.00 Convertible Preferred Stock or the Exchange Debentures. 5,500,000 shares of $3.00 Convertible Preferred Stock were originally issued and sold (the "Original Offering") on June 16, 1997 (the "Original Offering Date") to Alex. Brown & Sons Incorporated, BT Securities Corporation, Credit Suisse First Boston Corporation, Goldman, Sachs & Co., NationsBanc Capital Markets, Inc. and TD Securities (USA) Inc. (the "Initial Purchasers"), and such shares were simultaneously sold by the Initial Purchasers in transactions exempt from the registration requirements of the Securities Act of 1933, as amended (the "Securities Act") in the United States to persons reasonably believed by the Initial Purchasers to be "qualified institutional buyers" (as defined in Rule 144A under the Securities Act) or institutional "accredited investors" (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act). An additional 490,000 shares of the $3.00 Convertible Preferred Stock were issued and sold (the "Overallotment Offering") on June 20, 1997 (the "Overallotment Offering Date") to the Initial Purchasers, and such shares were simultaneously sold by the Initial Purchasers in transactions exempt from the registration requirements of the Securities Act in the United States to persons reasonably believed by the Initial Purchasers to be "qualified institutional buyers." The Securities may be offered and sold from time to time by the holders named herein or by their transferees, pledgees, donees or their successors (collectively, the "Selling Holders") pursuant to this Prospectus. The Securities may be sold by the Selling Holders from time to time directly to purchasers or through agents, underwriters or dealers. See "Selling Holders" and "Plan of Distribution." If required, the names of any such agents, underwriters or dealers involved in the sale of the Securities and the applicable agent's commission, dealer's purchase price or underwriter's discount, if any, will be set forth in an accompanying supplement to this Prospectus (the "Prospectus Supplement"). The Selling Holders will receive all of the net proceeds from the sale of the Securities and will pay all underwriting discounts, selling commissions and transfer taxes, if any, applicable to any such sale. The Company is responsible for payment of all other expenses incident to the registration of the Securities. The Selling Holders and any broker-dealers, agents or underwriters that participate in the distribution of the Securities may be deemed to be "underwriters" within the meaning of the Securities Act, and any commission received by them and any profit on the resale of the Securities purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act. See "Plan of Distribution" for a description of indemnification arrangements. The shares of $3.00 Convertible Preferred Stock are convertible, at the option of the holder at any time unless previously redeemed or exchanged, into Common Stock, at a conversion price of $50.00 per share of Common Stock (equivalent to a conversion rate of 1.00 share of Common Stock per share of $3.00 Convertible Preferred Stock), subject to adjustment in certain events. Upon the occurrence of a Change of Control (as defined), holders will have special conversion rights, subject to cash redemption by the Company. The $3.00 Convertible Preferred Stock is redeemable, in whole or in part, at the option of the Company, for cash at any time on or after June 16, 1999, initially at $52.40 per share, declining ratably on June 15 of each year thereafter to a redemption price of $50.00 per share after June 15, 2007, plus in each case accrued and unpaid dividends, provided that prior to June 15, 2000 any such redemption shall be subject to the requirement that the price of the Common Stock shall have exceeded 150% of the conversion price for 20 out of any 30 consecutive trading days. See "Description of the $3.00 Convertible Preferred Stock." The $3.00 Convertible Preferred Stock will be exchangeable, subject to certain conditions, at the option of the Company, in whole but not in part, on any dividend payment date commencing September 15, 2000, for the Company's Exchange Debentures at a rate of $50.00 principal amount of Exchange Debentures for each share of $3.00 Convertible Preferred Stock. See "Description of the $3.00 Convertible Preferred Stock" and "Description of Exchange Debentures." On September 30, 1997, the last sale price of the Common Stock on the Nasdaq National Market (symbol: "AMFM") was $52.625 per share. ------------------------------ SEE "RISK FACTORS" BEGINNING ON PAGE 7 FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED IN EVALUATING AN INVESTMENT IN THE SECURITIES. ------------------------------ THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. ------------------------------ THE DATE OF THIS PROSPECTUS IS , 1997. 3 AVAILABLE INFORMATION The Company has filed with the Commission a Registration Statement on Form S-3 under the Securities Act with respect to the Exchange Offer. As permitted by the rules and regulations of the Commission, this Prospectus omits certain information, exhibits and undertakings contained in the Registration Statement. For further information with respect to the Company and this Exchange Offer, reference is made to the Registration Statement, including the exhibits thereto and the financial statements, notes and schedules filed as a part thereof. The Company is subject to the informational requirements of the Securities and Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance therewith, files reports, proxy materials and other information with the Commission. The reports, proxy materials and other information filed by the Company with the Commission can be inspected and copied at the public reference facilities maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the Regional Offices of the Commission at Seven World Trade Center, New York, New York 10048 and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such materials also can be obtained from the Public Reference Section of the Commission, Washington, D.C. 20549 at prescribed rates. The Commission maintains a Web site that contains reports, proxy and information statements and other information regarding registrants that file electronically with the Commission. The address of such site is http://www.sec.gov. The Company's Common Stock is listed on the Nasdaq National Market. The Company will provide without charge to each person to whom this Prospectus is delivered, on the request of any such person, a copy of any or all of the above documents incorporated herein by reference (other than exhibits to such documents, unless such exhibits are specially incorporated by reference into the documents that this Prospectus incorporates). Requests should be directed to Chancellor Media Corporation, 433 East Las Colinas Blvd., Suite 1130, Irving, Texas 75039 (telephone (972) 869-9020). SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS Certain statements in this Prospectus under the captions "Prospectus Summary," "Risk Factors," and "Business and Properties" and elsewhere constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other important factors that could cause the actual results, performance or achievements of the Company, or industry results, to differ materially from any future results, performance or achievements expressed or implied by such forward-looking statements. Such risks, uncertainties and other important factors include, among others: substantial leverage and the history of net losses; the necessity of governmental approval for a number of the transactions discussed in the Prospectus; certain risks associated with the closing and integration of acquisitions; competition; government regulation; general economic and business conditions; dependence on key personnel; terms of the Company's indebtedness; limitations on the ability of the Company to pay dividends; and other factors referenced in this Prospectus. See "Risk Factors." These forward-looking statements speak only as of the date of this Prospectus. The Company expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement contained herein to reflect any change in the Company's expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based. ii 4 PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and financial statements, including the notes thereto, appearing elsewhere in this Prospectus or incorporated by reference herein. As used herein, unless the context otherwise requires, the term "Company" refers to Chancellor Media Corporation ("Chancellor Media") and its subsidiaries. THE COMPANY 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"), Chancellor Radio Broadcasting Company ("CRBC"), Evergreen Media Corporation ("Evergreen"), Evergreen Mezzanine Holdings Corporation ("EMHC") and Evergreen Media Corporation of Los Angeles ("EMCLA"), among other things, (i) Chancellor was merged with and into EMHC, a direct and wholly-owned subsidiary of Evergreen, with EMHC surviving the merger, and (ii) CRBC was merged with and into EMCLA, a direct and wholly-owned subsidiary of EMHC, with EMCLA surviving the merger (collectively, the "Chancellor Merger"). Following the Chancellor Merger, Evergreen changed its name to Chancellor Media Corporation, EMHC changed its name to Chancellor Mezzanine Holdings Corporation ("CMHC") and EMCLA changed its name to Chancellor Media Corporation of Los Angeles ("CMCLA"). The Company is the largest pure play radio broadcasting company in the United States based on gross revenues, with a portfolio at September 5, 1997 consisting of 89 radio stations (63 FM and 26 AM) in 22 large markets, including each of the nation's 12 largest radio revenue markets. The Company's portfolio includes the first or second ranked station cluster in terms of revenue share in 15 of its 22 markets. On a pro forma basis, the Company had net revenue and broadcast cash flow (as defined) of approximately $396.0 million and $166.6 million, respectively, for the six months ended June 30, 1997, and its pro forma broadcast cash flow margin for such period would have been 42%. The Company's strategy is to secure the leading clusters of radio stations in each of the markets in which it operates. The Company's station portfolio includes a total of 11 station clusters of four or five FM stations ("superduopolies"), with seven in the 12 largest radio markets -- Los Angeles, New York, Chicago, San Francisco, Philadelphia, Washington, D.C. and Detroit -- and four in other large markets -- Denver, Minneapolis/St. Paul, Phoenix and Orlando. Consummation of the Pending Transactions (as defined below) will add 15 stations (12 FM and three AM) (without taking into account stations to be disposed or exchanged in the Pending Transactions) to the Company's portfolio, including five stations in its superduopoly markets, and will increase the number of superduopoly markets from 11 to 12. Approximately 78% of pro forma 1996 net revenue would have been generated by the superduopoly markets. The Company's 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 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 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 12.0% of the Company's pro forma 1996 broadcast cash flow. The Company's principal executive office is located at 433 East Las Colinas Boulevard, Suite 1130, Irving, Texas 75039, and its telephone number is (972) 869-9020. 1 5 BUSINESS STRATEGY The Company's senior management team, led by Scott K. Ginsburg and James de Castro, has extensive experience in acquiring and operating large market radio station groups. The Company's business strategy is to assemble and operate radio station clusters in order to maximize broadcast cash flow generated in each market. This strategy relies on the following six key elements. Create Large Market Superduopolies. The Company seeks to be the owner and operator of the leading superduopoly in the largest markets in the United States. Management believes that the large revenue base in these markets, in conjunction with operating synergies achievable through the operation of multiple stations, will enable it to appeal to a wider universe of national and local advertisers and to achieve a greater degree of profitability than that of operators and broadcasters in smaller markets. The Pending Transactions will complement the Company's existing stations in the Los Angeles, New York, Chicago, Dallas, Houston, Denver and Nassau/Suffolk (Long Island) markets. The Company expects to continue to selectively pursue acquisition opportunities in the major markets in which it will compete as well as in other markets. Maximize Superduopoly Revenue and Expense Synergies. The Company seeks to capitalize on the revenue growth and expense savings opportunities of superduopolies that have been created or that will be created by the Viacom Acquisition (as defined), the Chancellor Merger and the Pending Transactions. Superduopolies have only been permissible since the passage of the Telecommunications Act of 1996 (the "1996 Act") in January 1996. Management believes that substantial benefits can be derived from the successful integration of these station cluster groups. Management also 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. Establish Strong Listener Loyalty. Management believes that strong listener familiarity with a given radio station produces listener loyalty. Management seeks to establish this familiarity through a variety of programming and marketing techniques, including the development of high-profile on-air personalities and creative station-sponsored promotional events, all of which are designed to secure heightened listener awareness. The Company also conducts extensive market research to help identify programming format opportunities and attract new listeners, as has been the case with WKTU-FM in New York. After operating WKTU-FM for nine months under the call letters and country music format inherited from a prior operator, in February 1996 the Company began to operate WKTU-FM as a rhythmic contemporary hits station. According to Arbitron, WKTU-FM was ranked eleventh in its target demographic group as a country station, and was ranked first in several key demographic groups (including its target demographic group) in the first full ranking period after the station changed its format. The station has continued to rank among the top five stations in its target demographic group in subsequent periods. Management believes that institutionalizing its radio stations in their markets through programming, marketing and research ensures steady long-term audience share ratings. Maintain Strict Cost Controls. Management maintains a company-wide focus on cost controls in an effort to maximize broadcast cash flow margins. Management reviews station spending on a monthly basis. In addition, corporate level employees maintain weekly sales reporting systems designed to enable management to evaluate station performance on a current basis. The Company's focus on maximizing superduopoly revenues and maintaining cost controls is reflected by the fact that, for the last two years, the Company has achieved broadcast cash flow margins of 40% or more. The Company also carefully monitors capital expenditures. Develop Experienced, Incentivized Management Team. The Company believes that management depth is critical to achieving superior operating performance in a portfolio as large as the Company's. The Company's senior management team of Scott K. Ginsburg and James de Castro have an aggregate of more than 30 years of radio industry operating experience. This senior management team is supported by an experienced team of veteran group operators and station general managers. At the station level, the Company seeks to incentivize its individual radio station managers and sales forces to outperform revenue and broadcast 2 6 cash flow budget expectations by granting quarterly and annual performance measurement-based bonuses. The Company believes that the incentives it offers to its employees, as well as its stature in the radio industry, will enable it to continue to be successful in recruiting top industry employees. Maximize Free Cash Flow. By emphasizing the revenue and expense synergies achievable through the assembly and operation of superduopolies and by carefully monitoring operating costs and capital expenditures, the Company seeks to maximize broadcast cash flow and, ultimately, free cash flow (broadcast cash flow less corporate general and administrative expenses, debt service, tax payments, dividend requirements and capital expenditures). This focus on free cash flow should facilitate reduction of leverage without undue dependence on capital markets and position the Company to pursue attractive acquisitions. In addition to the foregoing strategy elements, the Company also anticipates that it will attempt to leverage its radio expertise and expand into industries related to the operation of radio stations in the future. In this respect, the Company has announced its intention to acquire Katz Media Group, Inc. ("Katz"), a full-service media representation firm, and has also announced a plan to create a new national radio network. There can be no assurance that these plans will ultimately be successful. In addition, there can be no assurance that the acquisition of Katz will be consummated. See "Risk Factors -- HSR Approval for Katz Acquisition." 3 7 RECENT DEVELOPMENTS For a further discussion of the transactions described below, see "Business and Properties." THE CHANCELLOR MERGER - - On September 5, 1997, Evergreen, EMHC, EMCLA, Chancellor and CRBC consummated the transactions contemplated by the Chancellor Merger Agreement. Pursuant to the Chancellor Merger Agreement, (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. Upon the consummation of the Parent Merger, Evergreen was renamed Chancellor Media Corporation and EMHC was renamed Chancellor Mezzanine Holdings Corporation ("CMHC"). Upon the consummation of the Subsidiary Merger, 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 the Company's portfolio of stations, including 13 stations in markets in which the Company previously operated. COMPLETED EVERGREEN TRANSACTIONS - - Between January 1, 1997 and the date of the completion of the Chancellor Merger, Evergreen and its subsidiaries had completed (i) the acquisition of 17 radio stations for a net purchase price of approximately $1.14 billion, (ii) the exchange of six stations for three stations and $9.5 million in cash, (iii) the disposition of 10 radio stations for $269.3 million in cash and a promissory note for $18.0 million and (iv) the disposition of one radio station for net proceeds of $80.0 million which are being held by a qualified intermediary pending the completion of the deferred exchange of the disposed station for one or more radio stations. COMPLETED CHANCELLOR TRANSACTIONS - - Between January 1, 1997 and the date of the completion of the Chancellor Merger, Chancellor and its subsidiaries had completed (i) the acquisition of 24 radio stations for a net purchase price of approximately $1.07 billion, (ii) the exchange of three stations for one station and $33.0 million in cash and (iii) the sale of five radio stations for $108.3 million in cash. PENDING TRANSACTIONS - - THE GANNETT ACQUISITION. On April 4, 1997, Evergreen entered into three separate asset purchase agreements (the "Gannett Agreements") with Pacific and Southern Company, Inc., a subsidiary of Gannett Co., Inc. ("P&S"), under which Evergreen agreed to acquire one FM and one AM station in Chicago, one FM and one AM station in Houston and one FM station in Dallas, for an aggregate purchase price of $340.0 million in cash, subject to an upward adjustment of up to $10.0 million, depending on the timing of the consummation of the transaction (the "Gannett Acquisition"). - - BONNEVILLE ACQUISITION. On June 24, 1997, Evergreen entered into an agreement to acquire two FM stations in Dallas for an aggregate purchase price of $83.5 million (the "Bonneville Acquisition"). - - BONNEVILLE OPTION. On August 6, 1997, Evergreen and Chancellor paid $3.0 million to Bonneville International Corporation ("Bonneville") for an option to exchange three stations in Los Angeles and Washington, D.C. plus an additional $57.0 million in cash for three stations in New York, Los Angeles and Houston (the "Bonneville Option"). 4 8 - - DENVER ACQUISITION. On July 30, 1997, Chancellor entered into an agreement to acquire one FM station in Denver for $26.0 million in cash (the "Denver Acquisition"). - - SFX EXCHANGE. On July 1, 1996, Chancellor entered into an agreement to exchange two FM stations in Jacksonville and $11.0 million in cash in return for four stations (three FM and one AM) in Nassau/ Suffolk (Long Island) (the "SFX Exchange"). - - KATZ ACQUISITION. On July 14, 1997, Evergreen, Chancellor and Katz entered into an agreement pursuant to which a jointly owned affiliate of Evergreen and Chancellor would acquire Katz, a full-service media representation firm, in a transaction valued at approximately $373 million (the "Katz Acquisition"). Under the terms of the Katz Acquisition, shareholders of Katz would be offered in a tender offer $11.00 in cash for each share of common stock held. Shares not purchased in the tender offer would be converted in a second-step merger into the right to receive $11.00 in cash per share, subject to statutory appraisal and dissenters' rights. Assuming completion of the Katz Acquisition, debt of Katz of approximately $218 million would be assumed in the transaction. Consummation of the Katz Acquisition is subject to the tender of a majority of Katz shares on a fully-diluted basis, approval of the Katz shareholders and the receipt of certain regulatory approvals, including the expiration or termination of the waiting period required under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"). In connection with its review under the HSR Act, the Antitrust Division of the United States Department of Justice (the "DOJ") has issued a second request for information concerning the Katz Acquisition. The Company is in the process of providing that information. As a result of the delay caused by such second request for information, assuming consummation of the Katz Acquisition, it is presently contemplated that the affiliate that would acquire Katz would be a direct, wholly-owned subsidiary of Chancellor Media. There can be no assurance as to whether or when the Katz Acquisition may ultimately be consummated. Upon the consummation of all the Pending Transactions, the Company's portfolio will consist of 99 radio stations (73 FM and 26 AM). Assuming completion of the Katz Acquisition, Chancellor Media will also own and operate Katz, a full-service media representation firm serving multiple types of electronic media, with leading market shares in the representation of radio and television stations and cable television systems. THE FINANCING TRANSACTIONS The financing for the Completed Evergreen Transactions, the Completed Chancellor Transactions and the Pending Transactions has included: - - EVERGREEN PREFERRED STOCK OFFERING. In June 1997, Evergreen issued and sold 5,990,000 shares of its $3.00 Convertible Exchangeable Preferred Stock (the "$3.00 Convertible Preferred Stock") which generated net proceeds of $287.8 million. - - EMCLA SENIOR CREDIT FACILITY. On April 25, 1997, EMCLA and a syndicate of commercial banks and financial institutions amended and restated EMCLA's senior loan agreement (as amended on June 26, 1997 and August 7, 1997, the "Senior Credit Facility") to, among other things, provide for a total commitment of $1.75 billion, consisting of a $1.25 billion reducing revolving credit facility and a $500.0 million term loan facility. The commitments under the revolving credit facility and the term loan facility were increased to $1.60 billion and $900.0 million, respectively, upon consummation of the Chancellor Merger, and at such time, CMCLA borrowed under the Senior Credit Facility to repay all amounts then outstanding under the CRBC Restated Credit Agreement and the Chancellor Interim Financing (as each term is defined below). - - CRBC SUBORDINATED NOTES OFFERING. On June 24, 1997, CRBC issued and sold the Original Notes, the net proceeds of $194.1 million of which were used to repay borrowings under CRBC's previous senior credit agreement. - - CRBC RESTATED CREDIT AGREEMENT. On July 2, 1997, CRBC and a syndicate of commercial banks and financial institutions amended and restated CRBC's senior credit facility (as amended, the "CRBC Restated Credit Agreement") to, among other things, provide for a total commitment of $750.0 million. 5 9 - - CHANCELLOR INTERIM FINANCING. On July 2, 1997, Chancellor borrowed funds under an interim loan of $170.0 million (the "Chancellor Interim Financing"). - - STATION SALES PROCEEDS. The cash proceeds of radio station dispositions totaling $490.6 million. USE OF PROCEEDS The Company will not receive any proceeds from the sale of Securities. The Selling Holders will receive all of the proceeds from any sale of the Securities. RISK FACTORS See "Risk Factors" beginning on page 7 for a discussion of certain factors that should be considered carefully in evaluating an investment in the Securities. 6 10 RISK FACTORS Holders of the Securities that are considering participating in this offer should carefully consider, in addition to the other information contained in this Prospectus, the following risk factors. SUBSTANTIAL LEVERAGE; HISTORY OF NET LOSSES AND INSUFFICIENCY OF EARNINGS TO COVER FIXED CHARGES The Company has consolidated indebtedness that is substantial in relation to its stockholders equity. The Company is subject to the terms of the Senior Credit Facility, the indenture (the "9 3/8% Indenture") governing the 9 3/8% Senior Subordinated Notes due 2004 of CMCLA (the "9 3/8% Notes"), the indenture (the "8 3/4% Indenture") governing the 8 3/4% Senior Subordinated Notes due 2007 of CMCLA (the "8 3/4% Notes") and the certificates of designation governing two series of preferred stock, the 12 1/4% Senior Cumulative Exchangeable Preferred Stock (the "12 1/4% Preferred Stock") and the 12% Exchangeable Preferred Stock (the "12% Preferred Stock"). The Senior Credit Facility, the 9 3/8% Indenture, the 8 3/4% Indenture and such certificates of designation limit, but do not prohibit, the incurrence of additional indebtedness by the Company. As of June 30, 1997, Evergreen and Chancellor had outstanding long-term indebtedness (including current portion) of approximately $525.0 million and $547.3 million, respectively. As of June 30, 1997, on a pro forma basis after giving effect to those Completed Transactions consummated after such date, the Chancellor Merger, the Pending Transactions (other than the Katz Acquisition) and the Financing Transactions, the Company would have had outstanding long term indebtedness (including current portion) of approximately $2.3 billion, redeemable preferred stock with an aggregate liquidation preference of approximately $440.0 million, an accumulated deficit of $110.8 million and stockholder's equity of $1.4 billion. In addition, CMCLA expects to borrow up to $180.0 million under the Senior Credit Facility and that amount will be distributed ultimately to Chancellor Media to be used by Chancellor Media as the equity capital required to finance the Katz Acquisition. See "-- Katz Acquisition". The degree to which the Company is leveraged could have material consequences to the Company and the holders of the $3.00 Convertible Preferred Stock, including, but not limited to the following: (i) its ability to obtain additional financing in the future for acquisitions, working capital, capital expenditures, and general corporate or other purposes may be impaired, (ii) a substantial portion of its cash flow will be required for debt service under the Senior Credit Facility, the 9 3/8% Notes and the 8 3/4% Notes and, as a result, will not be available for other purposes, (iii) commencing in February 2001, CMCLA will have substantial cash dividend requirements on the 12 1/4% Preferred Stock and, commencing in January 2002, on the 12% Preferred Stock, (iv) CMCLA's ability to declare cash dividends to CMHC, which will, in turn, distribute dividends paid to it to Chancellor Media, in an amount sufficient to enable Chancellor Media to pay dividends on the $3.00 Convertible Preferred Stock and the 7% Convertible Preferred Stock will be limited by the terms of the Senior Credit Facility and by the terms of the 9 3/8% Indenture, the 8 3/4% Indenture and the certificates of designation governing the 12% Preferred Stock and 12 1/4% Preferred Stock, (v) the Company's level of indebtedness could make it more vulnerable to economic downturns, limit its ability to withstand competitive pressures and reduce its flexibility in responding to changing business and economic conditions and (vi) the agreements governing its long-term debt (and, to a lesser extent, the 12 1/4% Preferred Stock and the 12% Preferred Stock) contain numerous restrictive operating and financial covenants with which it must comply. The failure by the Company to comply with the covenants in such debt instruments could result in an event of default thereunder, which could permit acceleration of the debt under such instruments and in some cases acceleration of debt under other instruments that contain cross-default or cross-acceleration provisions. The ability of the Company to satisfy its obligations under the Senior Credit Facility, the 9 3/8% Indenture, the 8 3/4% Indenture, and the certificates of designation governing the 12 1/4% Preferred Stock and the 12% Preferred Stock will depend upon the Company's future operating performance. Such operating performance will be affected by prevailing economic conditions and financial, business and other factors, certain of which are beyond the Company's control. The Company anticipates that its operating cash flow, together with borrowings under the Senior Credit Facility, will be sufficient to meet its operating expenses and to service its debt and preferred stock dividend requirements as they become due. However, if the Company is unable to service its indebtedness, whether upon acceleration of such indebtedness or in the ordinary course of business, it will be forced to pursue one or more alternative strategies such as selling assets, restructuring or refinancing 7 11 its indebtedness, or seeking additional equity capital. There can be no assurance that any of these strategies could be effected on satisfactory terms, if at all, or that the approval of the FCC could be obtained on a timely basis, or at all, for the transfer of any of the stations' licenses in connection with a proposed sale of assets. The Company has historically experienced, on a consolidated basis, net losses, principally as a result of significant interest charges, certain non-recurring expenses and depreciation and amortization charges relating to the acquisition of radio broadcasting stations. Evergreen's net loss attributable to common stockholders for the years ended December 31, 1994, 1995 and 1996 and for the six months ended June 30, 1997 was $8.4 million, $10.7 million, $20.0 million and $1.2 million, respectively. Chancellor's net loss attributable to common stockholders for the years ended December 31, 1994, 1995 and 1996 and for the six months ended June 30, 1997 was $.1 million, $11.5 million, $35.0 million and $33.8 million, respectively. On a pro forma basis, after giving effect to the Completed Transactions consummated after such date, the Chancellor Merger, the Pending Transactions (other than the Katz Acquisition) and the Financing Transactions, the Company's net loss attributable to common stockholders for the year ended December 31, 1996 and the six months ended June 30, 1997 would have been $216.5 million and $92.6 million, respectively. The acquisition of radio broadcasting stations has been and will continue to be an important part of the Company's operating strategy, and the Company expects that amortization charges and interest expenses relating to past and possible future acquisitions will continue to have a significant adverse effect on the Company's reported results. NECESSITY OF GOVERNMENTAL REVIEWS AND APPROVALS PRIOR TO CONSUMMATION OF THE PENDING TRANSACTIONS Approval of the FCC is required for the issuance, renewal or transfer of radio broadcast station operating licenses. In addition, the consummation of each of the Pending Transactions is conditioned upon the expiration or termination of the applicable waiting period under the HSR Act . To date, (i) the FCC has approved the Gannett Acquisition, the Bonneville Acquisition and the SFX Exchange, and the approvals for each of these transactions has become final, nonappealable orders, (ii) the waiting periods required under the HSR Act for the Gannett Acquisition, the Bonneville Acquisition, the Bonneville Option and the Denver Acquisition have expired or been terminated, and (iii) the waiting period required under the HSR Act for the SFX Exchange and the Katz Acquisition has not expired or been terminated. There can be no assurance that any governmental agency, including the FCC, will approve or take any other required action with respect to any of the Pending Transactions for which approval has not been given or actions not taken or, if approvals are received or actions are taken, that such approvals or actions will not require further, possibly numerous divestitures, or be conditioned upon matters that would cause the Company to abandon one or more of the Pending Transactions or that no action will be brought challenging such approvals or actions, or, if such challenge is made, as to the result thereof. INTEGRATION OF ACQUISITIONS; OPERATION OF KATZ The Company holds a significantly larger portfolio of radio stations than the Company has held in the past. In addition, management is regularly involved in discussions with third parties regarding potential acquisitions, and the Company may pursue an active acquisition strategy that could result in additional expansion in the future. As a result of the Company's acquisition strategy, the Company's management will be required to manage a substantially larger radio station group than historically has been the case. The Company's future operations and earnings will be largely dependent on the Company's ability to integrate the stations proposed to be acquired thereunder. The Company must, among other things, integrate management and employee personnel and combine certain administrative procedures. The integration of the stations proposed to be acquired involve numerous other risks, including the potential loss of key employees of acquired stations. There can be no assurance that the Company will successfully integrate the stations proposed to be acquired, and the failure to do so could have a material adverse effect on its results of operations and financial condition. In addition, the need to focus management's attention on the integration of these stations may limit the ability of the Company to successfully pursue other opportunities for a period of time. 8 12 Upon consummation of the Katz Acquisition, the Company will enter into a line of business not previously undertaken by the Company on a national basis. Although the media representation business is related to the radio broadcasting business and the Company's subsidiaries have experience in certain aspects of the media representation business at the local radio station level, consummation of the Katz Acquisition will require the Company to operate the business of Katz and manage a significantly larger base of management and employee personnel performing national media representation functions. There can be no assurance that the Company will successfully operate the business proposed to be acquired as a result of the Katz Acquisition. In addition, the need to focus management's attention on the operation of this business may limit the ability of the Company to successfully pursue other opportunities for a period of time. The acquisition strategy of the Company involves numerous other risks, including increasing leverage and debt service requirements, the diversion of management's attention from other business concerns and the potential loss of key employees of acquired stations. The availability of additional acquisition financing cannot be assured, and depending on the terms of the proposed acquisitions and financings, could be restricted by the terms of the Senior Credit Facility, the 9 3/8% Indenture, the Indenture, the certificates of designation for the 12 1/4% Preferred Stock and the 12% Preferred Stock, or the certificates of designation for the 7% Convertible Preferred Stock and $3.00 Convertible Preferred Stock. There can be no assurance that any future acquisitions will not have a material adverse effect on the Company's financial condition and results of operations. HSR APPROVAL FOR KATZ ACQUISITION On July 14, 1997, Evergreen, Chancellor and Katz entered into an agreement pursuant to which a jointly-owned affiliate of Evergreen and Chancellor would acquire Katz, a full-service media representation firm, in a tender offer transaction valued at approximately $373 million. The DOJ has issued a second request for information under the HSR Act in connection with the Katz Acquisition. Assuming that the Katz Acquisition may ultimately be completed, as a result of the delay caused by such second request for information, it is presently contemplated that the affiliate that would acquire Katz would be a direct wholly owned subsidiary of Chancellor Media. There can be no assurance as to whether, or when, the Katz Acquisition may be consummated. COMPETITIVE NATURE OF RADIO BROADCASTING The radio broadcasting industry is a highly competitive business. The success of each of the Company's stations will be dependent, to a significant degree, upon its audience ratings and share of the overall advertising revenue within its market. The Company's stations will compete for listeners and advertising revenue directly with other radio stations, as well as with other media, within their respective markets. The Company also will compete 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 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 their 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, direct broadcast satellite ("DBS") systems and other digital audio broadcasting formats to local and national audiences. In addition, 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 national or regional multi-channel and multi-format satellite radio services with sound quality equivalent to compact discs. Another possible competitor to traditional radio is In Band On Channel ("IBOC") digital radio. IBOC could provide multi-channel, multi-format digital radio services in the same band width currently 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. 9 13 ANTITRUST MATTERS As a result of the recent consolidation of ownership in the radio broadcast industry, the DOJ has been giving closer scrutiny to acquisitions in the industry, including certain transactions involving the Company. The consummation of the Pending Transactions are subject to notification filing requirements, applicable waiting periods and possible review by the DOJ or the United States Federal Trade Commission (the "FTC") under the HSR Act. To date, the waiting periods for all such transactions except the SFX Exchange have expired or been terminated. See "-- Necessity of Governmental Reviews and Approvals Prior to Consummation of the Pending Transactions" above and "Business and Properties -- Federal Regulation of Radio Broadcasting Industry." The DOJ has issued a second request for additional information in connection with the SFX Exchange (as well as for the Katz Acquisition, as described above). DOJ review of certain transactions has caused, and may continue to cause, delays in anticipated consummations of certain transactions and, in some cases, may result in attempts by DOJ to enjoin such transactions or negotiate modifications of the proposed transactions. Such delays, injunctions and modifications could have an adverse effect on the Company and may result in the abandonment of some otherwise attractive transactions. 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 the benchmarks. Given this uncertainty, the Company cannot predict whether it will be required by the DOJ or the FTC to dispose of certain stations to be acquired as a result of the Pending Transactions. 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. RADIO BROADCASTING INDUSTRY SUBJECT TO FEDERAL REGULATION The radio broadcasting industry is subject to extensive regulation by the FCC under the Communications Act of 1934 as amended (as amended by the 1996 Act, the "Communications Act"). Approval of the FCC is required for the issuance, renewal or transfer of radio broadcast station operating licenses. See "-- Necessity of Governmental Reviews and Approvals Prior to Consummation of the Pending Transactions" above. In particular, the Company's business is dependent upon its continuing to hold radio broadcasting licenses from the FCC that are issued for terms of up to eight years. While in the vast majority of cases such licenses are renewed by the FCC, there can be no assurance that any of the stations' licenses will be renewed at their expiration dates, or that renewals, if granted, will not include conditions or qualifications that could adversely affect the Company's operations. In addition, the Communications Act and FCC rules restrict alien ownership and voting of capital stock of, and participations in the affairs of the Company. Moreover, laws, regulations and policies may be changed significantly over time and there can be no assurance that such changes will not have a material adverse affect on the business, financial condition and results of operations of the Company. The 1996 Act, which amended the Communications Act in a number of important respects, has created significant new opportunities for radio broadcasters, but also has created uncertainties as to how the FCC and the courts will enforce and interpret the 1996 Act. Although the 1996 Act eliminated the national ownership ceiling previously applicable to radio broadcasters and also loosened restrictions previously applicable to ownership within single markets, significant restrictions remain on permitted levels of local ownership. In markets with 45 or more stations, ownership is limited to eight stations, no more than five of which can be FM or AM; in markets with 30-44 stations, ownership is limited to seven stations, no more than four of which can be FM or AM; in markets with 15-29 stations, ownership is limited to six stations, no more than four of which can be FM or AM; 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. Compliance with the FCC's multiple ownership rules is expected to cause the Company and other radio broadcasters to forego acquisition opportunities that they might otherwise wish to pursue. Compliance with these rules by third parties may also have a significant impact on the Company as, for example, in precluding the consummation of swap transactions that would cause such third parties to violate multiple ownership rules. 10 14 SUBORDINATION OF EXCHANGE DEBENTURES The payment of principal of and premium and interest on the Exchange Debentures will be subordinated to all existing and future Senior Debt (as defined in the Indenture relating to the Exchange Debentures) of the Company, including the Company's guarantee of CMCLA's borrowings under the Senior Credit Facility. As a result of such subordination, in the event of the Company's insolvency, liquidation, reorganization, dissolution or other winding up, or upon the acceleration of any Senior Debt, the holders of Senior Debt must be paid in full before the holders of the Exchange Debentures may be paid. Furthermore, payments on the Exchange Debentures will not be permitted if a default exists or would be caused with respect to any Senior Debt. In addition, payment of principal of and premium and interest on the Exchange Debentures effectively will be subordinated to all existing and future indebtedness and other liabilities of the Company's subsidiaries which, at June 30, 1997, aggregated $2.78 billion on a pro forma basis after giving effect to the Completed Transactions consummated after such date, the Chancellor Merger, the Pending Transactions (other than the Katz Acquisition) and the Financing Transactions. See "Description of Exchange Debentures -- Subordination." RESTRICTIONS IMPOSED BY TERMS OF INDEBTEDNESS The Senior Credit Facility, the 9 3/8% Indenture, the 8 3/4% Indenture and the certificates of designations for the Company's preferred stock and the Senior Credit Facility each contain certain covenants that restrict, among other things, the Company's ability to incur additional indebtedness, incur liens, pay dividends or make certain other restricted payments, consummate certain asset sales, enter into certain transactions with affiliates, impose restrictions on the ability of a subsidiary to pay dividends or make certain payments to the Company, 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 the assets of the Company. The Senior Credit Facility requires the Company to maintain specified financial ratios and to satisfy certain financial condition tests. The Company's ability to meet those financial ratios and financial condition tests can be affected by events beyond its control, and there can be no assurance that the Company will meet those tests. A breach of any of these covenants could result in a default under the Senior Credit Facility, the 9 3/8% Indenture, the 8 3/4% Indenture and other financial documents. In the event of an event of default under the Senior Credit Facility, the 9 3/8% Indenture or the 8 3/4% Indenture, the lenders thereunder could elect to declare all amounts outstanding thereunder, together with accrued interest, to be immediately due and payable. In the case of the Senior Credit Facility, if the Company were unable to repay those amounts, the lenders thereunder could proceed against the collateral granted to them to secure that indebtedness, including seeking foreclosure on the stock of CMHC, which has been pledged to secure that indebtedness. If the Senior Credit Facility indebtedness were to be accelerated, there can be no assurance that the assets of the Company would be sufficient to repay in full that indebtedness and the other indebtedness of the Company. Substantially all the assets of the Company have been pledged as security under the Senior Credit Facility. See "Description of Indebtedness." DEPENDENCE ON KEY PERSONNEL The Company's business will be dependent upon the performance of certain key individuals, including Thomas O. Hicks, the Chairman of the Company, Scott K. Ginsburg, the President and Chief Executive Officer of the Company; James de Castro, the Chief Operating Officer of the Company, and Matthew E. Devine, the Chief Financial Officer of the Company. The loss of the services of Mr. Hicks, Mr. Ginsburg, Mr. de Castro or Mr. Devine could have a material and adverse effect on the Company. Additionally, Steven Dinetz, the Company's former Co-Chief Operating Officer, has accepted a position as chief operating officer of another radio broadcaster affiliated with Hicks Muse (as defined), and there can be no assurance that the loss of Mr. Dinetz as Co-Chief Operating Officer of the Company will not have a material and adverse effect on the Company. 11 15 LIMITATIONS ON ABILITY TO PAY DIVIDENDS Chancellor Media is a holding company with no significant assets other than the common stock of CMHC. CMHC is also a holding company with no significant assets other than the common stock of CMCLA. Consequently, the Company will ultimately be dependent on dividends and other funds from CMCLA to meet its obligations, including with respect to dividends on the $3.00 Convertible Preferred Stock, and the 7% Convertible Preferred Stock. The Senior Credit Facility, the 9 3/8% Indenture, the 8 3/4% Indenture and the certificates of designation governing the 12 1/4% Preferred Stock and the 12% Preferred Stock will limit, but do not prohibit, the payment of dividends by CMCLA. In addition to these restrictions, under Delaware law the Company is permitted to pay dividends on its capital stock, including the $3.00 Convertible Preferred Stock and the 7% Convertible Preferred Stock, only out of its surplus or, in the event that it has no surplus, out of its net profits for the year in which a dividend is declared or for the immediately preceding fiscal year. Surplus is defined as the excess of a company's total assets over the sum of its total liabilities plus the par value of its outstanding capital stock. In order to pay dividends in cash, the Company must have surplus or net profits equal to the full amount of the cash dividend at the time such dividend is declared. In determining the Company's ability to pay dividends, Delaware law permits the board of directors of the Company to revalue the Company's assets and liabilities from time to time to their fair market values in order to create surplus. The Company cannot predict what the value of its assets or the amount of its liabilities will be in the future and, accordingly, there can be no assurance that the Company will be able to pay dividends on the $3.00 Convertible Preferred Stock and the 7% Convertible Preferred Stock. ABSENCE OF PUBLIC MARKET FOR THE PREFERRED STOCK AND RESTRICTIONS ON RESALE The Company does not intend to list the Preferred Stock on any public exchange and, although the Preferred Stock has been trading in the PORTAL market, there can be no assurance that any market for the Preferred Stock will develop or, if one does develop, that it will be maintained. If an active market for the Preferred Stock fails to develop or be sustained, the trading price of the Preferred Stock could be adversely affected. The Preferred Stock could trade at prices that may be higher or lower than the original price paid by the holder depending on many factors, including prevailing interest rates, the price of the Common Stock, the Company's operating results, any election by the Company to extend interest payment periods and the market for similar securities. However, there can be no assurance as to the liquidity of any trading market for the Preferred Stock or that an active public market for the Preferred Stock will develop. CONTROL OF THE COMPANY Affiliates of Hicks, Muse, Tate & Furst Incorporated ("Hicks Muse") hold approximately 15% of the outstanding primary shares of the Common Stock of Chancellor Media and Mr. Ginsburg holds approximately 4% of the outstanding primary shares of Common Stock of Chancellor Media. As the largest shareholder of Chancellor Media, Hicks Muse will have substantial influence on all matters submitted to a vote of the holders of Common Stock, and the combined voting power of Hicks Muse and Mr. Ginsburg may have the effect of discouraging certain types of transactions involving an actual or potential change of control of Chancellor Media or the Company. USE OF PROCEEDS The Selling Holders will receive all of the proceeds from any sale of the Securities. The Company will not receive any proceeds from the sale of Securities. 12 16 RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS The following table sets forth the Company's ratio of earnings to combined fixed charges and preferred stock dividends on a historical basis for each of the five fiscal years ended December 31, 1996 and for the six months ended June 30, 1997.
SIX MONTHS SIX MONTHS YEAR ENDED DECEMBER 31, ENDED ENDED --------------------------------------------- JUNE 30, JUNE 30, 1992 1993 1994 1995 1996 1996 1997 ------ ------- ------ ------- ------- ---------- ---------- Ratio of earnings to combined fixed charges and preferred stock dividends(1)........... -- -- -- -- -- -- 1.28 Deficiency of earnings to combined fixed charges and preferred stock dividends(1)........... $6,129 $28,066 $7,392 $13,089 $24,967 $23,915 $ --
- --------------- (1) 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. 13 17 BUSINESS AND PROPERTIES On September 5, 1997, pursuant to the Chancellor Merger Agreement, among other things, (i) Chancellor was merged with and into EMHC, a direct and wholly-owned subsidiary of Evergreen, with EMHC surviving the merger, and (ii) CRBC was merged with and into EMCLA, a direct and wholly-owned subsidiary of EMHC, with EMCLA surviving the merger. Following the Chancellor Merger, Evergreen changed its name to Chancellor Media Corporation, EMHC changed its name to Chancellor Mezzanine Holdings Corporation and EMCLA changed its name to Chancellor Media Corporation of Los Angeles. The Company is the largest pure play radio broadcasting company in the United States based on gross revenues, with a portfolio at September 5, 1997 consisting of 89 radio stations (63 FM and 26 AM) in 22 large markets, including each of the nation's 12 largest radio revenue markets. The Company's portfolio includes the first or second ranked station cluster in terms of revenue share in 15 of its 22 markets. On a pro forma basis, the Company had net revenue and broadcast cash flow (as defined) of approximately $396.0 million and $166.6 million, respectively, for the six months ended June 30, 1997, and its pro forma broadcast cash flow margin for such period would have been 42%. The Company's strategy is to secure the leading clusters of radio stations in each of the markets in which it operates. The Company's station portfolio includes a total of 11 superduopolies, with seven in the 12 largest radio markets -- Los Angeles, New York, Chicago, San Francisco, Philadelphia, Washington, D.C. and Detroit -- and four in other large markets -- Denver, Minneapolis/St. Paul, Phoenix and Orlando. Consummation of the Pending Transactions will add 15 stations (12 FM and three AM) (without taking into account stations to be disposed or exchanged in the Pending Transactions) to the Company's portfolio, including five stations in its superduopoly markets. Approximately 78% of pro forma 1996 net revenue would have been generated by the superduopoly markets. The Company's 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 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 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 12.0% of the Company's pro forma 1996 broadcast cash flow. The Company's principal executive office is located at 433 East Las Colinas Boulevard, Suite 1130, Irving, Texas 75039, and its telephone number is (972) 869-9020. RECENT DEVELOPMENTS CHANCELLOR MERGER On September 5, 1997, Evergreen, EMHC, EMCLA, Chancellor and CRBC consummated the transactions contemplated by the Chancellor Merger Agreement. Pursuant to the Chancellor Merger Agreement, (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. Upon the consummation of the Parent Merger, Evergreen was renamed Chancellor Media Corporation and EMHC was renamed Chancellor Mezzanine Holdings Corporation. Upon the consummation of the Subsidiary Merger, EMCLA 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. At the effective time of the Parent Merger (the "Parent Merger Effective Time"), (i) each share of Evergreen's Class A Common Stock, par value $.01 per share, and each share of Evergreen's Class B Common Stock, par value $.01 per share, outstanding immediately prior to the Parent Merger Effective Time were reclassified, changed and converted into one share of Common Stock of Chancellor Media, (ii) each 14 18 share of Chancellor's Class A Common Stock, par value $.01 per share, and each share of Chancellor's Class B Common Stock, par value $.01 per share, outstanding immediately prior to the Parent Merger Effective Time were converted into the right to receive 0.9091 shares of Common Stock of Chancellor Media, (iii) each share of Chancellor's 7% Convertible Preferred Stock, par value $.01 per share, outstanding immediately prior to the Parent Merger Effective Time was converted into the right to receive one share of 7% Convertible Preferred Stock of Chancellor Media with substantially identical powers, preferences and relative rights and (iv) Evergreen assumed all options to acquire shares of Chancellor's Class A Common Stock outstanding immediately prior to the Parent Merger Effective Time held by certain officers, directors, employees and consultants of Chancellor and its subsidiaries. Approximately 17.3 million shares of Chancellor Media Common Stock were issued in the Parent Merger to the former common stockholders of Chancellor, and approximately 1.8 million shares of Chancellor Media Common Stock may be issued from time to time upon the exercise of the options assumed by Chancellor Media in the Parent Merger. In addition, at the Parent Merger Effective Time, CMHC repaid all amounts outstanding under the Chancellor Interim Financing, in the principal amount of $133.0 million. Furthermore, at the effective time of the Subsidiary Merger (the "Subsidiary Merger Effective Time"), (i) each share of CRBC's 12 1/4% Series A Senior Cumulative Exchangeable Preferred Stock, par value $.01 per share, outstanding immediately prior to the Subsidiary Merger Effective Time was converted into the right to receive one share of 12 1/4% Series A Senior Cumulative Exchangeable Preferred Stock of CMCLA with substantially identical powers, preferences and relative rights, (ii) each share of CRBC's 12% Exchangeable Preferred Stock, par value $.01 per share, outstanding immediately prior to the Subsidiary Merger Effective Time was converted into the right to receive one share of 12% Exchangeable Preferred Stock of CMCLA with substantially identical powers, preferences and relative rights, (iii) CMCLA assumed all of the obligations under CRBC's $200,000,000 aggregate principal amount 9 3/8% Notes and the 9 3/8% Indenture governing such securities, (iv) CMCLA assumed all of the obligations under CRBC's $200,000,000 aggregate principal amount Original Notes and the Indenture governing such securities and (v) CMCLA refinanced, through additional borrowings under the Senior Credit Facility, all amounts outstanding under the CRBC Restated Credit Agreement. The aggregate amount of borrowings under the CRBC Restated Credit Agreement refinanced by CMCLA consisted of principal in the amount of $416.0 million, plus accrued interest. COMPLETED EVERGREEN TRANSACTIONS Between January 1, 1997 and the date of the completion of the Chancellor Merger, Evergreen and its subsidiaries had completed (i) the acquisition of 17 radio stations for a net purchase price of approximately $1.14 billion, (ii) the exchange of six stations for three stations and $9.5 million in cash, (iii) the sale or other disposition of 10 radio stations for $269.3 million in cash and a promissory note for $18.0 million and (iv) the disposition of one radio station for net proceeds of $80.0 million which are being held by a qualified intermediary pending the completion of the deferred exchange of the disposed station for one or more radio stations. On January 31, 1997, Evergreen acquired WWWW-FM and WDFN-AM in Detroit from affiliates of Chancellor for $30.0 million in cash plus various other direct acquisition costs (the "WWWW/WDFN Acquisition"). Evergreen 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, Evergreen 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 "KKSF/KDFC Acquisition"). Evergreen had previously been operating KKSF-FM and KDFC-FM/AM under a time brokerage agreement since November 1, 1996. On July 21, 1997, Evergreen sold KDFC-FM to Bonneville for $50.0 million in cash (the "Bonneville/KDFC Disposition"). The assets of KDFC-FM are classified as assets held for sale on June 30, 1997 in connection with the purchase price allocation of KKSF-FM and KDFC-FM/AM and no gain or loss was recognized by Evergreen upon consummation of the sale. 15 19 On April 1, 1997, Evergreen 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 "Secret/ Detroit Acquisition"). Evergreen had previously been operating WJLB-FM and WMXD-FM under time brokerage agreements since September 1, 1996. On April 3, 1997, Evergreen exchanged WQRS-FM in Detroit (which Evergreen 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. and $9.5 million in cash (the "Greater Media Exchange"). The net purchase price to Evergreen of WWRC-AM was therefore $22.5 million. Evergreen had previously been operating WWRC-AM under a time brokerage agreement since June 17, 1996. On May 1, 1997, Evergreen acquired WDAS-FM/AM in Philadelphia from affiliates of Beasley FM Acquisition Corp. ("Beasley") for $103.0 million in cash plus various other direct acquisition costs (the "Beasley Acquisition"). On May 15, 1997, Evergreen exchanged five of its six stations in Charlotte, North Carolina (WPEG-FM, WBAV-FM/AM, WRFX-FM and WFNZ-AM) for two FM stations (WIOQ-FM and WUSL-FM) owned by EZ Communications, Inc. ("EZ") in Philadelphia (the "EZ Exchange"), and also sold Evergreen's sixth radio station in Charlotte, WNKS-FM, to EZ for $10.0 million in cash and recognized a gain of $3.5 million (the "EZ Sale" and, collectively with the EZ Exchange, the "EZ Transaction"). On May 30, 1997, Evergreen acquired WPNT-FM in Chicago from affiliates of Century Broadcasting Company ("Century") for $75.7 million in cash (including $2.0 million for the purchase of the station's account receivables) plus various other direct acquisition costs (the "Century Acquisition"). On June 19, 1997, Evergreen sold WPNT-FM in Chicago to Bonneville for $75.0 million in cash and recognized a gain of $0.5 million (the "Bonneville/WPNT Disposition"). On June 3, 1997, Evergreen sold WEJM-FM in Chicago to affiliates of Crawford Broadcasting ("Crawford") for $14.8 million in cash and recognized a gain of $9.3 million (the "Crawford Disposition"). On July 2, 1997, Evergreen 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 (including various direct acquisition costs) (the "Evergreen Viacom Acquisition"). On July 7, 1997, Evergreen sold WJZW-FM in Washington, D.C. to affiliates of Capital Cities/ABC Radio ("ABC") for $68.0 million in cash (the "ABC/Washington Disposition"). The assets of WJZW-FM were accounted for as assets held for sale in connection with the purchase price allocation of the Evergreen Viacom Acquisition and no gain or loss was recognized by Evergreen upon consummation of the sale. On July 7, 1997, Evergreen sold the FCC authorizations and certain transmission equipment previously used in the operation of KYLD-FM in San Francisco to Susquehanna Radio Corp. ("Susquehanna") for $44.0 million in cash (the "San Francisco Frequency Disposition"). Simultaneously therewith, Chancellor sold the call letters "KSAN-FM" (which Chancellor previously used in San Francisco) to Susquehanna. On July 7, 1997, Evergreen and Chancellor entered a time brokerage agreement to enable Evergreen to operate KYLD-FM on the frequency previously assigned to KSAN-FM, which has an improved broadcast signal in the San Francisco market, and on July 7, 1997, Chancellor changed the call letters of KSAN-FM to KYLD-FM. Upon the consummation of the Chancellor Merger, Evergreen permanently changed the format of the frequency previously assigned to KSAN-FM to the format operated on KYLD-FM. On July 14, 1997, Evergreen completed the disposition of WLUP-FM in Chicago to Bonneville (the "Bonneville/WLUP Disposition" and, collectively with the Bonneville/KDFC Disposition and the Bonneville/WPNT Disposition, the "Bonneville Dispositions") and it is expected that this transaction will result in a deferred exchange for one or more radio stations within 180 days after July 14, 1997. In the event that such exchange does not take place, Evergreen will receive gross proceeds from the disposition of WLUP-FM of $80.0 million in cash. 16 20 On August 13, 1997, Evergreen sold KDFC-AM in San Francisco and WBZS-AM and WZHF-AM in Washington, D.C. to affiliates of Douglas Broadcasting ("Douglas") for $18.0 million in the form of a promissory note (the "Douglas AM Dispositions"). 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 $1.0 million letter of credit for the benefit of Evergreen that will remain outstanding until all amounts due under the promissory note are paid. On August 27, 1997, Evergreen sold WEJM-AM in Chicago to Douglas for $7.5 million in cash (the "Douglas Chicago Disposition"). The foregoing transactions, together with (i) the acquisition on January 17, 1996 of Pyramid Communications, Inc. for approximately $316.3 million; (ii) the acquisition on May 3, 1996 of WKLB-FM in Boston for $34.0 million in cash; (iii) the acquisition on August 14, 1996 of KYLD-FM in San Francisco for $44.0 million in cash; (iv) the acquisition on October 18, 1996 of WEDR-FM in Miami for $65.0 million in cash; (v) the exchange on November 26, 1996 of WKLB-FM in Boston for WGAY-FM in Washington, D.C.; and (vi) the dispositions on July 19, 1996 and August 1, 1996 of WHTT-FM/AM and WSJZ-FM in Buffalo for $32.0 million are referred to as the "Completed Evergreen Transactions." COMPLETED CHANCELLOR TRANSACTIONS Since January 1, 1997, Chancellor has completed (i) the acquisition of 24 radio stations for a net purchase price of approximately $1.07 billion, (ii) the exchange of three stations for one station and $33.0 million in cash and (iii) the sale of five stations for $108.3 million in cash. On January 23, 1997, Chancellor acquired Colfax Communications, a radio broadcasting company with eight FM stations and four AM stations located in four markets (Minneapolis/St. Paul, Phoenix, Washington, D.C. and Milwaukee) (the "Colfax Acquisition") for $383.7 million in cash (including acquisition costs). On March 31, 1997, Chancellor sold WMIL-FM and WOKY-AM in Milwaukee, which were acquired as part of the Colfax Acquisition, for $41.3 million in cash (the "Milwaukee Disposition"). On January 31, 1997, Chancellor sold WWWW-FM and WDFN-AM in Detroit to EMCLA for $30.0 million in cash plus various other direct transaction costs (the "WWWW/WDFN Disposition"). On February 13, 1997, Chancellor acquired three FM stations in Orlando, two FM stations and one AM station in West Palm Beach and two FM stations in Jacksonville from OmniAmerica Group for $166.0 million in cash (including acquisition costs) and common stock of Chancellor valued at $15.0 million (the "Omni Acquisition"). Chancellor had been operating the Orlando stations acquired in the Omni Acquisition pursuant to a time brokerage agreement since July 1, 1996. On March 24, 1997, Chancellor exchanged WEAT-FM/AM and WOLL-FM in West Palm Beach, which were acquired as part of the Omni Acquisition, for KSTE-FM in Sacramento and $33.0 million in cash (the "West Palm Beach Exchange"). Chancellor had previously been operating KSTE-FM under a time brokerage agreement since August 1, 1996. Prior to consummating the West Palm Beach Exchange, Chancellor had sold all of the broadcast time on WEAT-FM/AM and WOLL-FM pursuant to a time brokerage agreement since July 1, 1996. On July 2, 1997, Chancellor acquired KIBB-FM and KYSR-FM in Los Angeles, WLIT-FM in Chicago and WDRQ-FM in Detroit from Viacom for approximately $500.8 million (including various direct acquisition costs) (the "Chancellor Viacom Acquisition" and, together with the Evergreen Viacom Acquisition, the "Viacom Acquisition"). On August 11, Chancellor sold WDRQ-FM in Detroit, to ABC for $37.0 million in cash (the "ABC/Detroit Disposition" and, together with the ABC/Washington Disposition, the "ABC Dispositions"). The forgoing transactions, together with (i) the acquisition by Chancellor on February 14, 1996 of Trefoil Communications, Inc. and its wholly owned subsidiary, Shamrock Broadcasting, Inc. (collectively, "Shamrock Broadcasting"), a radio broadcasting company with 11 FM stations and 8 AM stations in 10 markets for $408.0 million in cash (including acquisition costs) (the "Shamrock Acquisition"), (ii) the exchange by Chancellor on July 31, 1996 of KTBZ-FM in Houston (which was acquired as part of the Shamrock Acquisition) and $5.6 million in cash for KIMN-FM and KALC-FM in Denver (the "Houston/Denver 17 21 Exchange") and (iii) the acquisition by Chancellor on November 22, 1996 of WKYN-AM in Cincinnati for $1.4 million in cash are referred to as the "Completed Chancellor Transactions." The Completed Evergreen Transactions and the Completed Chancellor Transactions are referred to collectively as the "Completed Transactions." PENDING TRANSACTIONS Gannett Acquisition On April 4, 1997, Evergreen entered into the Gannett Agreements with P&S, pursuant to which Evergreen will acquire WGCI-AM and WGCI-FM in Chicago for $140.0 million, KKBQ-AM and KKBQ-FM in Houston for $110.0 million, and KHKS-FM in Dallas for $90.0 million. The aggregate purchase price is subject to an upward adjustment of up to $10.0 million depending on the timing of the closings. The Gannett Agreements are independent with respect to each market and may be consummated at different times. On April 10, 1997, Evergreen issued letters of credit for the benefit of P&S in the aggregate amount of $34.0 million to secure Evergreen's obligations under the Gannett Agreements. The Company expects that it will ultimately borrow the funds necessary to complete the Gannett Acquisition from the Senior Credit Facility. However, if the Company does not have sufficient borrowing capacity under the Senior Credit Facility or otherwise to consummate the Gannett Acquisition within the time period specified in the Gannett Agreements, Chancellor Media has agreed, pursuant to an alternative financing facility with certain lenders, to issue common equity securities for the account of those lenders if the alternative facility is drawn. The Company presently expects that it will be able to consummate the Gannett Acquisition by drawing on the Senior Credit Facility and that, as a result, Chancellor Media will not be required to make any draw under an alternative facility. Although there can be no assurances, the Company expects that the Gannett Acquisition will be completed in the fourth quarter of 1997 or the first quarter of 1998. Bonneville Acquisition. On June 24, 1997, Evergreen entered into an agreement to acquire KZPS-FM and KDGE-FM in Dallas from Bonneville for $83.5 million in cash (the "Bonneville Acquisition"). Evergreen also entered into an agreement to operate KZPS-FM and KDGE-FM under a time brokerage agreement effective as of August 1, 1997. Although there can be no assurance, the Company expects that the Bonneville Acquisition will be completed in the third or fourth quarter of 1997. Denver Acquisition. On July 30, 1997, Chancellor entered into an agreement to acquire KXPK-FM in Denver from Ever Green Wireless LLC (which is unrelated to the Company) for $26.0 million in cash (including $1.7 million paid by Chancellor in escrow) (the "Denver Acquisition"). Chancellor also entered into an agreement to operate KXPK-FM under a time brokerage agreement effective as of September 1, 1997. Although there can be no assurance, the Company expects that the Denver Acquisition will be completed in the first quarter of 1998. SFX Exchange. On July 1, 1996, Chancellor entered into an agreement with SFX pursuant to which Chancellor agreed to exchange WAPE-FM and WFYV-FM in Jacksonville and $11.0 million in cash to SFX Broadcasting Inc. ("SFX") in return for WBAB-FM, WBLI-FM, WHFM-FM and WGBB-AM in Nassau/Suffolk (Long Island). Chancellor has been operating WBAB-FM, WBLI-FM, WHFM-FM and WGBB-FM pursuant to a time brokerage agreement effective July 1, 1996 and SFX has been operating WAPE-FM and WFYV-FM pursuant to time brokerage agreements each effective July 1, 1996. The Company is unable to predict whether or when it will consummate the SFX Exchange, as it is pending review by the DOJ under the HSR Act. Bonneville Option. On August 6, 1997, Evergreen and Chancellor announced that they had paid $3.0 million to Bonneville for an option to exchange Evergreen's station WTOP-AM in Washington and Chancellor's stations KZLA-FM in Los Angeles and WGMS-FM in Washington and $57.0 million in cash for Bonneville's stations WDBZ-FM in New York, KLDE-FM in Houston and KBIG-FM in Los Angeles. The Company is currently negotiating time brokerage agreements relating to these stations, which are expected to become effective on October 1, 1997. 18 22 Katz Acquisition On July 14, 1997, Evergreen, Chancellor and Katz entered into an agreement pursuant to which a jointly owned affiliate of Evergreen and Chancellor (referred to herein as "Morris Acquisition Corporation") would acquire Katz, a full-service media representation firm serving multiple types of electronic media with leading market shares in the representation of radio and television stations and cable television systems, in a tender offer transaction valued at approximately $373 million. As a result of the delay caused by the second request for information relating to the Katz Acquisition that has been issued by the DOJ under the HSR Act (see below), it is now presently contemplated that Morris Acquisition Corporation will be a direct, wholly-owned subsidiary of Chancellor Media. Under the terms of the Katz Acquisition, shareholders of Katz would be offered in a tender offer $11.00 in cash per share for each share of common stock held. Shares not purchased in the tender offer would be converted in a second-step merger into the right to receive $11.00 in cash per share, subject to statutory appraisal and dissenters' rights. Assuming completion of the Katz Acquisition, debt of Katz of approximately $218 million would be assumed in the transaction. In connection with the execution of the Katz acquisition agreement on July 14, 1997, holders of approximately 51.6% of Katz' outstanding common stock agreed to tender their shares in the offer and vote in favor of the transaction. Consummation of the Katz Acquisition is subject to the tender of a majority of the shares of common stock of Katz on a fully diluted basis, approval of the Katz shareholders and receipt of necessary regulatory approvals, including the expiration or termination of the required waiting period under the HSR Act. The DOJ has issued a second request for information under the HSR Act concerning the Katz Acquisition. Accordingly, there can be no assurance as to whether or when the Katz Acquisition may be consummated. FINANCING TRANSACTIONS In addition to the various radio station dispositions described above, Chancellor, CRBC, Evergreen and EMCLA have undertaken the following transactions: On April 25, 1997, EMCLA entered into the Senior Credit Facility (as amended on June 26, 1997 and August 7, 1997) with certain banks and financial institutions and Toronto Dominion (Texas), Inc. as Administrative Agent for such lenders. Pursuant to the Senior Credit Facility, EMCLA's previous facility was refinanced and increased to a total commitment of $1.75 billion and, upon consummation of the Chancellor Merger, such total commitment increased to $2.50 billion. On June 16, 1997 Evergreen completed its private offering of 5,500,000 shares of $3.00 Convertible Preferred Stock for aggregate gross proceeds of $275.0 million and on June 20, 1997, the initial purchasers of the $3.00 Convertible Preferred Stock exercised an over-allotment option granted by Evergreen to acquire an additional 490,000 shares of the $3.00 Convertible Preferred Stock for additional gross proceeds of $24.5 million. The net proceeds of $287.8 million were contributed to the Company and were used to repay borrowings under the Senior Credit Facility and subsequently were reborrowed as part of the financing of the Evergreen Viacom Acquisition. On June 24, 1997, CRBC completed its private offering of the Original Notes. The net proceeds of the offering of Original Notes of $194.1 million were used to repay borrowings under CRBC's previous senior credit agreement. On July 2, 1997, CRBC entered into the CRBC Restated Credit Agreement with certain lenders and Bankers Trust Company as Managing Agent for such lenders. Pursuant to the CRBC Restated Credit Agreement, CRBC's credit facility was refinanced and increased to a total commitment of $750.0 million. Additionally, on July 2, 1997 Chancellor borrowed funds under an interim loan of $170.0 million. These financing transactions were used to finance the Chancellor Viacom Acquisition. Upon consummation of the Chancellor Merger, all borrowings under the CRBC Restated Credit Agreement and the Chancellor Interim Financing were refinanced or repaid by CMHC and the Company. See "Management's Discussion and Analysis of Financial Conditions and Results of Operations -- Liquidity and Capital Resources." The foregoing transactions are referred to collectively as the "Financing Transactions." 19 23 BROADCAST PROPERTIES The following table sets forth selected information with respect to the portfolio of radio stations that are owned by the Company as of September 29, 1997.
RANKING OF STATION'S 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 4.5 Urban Contemporary Women 18-34 2 KYSR-FM 2.8 Hot Adult Contemporary Persons 18 25-54 KIBB-FM 1.6 Rhythmic Adult Persons 18 Contemporary 25-54 KLAC-AM 2.2 Adult Standards/Sports Persons 21 35-64 KZLA-FM++ 2.5 Country Persons 10 25-54 New York, NY 2 WKTU-FM 4.7 Rhythmic Contemporary Hits Persons 5 25-54 WLTW-FM 6.0 Soft Adult Contemporary Persons 1 25-54 WAXQ-FM 2.0 Classic Rock Persons 12 25-54 WHTZ-FM 3.5 Contemporary Hit Radio Persons 6 18-34 Chicago, IL 3 WMVP-AM 1.4 Personality/Sports Men 25-54 18 WRCX-FM 3.2 Mainstream Rock Men 18-34 1 WVAZ-FM 4.2 Black Adult Women 25-54 3 WNUA-FM 3.9 Contemporary Jazz Persons 5 25-54 WLIT-FM 4.8 Soft Adult Contemporary Persons 1 25-54 San Francisco, CA 4 KIOI-FM 3.2 Adult Contemporary Women 25-54 2 KMEL-FM 3.9 Contemporary Hits Persons 1 18-34 KKSF-FM 3.6 Contemporary Jazz Persons 4 25-54 KNEW-AM 1.0 Country/Sports Persons 34 25-54 KYLD-FM 4.2 Contemporary Hits Persons 13 18-34 KABL-AM 2.5 Adult Standards Persons 12 35-64 KISQ-FM 2.7 70's Oldies Persons 8 25-54 Dallas, TX 5 KSKY-AM 0.1 Inspirational N/M N/M Philadelphia, PA 6 WYXR-FM 3.5 Adult Contemporary Women 18-49 3 WJJZ-FM 3.9 Contemporary Jazz Persons 4 35-54 WDAS-FM 4.9 Urban Contemporary Persons 2 25-54 WDAS-AM 1.2 Gospel N/M N/M WUSL-FM 5.0 Urban Contemporary Women 18-34 1 WIOQ-FM 3.6 Contemporary Hit Women 18-34 3 Radio/Dance Houston, TX 7 KTRH-AM 4.5 News/Sports Men 25-54 3 KLOL-FM 3.2 Album Rock Men 18-34 2 Washington, D.C. 8 WTOP-AM++ 2.9 News/Sports Men 25-54 10 WASH-FM 4.6 Adult Contemporary Women 25-54 2 WGAY-FM 3.9 Adult Contemporary Persons 6 35-64 WWRC-AM 0.9 News/Talk Persons 24 35-64 WMZQ-FM 5.0 Country Persons 5 25-54 WBIG-FM 4.7 Oldies Persons 2 25-54 WGMS-FM++ 4.1 Classical Persons 3 35-64 WTEM-AM 1.0 Sports/Talk Men 18-49 18 Boston, MA 9 WJMN-FM 6.3 Contemporary Hits Women 18-24 2 WXKS-FM 6.2 Contemporary Hits Women 25-34 1 WXKS-AM 1.7 Nostalgia Women 45-54 12 Atlanta, GA 10 WFOX-FM 4.3 Oldies Persons 10 25-54 Detroit, MI 11 WKQI-FM 4.7 Adult Contemporary Women 25-54 4 WNIC-FM 7.2 Adult Contemporary Women 25-54 1 WYUR-AM(5) N/M Adult Contemporary Women 25-54 N/M WWWW-FM 3.6 Country Women 25-54 9 WDFN-AM 1.3 Sports/Talk Men 25-49 11 WJLB-FM 8.1 Urban Contemporary Persons 1 18-34 WMXD-FM 4.3 Black Adult Persons 4 25-54
20 24
RANKING OF STATION'S STATION RANKING MARKET BY AUDIENCE TARGET IN TARGET MARKET(1) REVENUE(2) STATION SHARE(%)(3) STATION FORMAT DEMOGRAPHICS DEMOGRAPHICS(4) - ------------------------ ---------- ----------- ----------- --------------------------- ------------ --------------- Miami/Ft. Lauderdale, FL 12 WVCG-AM 0.6 Brokered(6) N/M N/M WEDR-FM 4.9 Urban Contemporary Persons 6 25-54 Denver, CO 15 KRRF-AM 0.6 Talk Men 25-54 18 KXKL-FM 4.2 Oldies Persons 7 25-54 KVOD-FM 1.8 Classical Persons 19 25-54 KIMN-FM 2.7 70's Oldies Persons 13 25-54 KALC-FM 4.8 Hot Adult Contemporary Persons 1 18-34 Minneapolis/St. Paul, MN 16 KTCZ-FM 4.4 Progressive Album Rock Men 25-49 2 KTCJ-AM(7) 0.2 Progressive Album Rock Men 25-49 20 KDWB-FM 6.9 Contemporary Hit Radio Persons 2 18-34 KFAN-AM 1.8 Sports Men 18-49 11 KEEY-FM 6.9 Country Persons 3 25-54 KQQL-FM 5.0 Oldies Persons 4 25-54 WRQC-FM(8) 4.5 Young Country Persons 7 18-49 Phoenix, AZ 17 KMLE-FM 6.0 Country Persons 3 25-54 KISO-AM 0.8 Urban Adult Contemporary Persons 25 25-54 KOOL-FM 6.0 Oldies Persons 2 25-54 KOY-AM 5.1 Adult Standards Persons 10 35-64 KYOT-FM 3.1 Contemporary Jazz Persons 13 25-54 KZON-FM 3.7 Alternative Rock Persons 4 18-34 Cincinnati, OH 20 WUBE-FM(9) 8.6 Country Persons 1 25-54 WUBE-AM 0.4 Nostalgia Persons 24 35-64 WYGY-FM(9) 3.3 Young Country Men 18-34 8 WKYN-AM 0.7 Sports/Talk Men 18-49 15 Pittsburgh, PA 24 WWSW-AM(10) 0.3 Oldies Persons 24 25-54 WWSW-FM 5.6 Oldies Persons 4 25-54 Sacramento, CA 25 KGBY-FM 3.8 Adult Contemporary Women 25-54 2 KHYL-FM 4.1 Oldies Persons 6 25-54 KFBK-AM 10.5 News/Talk Persons 2 25-54 KSTE-AM 2.9 Talk Persons 15 25-54 Orlando, FL 26 WOCL-FM 4.4 Oldies Persons 10 25-54 WOMX-FM 4.7 Adult Contemporary Persons 1 25-54 WJHM-FM 8.2 Urban Contemporary Persons 1 18-34 WXXL-FM 6.9 Contemporary Hit Radio Persons 2 18-34 Nassau/Suffolk (Long Island) NY(11) 44 WALK-FM 6.2 Adult Contemporary Persons 1 25-54 WALK-AM 0.3 Adult Contemporary Persons 38 35-64 Jacksonville, FL 47 WAPE-FM+ 8.1 Contemporary Hit Radio Women 18-34 1 WFYV-FM+ 8.6 Album Oriented Rock Men 25-54 1 Riverside/ San Bernardino, CA 64 KGGI-FM 6.2 Contemporary Hit Radio Persons 1 18-34 KMRZ-AM 0.4 Oldies Men 25-54 32
- --------------- N/M: Not meaningful + Indicates station to be disposed in a Pending Transaction. ++ Includes station that would be disposed if the Bonneville Option is exercised. (1) Actual city of license may differ from metropolitan market served in certain cases. (2) Ranking of principal radio market served by the station among all U.S. radio broadcast markets by aggregate 1996 gross radio broadcasting revenue as reported by James H. Duncan, Duncan's Radio Market Guide (1997 ed.). (3) Information derived from The Arbitron Company, Spring 1997, Local Market Reports in the specified markets for listeners age 12+, Monday to Sunday, 6:00 a.m. to Midnight. Copyright, The Arbitron Company. (4) Information derived from The Arbitron Company, Spring 1997, 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 Company has historically brokered WYUR-AM to third parties. (6) The Company sells airtime on WVCG-AM to third parties for broadcast of specialty programming on a variety of topics. 21 25 (7) Programming provided to KTCJ-AM via simulcast of programming broadcast on KTCZ-FM. The format of KTCJ-AM was changed to Classic Country with a target demographic of Persons 35-64 effective April 25, 1997. (8) The format of WRQC-FM was changed to Album Rock with a target demographic of Men 18-34 effective April 15, 1997. (9) WUBE-FM and WYGY-FM are sold in combination. (10) Programming provided to WWSW-AM via simulcast of programming broadcast on WWSW-FM. (11) Nassau/Suffolk (Long Island) may be considered part of the greater New York market, although it is reported separately as a matter of convention. PENDING ACQUISITIONS The following table sets forth selected information with respect to the radio stations that will be acquired by the Company in the Pending Transactions (assuming exercise of the Bonneville Option).
RANKING OF STATION'S STATION RANKING MARKET BY AUDIENCE TARGET IN TARGET MARKET(1) REVENUE(2) STATION SHARE(%)(3) STATION FORMAT DEMOGRAPHICS DEMOGRAPHICS(4) - --------------------- ---------- ----------- ----------- ------------------------- ------------ --------------- Los Angeles, CA 1 KBIG-FM+ 2.4 Adult Contemporary Persons 14 25-54 New York, NY 2 WDBZ-FM+ 1.2 Modern Adult Contemporary Women 25-44 12 Chicago, IL 3 WGCI-AM 1.4 Urban/R&B Persons 25 18-34 WGCI-FM 5.6 Urban Oldies Persons 2 25-54 Dallas, TX 5 KHKS-FM 8.0 Contemporary Hits Women 18-34 1 KZPS-FM 3.8 Classic Rock Persons 4 25-54 KDGE-FM 3.0 Alternative Rock Persons 5 18-34 Houston, TX 7 KKBQ-AM 0.2 Country Persons 34 25-54 KKBQ-FM 4.3 Fresh Country Persons 6 25-54 KLDE-FM+ 7.2 Oldies Persons 2 25-54 Denver, CO 15 KXPK-FM 3.1 Alternative Persons 11 18-49 Nassau/Suffolk (Long Island) NY 44 WBAB-FM 2.8 Album Rock Men 25-49 3 WBLI-FM 3.9 Adult Contemporary Women 25-54 2 WHFM-FM N/M Album Rock Men 25-49 N/M WGBB-AM N/M News/Talk Persons N/M 25-54
- --------------- N/M: Not meaningful + Includes station that would be acquired if the Bonneville Option is exercised. (1) Actual city of license may differ from metropolitan market served in certain cases. (2) Ranking of principal radio market served by the station among all U.S. radio broadcast markets by aggregate 1996 gross radio broadcasting revenue as reported by James H. Duncan, Duncan's Radio Market Guide (1997 ed.). (3) Information derived from The Arbitron Company, Spring 1997, Local Market Reports in the specified markets for listeners age 12+, Monday to Sunday, 6:00 a.m. to Midnight. Copyright, The Arbitron Company. (4) Information derived from The Arbitron Company, Spring 1997, 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. Assuming consummation of the Katz Acquisition, for which no assurance can be given, Chancellor Media will also own and operate Katz, a full-service media representation firm serving multiple types of electronic media with leading market shares in the representation of radio and television stations and cable television systems. COMPANY STRATEGY The Company's senior management team, led by Scott K. Ginsburg and James de Castro, has extensive experience in acquiring and operating large market radio station groups. The Company's business strategy is to assemble and operate radio station clusters in order to maximize broadcast cash flow generated in each market. This strategy relies on the following six key elements. Create Large Market Superduopolies. The Company seeks to be the owner and operator of the leading superduopoly in the largest markets in the United States. Management believes that the large revenue base in 22 26 these markets, in conjunction with operating synergies achievable through the operation of multiple stations, will enable it to appeal to a wider universe of national and local advertisers and to achieve a greater degree of profitability than that of operators and broadcasters in smaller markets. The Pending Transactions will complement the Company's existing stations in the Los Angeles, New York, Chicago, San Francisco, Dallas, Houston, Denver and Nassau/Suffolk (Long Island) markets. The Company expects to continue to selectively pursue acquisition opportunities in the major markets in which it will compete as well as in other markets. Maximize Superduopoly Revenue and Expense Synergies. The Company seeks to capitalize on the revenue growth and expense savings opportunities of superduopolies that have been created or that will be created by the Viacom Acquisition, the Chancellor Merger and the Pending Transactions. Superduopolies have only been permissible since the passage of the 1996 Act in January 1996. Management believes that substantial benefits can be derived from the successful integration of these station cluster groups. Management also 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. Establish Strong Listener Loyalty. Management believes that strong listener familiarity with a given radio station produces listener loyalty. Management seeks to establish this familiarity through a variety of programming and marketing techniques, including the development of high-profile on-air personalities and creative station-sponsored promotional events, all of which are designed to secure heightened listener awareness. The Company also conducts extensive market research to help identify programming format opportunities and attract new listeners, as has been the case with WKTU-FM in New York. After operating WKTU-FM for nine months under the call letters and country music format inherited from a prior operator, in February 1996 the Company began to operate WKTU-FM as a rhythmic contemporary hits station. According to Arbitron, WKTU-FM was ranked eleventh in its target demographic group as a country station, and was ranked first in several key demographic groups (including its target demographic group) in the first full ranking period after the station changed its format. The station has continued to rank among the top five stations in its target demographic group in subsequent periods. Management believes that institutionalizing its radio stations in their markets through programming, marketing and research ensures steady long-term audience share ratings. Maintain Strict Cost Controls. Management maintains a company-wide focus on cost controls in an effort to maximize broadcast cash flow margins. Management reviews station spending on a monthly basis. In addition, corporate level employees maintain weekly sales reporting systems designed to enable management to evaluate station performance on a current basis. The Company's focus on maximizing superduopoly revenues and maintaining cost controls is reflected by the fact that, for the last two years, the Company has achieved broadcast cash flow margins of 40% or more. The Company also carefully monitors capital expenditures. Develop Experienced, Incentivized Management Team. The Company believes that management depth is critical to achieving superior operating performance in a portfolio as large as the Company's. The Company's senior management team of Scott K. Ginsburg and James de Castro have an aggregate of more than 30 years of radio industry operating experience. This senior management team is supported by an experienced team of veteran group operators and station general managers. At the station level, the Company seeks to incentivize its individual radio station managers and sales forces to outperform revenue and broadcast cash flow budget expectations by granting quarterly and annual performance measurement-based bonuses. The Company believes that the incentives it offers to its employees, as well as its stature in the radio industry, will enable it to continue to be successful in recruiting top industry employees. Maximize Free Cash Flow. By emphasizing the revenue and expense synergies achievable through the assembly and operation of superduopolies and by carefully monitoring operating costs and capital expenditures, the Company seeks to maximize broadcast cash flow and, ultimately, free cash flow (broadcast cash 23 27 flow less corporate general and administrative expenses, debt service, tax payments, dividend requirements and capital expenditures). This focus on free cash flow should facilitate reduction of leverage without undue dependence on capital markets and position the Company to pursue attractive acquisitions. In addition to the foregoing strategy elements, the Company also anticipates that it will attempt to leverage its radio expertise and expand into industries related to the operation of radio stations in the future. In this respect, the Company has announced its intention to acquire Katz, a full-service media representation firm, and has also announced a plan to create a new national radio network. There can be no assurance that these plans will ultimately be successful. In addition, there can be no assurance that the acquisition of Katz will be consummated. See "Risk -- HSR Approval for Katz Acquisition." FEDERAL REGULATION OF RADIO BROADCASTING INDUSTRY Introduction. The radio broadcasting industry is subject to extensive and changing regulation over, among other things, program content, technical operations and business and employment practices. The ownership, operation and sale of radio broadcast stations (including those licensed to the Company) are subject to the jurisdiction of the FCC, which acts under authority granted by the Communications Act. The Communications Act prohibits the assignment 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. 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. 24 28 The following table sets forth, for the portfolio of stations that are or will be owned by the Company, (assuming the consummation of all Pending Transactions and the exercise by the Company of the Bonneville Option) (i) the date of acquisition by the Company (if applicable), (ii) the frequency of each station and (iii) the date of expiration of each station's main FCC broadcast license:
DATE OF EXPIRATION DATE STATION MARKET(1) ACQUISITION FREQUENCY OF FCC LICENSE ------- --------- ----------- ---------- ---------------- KKBT-FM Los Angeles, CA 5/89 92.3 MHz 12/97 KYSR-FM Los Angeles, CA 9/97 98.7 MHz 12/97 KIBB-FM Los Angeles, CA 9/97 100.3 MHz 12/97 KLAC-AM Los Angeles, CA 9/97 570 kHz 12/97 KZLA-FM++ Los Angeles, CA 9/97 93.9 MHz 12/97 KBIG-FM+++ Los Angeles, CA Pending 104.3 MHz 12/97 WKTU-FM New York, NY 5/95 103.5 MHz 6/98 WLTW-FM New York, NY 7/97 106.7 MHz 6/98 WAXQ-FM New York, NY 7/97 104.3 MHz 6/98 WHTZ-FM New York, NY 9/97 100.3 MHz 6/98 WDBZ-FM+++ New York, NY Pending 105.1 MHz 6/98 WMVP-AM Chicago, IL 5/84 1000 kHz 12/03 WRCX-FM Chicago, IL 12/93 103.5 MHz 12/96* WVAZ-FM Chicago, IL 5/95 102.7 MHz 12/03 WNUA-FM Chicago, IL 1/96 95.5 MHz 12/03 WLIT-FM Chicago, IL 9/97 93.9 MHz 12/03 WGCI-FM# Chicago, IL Pending 107.5 MHz 12/03 WGCI-AM# Chicago, IL Pending 1390 kHz 12/03 KIOI-FM San Francisco, CA 4/94 101.3 MHz 12/97* KMEL-FM San Francisco, CA 11/92 106.1 MHz 12/97* KKSF-FM San Francisco, CA 1/97 103.7 MHz 12/97* KNEW-AM San Francisco, CA 9/97 910 kHz 12/97* KYLD-FM(2) San Francisco, CA 9/97 94.9 MHz 12/97* KABL-AM San Francisco, CA 9/97 960 kHz 12/97* KISQ-FM San Francisco, CA 9/97 98.1 MHz 12/97* KSKY-AM Dallas, TX 5/95 660 kHz 8/05 KHKS-FM# Dallas, TX Pending 106.1 MHz 8/05 KZPS-FM# Dallas, TX Pending 92.5 MHz 8/05 KDGE-FM# Dallas, TX Pending 94.5 MHz 8/05 WYXR-FM Philadelphia, PA 1/96 104.5 MHz 8/98 WJJZ-FM Philadelphia, PA 1/96 106.1 MHz 8/98 WDAS-AM Philadelphia, PA 5/97 1480 kHz 8/98 WDAS-FM Philadelphia, PA 5/97 105.3 MHz 8/98 WIOQ-FM Philadelphia, PA 5/97 102.1 MHz 8/98 WUSL-FM Philadelphia, PA 5/97 98.9 MHz 8/98 KTRH-AM Houston, TX 6/93 740 kHz 8/05 KLOL-FM Houston, TX 6/93 101.1 MHz 8/05 KKBQ-FM# Houston, TX Pending 92.9 MHz 8/05 KKBQ-AM# Houston, TX Pending 790 kHz 8/05 KLDE-FM# Houston, TX Pending 94.5 MHz 8/05 WTOP-AM++ Washington, D.C. 11/92 1500 kHz 10/02 WASH-FM Washington, D.C. 11/92 97.1 MHz 10/02 WGAY-FM Washington, D.C. 11/96 99.5 MHz 10/02 WWRC-AM Washington, D.C. 4/97 980 kHz 10/02 WMZQ-FM Washington, D.C. 7/97 98.7 MHz 10/02 WBIG-FM Washington, D.C. 9/97 100.3 MHz 10/03 WGMS-FM++ Washington, D.C. 9/97 103.5 MHz 10/03 WTEM-AM Washington, D.C. 9/97 570 kHz 10/03 WJMN-FM Boston, MA 1/96 94.5 MHz 4/98 WXKS-FM Boston, MA 1/96 107.9 MHz 4/98 WXKS-AM Boston, MA 1/96 1430 kHz 4/98
25 29
DATE OF EXPIRATION DATE STATION MARKET(1) ACQUISITION FREQUENCY OF FCC LICENSE ------- --------- ----------- ---------- ---------------- WFOX-FM Atlanta, GA 9/97 97.1 MHz 4/03 WKQI-FM Detroit, MI 5/95 95.5 MHz 10/03 WNIC-FM Detroit, MI 5/95 100.3 MHz 10/03 WYUR-AM Detroit, MI 5/95 1310 kHz 10/03 WWWW-FM Detroit, MI 1/97 106.7 MHz 10/03 WDFN-AM Detroit, MI 1/97 1130 kHz 10/03 WJLB-FM Detroit, MI 4/97 97.9 MHz 10/03 WMXD-FM Detroit, MI 4/97 92.3 MHz 10/03 WVCG-AM Miami/Ft. Lauderdale, FL 7/83 1080 kHz 2/03 WEDR-FM Miami/Ft. Lauderdale, FL 10/96 99.1 MHz 2/03 KRRF-AM Denver, CO 9/97 1280 kHz 4/05 KXKL-FM Denver, CO 9/97 105.1 MHz 4/05 KVOD-FM Denver, CO 9/97 92.5 MHz 4/05 KIMN-FM Denver, CO 9/97 100.3 MHz 4/05 KALC-FM Denver, CO 9/97 105.9 MHz 4/97* KXPK-FM# Denver, CO Pending 96.5 MHz 4/05 KTCZ-FM Minneapolis/St. Paul, MN 9/97 97.1 MHz 4/05 KTCJ-AM Minneapolis/St. Paul, MN 9/97 690 kHz 4/05 KDWB-FM Minneapolis/St. Paul, MN 9/97 101.3 MHz 4/05 KFAN-AM Minneapolis/St. Paul, MN 9/97 1130 kHz 4/05 KEEY-FM Minneapolis/St. Paul, MN 9/97 102.1 MHz 4/05 KQQL-FM Minneapolis/St. Paul, MN 9/97 107.9 MHz 4/05 WRCQ-FM Minneapolis/St. Paul, MN 9/97 100.3 MHz 4/05 KMLE-FM Phoenix, AZ 9/97 107.9 MHz 10/97* KISO-AM Phoenix, AZ 9/97 1230 kHz 10/05 KOOL-FM Phoenix, AZ 9/97 94.5 MHz 10/97* KOY-AM Phoenix, AZ 9/97 550 kHz 10/05 KYOT-FM Phoenix, AZ 9/97 95.5 MHz 10/97* KZON-FM Phoenix, AZ 9/97 101.5 MHz 10/97* WUBE-FM Cincinnati, OH 9/97 105.1 MHz 10/03 WUBE-AM Cincinnati, OH 9/97 1230 kHz 10/03 WYGY-FM Cincinnati, OH 9/97 96.5 MHz 10/03 WKYN-AM Cincinnati, OH 9/97 1160 kHz 10/03 WWSW-AM Pittsburgh, PA 9/97 970 kHz 8/98 WWSW-FM Pittsburgh, PA 9/97 94.5 MHz 8/98 KGBY-FM Sacramento, CA 9/97 92.5 MHz 12/97* KHYL-FM Sacramento, CA 9/97 101.1 MHz 12/97* KFBK-AM Sacramento, CA 9/97 1530 kHz 12/97* KSTE-AM Sacramento, CA 9/97 650 kHz 12/97* WOCL-FM Orlando, FL 9/97 105.9 MHz 2/03 WOMX-FM Orlando, FL 9/97 105.1 MHz 2/03 WJHM-FM Orlando, FL 9/97 101.9 MHz 2/03 WXXL-FM Orlando, FL 9/97 106.7 MHz 2/03 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 6/98 WBAB-FM# Nassau/Suffolk (Long Island), NY Pending 102.3 MHz 6/98 WBLI-FM# Nassau/Suffolk (Long Island), NY Pending 106.1 MHz 6/98 WHFM-FM# Nassau/Suffolk (Long Island), NY Pending 95.3 MHz 6/98 WGBB-AM# Nassau/Suffolk (Long Island), NY Pending 1240 kHz 6/98
26 30
DATE OF EXPIRATION DATE STATION MARKET(1) ACQUISITION FREQUENCY OF FCC LICENSE ------- --------- ----------- ---------- ---------------- WAPE-FM+ Jacksonville, FL 9/97 95.1 MHz 2/03 WFYV-FM+ Jacksonville, FL 9/97 104.5 MHz 2/03 KGGI-FM Riverside/San Bernardino, CA 9/97 99.1 MHz 12/97* KMRZ-AM Riverside/San-Bernardino, CA 9/97 1290 kHz 12/97*
- --------------- * Indicates pending renewal application. # Indicates station to be acquired in a Pending Transaction. + Indicates station to be disposed in a Pending Transaction. ++ Indicates station that would be disposed if the Bonneville Option is exercised. +++ Indicates station that would be acquired if the Bonneville Option is exercised. (1) Actual city of license may differ from metropolitan market served in certain cases. Ownership Matters. Under the Communications Act, a broadcast license may not be granted to or held by any corporation that has more than one-fifth of its capital stock owned or voted by aliens or their representatives, by foreign governments or their representatives, or by non-U.S. corporations. Under the Communications Act, a broadcast license also may not be granted to or held by any corporation that is controlled, directly or indirectly, by any other corporation more than one-fourth of whose capital stock is owned or voted by aliens or their representatives, by foreign governments or their representatives, or by non-U.S. corporations, if the FCC finds that the public interest will be served by the refusal or revocation of such license. The Company has been advised that the FCC staff has interpreted this provision of the Communications Act to require an affirmative public interest finding before a broadcast license may be granted to or held by any such corporation and that the FCC has made such an affirmative finding only in limited circumstances. These restrictions apply in modified form to other forms of business organizations, including partnerships. The Company, which serves as a holding company for its direct and indirect radio station subsidiaries, therefore may be restricted from having more than one-fourth of its stock owned or voted by aliens, foreign governments or non-U.S. corporations. The respective Certificates of Incorporation of Chancellor Media, CMHC and the Company prohibit 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, CMHC or the Company. The Communications Act and FCC rules also generally prohibit the common ownership, operation or control of a radio broadcast station and a television broadcast station serving the same local market, and of a radio broadcast station and a daily newspaper serving the same local market. Under these "cross-ownership" rules, absent waivers, the Company would not be permitted to acquire any daily newspaper or television broadcast station (other than low-power television) in a local market where it then owned any radio broadcast station. In October 1996, the Commission issued a Notice of Inquiry to explore possible changes in the newspaper/broadcast cross-ownership waiver policy with respect to newspaper/radio combinations, including the possibility of adopting a waiver policy based on market size or on the number of independently owned media in a market. The 1996 Act eliminated national ownership caps on ownership of AM and FM radio stations. Prior to the 1996 Act, radio groups were limited to ownership of 20 FM stations and 20 AM stations on a national basis. Additionally, the 1996 Act increased local ownership limits. Prior to the 1996 Act, a single owner was limited to owning two FMs and two AMs in a single large radio market with common ownership of three stations, including two in the same service, permitted in smaller markets. After the 1996 Act, local ownership limits were increased as follows: in markets with 45 or more stations, ownership is limited to eight stations, no more than five of which can be in the same 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. 27 31 Because of these multiple ownership rules and the cross-interest policy described below, a purchaser of Chancellor Media's common stock who acquires an attributable interest in the Company may violate the FCC's rules if it also has an "attributable" interest in other television or radio stations, or in daily newspapers, depending on the number and location of those radio or television stations or daily newspapers. Such a purchaser also may be restricted in the companies in which it may invest, to the extent that those investments give rise to an attributable interest. If an attributable stockholder of the Company violates any of these ownership rules, the Company may be unable to obtain from the FCC one or more authorizations needed to conduct its radio station business and may be unable to obtain FCC consents for certain future acquisitions. The FCC generally applies its television/radio/newspaper cross-ownership rules, and its broadcast multiple ownership rules, by considering the "attributable," or cognizable, interests held by a person or entity. A person or entity can have an interest in a radio station, television station or daily newspaper by being an officer, director, partner or stockholder of a company that owns that station or newspaper. Whether that interest is cognizable under the FCC's ownership rules is determined by the FCC's attribution rules. If an interest is attributable, the FCC treats the person or entity who holds that interest as the "owner" of the radio station, television station or daily newspaper in question, and therefore subject to the FCC's ownership rules. In the case of corporations, the interest of officers, directors and persons or entities that directly or indirectly have the right to vote 5% or more of the corporation's voting stock (or 10% or more of such stock in the case of insurance companies, investment companies, bank trust departments and certain other "passive investors" that hold such stock for investment purposes only) are generally attributed with ownership of whatever radio stations, television stations, and daily newspapers the corporation owns. Likewise, the interest of an officer or a director of a corporate parent (as well as the corporate parent) is generally attributed with ownership of whatever the subsidiary owns. In the case of a partnership, the interest of a general partner is attributable, as is the interest of any limited partner who is "materially involved" in the media-related activities of the partnership. Debt instruments, non-voting stock, options and warrants for voting stock that have not yet been exercised, limited partnership interests where the limited partner is not "materially involved" in the media-related activities of the partnership, and minority voting stock interests in corporations where there is a single holder of more than 50% of the outstanding voting stock, generally do not subject their holders to attribution. The FCC has issued a Notice of Proposed Rulemaking (the "NPRM") that contemplates tightening attribution standards where parties have multiple nonattributable interests in and relationships with stations that would be prohibited by the FCC's cross-interest rules, if the interests/relationships were attributable. The NPRM contemplates that this change in attribution will apply only to persons holding debt or equity interests that exceed certain benchmarks. In addition, the FCC has a "cross-interest" policy that under certain circumstances could prohibit a person or entity with an attributable interest in a broadcast station or daily newspaper from having a "meaningful" nonattributable interest in another broadcast station or daily newspaper in the same local market. Among other things, "meaningful" interests could include significant equity interests (including non-voting stock, voting stock, and limited partnership interests) and significant employment positions. 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, 28 32 sponsorship identification, and technical operations (including limits on radio frequency radiation). In addition, licensees must develop and implement programs designed to promote equal employment opportunities. The broadcast of obscene and indecent material and the advertisement of contests and lotteries are regulated by FCC rules, as well as by state and other federal laws. Time Brokerage Agreements. Over the past three years, a number of radio stations, including certain of the Company's stations, have entered into what commonly are referred to as "Time Brokerage Agreements," or "TBAs" (certain types of these agreements also are known as "Local Marketing Agreements," or "LMAs"). These agreements may take various forms. Separately-owned and licensed stations may agree to function cooperatively in terms of programming, advertising sales, and other matters, subject to the licensee of each station maintaining independent control over the programming and other operations of its own station and compliance with the requirements of antitrust laws. One typical type of TBA is a programming agreement between two separately-owned radio stations that serve a common service area, whereby the licensee of one station programs substantial portions of the broadcast day on the other licensee's station (subject to ultimate editorial and other controls being exercised by the latter licensee), and sells advertising time during those program segments. The FCC staff has held that such agreements do not violate the Communications Act as long as the licensee of the station that is being substantially programmed by another entity maintains complete responsibility for, and control over, operations of its broadcast station and otherwise ensures compliance with applicable FCC rules and policies. 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 views in certain circumstances. It is also possible that Congress may enact additional legislation that could have a material impact on the operation, ownership and financial performance of the Company's radio stations over and above the already substantial impact of the 1996 Act. 29 33 The FCC has taken initial steps to authorize the use of a new technology, DARS, to deliver audio programming by satellite. The FCC is also considering various proposals for terrestrial DARS. DARS may provide a medium for the delivery of multiple new audio programming formats to local and national audiences. It is not known at this time whether this technology also may be used in the future by existing radio broadcast stations either on existing or alternate broadcasting frequencies. The Company cannot predict what other matters might be considered in the future, nor can it judge in advance what impact, if any, the implementation of any of these proposals or changes might have on its business. Federal Antitrust Laws. The 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 the benchmarks. Given this uncertainty, the Company cannot predict whether it will be required by the DOJ or the FTC to dispose of certain stations to be acquired as a result of the Pending Transactions. 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. 30 34 DESCRIPTION OF THE $3.00 CONVERTIBLE 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. If a Dividend Payment Date is a Saturday, Sunday or day in which banking institutions are legally authorized to close in the City of New York, however, the dividend will be payable on the next business day. 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 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 ("Junior Dividend Stock"). 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. 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 set apart for payment on, and no purchase, redemption or other acquisition shall be made by the Company of, the Common Stock or Junior Dividend Stock unless all accrued and unpaid dividends on the $3.00 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, the Company may not pay dividends on any class or series of stock, if hereafter issued, having parity with the $3.00 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 Convertible Preferred Stock. The 7% Convertible Preferred Stock constitutes Parity Dividend Stock. In addition, except as provided below, the Company may not pay dividends on the $3.00 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 the $3.00 Convertible Preferred Stock and on any Parity Dividend Stock, all dividends declared on the $3.00 Convertible Preferred Stock and the Parity Dividend Stock will be declared and make pro rata so that the amount of dividends declared on the $3.00 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 $3.00 Convertible Preferred Stock and the Parity Dividend Stock bear to each other. Chancellor Media may not purchase any shares of the $3.00 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 $3.00 Convertible Preferred Stock and Parity Dividend Stock then outstanding if the Company has failed to pay any accrued dividend on the $3.00 Convertible Preferred Stock or any Parity Dividend Stock on a stated payment date. Notwithstanding the foregoing, in such event, the Company may purchase or redeem fewer than all the shares of the $3.00 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 $3.00 Convertible Preferred Stock and any Parity Dividend Stock then outstanding bear to each other. 31 35 If Chancellor Media hereafter issues any series or class of stock that ranks senior as to dividends to the $3.00 Convertible Preferred Stock ("Senior Dividend Stock") and fails to pay or declare and set apart for payment accrued and unpaid dividends on any Series 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 $3.00 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. Chancellor Media has no Senior Dividend Stock outstanding on the date of this Prospectus. The dividend payable on $3.00 Convertible Preferred Stock for each quarterly dividend period will be computed by dividing the annual dividend amount by four. The amount of dividends payable for the initial dividend period and for any period shorter than a full dividend period will be computed on the basis of a 360-day year of twelve 30-day months. No interest will be payable on any $3.00 Convertible Preferred Stock dividend that may be in arrears. Under Delaware law, Chancellor Media may declare and pay dividends or make other distributions on its capital stock only out of surplus, as defined in the Delaware General Corporation law (the "DGCL"), or if no surplus is available, out of its net profits for the fiscal year in which the dividend or distribution is declared and the preceding fiscal year. No dividends or distributions may be declared or paid if Chancellor Media is or would be rendered insolvent by virtue of the dividend or distribution, or if the declaration, payment or distribution would contravene Chancellor Media's Amended and Restated Certificate of Incorporation as then in effect. Chancellor Media's ability to pay dividends on its capital stock, including the $3.00 Convertible Preferred Stock, is dependent upon the receipt of funds from its subsidiaries. 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 $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 ("Junior Liquidation Stock"). Holders of $3.00 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 hereafter issued that ranks senior as to liquidation rights to the $3.00 Convertible Preferred Stock ("Senior Liquidation Stock"), if any has been paid in full. The holders of $3.00 Convertible Preferred Stock and any series or class of stock hereafter issued that ranks on a parity as to liquidation rights with the $3.00 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 $3.00 Convertible Preferred Stock and any Parity Liquidation Stock. The 7% Convertible Preferred Stock constitutes Parity Liquidation Stock. After payment in full of the liquidation preference plus any accrued and unpaid dividends on the $3.00 Convertible Preferred Stock, the holders will not be entitled to any further participation in any distribution of assets by Chancellor Media. Neither a consolidation or merger of Chancellor Media with another entity nor a sale or transfer or all or part of Chancellor Media's assets for cash, securities or other property will be considered a liquidation, dissolution or winding up of Chancellor Media. VOTING RIGHTS The holders of $3.00 Convertible Preferred Stock will 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. 32 36 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, voting separately as a class together with holders of any Parity Dividend Stock then having voting rights, 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. In addition, so long as any $3.00 Convertible Preferred Stock is outstanding, Chancellor Media will not, without the affirmative vote or consent of the holders of at least 66 2/3% of all outstanding shares of $3.00 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 Incorporation or the by-laws of Chancellor Media so as to affect adversely the relative rights, preferences, qualifications, limitations or restrictions of the $3.00 Convertible Preferred Stock or (ii) effect any reclassification of the $3.00 Convertible Preferred Stock. Under Delaware law, holders of the $3.00 Convertible Preferred Stock will be entitled to vote as a class upon a proposed amendment to Chancellor Media's Certificate of Incorporation, whether or not entitled to vote thereon by the Certificate of Incorporation, 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. 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 provision 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. If fewer than all the outstanding shares of $3.00 Convertible Preferred Stock are to be redeemed, Chancellor Media will select those shares to be redeemed pro rata or in such other manner as the Board of Directors may determine. There is no mandatory or sinking fund obligation for the $3.00 Convertible Preferred Stock. In the event that Chancellor Media has failed to pay accrued and unpaid dividends on the 33 37 $3.00 Convertible Preferred Stock, it may not redeem less than all of the outstanding shares of the $3.00 Convertible Preferred Stock until all accrued and unpaid dividends have been paid in full. Notice of redemption will be mailed at least 15 days but not more than 60 days before the redemption date to each holder of record of $3.00 Convertible Preferred Stock to be redeemed at the address shown on the stock transfer books. After the redemption date, dividends will cease to accrue on the shares of $3.00 Convertible Preferred Stock called for redemption and all rights of the holders of those shares will terminate, except the conversion rights to the extent described below and the right to receive the redemption price plus accrued and unpaid dividends, whether or not declared, to the redemption date, without interest. 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. If shares of $3.00 Convertible Preferred Stock not called for redemption are surrendered for conversion during the period between the close of business on any dividend record date and the opening of business on any corresponding Dividend Payment date such shares so surrendered must be accompanied by payment of an amount equal to the dividend payable on such shares on such Dividend Payment Date. No such payment will be required to accompany shares of $3.00 Convertible Preferred Stock called for redemption and surrendered during such period. A holder of shares of $3.00 Convertible Preferred Stock on a dividend record date who (or whose transferee) tenders any such shares for conversion into shares of Common Stock on such dividend payment date will receive the dividend payable by Chancellor Media on such shares of $3.00 Convertible Preferred Stock on such date, and the converting holder need not include payment of the amount of such dividend upon surrender of shares of $3.00 Convertible Preferred Stock for conversion. Except for shares of $3.00 Convertible Preferred Stock surrendered for conversion on a dividend payment date, Chancellor Media will make no payment or allowance for accrued and unpaid dividends, whether or not in arrears, on converted shares or for dividends on the shares of Common Stock issued upon such conversion. No fractional shares of Common Stock will be issued upon conversions but, in lieu thereof, an appropriate amount will be paid in cash based on the last reported sale price for the Common Stock on the day of conversion. The conversion price will be subject to adjustment in certain events, including (i) the payment of a dividend on any class of Chancellor Media's capital stock in shares of Common Stock; (ii) subdivisions or combinations of the Common Stock; (iii) the issuance to all holders of Common Stock or of certain rights or warrants (expiring within 45 days after the record date for determining stockholders entitled to receive them) to subscribe for or purchase shares of Common Stock of any class at less than current market price; or (iv) the payment of a dividend to all holders of Common Stock of any shares of capital stock of Chancellor Media or its subsidiaries (other than shares of Common Stock of any class) or evidences of indebtedness, cash (excluding cash dividends payable solely in cash that may from time to time be fixed by the Board of Directors, or dividends or distributions in connection with liquidation, dissolution or winding up of Chancellor Media), other assets or rights or warrants to subscribe for or purchase any securities (other than those referred to above); or (v) the issuance to all holder of Common Stock of securities convertible into or exchangeable for shares of Common Stock of any class (other than pursuant to transactions described above) for a consideration per share of Common Stock deliverable upon a conversion or exchange of the securities less than the current market price per share on the date of issuance of the securities. No adjustment of the conversion price will be required to be made until cumulative adjustments amount to 1% or more of the conversion price as last adjusted, and any adjustment below 1% will be carried forward. Chancellor Media from time to time may reduce the Conversion Price by any amount for any period of time if the period is at least 20 days and if the reduction is irrevocable during the period. Whenever the Conversion Price is so reduced, Chancellor Media shall mail to holders of record of the Convertible Preferred 34 38 Stock a notice of the reduction at least 15 days before the date the reduced Conversion Price takes effect, stating the reduced Conversion Price and the period it will be in effect. In case of any reclassification of the Common Stock, any consolidation of Chancellor Media with, or merger of Chancellor Media into, any other entity, any merger of any entity into Chancellor Media (other than a merger that does not result in a reclassification, conversion, exchange or cancellation of the outstanding shares of Common Stock), any sale or transfer of all or substantially all of the assets of Chancellor Media or any compulsory share exchange whereby the Common Stock is converted into other securities, cash or other property, then the holder of each share of $3.00 Convertible Preferred Stock then outstanding shall have the right thereafter, during the period that the share of $3.00 Convertible Preferred Stock shall be convertible, to convert that share only into the kind and amount of securities, cash and other property receivable upon the reclassification, consolidation, merger, sale, transfer or share exchange by a holder of the number of shares of Common Stock into which share of $3.00 Convertible Preferred Stock would have been convertible immediately prior to the reclassification, consolidation, merger, sale, transfer or share exchange. Change of Control. If there occurs a Change of Control 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. The adjusted conversion price is the greater of (i) the average closing price per share of the Common Stock for the last five trading days before the Change of Control or (ii) 66 2/3% of the last reported sales price of the Common Stock before the date hereof (as adjusted for stock splits or combinations). If the Change of Control occurs on or before June 16, 1999, the redemption price then in effect for the optional redemption by Chancellor Media shall, for purposes of the special conversion rights, be deemed to be the redemption price applicable beginning immediately after June 16, 1999. The special conversion rights will exist upon the occurrence of any Change of Control whether or not the transaction relating thereto has been approved by the Board of Directors of Chancellor Media and may not be waived by the Board of Directors. Exercise of the special conversion rights by the holder of a share of $3.00 Convertible Preferred Stock will be irrevocable. If the Change of Control involves a consolidation, merger or sale of assets of the Company, the holders of $3.00 Convertible Preferred Stock exercising their special conversion rights will be entitled to receive the same consideration as received for the number of shares of Common Stock into which their shares of $3.00 Convertible Preferred Stock would have been converted pursuant to the special conversion rights. The special conversion rights are in addition to the regular conversion rights that apply to the $3.00 Convertible Preferred Stock. Chancellor Media may, at its option, elect to pay holders of the $3.00 Convertible Preferred Stock exercising their special conversion rights an amount in cash equal to 101% of the liquidation preference of the $3.00 Convertible Preferred Stock plus any accrued and unpaid dividends. The Senior Credit Facility limits Chancellor Media's ability to pay cash upon election of the holders of the $3.00 Convertible Preferred Stock to exercise their special conversion rights. The special conversion rights may deter certain mergers, tender offers or other takeover attempts and may thereby adversely affect the market price of the Common Stock. "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 Chancellor Media to any Person or group of related Persons for purposes of Section 13(d) of the Exchange Act (a "Group"), other than to the Permitted Holders (as defined); or (ii) a majority of the Board of Directors of Chancellor Media shall consist of Persons who are not Continuing Directors (as defined); 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. 35 39 "Continuing Director" means, as of the date of determination, any Person who (i) was a member of the Board of Directors of Evergreen on June 10, 1997 or who became a director of Chancellor Media upon consummation of the Chancellor Merger, (ii) was nominated for election or elected to the Board of Directors of Chancellor Media 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. "Permitted Holders" means (i) if the Chancellor Merger is not consummated, Scott K. Ginsburg and (ii) if the Chancellor Merger is consummated from and after the effective date thereof, Scott K. Ginsburg, Hicks Muse or any of its affiliates, officers and directors, or Steven Dinetz. This "Change of Control" covenant will not apply in the event of (a) changes to the Board of Directors contemplated by the Chancellor Merger Agreement, (b) changes in a majority of the Board of Directors of the Company so long as a majority of such Board of Directors continues to consist of Continuing Directors and (c) certain transactions with Permitted Holders. In addition, this covenant is not intended to afford holders of shares of $3.00 Convertible Preferred Stock protection in the event of certain highly leveraged transactions, reorganizations, restructurings, mergers and other similar transactions that might adversely affect the holders of shares of $3.00 Convertible Preferred Stock, but would not constitute a Change of Control. Chancellor Media could in the future, enter into transactions including certain recapitalizations of Chancellor Media, that would not constitute a Change of Control but would increase the amount of indebtedness outstanding at such time. With respect to the sale of "all or substantially all" of the assets of Chancellor Media, which would constitute a Change of Control for proposes of the certificate of designation for the $3.00 Convertible Preferred Stock, the meaning of the phrase "all or substantially all" 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 Chancellor Media and, therefore, it may be unclear whether a Change of Control has occurred and whether the $3.00 Convertible Preferred Stock is subject to a Change of Control Offer. None of the provisions in the certificate of designation for the $3.00 Convertible Preferred Stock relating to the special conversion rights upon a Change of Control are waiveable by the Board of Directors of Chancellor Media. 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 (a "Debenture Exchange Date"), through the issuance of Chancellor Media's 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 Exchange Debentures at the rate of $50.00 principal amount of Exchange Debentures for each share of $3.00 Convertible Preferred Stock. Since Exchange Debentures will only be issued in denominations of $1,000 or any multiple thereof, holders of $3.00 Convertible Preferred Stock holding less than such a multiple will receive in cash the liquidation preference of the $3.00 Convertible Preferred Stock not so exchanged. No shares of $3.00 Convertible Preferred Stock may be exchanged for Exchange Debentures unless Chancellor Media has paid or set aside for the benefit of the holders of the $3.00 Convertible Preferred Stock all accrued and unpaid dividends on the $3.00 Convertible Preferred Stock to the Debenture Exchange Date. The Senior Credit Facility may limit Chancellor Media's ability to cause the exchange of the $3.00 Convertible Preferred Stock for Exchange Debentures. The ability of Chancellor Media to exchange $3.00 Convertible Preferred Stock for Exchange Debentures is also subject to certain conditions contained in the indenture relating to the Exchange Debentures and to limitations imposed under the DGCL and by applicable laws protecting the rights of creditors. 36 40 DESCRIPTION OF THE EXCHANGE DEBENTURES If the Company elects to issue Exchange Debentures in exchange for the $3.00 Convertible Preferred Stock, the Exchange Debentures will be issued under an Indenture (the "Indenture") between the Company and The Bank of New York as Trustee (the "Trustee") at a rate of $50.00 principal amount of Exchange Debentures for each share of $3.00 Convertible Preferred Stock so exchanged. The following statements are subject to the detailed provisions of the Indenture and are qualified in their entirety by reference to the Indenture, a copy of which will be available for inspection at the office of the Trustee. Wherever particular provisions of the Indenture are referred to, such provisions are incorporated by reference as a part of the statements made, and the statements are qualified in their entirety by such reference. GENERAL The Exchange Debentures will represent unsecured general obligations of the Company subordinate in right of payment to all Senior Debt (as defined) of the Company as described under "-- Subordination of Exchange Debentures," and convertible into Common Stock as described under "-- Conversion of Exchange Debentures." The Exchange Debentures are limited to $299.5 million principal amount, will be issued in fully registered form only in denominations of $1,000 or any multiple thereof and will mature on June 15, 2012, unless earlier redeemed at the option of the Company. The Exchange Debentures will initially be issued on the Debenture Exchange Date. The Indenture does not contain any restrictions on the payment of dividends or the repurchase of equity securities of the Company or any financial covenants. Exchange Debentures will bear interest at the annual rate of 6% payable quarterly on March 15, June 15, September 15 and December 15 of each year, commencing on the first payment date following the Exchange Date (as defined in the Indenture), to holders of record at the close of business on the preceding March 1, June 1, September 1 and December 1, respectively, and may, at the option of the Company, be paid by check mailed to such holders. Principal and premium, if any, will be payable, and the Exchange Debentures may be presented for conversion, registration of transfer and exchange, without service charge, at the office of the paying agent of the Company, initially the Trustee, in New York, and at the Corporate Trust office of the Trustee in New York. CONVERSION OF EXCHANGE DEBENTURES The holders of Exchange Debentures will be entitled at any time through the close of business on the maturity date, subject to prior redemption, to convert any Exchange Debentures or portions thereof (in denominations of $1,000 or multiples thereof) into Common Stock of the Company, at the conversion price per share of Common Stock in effect for the $3.00 Convertible Preferred Stock at the Debenture Exchange Date, subject to adjustment as described below. Holders of Exchange Debentures will not be entitled to any payment or adjustment on account of accrued and unpaid interest upon conversion of the Exchange Debentures or dividends on any Common Stock issued. Exchange Debentures called for redemption will not be convertible after the close of business on the business day preceding the date fixed for redemption, unless the Company defaults in payment of the redemption price. No fractional shares of Common Stock will be issued as a result of conversion, but in lieu thereof, in the sole discretion of the Board, either (i) such fractional interest will be rounded up to the next whole share or (ii) an appropriate amount will be paid in cash by the Company. The conversion price will be subject to adjustment in certain events, including (i) the payment of a dividend on any class of the Company's capital stock in shares of Common Stock; (ii) subdivisions or combinations of the Common Stock; (iii) the issuance to all holders of Common Stock of certain rights or warrants (expiring within 45 days after the record date for determining stockholders entitled to receive them) to subscribe for or purchase shares of its Common Stock of any class at less than current market price; or (iv) the payment of a dividend to all holders of Common Stock of any shares of capital stock of the Company or its subsidiaries (other than shares of its Common Stock of any class) or evidences of indebtedness, cash 37 41 (excluding cash dividends payable solely in cash that may from time to time be fixed by the Board of Directors, or dividends or distributions in connection with liquidation, dissolution or winding up of the Company), other assets or rights or warrants to subscribe for or purchase any securities (other than those referred to above); or (v) the issuance to all holders of Common Stock of securities convertible into or exchangeable for shares of its Common Stock of any class (other than pursuant to transactions described above) for a consideration per share of Common Stock deliverable upon a conversion or exchange of the securities less than the current market price per share on the date of issuance of the securities. No adjustment of the conversion price will be required to be made until cumulative adjustments amount to 1% or more of the conversion price as last adjusted, and any adjustment below 1% will be carried forward. To the extent permitted by law, the Company from time to time may reduce the conversion price by any amount for any period of at least 20 days, if the Board has made a determination that such reduction would be in the best interests of the Company, which determination shall be conclusive. In such case, the Company shall give at least 15 days notice of the reduction. In addition, at its option the Company may make such reduction in the conversion price as the Board deems advisable to avoid or diminish any income tax to holders of Common Stock resulting from any dividend or distribution of stock rights (or rights to acquire stock) or from any event treated as such for income tax purposes. See "Certain United States Federal Income Tax Considerations -- Adjustment of Conversion Price." In case of any reclassification of the Common Stock, any consolidation of the Company with, or merger of the Company into, any other entity, any merger of any entity into the Company (other than a merger that does not result in a reclassification, conversion, exchange or cancellation of the outstanding shares of Common Stock), any sale or transfer of all or substantially all of the assets of the Company or any compulsory share exchange whereby the Common Stock is converted into certain other securities, cash or other property, then the holders of each Exchange Debenture then outstanding shall have the right thereafter, during the period that the Exchange Debenture shall be convertible, to convert that share only into the kind and amount of securities, cash and other property receivable upon the reclassification, consolidation, merger, sale, transfer or share exchange by a holder of the number of shares of Common Stock into which each Exchange Debenture would have been convertible immediately prior to the reclassification, consolidation, merger, sale, transfer or share exchange. CHANGE OF CONTROL If there occurs a Change of Control (as hereinafter defined) with respect to the Company, then each holder of the Exchange Debentures will have the option (the "Holder's Redemption Option") to require the Company to buy such holder's Exchange Debentures pursuant to the offer described below (the "Debenture Change of Control Offer") at a price equal to 101% of the principal amount thereof plus accrued and unpaid interest to the date of purchase (the "Debenture Change of Control Payment"). The Holder's Redemption Option will exist upon the occurrence of any Change of Control whether or not the transaction relating thereto has been approved by management of the Company and may not be waived by management. Exercise of the Holder's Redemption Option by the holder of a Exchange Debenture will be irrevocable. Within 30 days following the date upon which the Company becomes aware that a Change of Control has occurred, the Company must send, by first class mail postage prepaid, a notice to each holder of Exchange Debentures, with a copy to the Trustee, which notice shall govern the terms of the Debenture 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 "Debenture Change of Control Payment Date"). Holders electing to have an Exchange Debenture purchased pursuant to a Debenture Change of Control Offer will be required to surrender the Exchange Debenture, 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 Debenture Change of Control Payment Date. The Company will comply with the requirements of Rule 14e-1 under the Exchange Act and any other applicable securities laws and regulations to the extent such laws and regulations are applicable in connection with the repurchase of Exchange Debentures as a result of a Change of Control. 38 42 On the Debenture Change of Control Payment Date, the Company will, to the extent lawful, (1) accept for payment all Exchange Debentures or portions thereof properly tendered pursuant to the Debenture Change of Control Offer, (2) deposit with the paying agent an amount equal to the Debenture Change of Control Payment in respect of all Exchange Debentures or portions thereof so tendered and (3) deliver or cause to be delivered to the Trustee the Exchange Debentures so accepted together with an officers' certificate stating the aggregate principal amount of Exchange Debentures or portions thereof being purchased by the Company. The paying agent will promptly mail to each holder of Exchange Debentures so tendered the Debenture Change of Control Payment for such Exchange Debentures, and the Trustee will promptly authenticate and mail (or cause to be transferred by book entry) to each holder new Exchange Debentures equal in aggregate principal amount to any unpurchased portion of the Exchange Debentures surrendered, if any. 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 of the Exchange Debentures that the Company might be required to purchase. "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"), other than to the Permitted Holders (as defined); or (ii) a majority of the Board of Directors of the Company shall consist of Persons who are not Continuing Directors (as defined); 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 the Company. "Continuing Director" means, as of the date of determination, any Person who (i) was a member of the Board of Directors of the Company on June 10, 1997 or becomes a director upon consummation of the Chancellor Merger, (ii) was nominated for election or elected to the Board of Directors of 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. "Permitted Holders" means (i) if the Chancellor Merger is not consummated, Scott K. Ginsburg and (ii) if the Chancellor Merger is consummated, from and after the effective date thereof, Scott K. Ginsburg, Hicks Muse or any of its affiliates, officers and directors, or Steven Dinetz. This "Change of Control" covenant will not apply in the event of (a) changes to the Board of Directors contemplated by the Chancellor Merger Agreement, (b) changes in a majority of the Board of Directors of the Company so long as a majority of such Board of Directors continues to consist of Continuing Directors and (c) certain transactions with Permitted Holders. In addition, this covenant is not intended to afford holders of shares of $3.00 Convertible Preferred Stock protection in the event of certain highly leveraged transactions, reorganizations, restructurings, mergers and other similar transactions that might adversely affect the holders of shares of Convertible Preferred Stock, but would not constitute a Change of Control. The Company could, in the future, enter into certain transactions including certain recapitalizations of the Company, that would not constitute a Change of Control with respect to the Change of Control purchase feature of the $3.00 Convertible Preferred Stock, but would increase the amount of indebtedness outstanding at such time. With respect to the sale of "all or substantially all" of the assets of the Company, which would constitute a Change of Control for proposes of the Indenture, the meaning of the phrase "all or substantially all" 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 the Company and, therefore, it may be unclear whether a Change of Control has occurred. None of the provisions in the Indenture relating to the Holder's Redemption Option upon a Change of Control are waiveable by the Board of Directors of the Company. 39 43 OPTIONAL REDEMPTION The Exchange Debentures are not subject to any mandatory redemption, sinking fund or other similar provision. The Exchange Debentures will be redeemable at the option of the Company upon notice at any time, in whole or in part, at the following redemption prices (expressed as a percentage of the principal amount), together with accrued and unpaid interest to the date fixed for redemption, if redeemed during the twelve-month period commencing immediately after September 15 of the years indicated below:
REDEMPTION YEAR PRICE ---- ---------- 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
The ability of the Company to redeem Exchange Debentures will be restricted under the terms of the Senior Credit Facility. SUBORDINATION OF EXCHANGE DEBENTURES The indebtedness evidenced by the Exchange Debentures will be subordinate to the prior payment when due of all Senior Debt. Upon maturity of any Senior Debt by lapse of time, acceleration or otherwise, payment in full must be made on such Senior Debt before any payment is made on or in respect of the Exchange Debentures. During the continuance of any default in payment or any event of default pursuant to the terms of any Senior Debt, no payment may be made by the Company on or in respect of the Exchange Debentures. Upon any acceleration of the principal amount due on the Exchange Debentures or distribution of assets of the Company in any dissolution, winding-up, liquidation or reorganization of the Company, payment of the principal of, and interest on, the Exchange Debentures will be subordinated to the extent and in the manner set forth in the Exchange Debenture Indenture, to the prior payment in full of all Senior Debt. Such subordination will not prevent the occurrence of any Event of Default (as defined in the Exchange Debenture Indenture). "Senior Debt" means the principal of (and premium, if any) and interest on all Indebtedness of the Company (other than the Exchange Debentures) (including, without limitation, any interest that would accrue but for the filing of a petition in bankruptcy, insolvency, reorganization or similar proceeding) on such Indebtedness, whether outstanding on the date of issuance of the Exchange Debentures or thereafter created, incurred or assumed. Notwithstanding anything in the Exchange Debenture Indenture to the contrary, Senior Debt will not include (i) Indebtedness of or monies owed by the Company for compensation to employees or for goods or materials purchased or for services rendered in the ordinary course of business, (ii) Indebtedness of the Company to any affiliate and (iii) any other Indebtedness which by the terms of the instrument creating or evidencing the same are specifically designated as not being senior in right of payment to the Exchange Debentures. "Indebtedness" means (i) any liability of any person (a) for borrowed money, (b) evidenced by bonds, debentures, notes or other similar instruments, (c) in respect of letters of credit or other similar instruments (or reimbursement obligations with respect thereto), (d) for the payment of the deferred purchase price of property or services or (e) as lessee under capital leases; (ii) all indebtedness of others secured by a lien on any asset of a person, whether or not such indebtedness is assumed by that person; (iii) any liability of others described in the preceding clause that the person has guaranteed; and (iv) to the extent not otherwise included, obligations under Currency Agreements and Interest Rate Agreements (as defined in the Exchange Debenture Indenture). Because the Company is a holding company, the Exchange Debentures will be structurally subordinated to the obligations of the Company's subsidiaries, which liabilities as of June 30, 1997 would have been, on a pro forma basis after giving effect to the Completed Transactions completed after such date, the Chancellor Merger, the Pending Transactions (other than the Katz 40 44 Acquisition), and the Financing Transactions, $2.78 billion. There are no restrictions in the Indenture on the ability of the Company and its subsidiaries to incur additional indebtedness, including Senior Debt. EVENTS OF DEFAULT AND REMEDIES An Event of Default is defined in the Indenture as being a default in payment of the principal of or premium, if any, when due, upon maturity, acceleration, redemption or otherwise, on any of the Exchange Debentures; default for 30 days in payment of any installment of interest on the Exchange Debentures; default by the Company for 45 days after notice in the observance or performance of any other covenants in the Indenture; and certain events involving bankruptcy, insolvency or reorganization of the Company. The Indenture provides that the Trustee may withhold notice to the holders of Exchange Debentures of any default (except in payment of principal, or premium, if any, or interest with respect to the Exchange Debentures) if the Trustee considers it in the interest of the holders of the Exchange Debentures to do so. The Indenture provides that if any Event of Default shall have occurred and be continuing the Trustee or the holders of not less than 25% in principal amount of the Exchange Debentures then outstanding may declare the principal of all Exchange Debentures to be due and payable immediately, but if the Company shall cure all defaults (except the nonpayment of interest and premium, if any, on and principal of any Exchange Debentures which shall have become due by acceleration) and certain other conditions are met, such declaration may be annulled and past defaults may be waived by the holders of a majority in principal amount of Exchange Debentures then outstanding. The holders of a majority in principal amount of the Exchange Debentures then outstanding shall have the right to direct the time, method and place of conducting any proceedings for any remedy available to the Trustee, subject to certain limitations specified in the Indenture. MODIFICATION OF THE INDENTURE The Indenture contains provisions permitting the Company and the Trustee, with the consent of the holders of not less than a majority in principal amount of the Exchange Debentures at the time outstanding (or prior to any exchange of Exchange Debentures for $3.00 Convertible Preferred Stock, with the consent of holders of not less than a majority of the outstanding shares of $3.00 Convertible Preferred Stock), to modify the Indenture or any supplemental indenture or the rights of the holders of the Exchange Debentures, except that no such modification shall (i) extend the final maturity of any Exchange Debentures, reduce the rate or extend the time for payment of interest thereon, reduce the principal amount thereof or premium, if any, thereon, change the provisions for redemption at the option of the holders in a manner adverse to the holders, impair or affect the right of a holder to institute suit for the payment thereof, change the currency in which the Exchange Debentures are payable, impair the right to convert the Exchange Debentures into Common Stock, subject to the terms set forth in the Indenture, or change the subordination provisions in a way that adversely affects a holder, without the consent of the holder of each Exchange Debenture so affected; or (ii) reduce the aforesaid percentage of Exchange Debentures, the consent of the holders of which is required for any such modification. CONCERNING THE TRUSTEE The Bank of New York, the Trustee under the Indenture, is the registrar, transfer agent, conversion agent and dividend disbursing agent for the $3.00 Convertible Preferred Stock. The Bank of New York also serves as the transfer agent and registrar for the Common Stock, the 7% Convertible Preferred Stock, the 12 1/4% Preferred Stock and the 12% Preferred Stock. 41 45 DESCRIPTION OF CHANCELLOR MEDIA CAPITAL STOCK COMMON STOCK General Chancellor Media's authorized common stock consists of 250,000,000 shares of Common Stock, par value $0.01 per share (the "Common Stock"), approximately 59,613,500 of which were issued and outstanding as of September 5, 1997 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 September 5, 1997. 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 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. Chancellor Media presently expects that the Board of Directors of Chancellor Media will submit a proposal at the 1998 annual meeting of stockholders in order to eliminate the authorized shares of Class A Common Stock. 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 Indenture and the certificates of designation governing the 12% Preferred Stock and the 12 1/4 Preferred Stock will each indirectly restrict, Chancellor Media's ability to pay cash dividends on the Common Stock and Class A Common Stock. Neither Evergreen nor Chancellor has declared or paid any dividends with respect to its respective formerly outstanding 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 Amended and Restated Certificate of Incorporation of Chancellor Media 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. 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. Change of Control Provisions Certain provisions of Chancellor Media's Amended and Restated Certificate of Incorporation and Bylaws may have the effect of preventing, discouraging or delaying any change of control of the Company and may maintain the incumbency of the Board of Directors and management. The authorization of 50,000,000 shares of preferred stock makes it possible for the Board of Directors to issue preferred stock with voting or other rights or preferences that could impede the success of any attempt to effect a change of control of the 42 46 Company. In addition, the Amended and Restated Certificate of Incorporation of Chancellor Media provides for three classes of directors serving for staggered three-year terms. This provision could also impede the success of any attempt to effect a change of control of the Company. Under the Delaware General Corporation Law, directors on a classified board may only be removed by shareholders for cause. The Company is subject to Section 203 ("Section 203") of the Delaware General Corporation Law. Section 203 prohibits a publicly-held Delaware corporation from engaging in a "business combination" with an "interested stockholder" for a period of three years after the date of the transaction in which the person became an interested stockholder, unless: (i) prior to such date, the board of directors of the corporation approves either the business combination or the transaction which resulted in the stockholder becoming an interested stockholder, or (ii) upon consummation of the transaction which resulted in the stockholder becoming an interested stockholder, the interested stockholder owns at least 85% of the outstanding voting stock (excluding certain shares held by persons who are both directors and officers of the corporation and certain employee stock plans) or (iii) on or after the consummation date, the business combination is approved by the board of directors and by the affirmative vote of at least 66 2/3% of the outstanding voting stock that is not owned by the interested stockholder. For purposes of Section 203, a "business combination" includes, among other things, a merger, asset sale or other transaction resulting in a financial benefit to the interested stockholder, and an "interested stockholder" is generally a person who, together with affiliates and associates, owns (or within three years, owned) 15% or more of the corporation's voting stock. Alien Ownership Chancellor Media's Amended and Restated Certificate of Incorporation 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 Certificate of Incorporation also prohibits any transfer of Chancellor Media's capital stock that would cause Chancellor Media to violate this prohibition. In addition, the Amended and Restated Certificate of Incorporation of Chancellor Media 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 and Properties -- Federal Regulation of Radio Broadcasting Industry -- Ownership Matters." Transfer Agent The Bank of New York serves as the Transfer Agent and Registrar for the Common Stock. PREFERRED STOCK General Chancellor Media's authorized preferred stock consists of 50,000,000 shares of preferred stock, par value $.01 per share. Chancellor Media has issued 2,200,000 shares of 7% Convertible Preferred Stock with a stated liquidation preference of $50.00 per share and 5,990,000 shares of $3.00 Convertible Preferred Stock with a stated liquidation preference of $50.00 per share. 43 47 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 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 44 48 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 Preferred Stock constitutes "Parity Liquidation Stock" for purposes of the 7% Convertible Preferred Stock. Voting Rights The holders of 7% Convertible Preferred Stock will 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 Certificate of Incorporation of Chancellor Media 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 45 49 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 and 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. $3.00 CONVERTIBLE EXCHANGEABLE PREFERRED STOCK For a description of the $3.00 Convertible Preferred Stock, see "Description of the $3.00 Convertible Preferred Stock." CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS The following discussion summarizes the material Federal income tax considerations generally applicable to the purchase, ownership and disposition of the Securities. The discussion is based upon the Internal Revenue Code of 1986, as amended (the "Code"), Treasury Regulations, Internal Revenue Service ("IRS") rulings and judicial decisions now in effect, all of which are subject to change at any time. Any such change may be applied retroactively in a manner that could adversely affect a holder of the Securities. The discussion assumes that the holders of Securities will hold such shares as "capital assets" within the meaning of Section 1221 of the Code. The consequences set forth in this discussion are not binding on the IRS or the courts. The Company has not sought and will not seek any rulings from the IRS with respect to the positions of the Company discussed herein, and there can be no assurance that the IRS will not take a different position concerning the tax consequences of the purchase, ownership or disposition of the Securities. The tax treatment of a holder of the Securities may vary depending on such holder's particular situation or status. Certain holders (including S corporations, insurance companies, tax-exempt organizations, financial institutions, broker-dealers, taxpayers subject to alternative minimum tax and persons holding the Securities as part of a hedging or conversion transaction or a straddle) may be subject to special rules not discussed 46 50 below. The following discussion is limited to the United States Federal income tax consequences relevant to a holder of the Securities that is a citizen or resident of the United States, or any state thereof, or a corporation or other entity created or organized under the laws of the United States, or any political subdivision thereof, or an estate the income of which is subject to United States Federal income tax regardless of its source or a trust whose administration is subject to the primary supervision of a United States court and which has one or more United States persons who have the authority to control all substantial decisions of the trust. The following discussion does not consider all aspects of United States Federal income tax that may be relevant to the purchase, ownership, and disposition of the Securities by a holder in light of such holder's personal circumstances. In addition, the discussion does not consider the effect of any applicable foreign, state, local or other tax laws or estate or gift tax considerations. DIVIDENDS ON $3.00 CONVERTIBLE PREFERRED STOCK Dividends paid on the Convertible Preferred Stock will be taxable to a holder as ordinary dividend income to the extent of the Company's current or accumulated earnings and profits (as determined for Federal income tax purposes). To the extent that the amount of any distribution on the $3.00 Convertible Preferred Stock exceeds the Company's current or accumulated earnings and profits (as determined for Federal income tax purposes), such distribution will be treated as a return of capital that will reduce the holder's adjusted tax basis in such $3.00 Convertible Preferred Stock in respect of which such distribution is made. Any such excess distribution that is greater than the holder's adjusted tax basis in such $3.00 Convertible Preferred Stock will be taxed as a capital gain and in the case of a non-corporate holder will be mid-term or long-term capital gain if the holding period for such $3.00 Convertible Preferred Stock is more than one year or eighteen months, respectively. Although the Company does not expect to have significant accumulated earnings and profits for Federal income tax purposes as of the date of this offering, current and accumulated earnings and profits are computed annually at the close of the taxable year in which the distribution is paid. As a result, whether dividends on the $3.00 Convertible Preferred Stock will be treated as a return of capital or ordinary income will depend principally on the amount of earnings and profits for Federal income tax purposes which are generated by the Company in 1997 and future years. For purposes of the remainder of this discussion, the term "dividend" refers to a distribution taxed as ordinary income as described above unless the context indicates otherwise. Dividends received by corporate shareholders will be eligible for the 70% dividends-received deduction under section 243 of the Code, subject to limitations contained in sections 246 and 246A of the Code. Section 246(c) of the Code, as recently modified, requires that in order for a corporation to be eligible for the dividends-received deduction with respect to dividends paid or accrued after September 5, 1997, the corporate shareholder must generally hold the $3.00 Convertible Preferred Stock for a 46-day minimum holding period during the 90-day period beginning on the date that is 45 days before the date on which such share becomes ex-dividend with respect to such dividend (or in the case of a dividend on Preferred Stock attributable to a period or periods aggregating more than 366 days, a minimum period of 91 days during the 180-day period beginning on the date which is 90 days before the date on which the stock becomes ex-dividend with respect to such dividend). A taxpayer's holding period is reduced for periods during which the shareholder's risk of loss with respect to the stock is diminished by reason of the existence of certain options, contracts to sell, short sales or other similar transactions. Section 246(c) also denies the dividends-received deduction to the extent that a corporate taxpayer is under an obligation with respect to substantially similar or related property, to make payments corresponding to the dividend received. Under section 246(b) of the Code, the aggregate dividends-received deductions allowed may not exceed 70% of the taxable income (with certain adjustments) of the corporate shareholder. Moreover, under section 246A of the Code, to the extent that a corporate shareholder incurs indebtedness "directly attributable" to investment in the $3.00 Convertible Preferred Stock and the $3.00 Convertible Preferred Stock constitutes "debt financed portfolio stock" within the meaning of section 246A(c)(1) of the Code, the dividends-received deduction is proportionately reduced. Section 1059 of the Code requires a corporate shareholder to reduce its basis (but not below zero) in the $3.00 Convertible Preferred Stock by the "nontaxed portion" of any "extraordinary dividend" if the holder has not held its $3.00 Convertible Preferred Stock for more than two years before the earliest of the date such 47 51 dividend is agreed to, announced or declared. Generally, the nontaxed portion of an extraordinary dividend is the amount excluded from income under section 243 of the Code (relating to the dividends-received deduction). An "extraordinary dividend" on the $3.00 Convertible Preferred Stock generally would be a dividend that (i) equals or exceeds 5% of the holder's adjusted tax basis in the $3.00 Convertible Preferred Stock, treating all dividends having ex-dividend dates within an 85-day period as one dividend, or (ii) exceeds 20% of the holder's adjusted tax basis in the $3.00 Convertible Preferred Stock, treating all dividends having ex-dividend dates within a 365-day period as one dividend. In determining whether a dividend paid on the $3.00 Convertible Preferred Stock is an extraordinary dividend, a holder may elect to substitute the fair market value of the $3.00 Convertible Preferred Stock for such holder's adjusted tax basis for purposes of applying these tests, provided such fair market value is established to the satisfaction of the Secretary of the Treasury as of the day before the exdividend date. An "extraordinary dividend" also includes any amount treated as a dividend in the case of a partial liquidation of the Company, a redemption of the $3.00 Convertible Preferred Stock for cash or in exchange for Exchange Debentures or a redemption treated as a dividend because the holding of options was deemed to be stock ownership under the constructive stock ownership rules of Section 318(a)(4) of the Code, regardless of the shareholder's holding period and regardless of the size of the dividend (see "Redemption, Sale and Exchange of $3.00 Convertible Preferred Stock"). If any part of the nontaxed portion of an extraordinary dividend is not applied to reduce the holder's tax basis as a result of the limitation on reducing basis below zero, the amount thereof will be treated as gain from the sale or exchange of stock and under recently enacted legislation, will be recognized at the time when the extraordinary dividend is paid. Special rules exist with respect to extraordinary dividends with respect to "qualified preferred dividends." A "qualified preferred dividend" is any fixed dividend payable with respect to preferred stock which (i) provides for fixed preferred dividends payable no less often than annually and (ii) is not in arrears as to dividends when acquired, provided the actual rate of return, as determined under section 1059(e)(3) of the Code, on such stock does not exceed 15%. Section 1059 does not apply to qualified preferred dividends if the corporate stockholder holds such stock for more than five years. If the stockholder disposes of such stock before it has been held for more than five years, the aggregate reduction in basis cannot exceed the excess of the qualified preferred dividends paid on such stock during the period held by the taxpayer over the qualified preferred dividends which would have been paid during such period on the basis of the stated rate of return, as determined under section 1059(e)(3) of the Code. The length of time that a taxpayer is deemed to have held stock for purposes of section 1059 of the Code is determined under principles similar to those contained in section 246(c) of the Code discussed above. A corporate shareholder's liability for alternative minimum tax may be affected by the portion of the dividends received which such corporate shareholder deducts in computing taxable income. This results from the fact that the corporate shareholders are required to increase alternative minimum taxable income by 75% of the excess of adjusted current earnings of the corporation (as defined in Section 56 of the Code) over alternative minimum taxable income (determined without regard to this adjusted current earnings adjustment or the alternative tax net operating loss deduction). REDEMPTION PREMIUM ON $3.00 CONVERTIBLE PREFERRED STOCK Under Section 305(c) of the Code and the applicable Treasury Regulations thereunder, if the redemption price of $3.00 Convertible Preferred Stock exceeds its issue price, the difference ("redemption premium") may be taxable as a constructive distribution of additional $3.00 Convertible Preferred Stock to the holder (treated as a dividend to the extent of the Company's current and accumulated earnings and profits and otherwise subject to the treatment described above for dividends) over a certain period. In general, the issue price of the $3.00 Convertible Preferred Stock that is sold for money should be the price at which a substantial amount of such stock is sold. Because the $3.00 Convertible Preferred Stock provides for an optional right of redemption by the Company at a price in excess of the issue price, holders could be required to recognize such redemption under a constant interest rate method similar to that described for accruing original issue discount (see "Original Issue Discount on Exchange Debentures") if, based on all the facts and circumstances, the optional redemption is more likely than not to occur. If stock may be redeemed at more than one time, the 48 52 time and price at which such redemption is most likely to occur must be determined based on all the facts and circumstances. Applicable Treasury Regulations provide a "safe harbor" under which a right to redeem will not be treated as more likely than not to occur if (i) the issuer and holder are not related within the meaning of the Treasury Regulations; (ii) there are no plans, arrangements, or agreements that effectively require or are intended to compel the issuer to redeem the stock (disregarding, for this purpose, a separate mandatory redemption); and (iii) exercise of the right to redeem would not reduce the yield of the stock, as determined under the Treasury Regulations. Regardless of whether the optional redemption is more than likely not to occur, constructive dividend treatment will not result if the redemption premium does not exceed a de minimis amount. The Company intends to file information returns which take the position that the existence of the Company's optional redemption right does not result in a constructive distribution to the holders. REDEMPTION, SALE AND EXCHANGE OF $3.00 CONVERTIBLE PREFERRED STOCK A redemption of shares of $3.00 Convertible Preferred Stock for cash, a sale of $3.00 Convertible Preferred Stock for cash or other property, or an exchange of shares of $3.00 Convertible Preferred Stock for Exchange Debentures will be a taxable event. A redemption of shares of $3.00 Convertible Preferred Stock for cash will be treated as a dividend to the extent of the Company's current or accumulated earnings and profits, unless the redemption (i) results in a "complete termination" of the shareholder's stock interest in the Company under section 302(b)(3) of the Code, (ii) is "substantially disproportionate" with respect to the shareholder under section 302(b)(2) of the Code or (iii) is "not essentially equivalent to a dividend" with respect to the shareholder under section 302(b)(1) of the Code. In determining whether any of these tests have been met, the shareholder must take into account not only stock he actually owns, but also stock he constructively owns within the meaning of section 318 of the Code. A distribution to a shareholder is "not essentially equivalent to a dividend" if it results in a "meaningful reduction" in the shareholder's stock interest in the Company. If, as a result of a redemption for cash of the $3.00 Convertible Preferred Stock, a shareholder of the Company, whose relative stock interest in the Company is minimal and who exercises no control over corporate affairs suffers a meaningful reduction in his proportionate interest in the Company (including any ownership of Common Stock and any shares constructively owned), that shareholder should be regarded as having suffered a meaningful reduction in his interest in the Company, but there can be no certainty as to when such reduction has occurred because the applicable test is not based on numerical criteria. Satisfaction of the "complete termination" and "substantially disproportionate" exceptions is dependent upon compliance with the objective tests set forth in sections 302(b)(3), and 302(b)(2) of the Code, respectively. If the redemption is not treated as a distribution taxable as a dividend, the redemption of the $3.00 Convertible Preferred Stock for cash, and any sale of the $3.00 Convertible Preferred Stock for cash or other property, would result in taxable gain or loss equal to the difference between the amount of cash and the fair market value of property, if any, received and the shareholder's adjusted tax basis in the $3.00 Convertible Preferred Stock redeemed or sold. Such gain or loss would be capital gain or loss and in the case of a non-corporate holder will be mid-term or long-term capital gain if the holding period for the $3.00 Convertible Preferred Stock is more than one year or eighteen months, respectively. An exchange of $3.00 Convertible Preferred Stock for Exchange Debentures at the option of the Company will be subject to the same general rules as a redemption for cash, including the rules for treating the redemption as a dividend or as a sale or exchange. However, because the Exchange Debentures will be convertible into Common Stock, which a holder of the Exchange Debentures will be deemed to own under the constructive ownership rules of the Code, the receipt of Exchange Debentures in exchange for the Convertible Preferred Stock would not qualify under the "complete termination" or "substantially disproportionate" tests described above. As such, unless the "not essentially equivalent to a dividend" test is satisfied, the redemption would be treated as a distribution to the extent of the issue price of the Exchange Debentures and be taxable as a dividend (to the extent of the Company's current or accumulated earnings and profits). As noted above, this subjective test requires that the distribution result in a meaningful reduction of the shareholder's stock interest in the Company in order for the distribution to qualify as a sale or exchange. Because a holder will be deemed for purposes of section 302(b) of the Code to own shares of Common Stock into which Exchange 49 53 Debentures are convertible under a literal interpretation of the Code, Treasury Regulations and IRS rulings, the receipt of Exchange Debentures in exchange for $3.00 Convertible Preferred Stock will be taxable as a dividend to the extent of the shareholder's allocable share of the Company's earnings and profits because the exchange does not result in any reduction in stock interest in the Company. Accordingly, each shareholder is urged to consult his tax advisor regarding this issue, including the possible effect of the disposition of a portion of its interest in the Company contemporaneously and as part of an integrated plan with the exchange of the $3.00 Convertible Preferred Stock for Exchange Debentures. If the amount received in a redemption or exchange of the $3.00 Convertible Preferred Stock is treated as a distribution that is taxable as a dividend, as opposed to consideration received in a sale or exchange, the amount of the distribution will be measured by the amount of cash or the issue price of the Exchange Debentures, as the case may be, received by the shareholder. The issue price of the Exchange Debentures would be determined in the manner described below for purposes of computing original issue discount, if any, on the Exchange Debentures (see "Original Issue Discount on Exchange Debentures"). The shareholder's adjusted tax basis in the redeemed $3.00 Convertible Preferred Stock will be transferred to any remaining stock holdings in the Company. If the shareholder does not retain any stock ownership in the Company, it is unclear whether the shareholder will be permitted to transfer such basis to any Exchange Debentures received in the redemption or will lose such basis entirely. ORIGINAL ISSUE DISCOUNT ON EXCHANGE DEBENTURES General Original Issue Discount Rules The amount of original issue discount ("OID"), if any, on a debt instrument is the excess of its "stated redemption price at maturity" over its "issue price," subject to a statutorily defined de minimis exception. The "issue price" of an Exchange Debenture will be equal to (i) its fair market value as of the exchange date if the Exchange Debentures are traded on an established market at any time during the 60 day period ending 30 days after the exchange date or (ii) the fair market value at the exchange date of the $3.00 Convertible Preferred Stock if such $3.00 Convertible Preferred Stock is traded on an established securities market during the 60 day period ending 30 days after the exchange date but the Exchange Debentures are not so traded. If neither the $3.00 Convertible Preferred Stock nor the Exchange Debentures are so traded, the issue price of the Exchange Debentures is determined under section 1274 of the Code, in which case the issue price will be the stated principal amount of the Exchange Debentures provided that the yield on the Exchange Debentures is equal to or greater than the "applicable federal rate" in effect at the time the Exchange Debentures are issued. If the yield on the Exchange Debentures is less than such applicable federal rate, the issue price of such Exchange Debentures under section 1274 of the Code will be equal to the present value as of the issue date of all payments to be made on the Exchange Debentures discounted at the applicable federal rate. The "stated redemption price at maturity" of an Exchange Debenture is the sum of its principal amount plus all other payments required thereunder, other than payments of "qualified stated interest" (defined generally as stated interest that is unconditionally payable in cash or in property (other than debt instruments of the Company) at least annually at a single fixed rate that appropriately takes into account the length of intervals between payments). In general, the amount of OID that a holder of a debt instrument with OID must include in gross income for federal income tax purposes will be the sum of the daily portions of OID with respect to such debt instrument for each day during the taxable year or portion of a taxable year on which such holder holds the debt instrument. The daily portion is determined by allocating to each day of an accrual period (generally, a six month period or a shorter or longer period from the date of original issuance) a pro rata portion of an amount equal to the "adjusted issue price" of the debt instrument at the beginning of the accrual period multiplied by the yield to maturity of the debt instrument. The "adjusted issue price" is the issue price of the debt instrument increased by the accrued OID for all prior accrual periods and decreased by the amount of cash payments made in all prior accrual periods, other than qualified stated interest payments. The tax basis of the debt instruments in the hands of a holder will be increased by the OID, if any, on the debt instrument that 50 54 is included in the holder's gross income and will be decreased by the amount of cash payments, other than qualified stated interest payments, received with respect to the debt instrument, whether such payments are denominated as principal or interest. Exchange Debentures Stated interest on the Exchange Debentures should be includible in income by a holder in accordance with its method of accounting. There is a risk that the Exchange Debentures will be treated as having OID taxable as interest income, as described above. If the $3.00 Convertible Preferred Stock is exchanged for Exchange Debentures at a time when the stated redemption price at maturity of such Exchange Debentures exceeds their issue price (including the value of the conversion feature) by an amount equal to or greater than 0.25% of the stated redemption price at maturity multiplied by the number of complete years to maturity, the Exchange Debentures will be treated as having OID equal to the entire amount of such excess. For purposes of this paragraph and the following discussion it is assumed that the Exchange Debentures will be treated as being traded on an established securities market, within the meaning of section 1273(b)(3) of the Code, at the time the Exchange Debentures are exchanged for $3.00 Convertible Preferred Stock. As such, the issue price of the Exchange Debentures will be their fair market value (including the value of the conversion feature) as of the issue date. If the Exchange Debentures are issued with OID, a holder of an Exchange Debenture would generally be required to include in gross income (irrespective of its method of accounting) a portion of such OID for each year during which it holds such an Exchange Debenture, even though the cash to which such income is attributable would not be received until maturity or redemption of the Exchange Debenture. The amount of any OID included in income for each year would be calculated under a constant yield to maturity formula (as described above) that would result in the allocation of less OID to the early years of the term of the Exchange Debenture and more OID for later years. AMORTIZABLE BOND PREMIUM AND ACQUISITION PREMIUM ON EXCHANGE DEBENTURES If the $3.00 Convertible Preferred Stock is exchanged for Exchange Debentures at a time when the issue price of such Exchange Debentures (excluding the amount thereof attributable to the conversion feature as determined under Treasury Regulation section 1.171-2(c)(2)) exceeds the amount payable at the maturity date (or earlier redemption date, if appropriate) of the Exchange Debentures, such excess will be deductible, subject to certain limitations with respect to individuals, by the holder of such Exchange Debentures as amortizable bond premium over the term of the Exchange Debentures (taking into account earlier call dates, as appropriate), under a yield to maturity formula, but only if an election by the taxpayer under section 171 of the Code is in effect or is made. An election under section 171 of the Code is available only if the Exchange Debentures are held as capital assets. Such election is binding once made and applies to all debt obligations owned or subsequently acquired by the taxpayer. Under the Code, the amortizable bond premium will be treated as an offset to interest income on the Exchange Debentures rather than as a separate deduction item unless otherwise provided in future regulations. Proposed Treasury Regulations issued on June 27, 1996, which are not yet effective, would modify the described rules under section 171 of the Code in order to coordinate such rules with the rules relating to OID. A holder that purchases an Exchange Debenture that is issued with OID for an amount that is greater than its adjusted issue price but equal to or less than the sum of all amounts payable on the Exchange Debenture after the purchase date other than payments of qualified stated interest will be considered to have purchased such Exchange Debenture at an "acquisition premium." Under the acquisition premium rules, the amount of OID, if any, which such holder must include in its gross income with respect to such Exchange Debenture for any taxable year will be reduced by the portion of such acquisition premium properly allocable to such year. 51 55 MARKET DISCOUNT ON SALE OF EXCHANGE DEBENTURES If a holder purchases an Exchange Debenture not issued with OID for an amount that is less than its stated redemption price at maturity or, in the case of an Exchange Debenture issued with OID, its adjusted issue price, the amount of the difference will be treated as "market discount" for federal income tax purposes, unless such difference is less than a specified de minimis amount. Under the market discount rules, a holder will be required to treat any principal payment on, or any gain on the sale, exchange, retirement or other disposition of, the Exchange Debentures as ordinary income to the extent of the market discount which has not previously been included in income and is treated as having accrued on such Exchange Debenture at the time of such payment or disposition. In addition, the holder may be required to defer, until the maturity of the Exchange Debenture or its earlier disposition in a taxable transaction, the deduction of all or a portion of the interest expense on any indebtedness incurred or continued to purchase or carry such Exchange Debenture. Any market discount will be considered to accrue ratably during the period from the date of acquisition to the maturity date of the Exchange Debentures, unless the holder elects to accrue on a constant interest method. A holder of an Exchange Debenture may elect to include market discount in income currently as it accrues (on either a ratable or constant interest method), in which case the rule described above regarding deferral of interest deductions will not apply. This election to include market discount in income currently, once made, applies to all market discount obligations acquired on or after the first taxable year to which the election applies and may not be revoked without the consent of the IRS. REDEMPTION OR SALE OF EXCHANGE DEBENTURES Generally, any redemption or sale of Exchange Debentures by a holder would result in taxable gain or loss equal to the difference between the amount of cash received (except to the extent that cash received is attributable to accrued interest not previously included in income) and the holder's adjusted tax basis in the Exchange Debentures. Such gain or loss would be capital gain or loss and in the case of a non-corporate holder will be mid-term or long-term capital gain if the holding period for the $3.00 Convertible Preferred Stock is more than one year or eighteen months, respectively. The adjusted tax basis of a holder who received an Exchange Debenture in exchange for Convertible Preferred Stock will generally be equal to the issue price of the Exchange Debenture plus any OID on the Exchange Debenture included in the holder's income prior to sale or redemption of the Exchange Debenture and reduced by any cash payments on the Exchange Debentures other than qualified stated interest and any amortizable bond premium applied against the holder's income prior to sale or redemption of the Exchange Debenture. CONVERSION OF $3.00 CONVERTIBLE PREFERRED STOCK OR EXCHANGE DEBENTURES INTO COMMON STOCK No gain or loss will be recognized for federal income tax purposes on conversion of $3.00 Convertible Preferred Stock or Exchange Debentures solely into shares of Common Stock, except with respect to any cash received in lieu of a fractional share interest or to the extent the shares of Common Stock are attributable to dividend arrearage on the $3.00 Convertible Preferred Stock or accrued and unpaid interest and OID on the Exchange Debentures. The amount of gain recognized upon the conversion of $3.00 Convertible Preferred Stock into Common Stock as a result of the receipt of cash in lieu of fractional shares will equal the difference between the cash received and the shareholder's adjusted tax basis in such fractional shares. Except for any Common Stock treated as a payment of a dividend arrearage or treated as payment of interest and OID, or cash paid in lieu of fractional shares, the tax basis for the shares of Common Stock received upon conversion will be equal to the tax basis of the $3.00 Convertible Preferred Stock or Exchange Debentures converted, and the holding period of the shares of Common Stock will include the holding period of the $3.00 Convertible Preferred Stock or Exchange Debentures converted (provided the $3.00 Convertible Preferred Stock or Exchange Debentures were held as capital assets). ADJUSTMENT OF CONVERSION PRICE Treasury Regulations issued under Section 305 of the Code treat certain adjustments to conversion provisions of stock such as the $3.00 Convertible Preferred Stock and securities such as the Exchange Debentures as constructive distributions of stock with respect to preferred stock or convertible securities (which are treated as stock for this purpose). Such constructive distributions would be taxable to holders of 52 56 $3.00 Convertible Preferred Stock or Exchange Debentures as described above under the caption "Dividends on $3.00 Convertible Preferred Stock," although the holders would not receive any cash upon a conversion price adjustment. The conversion rates of the $3.00 Convertible Preferred Stock and the Exchange Debentures are subject to adjustment under certain circumstances. In general, any adjustment increasing the number of shares of Common Stock into which the $3.00 Convertible Preferred Stock or Exchange Debentures can be converted could constitute a constructive distribution of stock to holders of $3.00 Convertible Preferred Stock or Exchange Debentures unless made pursuant to a bona fide, reasonable adjustment formula that has the effect of preventing dilution of the interest of the holders of $3.00 Convertible Preferred Stock or Exchange Debentures. Any adjustment in the conversion price to compensate holders of Convertible Preferred Stock or Exchange Debentures for taxable distributions of cash or property on any of the outstanding Common Stock of the Company will be treated as a constructive distribution of stock to holders of $3.00 Convertible Preferred Stock or Exchange Debentures. BACKUP WITHHOLDING A holder of $3.00 Convertible Preferred Stock, Exchange Debentures or Common Stock may be subject to backup withholding at the rate of 31% with respect to "reportable payments," which include dividends and interest paid on, OID accrued, and the gross proceeds of a sale of the $3.00 Convertible Preferred Stock, Exchange Debentures or Common Stock as the case may be. The payor will be required to deduct and withhold the prescribed amounts unless (i) such holder is a corporation or comes within other exempt categories and, when required, demonstrates this fact or (ii) provides a correct taxpayer identification number, certifies as to no loss to exemption from backup withholding and otherwise complies with applicable requirements of the backup withholding rules. A holder of $3.00 Convertible Preferred Stock, Exchange Debentures or Common Stock who does not provide the Company with his or her correct taxpayer identification number may be subject to penalties imposed by the IRS. Amounts paid as backup withholding do not constitute an additional tax and will be credited against the holder's federal income tax liabilities, so long as the required information is provided to the IRS. The Company will report to the holders of $3.00 Convertible Preferred Stock, Exchange Debentures or Common Stock and to the IRS the amount of any "reportable payments" for each calendar year and the amount of tax withheld, if any with respect to payment on the securities. THE FOREGOING DISCUSSION IS FOR GENERAL INFORMATION AND IS NOT TAX ADVICE. ACCORDINGLY, EACH PROSPECTIVE HOLDER OF $3.00 CONVERTIBLE PREFERRED STOCK, EXCHANGE DEBENTURES OR COMMON STOCK SHOULD CONSULT HIS OWN TAX ADVISOR AS TO THE PARTICULAR TAX CONSEQUENCES TO HIM OF THE $3.00 CONVERTIBLE PREFERRED STOCK, EXCHANGE DEBENTURES OR COMMON STOCK INCLUDING THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL, OR FOREIGN INCOME TAX LAWS, AND ANY RECENT OR PROSPECTIVE CHANGES IN APPLICABLE TAX LAWS. 53 57 SELLING HOLDERS The $3.00 Convertible Preferred Stock was originally issued to and sold by Alex Brown & Sons, Inc., BT Securities Corporation, Credit Suisse First Boston Corporation, Goldman, Sachs & Co., NationsBanc Capital Markets, Inc., and TD Securities (USA) Inc. (collectively, the "Initial Purchasers") in transactions exempt from the registration requirements of the Securities Act to persons reasonably believed by the Initial Purchasers to be "qualified institutional buyers" (as defined in Rule 144A under the Securities Act) and institutional "accredited investors" (as defined in Rule 501(a)(1)(2),(3) or (7) under the Securities Act). The Selling Holders may from time to time offer and sell pursuant to this Prospectus any or all of the Securities. The term Selling Holder includes the holders listed below and the beneficial owners of the Securities and their transferees, pledgees, donees or other successors. The following table sets forth information with respect to the Selling Holders of the Securities and the respective number of Preferred Stock beneficially owned by each Selling Holder that may be offered pursuant to this Prospectus. Selling Number of Shares of Principal Amount of Shares of Common Stock Holders* Preferred Stock* Exchange Issuable upon Debentures* conversion of Preferred Stock or Exchange Debentures*
- ------------------ * To be provided by amendment None of the Selling Holders has, or within the past three years has had, any position, office or other material relationship with the Issuer or the Company or any of their predecessors or affiliates. Because the Selling Holders may, pursuant to this Prospectus, offer all or some portion of the Preferred Stock, the Exchange Debentures or the Common Stock, no estimate can be given as to the amount of the Preferred Stock, the Exchange Debentures or the Common Stock issuable upon conversion of the Preferred Stock or Exchange Debentures that will be held by the Selling Holders upon termination of any such sales. In addition, the Selling Holders may have sold, transferred or otherwise disposed of all or a portion of their Securities since the date on which they provided the information regarding their Securities included herein in transactions exempt from the registration requirements of the Securities Act. PLAN OF DISTRIBUTION The Securities may be sold from time to time to purchasers directly by the Selling Holders. Alternatively, the Selling Holders may from time to time offer the Securities to or through underwriters, broker/dealers or agents, who may receive compensation in the form of underwriting discounts, concessions or commissions from the Selling Holders or the purchasers of such securities for whom they may act as agents. The Selling Holders and any underwriters, broker/dealers or agents that participate in the distribution of Securities may be deemed to be "underwriters" within the meaning of the Securities Act and any profit on the sale of such securities and any discounts, commissions, concessions or other compensation received by any such underwriter, broker/dealer or agent may be deemed to be underwriting discounts and commissions under the Securities Act. The Securities may be sold from time to time in one or more transactions at fixed prices, at prevailing market prices at the time of sale, at varying prices determined at the time of sale or at negotiated prices. The sale of the Securities may be effected in transactions (which may involve crosses or block transactions) (i) on any national securities exchange or quotation service on which the Securities may be listed or quoted at the time of sale, (ii) in the over-the-counter market or (iii) in transactions otherwise than on such exchanges or in the over-the-counter market. At the time a particular offering of the Securities is made, a Prospectus Supplement, if required, will be distributed which will set forth the aggregate amount and type of Securities being offered and the terms of the offering, including the name or names of any underwriters, broker/dealers or agents, any discounts, commissions and other terms constituting compensation from the Selling Holders and any discounts, commissions or concessions allowed or reallowed or paid to broker/dealers. 54 58 To comply with the securities laws of certain jurisdictions, if applicable, the Securities will be offered or sold in such jurisdictions only through registered or licensed brokers or dealers. In addition, in certain jurisdictions the Securities may not be offered or sold unless they have been registered or qualified for sale in such jurisdictions or any exemption from registration or qualification is available and is complied with. The Selling Holders will be subject to applicable provisions of the Exchange Act and the rules and regulations thereunder, which provisions may limit the timing of purchases and sales of any of the Securities by the Selling Holders. The foregoing may affect the marketability of such securities. Pursuant to the Registration Rights Agreement, the Company shall bear all reasonable fees and expenses customarily borne by issuers in a non-underwritten secondary offering by selling security holders or in an underwritten offering, as the case may be, incurred in connection with the performance of its obligations under the Registration Rights Agreement; provided, however, that the Selling Holders will pay all underwriting discounts and selling commissions, if any. The Selling Holders will be indemnified by the Company against certain civil liabilities, including certain liabilities under the Securities Act, or will be entitled to contribution in connection therewith. The Company will be indemnified by the Selling Holders severally against certain civil liabilities, including certain liabilities under the Securities Act, or will be entitled to contribution in connection therewith. LEGAL MATTERS Legal matters with respect to the Securities will be passed upon for the Company by Latham & Watkins. Eric L. Bernthal is a partner of Latham & Watkins and owns options to purchase 2,500 shares of Common Stock. EXPERTS The consolidated financial statements of Evergreen Media Corporation and subsidiaries, the combined financial statements of WMZQ Inc. and Viacom Broadcasting East Inc., the financial statements of WDRQ 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., the financial statements of WDAS-AM/FM (station owned and operated by Beasley FM Acquisition Corp.), and the financial statements of KKSF-FM/KDFC-FM and AM (stations owned and operated by The Brown Organization) have been incorporated by reference herein in reliance upon the reports of KPMG Peat Marwick LLP, independent certified public accountants. Such financial statements are incorporated herein by reference in reliance upon the authority of said firm as experts in accounting and auditing. The consolidated financial statements of Chancellor Broadcasting Company and Subsidiaries and 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 incorporated by reference in this Prospectus, have been incorporated herein in reliance on the report of Coopers & Lybrand, L.L.P., independent accountants, given on the authority of that firm as experts in accounting and auditing. The consolidated statements of operations, changes in common stockholders' equity and cash flows of Trefoil Communications, Inc. and Subsidiaries for the period January 1, 1996 through February 13, 1996 incorporated by reference in this Prospectus, have been incorporated herein in reliance on the report of Coopers & Lybrand, L.L.P., independent accountants, given on the authority of that firm as experts in accounting and auditing. The financial statements of Century Chicago Broadcasting, L.P. as of and for the year ended December 31, 1996 incorporated by reference in this Prospectus have been so incorporated in reliance on the report of Price Waterhouse LLP, independent accountants, given on the authority of said firm as experts in auditing and accounting. The combined financial statements of WJLB/WMXD, Detroit, as of December 31, 1996 and for the year then ended, incorporated by reference in this Prospectus have been audited by Arthur Andersen LLP, 55 59 independent public accountants, as indicated in their report with respect thereto, and are incorporated herein by reference in reliance upon the authority of said firm as experts in giving said report. The financial statements of Trefoil Communications, Inc., as of and for the years ended December 31, 1995 and 1994 incorporated by reference in this Prospectus have been so incorporated in reliance on the report of Price Waterhouse LLP, independent accountants, given on the authority of said firm as experts in auditing and accounting. MATERIAL CHANGES None. 56 60 INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The Company hereby incorporates by reference in this Prospectus the following documents previously filed with the Commission pursuant to the Exchange Act: 1. Evergreen Media Corporation's ("Evergreen") Annual Report on Form 10-K for the fiscal year ended December 31, 1996; 2. Evergreen's Current Reports on Form 8-K dated February 16, 1997 and filed March 9, 1997, dated April 1, 1997 and filed May 9, 1997, dated May 27, 1997 and filed May 28, 1997, dated May 27, 1997 and filed May 29, 1997, dated May 30, 1997 and filed June 4, 1997, dated June 11, 1997 and filed June 12, 1997, dated June 16, 1997 and filed July 2, 1997 and dated July 7, 1997 and filed July 31, 1997; 3. Evergreen's Quarterly Report on Form 10-Q for the quarter ended March 31, 1997; 4. Evergreen's Quarterly Report on Form 10-Q for the quarter ended June 30, 1997; 5. Chancellor Broadcasting Company's ("Chancellor") and Chancellor Radio Broadcasting Company's ("CRBC") Annual Report on Form 10-K for the fiscal year ended December 31, 1996, as amended on Form 10-K/A; 6. Chancellor's and CRBC's Quarterly Report on Form 10-Q for the quarter ended March 31, 1997; 7. Chancellor's and CRBC's Quarterly Report on Form 10-Q for the quarter ended June 30, 1997; 8. Chancellor's Current Reports on Form 8-K dated January 3, 1997 and filed January 7, 1997, dated January 23, 1997 and filed February 6, 1997, as amended on Form 8-K/A dated April 29, 1997, dated February 13, 1997 and filed March 11, 1997, dated June 3, 1997 and filed June 4, 1997, dated June 18, 1997 and filed June 25, 1997, and dated July 2, 1997 and filed July 17, 1997; 9. The Definitive Joint Proxy Statement of Chancellor and Evergreen dated August 1, 1997 and filed on August 4, 1997; and 10. Chancellor Media Corporation's Current Reports on Form 8-K, dated September 5, 1997 and filed September 17, 1997, as amended on Form 8-K/A, dated September 23, 1997 and filed September 29, 1997. All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to the termination of the Exchange Offer shall be deemed to be incorporated by reference in the Prospectus and made a part hereof from the date of filing of such documents. Any statement contained in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes of this Prospectus to the extent that a statement contained herein or in any other document subsequently filed with the Commission which also is or is deemed to be incorporated by reference herein modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Prospectus. THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS ARE AVAILABLE UPON WRITTEN OR ORAL REQUEST FROM: SECRETARY, CHANCELLOR MEDIA CORPORATION, 433 EAST LAS COLINAS BOULEVARD, SUITE 1130, IRVING, TEXAS, 75039 (972) 869-9020. IN ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE BY ,1997. 57 61 ====================================================== NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY (AS DEFINED HEREIN). THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF ANY OFFER TO BUY ANY SECURITY OTHER THAN THE SECURITIES OFFERED BY THIS PROSPECTUS, NOR DOES IT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY THE SECURITIES, BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE SUCH DATE. ------------------------------ TABLE OF CONTENTS
PAGE ---- Available Information....................... ii Prospectus Summary.......................... 1 Risk Factors................................ 7 Use of Proceeds............................. 12 Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends............. 13 Business and Properties..................... 14 Description of $3.00 Convertible Exchangeable Preferred Stock.............. 31 Description of the Exchange Debentures...... 37 Description of Capital Stock................ 42 Certain United States Federal Income Tax Considerations............................ 46 Selling Holders............................. 54 Plan of Distribution........................ 54 Legal Matters............................... 55 Experts..................................... 55 Material Changes............................ 56 Incorporation of Certain Documents by Reference................................. 57
====================================================== ====================================================== CHANCELLOR MEDIA CORPORATION 5,990,000 SHARES $3.00 CONVERTIBLE EXCHANGEABLE PREFERRED STOCK --------------------------- PROSPECTUS --------------------------- , 1997 ====================================================== 62 PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION The following is an itemized statement of all expenses in connection with the issuance and distribution of the securities registered hereby. Except for the SEC registration fee, all amounts provided are estimated.
SEC registration fee........................................ $ 90,758 Printing and engraving expenses............................. 150,000 Legal fees and expenses..................................... 100,000 Accounting fees and expenses................................ 50,000 Miscellaneous............................................... 125,000 -------- Total............................................. $515,758 ========
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS. Section 145 of the Delaware General Corporation Law 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. Set forth below is a description of the Company's indemnification and director liability provisions. This description is intended as a summary and is qualified in its entirety by reference to the Company's Amended and Restated Certificate of Incorporation. Article Nine of the Amended and Restated Certificate (the "Certificate") provides indemnification for 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 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 counsel 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. Article Ten of the Certificate 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 the Company 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 Delaware General Corporation Law, or (iv) for any transaction from which the director derived an improper personal benefit. II-1 63 ITEM 16. EXHIBITS A. Exhibits
EXHIBIT NO. DESCRIPTION OF EXHIBIT ------- ---------------------- 1.1+ -- Securities Purchase Agreement, dated June 10, 1997, among Evergreen Media Corporation, Alex. Brown & Sons Incorporated BT Securities Corporation, Credit Suisse First Boston Corporation, Goldman, Sachs & Co., NationsBanc Capital Markets, Inc. and TD Securities (USA) Inc. 1.2+ -- Registration Rights Agreement, dated June 16, 1997, among Evergreen Media Corporation, Alex. Brown & Sons Incorporated, BT Securities Corporation, Credit Suisse First Boston Corporation, Goldman, Sachs & Co., NationsBanc Capital markets, Inc. and TD Securities (USA) Inc. 2.9(f) -- Plan of Reorganization and Merger by and between Evergreen Media Corporation and Broadcasting Partners, Inc., dated as of January 31, 1995, as amended, including the Form of Registration Rights Agreement among MLGA Fund I, L.P., MLGA Fund II, L.P., MLGA/BPI Partners I, L.P., MLGAL Partners, Limited Partnership and Evergreen Media Corporation (see table of contents for a list of omitted schedules). 2.9A(g) -- Agreement dated as of January 31, 1995 among Evergreen Media Corporation, Broadcasting Partners, Inc., the holders of the shares of capital stock of Broadcasting Partners, Inc. and Scott K. Ginsburg, holder of shares of capital stock of Evergreen Media Corporation. 2.10(f) -- Plan and Agreement of Merger among Evergreen Media Partners Corporation, Evergreen Media Corporation and Broadcasting Partners, Inc., dated as of April 12, 1995. 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).
II-2 64
EXHIBIT NO. DESCRIPTION OF EXHIBIT ------- ---------------------- 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., Seller and Evergreen Media Corporation of Los Angeles, Buyer. (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. 2.21(p) -- Asset Purchase Agreement dated July 15, 1996 by and among Century Chicago Broadcasting L.P., an Illinois limited partnership, ("Seller"), Century Broadcasting Corporation, a Delaware Corporation ("Century"), Evergreen Media Corporation of Los Angeles, a Delaware Corporation ("Parent"), and Evergreen Media Corporation of Chicago, a Delaware Corporation ("Buyer"). 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.
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EXHIBIT NO. DESCRIPTION OF EXHIBIT ------- ---------------------- 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. 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.
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EXHIBIT NO. DESCRIPTION OF EXHIBIT ------- ---------------------- 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. 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. 4.12(y) -- Specimen Common Stock Certificate of Chancellor Media Corporation. 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. 4.31* -- Specimen $3.00 Convertible Exchangeable Preferred Stock Certificate 4.32+ -- Certificate of Designation for $3.00 Convertible Exchangeable Preferred Stock. 4.33+ -- Convertible Subordinated Exchange Indenture (including form of 6% Convertible Subordinated Exchange Debenture attached thereto), dated June 16, 1997, between Evergreen Media Corporation and The Bank of New York. 5.1* -- Opinion of Latham & Watkins. 8.1* -- Tax Matters Opinion of Latham & Watkins. 12.1+ -- Chancellor Media Corporation Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends. 23.1* -- Consent of Latham & Watkins (included as part of their opinion listed as Exhibit 5.1). 23.2+ -- Consent of KPMG Peat Marwick LLP, independent accountants. 23.3+ -- Consent of KPMG Peat Marwick LLP, independent accountants. 23.4+ -- Consent of Price Waterhouse LLP, independent accountants. 23.5+ -- Consent of Arthur Andersen LLP, independent accountants. 23.6+ -- Consent of Coopers & Lybrand L.L.P., independent accountants. 23.7+ -- Consent of Coopers & Lybrand L.L.P., independent accountants. 23.8+ -- Consent of Coopers & Lybrand L.L.P., independent accountants. 23.9+ -- Consent of Price Waterhouse LLP, independent accountants. 23.10+ -- Consent of Arthur Andersen LLP, independent accountants. 23.11* -- Consent of Latham & Watkins (included as part of their opinion listed as Exhibit 8.1). 24.1 -- Powers of Attorney (included on signature page).
- --------------- * To be filed by amendment. + Filed herewith. (a) Incorporated by reference to the identically numbered exhibit to Evergreen's Registration Statement on Form S-1, as amended (Reg. No. 33-60036). II-5 67 (f) Incorporated by reference to the identically numbered exhibit to Evergreen's Registration Statement on Form S-4, as amended (Reg. No. 33-89838). (g) Incorporated by reference to Exhibit No. 4.8 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 September 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). (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. (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. (pp) Incorporated by reference to the identically-numbered exhibit to CMCLA's Registration Statement on Form S-4 (Reg. No. 333-36451), dated September 26, 1997. The Company hereby agrees to furnish supplementarily a copy of any omitted schedule or exhibit to the Commission upon request. II-6 68 ITEM 17. UNDERTAKINGS (a) The undersigned registrant hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: (i) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement; (2) That, for the purpose 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. (3) To remove from registration by means of a post-effective amendment any of the securities which remain unsold at the termination of the offering. (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) 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 foregoing provisions, 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 Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses 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 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. II-7 69 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Irving, State of Texas, on October 1, 1997. CHANCELLOR MEDIA CORPORATION By: /s/ MATTHEW E. DEVINE ---------------------------------- Matthew E. Devine Senior Vice President and Chief Financial Officer POWERS OF ATTORNEY Each person whose signature appears below constitutes and appoints Matthew E. Devine and Scott K. Ginsburg as his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for such person and in his name, place and stead, in any and all capacities, to sign any or all further amendment (including post-effective amendments) to this Registration Statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitute or substitutes, may lawfully do or cause to be done by virtue thereof. PURSUANT TO THE REQUIREMENTS OF THE SECURITIES AND EXCHANGE ACT OF 1933, AS AMENDED, THIS REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED.
SIGNATURES TITLE DATE ---------- ----- ---- /s/ THOMAS O. HICKS Chairman of the Board October 1, 1997 - ----------------------------------------------------- Thomas O. Hicks /s/ SCOTT K. GINSBURG President, Chief Executive October 1, 1997 - ----------------------------------------------------- Officer and Director Scott K. Ginsburg (Principal Executive Officer) /s/ JAMES E. DE CASTRO Chief Operating Officer and October 1, 1997 - ----------------------------------------------------- Director James E. de Castro /s/ MATTHEW E. DEVINE Senior Vice President and October 1, 1997 - ----------------------------------------------------- Chief Financial Officer Matthew E. Devine (Principal Financial Officer and Principal Accounting Officer) /s/ THOMAS J. HODSON Director October 1, 1997 - ----------------------------------------------------- Thomas J. Hodson /s/ PERRY J. LEWIS Director October 1, 1997 - ----------------------------------------------------- Perry J. Lewis /s/ ERIC C. NEUMAN Director October 1, 1997 - ----------------------------------------------------- Eric C. Neuman /s/ JOHN H. MASSEY Director October 1, 1997 - ----------------------------------------------------- John H. Massey
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SIGNATURES TITLE DATE ---------- ----- ---- /s/ JEFFREY A. MARCUS Director October 1, 1997 - ----------------------------------------------------- Jeffrey A. Marcus /s/ LAWRENCE D. STUART, JR. Director October 1, 1997 - ----------------------------------------------------- Lawrence D. Stuart, Jr. /s/ STEVEN DINETZ Director October 1, 1997 - ----------------------------------------------------- Steven Dinetz
II-9 71 INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION OF EXHIBIT ------- ---------------------- 1.1+ -- Securities Purchase Agreement, dated June 10, 1997, among Evergreen Media Corporation, Alex, Brown & Sons Incorporated, BT Securities Corporation, Credit Suisse First Boston Corporation, Goldman, Sachs & Co., NationsBanc Capital Markets, Inc. and TD Securities (USA) Inc. 1.2+ -- Registration Rights Agreement, dated June 16, 1997, among Evergreen Media Corporation, Alex, Brown & Sons Incorporated, BT Securities Corporation, Credit Suisse First Boston Corporation, Goldman, Sachs & Co., NationsBanc Capital Markets, Inc. and TD Securities (USA) Inc. 2.9(f) -- Plan of Reorganization and Merger by and between Evergreen Media Corporation and Broadcasting Partners, Inc., dated as of January 31, 1995, as amended, including the Form of Registration Rights Agreement among MLGA Fund I, L.P., MLGA Fund II, L.P., MLGA/BPI Partners I, L.P., MLGAL Partners, Limited Partnership and Evergreen Media Corporation (see table of contents for a list of omitted schedules). 2.9A(g) -- Agreement dated as of January 31, 1995 among Evergreen Media Corporation, Broadcasting Partners, Inc., the holders of the shares of capital stock of Broadcasting Partners, Inc. and Scott K. Ginsburg, holder of shares of capital stock of Evergreen Media Corporation. 2.10(f) -- Plan and Agreement of Merger among Evergreen Media Partners Corporation, Evergreen Media Corporation and Broadcasting Partners, Inc., dated as of April 12, 1995. 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).
72
EXHIBIT NO. DESCRIPTION OF EXHIBIT ------- ---------------------- 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., Seller and Evergreen Media Corporation of Los Angeles, Buyer. (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. 2.21(p) -- Asset Purchase Agreement dated July 15, 1996 by and among Century Chicago Broadcasting L.P., an Illinois limited partnership, ("Seller"), Century Broadcasting Corporation, a Delaware Corporation ("Century"), Evergreen Media Corporation of Los Angeles, a Delaware Corporation ("Parent"), and Evergreen Media Corporation of Chicago, a Delaware Corporation ("Buyer"). 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.
73
EXHIBIT NO. DESCRIPTION OF EXHIBIT ------- ---------------------- 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. 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.
74
EXHIBIT NO. DESCRIPTION OF EXHIBIT ------- ---------------------- 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. 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. 4.12(y) -- Specimen Common Stock Certificate of Chancellor Media Corporation. 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. 4.31* -- Specimen $3.00 Convertible Exchangeable Preferred Stock Certificate. 4.32+ -- Certificate of Designation for $3.00 Convertible Exchangeable Preferred Stock. 4.33+ -- Convertible Subordinated Exchange Indenture (including form of 6% Convertible Subordinated Exchange Debenture attached thereto), dated June 16, 1997, between Evergreen Media Corporation and The Bank of New York. 5.1* -- Opinion of Latham & Watkins. 8.1* -- Tax Matters Opinion of Latham & Watkins. 12.1+ -- Chancellor Media Corporation Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends. 23.1* -- Consent of Latham & Watkins (included as part of their opinion listed as Exhibit 5.1). 23.2+ -- Consent of KPMG Peat Marwick LLP, independent accountants. 23.3+ -- Consent of KPMG Peat Marwick LLP, independent accountants. 23.4+ -- Consent of Price Waterhouse LLP, independent accountants. 23.5+ -- Consent of Arthur Andersen LLP, independent accountants. 23.6+ -- Consent of Coopers & Lybrand L.L.P., independent accountants. 23.7+ -- Consent of Coopers & Lybrand L.L.P., independent accountants. 23.8+ -- Consent of Coopers & Lybrand L.L.P., independent accountants. 23.9+ -- Consent of Price Waterhouse LLP, independent accountants. 23.10+ -- Consent of Arthur Andersen LLP, independent accountants. 23.11* -- Consent of Latham & Watkins (included as part of their opinion listed as Exhibit 8.1). 24.1 -- Powers of Attorney (included on signature page). 25.1* -- Statement of Eligibility on Form T-1 of The Bank of New York under the Convertible Subordinated Indenture.
75 - --------------- * To be filed by amendment. + Filed herewith. (a) Incorporated by reference to the identically numbered exhibit to Evergreen's Registration Statement on Form S-1, as amended (Reg. No. 33-60036). (f) Incorporated by reference to the identically numbered exhibit to Evergreen's Registration Statement on Form S-4, as amended (Reg. No. 33-89838). (g) Incorporated by reference to Exhibit No. 4.8 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 September 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). (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. 76 (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. (pp) Incorporated by reference to the identically-numbered exhibit to CMCLA's Registration Statement on Form S-4 (Reg. No. 333-36451), dated September 26, 1997. EX-1.1 2 SECURITIES PURCHASE AGREEMENT - 6/16/97 1 EXHIBIT 1.1 5,500,000 Shares EVERGREEN MEDIA CORPORATION $3.00 Convertible Exchangeable Preferred Stock PURCHASE AGREEMENT June 10, 1997 Alex. Brown & Sons Incorporated BT Securities Corporation Credit Suisse First Boston Corporation Goldman, Sachs & Co. NationsBanc Capital Markets, Inc. TD Securities (USA) Inc. c/o Alex. Brown & Sons Incorporated One South Street Baltimore, Maryland 21202 Ladies and Gentlemen: Evergreen Media Corporation (the "COMPANY"), a Delaware corporation, hereby confirms its 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 5,500,000 shares of its $3.00 Convertible Exchangeable Preferred Stock, par value $.01 per share (the "FIRM SHARES"). The Company also proposes to issue and sell to the Initial Purchasers not more than 500,000 additional shares of its $3.00 Convertible Preferred Stock (the "Additional Shares") if requested by the Initial Purchasers pursuant to Section 3 hereof. The Firm Shares and the Additional Shares are herein collectively referred to as the "Shares." The shares of $3.00 Convertible Exchangeable Preferred Stock to be outstanding after giving effect to the sales contemplated hereby are hereafter referred to as the "Convertible Preferred Stock." The Shares are convertible at the option of the holder at any time, unless previously redeemed or exchanged, into Class A Common Stock, par value $.01 2 per share (the "CLASS A COMMON STOCK"), of the Company at a conversion price of $50.00 per share of Class A Common Stock subject to adjustment. The Shares are exchangeable, subject to certain conditions, at the option of the Company, in whole but not in part, on any dividend payment date commencing September 15, 2000, for the Company=s 6% Convertible Subordinated Debentures due 2012 (the "DEBENTURES"). The Debentures are to be issued under an indenture (the "INDENTURE") dated as of June 16, 1997 between the Company and Bank of New York, as trustee (the "TRUSTEE"). The Debentures are convertible, at the option of the holders thereof into Class A Common Stock at a conversion price of $50.00 per share of Class A Common Stock subject to adjustment. The Shares, the Debentures issuable on exchange thereof and the Class A Common Stock issuable upon conversion of the Shares or the Debentures, as appropriate, are referred to herein collectively as the "SECURITIES." The Shares 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 Shares, the Company has prepared a preliminary offering memorandum dated May 23, 1997 (the "PRELIMINARY MEMORANDUM"), and a final offering memorandum dated June 10, 1997 (the "FINAL MEMORANDUM;" the Preliminary Memorandum and the Final Memorandum each herein being referred to as a "MEMORANDUM") setting forth or including a description of the terms of the Securities, the terms of the offering of the Shares, 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. All references in this Agreement to a Memorandum include the documents incorporated by reference therein. The Initial Purchasers and their direct and indirect transferees of the Securities 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 a shelf registration statement (the "REGISTRATION STATEMENT") with the Securities and Exchange Commission (the "COMMISSION") registering the Securities under the Act. 2. Representations and Warranties of the Company. The Company represents and warrants to and agrees with the Initial Purchasers that: (a) Each document, if any, filed or to be filed pursuant to the Securities Exchange Act of 1934 (the "Exchange Act"), as amended, and 2 3 incorporated by reference in the Final Memorandum complied or will comply when so filed in all material respects with the Exchange Act and the applicable rules and regulations of the Commission thereunder. (b) Neither the Preliminary Memorandum as of the date thereof nor the Final Memorandum nor any amendment or supplement thereto as of the date thereof and at all times subsequent thereto up to the Closing Date (as defined in Section 3 below) contained or contains any untrue statement of a material fact or omitted or omits 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(b) shall not apply to statements or omissions made in reliance upon and in conformity with information relating to any of the Initial Purchasers furnished to the Company in writing by the Initial Purchasers expressly for use in the Preliminary Memorandum, the Final Memorandum or any amendment or supplement thereto. (c) Each of the Company and its subsidiaries has been duly incorporated, is validly existing as a corporation in good standing under the laws of its jurisdiction of incorporation and has the corporate power and authority to carry on its business as it is currently being conducted and to own, lease and operate its properties, and each is or as of the Closing Date will be duly qualified and is or as of the Closing Date will be in good standing as a foreign corporation authorized to do business in each jurisdiction in which the nature of its business or its ownership or leasing of property requires such qualification, except where the failure to be so qualified would not have a material adverse effect on the Company and its subsidiaries, taken as a whole. (d) All of the outstanding shares of capital stock of, or other ownership interests in, each of the Company's subsidiaries have been duly authorized and validly issued and are fully paid and non-assessable, and are owned, directly or indirectly, by the Company, free and clear of any security interest, claim, lien, encumbrance or adverse interest of any nature, other than (i) the stock pledge securing certain obligations of the Company, Evergreen Media Corporation of Los Angeles ("Evergreen LA") and the subsidiaries of Evergreen LA under the Senior Credit Facility (as such term is defined in the Final Memorandum) and (ii) the pledge by the Company of the common stock of Evergreen Media Corporation of Texas in connection with the alternative financing of the Gannett Acquisition (as such term is defined in the Final Memorandum). 3 4 (e) All the shares of capital stock of the Company outstanding prior to the issuance of the Shares have been duly authorized and validly issued and are fully paid and non-assessable and not subject to any preemptive or similar rights. (f) The authorized capital stock of the Company (including the Class A Common Stock and the Convertible Preferred Stock) conforms as to legal matters to the description thereof contained in the Final Memorandum. (g) This Agreement has been duly authorized, executed and delivered by the Company and is a valid and binding agreement of the Company enforceable in accordance with its terms (except as rights to indemnity and contribution hereunder may be limited by applicable law). (h) Neither the Company nor any of its subsidiaries is in violation of its respective charter or by- laws (or other organizational documents) or in default in the performance of any obligation, agreement or condition contained in any bond, debenture, note or any other evidence of indebtedness or in any other agreement or instrument material to the conduct of the business of the Company and its subsidiaries, taken as a whole, to which the Company or any of its subsidiaries is a party or by which it or any of its subsidiaries or their respective property is bound. (i) The execution, delivery and performance of this Agreement, the Indenture, the Registration Rights Agreement and the Certificate of Designation related to the Convertible Preferred Stock (the "Certificate of Designation"), compliance by the Company with all the provisions hereof and thereof, the issuance and sale of the Shares, the issuance of the Debentures upon exchange of the Shares (assuming that the issuance of the Debentures upon exchange of the Shares were to take place on the Closing Date (as defined below)) and the issuance of the Class A Common Stock upon conversion of the Shares and the Debentures, as applicable, and the consummation of the transactions contemplated hereby and thereby will not (A) assuming compliance by the Initial Purchasers with their representations, warranties and agreements set forth in Section 8 hereof, require any consent, approval, authorization or other order of any court, regulatory body, administrative agency or other governmental body, including the Federal Communications Commission (the "FCC"), except (x) such as have been obtained or made and are in full force and effect, (y) in the case of the performance of and compliance with the Registration 4 5 Rights Agreement, such as will be obtained and made under the Act and the Trust Indenture Act of 1939, as amended (the "TIA") and (z) as may be required under Blue Sky laws of the various states; (B) conflict with or constitute a breach of any of the terms or provisions of, or a default under, the charter or by-laws (or other organizational documents) of the Company or any of its subsidiaries; (C) require any consent or approval (which has not been obtained) of the parties to, or conflict with or constitute a breach of any of the terms or provisions of, or a default under, any agreement or other instrument to which it or any of its subsidiaries is a party or by which it or any of its subsidiaries or their respective property is bound, except that the issuance of the Debentures upon exchange of the Shares on the Closing Date would require obtaining consents under the Senior Credit Facility (including the Company=s guarantee of Evergreen LA=s obligations thereunder) and the Chancellor Merger Agreement (as such term is defined in the Final Memorandum); (D) assuming compliance by the Initial Purchasers with their representations, warranties and agreements set forth in Section 8 hereof, violate or conflict with any laws or administrative regulations, including without limitation the Communications Act of 1934, as amended, and the rules and regulations of the FCC thereunder (collectively called the "Communications Act"), rulings or court decrees applicable to the Company, any of its subsidiaries or their respective property; (E) result in termination or revocation of any of the permits, licenses, approvals, orders, certificates, franchise or authorization of governmental or regulatory authorities, including those relating to the Communications Act, owned or held by the Company or any of its subsidiaries in order to conduct the broadcast operations of the stations owned or operated by them ("Licenses") or result in any other material impairment of the rights of the holder of any such License; or (F) result in the creation or imposition of any lien on any asset of the Company or any of its subsidiaries. (j) Except as otherwise set forth in the Final Memorandum, there are no material legal or governmental proceedings pending to which the Company or any of its subsidiaries is a party or of which any of their respective property (including without limitation Licenses) is the subject, and, to the best of the Company's knowledge, no such proceedings are threatened or contemplated; there are no material contracts or other documents which would be required to be described in a prospectus pursuant to the Act that are not described in the Final Memorandum. (k) Each of the Company and its subsidiaries is operating in compliance with all (and has not violated any) laws, regulations, 5 6 administrative orders or rulings or court decrees applicable to it or to any of its property (including without limitation those relating to broadcast operations, environmental, safety or similar matters, federal or state laws relating to the hiring, promotion or pay of employees, the Employees Retirement Income Security Act or the rules and regulations promulgated thereunder), except for violations which will not result in any material adverse change in the business, prospects, financial condition or results of operations of the Company and its subsidiaries, taken as a whole. (l) Each of the Company and its subsidiaries has such Licenses as are necessary to own, lease and operate its respective properties and to conduct its business; each of the Company and its subsidiaries has fulfilled and performed all of its material obligations with respect to such Licenses and no event has occurred which allows, or after notice or lapse of time would allow, revocation or termination thereof or results in any other material impairment of the rights of the holder of any such permit. (m) Except as otherwise set forth in the Final Memorandum or such as are not material to the business, prospects, financial condition or results of operation of the Company and its subsidiaries, taken as a whole, the Company and each of its subsidiaries has good and marketable title, free and clear of all liens, claims, encumbrances and restrictions except liens for taxes not yet due and payable, to, and enjoys peaceful and undisturbed possession of, all property and assets described in the Final Memorandum as being owned by it. (n) KPMG Peat Marwick LLP are independent public accountants with respect to the Company for the purposes of the Act. (o) The financial statements and related notes included in the Final Memorandum (other than the Viacom Financials, the WDRQ Financials, the Riverside Financials, the WLIT Financials, the KYSR/KIBB Financials, the WDAS Financials, the KKSF/KDFC Financials, the Chancellor Financials, the Century Financials and WJLB Financials, each as defined below), present fairly the consolidated financial position, results of operations and changes in cash flows of the Company and/or its subsidiaries on the basis stated in the Final Memorandum at the respective dates or for the respective periods to which they apply; such statements and related schedules and notes have been prepared in accordance with generally accepted accounting principles consistently applied throughout the periods involved, except as disclosed therein; the pro forma financial information included in the Final 6 7 Memorandum has been prepared in accordance with the Commission's rules and guidelines with respect to pro forma financial statements and the assumptions used in the preparation thereof are, in the Company's opinion, reasonable; and the other financial and statistical information and data included in the Final Memorandum is, in all material respects, accurately presented and prepared on a basis consistent with such financial statements and the books and records of the Company. (p) After due inquiry, the Company has no reason to believe that (A) the combined financial statements and related notes of WMZQ Inc. and Viacom Broadcasting East Inc. (the "VIACOM FINANCIALS") included in the Final Memorandum do not fairly present, as applicable, the consolidated financial position, results of operations and changes in cash flows of WMZQ Inc. ("WMZQ") and/or its subsidiaries and Viacom Broadcasting East Inc. ("VIACOM") and/or its subsidiaries on the basis stated in the Final Memorandum at the respective dates or for the respective periods to which they apply or (B) the Viacom Financials have not been prepared in accordance with generally accepted accounting principles consistently applied, except as disclosed therein. (q) After due inquiry, the Company has no reason to believe that (A) the financial statements and related notes of WDRQ Inc. (the "WDRQ FINANCIALS") included in the Final Memorandum do not fairly present, as applicable, the consolidated financial position, results of operations and changes in cash flows of WDRQ Inc. ("WDRQ") and/or its subsidiaries on the basis stated in the Final Memorandum at the respective dates or for the respective periods to which they apply or (B) the WDRQ Financials have not been prepared in accordance with generally accepted accounting principles consistently applied, except as disclosed therein. (r) After due inquiry, the Company has no reason to believe that (A) the combined financial statements and related notes of Riverside Broadcasting Co., Inc. and WAXQ Inc. (the "RIVERSIDE FINANCIALS") included in the Final Memorandum do not fairly present, as applicable, the consolidated financial position, results of operations and changes in cash flows of Riverside Broadcasting Co., Inc. ("RIVERSIDE") and/or its subsidiaries and WAXQ Inc. ("WAXQ") and/or its subsidiaries on the basis stated in the Final Memorandum at the respective dates or for the respective periods to which they apply or (B) the Riverside Financials have not been prepared in accordance with generally accepted accounting principles consistently applied, except as disclosed therein. 7 8 (s) After due inquiry, the Company has no reason to believe that (A) the financial statements and related notes of WLIT Inc. (the "WLIT FINANCIALS") included in the Final Memorandum do not fairly present, as applicable, the consolidated financial position, results of operations and changes in cash flows of WLIT Inc. ("WLIT") and/or its subsidiaries on the basis stated in the Final Memorandum at the respective dates or for the respective periods to which they apply or (B) the WLIT Financials have not been prepared in accordance with generally accepted accounting principles consistently applied, except as disclosed therein. (t) After due inquiry, the Company has no reason to believe that (A) the combined financial statements and related notes of KYSR Inc. and KIBB Inc. (the "KYSR/KIBB FINANCIALS") included in the Final Memorandum do not fairly present, as applicable, the consolidated financial position, results of operations and changes in cash flows of KYSR Inc., and KIBB Inc. (collectively, "KYSR/KIBB") on the basis stated in the Final Memorandum at the respective dates or for the respective periods to which they apply or (B) the KYSR/KIBB Financials have not been prepared in accordance with generally accepted accounting principles consistently applied, except as disclosed therein. (u) After due inquiry, the Company has no reason to believe that (A) the financial statements and related notes of WDAS AM/FM (station owned and operated by Beasley FM Acquisition Corp.) (the "WDAS FINANCIALS") included in the Final Memorandum do not fairly present, as applicable, the consolidated financial position, results of operations and changes in cash flows of WDAS AM/FM (station owned and operated by Beasley FM Acquisition Corp.) ("WDAS") on the basis stated in the Final Memorandum at the respective dates or for the respective periods to which they apply or (B) the WDAS Financials have not been prepared in accordance with generally accepted accounting principles consistently applied, except as disclosed therein. (v) After due inquiry, the Company has no reason to believe that (A) the financial statements and related notes of KKSF-FM and KDFC-AM/FM (A Division of the Brown Organization) (the "KKSF/KDFC FINANCIALS") included in the Final Memorandum do not fairly present, as applicable, the consolidated financial position, results of operations and changes in cash flow of KKSF-FM and KDFC-AM/FM (A Division of the Brown Organization) (collectively, "KKSF/KDFC") on the basis stated in the Final Memorandum at the respective dates or for the respective 8 9 periods to which they apply or (B) that the KKSF/KDFC Financials have not been prepared in accordance with generally accepted accounting principles consistently applied, except as disclosed herein. (w) After due inquiry, the Company has no reason to believe that (A) the financial statements and related notes of Chancellor Broadcasting Company (the "CHANCELLOR FINANCIALS") included in the Final Memorandum do not fairly present, as applicable, the consolidated financial position, results of operations and changes in cash flow of Chancellor Broadcasting Company ("CHANCELLOR") and/or its subsidiaries on the basis stated in the Final Memorandum at the respective dates or for the respective periods to which they apply or (B) that the Chancellor Financials have not been prepared in accordance with generally accepted accounting principles consistently applied, except as disclosed therein. (x) After due inquiry, the Company has no reason to believe that (A) the financial statements and related notes of Century Chicago Broadcasting, L.P. (the "CENTURY FINANCIALS") included in the Final Memorandum do not fairly present, as applicable, the consolidated financial position, results of operations and changes in cash flow of Century Chicago Broadcasting, L.P. ("CENTURY") and/or its subsidiaries on the basis stated in the Final Memorandum at the respective dates or for the respective periods to which they apply or (B) that the Century Financials have not been prepared in accordance with generally accepted accounting principles consistently applied, except as disclosed therein. (y) After due inquiry, the Company has no reason to believe that (A) the financial statements and related schedules and notes of WJLB/WMXD Detroit, (the "WJLB/WMXD FINANCIALS") included in the Final Memorandum do not fairly present , as applicable, the consolidated financial position, results of operations and changes in cash flow of WLJB/WMXD, Detroit ("WJLB/WMXD") and/or its subsidiaries on the basis stated in the Final Memorandum at the respective dates or for the respective periods to which they apply or (B) that the WJLB/WMXD Financials have not been prepared in accordance with generally accepted accounting principles consistently applied, except as disclosed therein. (z) The agreements (the "Pending Evergreen Transactions Agreements") relating to each of the pending transactions described in the Final Memorandum under the captions "BUSINESS AND PROPERTIES - RECENT DEVELOPMENTS - CHANCELLOR MERGER" and "BUSINESS AND PROPERTIES - RECENT DEVELOPMENTS - PENDING EVERGREEN TRANSACTIONS" 9 10 have been duly authorized, executed and delivered by the Company or one or more of its subsidiaries and constitute the valid and binding agreements of the Company and/or its subsidiaries (except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium and similar laws relating to or affecting creditors' rights generally or by general equity principles) and, except as described in the Final Memorandum, the Company has no reason to believe based on information known to it as of the date of this Agreement that the transactions contemplated by the Pending Transactions Agreements will not be consummated on the basis described therein. (aa) After due inquiry, the Company has no reason to believe that the agreements (the "PENDING CHANCELLOR TRANSACTION AGREEMENTS") relating to each of the pending transactions described in the Final Memorandum under the captions "BUSINESS AND PROPERTIES - RECENT DEVELOPMENTS - CHANCELLOR MERGER" and "BUSINESS AND PROPERTIES - RECENT DEVELOPMENTS - PENDING CHANCELLOR TRANSACTIONS" have not been duly authorized, executed and delivered by Chancellor or one or more of its subsidiaries and do not constitute the valid and binding agreements of Chancellor and/or its subsidiaries (except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium and similar laws relating to or affecting creditors= rights generally or by general equity principles) and, except as described in the Final Memorandum, the Company has no reason to believe based on information known to it as of the date of this Agreement that the transactions contemplated by the Pending Chancellor Transactions Agreements will not be consummated on the basis described therein. (bb) The Company is not and, after giving effect to the offering and sale of the Shares and the application of the proceeds thereof as described in the Final Memorandum, will not be an "investment company" as such term is defined in the Investment Company Act of 1940, as amended. (cc) The Company has complied with all provisions of Section 517.075, Florida Statutes (Chapter 92- 198, Laws of Florida) relating to the disclosure of business with Cuba. (dd) The Certificate of Designation has been duly authorized by the Company and on or prior to the Closing Date will have been duly executed and delivered by the Company and filed with the Secretary of State of the State of Delaware; the Shares have been duly authorized and, 10 11 when issued and delivered to the Initial Purchasers against payment therefor in accordance with the terms hereof, will be validly issued, fully paid and nonassessable and the issuance of such Shares will not be subject to any preemptive or similar rights. (ee) The shares of Class A Common Stock of the Company to be issued upon conversion of the Convertible Preferred Stock and the Debentures have been duly authorized and reserved for issuance upon such conversion and, when issued upon such conversion in accordance with the Certificate of Designation and Indenture, respectively, will be validly issued, fully paid and non-assessable and the issuance of such shares will not be subject to any preemptive or similar rights. (ff) The Debentures have been duly authorized by the Company for issuance and conform to the description thereof in the Final Memorandum. The Debentures, when executed by the Company and authenticated by the Trustee in accordance with the provisions of the Indenture and delivered upon the exchange of the Shares in accordance with the Certificate of Designation, will have been duly executed, issued and delivered and will constitute valid and legally binding obligations of the Company, entitled to the benefits of the Indenture and enforceable against the Company in accordance with their terms (except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium and similar laws relating to or affecting creditors' rights generally or by general equity principles). The Company has all requisite corporate power and authority to execute, deliver and perform its obligations under the Indenture; the Indenture has been duly authorized by the Company and meets the requirements for qualification under the TIA and, when executed and delivered by the Company (assuming the due authorization, execution and delivery by the Trustee), will constitute a valid and legally binding agreement of the Company, enforceable against it in accordance with its terms (except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium and similar laws relating to or affecting creditors' rights generally or by general equity principles). The Indenture conforms to the description thereof in the Final Memorandum. (gg) The Company has all requisite corporate power and authority to execute and deliver the Registration Rights Agreement; the Registration Rights Agreement has been duly authorized by the Company and, when executed and delivered by the Company (assuming due authorization, execution and delivery by you), will constitute a valid and legally binding 11 12 agreement of the Company enforceable against it in accordance with its terms (except (x) as any rights for indemnity and contribution thereunder may be limited by applicable law and (y) as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium and similar laws relating to or affecting creditors' rights generally or by general equity principles). The Registration Rights Agreement conforms to the description thereof in the Final Memorandum. (hh) The execution and delivery of this Agreement, the Indenture, the Certificate of Designation and the Registration Rights Agreement and the sale of the Shares as provided herein will not involve any prohibited transaction within the meaning of Section 406 of Employee Retirement Income Security Act of 1974, as amended, or Section 4975 of the Internal Revenue Code of 1986, as amended. The representation made by the Company in the preceding sentence is made in reliance upon and subject to the accuracy of, and compliance with, the representations and covenants made or deemed made by the persons purchasing the Shares from the Initial Purchasers as set forth in the Final Memorandum under the section entitled "Transfer Restrictions." (ii) There are no holders of securities of the Company who, by reason of the execution by the Company of any of the Certificate of Designation, the Indenture, the Registration Rights Agreement or this Agreement or the consummation of the transactions contemplated therein, have the right to request or demand that the Company register under the Act any securities held by them, except that holders of Convertible Preferred Stock, Debentures issuable on exchange thereof or shares of Class A Common Stock issuable upon conversion thereof will have registration rights pursuant to the Registration Rights Agreement. (jj) Other than this Agreement, there are no contracts, agreements or understandings between the Company or any of its subsidiaries and any person that would give rise to a valid claim against the Company or any of its subsidiaries or any of the Initial Purchasers for a brokerage commission, finder=s fee or like payment in connection with the issuance, purchase and sale of Shares. (kk) None of the Company, any of its subsidiaries or 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) which is or could be integrated with the sale of the 12 13 Securities in a manner that would require the registration under the Act of the Securities 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 Securities or in any manner involving a public offering within the meaning of Section 4(2) of the Act. Assuming the accuracy of the representations, warranties, and agreements of the Initial Purchasers in Section 8 hereof, it is not necessary in connection with the offer, sale and delivery of the Shares to the Initial Purchasers in the manner contemplated by this Agreement to register any of the Securities under the Act or to qualify the Indenture under the TIA. (ll) The Convertible Preferred Stock satisfies the requirements set forth in Rule 144A(d)(3) under the Act. (mm) None of the Company, its subsidiaries or any agent acting on their behalf has taken or will take any action that might cause this Agreement or the sale of the Shares to violate Regulation G, 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. (nn) None of the Company or the subsidiaries has taken, directly or indirectly, any action prohibited by Regulation M under the Act in connection with the offering of the Shares contemplated hereby. 3. Purchase, Sale and Delivery of the Shares. On the basis of the representations, warranties, agreements and covenants herein contained and subject to the terms and conditions herein set forth, the Company agrees to issue and sell to the Initial Purchasers, and the Initial Purchasers, acting severally and not jointly, agree to purchase from the Company, at a price of $48.25 per share (the "Share Price"), the number of Shares set forth opposite their respective names on Schedule A hereto. On the basis of the representations, warranties, agreements and covenants contained in this Agreement, and subject to its terms and conditions, the Company agrees to issue and sell to the Initial Purchasers the Additional Shares, if any, and the Initial Purchasers shall have a one-time right to purchase, severally and not jointly, up to 500,000 Additional Shares from the Company at the Share Price. Additional Shares may be purchased solely for the purpose of covering over-allotments made in connection with the offering of the Firm Shares. The Initial Purchasers may exercise their right to purchase Additional Shares in whole or in part by giving written notice thereof to the Company at any time within 30 days after the date of the Final Memorandum. You shall give such notice on 13 14 behalf of the Initial Purchasers and the notice shall specify the aggregate number of Additional Shares to be purchased and the date for payment and delivery thereof. The date specified in the notice shall be a business day (i) no earlier than the Closing Date (as hereinafter defined) and (ii) no later than ten business days after such notice has been given. Each Initial Purchaser, severally and not jointly, agrees to purchase the number of Additional Shares (subject to such adjustments to eliminate fractional shares as you may determine) which bears the same proportion to the total number of Additional Shares to be purchased as the number of Firm Shares set forth opposite the name of such Initial Purchaser in Schedule A bears to the total number of Firm Shares. Delivery to the Initial Purchasers of the Firm Shares shall take place at the offices of Davis Polk & Wardwell, 450 Lexington Avenue, New York, New York. Payment for the Firm Shares shall be made by wire transfer at 10:00 A.M., New York City time, on June 16, 1997 (the "Closing Date") of same day funds to such bank account as the Company shall designate. The Closing Date and the location of delivery of and the form of payment for the Firm Shares may be varied by agreement between you and the Company. Delivery to the Initial Purchasers of the Additional Shares to be purchased by the Initial Purchasers shall take place at the offices of Davis Polk & Wardwell, 450 Lexington Avenue, New York, New York. Payment for the Additional Shares shall be made by wire transfer at 10:00 A.M., New York City time, on the date specified in the exercise notice given by you pursuant to this Section (the "Option Closing Date") of same day funds to such bank account as the Company may designate. The Option Closing Date and the location of delivery of and the form of payment for the Additional Shares may be varied by agreement between you and the Company. Certificates representing the Shares shall be registered in such names and issued in such denominations as you shall request in writing not later than two full business days prior to the Closing Date or the Option Closing Date, as the case may be. Such certificates shall be made available to you for inspection not later than 9:30 A.M., New York City time, on the business day next preceding the Closing Date or the Option Closing Date, as the case may be. Certificates in definitive form evidencing the Shares shall be delivered to you on the Closing Date or the Option Closing Date, as the case may be, with any transfer taxes thereon duly paid by the Company for the respective accounts of the several Initial Purchasers against payment of the Share Price. The Company hereby agrees not to offer, sell, contract to sell, grant any option to purchase, or otherwise dispose of any Common Stock of the Company 14 15 or any securities convertible into or exercisable or exchangeable for such Common Stock, except to the Initial Purchasers pursuant to this Agreement, and not to file any registration statement with respect to any such securities (other than on Form S-8, the Registration Statement and the registration statement on Form S-4 relating to the Chancellor Merger (as such term is defined in the Final Memorandum)), in each case for a period of 90 days after the date of the Final Memorandum, without the prior written consent of Alex. Brown & Sons Incorporated. Notwithstanding the foregoing, during such period (i) the Company may grant stock options pursuant to the Company=s existing stock option plans or if the Chancellor Merger is consummated, the existing stock option plans of Chancellor Broadcasting Company ("Chancellor"), (ii) the Company may issue shares of its Common Stock upon the exercise of any option or warrant or the conversion of any security outstanding on the date hereof or granted pursuant to an existing stock option plan of the Company, or if the Chancellor Merger is consummated, granted pursuant an existing stock option plan of Chancellor, (iii) the Company may issue shares of its Class A Common Stock as consideration for radio station or radio station group acquisitions including in connection with the Chancellor Merger and (iv) the Company may honor registration rights obligations assumed by it in connection with the Chancellor Merger. 4. Offering by the Initial Purchasers. The Initial Purchasers propose to make an offering of the Shares in a manner consistent with Section 8 hereof at the price and upon the terms set forth in the Final 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 Company. The Company covenants and agrees with the Initial Purchasers: (a) To advise the Initial Purchasers promptly and, if requested by them, to confirm such advice in writing, (i) of the issuance by any state securities commission of any stop order suspending the qualification or exemption from qualification of the Securities for offering or sale in any jurisdiction, or the initiation of any proceedings for such purpose by any state securities commission or other regulatory authority, and (ii) during the period set forth in Section 5(d) below, of the happening of any event, or of any information becoming known, which makes any statement of a material fact made in the Final Memorandum untrue or which requires the making of any additions to or changes in the Final Memorandum in order to make the statements therein, in the light of the circumstances under which they are made, not misleading. The Company shall use every 15 16 reasonable effort to prevent the issuance of any stop order or order suspending the qualification or exemption of any of the Securities under any state securities or Blue Sky laws (and the Initial Purchasers will (at the sole expense of the Company) cooperate with the Company in connection therewith), and if at any time any state securities commission or other regulatory authority shall issue an order suspending the qualification or exemption of any of the Securities under any state securities or Blue Sky laws, the Company shall use every reasonable effort to obtain the withdrawal or lifting of such order at the earliest possible time, subject in any event to the provision in Section 5(c) below. (b) The Company will not amend or supplement the Final 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. The Company will promptly, upon the reasonable request of the Initial Purchasers or counsel for the Initial Purchasers, make any amendments or supplements to the Preliminary Memorandum or the Final Memorandum that may be necessary or advisable in connection with the resale of the Shares by the Initial Purchasers. (c) The Company will cooperate with the Initial Purchasers in arranging for the qualification of the Securities for offering and sale under the securities or "Blue Sky" laws of such jurisdictions as the Initial Purchasers may designate and will continue such qualifications in effect for as long as may be necessary to complete the resale of the Securities by the Initial Purchasers; provided, however, that in connection therewith the Company shall not be required to qualify as a foreign corporation or to execute a general consent to service of process or taxation in any jurisdiction in which it is not now so subject other than as to matters and transactions relating to the offer and sale of the Shares.. (d) If, at any time prior to the completion of the distribution by the Initial Purchasers of the Shares, any event occurs as a result of which the Final Memorandum as then amended or supplemented would include an 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 Final Memorandum in order to comply with applicable law, the Company will promptly notify the Initial Purchasers thereof and will prepare, at the Company's expense, 16 17 an amendment to the Final Memorandum that corrects such statement or omission or effects such compliance. (e) The Company will, without charge, provide to the Initial Purchasers and to counsel for the Initial Purchasers, as many copies of the Preliminary Memorandum and the Final Memorandum or any amendment or supplement thereto as the Initial Purchasers may reasonably request. (f) For and during the five-year period ending on the fifth anniversary of this Agreement, the Company will furnish to the Initial Purchasers upon their reasonable request (without charge) copies of all reports and other communications (financial or otherwise) furnished by the Company to the holders of the Securities or the Trustee under the Indenture 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 Company will furnish to the Initial Purchasers, as soon as they have been prepared by or are available to the Company, a copy of any unaudited interim consolidated financial statements of the Company for any period subsequent to the period covered by its most recent financial statements appearing in the Final Memorandum. (h) None the Company, any of its subsidiaries or any of their respective affiliates (as defined in Regulation 501(b) of Regulation D under the Act) will, directly or through any agent, sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any security (as defined in the Act) the offering of which security is or would be integrated with the sale of the Securities contemplated hereby in a manner which would require the registration of the Securities under the Act, and the Company will take all action that is appropriate to assure that its offerings of other securities will not be integrated for purposes of the Act with the offering contemplated hereby. (i) The Company will not, and will not permit any of its subsidiaries to, 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 Securities or in any manner involving a public offering within the meaning of Section 4(2) of the Act. 17 18 (j) For so long as any of the Securities remain outstanding and are "restricted securities" within the meaning of Rule 144(a)(3) under the Act, the Company will make available at its expense, upon request, to any holder or beneficial owner of such Securities and any prospective purchasers thereof the information specified in Rule 144A(d) (4) under the Act, unless the Company is then subject to Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended. (k) In the event that the Company or any of its affiliates (as defined in Rule 144(a)(1) under the Act) acquires any of the Securities, the Company or such affiliate will not sell or otherwise transfer such Securities other than to the Company or its affiliates. (l) To comply in all material respects with all of its agreements set forth in the Registration Rights Agreement, and all agreements set forth in the representation letter of the Company to the Depository Trust Company relating to the approval of the Convertible Preferred Stock and the Debentures by the Depository Trust Company for "book-entry" transfer. (m) The Company will use its best efforts to (i) permit the Shares and the Debentures 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 market (the "Portal Market") and (ii) permit the Shares and Debentures to be eligible for clearance and settlement through The Depository Trust Company. (n) The Company will apply the net proceeds from the sale of the Shares substantially as set forth under "Use of Proceeds" in the Final Memorandum. (o) To not take any action prohibited by Regulation M under the Exchange Act in connection with the offering of the Shares contemplated hereby. (p) To use its best efforts to do and perform all things required or necessary to be done and performed under this Agreement by the Company prior to the Closing Date or the Option Closing Date, as the case may be, and to satisfy all conditions precedent to the delivery of the Shares. 18 19 (q) To reserve and keep available at all times, free of preemptive rights, shares of Class A Common Stock for the purpose of enabling the Company to satisfy any obligations to issue shares of Class A Common Stock upon conversion of the Convertible Preferred Stock or the Debentures. 6. Expenses. The Company agrees to pay the following costs and expenses and all other costs and expenses incident to the performance of its obligations under this Agreement, whether or not the transactions contemplated herein are consummated or this Agreement is terminated pursuant to Section 11 hereof: (i) the printing, word processing or other production of documents with respect to such transactions, including any costs of printing the Preliminary Memorandum and the Final Memorandum and any amendments 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 Company, (iv) the preparation (including printing), issuance and delivery to the Initial Purchasers of any certificates evidencing the Shares, including transfer agent=s fees, (v) the qualification of the Securities under state securities and "Blue Sky" laws, including filing fees and reasonable fees and disbursements of counsel for the Initial Purchasers relating thereto, (vi) the expenses of the Company in connection with any meetings with prospective investors in the Shares, (vii) the fees and expenses of the Transfer Agent and the Trustee, including fees and expenses of their counsel, (viii) any fees charged by rating agencies for the rating of the Shares and the Debentures, (ix) the fees and expenses, if any, incurred in connection with the admission of the Shares or the Debentures for trading on any appropriate trading system (such as PORTAL), and (x) the fees and expenses (including fees and expenses of counsel) of the Company in connection with approval of the Convertible Preferred Stock and the Debentures by the Depository Trust Company for "book-entry" transfer. If the issuance and sale of the Shares 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 pursuant to Section 11 hereof or because of any failure, refusal or inability on the part of the Company to perform all obligations and satisfy all conditions on its part to be performed or satisfied hereunder other than by reason of a default by the Initial Purchasers, the Company will reimburse the Initial Purchasers upon demand for all reasonable out-of-pocket expenses (including reasonable counsel fees and disbursements) that shall have been incurred by the Initial Purchasers in connection with the proposed purchase and sale of the Shares. 19 20 7. Conditions of the Initial Purchasers= Obligations. The several obligations of the Initial Purchasers to purchase and pay for the Firm Shares shall, in their sole discretion, be subject to the following conditions: (a) The Initial Purchasers shall have received opinions dated the Closing Date in form and substance satisfactory to the Initial Purchasers and counsel for the Initial Purchasers, dated the Closing Date, of Latham & Watkins, counsel to the Company, and Weil, Gotshal & Manges or Leibowitz & Associates, counsel to Chancellor, substantially in the form of Exhibits A and B, respectively, hereto. (b) The Initial Purchasers shall have received an opinion, dated the Closing Date, of Davis Polk & Wardwell, counsel for the Initial Purchasers, with respect to certain legal matters relating to this Agreement, and such other related matters as the Initial Purchasers may require. In rendering such opinion, Davis Polk & Wardwell 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, Davis Polk & Wardwell may state that their opinion is limited to matters of New York, Delaware corporate and federal law. (c) The Initial Purchasers shall have received from KPMG Peat Marwick LLP, independent public accountants for the Company, WMZQ, Viacom, WDRQ, Riverside, WAXQ, WLIT, KYSR/KIBB, WDAS and KKSF/KDFC letters dated, respectively, the date hereof and the Closing Date, in form and substance satisfactory to the Initial Purchasers and counsel for the Initial Purchaser, provided, that the letter delivered on the Closing Date shall use a "cut off date" not earlier than the date of this Agreement. (d) The Initial Purchasers shall have received from Coopers & Lybrand L.L.P., independent public accountants for Chancellor Broadcasting, letters dated, respectively, the date hereof and the Closing Date, in form and substance satisfactory to the Initial Purchasers and counsel for the Initial Purchasers, provided, that the letter delivered on the Closing Date shall use a "cut off date" not earlier than the date of this Agreement. (e) The Initial Purchasers shall have received from Price Waterhouse LLP, independent public accountants for Century, letters dated, respectively, the date hereof and the Closing Date, in form and 20 21 substance satisfactory to the Initial Purchasers and counsel for the Initial Purchasers, provided, that the letter delivered on the Closing Date shall use a "cut off date" not earlier than the date of this Agreement. (f) The Initial Purchasers shall have received from Arthur Andersen LLP, independent public accountants for WJLB/WMXD, letters dated respectively, the date hereof and the Closing Date in form and substance satisfactory to the Initial Purchasers and counsel for the Initial Purchasers, provided, that the letter delivered on the Closing Date shall use a "cut off date" not earlier than the date of this Agreement. (g) All the representations and warranties of the Company contained in this Agreement shall be true and correct on and as of the Closing Date with the same force and effect as if made on and as of the Closing Date. (h) The issuance and sale of the Shares pursuant to this Agreement shall not be enjoined (temporarily or permanently) 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 before any court or governmental authority (including, without limitation, the FCC). (i) Since the date of the latest balance sheet included or incorporated by reference in the Final Memorandum, there shall not have been any material adverse change, or any development involving a prospective material adverse change, in the condition, financial or otherwise, or in the earnings, affairs or business prospects, whether or not arising in the ordinary course of business, of the Company, (ii) since the date of the latest balance sheet included or incorporated by reference in the Final Memorandum there shall not have been any change, or any development involving a prospective material adverse change, in the capital stock or in the long-term debt of the Company from that set forth in the Final Memorandum, (iii) the Company and its subsidiaries shall have no liability or obligation, direct or contingent, which is material to the Company and its subsidiaries, taken as a whole, other than those reflected in the Final Memorandum and (iv) on the Closing Date you shall have received a certificate dated the Closing Date, signed by Scott K. Ginsburg and Matthew E. Devine, in their capacities as the Chief Executive Officer and Chief Financial Officer of the Company, confirming the matters set forth in paragraphs (g), (h) and (i) of this Section 7. 21 22 (j) On the Closing Date, the Initial Purchasers shall have received the Registration Rights Agreement executed by the Company and such agreement shall be in full force and effect at all times from and after the Closing Date. (k) On or before the Closing Date, (i) the Certificate of Designation shall have been filed with the Secretary of State of the State of Delaware and (ii) the Initial Purchasers and counsel for the Initial Purchasers shall have received such further documents, opinions, certificates and schedules or instruments relating to the business, corporate, legal and financial affairs of the Company as they shall have heretofore reasonably requested from the Company. (l) The Convertible Preferred Stock shall have been rated no less than B by Standard & Poors Ratings Services. (m) The Company shall not have failed at or prior to the Closing Date to perform or comply in any material respect with any of the agreements herein contained and required to be performed or complied with by the Company at or prior to the Closing Date. (n) The Company shall have complied with the provisions with respect to printing and furnishing of Final Memorandum set forth in Section 5(e) hereof by the business day next succeeding the date of this Agreement. All such documents, opinions, certificates and schedules 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 documents, opinions, certificates and schedules or instruments in such quantities as the Initial Purchasers shall reasonably request. The several obligations of the Initial Purchasers to purchase Additional Shares hereunder are subject to the delivery to you on the Option Closing Date of such documents as you may reasonably request with respect to the good standing of the Company, the due authorization and issuance of the Additional Shares and other matters related to the issuance of such Shares. 22 23 8. Offering of Securities; Restrictions on Transfer. Each of the Initial Purchasers represents and warrants to, and agrees with, the Company that (i) it is a Qualified Institutional Buyer (as defined in Rule 144A under the Act) with such knowledge and experience in financial and business matters as are necessary in order to evaluate the events and risks of an investment in the Securities, (ii) it is not acquiring the Convertible Preferred Stock with a view to any distribution thereof that would violate the Act or the securities laws of any state, (iii) it has not and will not solicit offers for, or offer or sell, the Convertible Preferred Stock 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;(iv) it has and will solicit offers for the Convertible Preferred Stock only from, and will offer and sell the Convertible Preferred Stock only to (x) persons whom it reasonably believes to be Qualified Institutional Buyers 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 the Initial Purchasers that each such account is a Qualified Institutional Buyer, 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 or (y) a limited number of institutional "accredited investors," as defined in Rule 501(a)(1), (2), (3) or (7) promulgated under the Act, that prior to their purchase of the Shares, deliver to such Initial Purchaser a letter containing the representations and agreements set forth in Annex A to the Final Memorandum, and (v) it has and will comply with all provisions of the federal securities laws and the rules and regulations of the Commission thereunder in connection with the offering of the Shares contemplated herein and the applicable provisions set forth under the captions "Transfer Restrictions" and "Private Placement" in the Final Memorandum. 9. Indemnification and Contribution. (a) The Company agrees 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, from and against any and all losses, claims, damages, liabilities and judgments caused by any untrue statement or alleged untrue statement of a material fact contained in the Final Memorandum (as amended or supplemented if the Company shall have furnished any amendments or supplements thereto) or the Preliminary Memorandum or caused by any omission or alleged omission to state therein a material fact or necessary to make the statements therein not misleading, except insofar as such losses, claims, damages, liabilities or judgments are caused by any such untrue statement or omission or alleged untrue statement or omission 23 24 based upon information relating to any Initial Purchaser furnished in writing to the Company by or on behalf of any Initial Purchaser through you expressly for use therein; provided, however, that the foregoing indemnity agreement with respect to the Preliminary Memorandum shall not inure to the benefit of any Initial Purchaser from whom the person asserting any such losses, claims, damages or liabilities purchased Shares, or any person controlling such Initial Purchaser, if a copy of the Final Memorandum was not sent or given by or on behalf of such Initial Purchaser to such person at or prior to the written confirmation of the sale of the Shares to such person, and if the Final Memorandum would have cured the defect giving rise to such loss, claim, damage or liability. (b) In case any action shall be instituted involving any person in respect of which indemnity may be sought pursuant to Section 9(a), based upon the Preliminary Memorandum or the Final Memorandum or any amendment or supplement thereto, such person (the "indemnified party") shall promptly notify the person against whom such indemnity may be sought (the "indemnifying party") in writing and the indemnifying party shall assume the defense thereof, including the employment of counsel reasonably satisfactory to such indemnified party and payment of all fees and expenses. Any indemnified party shall have the right to employ separate counsel in any such action and participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such indemnified party unless (i) the employment of such counsel shall have been specifically authorized in writing by the indemnifying party, (ii) the indemnifying party shall have failed to assume the defense and employ counsel or (iii) the named parties to any such action (including any impleaded parties) include both the indemnifying party and the indemnified party and such indemnified party shall have been advised by such counsel that there may be one or more legal defenses available to it which are different from or additional to those available to the indemnifying party (in which case the indemnifying party shall not have the right to assume the defense of such action on behalf of such indemnified party, it being understood, however, that the indemnifying party shall not, in connection with any one such action or separate but substantially similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances, be liable for (A) the fees and 24 25 expenses of more than one separate firm of attorneys (in addition to any local counsel) for all such Initial Purchasers and all persons, if any, who control any Initial Purchasers within the meaning of Section 15 of the Act or Section 20 of the Exchange Act, which firm shall be designated in writing by Alex. Brown & Sons Incorporated and (B) the fees and expenses of more than one separate firm of attorneys (in addition to any local counsel) for the Company, its directors, and each person, if any, who controls the Company within the meaning of either such Section, which firm shall be designated in writing by the Company, and that all such fees and expenses shall be reimbursed as they are incurred). The indemnifying party shall not be liable for any settlement of any such action effected without its written consent but if settled with the written consent of such indemnifying party, such indemnifying party agrees to indemnify and hold harmless the indemnified party from and against any loss or liability by reason of such settlement. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened proceeding in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party, unless such settlement includes an unconditional release of such indemnified party from all liability on claims that are the subject matter of such proceeding. (c) Each Initial Purchaser agrees, severally and not jointly, to indemnify and hold harmless the Company, its directors and any person controlling the Company within the meaning of Section 15 of the Act or Section 20 of the Exchange Act, to the same extent as the foregoing indemnity from the Company to each Initial Purchaser but only with reference to information relating to such Initial Purchaser furnished in writing by or on behalf of such Initial Purchaser through you expressly for use in the Preliminary Memorandum or the Final Memorandum and any amendment or supplement thereto. In case any action shall be brought against the Company, any of its directors or any person controlling the Company based on the Preliminary Memorandum or the Final Memorandum or any amendment or supplement thereto and in respect of which indemnity may be sought against any Initial Purchaser, the Initial Purchaser shall have the rights and duties given to the Company (except that if the Company shall have assumed the defense thereof, such Initial Purchaser shall not be required to do so, but may employ separate counsel therein and participate in the defense thereof but the fees and expenses of such counsel shall be at the expense of such Initial Purchaser), and the Company, its directors and any controlling person of the Company shall have the rights and duties given to the Initial Purchasers by Section 9(b) hereof. (d) If the indemnification provided for in this Section 9 is unavailable to an indemnified party in respect of any losses, claims, damages, liabilities or judgments referred to therein, then each 25 26 indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages, liabilities and judgments (i) in such proportion as is appropriate to reflect the relative benefits received by the indemnifying party or parties on the one hand and the indemnified party or parties on the other hand from the offering of the Shares or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the indemnifying party or parties on the one hand and of the indemnified party or parties on the other in connection with the statements or omissions which resulted in such losses, claims, damages, liabilities or judgments, as well as any other relevant equitable considerations. The relative benefits received by the Company and the Initial Purchasers shall be deemed to be in the same proportion as the total net proceeds from the offering (before deducting expenses) received by the Company and the total discounts received by the Initial Purchasers, bear to the total price to the public of the Shares, in each case as set forth in the table on the cover page of the Final Memorandum. The relative fault of the Company and the Initial Purchasers shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission to state a material fact relates to information supplied by the Company or the Initial Purchasers and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company and the Initial Purchasers agree that it would not be just and equitable if contribution pursuant to this Section 9(d) were determined by pro rata allocation (even if the Initial Purchasers were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately preceding paragraph. The amount paid or payable by an indemnified party as a result of the losses, claims, damages, liabilities or judgments referred to in the immediately preceding paragraph shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 9, no Initial Purchaser shall be required to contribute any amount in excess of the amount by which the total price at which the Shares purchased by it and distributed to the public were offered to the public exceeds the amount of any damages which such Initial Purchaser has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent 26 27 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. The Initial Purchasers' obligations to contribute pursuant to this Section 9(d) are several in proportion to the respective number of Shares purchased by each of the Initial Purchaser hereunder and not joint. 10. Survival Clause. The respective representations, warranties, agreements, covenants, indemnities and other statements of the Company and the Initial Purchasers set forth in this Agreement or made by or on behalf of them, respectively, pursuant to this Agreement shall remain in full force and effect, regardless of (i) any investigation made by or on behalf of the Company, any of its officers or directors, the Initial Purchasers or any controlling person referred to in Sections 9(a) hereof and (ii) delivery of and payment for the Shares. The respective agreements, covenants, indemnities and other statements set forth in Sections 6 and 9 hereof shall remain in full force and effect, regardless of any termination or cancellation of this Agreement. 11. Termination. (a) This Agreement may be terminated at any time prior to the Closing Date by you by written notice to the Company if any of the following has occurred: (i) since the respective dates as of which information is given in the Final Memorandum, any material adverse change or development involving a prospective material adverse change in the condition, financial or otherwise, of the Company or any of its subsidiaries or the earnings, affairs, or business prospects of the Company or any of its subsidiaries, whether or not arising in the ordinary course of business, which would, in your judgment, make it impracticable to market or consummate the sale of the Shares on the terms and in the manner contemplated in the Final Memorandum, (ii) any outbreak or escalation of hostilities or other national or international calamity or crisis or change in economic conditions or in the financial markets of the United States or elsewhere that, in your judgment, is material and adverse and would, in your judgment, make it impracticable to market the Shares on the terms and in the manner contemplated in the Final Memorandum, (iii) trading of the Class A Common Stock shall have been suspended on the NASDAQ National Market System, (iv) the suspension or material limitation of trading in securities on the New York Stock Exchange, the American Stock Exchange or the NASDAQ National Market System or limitation on prices for securities on any such exchange or National Market System, (v) the enactment, publication, decree or other promulgation of any federal or state statute, regulation, rule or order of any court or other 27 28 governmental authority which in your opinion materially and adversely affects, or will materially and adversely affect, the business or operations of the Company or any Subsidiary, (vi) the declaration of a banking moratorium by either federal or New York State authorities or (vii) the taking of any action by any federal, state or local government or agency in respect of its monetary or fiscal affairs which in your opinion has a material adverse effect on the financial markets in the United States. (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. Notices. All communications hereunder shall be in writing and, if sent to the Initial Purchasers, shall be mailed or delivered or telecopied and confirmed in writing to Alex. Brown & Sons Incorporated, One South Street, Baltimore, Maryland 21202, Attention: Syndicate Department, and BT Securities Corporation, One Bankers Trust Plaza, 130 Liberty Street, New York, NY 10006, Attention: Corporate Finance Department; if sent to the Company, shall be mailed or delivered or telecopied and confirmed in writing to the Company at 433 East Las Colinas Boulevard, Suite 1130, Irving, Texas 75039, Attention: Chief Financial Officer. 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. 13. Successors. This Agreement shall inure to the benefit of and be binding upon the Initial Purchasers, the Company 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 Company 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 28 29 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 Company, its officers and any person or persons who control the Company within the meaning of Section 15 of the Act or Section 20 of the Exchange Act. No purchaser of Securities from the Initial Purchasers will be deemed a successor because of such Purchaser. 14. 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, WITHOUT GIVING EFFECT TO ANY PROVISIONS RELATING TO CONFLICTS OF LAW. 15. 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. Default of Initial Purchasers. If on the Closing Date or on the Option Closing Date, as the case may be, any one or more of the Initial Purchasers shall fail or refuse to purchase the Firm Shares or Additional Shares, as the case may be, which it or they have agreed to purchase hereunder on such date and the aggregate number of Firm Shares or Additional Shares, as the case may be, which such defaulting Initial Purchaser or Initial Purchasers, as the case may be, agreed but failed or refused to purchase is not more than one-tenth of the total number of Shares to be purchased on such date by all Initial Purchasers, each non-defaulting Initial Purchaser shall be obligated severally, in the proportion which the number of Firm Shares set forth opposite its name in Schedule A hereto, as the case may be, bears to the total number of Firm Shares which all the non-defaulting Initial Purchasers, as the case may be, have agreed to purchase, or in such other proportion as you may specify, to purchase the Firm Shares or additional Shares, as the case may be, which such defaulting Initial Purchaser or Initial Purchasers, as the case maybe, agreed but failed or refused to purchase on such date; provided that in no event shall the number of Shares which any Initial Purchaser has agreed to purchase pursuant to Section 3 hereof be increased pursuant to this Section 16 by an amount in excess of one-ninth of such number of Shares without the written consent of such Initial Purchaser. If on the Closing Date or on the Option Closing Date, as the case may be, any Initial Purchaser or Initial Purchasers shall fail or refuse to purchase Firm Shares or Additional Shares, as the case may be, and the aggregate number of Firm Shares or Additional Shares with respect to which such default occurs is more than one-tenth of the aggregate number of Shares to be purchased on such date by all Initial Purchasers and arrangements satisfactory to you and the Company for purchase of such Shares are not made within 48 hours after such default, this Agreement will terminate without liability on the part of any non- defaulting Initial Purchasers and the Company. In any such case which does not result in 29 30 termination of this Agreement, either you or the Company shall have the right to postpone the Closing Date or the Option Closing Date, as the case may be, but in no event for longer than seven days, in order that the required changes, if any, in the Final Memorandum or any other documents or arrangements may be effected. Any action taken under this paragraph shall not relieve any defaulting Initial Purchaser from liability in respect of any default of any such Initial Purchaser under this Agreement. 30 31 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 among the Company and the Initial Purchasers. Very truly yours, EVERGREEN MEDIA CORPORATION By: /s/ Matthew E. Devine ---------------------------------- Name: Matthew E. Devine Title: Senior Vice President and Chief Financial Officer 31 32 The foregoing Agreement is hereby confirmed and accepted as of the date first above written. ALEX. BROWN & SONS INCORPORATED BT SECURITIES CORPORATION CREDIT SUISSE FIRST BOSTON CORPORATION GOLDMAN, SACHS & CO. NATIONSBANC CAPITAL MARKETS, INC. TD SECURITIES (USA) INC. BY: ALEX. BROWN & SONS INCORPORATED By: /s/ Jeffrey S. Amling ---------------------------------- Name: Jeffrey S. Amling Title: Managing Director 32 33 SCHEDULE A
INITIAL PURCHASER NUMBER OF SHARES ----------------- ---------------- Alex. Brown & Sons Incorporated . . . . . . . . . . . . . . . . . 916,668 BT Securities Corporation . . . . . . . . . . . . . . . . . . . . 916,668 Credit Suisse First Boston Corporation . . . . . . . . . . . . . 916,666 Goldman, Sachs & Co. . . . . . . . . . . . . . . . . . . . . . . 916,666 NationsBanc Capital Markets, Inc. . . . . . . . . . . . . . . . . 916,666 TD Securities (USA) Inc. . . . . . . . . . . . . . . . . . . . . 916,666 Total . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,500,000
33 34 EXHIBIT A FORM OF OPINION OF LATHAM & WATKINS Capitalized terms herein have the meanings provided therefore in the Purchase Agreement to which this form of opinion is an Exhibit. The opinion of Latham & Watkins described in this Exhibit shall be rendered to the Initial Purchasers at the request of the Company and shall so state therein. (i) The Company has been duly incorporated, is validly existing as a corporation in good standing under the laws of its jurisdiction of incorporation and has the corporate power and authority required to carry on its business and to own, lease and operate its properties as described in the Final Memorandum. (ii) Based solely on certificates of public officials, the Company is qualified to do business in each jurisdiction listed in such opinion. (iii) All the shares of capital stock of the Company outstanding prior to the issuance of the Shares have been duly authorized and validly issued and are fully paid, non-assessable and not subject to any preemptive or, to the best knowledge of such counsel, similar rights that entitle or will entitle any person to acquire shares of capital stock from the Company upon the issuance of the Shares by the Company. (iv) The Purchase Agreement has been duly authorized, executed and delivered by the Company. (v) The statements in the Final Memorandum under the captions "Offering Memorandum Summary - Recent Developments," "Risk Factors - Necessity of Governmental Reviews and Approvals Prior to Consummation of the Pending Transactions; Required Dispositions," "Risk Factors - Radio Industry Subject to Federal Regulation," "Risk Factors - Antitrust Matters," "Risk Factors - FCC Consent For Viacom Acquisition," "Risk Factors - Chancellor Viacom Acquisition; Financing," "Risk Factors - Limitation on Ability to Pay Dividends," "Business and Properties - Recent Developments," "Business and Properties - A-1 35 Federal Regulation of Radio Broadcasting Industry," "Business and Properties - Legal Proceedings," "Management and Board of Directors - Employment Agreements," "Description of the Convertible Preferred Stock," "Description of Exchange Debentures," "Registration Rights; Liquidated Damages," "Description of Certain Indebtedness," "Description of Capital Stock" and "Certain United States Federal Income Tax Considerations," insofar as such statements constitute a summary of legal matters, documents or proceedings referred to therein, are accurate in all material respects. (vi) The execution, delivery and performance of the Purchase Agreement, the Indenture, the Registration Rights Agreement and the Certificate of Designation, compliance by the Company with all the provisions thereof, the issuance and sale of the Shares, the issuance of the Debentures upon exchange of the Shares (assuming that the issuance of the Debentures upon exchange of the Shares were to take place on the date hereof), the issuance of Class A Common Stock upon conversion of the Shares and the Debentures, as applicable, and the consummation of the transactions contemplated thereby will not (A) require any consent, approval, authorization or other order of any Federal or New York State court, regulatory body, administrative agency or other governmental body, including the FCC, except (subject to clause (xxii) below, and assuming reliance by such counsel on the accuracy of the representations, warranties and agreements referred to therein) (x) such as have been obtained or made and are in full force and effect, (y) in the case of the performance of and compliance with the Registration Rights Agreement, such as will be obtained and made under the Act and the TIA and (z) as may be required under Blue Sky laws of the various states; (B) result in a violation of the Certificate of Incorporation or by-laws of the Company; (C) require any consent or approval (which has not been obtained) of the parties to, or result in a breach of or a default under, any agreement or other instrument to which the Company or any of its subsidiaries is a party or by which the Company or any of its subsidiaries or their respective properties are bound that is identified to such counsel in a certificate of an officer of the Company as being material to the business of the Company and its subsidiaries, except that the issuance of the Debentures upon exchange of the Shares on the Closing Date would require obtaining consents under the Senior Credit Facility (including the A-2 36 Company's guarantee of Evergreen LA=s obligations thereunder) and the Chancellor Merger Agreement; or (D) violate or conflict with any Federal or New York State laws or administrative regulations (except that for purposes of the opinion set forth in this clause (vi) such counsel need express no opinion with respect to federal or New York State securities laws) including without limitation the Communications Act, court decrees or rulings known to such counsel and applicable to the Company or any of its subsidiaries or their respective properties; or (E) result in termination or revocation of any of the FCC Licenses listed in Attachment 1 to this Exhibit A or result in any other material impairment of the rights of the holder of any such FCC License; except with respect to (A), (C) and (D), where the failure to obtain such consent or approval or such breach, default, violation or conflict could not reasonably be expected to have a material adverse effect on the Company and its subsidiaries, taken as a whole, or impair the ability of the Company and its subsidiaries to consummate the transactions contemplated hereby. (vii) To the best knowledge of such counsel, there is no legal or governmental proceeding pending or threatened to which the Company or any of its subsidiaries is a party or to which any of their respective property (including without limitation Licenses) is subject which is required to be described in the Final Memorandum and is not so described, and there is no contract or other document which is required to be described in the Memorandum; there are no material contracts or other documents which would be required to be described in a prospectus pursuant to the Act that are not described in the Final Memorandum. (viii) The Company's subsidiaries validly hold the FCC Licenses listed on Attachment 1 of this Exhibit A, each of which is in full force and effect on the date hereof, and, to such counsel's knowledge, based on inquiry of the Company and review of the FCC's public files, the FCC Licenses constitute the only material licenses or other authorizations of the FCC as are required by the Communications Act of 1934, as amended, and the rules, regulations and orders of the FCC in order to operate the radio stations listed in Exhibit A of this opinion on the frequencies and in the communities of the licenses listed in Exhibit A of this opinion. A-3 37 (ix) To such counsel's knowledge, based solely on inquiry of officers of the Company and review of the FCC's public files, none of the FCC Licenses listed in such opinion is the subject of any proceedings with respect to the possible revocation of such FCC Licenses. (x) Each subsidiary listed in such opinion (a "Significant Subsidiary") has been duly incorporated, is validly existing as a corporation in good standing under the laws of its jurisdiction of incorporation and has the corporate power and authority required to carry on its business and to own, lease and operate its properties as described in the Final Memorandum. (xi) All of the outstanding shares of capital stock of such Significant Subsidiary have been duly authorized and validly issued and are fully paid and non-assessable, and to the best knowledge of such counsel, based solely on a review of each such subsidiary's stock records and inquiries of officers of the Company, are owned, directly or indirectly, by the Company, free and clear of any security interest, claim, lien, encumbrance or adverse interest of any nature other than the stock pledge securing certain obligations of the Company and Evergreen LA under the Senior Credit Facility. (xii) The Company is not and, after giving effect to the offering and sale of the Shares and the application of the proceeds thereof as described in the Final Memorandum, will not be an "investment company" as such term is defined in the meaning of the Investment Company Act of 1940, as amended. (xiii) Each document filed pursuant to the Exchange Act and incorporated by reference in the Final Memorandum (except for financial statements, pro forma financial statements and other financial and statistical data included therein as to which no opinion need be expressed) complied when so filed as to form in all material respects with the Exchange Act and the applicable rules and regulations of the Commission thereunder. (xiv) Each of the Pending Evergreen Transactions Agreements has been duly authorized, executed and delivered by the Company or one or more subsidiaries of the Company and (other than the Chancellor Merger Agreement as to which it is A-4 38 understood, that no opinion as to enforceability will be delivered) constitutes the valid and binding agreement of the Company and/or such subsidiary or subsidiaries party thereto, subject to (i) the effect of bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to or affecting the rights or remedies of creditors, (ii) the effect of general principles of equity, whether enforcement is considered in a proceeding in equity or law and the discretion of the court before which any proceeding therefor may be brought, (iii) the unenforceability under certain circumstances under law or court decisions of provisions providing for the indemnification of or contribution to a party with respect to a liability where such indemnification or contribution is contrary to public policy and (iv) the unenforceability of any provision requiring the payment of attorneys' fees, except to the extent that a court determines such fees to be reasonable. (xv) The Debentures have been duly authorized by the Company for issuance and, when executed by the Company and authenticated by the Trustee in accordance with the provisions of the Indenture and delivered upon the exchange of the Shares, in accordance with the Certificate of Designation, will have been duly executed, issued and delivered and will constitute valid and legally binding obligations of the Company, entitled to the benefits of the Indenture and enforceable against the Company in accordance with their terms (except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium and similar laws relating to or affecting creditors' rights generally or by general equity principles). The Company has all requisite corporate power and authority to execute, deliver and perform its obligations under the Indenture; the Indenture has been duly authorized by the Company and meets the requirements for qualification under the TIA and, when executed and delivered by the Company (assuming the due authorization, execution and delivery by the Trustee), will constitute a valid and legally binding agreement of the Company, enforceable against it in accordance with its terms (except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium and similar laws relating to or affecting creditors' rights generally or by general equity principles). (xvi) The Company has all requisite corporate power and authority to execute and deliver the Registration Rights A-5 39 Agreement; the Registration Rights Agreement has been duly authorized by the Company and, when executed and delivered by the Company (assuming due authorization, execution and delivery by the Initial Purchasers), will constitute a valid and legally binding agreement of the Company enforceable against it in accordance with its terms (except (x) as any rights for indemnity and contribution thereunder may be limited by applicable law and (y) as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium and similar laws relating to or affecting creditors' rights generally or by general equity principles). (xvii) To the best of our knowledge, there are no holders of securities of the Company who, by reason of the execution by the Company of any of the Certificate of Designation, the Indenture, the Registration Rights Agreement or the Purchase Agreement or the consummation of the transactions contemplated therein, have the right to request or demand that the Company register under the Act any securities held by them, except that holders of Convertible Preferred Stock, Debentures issuable on exchange thereof or shares of Class A Common Stock issuable upon conversion thereof will have registration rights pursuant to the Registration Rights Agreement. (xviii) The Certificate of Designation has been duly authorized, executed and delivered by the Company and filed with the Secretary of State of the State of Delaware. The Shares, have been duly authorized, and when issued and delivered to the Initial Purchasers against payment therefor as provided by the Purchase Agreement, will have been validly issued and will be fully paid and nonassessable and the issuance of such Shares is not subject to any preemptive or, to the best of such counsel's knowledge, similar rights that entitle or will entitle any person to acquire shares of capital stock from the Company upon the issuance thereof by the Company. (xix) All the shares of Class A Common Stock of the Company to be issued upon conversion of the Convertible Preferred Stock and the Debentures have been duly authorized and reserved for issuance upon such conversion and, when issued upon such conversion in accordance with the Certificate of Designation or the Indenture, respectively, will be validly issued, fully paid and A-6 40 non-assessable and the issuance of such securities will not be subject to any preemptive or, to the best of such counsel's knowledge, similar rights that entitle or will entitle any person to acquire shares of capital stock from the Company upon the issuance thereof by the Company. (xx) The Convertible Preferred Stock satisfies the requirements set forth in Rule 144A(d)(3) under the Act. (xxi) Assuming the statements made therein are true and correct, the Final Memorandum, as of its date, and each amendment or supplement prepared by the Company, if any, thereto, as of its date (except for the financial statements, including the notes thereto, and other financial and statistical data included therein, as to which no opinion need to expressed), comply as to form in all material respects with the requirements of, Rule 144A(d)(4) under the Act. (xxii) Assuming the accuracy of (1) the representations, warranties and agreements of the Company in Sections 2(kk), 2(ll), 5(h), 5(i), 5(j) and 5(k) of the Purchase Agreement, (2) the representations, warranties and agreements of the Initial Purchasers in Section 8 of the Purchase Agreement and (3) the representations, warranties and agreements made in accordance with the Purchase Agreement and Final Memorandum of the purchasers to whom the Initial Purchasers initially resell Shares (including in the letters delivered or to be delivered by accredited investors (the form of which is attached as Annex A to the Final Memorandum), it is not necessary in connection with the offer, sale and delivery of the Shares to the Initial Purchasers under the Purchase Agreement or in connection with the initial resale of the Shares by the Initial Purchasers in the manner contemplated by the Purchase Agreement and the Final Memorandum to register the Securities under the Act or to qualify the Indenture under the TIA; provided that such counsel need express no opinion as to when and under what circumstances the Securities may be otherwise resold. We have participated in conferences with directors, officers and other representatives of the Company, representatives of the independent public accountants for the Company and representatives of the Initial Purchasers at which the contents of the Final Memorandum and related matters were discussed and, although we are not passing upon, and do not assume any responsibility for, A-7 41 the accuracy, completeness or fairness of the statements contained in the Final Memorandum and have not made any independent check or verification thereof (other than as stated in clause (v), (viii), (ix) and (xi) above), during the course of such participation (relying as to materiality to a large extent upon the statements of officers and other representatives of the Company), no facts came to our attention that caused us to believe that the Final Memorandum, as of its date or as of the Closing Date, contained an untrue statement of a material fact or omitted to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; it being understood that we express no belief with respect to the financial statements, pro forma financial statements and other financial and statistical data included or incorporated by reference in the Final Memorandum. Any statement herein that is qualified by "to the best of our knowledge" or a similar phrase, is intended to indicate that those attorneys in the firm who have rendered legal services to the Company in connection with the offering of the Shares, the Completed Evergreen Transactions, the Chancellor Merger, the Pending Evergreen Transactions and the Senior Credit Facility (each as defined in the Final Memorandum), and in connection with matters relating to the FCC and the HSR Act (as defined in the Final Memorandum) do not have current actual knowledge of the inaccuracy of such statement and that, except as otherwise expressly indicated, such counsel has not undertaken any independent investigation to determine the accuracy of such statement. A-8 42 EXHIBIT B FORM OF OPINION OF WEIL, GOTSHAL & MANGES Capitalized terms herein have the meanings provided therefore in the Purchase Agreement to which this form of opinion is an Exhibit. The opinion of Weil, Gotshal & Manges and/or Leibowitz Associates described in this Exhibit shall be rendered to you at the request of the Company and shall so state therein. (i) Each of the Pending Chancellor Agreements has been duly authorized, executed and delivered by Chancellor or one or more of its subsidiaries and constitutes the valid and binding agreements of Chancellor and/or its subsidiaries enforceable against Chancellor or such subsidiary or subsidiaries, as the case may be (except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium and similar laws relating to or affecting creditors= rights generally or by general equity principles). Chancellor has been duly incorporated, is validly existing as a corporation in good standing under the laws of its jurisdiction of incorporation and has the corporate power and authority required to carry on its business and to own, lease and operate its properties as described in the Final Memorandum. B-1 EX-1.2 3 REGISTRATION RIGHTS AGREEMENT - 6/16/97 1 EXHIBIT 1.2 REGISTRATION RIGHTS AGREEMENT Dated as of June 16, 1997 between EVERGREEN MEDIA CORPORATION as Issuer and ALEX. BROWN & SONS INCORPORATED BT SECURITIES CORPORATION CREDIT SUISSE FIRST BOSTON CORPORATION GOLDMAN, SACHS & CO. NATIONSBANC CAPITAL MARKETS, INC. TD SECURITIES (USA), INC. as Initial Purchasers 2 TABLE OF CONTENTS
Page ---- 1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 2. Securities Subject to this Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 3. Shelf Registration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 4. Liquidated Damages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 5. Registration Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 6. Registration Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 7. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 8. Rules 144 and 144A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 9. Underwritten Registrations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 10. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 (a) No Inconsistent Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 (b) Adjustments Affecting Transfer Restricted Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 (c) Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 (d) Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 (e) Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 (f) Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 (g) Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 (h) Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 (i) Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 (j) Securities Held by the Company or Its Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 (k) Third Party Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 (l) Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
i 3 REGISTRATION RIGHTS AGREEMENT This Registration Rights Agreement (the "Agreement") is dated as of June 16, 1997, between Evergreen Media Corporation, a Delaware corporation (the "Company"), Alex. Brown & Sons Incorporated, BT Securities Corporation, Credit Suisse First Boston Corporation, Goldman, Sachs & Co., NationsBanc Capital Markets, Inc. and TD Securities (USA), Inc. (the "Initial Purchasers"). This Agreement is entered into in connection with the Purchase Agreement, dated June 16, 1997, between the Company and the Initial Purchasers (the "Purchase Agreement"), which provides for the issuance and sale by the Company to the Initial Purchasers of 5,500,000 (the "Firm Shares") of $3.00 Convertible Exchangeable Preferred Stock with a liquidation preference of $50.00 per share (the "Preferred Stock") of the Company and, upon the terms and conditions set forth in the Purchase Agreement, up to an additional 500,000 shares (the "Additional Shares") of Preferred Stock. The Firm Shares and the Additional Shares are hereinafter collectively referred to as the "Shares." In order to induce the Initial Purchasers to enter into the Purchase Agreement, the Company has agreed to provide the registration rights set forth in this Agreement for the benefit of the Initial Purchasers and their direct and indirect transferees and assigns. The execution and delivery of this Agreement is a condition to the Initial Purchasers=s obligation to purchase the Shares under the Purchase Agreement. All terms used but not defined herein shall have the meanings given such terms in the Purchaser Agreement. The parties hereby agree as follows: 1. Definitions. Definitions. As used in this Agreement, the following terms shall have the following meanings: Advice: See Section 5 hereof. Agreement: See the introductory paragraphs hereto. Certificate of Designation: The Certificate of Designation governing the Preferred Stock as filed with the Secretary of State of the State of Delaware, as amended from time to time. Chancellor: Chancellor Broadcasting Company, a Delaware corporation. 4 Chancellor Merger: The merger or mergers contemplated by the Agreement and Plan of Merger dated February 19, 1997, by and among the Company, Chancellor and Chancellor Radio Broadcasting Company, as the same may be amended, or amended and restated, from time to time. Date: The Closing Date as defined in the Purchase Agreement. Common Stock: The Class A Common Stock, par value $.01 per share, of the Company. Company: See the introductory paragraphs hereto. Damages Payment Date: With respect to the Shares or Common Stock, as applicable, each Dividend Payment Date; and with respect to the Debentures, each Interest Payment Date. Debentures: The 6% Convertible Subordinated Debentures due June 15, 2012 of the Company issuable pursuant to the Indenture upon exchange of the Shares as provided in the Certificate of Designation. Dividend Payment Date: With respect to the Shares and the Common Stock, each regularly scheduled dividend payment date for the Shares, as set forth in the Certificate of Designation with respect to the payment of dividends on the Shares. Effectiveness Period: See Section 3(a) hereof. Exchange Act: The Securities Exchange Act of 1934, as amended, and the rules and regulations of the SEC promulgated thereunder. Holder: See Section 2(b) hereof. Indemnified Person: See Section 7(c) hereof. Indemnifying Person: See Section 7(c) hereof. Indenture: The Indenture dated June 16, 1997 between the Company and The Bank of New York, as trustee, pursuant to which the Debentures are issuable. Initial Purchasers: See the introductory paragraphs hereto. Inspectors: See Section 5(o) hereof. 2 5 Interest Payment Date: With respect to the Debentures, each interest payment date as set forth in the Indenture with respect to the payment of interest on the Debentures. NASD: The National Association of Securities Dealers, Inc. Participant: See Section 7(a) hereof. Person: An individual, partnership, corporation, limited liability company, unincorporated association, trust or joint venture, or a governmental agency or political subdivision thereof. Prospectus: The prospectus included in the Shelf 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 with respect to the terms of the offering of any portion of the Transfer Restricted Securities covered by the Shelf Registration Statement, and all other amendments and supplements to the Prospectus, including post-effective amendments, and all material incorporated by reference or deemed to be incorporated by reference in such Prospectus. Prospectus Supplement: See Section 5(b). Purchase Agreement: See the introductory paragraphs hereto. Record Holder: (i) With respect to any Damages Payment Date relating to the Shares constituting Transfer Restricted Securities, each Person who is registered on the books of the transfer agent for the Shares as the record holder of Shares on the record date with respect to the Dividend Payment Date on which such Damages Date shall occur, (ii) with respect to any Damages Payment Date relating to the Common Stock constituting Transfer Restricted Securities, each Person who is registered on the books of the transfer agent for the Common Stock as the record holder of such Common Stock on the record date with respect to the Dividend Payment Date on which such Damages Payment Date shall occur and (iii) with respect to any Damages Payment Date relating to the Debentures constituting Transfer Restricted Securities, each Person who is registered on the books of the registrar for the Debentures as the record holder of Debentures on the record date with respect to the Interest Payment Date on which such Damages Payment Date occurs. 3 6 Records: See Section 5(o) hereof. Registration Default: See Section 4 hereof. Registration Expenses: See Section 6(a) hereof. Request: See Section 3(e) hereof. 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. Shares: See the introductory paragraphs hereto. Shelf Registration Statement: See Section 3(a) hereof. The term Shelf Registration Statement for purposes of this Agreement shall include the documents, if any, incorporated by reference therein. Suspension Period: See Section 3(a) hereof. Transfer Restricted Securities: Each Share, each Debenture issuable upon exchange thereof, and each share of Common Stock issuable upon conversion of the Shares or the Debentures until the date on which (i) such Share, such Debenture or such share of Common Stock has been effectively registered under the Securities Act and disposed of in accordance with the Shelf Registration Statement, (ii) such Share, such Debenture or such share of Common Stock is 4 7 distributed to the public pursuant to Rule 144 under the Securities Act or (iii) the date on which such Share, such Debenture or such share of Common Stock, may be sold or transferred pursuant to Rule 144(k) (or any similar provision then in force). TIA: The Trust Indenture Act of 1939, as amended. Trustee: The Trustee under the Indenture for the Debentures. Underwriter: Any underwriter, placement agent, selling broker, dealer manager, qualified independent underwriter or similar securities industry professional. Underwritten Registration or Underwritten Offering: An offering in which securities of the Company are sold to an Underwriter or with the assistance of such Underwriter for reoffering to the public on a firm commitment basis. 2. Securities Subject to this Agreement. (a) Transfer Restricted Securities. The securities entitled to the benefits of this Agreement are the Transfer Restricted Securities. (b) Holders of Transfer Restricted Securities. A Person is deemed to be a holder of Transfer Restricted Securities (each, a "Holder") whenever such Person owns of record Transfer Restricted Securities. 3. Shelf Registration. Shelf Registration (a) The Company shall use its reasonable best efforts to cause to be filed with the SEC on or prior to the 150th day after the Closing Date, a shelf registration statement pursuant to Rule 415 (the "Shelf Registration Statement") on Form S-1 or Form S-3, if the use of such form is then available as determined by the Company, to cover resales of Transfer Restricted Securities by the Holders thereof in accordance with Section 3(e). The Company shall use its reasonable best efforts to cause such Shelf Registration Statement to be declared effective by the SEC on or prior to the 210th day after the Closing Date. The Company shall use its reasonable best efforts to keep such Shelf Registration Statement continuously effective under the Securities Act for a period ending two years from the effective date thereof or such shorter period that will terminate when each of the Transfer Restricted Securities covered by the Shelf Registration Statement shall cease to be a Transfer Restricted Security (the "Effectiveness Period"). The Company further agrees to use its reasonable best efforts to cause 5 8 the Shelf Registration Statement to be effective and usable for resale of the Transfer Restricted Securities during the period that such Shelf Registration Statement is required to be effective and usable. Subject to the immediately following paragraph, upon the occurrence of any event that would cause the Shelf Registration Statement (i) to contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading or (ii) to be not effective and usable for resale of Transfer Restricted Securities during the period that such Shelf Registration Statement is required to be effective and usable, the Company shall as promptly as practicable file an amendment to the Shelf Registration Statement, in the case of clause (i), correcting any such misstatement or omission, and in the case of either clause (i) or (ii), use its reasonable best efforts to cause such amendment to be declared effective and such Shelf Registration Statement to become usable as soon as practicable thereafter. Notwithstanding anything to the contrary in this Section 3, subject to compliance with Sections 4 and 5(b), if applicable, the Company may prohibit offers and sales of Transfer Restricted Securities pursuant to the Shelf Registration Statement at any time if (A)(i) it is in possession of material non-public information, (ii) the Board of Directors of the Company determines (based on advice of counsel) that such prohibition is necessary in order to avoid a requirement to disclose such material non-public information and (iii) the Board of Directors of the Company determines in good faith that disclosure of such material non-public information would not be in the best interests of the Company and its shareholders or (B) the Company has made a public announcement relating to an acquisition or business combination transaction including the Company and/or one or more of its subsidiaries (i) that is material to the Company and its subsidiaries taken as a whole and (ii) the Board of Directors of the Company determines in good faith that offers and sales of Transfer Restricted Securities pursuant to the Shelf Registration Statement prior to the consummation of such transaction (or such earlier date as of the Board of Directors shall determine) is not in the best interests of the Company and its shareholders or that it would be impracticable at the time to obtain any financial statements relating to such acquisition or business combination transaction that would be required to be set forth in the Shelf Registration Statement (the period during which any such prohibition of offers and sales of Transfer Restricted Securities pursuant to the Shelf Registration Statement is in effect pursuant to clause (A) or (B) of this subparagraph (a) is referred to herein as a "Suspension Period"). A Suspension Period shall commence on and include the date on which the Company provides written notice to Holders of Transfer Restricted Securities 6 9 covered by the Shelf Registration Statement that offers and sales of Transfer Restricted Securities cannot be made thereunder in accordance with this Section 3 and shall end on the date on which each Holder of Transfer Restricted Securities covered by the Shelf Registration Statement either receives copies of a Prospectus Supplement contemplated by Section 5(b) or is advised in writing by the Company that offers and sales of Transfer Restricted Securities pursuant to the Shelf Registration Statement and use of the Prospectus may be resumed; provided, however, that the Suspension Period shall in no event be longer than 60 days in the aggregate in any of the one-year periods ending on the first or second anniversary of the Closing Date, or longer than 30 days in the aggregate in any calendar quarter within any one-year period. (b) None of the Company nor any of its security holders (other than the Holders of Transfer Restricted Securities in such capacity) shall have the right to include any of the Company's securities in the Shelf Registration Statement, except to the extent that security holders of Chancellor may have such rights to which the Company may become subject upon consummation of the Chancellor Merger. (c) If the Holders of a majority of the Transfer Restricted Securities outstanding so elect (with holders of Common Stock constituting Transfer Restricted Securities being deemed to be Holders of the number of Shares or the principal amount of Debentures, as applicable, converted by them into such Common Stock for purposes of such calculation), an offering of Transfer Restricted Securities pursuant to the Shelf Registration Statement may be effected in the form of an Underwritten Offering; provided, however, that notwithstanding anything contained in this Agreement to the contrary, the Company shall not be required to undertake more than one such Underwritten Offering during any consecutive 12-month period. The Holders of the Transfer Restricted Securities to be registered shall pay all underwriting discounts and commissions of such Underwriters and the fees and expenses of any counsel for the Holders. (d) If any of the Transfer Restricted Securities covered by the Shelf Registration Statement are to be sold in an Underwritten Offering, the Underwriter(s) that will administer the offering will be selected by the Company and shall be a nationally recognized investment bank(s) reasonably satisfactory to the Holders of a majority of the outstanding Transfer Restricted Securities (with holders of Common Stock constituting Transfer Restricted Securities being deemed to be Holders of the number of Shares or the principal amount of Debentures, as applicable, converted by them into such Common Stock for purposes of such calculation). 7 10 (e) The Company will mail only one request (the "Request") for information for use in connection with any Shelf Registration Statement or Prospectus or Preliminary Prospectus included therein to Holders of the Transfer Restricted Securities as of the close of business on a business day selected by the Company to be no more than three business days prior to the date the Request is mailed. No Holder of Transfer Restricted Securities may include any of its Transfer Restricted Securities in the Shelf Registration Statement pursuant to this Agreement, unless such Holder (i) furnishes to the Company in writing, within 10 business days after the Request is mailed, the information requested therein, including the identity of the beneficial owner for whom any Holder may be acting as nominee and such other information relating to such Holder as the Company, based on advice of counsel, may reasonably determine is required by applicable law to be included therein or (ii) follows the procedure set forth in Section 5(e) and, in addition, provides the information required in clause (i) hereof. 4. Liquidated Damages. (a) If (i) the Shelf Registration Statement is not filed with the SEC on or prior to the 150th day after the Closing Date, (ii) the Shelf Registration Statement has not been declared effective by the SEC on or prior to the 210th day after the Closing Date or (iii) the Shelf Registration Statement is filed and declared effective but shall thereafter cease for any reason to be effective (without being succeeded immediately by an additional registration statement filed and declared effective) or usable for resale for a period of time (including any Suspension Period) which shall exceed 60 days in the aggregate in any of the one year periods ending on the first or second anniversary of the Closing Date (each such event referred to in clauses (i) through (iii), a "Registration Default"), the Company will pay liquidated damages to each Holder of Transfer Restricted Securities who has complied with such Holder=s obligations under this Agreement. The amount of liquidated damages payable during any period during which a Registration Default shall have occurred and be continuing will accrue at a rate per annum which is equal to $2.50 per $1,000 liquidation preference of Preferred Stock, $2.50 per $1,000 principal amount of Debentures or $2.50 per 20.0 shares of Class A Common Stock (subject to adjustment in the event of stock splits, stock recombinations, stock dividends and the like) constituting Transfer Restricted Securities to and including the 90th day following such Registration Default and $5.00 per $1,000 liquidation preference of Preferred Stock, $5.00 per $1,000 principal amount of Debentures or $5.00 per 20.0 shares of Class A Common Stock (subject to adjustment as set forth above) constituting Transfer Restricted Securities from and after the 91st day following such Registration Default. All accrued liquidated damages shall be paid to Record Holders by wire transfer of immediately available funds (if such Record Holders shall have 8 11 provided wire transfer instructions to the transfer agent for the Preferred Stock and to the Company) or by federal funds check by the Company on the next succeeding Damages Payment Date. Following the cure of a Registration Default, liquidated damages will cease to accrue with respect to such Registration Default. All of the Company's obligations set forth in the preceding paragraph which are outstanding with respect to any Transfer Restricted Security shall cease at the time such security ceases to be a Transfer Restricted Security. The parties hereto agree that the liquidated damages provided in this Section 4 constitute a reasonable estimate of the damages that will be incurred by Holders of Transfer Restricted Securities by reason of the failure of the Shelf Registration Statement to be filed, declared effective or to remain effective, as the case may be, and shall constitute the sole remedy for a Registration Default. 5. Registration Procedures. In connection with the filing of the Shelf Registration Statement, the Company will use its reasonable best efforts to effect such registration to permit the sale of the Transfer Restricted Securities in accordance with the intended method or methods of distribution or disposition thereof, and pursuant thereto and in connection with the Shelf Registration Statement filed by the Company hereunder the Company shall: (a) On or prior to the 150th day following the Closing Date, prepare and file with the SEC, a Shelf Registration Statement on Form S-1 or Form S-3, if the use of such form is then available as determined by the Company, for the sale of the Transfer Restricted Securities in accordance with the intended method or methods of distribution or disposition thereof and shall include all financial statements required to be included or incorporated by reference therein, and use its reasonable best efforts to cause such Shelf Registration Statement to become effective under the Securities Act and to remain effective as provided herein for the Effectiveness Period and to be approved by such governmental agencies or authorities as may be necessary to enable the Holders of Transfer Restricted Securities to consummate the disposition of such Transfer Restricted Securities in the manner specified in the Shelf Registration Statement; provided, however, before filing any Shelf Registration Statement, preliminary prospectus or Prospectus or any amendments or supplements thereto, the Company shall furnish to and afford to the Initial Purchasers, the Holders of the Transfer Restricted Securities covered by such Shelf Registration Statement, their counsel and the managing underwriters, if any, copies of all such documents (except the Company 9 12 shall not be required to furnish any documents to be incorporated by reference therein or any exhibits thereto unless requested in writing by such Initial Purchasers, Holders, their counsel or such managing underwriter) proposed to be filed. The Company shall not file the Shelf Registration Statement, any preliminary prospectus or Prospectus or any amendments or supplements thereto if (i) in the case of the filing of the Shelf Registration Statement, the Initial Purchasers shall reasonably object or (ii) the Holders of a majority of the outstanding Transfer Restricted Securities, their counsel, or the managing underwriters, if any, shall reasonably object (with holders of Common Stock constituting Transfer Restricted Securities being deemed to be Holders of the number of Shares or the principal amount of Debentures, as applicable, converted by them into such Common Stock for purposes of such calculation). Such persons shall be deemed to have reasonably objected if the Shelf Registration Statement, any preliminary prospectus or the Prospectus or any document incorporated or deemed to be incorporated by reference therein contains any untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statement therein not misleading, which misstatement or omission is identified to the Company by such Person in writing within 5 business days of the mailing of the Shelf Registration Statement, preliminary prospectus or Prospectus or any amendments or supplements thereto by the Company. (b) Prepare and file with the SEC such amendments and post-effective amendments to the Shelf Registration Statement as may be necessary to keep such Shelf Registration Statement continuously effective for the Effectiveness Period; cause the related Prospectus to be supplemented by any Prospectus supplement required by applicable law (a "Prospectus Supplement"), and as so supplemented to be filed pursuant to, and within the time periods specified in, 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 it with respect to the disposition of all securities covered by such Shelf Registration Statement as so amended or in such Prospectus as so supplemented. (c) Notify the Initial Purchasers and the Holders of Transfer Restricted Securities and their counsel (except in the case of clause (ii) below) 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, any Prospectus Supplement or post-effective amendment to the Shelf Registration Statement has been filed, and, with respect to the Shelf 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 Company, one conformed copy of such 10 13 Shelf Registration Statement or post-effective amendment including financial statements and schedules, documents incorporated or deemed to be incorporated by reference and exhibits thereto), (ii) of any request by the SEC for any amendment of or supplement to the Shelf Registration Statement, any preliminary prospectus or the Prospectus or for additional information, (iii) of the issuance by the SEC of any stop order suspending the effectiveness of the Shelf Registration Statement or of any order preventing or suspending the use of any preliminary prospectus or the Prospectus or the initiation of any proceedings for that purpose, (iv) if at any time when a prospectus is required by the Securities Act to be delivered in connection with sales of the Transfer Restricted Securities the representations and warranties of the Company contained in any agreement (including any underwriting agreement), contemplated by Section (n) hereof cease to be true and correct, (v) of the receipt by the Company of any notification with respect to the suspension of the qualification or exemption from qualification of the Shelf Registration Statement or any of the Transfer Restricted Securities for offer or sale in any jurisdiction, or the initiation or threatening of any proceeding for such purpose, (vi) of the happening of any event or the existence of any condition or any information becoming known that makes any statement made in such Registration Statement or related Prospectus (as then amended or supplemented) or in 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 (as then amended or supplemented) 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 or of the necessity to amend or supplement the Prospectus (as then amended or supplemented) to comply with the Securities Act or any other law, and (vii) of the Company=s determination that a post-effective amendment to the Shelf Registration Statement would be appropriate. (d) Use its reasonable best efforts to prevent the issuance of any order suspending the effectiveness of the Shelf Registration Statement or of any order preventing or suspending the use of any preliminary prospectus or a Prospectus or suspending the qualification (or exemption from qualification) of any of the Transfer Restricted Securities 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. 11 14 (e) If requested by the Holders of Transfer Restricted Securities or, if the Transfer Restricted Securities are being sold in an Underwritten Offering, by the managing Underwriter or Underwriters of such Underwritten Offering, (i) promptly incorporate in the Prospectus, Prospectus Supplement or post-effective amendment to the Shelf Registration Statement such information as the managing Underwriter or Underwriters (if any), such Holders, or counsel for any of them, determine is reasonably necessary to be included therein including, without limitation, information relating to the plan of distribution of the Transfer Restricted Securities, information with respect to the number of Shares, principal amount of Debentures and/or the number of shares of Common Stock sold by the Holders, the purchase price being paid thereof and any other terms with respect to the Transfer Restricted Securities to be sold in such offering and (ii) make all required filings of such Prospectus, Prospectus Supplement or post-effective amendment as soon as practicable after the Company has received notification of the matters to be incorporated in such Prospectus, Prospectus Supplement or post-effective amendment. (f) Furnish to the Initial Purchasers, each Holder of Transfer Restricted Securities and to counsel and each managing Underwriter, if any, at the sole expense of the Company, one conformed copy of the Shelf Registration Statement as first filed with the SEC and each amendment (including post-effective amendments) thereto, including financial statements and schedules, and, if requested, all documents incorporated or deemed to be incorporated therein by reference and all exhibits. (g) Deliver to the Initial Purchasers, each selling Holder of Transfer Restricted Securities, their counsel, and the underwriters, if any, at the sole expense of the Company, as many copies of the Prospectus (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 Company hereby consents to the use of such Prospectus (or preliminary prospectus) and each amendment or supplement thereto by each of the selling Holders of Transfer Restricted Securities and the underwriters or agents, if any, and dealers (if any), in connection with the offering and sale of the Transfer Restricted Securities covered by such Prospectus and any amendment or supplement thereto. (h) Prior to any public offering of Transfer Restricted Securities, to use its reasonable best efforts to register or qualify, and to cooperate with the selling Holders of Transfer Restricted Securities, 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) 12 15 of such Transfer Restricted Securities for offer and sale under the securities or Blue Sky laws of such jurisdictions of the United States as any selling Holder or Underwriter may reasonably request, to keep each such registration or qualification (or exemption therefrom) effective during the period such Shelf 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 Transfer Restricted Securities covered by the Shelf Registration Statement; provided, however, that the Company shall not be required to qualify as a foreign corporation or to execute a general consent to service of process in any jurisdiction or be subject to taxation in any jurisdiction in which it is not so subject. (i) Cooperate with the selling Holders of Transfer Restricted Securities and the managing Underwriter or Underwriters, if any, to facilitate the timely preparation and delivery of certificates representing Transfer Restricted Securities 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 Transfer Restricted Securities to be in such denominations and registered in such names as the managing Underwriter or Underwriters, if any, or Holders may request at least two business days prior to any sale of Transfer Restricted Securities. (j) Use its reasonable best efforts to cause the Transfer Restricted Securities covered by the Shelf Registration Statement to be registered with or approved by such other governmental agencies or authorities as may be necessary to enable the seller or sellers thereof or the Underwriter or Underwriters, if any, to consummate the disposition of such Transfer Restricted Securities subject to the proviso in Section 5(h) above and except as may be required solely as a consequence of the nature of such selling Holder=s business, in which case the Company will cooperate in all reasonable respects with the filing of such Registration Statement and the granting of such approvals. (k) Upon the occurrence of any event contemplated by Section 5(c)(iv) or 5(c)(vi) hereof, as promptly as practicable prepare and (subject to Sections 3(a) and 5(a) hereof) file with the SEC, at the sole expense of the Company, a supplement or post-effective amendment to the Shelf 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 Transfer Restricted Securities being sold thereunder, any such Prospectus will not contain an untrue statement of a material fact or omit to state a material fact 13 16 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 its reasonable best efforts to cause the Shares and the Debentures covered by the Shelf Registration Statement to be rated with the appropriate rating agencies, if so requested by the Holders of a majority of the outstanding Transfer Restricted Securities covered by such Registration Statement (with holders of Common Stock constituting Transfer Restricted Securities being deemed to be Holders of the number of Shares or the principal amount of Debentures, as applicable, converted by them into such Common Stock for purposes of such calculation) or the managing Underwriter or Underwriters, if any. (m) Prior to the effective date of the Shelf Registration Statement, (i) provide the transfer agent for the Shares and the shares of Common Stock and the Trustee with certificates for the Transfer Restricted Securities in a form eligible for deposit with The Depository Trust Company and (ii) provide a CUSIP number for the Transfer Restricted Securities. (n) In connection with any Underwritten Offering of Transfer Restricted Securities pursuant to the Shelf Registration Statement, enter into such agreements (including an underwriting agreement) as are customary in underwritten offerings of securities similar to the Transfer Restricted Securities 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 Transfer Restricted Securities and, in such connection, (i) make such representations and warranties to, and covenants with, the Holders and the Underwriters with respect to the business of the Company and its subsidiaries (including any acquired business, properties or entity, if applicable) and the Shelf Registration Statement, Prospectus and documents, if any, incorporated or deemed to be incorporated by reference therein, in each case, in form, substance and scope as they may reasonably request and as are customarily made by issuers to underwriters in underwritten offerings of securities similar to the Transfer Restricted Securities, and confirm the same in writing if and when requested; (ii) obtain the written opinion of counsel to the Company and written updates thereof in form, scope and substance reasonably satisfactory to the managing Underwriter or Underwriters, addressed to the Underwriters covering the matters customarily covered in opinions requested in underwritten offerings of securities similar to the Transfer Restricted Securities and such other matters as may be reasonably requested by the Holders and 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 14 17 independent certified public accountants of the Company (and, if necessary, any other independent certified public accountants of any subsidiary of the Company 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 Shelf 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 securities similar to the Transfer Restricted Securities and such other matters as reasonably requested by the managing Underwriter or Underwriters; (iv) delivering such documents and certificates as may be reasonably requested by the Holders of the Transfer Restricted Securities being sold or the Underwriters of such Underwritten Offering to evidence compliance with clause (i) above and with any customary conditions contained in the underwriting agreement entered into by the Company pursuant to Section 5(n); and (v) if an underwriting agreement is entered into, the same shall contain indemnification provisions and procedures not less favorable than those set forth in Section 7 hereof (or such other provisions and procedures acceptable to Holders of a majority of the outstanding Transfer Restricted Securities 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 (with holders of Common Stock constituting Transfer Restricted Securities being deemed to be Holders of the number of Shares or the principal amount of Debentures, as applicable, converted by them into such Common Stock for purposes of such calculation). The above shall be done at each closing under such underwriting agreement, or as and to the extent required thereunder. (o) Make available for inspection by any selling Holder of such Transfer Restricted Securities being sold, any Underwriter participating in any such disposition of Transfer Restricted Securities, if any, and any attorney, accountant or other agent retained by any such selling Holder 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 Company and its subsidiaries (collectively, the "Records") as shall be reasonably necessary to enable them to exercise any applicable due diligence responsibilities, and cause the officers, directors and employees of the Company and its subsidiaries to supply all information reasonably requested by any such Inspector in connection with the Shelf Registration Statement. Records that the Company determines, 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 Shelf Registration Statement, (ii) the release of such Records is ordered pursuant to a 15 18 subpoena or other order from a court of competent jurisdiction, (iii) disclosure of such information is, in the reasonable opinion of counsel for any Inspector, necessary or advisable in connection with any action, claim, suit or proceeding, directly or indirectly, involving or potentially 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 as a result of an impermissible disclosure or failure to safeguard by the Inspectors). Each selling Holder of such Transfer Restricted Securities 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 as the basis for any market transactions in the securities of the Company unless and until such information is generally available to the public (other than as a result of an impermissible disclosure or failure to safeguard by such person). Each selling Holder of such Transfer Restricted Securities will be required to further agree that it will, upon learning that disclosure of such Records is sought in a court of competent jurisdiction, give notice to the Company and allow the Company to undertake appropriate action to prevent disclosure of the Records deemed confidential at the Company's sole expense. (p) Provide a Trustee for the Debentures, and cause the Indenture to be qualified under the TIA not later than the effective date of the first Shelf Registration Statement relating to the Transfer Restricted Securities; and in connection therewith, cooperate with the Trustee under the Indenture and the Holders of the Transfer Restricted Securities, 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 its 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 security holders 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 Transfer Restricted Securities 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 the Shelf Registration Statement, which statements shall cover said 12-month periods. 16 19 (r) Cooperate with each seller of Transfer Restricted Securities covered by any Shelf Registration Statement and each Underwriter, if any, participating in the disposition of such Transfer Restricted Securities and their respective counsel in connection with any filings required to be made with the National Association of Securities Dealers, Inc. (the "NASD") and in the performance of any due diligence investigations by any Underwriter (including any "qualified independent underwriter" that is required to be retained in accordance with rules and regulations of the NASD). (s) Cause the Preferred Stock and the Common Stock issuable upon conversion of the Preferred Stock and the Debentures to be accepted for listing, subject to official notice of issuance, on each securities exchange or quotation system on which similar securities issued by the Company are listed by the Company. (t) Use its reasonable best efforts to take all other steps necessary or advisable to effect the registration of Transfer Restricted Securities covered by a Registration Statement contemplated hereby. The Company may require each Holder of Transfer Restricted Securities as to which any registration is being effected to furnish to the Company such information regarding such Holder and the distribution of such Transfer Restricted Securities as the Company may, from time to time, reasonably request. The Company may exclude from such registration the Transfer Restricted Securities of any Holder who unreasonably fails to furnish such information within a reasonable time after receiving such request. Each Holder as to which the Shelf Registration Statement is being effected agrees to furnish promptly to the Company all information required to be disclosed in order to make the information previously furnished to the Company by such Holder not materially misleading. Each Holder of Transfer Restricted Securities agrees by acquisition of such Transfer Restricted Securities that, upon actual receipt of any notice from the Company of the happening of any event of the kind described in Section 5(c)(ii), 5(c)(iii), 5(c)(iv), 5(c)(v), or 5(c)(vi) hereof, such Holder will forthwith discontinue disposition of such Transfer Restricted Securities covered by the Shelf Registration Statement or Prospectus, until such Holder'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 Company that the use of the Prospectus may be resumed, and has received copies of any amendments or supplements thereto. If so directed by the Company, each Holder will deliver to the Company (at the Company's expense) all copies, other than 17 20 permanent file copies then in such Holder's possession, of the Prospectus covering such Transfer Restricted Securities current at the time of receipt of such notice. In the event the Company shall give any such notice, the Effectiveness Period shall be extended (but not beyond the date on which there no longer are Transfer Restricted Securities) by the number of days during the period from and including the date of the giving of such notice pursuant to Section 5(c) to and including the date when each Holder of Transfer Restricted Securities covered by the Shelf Registration Statement, shall have received (x) the copies of the supplemented or amended Prospectus contemplated by Section 5(k) hereof or (y) the Advice. 6. Registration Expenses (a) All fees and expenses incident to the performance of or compliance with this Agreement by the Company shall be borne by the Company whether or not the Shelf Registration Statement 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 Transfer Restricted Securities, (ii) printing expenses, including, without limitation, expenses of printing certificates for Transfer Restricted Securities 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, (iii) messenger, telephone and delivery expenses, (iv) fees and disbursements of counsel for the Company and fees and disbursements of special counsel for the sellers of Transfer Restricted Securities (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, (vii) Securities Act liability insurance, if the Company desires such insurance, (viii) fees and expenses of all other persons retained by the Company, (ix) internal expenses of the Company (including, without limitation, all salaries and expenses of officers and employees of the Company performing legal or accounting duties), (x) the expenses of any annual audit, (xi) the fees and expenses incurred in connection with the listing of the Transfer Restricted Securities to be registered on any securities exchange, if applicable, and (xii) the expenses relating to printing, word processing and distributing the Shelf Registration Statement, all Prospectuses (including any Preliminary Prospectus) and all amendments and supplements thereto, underwriting agreements, securities 18 21 sales agreements, indentures and any other documents necessary in order to comply with this Agreement. Notwithstanding the foregoing, the Holders of Transfer Restricted Securities being registered shall pay all underwriting discounts, commissions and placement agent fees attributable to the sale of such Transfer Restricted Securities. (b) The Company shall reimburse the Holders of the Transfer Restricted Securities being registered in the Shelf Registration Statement 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 of the outstanding Transfer Restricted Securities to be included in such Shelf Registration Statement (with holders of Common Stock constituting Transfer Restricted Securities being deemed to be Holders of the number of Shares or the principal amount of Debentures, as applicable, converted by them into such Common Stock for purposes of such calculation). The aggregate reimbursement obligation of the Company pursuant to this Section 6(b) shall in no event exceed $50,000. Notwithstanding anything herein to the contrary, the Company shall not be responsible for fees and expenses of counsel to any Underwriter(s), whether in connection with the Shelf Registration Statement, NASD matters or otherwise, except to the extent specifically agreed in any underwriting agreement for an Underwritten Offering. 7. Indemnification (a) The Company agrees to indemnify and hold harmless the Initial Purchasers and each Holder of Transfer Restricted Securities, the officers and directors of each such Person, and each Person, if any, who controls any such Person within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act (each, a "Participant"), from and against any and all losses, claims, damages, liabilities and expenses (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 any untrue statement or alleged untrue statement of a material fact contained in the Shelf Registration Statement (or any amendment thereto) or Prospectus (as amended or supplemented if the Company shall have furnished any amendments or supplements thereto) or any preliminary prospectus, or caused by, arising out of or based upon any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein (in the case of the Prospectus or any Preliminary Prospectus), in the light of the circumstances under which they were made, not misleading, except insofar as such losses, claims, damages, liabilities or expenses are caused by, arise out of or are based upon any untrue statement or omission or alleged untrue statement or 19 22 omission made in reliance upon and in conformity with information relating to any Participant furnished to the Company in writing by such Participant expressly for use therein; provided, however, that the Company will not be required to indemnify a Participant if 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 it is established 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 Transfer Restricted Securities sold to such Person if required by applicable law, unless such failure to deliver or provide a copy of the Prospectus (as amended or supplemented) was a result of noncompliance by the Company with Section 5 of this Agreement; provided further that the foregoing proviso shall not limit the Company's obligation to indemnify a Participant for any other untrue statement or omission or alleged untrue statement or omission of a material fact in the Prospectus that was the subject matter of the related proceeding. (b) Each Holder of Transfer Restricted Securities agrees, severally and not jointly, to indemnify and hold harmless the Initial Purchasers, each other Holder, the Company, its directors and officers who sign the Shelf Registration Statement and each Person, if any, who controls the Company 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 Company to each Participant, but only (i) with reference to information relating to such Holder furnished to the Company in writing by such Holder expressly for use in the Shelf 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 Holder in writing to the Company. The liability of any Holder under this paragraph shall in no event exceed the proceeds received by such Holder from sales of Transfer Restricted Securities 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 20 23 proceeding; provided, however, that the failure to so notify the Indemnifying Person shall not relieve it of any obligation or liability which it may have hereunder or otherwise (unless and to the extent that it did not otherwise learn of such action or claim and such omission results in the forfeiture by the Indemnifying Person of substantial rights and defenses). In any such proceeding, any Indemnified Person shall have the right to retain its own counsel, but the 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 has failed to retain counsel reasonably satisfactory to the Indemnified Person or (iii) the named parties in any such proceeding (including any impeded parties) include both the Indemnifying Person and the Indemnified Person and the Indemnified Person shall have been advised by counsel that representation of both parties by the same counsel would be inappropriate under applicable standards of professional conduct due to 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 or circumstances, 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 of the outstanding Transfer Restricted Securities sold by all such Participants (with holders of Common Stock constituting Transfer Restricted Securities being deemed to be Holders of the number of Shares or the principal amount of Debentures, as applicable, converted by them into such Common Stock for purposes of such calculation) and any such separate firm for the Company, its directors, its officers and such control Persons of the Company shall be designated in writing by the Company. The Indemnifying Person shall not be liable for any settlement of any proceeding effected without its prior written consent (which consent shall not be unreasonably withheld or delayed), 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. 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, or 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 21 24 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 unavailable to, or insufficient to hold harmless, an Indemnified Person in respect of any losses, claims, damages, liabilities or expenses referred to therein, then each Indemnifying Person under such paragraphs, in lieu of indemnifying such Indemnified Person thereunder shall contribute to the amount paid or payable by such Indemnified Person as a result of such losses, claims, damages, liabilities or expenses in such proportion as is appropriate to reflect (i) the relative benefits received by the Indemnifying Person or Persons on the one hand and the Indemnified Person or Persons on the other from the offering of the Transfer Restricted Securities or (ii) if the allocation provided by the foregoing clause (i) is not permitted by applicable law, not only such relative benefits but also 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, liabilities or expenses (or actions in respect thereof) as well as any other relevant equitable considerations. 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 Company 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. (e) The Company, each of the Initial Purchasers and each Holder of Transfer Restricted Securities 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, liabilities and expenses 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 Holder of 22 25 Transfer Restricted Securities be required to contribute any amount in excess of the amount by which proceeds received by such Holder from the sale of Transfer Restricted Securities exceeds the amount of any damages that such Holder 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. The Holders' obligations to contribute pursuant to this Section 7 are several in proportion to the respective liquidation preference of Preferred Stock held by each of the Holders hereunder (or, if such Preferred Stock (or the Debentures issuable upon exchange thereof) has been converted or the Preferred Stock has been exchanged for Debentures, the liquidation preference of the shares of Preferred Stock so exchanged or converted) and not joint. (f) The indemnity and contribution agreements contained in this Section 7 will be in addition to any liability which the Indemnifying Persons may otherwise have to the Indemnified Persons referred to above. (g) Any losses, claims, damages, liabilities or expenses for which an Indemnified Person is entitled to indemnification or contribution under this Section 7 shall be paid by the Indemnifying Person to the Indemnified Person on a monthly basis. The indemnity and contribution agreements contained in this Section 7 and any representations and warranties of the Company set forth in this Agreement shall remain operative and in full force and effect, regardless of (i) any investigation made by or on behalf of any Initial Purchaser or any person controlling any Initial Purchaser, any Holder, the Company, its directors or officers or any person controlling the Company, and (ii) any termination of this Agreement. A successor to any Initial Purchaser, or any person controlling any Initial Purchaser, or to any Holder, or to the Company, its directors or officers, or any person controlling the Company, shall be entitled to the benefits of the indemnity, contribution and reimbursement agreements contained in this Section 7. 8. Rules 144 and 144A The Company 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 Company is not required to file such reports, it will, upon the request of any Holder of Transfer Restricted Securities, make publicly available annual reports 23 26 and such information, documents and other reports of the type specified in Sections 13 and 15(d) of the Exchange Act. The Company further covenants for so long as any Transfer Restricted Securities remain outstanding, to make available to any Holder or beneficial owner of Transfer Restricted Securities in connection with any sale thereof and any prospective purchaser of such Transfer Restricted Securities from such Holder or beneficial owner, the information required by Rule 144A(d) under the Securities Act in order to permit resales of such Transfer Restricted Securities pursuant to Rule 144A. 9. Underwritten Registrations No Holder of Transfer Restricted Securities may participate in any Underwritten Registration hereunder unless such Holder (a) agrees to sell such Holder's Transfer Restricted Securities on the basis provided in any underwriting arrangements approved by the Persons entitled hereunder to approve such arrangements, (b) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents required under the terms of such underwriting arrangements and (c) furnishes the Company in writing information in accordance with Section 3(e) and agrees to indemnify and hold harmless the Company, its directors, its officers who sign the Registration Statement and any person controlling the Company within the meaning of Section 15 of the Act or Section 20 of the Exchange Act to the extent contemplated by Section 7 hereof. 10. Miscellaneous (a) No Inconsistent Agreements. The Company has not entered into, as of the date hereof, and the Company shall not, 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 Transfer Restricted Securities in this Agreement or otherwise conflicts with the provisions hereof. The rights granted to the Holder of Transfer Restricted Securities hereunder do not in any way conflict with and are not inconsistent with the rights granted to the holders of the Company's securities under any other agreements. The Company has not entered and will not enter into any agreement with respect to any of its securities that will grant to any Person piggy-back registration rights with respect to the Shelf Registration Statement; provided, however that this restriction will not be applicable to any piggy-back registration obligations which the Company may assume in connection with the Chancellor Merger. (b) Adjustments Affecting Transfer Restricted Securities. The Company shall not, directly or indirectly, take any action with respect to the 24 27 Transfer Restricted Securities that would adversely affect the ability of the Holders of Transfer Restricted Securities to include such Transfer Restricted Securities 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 of the outstanding Transfer Restricted Securities affected by such amendment, modification, supplement, waiver or departure (with holders of Common Stock constituting Transfer Restricted Securities being deemed to be Holders of the number of Shares or the principal amount of Debentures, as applicable, converted by them into such Common Stock for purposes of such calculation); provided, however, that Section 7 and this Section 10(c) may not be amended, modified or supplemented without the prior written consent of each Holder (including any person who was a Holder of Transfer Restricted Securities disposed of pursuant to any Registration Statement). 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 Transfer Restricted Securities whose securities are being sold pursuant to the Shelf Registration Statement and that does not directly or indirectly affect, impair, limit or compromise the rights of other Holders of Transfer Restricted Securities may be given by Holders of at least a majority of the outstanding Transfer Restricted Securities being sold by such Holders pursuant to such Registration Statement (with holders of Common Stock constituting Transfer Restricted Securities being deemed to be Holders of the number of Shares or the principal amount of Debentures, as applicable, converted by them into such Common Stock for purposes of such calculation); 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 provided for or permitted hereunder shall be made in writing by hand-delivery, registered first-class mail, next-day air courier or facsimile: (i) If to a Holder of the Transfer Restricted Securities, at the most current address of such Holder, on the stock books of the Company (or, in respect of the Debentures, on the books of the registrar under the Indenture) with a copy in like manner to the Initial Purchasers as follows: Alex. Brown & Sons Incorporated 25 28 BT Securities Corporation Credit Suisse First Boston Corporation Goldman, Sachs & Co. NationsBanc Capital Markets, Inc. TD Securities (USA), Inc. c/o Alex. Brown & Sons Incorporated One South Street Baltimore, Maryland 21202 Facsimile No: (410) 895-4481 ATTENTION: [ ] with a copy to: Davis Polk & Wardwell 450 Lexington Avenue New York, New York 10017 Facsimile No: (212) 450-4800 Attention: Winthrop B. Conrad, Jr. (ii) If to the Initial Purchasers, at the address specified in Section 10(d)(i); (iii) If to the Company, at the addresses as follows: Evergreen Media Corporation 433 East Las Colina Boulevard, Suite 1130 Irving, Texas 75039 Facsimile No: (972) 869-3671 Attention: Matthew E. Devine, Chief Financial Officer with copies to: Latham & Watkins 1001 Pennsylvania Avenue, N.W. Suite 1300 Washington, D.C. 20004 Facsimile No: (202) 637-2201 Attention: John D. Watson, Jr. 26 29 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. (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, including the Holders of Transfer Restricted Securities; provided, however, that this Agreement shall not inure to the benefit of or be binding upon a successor or assign of a Holder of Transfer Restricted Securities unless and to the extent such successor or assign holds Transfer Restricted Securities; and provided, further, that nothing herein shall be deemed to permit any assignment, transfer or any disposition of Transfer Restricted Securities in violation of the terms of the Purchase Agreement or applicable law. If any transferee of any Holder shall acquire Transfer Restricted Securities, in any manner, whether by operation of law or otherwise, such Transfer Restricted Securities shall be held subject to all of the terms of this Agreement and by taking and holding such Transfer Restricted Securities such Person shall be conclusively deemed to have agreed to be bound by and to perform all of the terms and provisions of this Agreement and such Person shall be entitled to receive the benefits hereof. (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. EACH OF THE PARTIES HERETO AGREES TO SUBMIT TO THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT. (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 27 30 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 reasonable 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) Securities Held by the Company or Its Affiliates. Whenever the consent or approval of Holders of a specified percentage of Transfer Restricted Securities is required hereunder, Transfer Restricted Securities held by the Company or its affiliates (as such term is defined in Rule 405 under the Securities Act) shall not be counted in determining whether such consent or approval was given by the Holders of such required percentage. (k) Third Party Beneficiaries. Holders of Transfer Restricted Securities are intended third party beneficiaries of this Agreement and this Agreement may be enforced by such Persons. (l) Entire Agreement. This Agreement, together with the Purchase Agreement, the Certificate of Designation 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, contacts, understandings, correspondence, conversations and memoranda between the Initial Purchasers on the one hand and the Company 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. 28 31 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. EVERGREEN MEDIA CORPORATION By: ------------------------------------------------ Name: Title: ALEX. BROWN & SONS INCORPORATED By: ------------------------------------------------ Name: Title: BT SECURITIES CORPORATION By: ------------------------------------------------ Name: Title: CREDIT SUISSE FIRST BOSTON By: ------------------------------------------------ Name: Title: GOLDMAN, SACHS & CO. By: ------------------------------------------------ Name: Title: NATIONSBANC CAPITAL MARKETS, INC. By: ------------------------------------------------ Name: Title: TD SECURITIES (USA), INC. By: ------------------------------------------------ Name: Title: 29 EX-4.32 4 CERTIFICATE OF DESCRIPTION FOR $3.00 CONVERTIBLE 1 EXHIBIT 4.32 CERTIFICATE OF DESIGNATION OF $3.00 CONVERTIBLE EXCHANGEABLE PREFERRED STOCK OF EVERGREEN MEDIA CORPORATION Pursuant to Section 151(g) of the General Corporation Law of the State of Delaware Evergreen Media Corporation, a Delaware corporation (hereinafter called, the "Company"), pursuant to Section 151 of the General Corporation Law of the State of Delaware does hereby make this Certificate of Designation and does hereby state and certify that pursuant to the authority expressly vested in the Board of Directors of the Company (the "Board") by the Certificate of Incorporation, a duly authorized and constituted Committee of the Board duly adopted the following resolution: RESOLVED, that pursuant to Article Four of the Certificate of Incorporation (which authorizes 6,000,000 shares of preferred stock, $.01 par value), the Committee as authorized by the Board hereby fixes the designation, powers and preferences, and the relative participating, optional and other special rights, and the qualifications, limitations and restrictions thereof, of a series of Convertible Exchangeable Preferred Stock. RESOLVED, that each share of the Convertible Exchangeable Preferred Stock shall rank equally in all respects and shall be subject to the following provisions: 1. Number of Shares; Designation. A total of 6,000,000 shares of Preferred Stock, par value $.01 per share, of the Company are hereby designated as $3.00 Convertible Exchangeable Preferred Stock (the "CONVERTIBLE PREFERRED STOCK"). The number of authorized shares of Convertible Preferred Stock may be decreased, at any time and from time to time, by resolution of the Board of Directors of the Company; provided, however, that no decrease shall reduce the authorized number of shares of the Convertible Preferred Stock to a number less than the number of shares outstanding. 2. Rank. The Convertible Preferred Stock shall, with respect to payment of dividends, redemption payments and rights upon liquidation, dissolution or winding up of the affairs of the Company (x) rank senior and prior to (a) all classes of Common Stock, par value $.01 per share, of the Company (the "COMMON STOCK") and (b) any other class or series of capital stock of the Company that by its terms ranks junior to the Convertible Preferred Stock as to payment of dividends, redemption payments and rights upon liquidation, dissolution or winding up of the affairs of the Company, (y) rank on a parity with all Parity Dividend Shares (as defined in Section 3 (a)) and all 2 Parity Liquidation Shares (as defined in Section 5(b)) and (z) rank junior to all Senior Dividend Shares (as defined in Section 3(c)), all Senior Liquidation Shares (as defined in Section 5(b)) and to any class 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 Convertible Preferred Stock as to dividends and rights upon liquidation, dissolution or winding-up of the Company (which shall include, for purposes of the foregoing, any entity with which the Company may be merged or consolidated or to which all or substantially all the assets of the Company may be transferred or which transfers all or substantially all of its assets to the Company). 3. Dividends. (a) The cash dividend rate per annum on shares of the Convertible Preferred Stock shall be $3.00 per share of Convertible Preferred Stock. Dividends on shares of Convertible Preferred Stock shall be fully cumulative, accruing, without interest (or sum of money in lieu of interest), from the most recent date to which dividends have been paid or, if none have been paid, from June 16, 1997 and shall be payable quarterly in arrears, when, as and if declared by the Board of Directors out of funds legally available for the payment of dividends on March 15, June 15, September 15 and December 15 of each year (each, a "DIVIDEND PAYMENT DATE") commencing September 15, 1997, except that if any Dividend Payment Date is not a business day then the Dividend Payment Date shall be on the first immediately succeeding business day (as used herein, the term "business day" shall mean any day except a Saturday, Sunday or day on which banking institutions are legally authorized to close in the City of New York). Each dividend shall be paid to the holders of record of shares of the Convertible Preferred Stock as they appear on the stock register of the Company at the close of business on the March 1, June 1, September 1, and December 1 immediately preceding the relevant Dividend Payment Date (each, a "DIVIDEND PAYMENT RECORD DATE"). Dividends payable for each quarterly dividend period shall be computed by dividing the annual dividend by four. Dividends payable for any partial dividend period shall be computed on the basis of a 360-day year of twelve 30-day months. Dividends on account of arrears for any past dividend periods may be declared and paid at any time, without reference to any regular Dividend Payment Date, to holders of record on such date not more than 60 days nor fewer than 10 days preceding the date on which dividends in arrears will be paid, as may be fixed by the Board of Directors of the Company. No interest shall be payable with respect to any dividend payment that may be in arrears. Holders of shares of the Convertible Preferred Stock shall be entitled to receive dividends in preference to and in priority over dividends upon the Common Shares (as defined in Section 12) and any other series or class of the Company's capital stock that ranks junior as to dividends to the Convertible Preferred Stock ("JUNIOR DIVIDEND SHARES") and shall be on a parity as to dividends with any series or class of the Company's capital stock that does not rank senior or junior as to dividends to the Convertible Preferred Stock ("PARITY DIVIDEND 2 3 SHARES"). The holders of shares of the Convertible Preferred Stock shall not be entitled to any dividends other than the cash dividends provided for in this Section 3. (b) No dividends, other than dividends payable solely in Common Shares, Junior Dividend Shares, or warrants or other rights to acquire such Common Shares or Junior Dividend Shares, shall be paid or declared and set apart for payment on, and no purchase, redemption or other acquisitions shall be made by the Company of, any Common Shares or Junior Dividend Shares unless and until all accrued and unpaid dividends on the 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. (c) If at any time the Company issues any class or series of capital stock ranking senior and prior to the Convertible Preferred Stock with respect to the payment of dividends ("SENIOR DIVIDEND SHARES") and fails to pay or declare and set apart for payment all accrued and unpaid dividends on such Senior Dividend Shares, then (except to the extent allowed by the terms of the Senior Dividend Shares) no dividend shall be paid or declared and set apart for payment on the Convertible Preferred Stock unless and until all accrued and unpaid dividends with respect to the Senior Dividend Shares, including the full dividends for the then-current dividend period, shall have been paid or declared and set apart for payment, without interest. Except as provided in Section 3(d) below, no dividends shall be paid or declared and set apart for payment on any Parity Dividend Shares for any period unless the Company has paid or declared and set apart for payment, or contemporaneously pays or declares and sets apart for payment, on the Convertible Preferred Stock all accrued and unpaid dividends for all dividend payment periods terminating on or prior to the date of payment of such dividends. Except as provided in Section 3(d) below, no dividends shall be paid or declared and set apart for payment on the Convertible Preferred Stock for any period unless the Company has paid or declared and set apart for payment, or contemporaneously pays or declares and sets apart for payment, on any Parity Dividend Shares all accrued and unpaid dividends for all dividend payment periods terminating on or prior to the date of payment of such dividends. (d) If at any time the Company has failed to pay accrued dividends on any shares of the Convertible Preferred Stock on any Dividend Payment Date or on any Parity Dividend Shares on a stated payment date, as the case may be, the Company shall not: (i) purchase any shares of the Convertible Preferred Stock or Parity Dividend Shares (except for a consideration payable in Common Shares or Junior Dividend Shares) or redeem fewer than all of the shares of the Convertible Preferred Stock and Parity 3 4 Dividend Shares then outstanding except for the repurchase or redemption made pro rata with respect to all shares of the Convertible Preferred Stock and Parity Dividend Shares then outstanding so that the amounts repurchased or redeemed shall in all cases bear to each other the same ratio that, at the time of the repurchase or redemption, the required redemption payments on the shares of the Convertible Preferred Stock and the other Parity Dividend Shares then outstanding, respectively, bear to each other; or (ii) permit any corporation or other entity directly or indirectly controlled by the Company to purchase any Common Shares, Junior Dividend Shares, shares of the Convertible Preferred Stock or Parity Dividend Shares, except to the same extent that the Company could purchase such shares. Unless and until all dividends accrued but unpaid in respect of prior dividend payment periods on shares of the Convertible Preferred Stock and any Parity Dividend Shares at the time outstanding have been paid in full or a sum sufficient for such payment is declared and set apart, as provided in the preceding paragraph, all dividends accrued upon shares of the Convertible Preferred Stock or Parity Dividend Shares shall be declared pro rata with respect to all shares of the Convertible Preferred Stock and Parity Dividend Shares then outstanding, so that the amounts of any dividends declared on shares of the Convertible Preferred Stock and on the Parity Dividend Shares shall in all cases bear to each other the same ratio that, at the time of the declaration, all accrued but unpaid dividends in respect of prior dividend payment periods on shares of the Convertible Preferred Stock and the other Parity Dividend Shares, respectively, bear to each other. 4 5 4. Optional Redemptions for Cash. (a) Shares of the Convertible Preferred Stock shall not be redeemable prior to June 16, 1999. Thereafter, subject to the restrictions in Section 3 above, shares of the Convertible Preferred Stock may be redeemed by the Company, in whole or in part, at the option of the Company at the following redemption prices (expressed as percentages of the liquidation preference thereof) per share if redeemed during the 12-month period beginning June 15 in the year indicated below (June 16, in the case of 1999):
- -------------------------------------------------------------------------------- YEAR PERCENTAGE YEAR PERCENTAGE - -------------------------------------------------------------------------------- 1999 . . . . 104.8% 2003 . . . . . . . 102.4% 2000 . . . . 104.2% 2004 . . . . . . . 101.8% 2001 . . . . 103.6% 2005 . . . . . . . 101.2% 2002 . . . . 103.0% 2006 . . . . . . . 100.6% 2007 and thereafter 100.0%
plus, in each case, an amount equal to the dividends accrued and unpaid thereon, whether or not declared, to the redemption date ("OPTIONAL REDEMPTION PRICE"). Notwithstanding the foregoing, the Company may not redeem any shares of Convertible Preferred Stock on or prior to June 15, 2000, unless the last reported Sale Price (as defined in Section 6(c)) of the Company's Class A Common Stock, par value $.01 per share (the "CLASS A COMMON STOCK"), in its principal trading market for any 20 trading days within a period of 30 consecutive trading days ending not more than 15 days prior to the date of the notice of redemption is at least 150% of the Conversion Price (as defined in Section 6(a)) then in effect. (b) Not less than 15 nor more than 60 days (such date as fixed by the Board of Directors of the Company referred to herein as the "REDEMPTION RECORD DATE") prior to the date fixed for any redemption of shares of the Convertible Preferred Stock pursuant to this Section 4, a notice specifying the time and place of the redemption and the number of shares of Convertible Preferred Stock to be redeemed shall be given by first class mail, postage prepaid, to the holders of record on the Redemption Record Date of the shares of the Convertible Preferred Stock to be redeemed at their respective addresses as the same shall appear on the books of the Company, calling upon each holder of record to surrender to the Company on the redemption date at the 5 6 place designated in the notice such holder's certificate or certificates representing the number of shares specified in the notice of redemption. Neither failure to mail such notice, nor any defect therein or in the mailing thereof, to any particular holder shall affect the sufficiency of the notice or the validity of the proceedings for redemption with respect to the other holders. Any notice mailed in the manner herein provided shall be conclusively presumed to have been duly given whether or not the holder receives the notice. On or after the redemption date, each holder of shares of Convertible Preferred Stock to be redeemed shall present and surrender such holder's certificate or certificates for such shares to the Company at the place designated in the redemption notice and thereupon the Optional Redemption Price of the shares shall be paid to or on the order of the person whose name appears on such certificate or certificates as the owner thereof, and each surrendered certificate shall be canceled. In case fewer than all the shares represented by any such certificate are redeemed, a new certificate shall be issued representing the unredeemed shares. (c) If a notice of redemption has been given pursuant to this Section 4 and if, on or before the redemption date, the funds necessary for such redemption (including all dividends on the shares of Convertible Preferred Stock to be redeemed that will accrue to but not including the redemption date) shall have been set aside by the Company, separate and apart from its other funds, in trust for the pro rata benefit of the holders of the shares so called for redemption, then, notwithstanding that any certificates for such shares have not been surrendered for cancellation, on the redemption date dividends shall cease to accrue on the shares of the Convertible Preferred Stock to be redeemed, and at the close of business on the date on which such funds have been segregated and set aside by the Company as provided in this Section 4(c), the holders of such shares shall cease to be stockholders with respect to those shares, shall have no interest in or claims against the Company by virtue thereof and shall have no voting or other rights with respect thereto, except the conversion rights provided in Section 6 below and the right to receive the moneys payable upon such redemption, without interest thereon, upon surrender (and endorsement, if required by the Company) of their certificates, and the shares evidenced thereby shall no longer be outstanding. Subject to applicable escheat laws, any moneys so set aside by the Company and unclaimed at the end of two years from the redemption date shall revert to the general funds of the Company, after which reversion the holders of such shares so called for redemption shall look only to the general funds of the Company for the payment of the Optional Redemption Price, without interest. Any interest accrued on funds so deposited shall belong to the Company and be paid thereto from time to time. (d) If a notice of redemption has been given pursuant to this Section 4 and any holder of shares of Convertible Preferred Stock shall, prior to the close of business on the redemption date, give written notice to the Company pursuant to Section 6 below of the conversion of any or all of the shares to be redeemed held by the holder (accompanied by a certificate or certificates for such shares, duly endorsed or assigned 6 7 to the Company, and any necessary transfer tax payment, as required by Section 6 below), then such redemption shall not become effective as to such shares to be converted and such conversion shall become effective as provided in Section 6 below, whereupon any funds deposited by the Company for the redemption of such shares shall (subject to any right of the holder of such shares to receive the dividend payable thereon as provided in Section 6 below) immediately upon such conversion be returned to the Company or, if then held in trust by the Company, shall automatically and without further corporate action or notice be discharged from the trust. (e) In every case of redemption of fewer than all of the outstanding shares of the Convertible Preferred Stock pursuant to this Section 4, the shares to be redeemed shall be selected pro rata or by lot or in such other manner as the Board of Directors of the Company may determine, as may be prescribed by resolution of the Board of Directors of the Company, provided that only whole shares of Convertible Preferred Stock shall be selected for redemption. In the event that any quarterly dividends payable on the Convertible Preferred Stock are in arrears, the Company may not redeem less than all of the outstanding shares of Convertible Preferred Stock until such dividends in arrears have been paid in full. 5. Liquidation. (a) The liquidation value of shares of Convertible Preferred Stock, in case of the voluntary or involuntary liquidation, dissolution or winding-up of the Company, shall be $50.00 per share, plus an amount equal to the dividends accrued and unpaid thereon, whether or not declared, to the payment date (the "LIQUIDATION VALUE"). (b) In the event of any voluntary or involuntary liquidation, dissolution or winding-up of the Company, the holders of shares of Convertible Preferred Stock (i) shall not be entitled to receive the Liquidation Value of the shares held by them until payment in full or provision has been made for the payment of all claims of creditors of the Company and the liquidation preference of any class or series of capital stock ranking senior to the Convertible Preferred Stock with respect to redemption rights and rights upon liquidation, dissolution or winding-up of the affairs of the Company ("SENIOR LIQUIDATION SHARES") shall have been paid in full and (ii) shall be entitled to receive the Liquidation Value of such shares held by them in preference to and in priority over any distributions upon the Common Shares and any other series or class of the Company's capital stock that ranks junior to the Convertible Preferred Stock as to redemption rights and rights upon liquidation, dissolution or winding-up of the affairs of the Company ("JUNIOR LIQUIDATION SHARES"). Upon payment in full of the Liquidation Value to which the holders of shares of the Convertible Preferred Stock are entitled, the holders of shares of the Convertible Preferred Stock will not be entitled to any further participation in any distribution of assets by the Company. Subject to clause (i) above, if the assets of the Company are not sufficient to pay in full the Liquidation Value payable to the holders of shares of the Convertible Preferred 7 8 Stock and the liquidation preference payable to the holders of any series or class of the Company's capital stock, outstanding on the date hereof or hereafter issued, that ranks on a parity with the Convertible Preferred Stock as to redemption rights and rights upon liquidation, dissolution or winding-up of the affairs of the Company ("PARITY LIQUIDATION SHARES"), the holders of all such shares shall share ratably in accordance with the respective preferential amounts payable on such shares in any distribution. (c) Neither a consolidation or merger of the Company with or into any other entity, nor a merger of any other entity with or into the Company, nor a sale or transfer of all or any part of the Company's assets for cash, securities or other property shall be considered a liquidation, dissolution or winding-up of the Company within the meaning of this Section 5. 6. Conversion. (a) Holders of shares of Convertible Preferred Stock will have the right, exercisable at any time, except in the case of shares of Convertible Preferred Stock called for redemption (as described in Section 4(d) above), to convert shares of Convertible Preferred Stock into shares of Class A Common Stock at the conversion price of $50.00 per share of Class A Common Stock, subject to adjustment as described below in Section 6(f) (the "CONVERSION PRICE"). The number of shares of Class A Common Stock into which a share of the Convertible Preferred Stock shall be convertible (calculated as to each conversion to the nearest 1/100th of a share) shall be determined by dividing $50.00 by the Conversion Price then in effect. In the case of shares of the Convertible Preferred Stock called for redemption, conversion rights will expire at the close of business on the redemption date. Certificates representing shares of the Convertible Preferred Stock surrendered for conversion during the period between the close of business on any Dividend Payment Record Date and the opening of business on any corresponding Dividend Payment Date must be accompanied by payment of an amount equal to the dividend payable on such shares on such Dividend Payment Date. No such payment will be required to accompany shares of the Convertible Preferred Stock called for redemption and surrendered during the period between the close of business on any Dividend Payment Record Date and the opening of business on any corresponding Dividend Payment Date (it being the case that, except as may be otherwise provided herein, any shares so redeemed shall not be entitled to receive the dividend payable by the Company on such Dividend Payment Date). Notwithstanding the foregoing, a holder of shares of the Convertible Preferred Stock on a Dividend Payment Record Date who (or whose transferee) tenders any such shares for conversion into shares of Class A Common Stock on the relevant Dividend Payment Date shall be entitled to receive the dividend payable by the Company on such shares of Convertible Preferred Stock on such Dividend Payment Date, and the converting holder need not include payment of the amount of such dividend upon surrender of shares of Convertible Preferred Stock for conversion. Except as provided in the immediately preceding sentence, no payment or allowance for accrued dividends on the shares of Convertible Preferred Stock is to be made on conversion. 8 9 (b) Any holder of shares of Convertible Preferred Stock electing to convert the shares or any portion thereof in accordance with Section 6(a) above shall deliver the certificates therefor and the dividend payment referred to in Section 6(a) above, if applicable, to the principal office of any transfer agent for the Class A Common Stock, with a form of conversion notice fully completed and duly executed and, if required by Section 6(a) above, accompanied by payment of an amount equal to the dividend payable on such shares on the applicable Dividend Payment Date. The conversion right with respect to any shares of Convertible Preferred Stock shall be deemed to have been exercised on the date upon which the certificates therefor and the dividend payment referred to in Section 6(a) above, if applicable, with the conversion notice duly executed (and the payment required by Section 6(d), if applicable), shall have been so delivered and the person or persons entitled to receive the Class A Common Stock issuable upon conversion shall be treated for all purposes as the record holder or holders of such Class A Common Stock upon that date. (c) No fractional shares of Class A Common Stock or scrip representing fractional shares shall be issued upon conversion of shares of Convertible Preferred Stock. If more than one share of Convertible Preferred Stock shall be surrendered for conversion at one time by the same record holder, the number of full shares of Class A Common Stock issuable upon conversion thereof shall be computed on the basis of the aggregate number of shares of Convertible Preferred Stock so surrendered. Instead of any fractional shares of Class A Common Stock otherwise issuable upon conversion of any shares of Convertible Preferred Stock, the Company shall pay a cash adjustment in respect of such fraction in an amount equal to the same fraction of Sale Price (as defined below) of the Class A Common Stock at the close of business on the day of conversion. In the absence of a Sale Price, the Board of Directors shall in good faith determine the current market price on such basis as it considers appropriate and such current market price shall be used to calculate the cash adjustment. As used herein, "SALE PRICE" means the last sale price of the Class A Common Stock (or if no sale price is reported, the average of the high and low bid prices) as reported by the the principal national or regional stock exchange on which the Class A Common Stock is listed or, if the Class A Common Stock is not listed on a national or regional stock exchange, as reported by the Nasdaq National Market or if the Class A Common Stock is not approved for quotation and trading on the Nasdaq National Market as reported by the National Quotation Bureau Incorporated. (d) If a holder converts shares of Convertible Preferred Stock, the Company shall pay any documentary, stamp or similar issue or transfer tax due on the issue of Class A Common Stock upon the conversion or due upon the issuance of a new certificate or certificates for any shares of Convertible Preferred Stock not converted. The holder, however, shall pay any such tax that is due because any such 9 10 shares of the Class A Common Stock or of the Convertible Preferred Stock are issued in a name other than the name of the holder. (e) The Company shall reserve out of its authorized but unissued Class A Common Stock or its Class A Common Stock held in treasury enough shares of Class A Common Stock to permit the conversion of all of the then-outstanding shares of Convertible Preferred Stock. For the purposes of this Section 6(e), the full number of shares of Class A Common Stock then issuable upon the conversion of all then-outstanding shares of Convertible Preferred Stock shall be computed as if at the time of computation all outstanding shares of Convertible Preferred Stock were held by a single holder. The Company shall from time to time, in accordance with the laws of the State of Delaware and its Certificate of Incorporation, increase the authorized amount of its Class A Common Stock if at any time the authorized amount of its Class A Common Stock remaining unissued shall not be sufficient to permit the conversion of all shares of Convertible Preferred Stock at the time outstanding. If any shares of Class A Common Stock required to be reserved for issuance upon conversion of shares of Convertible Preferred Stock hereunder require registration with or approval of any governmental authority under any federal or state law before the shares may be issued upon conversion, the Company will in good faith and as expeditiously as possible endeavor to cause the shares to be so registered or approved. All shares of Class A Common Stock issued upon conversion of the shares of Convertible Preferred Stock shall be validly issued, fully paid and nonassessable. (f) The Conversion Price shall be subject to adjustment as follows: (i) In case the Company shall (A) pay a dividend on any class of its capital stock in shares of its Common Stock of any class, (B) subdivide its outstanding shares of Class A Common Stock into a greater number of shares or (C) combine its outstanding shares of Class A Common Stock into a smaller number of shares, the Conversion Price in effect immediately prior thereto shall be adjusted retroactively as provided below so that the Conversion Price thereafter shall be determined by multiplying the Conversion Price at which the shares of Convertible Preferred Stock were theretofore convertible by a fraction, the denominator of which shall be the number of shares of Class A Common Stock outstanding immediately following such action and the numerator of which shall be the number of shares of Class A Common Stock outstanding immediately prior thereto. Such adjustment shall be made whenever any event listed above shall occur and shall become effective retroactively immediately after the record date in the case of a dividend and immediately after the effective date in the case of a subdivision or combination. 10 11 (ii) In case the Company shall issue rights or warrants to all holders of its Class A Common Stock entitling them (for a period expiring within 45 days after the record date for determining stockholders entitled to receive such rights or warrants) to subscribe for or purchase shares of its Common Stock of any class at a price per share less than the current market price per share of Class A Common Stock (as determined in accordance with the provisions of Section 6(f)(iv) below) on the record date therefor (the "CURRENT MARKET PRICE"), or in case the Company shall issue to all holders of its Class A Common Stock other securities convertible into or exchangeable for shares of its Common Stock of any class for a consideration per share of Common Stock deliverable upon conversion or exchange thereof less than the Current Market Price, then the Conversion Price in effect immediately prior thereto shall be adjusted as provided below so that the Conversion Price therefor shall be equal to the price determined by multiplying (A) the Conversion Price at which shares of Convertible Preferred Stock were theretofore convertible by (B) a fraction, the denominator of which shall be the sum of (1) the number of shares of Common Stock of all classes outstanding on the date of issuance of the convertible or exchangeable securities, rights or warrants and (2) the number of additional shares of Common Stock offered for subscription or purchase, or issuable upon such conversion or exchange, and the numerator of which shall be the sum of (1) the number of shares of Common Stock of all classes outstanding on the date of issuance of such convertible or exchangeable securities, rights or warrants and (2) the number of additional shares of Common Stock of all classes which the aggregate offering price of the number of shares of Common Stock so offered would purchase at the Current Market Price per share of Class A Common Stock (as determined in accordance with the provisions of Section 6(f)(iv) below). Such adjustment shall be made whenever such convertible or exchangeable securities, rights or warrants are issued, and shall become effective immediately after the record date for the determination of stockholders entitled to receive such securities. However, upon the expiration of any right or warrant to purchase Common Stock, the issuance of which resulted in an adjustment in the Conversion Price pursuant to this Section 6(f)(ii), if any such right or warrant shall expire and shall not have been exercised, the Conversion Price shall be recomputed immediately upon such expiration and effective immediately upon such expiration shall be increased to the price it would have been (but reflecting any other adjustments to the Conversion Price made pursuant to the provisions of this Section 6(f) after the issuance of such rights or warrants) had the 11 12 adjustment of the Conversion Price made upon the issuance of such rights or warrants been made on the basis of offering for subscription or purchase only that number of shares of Common Stock actually purchased upon the exercise of such rights or warrants. No further adjustment shall be made upon exercise of any right, warrant, convertible security or exchangeable security if any adjustment shall have been made upon issuance of such security. (iii) In case the Company shall pay a dividend to all holders of its Class A Common Stock (including any dividend paid in connection with a consolidation or merger in which the Company is the continuing company) of any shares of capital stock of the Company or its subsidiaries (other than its Common Stock of any class) or evidences of its indebtedness or assets (excluding cash dividends payable solely in cash that may from time to time be fixed by the Board of Directors, or dividends or distributions in connection with the liquidation, dissolution or winding up of the Company) or rights or warrants to subscribe for or purchase any of its securities or those of its subsidiaries or securities convertible or exchangeable for Common Stock (excluding those securities referred to in Section 6(f)(ii) above), then in each such case the Conversion Price in effect immediately prior thereto shall be adjusted as provided below so that the Conversion Price thereafter shall be equal to the price determined by multiplying (A) the Conversion Price in effect on the record date mentioned below by (B) a fraction, the numerator of which shall be the Current Market Price per share of Class A Common Stock on the record date mentioned below less the then fair market value (as determined by the Board of Directors, whose good faith determination shall be conclusive) as of such record date of the assets, evidences of indebtedness or securities so paid with respect to one share of Class A Common Stock, and the denominator of which shall be the Current Market Price per share of Class A Common Stock on such record date; provided, however, that in the event the then fair market value (as so determined) so paid with respect to one share of Class A Common Stock is equal to or greater than the Current Market Price per share of Class A Common Stock on the record date mentioned above, in lieu of the foregoing adjustment, adequate provision shall be made so that each holder of shares of the Convertible Preferred Stock shall have the right to receive the amount and kind of assets, evidences of indebtedness, or securities such holder would have received had such holder converted each such share of Convertible Preferred Stock immediately prior to the record date for such dividend. Such adjustment shall be made whenever any such payment is made, and shall become 12 13 effective retroactively immediately after the record date for the determination of stockholders entitled to receive the payment. (iv) For the purpose of any computation under Sections 6(f)(ii) and 6(f)(iii) above, the Current Market Price per share of Class A Common Stock at any date shall be deemed to be the average Sale Price for the 30 consecutive trading days commencing 45 trading days before the day in question. (v) No adjustment in the Conversion Price shall be required unless the adjustment would require an increase or decrease of at least 1% in the Conversion Price then in effect; provided, however, that any adjustments that by reason of this Section 6(f)(v) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Section 6(f) shall be made to the nearest cent or to the nearest 1/100th of a share, as the case may be. (vi) In the event that, at any time as a result of an adjustment made pursuant to Section 6(f)(i) or 6(f)(iii) above, the holder of any share of Convertible Preferred Stock thereafter surrendered for conversion shall become entitled to receive any shares of the Company other than shares of the Class A Common Stock, thereafter the number of such other shares so receivable upon conversion of any share of Convertible Preferred Stock shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the Class A Common Stock contained in Section 6(f)(i) through 6(f)(v) above, and the other provisions of this Section 6 with respect to the Class A Common Stock shall apply on like terms to any such other shares. (vii) Whenever the Conversion Price is adjusted, as herein provided, the Company shall promptly file with the transfer agent for the Convertible Preferred Stock a certificate of an officer of the Company setting forth the Conversion Price after the adjustment and setting forth a brief statement of the facts requiring such adjustment and a computation thereof. The certificate shall be conclusive evidence of the correctness of the adjustment. The Company shall promptly cause a notice of the adjusted Conversion Price to be mailed to each registered holder of shares of Convertible Preferred Stock. (viii) In the case of any reclassification of the Class A Common Stock, any consolidation of the Company with, or merger of the 13 14 Company into, any other entity, any merger of another entity into the Company (other than a merger that does not result in any reclassification, conversion, exchange or cancellation of outstanding shares of Class A Common Stock of the Company), any sale or transfer of all or substantially all of the assets of the Company or any compulsory share exchange pursuant to which share exchange the Class A Common Stock is converted into other securities, cash or other property, then lawful provision shall be made as part of the terms of such transaction whereby the holder of each share of Convertible Preferred Stock then outstanding shall have the right thereafter, during the period such share of Convertible Preferred Stock shall be convertible, to convert such share only into the kind and amount of securities, cash and other property receivable upon the reclassification, consolidation, merger, sale, transfer or share exchange by a holder of the number of shares of Class A Common Stock of the Company into which a share of Convertible Preferred Stock would have been convertible immediately prior to the reclassification, consolidation, merger, sale, transfer or share exchange. The Company, the person formed by the consolidation or resulting from the merger or which acquires such assets or which acquires the Company's shares, as the case may be, shall make provisions in its certificate or articles of incorporation or other constituent document to establish such rights. The certificate or articles of incorporation or other constituent document shall provide for adjustments, which, for events subsequent to the effective date of the certificate or articles of incorporation or other constituent document, shall be as nearly equivalent as may be practicable to the adjustments provided for in this Section 6. The provisions of this Section 6(f)(viii) shall similarly apply to successive reclassifications, consolidations, mergers, sales, transfers or share exchanges. (g) The Company from time to time may reduce the Conversion Price by any amount for any period of time if (i) the period is at least 20 days, (ii) the Board has made a determination that such reduction would be in the best interests of the Company, which determination shall be conclusive and (iii) the reduction is irrevocable during the period. Whenever the Conversion Price is so reduced, the Company shall mail to holders of record of the Convertible Preferred Stock a notice of the reduction at least 15 days before the date the reduced Conversion Price takes effect, stating the reduced Conversion Price and the period it will be in effect. A voluntary reduction of the Conversion Price does not change or adjust the Conversion Price otherwise in effect for purposes of paragraph 6(f) above. 14 15 7. Status of Shares. All shares of the Convertible Preferred Stock that are at any time redeemed pursuant to Section 4 above or converted pursuant to Section 6 above, or exchanged pursuant to Section 10 below, and all shares of the Convertible Preferred Stock that are otherwise reacquired by the Company and subsequently canceled by the Board of Directors of the Company shall have the status of authorized but unissued shares of Preferred Stock, without designation as to series, subject to reissuance by the Board of Directors of the Company as shares of any one or more other series. 8. Voting Rights. Except as set forth below or otherwise required by law, holders of shares of the Convertible Preferred Stock shall have no voting rights. In connection with any right to vote, each holder of shares of Convertible Preferred Stock will have one vote for each share held except that shares held by the Company or any entity controlled by the Company shall have no voting rights. (a) Dividend Defaults. (i) Whenever, at any time or times, dividends payable on the shares of Convertible Preferred Stock at the time outstanding shall be in arrears in an aggregate amount equal to at least six quarterly dividend payments (whether or not consecutive), the holders of shares of Convertible Preferred Stock shall have the right, voting separately as a class with holders of Parity Dividend Shares to the extent such Parity Dividend Shares have such voting rights (the shares of Convertible Preferred Stock and any such other Parity Dividend Shares, collectively for purposes of this Section 8, the "DEFAULTED PREFERRED STOCK"), to elect two directors of the Company at the Company's next annual meeting of stockholders and at each subsequent annual meeting of stockholders; provided, however, that if such voting rights shall become vested more than 90 days or less than 20 days before the date prescribed for the annual meeting of stockholders the holders of the shares of Defaulted Preferred Stock shall be entitled to exercise their voting rights at a special meeting of the holders of shares of Defaulted Preferred Stock as set forth in Section 8(a)(ii) hereof. At elections for such directors, each holder of shares of Convertible Preferred Stock shall be entitled to one vote for each share held (the holders of any Parity Preferred Stock being entitled to such number of votes, if any, for each share of stock held as may be granted to them). Upon the vesting of such voting rights, the maximum authorized number of members of the Board of Directors of the Company shall automatically be increased by two and the two vacancies so created shall be filled by 15 16 vote of the holders of outstanding Defaulted Preferred Stock as herein set forth. The right of holders of Defaulted Preferred Stock, voting separately as a class without regard to series, to elect members of the Board of Directors of the Company as aforesaid shall continue until such time as all dividends accumulated on Defaulted Preferred Stock shall have been paid in full or declared and set aside for payment in full, at which time such right immediately shall terminate subject to revesting in the event of each and every subsequent default of the character above mentioned. (ii) At any time when such voting right shall have vested in the holders of shares of Defaulted Preferred Stock entitled to vote thereon, and if such right shall not already have been initially exercised, an officer of the Company shall, upon the written request of holders of record of 10% of the voting power represented by the shares of such Defaulted Preferred Stock then outstanding, addressed to the Secretary of the Company, call a special meeting of holders of shares of such Defaulted Preferred Stock. Such meeting shall be held at the earliest practicable date upon the notice required for annual meetings of stockholders at the place for holding annual meetings of stockholders of the Company or, if none, at a place designated by the Secretary of the Company. If such meeting shall not be called by the proper officers of the Company within 30 days after the personal service of such written request upon the Secretary of the Company, or within 30 days after mailing the same within the United States, by registered mail, addressed to the Secretary of the Company at its principal office (such mailing to be evidenced by the registry receipt issued by the postal authorities), then the holders of record of 10% of the voting power represented by the shares of Defaulted Preferred Stock then outstanding may designate in writing any person to call such meeting at the expense of the Company, and such meeting may be called by such person so designated upon the notice required for annual meetings of stockholders and shall be held at the same place as is elsewhere provided in this Section. Any holder of shares of Defaulted Preferred Stock then outstanding that would be entitled to vote at such meeting shall have access to the stock books of the Company for the purpose of causing a meeting of stockholders to be called pursuant to the provisions of this Section. Notwithstanding the provisions of this Section, however, no such special meeting shall be called or held during a period within 45 days immediately preceding the date fixed for the next annual meeting of stockholders. 16 17 (iii) So long as any shares of Convertible Preferred Stock are outstanding, the By-laws of the Company shall contain no provisions that would restrict the exercise, by the holders of Defaulted Preferred Stock, of the right to elect directors under the circumstances provided in Section 8(a)(i) above. (iv) Directors elected pursuant to Section 8(a)(i) shall serve until the earlier of (A) the next annual meeting of the stockholders of the Company and the election (by the holders of Defaulted Preferred Stock) and qualification of their respective successors or (B) the date upon which all dividends accumulated on the Defaulted Preferred Stock shall have been paid in full or declared and set apart for payment. If, prior to the end of the term of any director elected as aforesaid, a vacancy in the office of that director shall occur during the continuation of a default in dividends on the shares of the Convertible Preferred Stock or such Parity Dividend Shares by reason of death, resignation or disability, the vacancy shall be filled for the unexpired term by the appointment by the remaining director elected as aforesaid of a new director for the unexpired term of the former director. (b) Miscellaneous. Without the affirmative vote or consent of the holders of at least 66 2/3% of the outstanding shares of the Convertible Preferred Stock and outstanding Parity Dividend Shares, voting as a single class (or, if less than all shares of the Convertible Preferred Stock or Parity Dividend Shares then outstanding would be adversely affected thereby, without the affirmative vote of the holders of at least 66 2/3% of the outstanding shares of each series so affected, voting as a separate class), the Company may not: (i) amend, alter or repeal (by merger or otherwise) any provision of the Company's Certificate of Incorporation or this Certificate or the By-laws of the Company so as to adversely affect the relative rights, preferences, qualifications, limitations or restrictions of the shares of the Convertible Preferred Stock; or (ii) effect any reclassification of the shares of the Convertible Preferred Stock. The above notwithstanding, the Company's Certificate of Incorporation may be amended (i) to increase or decrease the number of authorized shares of Preferred Stock (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority of the stock of the Company entitled to vote thereon or (ii) to authorize any other class or series of capital stock of the Company, regardless 17 18 of the relative rights, preferences, qualifications, limitations or restrictions thereof, including an amendment to increase the authorized number of shares of Common Stock or Preferred Stock of the Company without the vote of the holders of shares of the Convertible Preferred Stock. 9. Change of Control. If there occurs a Change in Control (as defined below) with respect to the Company, then shares of the Convertible Preferred Stock may be converted (the "SPECIAL CONVERSION RIGHTS"), at the option of the holder thereof, in whole or in part, at any time from the date of such Change in Control until the expiration of 45 days after the date of the Conversion Notice (as defined below) (the "EXPIRATION DATE"), into the number of shares of Class A Common Stock determined by dividing (i) the Optional Redemption Price for the Convertible Preferred Stock in effect on the date of the Change in Control by (ii) the Special Conversion Price. The "SPECIAL CONVERSION PRICE" is the greater of (i) the average of the Sale Prices per share of the Class A Common Stock for the last five trading days before the Change in Control and (ii) 66 2/3% of the Sale Price (adjusted for any stock splits or combinations) of the Class A Common Stock on June 10, 1997. If the Change in Control occurs prior to June 16, 1999, the Optional Redemption Price then in effect shall, solely for purposes of the Special Conversion Rights, be deemed to be the Optional Redemption Price applicable on June 16, 1999. The Special Conversion Rights will exist upon the occurrence of any Change in Control whether or not the transaction relating thereto is approved by the Board of Directors of the Company and may not be waived by the Board of Directors. The Company may, at its option, out of funds legally available therefor, elect to pay the holders of the Convertible Preferred Stock exercising their Special Conversion Rights (the "CONVERTING HOLDERS") an amount in cash equal to 101% of the liquidation preference of the Convertible Preferred Stock, plus any accrued and unpaid dividends (the "CONVERTING HOLDERS PAYMENT"). Any holder of shares of Convertible Preferred Stock electing to exercise the Special Conversion Rights in accordance with this Section 9 shall, not later than the close of business on the fifth day prior to the Expiration Date, deliver the certificates therefor and the dividend payment referred to in Section 6(a), if applicable, to the principal office of any transfer agent for the Class A Common Stock, with a form of conversion notice fully completed and duly executed and the payment, if any, required by Section 6(d). Unless the Company elects to pay the Converting Holders the Converting Holders Payment, the Special Conversion Right with respect to any shares of Convertible Preferred Stock shall be deemed to have been exercised on the Expiration Date so long as the certificates therefor and the dividend payment referred to in Section 6(a), if applicable, with the notice of exercise of the Special Conversion Rights duly executed (and the payment required by Section 6(d), if applicable), shall have been so delivered and the person or persons entitled to receive the Class A 18 19 Common Stock issuable upon conversion shall be treated for all purposes as the record holder or holders of such Class A Common Stock on the Expiration Date. Within five days after the occurrence of a Change in Control, the Company shall give notice of the occurrence of the Change in Control and of the Special Conversion Rights set forth herein in accordance with the procedures set forth below to each holder of a share of the Convertible Preferred Stock (the "CONVERSION NOTICE"). Each Conversion Notice shall state: (1) that a Change in Control has occurred (and shall specify the date of occurrence), the circumstances and relevant facts regarding such Change in Control and that the holder's Special Conversion Rights may be exercised in accordance with this Section; (2) the Expiration Date of the Special Conversion Rights; (3) that a holder of a share of the Convertible Preferred Stock to exercise the Special Conversion Rights must deliver on or before the fifth day prior to the Expiration Date of the Special Conversion Rights written notice to the Company of the holder's exercise of such option, together with the certificate evidencing such holder's shares with respect to which the option is being exercised, duly endorsed for transfer and the dividend payment, if any, required by Section 6(a) hereof and the payment required by Section 6(d), if applicable; (4) the applicable Special Conversion Price and the Conversion Price; (5) a description of the procedure which a holder must follow to exercise its Special Conversion Rights; (6) that holders of shares of the Convertible Preferred Stock electing to have such shares converted will be required to surrender the certificates evidencing such shares for delivery of shares of Class A Common Stock; (7) that any shares of Convertible Preferred Stock not tendered for conversion will continue to accrue dividends and that holders whose shares of Convertible Preferred Stock are converted only in part will be issued a new certificate representing the unconverted shares of Convertible Preferred Stock; and 19 20 (8) that the Company may, at its option, elect to pay all Converting Holders the Converting Holders Payment and if the Company elects to pay the Converting Holders Payment, all Converting Holders shall receive the Converting Holders Payment in lieu of shares of Class A Common Stock. The Conversion Notice shall be given by first class mail, postage paid, to the holders of record of the shares of the Convertible Preferred Stock at their respective addresses as the same shall appear on the books of the Company. No failure of the Company to give the foregoing Conversion Notice shall limit any holder's right to exercise its Special Conversion Rights. Exercise of the Special Conversion Rights by the holder of a share of Convertible Preferred Stock will be irrevocable. The Company shall not enter into any consolidation, merger or sale of assets, unless in connection therewith, the holders of Convertible Preferred Stock exercising their Special Conversion Rights will be entitled to receive the same consideration as received for the number of shares of Class A Comnmon Stock into which their shares of Convertible Preferred Stock would have been converted pursuant to the Special Conversion Rights. The Special Conversion Rights are in addition to the regular conversion rights that apply to the Convertible Preferred Stock. The Company will comply with any securities laws and regulations, to the extent such laws and regulations are applicable to the conversion of the Convertible Preferred Stock in connection with exercise of the Special Conversion Rights by the holders of the Convertible Preferred Stock. If the Company elects to pay the Converting Holders the Converting Holders Payment, then on the Expiration Date (other than as may be required by law), payment (in cash) of the Converting Holders Payment shall be made to the Converting Holders. "Chancellor Merger Agreement" means the Agreement and Plan of Merger dated February 19, 1997 among the Company, Chancellor Broadcasting Company, a Delaware corporation, and Chancellor Radio Broadcasting Company, a Delaware corporation, as the same may be amended or amended and restated from time to time. "Change in 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 (as defined below) or group of related Persons for 20 21 purposes of Section 13(d) of the Securities Exchange Act of 1934, as amended (a "Group"), other than to the Permitted Holders (as defined below); or (ii) a majority of the Board shall consist of Persons who are not Continuing Directors (as defined below); 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 the Company. "Continuing Director" means, as of the date of determination, any Person who (i) was a member of the Board on June 10, 1997 or who becomes a director upon consummation of the merger contemplated by the Chancellor Merger Agreement, (ii) was nominated for election or elected to the with the affirmative vote of a majority of the Continuing Directors who were members of the Board at the time of such nomination or election, or (iii) is a representative of a Permitted Holder. "Permitted Holders" means (i) if the merger contemplated by the Chancellor Merger Agreement is not consummated, Scott K. Ginsburg and (ii) if the merger contemplated by the Chancellor Merger Agreement is consummated, from and after the effective date thereof, Scott K. Ginsburg, Hicks, Muse, Tate and Furst, Incorporated or any of its affiliates, officers and directors, or Steven Dinetz. "Person" means an individual, partnership, corporation, limited liability company, unincorporated organization, trust or joint venture, or a governmental agency or political subdivision thereof. 10. Exchange Provisions. (a) Shares of Convertible Preferred Stock will be exchangeable at the option of the Company, out of funds legally available therefor, in whole but not in part, on any March 15, June 15, September 15 or December 15 commencing September 15, 2000 (a "DEBENTURE EXHANGE DATE"), through the issuance of the Company's 6% Convertible Subordinated Debentures due 2012 (the "EXCHANGE DEBENTURES") in redemption of and in exchange for shares of Convertible Preferred Stock, in the manner provided in this Section 10. The Exchange Debentures will be subject to the terms and conditions of an indenture (the "INDENTURE") between the Company and The Bank of New York, as Trustee in substantially the form attached hereto as Exhibit A. (b) Holders of the Convertible Preferred Stock will be entitled to receive Exchange Debentures at the rate of $50.00 principal amount of Exchange Debentures for each share of Convertible Preferred Stock. Such exchange may be made only if, at the time of the exchange there shall be no dividend arrearage (including the dividend payable on the date of exchange) on the shares of the 21 22 Convertible Preferred Stock and no Event of Default (as defined in the Indenture) under the Indenture shall have occurred and be continuing. Exchange Debentures will only be issued in denominations of $1,000 or any multiple thereof and holders of the Convertible Preferred Stock holding less than such a multiple will receive in cash the liquidation preference of Convertible Preferred Stock not so exchanged. (c) The Company will mail notice of its intention to redeem through such an exchange to each holder of record of the Convertible Preferred Stock not less than 60 days before the Debenture Exchange Date. Such notice shall be given by first class mail, postage prepaid, to the holders of record of shares of the Convertible Preferred Stock at their respective addresses as the same shall appear on the books of the Company, specifying the Debenture Exchange Date and the place where certificates for shares of the Convertible Preferred Stock are to be surrendered for Exchange Debentures and stating that dividends on shares of the Convertible Preferred Stock will cease to accrue on the Debenture Exchange Date, but neither failure to mail such notice, nor any defect therein or in the mailing thereof, to any particular holder shall affect the sufficiency of the notice or the validity of the proceedings for redemption and exchange with respect to the other holders. Any notice which was mailed in the manner herein provided shall be conclusively presumed to have been duly given whether or not the holder receives the notice. If the notice of exchange has been given pursuant to this Section 10(c) then (unless the Company defaults in issuing Exchange Debentures in redemption of and in exchange for the Convertible Preferred Stock or fails to pay or set aside accrued and unpaid dividends on the Convertible Preferred Stock as set forth in Section 10 (d) hereof and notwithstanding that any certificates for shares of the Convertible Preferred Stock have not been surrendered for exchange) on the Debenture Exchange Date the holders of the Convertible Preferred Stock will cease to the stockholders with respect to such shares and will have no interests in or claims against the Company by virtue thereof (except the right to receive Exchange Debentures in exchange therefor and accrued and unpaid dividends thereon to the Debenture Exchange Date) and will have no voting, conversion or other rights with respect to such shares, and the shares of Convertible Preferred Stock will no longer be outstanding. Upon the surrender (and endorsement, if required by the Company) in accordance with such notice of the certificates for shares of the Convertible Preferred Stock, such certificates shall be exchanged for Exchange Debentures and such accrued and unpaid dividends in accordance with this Section 10(c). Notwithstanding the foregoing, if notice of redemption and exchange has been given pursuant ot this Section 10(c) and any holder of shares of the Convertible Preferred Stock shall, prior to the close of business on the fifth day preceding the Debenture Exchange 22 23 Date, given written notice to the Company pursuant to Section 6 hereof of the conversion into Class A Common Stock of any or all of the shares to be redeemed and exchanged held by such holder (accompanied by a certificate or certificates for such shares, duly endorsed or assigned to the Company, and any necessary transfer tax payment, as required by Section 6 hereof), then such redemption and exchange shall not become effective as provided in Section 6 hereof and any funds which have been deposited by the Company, or on its behalf, with a paying agent or segregated and held in trust by the Company for the redemption and exchange of such shares shall (subject to any right of the holder of such shares to receive the dividend payable thereon as provided in Section 6 hereof) immediately upon such conversion be returned to the Company or, if then held in trust by the Company, shall be discharged from such trust. (d) No shares of Convertible Preferred Stock may be exchanged for Exchange Debentures unless the Company has paid or set aside for the benefit of the holders of the Convertible Preferred Stock all accrued and unpaid dividends on the Convertible Preferred Stock to the Debenture Exchange Date. 11. Mandatory Redemption. The shares of the Convertible Preferred Stock are not subject to mandatory redemption or sinking fund requirements. 12. Certain Definitions. As used in this Certificate, the following terms shall have the following respective meanings: "COMMON SHARES" shall mean any stock of the Company which has no preference in respect of dividends or of amounts payable in the event of any voluntary or involuntary liquidation, dissolution or winding-up of the Company and which is not subject to redemption by the Company. Unless the context otherwise specifies or requires, all references in this certificate to "COMMON SHARES" include the Common Stock. 23 24 IN WITNESS WHEREOF, the Company has caused this Certificate to be duly executed on its behalf of its undersigned duly authorized officer this 13th day of June 1997. EVERGREEN MEDIA CORPORATION By: ---------------------------------- Name: Matthew E. Devine Title: Senior Vice President and Chief Financial Officer 24 EX-4.33 5 CONVERTIBLE SUBORDINATED EXCHANGE INDENTURE 1 EXHIBIT 4.33 EVERGREEN MEDIA CORPORATION AND THE BANK OF NEW YORK, Trustee CONVERTIBLE SUBORDINATED INDENTURE Dated as of June 16, 1997 6% Convertible Subordinated Debentures Due 2012 2 TABLE OF CONTENTS
PAGE ---- ARTICLE 1 DEFINITIONS SECTION 1.01. Certain Terms Defined . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 ARTICLE 2 SECURITIES SECTION 2.01. Form and Dating . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 SECTION 2.02. Execution and Authentication . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 SECTION 2.03. Registrar, Paying Agent and Conversion Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 SECTION 2.04. Paying Agent to Hold Money in Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 SECTION 2.05. Holder Lists . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 SECTION 2.06. Transfer and Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 SECTION 2.07. Replacement Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 SECTION 2.08. Outstanding Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 SECTION 2.09. Treasury Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 SECTION 2.10. Temporary Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 SECTION 2.11. Cancellation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 SECTION 2.12. Defaulted Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 SECTION 2.13. Cusip Numbers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 SECTION 2.14. Computation of Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 ARTICLE 3 COVENANTS OF THE ISSUER SECTION 3.01. Payment of Principal and Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 SECTION 3.02. Written Statements to Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 SECTION 3.03. Corporate Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 SECTION 3.04. Reports by the Issuer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 SECTION 3.05. Waiver of Usury Defense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 SECTION 3.06. Liquidation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3
PAGE ---- ARTICLE 4 REMEDIES OF THE TRUSTEE AND SECURITYHOLDERS ON EVENT OF DEFAULT SECTION 4.01. Event of Default Defined; Acceleration of Maturity; Waiver of Default . . . . . . . . . . . . . . . . 18 SECTION 4.02. Collection of Indebtedness by Trustee; Trustee May Prove Debt . . . . . . . . . . . . . . . . . . . . 20 SECTION 4.03. Application of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 SECTION 4.04. Suits for Enforcement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 SECTION 4.05. Restoration of Rights on Abandonment of Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . 23 SECTION 4.06. Limitation on Suits by Securityholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 SECTION 4.07. Unconditional Right of Securityholders to Receive Principal, Premium and Interest, to Convert and to Institute Certain Suits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 SECTION 4.08. Powers and Remedies Cumulative; Delay or Omission Not Waiver of Default . . . . . . . . . . . . . . . 24 SECTION 4.09. Control by Securityholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 SECTION 4.10. Waiver of Past Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 SECTION 4.11. Trustee to Give Notice of Default, But May Withhold in Certain Circumstances . . . . . . . . . . . . . 26 SECTION 4.12. Right of Court to Require Filing of Undertaking to Pay Costs . . . . . . . . . . . . . . . . . . . . . 26 SECTION 4.13. Waiver of Stay or Extension Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 ARTICLE 5 CONCERNING THE TRUSTEE SECTION 5.01. Duties and Responsibilities of the Trustee; During Default; Prior to Default . . . . . . . . . . . . . 27 SECTION 5.02. Certain Rights of the Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 SECTION 5.03. Trustee Not Responsible for Recitals, Disposition of Securities or Application of Proceeds Thereof . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 SECTION 5.04. Trustee and Agents May Hold Securities; Collections, etc . . . . . . . . . . . . . . . . . . . . . . . 29 SECTION 5.05. Compensation and Indemnification of Trustee and Its Prior Claim . . . . . . . . . . . . . . . . . . . 30 SECTION 5.06. Right of Trustee to Rely on Officers' Certificate, etc . . . . . . . . . . . . . . . . . . . . . . . . 30 SECTION 5.07. Persons Eligible for Appointment as Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 SECTION 5.08. Resignation and Removal; Appointment of Successor Trustee . . . . . . . . . . . . . . . . . . . . . . 31 SECTION 5.09. Acceptance of Appointment by Successor Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
ii 4
PAGE ---- SECTION 5.10. Merger, Conversion, Consolidation or Succession to Business of Trustee . . . . . . . . . . . . . . . . 33 SECTION 5.11. Preferential Collection of Claims Against the Issuer . . . . . . . . . . . . . . . . . . . . . . . . . 34 SECTION 5.12. Reports by Trustee to Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 ARTICLE 6 CONCERNING THE SECURITYHOLDERS SECTION 6.01. Evidence of Action Taken by Securityholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 SECTION 6.02. Proof of Execution of Instruments and of Holding of Securities . . . . . . . . . . . . . . . . . . . . 39 SECTION 6.03. Holders to Be Treated as Owners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 SECTION 6.04. Securities Owned by Issuer Deemed Not Outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . 40 SECTION 6.05. Right of Revocation of Action taken . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 SECTION 6.06. Record Date for Consents and Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 ARTICLE 7 SUPPLEMENTAL INDENTURES SECTION 7.01. Supplemental Indentures Without Consent of Securityholders . . . . . . . . . . . . . . . . . . . . . . 41 SECTION 7.02. Supplemental Indentures with Consent of Securityholders . . . . . . . . . . . . . . . . . . . . . . . 43 SECTION 7.03. Effect of Supplemental Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 SECTION 7.04. Documents to Be Given to Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 SECTION 7.05. Notation on Securities in Respect of Supplemental Indentures . . . . . . . . . . . . . . . . . . . . . 45 ARTICLE 8 CONSOLIDATION, MERGER, SALE OR CONVEYANCE SECTION 8.01. Covenant Not to Merger, Consolidate, Sell or Convey Property Except Under Certain Conditions . . . . . 45 SECTION 8.02. Successor Corporation or Partnership Substituted . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 SECTION 8.03. Opinion of Counsel to Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 ARTICLE 9 SATISFACTION AND DISCHARGE OF INDENTURE; UNCLAIMED MONEYS SECTION 9.01. Satisfaction and Discharge of Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
iii 5
PAGE ---- SECTION 9.02. Application by Trustee of Funds Deposited for Payment of Securities . . . . . . . . . . . . . . . . . 48 SECTION 9.03. Repayment of Moneys Held by Paying Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 SECTION 9.04. Return of Moneys Held by Trustee and Paying Agent Unclaimed for Two Years . . . . . . . . . . . . . . 48 SECTION 9.05. Indemnity for U.S. Governmental Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 ARTICLE 10 MISCELLANEOUS PROVISIONS SECTION 10.01. Partners, Incorporators, Stockholders, Officers and Directors of Issuer Exempt from Individual Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 SECTION 10.02. Provisions of Indenture for the Sole Benefit of Parties and Securityholders . . . . . . . . . . . . . 49 SECTION 10.03. Successors and Assigns of Issuer Bound by Indenture . . . . . . . . . . . . . . . . . . . . . . . . . 49 SECTION 10.04. Notices and Demands on Issuer, Trustee and Securityholders . . . . . . . . . . . . . . . . . . . . . 49 SECTION 10.05. Officers' Certificates and Opinions of Counsel; Statements to Be Contained Therein . . . . . . . . . 50 SECTION 10.06. Payments Due on Saturdays, Sundays and Legal Holidays . . . . . . . . . . . . . . . . . . . . . . . . 51 SECTION 10.07. Conflict of Any Provision of Indenture with Trust Indenture Act of 1939 . . . . . . . . . . . . . . . 52 SECTION 10.08. Communications by Holders with Other Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 SECTION 10.09. New York Law to Govern . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 SECTION 10.10. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 SECTION 10.11. Effect of Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 ARTICLE 11 REDEMPTION OF SECURITIES SECTION 11.01. Right of Optional Redemption; Prices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 SECTION 11.02. Notice of Redemption; Partial Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 SECTION 11.03. Payment of Securities Called for Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 SECTION 11.04. Exclusion of Certain Securities from Eligibility for Selection for Redemption . . . . . . . . . . . . 55
iv 6
PAGE ---- ARTICLE 12 SUBORDINATION OF SECURITIES SECTION 12.01. Agreement to Subordinate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 SECTION 12.02. Payments to Securityholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 SECTION 12.03. Subrogation of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 SECTION 12.04. Authorization by Securityholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 SECTION 12.05. Notice to Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 SECTION 12.06. Trustee's Relation to Senior Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 SECTION 12.07. No Impairment of Subordination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 ARTICLE 13 CONVERSION OF SECURITIES SECTION 13.01. Conversion Privilege . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 SECTION 13.02. Exercise of Conversion Privilege . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 SECTION 13.03. Fractional Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 SECTION 13.04. Adjustment of Conversion Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 SECTION 13.05. Continuation of Conversion Privilege in Case of Reclassification, Consolidation, Merger, Sale, Transfer or Share Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67 SECTION 13.06. Notice of Certain Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68 SECTION 13.07. Taxes on Conversion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69 SECTION 13.08. Issuer to Provide Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70 SECTION 13.09. Disclaimer of Responsibility for Certain Matters . . . . . . . . . . . . . . . . . . . . . . . . . . 70 SECTION 13.10. Return of Funds Deposited for Redemption of Converted Securities . . . . . . . . . . . . . . . . . . 71 ARTICLE 14 RIGHT TO REQUIRE REDEMPTION SECTION 14.01. Right to Require Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71 SECTION 14.02. Notices; Method of Exercising Redemption Right, etc . . . . . . . . . . . . . . . . . . . . . . . . . 72 SECTION 14.03. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74 TESTIMONIUM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ACKNOWLEDGMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . EXHIBIT A -- FORM OF SECURITY
v 7 CROSS REFERENCE SHEET(1) Provisions of Trust Indenture Act of 1939 and Indenture to be dated as of June [ ], 1997 between Evergreen Media Corporation and The Bank of New York, as Trustee:
Section of the TIA Section of Indenture ------------------ -------------------- 310(a)(1) and (2) . . . . . . . . . . . . . . . . 5.7 310(a)(3) and (4) . . . . . . . . . . . . . . . . Inapplicable 310(b) . . . . . . . . . . . . . . . . . . . . . 5.8(a), (b) and (d) 310(c) . . . . . . . . . . . . . . . . . . . . . Inapplicable 311(a) . . . . . . . . . . . . . . . . . . . . . 5.11(a) and (c)(1) and (2) 311(b) . . . . . . . . . . . . . . . . . . . . . 5.11(b) 311(c) . . . . . . . . . . . . . . . . . . . . . Inapplicable 312(a) . . . . . . . . . . . . . . . . . . . . . 2.5 312(b) . . . . . . . . . . . . . . . . . . . . . 2.5 and 10.8 312(c) . . . . . . . . . . . . . . . . . . . . . 10.8 313(a) . . . . . . . . . . . . . . . . . . . . . 5.12 313(a)(5) . . . . . . . . . . . . . . . . . . . . Inapplicable 313(b)(1) . . . . . . . . . . . . . . . . . . . . Inapplicable 313(b)(2) . . . . . . . . . . . . . . . . . . . . 5.12 313(c) . . . . . . . . . . . . . . . . . . . . . 5.12 313(d) . . . . . . . . . . . . . . . . . . . . . 5.12 314(a) . . . . . . . . . . . . . . . . . . . . . 3.4 314(b) . . . . . . . . . . . . . . . . . . . . . Inapplicable 314(c)(1) and (2) . . . . . . . . . . . . . . . . 10.5 314(c)(3) . . . . . . . . . . . . . . . . . . . . Inapplicable 314(d) . . . . . . . . . . . . . . . . . . . . . Inapplicable 314(e) . . . . . . . . . . . . . . . . . . . . . 10.5 314(f) . . . . . . . . . . . . . . . . . . . . . Inapplicable 315(a), (c) and (d) . . . . . . . . . . . . . . . 5.1 315(b) . . . . . . . . . . . . . . . . . . . . . 4.11 315(e) . . . . . . . . . . . . . . . . . . . . . 4.12 316(a)(1) . . . . . . . . . . . . . . . . . . . . 4.9 316(a)(2) . . . . . . . . . . . . . . . . . . . . Inapplicable 316(a) (last sentence) . . . . . . . . . . . . . 6.4 316(b) . . . . . . . . . . . . . . . . . . . . . 4.7 317(a) . . . . . . . . . . . . . . . . . . . . . 4.2 317(b) . . . . . . . . . . . . . . . . . . . . . 2.4 318(a) . . . . . . . . . . . . . . . . . . . . . 10.7
- ---------------- (1) This Cross Reference Sheet is not part of the Indenture. 8 THIS SUBORDINATED INDENTURE, dated as of June 16, 1997 between Evergreen Media Corporation, a Delaware corporation (the "Issuer"), and The Bank of New York, a New York banking corporation (the "Trustee"), W I T N E S S E T H : WHEREAS, the Issuer has duly authorized the issuance of up to $300,000,000 principal amount of its unsecured 6% Convertible Subordinated Debentures Due 2012 (the "Securities") to be issued in exchange for shares of the Issuer's $3.00 Convertible Exchangeable Preferred Stock, par value $.01 per share (the "Convertible Preferred Stock"); WHEREAS, the Issuer has duly authorized the execution and delivery of this Indenture to provide, among other things, for the authentication, delivery and administration of the Securities; and WHEREAS, all things necessary to make this Indenture a valid indenture and agreement according to its terms have been done; NOW, THEREFORE: In consideration of the premises and the purchases of the Securities by the Holders thereof, the Issuer and the Trustee mutually covenant and agree for the equal and proportionate benefit of the respective Holders from time to time of the Securities as follows: ARTICLE 1 DEFINITIONS SECTION 1.01. Certain Terms Defined. The following terms (except as otherwise expressly provided or unless the context otherwise clearly requires) for all purposes of this Indenture and of any indenture supplemental hereto shall have the respective meanings specified in this Section. All other terms used in this Indenture which are defined in the Trust Indenture Act of 1939, as amended, or the definitions of which in the Securities Act of 1933, as amended (the "Securities Act") are referred to in the Trust Indenture Act of 1939, as amended, (except as herein otherwise expressly provided or unless the context otherwise requires), shall have the meanings assigned to such terms in said Trust Indenture Act and in the Securities Act as in force at the date of this Indenture. All accounting terms used herein and not expressly defined shall have the meanings given to them in 2 9 accordance with generally accepted accounting principles, and the term "generally accepted accounting principles" shall mean such accounting principles which are generally accepted at the date or time of any computation. The words "herein", "hereof" and "hereunder" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision. The terms defined in this Article include the plural as well as the singular. "Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, "control" when used with respect to any specified Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Agent" means any Registrar, Paying Agent or Conversion Agent, each as defined in Section 2.03. "Board of Directors" means either the Board of Directors of the Issuer or any committee of such Board duly authorized to act on its behalf. "Board Resolution" means a copy of one or more resolutions, certified by the secretary or an assistant secretary of the Issuer to have been duly adopted or consented to by the Board of Directors and to be in full force and effect, and delivered to the Trustee. "Business Day" means a day which is neither Saturday, Sunday, nor a day on which banking institutions and trust companies in the City and State of New York are authorized by law or regulation or executive order to close. "Certificate of Designation" means the Certificate of Designation relating to the Convertible Preferred Stock and filed by the Issuer with the Secretary of State of the State of Delaware. "Chancellor Merger" means the merger or mergers contemplated by the Chancellor Merger Agreement. "Chancellor Merger Agreement" means the Agreement and Plan of Merger dated February 19, 1997, by and among the Issuer, Chancellor Broadcasting Company and Chancellor Radio Broadcasting Company, as the same may be amended, or amended and restated, from time to time. 3 10 "Change of Control" has the meaning set forth in Section 14.01. "Change of Control Offfer" has the meaning set forth in Section 14.01. "Class A Common Stock" means the Class A Common Stock, par value $0.01 per share, of the Issuer as the same exists at the date of execution and delivery of this Indenture or as such stock may be reconstituted from time to time. "Common Stock" means the Class A Common Stock and the Class B Common Stock, par value $0.01 per share, of the Issuer as the same exists at the date of execution and delivery of this Indenture or as such stock may be reconstituted from time to time. "Conversion Price" means the principal amount of the Securities convertible into one share of Class A Common Stock, subject to adjustment in accordance with Section 13.04. "Convertible Preferred Stock" has the meaning set forth in the first recital to this Indenture, which by its terms is exchangeable at the option of the Issuer for Securities. "Corporate Trust Office" means the office of the Trustee at which the corporate trust business of the Trustee shall, at any particular time, be principally administered, which office is, at the date as of which this Indenture is dated, located at 101 Barclay Street, Floor 21W, New York, New York 10286. "Currency Agreement" means any foreign exchange contract, currency swap agreement or other similar agreement or arrangement designed to protect the Issuer against fluctuations in currency values. "Current Market Price" has the meaning set forth in Section 13.04(b). "Date of Conversion" has the meaning set forth in Section 13.02. "Event of Default" means any event or condition specified as such in Section 4.01. "Exchange Act" means the Securities Exchange Act of 1934, as amended. 4 11 "Exchange Date" means the date on which the outstanding shares of Convertible Preferred Stock are exchanged for the Securities. "Holder", "Holder of Securities", "Securityholder" or other similar terms mean in the case of any Security, the Person in whose name such Security is registered in the security register kept by the Issuer for that purpose in accordance with the terms hereof. "Indebtedness" means (i) any liability of any person (a) for borrowed money, (b) evidenced by bonds, debentures, notes or other similar instruments, (c) in respect of letters of credit or other similar instruments (or reimbursement obligations with respect thereto), (d) for the payment of the deferred purchase price of property or services or (e) as lessee under capital leases; (ii) all indebtedness of others secured by a lien on any asset of a person, whether or not such indebtedness is assumed by that person; (iii) any liability of others described in the preceding clause that the person has guaranteed; and (iv) to the extent not otherwise included, obligations under Currency Agreements and Interest Rate Agreements. "Indenture" means this instrument as originally executed and delivered or, if amended or supplemented as herein provided, as so amended or supplemented. "Interest Rate Agreement" means any interest rate protection agreement, interest rate future, interest rate option, interest rate swap, interest rate cap or other interest rate hedge arrangement, to or under which the Issuer is a party or a beneficiary on the date hereof or becomes a party or a beneficiary hereafter. "Issuer" means (except as otherwise provided in Article 5) Evergreen Media Corporation, a Delaware corporation, and, subject to Article 8, its successors and assigns. "Issuer Notice" has the meaning set forth in Section 14.02 hereof. "Issuer Order" means a written statement, request or order of the Issuer which is signed in its name by any two Officers. "NASDAQ" means the Nasdaq National Market. "Officer" means the chairman of the Board of Directors, the chief executive officer, president, any executive vice president, any senior vice president or any vice president, the chief financial officer or the treasurer of the Issuer. 5 12 "Officers' Certificate" means a certificate signed by the chairman of the board or the president or any vice president (whether or not designated by a number or numbers or a word or words added before or after the title "Vice President") and by the treasurer or any assistant treasurer or the secretary or any assistant secretary of the Issuer and delivered to the Trustee. Each such certificate shall include the statements provided for in Section 10.05, if and to the extent required hereby. "Opinion of Counsel" means an opinion in writing signed by legal counsel who may be an employee of or counsel to the Issuer or who may be other counsel satisfactory to the Trustee. Each such opinion shall include the statements provided for in Section 10.05, if and to the extent required hereby. "Original issue date" of any Security (or portion thereof) means the earlier of (a) the date of such Security or (b) the date of any Security (or portion thereof) for which such Security was issued (directly or indirectly) on registration of transfer, exchange or substitution. "Outstanding", when used with reference to Securities, shall, subject to the provisions of Section 6.04, mean, as of any particular time, all Securities authenticated and delivered by the Trustee under this Indenture, except (a) Securities theretofore canceled by the Trustee or delivered to the Trustee for cancellation; (b) Securities, or portions thereof, for the payment or redemption of which moneys in the necessary amount shall have been deposited in trust with the Trustee or with any Paying Agent (other than the Issuer) or shall have been set aside, segregated and held in trust by the Issuer (if the Issuer shall act as its own Paying Agent), provided that if such Securities are to be redeemed prior to the maturity thereof, notice of such redemption shall have been given as herein provided, or provision satisfactory to the Trustee shall have been made for giving such notice; and (c) Securities in substitution for which other Securities shall have been authenticated and delivered, or which shall have been paid, pursuant to the terms of Section 2.07 (unless proof satisfactory to the Trustee is presented that any of such Securities is held by a Person in whose hands such Security is a legal, valid and binding obligation of the Issuer), Securities converted into Class A Common Stock pursuant hereto and Securities not deemed Outstanding pursuant to and for the purposes of the last sentence of Section 11.02. 6 13 "Person" means any individual, corporation, partnership, joint venture, trust, unincorporated organization or government or any agency or political subdivision thereof. "principal" wherever used with reference to the Securities or any Security or any portion thereof shall be deemed to include "and premium, if any". "Redemption Date", when used with respect to any Security to be redeemed, means the date fixed for such redemption by or pursuant to this Indenture. "Redemption Price", when used with respect to any Security to be redeemed, means the price at which it is to be redeemed pursuant to this Indenture. "Repurchase Date" has the meaning set forth in Section 14.01 hereof. "Repurchase Price" has the meaning set forth in section 14.01 hereof. "Responsible Officer", when used with respect to the Trustee means the Chairman of the Board of Directors, the President, the Secretary, the Treasurer, or any other officer of the Trustee customarily performing corporate trust functions. "Sale Price" means the last sale price of the Class A Common Stock (or if no sale price is reported, the average of the high and low bid prices) as reported by the principal national or regional stock exchange on which the Class A Common Stock is listed or, if the Class A Common Stock is not listed on a national or regional stock exchange, as reported by NASDAQ or if the Class A Common Stock is not approved for quotation and trading on NASDAQ as reported by the National Quotation Bureau Incorporated. In the absence of a Sale Price for the Class A Common Stock, the Board of Directors shall in good faith determine the current market price for such Class A Common Stock on such basis as it considers appropriate. "SEC" means the Securities and Exchange Commission. "Securities Act" has the meaning set forth in the first paragraph of this Section 1.01 hereof. "Security" or "Securities" has the meaning stated in the first recital of this Indenture and more particularly means any securities authenticated and delivered under this Indenture. 7 14 "Senior Debt" means the principal of (and premium, if any) and interest on all Indebtedness of the Issuer (other than the Securities) (including without limitation any interest that would accrue but for the filing of a petition in bankruptcy, insolvency, reorganization or similar proceeding) on such Indebtedness, whether outstanding on the date of issuance of the Securities or thereafter created, incurred or assumed. Notwithstanding anything in the Indenture to the contrary, Senior Debt will not include (i) Indebtedness of or monies owned by the Issuer for compensation to employees or for goods or materials purchased or for services rendered in the ordinary course of business, (ii) Indebtedness of the Issuer to any Affiliate and (iii) any other Indebtedness which by the express terms of the instrument creating or evidencing the same are specifically designated as not being senior in right of payment to the Securities. "Subsidiary" means (i) any corporation or other entity of which securities or other ownership interests having ordinary voting power to elect a majority of the board of directors or other persons performing similar functions are at the time directly or indirectly owned by the Issuer or (ii) any partnership of which more than 50% of the partnership interests are owned by the Issuer or any Subsidiary. "TIA" (except as otherwise provided in Sections 7.01, 7.02 and 13.05) means the Trust Indenture Act of 1939, as amended, as in force at the date as of which this Indenture was originally executed. "Trading Day" means each Monday, Tuesday, Wednesday, Thursday and Friday, other than any day on which securities are not traded on the applicable securities exchange or in the applicable securities market. "Trustee" means the entity identified as "Trustee" in the first paragraph hereof and, subject to the provisions of Article Five, shall also include any successor trustee. "Trustee" shall also mean or include each Person who is then a trustee hereunder and if at any time there is more than one such Person. ARTICLE 2 SECURITIES SECTION 2.01. Form and Dating. The Securities and the Trustee's certificate of authentication shall be substantially in the form of Exhibit A, the terms of which are incorporated in and made a part of this Indenture. The Securities may have notations, legends or endorsements required by law, 8 15 securities exchange (including NASDAQ) rule, agreements to which the Issuer is subject or usage. The Issuer shall approve the form of the Securities and any notation, legend or endorsement on them. Each Security shall be dated the date of its authentication. The Securities shall bear such legend or legends relating to restrictions on transfer as the Issuer shall, based on written advice of counsel, deem necessary or appropriate in order to comply with Federal or state securities laws. SECTION 2.02. Execution and Authentication. Two Officers shall sign the Securities for the Issuer by manual or facsimile signature. The Issuer's seal shall be reproduced on the Securities. If an Officer whose signature is on a Security no longer holds that office at the time the Trustee authenticates the Security, the Security shall be valid nevertheless. A Security shall not be valid until the Trustee manually signs the certificate of authentication on the Security. The signature of the Trustee shall be conclusive evidence that the Security has been authenticated under this Indenture. The Trustee shall authenticate Securities for original issue in the aggregate principal amount of up to $300,000,000 upon an Issuer Order. The Issuer Order shall specify the amount of Securities to be authenticated and the date on which the original issue of Securities is to be authenticated. The aggregate principal amount of Securities outstanding at any time may not exceed $300,000,000 except as provided in Section 2.07. The Trustee's authentication of Securities pursuant to the next preceding paragraph shall be conditioned upon receipt of each of the following in form and substance satisfactory to the Trustee on or prior to the Exchange Date: (A) An Officer's Certificate to the effect that: (1) All conditions required to be satisfied under the Certificate of Designation for the exchange of the outstanding Convertible Preferred Stock for the Securities have been so satisfied on or prior to the Exchange Date; (2) The Indenture is duly qualified under the TIA; and 9 16 (3) No Event of Default (as defined in Section 4.01 hereof) shall have occurred and be continuing. (B) An Opinion of Counsel to the effect that: (1) The execution and delivery of the Indenture, the issuance of the Securities and the fulfillment of the terms herein and therein contemplated will not conflict with the charter or bylaws of the Issuer, or constitute a breach of or default under any material agreement, indenture, evidence of indebtedness, mortgage, deed of trust or other material agreement or instrument known to such counsel to which the Issuer is a party or by which it is bound, or any law, administrative regulation, rule, judgment, order or decree known to such counsel to be applicable to the Issuer or any of its properties; (2) The Indenture has been duly authorized by the Issuer and, when executed and delivered by the Issuer, will be a legal, valid and binding agreement of the Issuer enforceable in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, receivership, moratorium and similar laws affecting the rights and remedies of creditors generally and by the effect of general principles of equity, whether applied by a court of law or equity; (3) All legally required proceedings by the Issuer in connection with the authorization and issuance of the Securities have been duly taken, and all orders, consents or other authorizations or approvals of any public board or body legally required for the validity of the Securities have been obtained; (4) The Indenture is duly qualified under the TIA; and (5) The Securities, when executed and authenticated in accordance with the terms of this Indenture and delivered in exchange for the outstanding Convertible Preferred Stock, will be legal, valid and binding obligations of the Issuer enforceable in accordance with their terms, 10 17 except as such enforceability may be limited by bankruptcy, insolvency, reorganization, receivership, moratorium and similar laws affecting the rights and remedies of creditors generally and by the effect of general principles of equity, whether applied by a court of law or equity. The Trustee may appoint an authenticating agent acceptable to the Issuer to authenticate Securities. Unless limited by the term of such appointment, 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 the Issuer or an Affiliate of the Issuer. The Securities shall be issuable only in registered form without coupons and only in denominations of $1,000 and any integral multiple thereof. SECTION 2.03. Registrar, Paying Agent and Conversion Agent. The Issuer shall maintain an office or agency where Securities may be presented for registration of transfer or for exchange ("Registrar"), an office or agency where Securities may be presented for payment ("Paying Agent"), an office or agency where Securities may be presented for conversion ("Conversion Agent") and an office or agency where notices and demands to or upon the Issuer in respect of the Securities and this Indenture may be served. The Registrar shall keep a register of the Securities and of their transfer and exchange. The Issuer may appoint one or more co-Registrars, one or more additional Paying Agents and one or more additional Conversion Agents. The term "Registrar" includes any co-Registrar, the term "Paying Agent" includes any additional Paying Agent and the term "Conversion Agent" includes any additional Conversion Agent. The Issuer may change any Registrar, Paying Agent or Conversion Agent without notice to any Holder. If the Issuer fails to appoint or maintain another person as Registrar, Paying Agent or Conversion Agent, the Trustee shall act as such. The Issuer or any Affiliate of the Issuer may act as Registrar or Conversion Agent. Except for purposes of Article 9, the Issuer or any Affiliate of the Issuer may act as Paying Agent. The Issuer shall enter into an appropriate agency agreement with any Agent not a party to this Indenture. The agreement shall implement the provisions of this Indenture that relate to such Agent. The Issuer shall promptly notify the Trustee of the name and address of any Agent not a party to this Indenture. If the Issuer fails to maintain a Registrar, Paying Agent, Conversion Agent or agent for 11 18 service of notices and demands, or fails to give the foregoing notice, the Trustee shall act as such. The Issuer initially appoints the Trustee as Registrar, Paying Agent, Conversion Agent and agent for service of notices and demands. SECTION 2.04. Paying Agent to Hold Money in Trust. Not later than each due date of the principal of or interest on any Securities, the Issuer shall deposit with the Paying Agent a sum of money in immediately available funds sufficient to pay such principal or interest so becoming due. Subject to Section 9.02, the Paying Agent shall hold in trust for the benefit of Securityholders or the Trustee all money held by the Paying Agent for the payment of principal of or interest on the Securities, and shall notify the Trustee of any default by the Issuer in making any such payment. If the Issuer or an Affiliate of the Issuer acts as Paying Agent, it shall on or before each due date of the principal of or interest on any Securities segregate the money and hold it as a separate trust fund. The Issuer at any time may require a Paying Agent to pay all money held by it to the Trustee, and the Trustee may at any time during the continuance of any default, upon written request to a Paying Agent, require such Paying Agent to forthwith pay to the Trustee all sums so held in trust by such Paying Agent. Upon doing so, the Paying Agent (other than the Issuer) shall have no further liability for the money. 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 the Holders. If the Trustee is not the Registrar, the Issuer shall promptly furnish to the Trustee on or 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 for the names and addresses of the Holders. SECTION 2.06. Transfer and Exchange. When a Security is presented to the Registrar with a request to register a transfer thereof, the Registrar shall register the transfer as requested, and, when Securities are presented to the Registrar with a request to exchange them for an equal principal amount of Securities of other authorized denominations, the Registrar shall make the exchange as requested; provided that every Security presented or surrendered for registration of transfer or exchange shall be duly endorsed or be accompanied by a written instrument of transfer in form satisfactory to the Issuer and the Registrar duly executed by the Holder thereof or his attorney duly authorized in writing. To permit registration of transfers and exchanges, the Issuer shall execute and the Trustee shall authenticate Securities at the Registrar's request. The Issuer shall not be required (i) to issue, register the transfer of or exchange Securities during a 12 19 period beginning at the opening of business on a Business Day 15 days before the day of any selection of Securities for redemption under Section 11.02 and ending at the close of business on the day of selection, (ii) to register the transfer of or exchange any Security so selected for redemption in whole or in part, except the unredeemed portion of any Security being redeemed in part or (iii) to register the transfer or exchange of a Security between the record date and the next succeeding interest payment date. Any exchange or transfer shall be without charge, except that the Issuer may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto, but this provision shall not apply to any exchange pursuant to Section 7.05 or 11.02. Prior to due presentment for registration of transfer of any Security, the Trustee, any Agent and the Issuer 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 Security and for all other purposes whatsoever, whether or not such Security is overdue, and none of the Trustee, any Agent or the Issuer shall be affected by notice to the contrary. 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, and neither the Issuer nor the Trustee has received notice that such Security has been acquired by a bona fide purchaser, the Issuer may execute and the Trustee shall authenticate a replacement Security if the requirements of Section 8-405 of the New York Uniform Commercial Code, as in effect on the date of this Indenture, are met, and there shall have been delivered to the Issuer and the Trustee evidence to their satisfaction of the loss, destruction or theft of any Security if such is the case. An indemnity bond may be required that is sufficient in the judgment of the Issuer and the Trustee to protect the Issuer, the Trustee or any Agent from any loss which any of them may suffer if a Security is replaced. The Issuer may charge the Holder for its expenses (including the fees and expenses of the Trustee) in replacing a Security. Every replacement Security is an additional obligation of the Issuer. The provisions of this Section 2.07 are exclusive and shall preclude all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities. In the event any such mutilated, destroyed or wrongfully taken Security has become or is about to become due and payable, the Issuer, in its discretion may, instead of issuing a new Security, pay such Security. SECTION 2.08. Outstanding Securities. The Securities outstanding at any time are all of the Securities authenticated by the Trustee, except for those 13 20 canceled by it, those delivered to it for cancellation and those described in this Section 2.08 as not outstanding. If a Security is replaced pursuant to Section 2.07, it ceases to be outstanding until the Trustee receives proof satisfactory to it that the replaced Security is held by a bona fide purchaser. If the Paying Agent (other than the Issuer or an Affiliate of the Issuer) holds on a redemption date or maturity date money sufficient to pay the principal of and accrued interest on Securities payable on that date, then on and after that date such Securities cease to be outstanding and interest on them ceases to accrue. Subject to Section 2.09, a Security does not cease to be outstanding because the Issuer or an Affiliate of the Issuer holds the Security. SECTION 2.09. Treasury Securities. In determining whether the Holders of the required principal amount of Securities have concurred in any notice, direction, waiver or consent, Securities owned by the Issuer or by any Affiliate of the Issuer shall be disregarded, except that for the purposes of determining whether the Trustee shall be protected in relying on any such notice, direction, waiver or consent, only Securities that a Responsible Officer of the Trustee knows are so owned shall be so disregarded. Securities so owned that have been pledged in good faith shall not be disregarded if the pledgee establishes to the satisfaction of the Trustee the pledgee's right so to act with respect to the Securities and that the pledgee is not the Issuer or any Affiliate of the Issuer. SECTION 2.10. Temporary Securities. Until definitive Securities are ready for delivery, the Issuer may prepare and, upon the order of the Issuer, the Trustee shall authenticate temporary Securities. Temporary Securities shall be substantially in the form of definitive Securities but may have variations that the Issuer considers appropriate for temporary Securities. Without unreasonable delay, the Issuer shall prepare and the Trustee shall authenticate definitive Securities in exchange for temporary Securities. Until such exchange, temporary Securities shall be entitled to the same rights, benefits and privileges as definitive Securities. SECTION 2.11. Cancellation. The Issuer at any time may deliver Securities to the Trustee for cancellation. The Registrar, Paying Agent and Conversion Agent shall forward to the Trustee any Securities surrendered to them for transfer, exchange, payment or conversion. The Trustee and no one else shall cancel all Securities surrendered for transfer, exchange, payment, conversion or cancellation. The Issuer may not issue new Securities to replace Securities it has 14 21 paid or delivered to the Trustee for cancellation or which have been converted. All canceled Securities shall be held by the Trustee unless the Issuer shall direct in writing that the canceled Securities be returned to it. SECTION 2.12. Defaulted Interest. If the Issuer defaults in a payment of interest on the Securities, it shall pay the defaulted interest in any lawful manner plus, to the extent lawful, interest payable on the defaulted interest, to the persons who are Holders on a subsequent special record date, which date shall be at least five Business Days prior to the payment date, in each case at the rate provided in the Securities and in Section 3.01. The Issuer shall, with the consent of the Trustee, fix or cause to be fixed each such special record date and payment date. At least 15 days before a special record date, the Issuer (or the Trustee in the name of and at the expense of the Issuer) shall mail to the Holders a notice that states the special record date, the related payment date and the amount of such interest to be paid. SECTION 2.13. Cusip Numbers. The Issuer in issuing the Securities may use "CUSIP" numbers (if then generally in use), and, if so, the Trustee shall use "CUSIP" numbers in notices of redemption as a convenience to Holders; provided that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Securities or as contained in any notice of redemption and that reliance may be placed only on the other identification numbers printed on the Securities, and any such redemption shall not be affected by any defect in or omission of such numbers. SECTION 2.14. Computation of Interest. Unless otherwise provided in the Securities, interest on the Securities shall be computed on the basis of a 360-day year of twelve 30-day months. ARTICLE 3 COVENANTS OF THE ISSUER SECTION 3.01. Payment of Principal and Interest. The Issuer covenants and agrees that it will duly and punctually pay or cause to be paid the principal of, and interest on, each of the Securities at the place or places, at the respective times and in the manner provided in the Securities and this Indenture. Each installment of interest on the Securities may be paid by mailing checks for such interest payable to or upon the written order of the Holders of Securities entitled thereto as they shall appear on the registry books of the Issuer. 15 22 SECTION 3.02. Written Statements to Trustee. (a) The Issuer will deliver to the Trustee on or before May 1 in each year (beginning with the May 1 immediately following the date of the initial issuance of the Securities) a brief certificate (which need not comply with Section 10.05) from the principal executive, financial or accounting officer of the Issuer stating that in the course of the performance by the signer of his duties as an officer of the Issuer he would normally have knowledge of any default or non-compliance (without regard to periods of grace or notice requirements) by the Issuer in the performance or fulfillment of any covenant, agreement or condition contained in this Indenture, stating whether or not he has knowledge of any such default or non-compliance and, if so, specifying each such default or non-compliance of which the signer has knowledge and the nature thereof. (b) Commencing with the date the Securities are initially issued, the Issuer shall file with the Trustee written notice of the occurrence of any default or Event of Default within five Business Days of its becoming aware of any such default or Event of Default. SECTION 3.03. Corporate Existence. Subject to Article 8, the Issuer will do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence, rights and franchises; provided that the Issuer shall not be required to preserve its corporate existence or any such right or franchise if the Issuer shall determine that the preservation thereof is no longer desirable in the conduct of its business and that the loss thereof is not disadvantageous in any material respect to the Holders of the Securities. SECTION 3.04. Reports by the Issuer. The Issuer covenants: (a) to file with the Trustee, within 15 days after the Issuer is required to file the same 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 from time to time by rules and regulations prescribe) which the Issuer may be required to file with the SEC pursuant to Section 13 or Section 15(d) of the Exchange Act, or if the Issuer is not required to file information, documents, or reports pursuant to either of such sections, then to file with the Trustee and the SEC, in accordance with rules and regulations prescribed from time to time by the SEC, such of the supplementary and periodic information, documents, and reports which may be required pursuant to Section 13 of the Exchange Act; or, in respect of a security listed and registered on a national securities exchange as may be prescribed from time to time in such rules and regulations; provided that, prior to the date of initial issuance of the Securities, 16 23 the Issuer shall be required to file such information with the Trustee only if so requested by the Trustee; (b) to file with the Trustee and the SEC, in accordance with rules and regulations prescribed from time to time by the SEC, such additional information, documents, and reports with respect to compliance by the Issuer with the conditions and covenants provided for in this Indenture as may be required from time to time by such rules and regulations; provided that, prior to the date of initial issuance of the Securities, the Issuer shall be required to file such information with the Trustee only if so requested by the Trustee; and (c) to transmit by mail to all registered Holders of Securities as the names and addresses of such Holders appear upon the registry books of the Issuer, within 30 days after the filing thereof with the Trustee, such summaries of any information, documents and reports required to be filed by the Issuer pursuant to (a) and (b) in this Section above as may be required by rules and regulations prescribed from time to time by the SEC. (d) for so long as any of the Securities remain outstanding and are "restricted securities" within the meaning of Rule 144(a)(3) under the Securities Act, to make available at its expense, upon request, to any holder or beneficial owner of such Securities and any prospective purchasers thereof the information specified in Rule 144A(d)(4) under the Securites Act, unless the Issuer is then subject to Section 13 or 15(d) of the Exchange Act. Delivery of such information, documents and reports to the Trustee is for informational purposes only and the Trustee's receipt of such reports or documents shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Issuer's compliance with any of its covenants hereunder (as to which the Trustee is entitled to rely exclusively on Officers' Certificates). SECTION 3.05. Waiver of Usury Defense. The Issuer covenants (to the extent that it may lawfully do so) that it shall not assert, plead (as a defense or otherwise) or in any manner whatsoever claim (and shall actively resist any attempt to compel it to assert, plead or claim) in any action, suit or proceeding that the interest rate on the Securities violates present or future usury or other laws relating to the interest payable on any indebtedness and shall not otherwise avail itself (and shall actively resist any attempt to compel it to avail itself) of the benefits or advantages of any such laws. 17 24 SECTION 3.06. Liquidation. Neither the Board of Directors nor the stockholders of the Issuer shall adopt a plan of liquidation that provides for, contemplates or the effectuation of which is preceded by (a) the sale, lease, conveyance or other disposition of all or substantially all of the assets of the Issuer otherwise than substantially as an entirety (Article 6 of this Indenture being the Article that governs any such sale, lease, conveyance or other disposition substantially as an entirety) and (b) the distribution of all or substantially all of the proceeds of such sale, lease, conveyance or other disposition and of the remaining assets of the Issuer to the holders of the capital stock of the Issuer, unless the Issuer shall in connection with the adoption of such plan make provision for, or agree that prior to making any liquidating distributions it will make provision for, the satisfaction of the Issuer's obligations hereunder and under the Securities as to the payment of the principal thereof and interest thereon. The Issuer shall be deemed to make provision for such payments only if (1) the Issuer irrevocably deposits in trust with the Trustee money or direct obligations of the United States of America, backed by its full faith and credit ("U.S. Government Obligations"), maturing as to principal and interest in such amounts and at such times as are sufficient, without consideration of any reinvestment of such interest, to pay the principal of and interest on the Securities then outstanding to maturity and to pay all other sums payable by it hereunder or (2) there is an express assumption of the due and punctual payment of the Issuer's obligations hereunder and under the Securities and the performance and observance of all covenants and conditions to be performed by the Issuer hereunder by the execution and delivery of a supplemental indenture in form satisfactory to the Trustee by a person who acquires, or will acquire (otherwise than pursuant to a lease), a portion of the assets of the Issuer, and which person will have assets (immediately after the acquisition) and aggregate earnings (for such person's four full fiscal quarters immediately preceding such acquisition) equal to not less than the assets of the Issuer (immediately preceding such acquisition) and the aggregate earnings of the Issuer (for its four full fiscal quarters immediately preceding the acquisition), respectively, and which is a corporation organized under the laws of the United States, any State thereof or the District of Columbia; provided, however, that the Issuer shall not make any liquidating distribution until after the Issuer shall have certified to the Trustee with an Officers' Certificate at least five days prior to the making of any liquidating distribution that it has complied with the provisions of this Section 3.06. Notwithstanding the foregoing, the provisions of this Section 3.06 shall be subject to Article 4 hereof. 18 25 ARTICLE 4 REMEDIES OF THE TRUSTEE AND SECURITYHOLDERS ON EVENT OF DEFAULT SECTION 4.01. Event of Default Defined; Acceleration of Maturity; Waiver of Default. "Event of Default" with respect to Securities where used herein, means each one of the following events which shall have occurred and be continuing (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body): (a) default in the payment of any installment of interest upon any of the Securities as and when the same shall become due and payable, and continuance of such default for a period of 30 days; or (b) default in the payment of all or any part of the principal of or premium, if any, any of the Securities as and when the same shall become due and payable at maturity, upon any redemption or acceleration, by declaration or otherwise; or (c) failure on the part of the Issuer duly to observe or perform any other of the covenants or agreements on the part of the Issuer in the Securities or contained in this Indenture for a period of 45 days after the date on which written notice specifying such failure, stating that such notice is a "Notice of Default" hereunder and demanding that the Issuer remedy the same, shall have been given by registered or certified mail, return receipt requested, to the Issuer by the Trustee, or to the Issuer and the Trustee by the Holders of at least 25% in aggregate principal amount of the Outstanding Securities; or (d) a court having jurisdiction in the premises shall enter a decree or order for relief in respect of the Issuer in an involuntary case or proceeding under any applicable Federal or State bankruptcy, insolvency, reorganization or other similar law now or hereafter in effect, or a decree or order adjudging the Issuer a bankrupt or insolvent, approving as properly filed a petition seeking reorganization, assignment, adjustment or composition of, or in respect of, the Issuer under any applicable Federal or State law or appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar official) of the Issuer or for any substantial part of its property or ordering the winding up or liquidation of its affairs, and such decree or order shall remain unstayed and in effect for a period of 60 consecutive days; or 19 26 (e) the Issuer shall commence a voluntary case or proceeding under any applicable Federal or State bankruptcy, insolvency, reorganization or other similar law now or hereafter in effect, or any other case or proceeding to be adjudicated a bankrupt or insolvent, or consent to the entry of an order for relief in an involuntary case or proceeding under any applicable Federal or State bankruptcy, insolvency, reorganization or other similar law or to the commencement of any bankruptcy or insolvency case or proceeding against it, or to the filing by it of a petition or answer or consent seeking reorganization or relief under any applicable Federal or State law, or consent to the filing of such petition or to the appointment or taking possession by a receiver, liquidator, assignee, custodian, trustee or sequestrator (or similar official) of the Issuer or for any substantial part of its property, or make any general assignment for the benefit of creditors, or the admission by it in writing of its inability to pay its debts generally as they become due, or the taking of corporate action by the Issuer in furtherance of any such action. If an Event of Default (other than an Event of Default specified in subparagraphs (d) or (e)) occurs and is continuing with respect to the Securities, then, and in each and every such case, unless the Principal of all the Securities shall have already become due and payable, either the Trustee or the Holders of not less than 25% in aggregate principal amount of the Securities then Outstanding hereunder, by notice in writing to the Issuer (and to the Trustee if given by Securityholders), may declare the entire principal of all the Securities and the interest accrued thereon, to be due and payable immediately, and upon any such declaration the same shall become immediately due and payable. If an Event of Default specified in subparagraph (d) or (e) occurs, the unpaid principal of any and any accrued but unpaid interest on all the Securities 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. This provision, however, is subject to the condition that if, at any time after the principal of the Securities shall have been so declared due and payable, and before any judgment or decree for the payment of the moneys due shall have been obtained or entered as hereinafter provided, the Issuer shall pay or shall deposit with the Trustee a sum sufficient to pay all matured installments of interest upon all the Securities and the principal of any and all Securities which shall have become due otherwise than by acceleration (with interest upon such principal and, to the extent that payment of such interest is enforceable under applicable law, on overdue installments of interest, at the same rate as the rate of interest specified in the Securities, to the date of such payment or deposit) and such amount as shall be sufficient to cover reasonable compensation to the Trustee and each predecessor Trustee, their respective agents, attorneys and 20 27 counsel, and all other expenses and liabilities incurred, and all advances made, by the Trustee and each predecessor Trustee except as a result of negligence or bad faith, and if any and all Events of Default under the Indenture, other than the non-payment of the principal of Securities which shall have become due by acceleration, shall have been cured, waived or otherwise remedied as provided herein--then and in every such case the Holders of a majority in aggregate principal amount of the Securities then Outstanding, by written notice to the Issuer and to the Trustee, may waive all defaults and rescind and annul such declaration and its consequences, but no such waiver or rescission and annulment shall extend to or shall affect any subsequent default or shall impair any right consequent thereon. SECTION 4.02. Collection of Indebtedness by Trustee; Trustee May Prove Debt. The Issuer covenants that (a) in case default shall be made in the payment of any installment of interest on any of the Securities when such interest shall have become due and payable, and such default shall have continued for a period of 30 days or (b) in case default shall be made in the payment of all or any part of the principal of any of the Securities when the same shall have become due and payable, whether upon maturity or upon any redemption or acceleration or by declaration or otherwise, then upon demand of the Trustee, the Issuer will pay to the Trustee for the benefit of the Holders of the Securities the whole amount that then shall have become due and payable on all such Securities for principal or interest, as the case may be (with interest to the date of such payment upon the overdue principal and, to the extent that payment of such interest is enforceable under applicable law, on overdue installments of interest at the same rate as the rate of interest specified in the Securities); and in addition thereto, such further amount as shall be sufficient to cover the costs and expenses of collection, including reasonable compensation to the Trustee and each predecessor Trustee, their respective agents, attorneys and counsel, and any expenses and liabilities incurred, and all advances made, by the Trustee and each predecessor Trustee except as a result of its negligence or bad faith. Until such demand is made by the Trustee, the Issuer may pay the principal of and interest on the Securities to the registered Holders, whether or not the Securities be overdue. In case the Issuer shall fail forthwith to pay such amounts upon such demand, the Trustee, in its own name and as trustee of an express trust, shall be entitled and empowered to institute any action or proceedings at law or in equity for the collection of the sums so due and unpaid, and may prosecute any such action or proceedings to judgment or final decree, and may enforce any such judgment or final decree against the Issuer or other obligor upon the Securities 21 28 and collect in the manner provided by law out of the property of the Issuer or other obligor upon the Securities, wherever situated the moneys adjudged or decreed to be payable. In case there shall be pending proceedings relative to the Issuer or any other obligor upon the Securities under Title 11 of the United States Code or any other applicable Federal or State bankruptcy, insolvency, reorganization or other similar law, or in case a receiver, assignee or trustee in bankruptcy or reorganization, liquidator, sequestrator or similar official shall have been appointed for or taken possession of the Issuer or its property or such other obligor, or in case of any other comparable judicial proceedings relative to the Issuer or other obligor upon the Securities, or to the creditors or property of the Issuer or such other obligor, the Trustee, irrespective of whether the principal of the Securities shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Trustee shall have made any demand pursuant to the provisions of this Section, shall be entitled and empowered, by intervention in such proceedings or otherwise: (a) to file and prove a claim or claims for the whole amount of principal and interest owing and unpaid in respect of the Securities, and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for reasonable compensation to the Trustee and each predecessor Trustee, and their respective agents, attorneys and counsel, and for reimbursement of all expenses and liabilities incurred, and all advances made, by the Trustee and each predecessor Trustee, except as a result of negligence or bad faith) and of the Securityholders allowed in any judicial proceedings relative to the Issuer or other obligor upon the Securities, or to the creditors or property of the Issuer or such other obligor, (b) unless prohibited by applicable law and regulations, to vote on behalf of the Holders of the Securities in any election of a trustee or a standby trustee in arrangement, reorganization, liquidation or other bankruptcy or insolvency proceedings or person performing similar functions in comparable proceedings, and (c) to collect and receive any moneys or other property payable or deliverable on any such claims, and to distribute all amounts received with respect to the claims of the Securityholders and of the Trustee on their behalf; and any trustee, receiver, or liquidator, custodian or other similar official is hereby authorized by each of the Securityholders to make payments to the Trustee, and, in the event that the Trustee shall consent to the making of payments directly to the Securityholders, to pay to the Trustee such amounts as shall be sufficient to 22 29 cover reasonable compensation to the Trustee, each predecessor Trustee and their respective agents, attorneys and counsel, and all other expenses and liabilities incurred, and all advances made, by the Trustee and each predecessor Trustee except as a result of negligence or bad faith. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or vote for 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 except, as aforesaid, to vote for the election of a trustee in bankruptcy or similar person. All rights of action and of asserting claims under this Indenture, or under any of the Securities, may be prosecuted and enforced by the Trustee without the possession of any of the Securities or the production thereof on any trial or other proceedings relative thereto, and any such action or proceedings instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment, subject to the payment of the expenses, disbursements and compensation of the Trustee, each predecessor Trustee and their respective agents and attorneys, shall be for the ratable benefit of the Holders of the Securities. In any proceedings brought by the Trustee (and also any proceedings involving the interpretation of any provision of this Indenture to which the Trustee shall be a party) the Trustee shall be held to represent all the Holders of the Securities in respect of which such action was taken, and it shall not be necessary to make any Holders of the Securities parties to any such proceedings. SECTION 4.03. Application of Proceeds. Any moneys collected by the Trustee pursuant to this Article in respect of Securities shall be applied in the following order at the date or dates fixed by the Trustee and, in case of the distribution of such moneys on account of principal or interest, upon presentation of the several Securities and stamping (or otherwise noting) thereon the payment, or issuing Securities in reduced principal amounts in exchange for the presented Securities if only partially paid, or upon surrender thereof if fully paid: FIRST: To the payment of costs and expenses, including any and all amounts due the Trustee under Section 5.05; SECOND: Subject to Article 12 herein, in case the principal of the Securities shall not have become and be then due and payable, to the payment of interest on the Securities in default 23 30 in the order of the maturity of the installments of such interest, with interest (to the extent that such interest has been collected by the Trustee) upon the overdue installments of interest at the same rate as the rate of interest specified in the Securities, such payments to be made ratably to the persons entitled thereto, without discrimination or preference; THIRD: In case the principal of the Securities shall have become and shall be then due and payable, to the payment of the whole amount then owing and unpaid upon all the Securities for principal and interest, with interest upon the overdue principal, and (to the extent that such interest has been collected by the Trustee) upon overdue installments of interest at the same rate as the rate of interest specified in the Securities; and in case such moneys shall be insufficient to pay in full the whole amount so due and unpaid upon the Securities, then to the payment of such principal and interest, without preference or priority of principal over interest, or of interest over principal, or of any installment of interest over any other installment of interest, or of any Security over any other Security, ratably to the aggregate of such principal and accrued and unpaid interest; and FOURTH: To the payment of the remainder, if any, to the Issuer or any other person lawfully entitled thereto. SECTION 4.04. Suits for Enforcement. In case an Event of Default has occurred, has not been waived and is continuing, the Trustee may in its discretion proceed to protect and enforce the rights vested in it by this Indenture by such appropriate judicial proceedings as the Trustee shall deem most effectual to protect and enforce any of such rights, either at law or in equity or in bankruptcy or otherwise, whether for the specific enforcement of any covenant or agreement contained in this Indenture or in aid of the exercise of any power granted in this Indenture or to enforce any other legal or equitable right vested in the Trustee by this Indenture or by law. SECTION 4.05. Restoration of Rights on Abandonment of Proceedings. In case the Trustee or any Securityholder shall have proceeded to enforce any right under this Indenture and such proceedings shall have been discontinued or abandoned for any reason, or shall have been determined adversely to the Trustee or to such Securityholder, then and in every such case, subject to any determination in such proceeding, the Issuer, the Trustee and the Securityholders shall be restored severally and respectively to their former positions 24 31 and rights hereunder, and thereafter all rights, remedies and powers of the Issuer, the Trustee and the Securityholders shall continue as though no such proceedings had been taken. SECTION 4.06. Limitation on Suits by Securityholders. No Holder of any Security shall have any right by virtue or by availing of any provision of this Indenture to institute any action or proceeding, judicial or otherwise, at law or in equity or in bankruptcy or otherwise upon or under or with respect to this Indenture, or for the appointment of a trustee, receiver, liquidator, custodian or other similar official or for any other remedy hereunder, unless such Holder previously shall have given to the Trustee written notice of a continuing Event of Default as hereinbefore provided, and unless also the Holders of not less than 25% in aggregate principal amount of the Securities then Outstanding shall have made written request upon the Trustee to institute such action or proceedings in its own name as trustee hereunder and shall have offered to the Trustee such reasonable indemnity as it may require against the costs, expenses and liabilities to be incurred therein or thereby and the Trustee for 45 days after its receipt of such notice, request and offer of indemnity shall have failed to institute any such action or proceedings and no direction inconsistent with such written request shall have been given to the Trustee pursuant to Section 4.09; it being understood and intended, and being expressly covenanted by the taker and Holder of every Security with every other taker and Holder of the Securities and the Trustee, that no one or more Holders of Securities shall have any right in any manner whatever by virtue or by availing of any provision of this Indenture to affect, disturb or prejudice the rights of any other Holder of Securities, or to obtain or seek to obtain priority over or preference to any other such Holder or to enforce any right under this Indenture, except in the manner herein provided and for the equal, ratable and common benefit of all Holders of Securities. For the protection and enforcement of the provisions of this Section, each and every Securityholder and the Trustee shall be entitled to such relief as can be given either at law or in equity. SECTION 4.07. Unconditional Right of Securityholders to Receive Principal, Premium and Interest, to Convert and to Institute Certain Suits. Notwithstanding any other provision in this Indenture and any provision of any Security, the right of any Holder of any Security to receive payment of the principal of and interest on such Security on or after the respective due dates expressed in such Security, or to convert such Security in accordance with Article 13, or to institute suit for the enforcement of any such payment on or after such respective dates, or for the enforcement of such conversion right, shall not be impaired or affected without the consent of such Holder. 25 32 SECTION 4.08. Powers and Remedies Cumulative; Delay or Omission Not Waiver of Default. Except as provided in Section 2.07 and 4.07, no right or remedy herein conferred upon or reserved to the Trustee or to the Securityholders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy. No delay or omission of the Trustee or of any Holder of any of the Securities to exercise any right or power accruing upon any Event of Default occurring and continuing as aforesaid shall impair any such right or power or shall be construed to be a waiver of any such Event of Default or an acquiescence therein; and, subject to Section 4.06, every power and remedy given by this Indenture or by law to the Trustee or to the Securityholders may be exercised from time to time, and as often as shall be deemed expedient, by the Trustee or by the Securityholders, as the case may be. SECTION 4.09. Control by Securityholders. The Holders of a majority in aggregate principal amount of the Securities at the time Outstanding shall 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; provided that such direction shall not be otherwise than in accordance with law and the provisions of this Indenture and provided further that (subject to the provisions of Section 5.01) the Trustee shall have the right to decline to follow any such direction if the Trustee, being advised by counsel, shall determine that the action or proceeding so directed may expose the Trustee to personal liability or if the Trustee in good faith by its board of directors or the executive committee thereof shall so determine that the actions or forbearances specified in or pursuant to such direction would be unduly prejudicial to the interests of Holders of the Securities not joining in the giving of said direction, it being understood that (subject to Section 5.01) the Trustee shall have no duty to ascertain whether or not such actions or forbearances are unduly prejudicial to such Holders. Nothing in this Indenture shall impair the right of the Trustee in its discretion to take any action deemed proper by the Trustee and which is not inconsistent with such direction by Securityholders. SECTION 4.10. Waiver of Past Defaults. Prior to the declaration of the maturity of the Securities as provided in Section 4.01, the Holders of a majority 26 33 in aggregate principal amount of the Securities at the time Outstanding may on behalf of the Holders of all the Securities waive any past default or Event of Default hereunder and its consequences, except a default in respect of a covenant or provision hereof which cannot be modified or amended without the consent of the Holder of each Security affected (including, without limitation, the provisions with respect to payment of principal of and interest on such Security or with respect to conversion of such Security). Upon any such waiver, such default shall cease to exist and be deemed to have been cured and not to have occurred, and any Event of Default arising therefrom shall be deemed to have been cured, and not to have occurred for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other default or Event of Default or impair any right consequent thereon. SECTION 4.11. Trustee to Give Notice of Default, But May Withhold in Certain Circumstances. The Trustee shall, at the Issuer's expense, transmit to the Holders of Securities, as the names and addresses of such Holders appear on the registry books, notice by mail of all defaults known to the Trustee, such notice to be transmitted within 90 days after the occurrence thereof, unless such defaults shall have been cured before the giving of such notice (the term "default" or "defaults" for the purposes of this Section being hereby defined to mean any event or condition which is, or with notice or lapse of time or both would become, an Event of Default); provided that, except in the case of default in the payment of the principal or premium of, if any, or interest on any of the Securities, the Trustee shall be protected in withholding such notice if and so long as the board of directors, the executive committee, or a trust committee of directors or trustees and/or Responsible Officers of the Trustee in good faith determines that the withholding of such notice is in the interests of the Securityholders. SECTION 4.12. Right of Court to Require Filing of Undertaking to Pay Costs. All parties to this Indenture agree, and each Holder of any Security by his acceptance thereof shall be deemed to have agreed, that any court may in its discretion require, 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, suffered or omitted by it as Trustee, the filing by any party litigant in such suit other than the Trustee of an undertaking to pay the costs of such suit, and that such court may in its discretion assess reasonable costs, including reasonable attorneys' fees, against any party litigant in such suit including the Trustee, having due regard to the merits and good faith of the claims or defenses made by such party litigant; but the provisions of this Section shall not apply to any suit instituted by the Trustee, to any suit instituted by any Securityholder or group of Securityholders holding in 27 34 the aggregate more than 10% in aggregate principal amount of the Securities outstanding, or to any suit instituted by any Securityholder for the enforcement of the payment of the principal of or interest on any Security on or after the due date expressed in such Security or for the enforcement of a right to convert any Security in accordance with Article 13. SECTION 4.13. Waiver of Stay or Extension Laws. The Issuer covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of this Indenture; and the Issuer (to the extent that it may lawfully do so) 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. ARTICLE 5 CONCERNING THE TRUSTEE SECTION 5.01. Duties and Responsibilities of the Trustee; During Default; Prior to Default. With respect to the Holders of Securities issued hereunder, the Trustee, prior to the occurrence of an Event of Default and after the curing or waiving of all Events of Default which may have occurred, undertakes to perform such duties and only such duties as are specifically set forth in this Indenture. In case an Event of Default with respect to the Securities has occurred (which has not been cured or waived) 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 their exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs. No provision of this Indenture shall be construed to relieve the Trustee from liability for its own negligent action, its own negligent failure to act or its own wilful misconduct, except that (a) prior to the occurrence of an Event of Default and after the curing or waiving of all such Events of Default which may have occurred: (i) the duties and obligations of the Trustee with respect to Securities shall be determined solely by the express provisions of this 28 35 Indenture, and the Trustee shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and (ii) in the absence of bad faith on the part of the Trustee, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any statements, certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture; but in the case of any such statements, certificates or opinions which by any provision hereof are specifically required to be furnished to the Trustee, the Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Indenture; (b) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer or Responsible Officers of the Trustee, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts; and (c) the Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of Holders pursuant to Section 4.09 relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, under this Indenture. None of the provisions contained in this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur personal financial liability in the performance of any of its duties or in the exercise of any of its rights or powers, if there shall be reasonable ground for believing that the repayment of such funds or adequate indemnity against such liability is not reasonably assured to it. SECTION 5.02. Certain Rights of the Trustee. Subject to Section 5.01: (a) the Trustee may rely and shall be protected in acting or refraining from acting upon any resolution, Officers' Certificate or any other certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, coupon, security or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties; 29 36 (b) any request, direction, order or demand of the Issuer mentioned herein shall be sufficiently evidenced by an Officers' Certificate (unless other evidence in respect thereof be herein specifically prescribed); and any resolution of the Board of Directors may be evidenced to the Trustee by a copy thereof certified by the Secretary or an Assistant Secretary of the Issuer; (c) the Trustee may consult with counsel of its selection and any advice or Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted to be taken by it hereunder in good faith and in accordance with such advice or Opinion of Counsel; (d) the Trustee shall be under no obligation to exercise any of the trusts or powers vested in it by this Indenture at the request, order or direction of any of the Securityholders pursuant to the provisions of this Indenture, unless such Securityholders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which might be incurred therein or thereby; (e) the Trustee shall not be liable for any action taken, suffered or omitted by it in good faith and believed by it to be authorized or within the discretion, rights or powers conferred upon it by this Indenture; (f) the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, approval, appraisal, bond, debenture, note, coupon, security, or other paper or document unless requested in writing so to do by the Holders of not less than a majority in aggregate principal amount of the Securities then Outstanding, but during an Event of Default or upon reasonable grounds prior to such Event of Default the Trustee, in its discretion, may make such further inquiries or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such inquiry or investigation, it shall be entitled to examine the books, records and premises of the Issuer, personally or by agent or attorney; provided that, if the payment within a reasonable time to the Trustee of the costs, expenses or liabilities likely to be incurred by it in the making of such investigation is, in the opinion of the Trustee, not reasonably assured to the Trustee by the security afforded to it by the terms of this Indenture, the Trustee may require reasonable indemnity against such expenses or liabilities as a condition to proceeding; the reasonable expenses of every such examination shall be paid by the Issuer or, if paid by the Trustee or any predecessor trustee, shall be repaid by the Issuer upon demand; and 30 37 (g) the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys not regularly in its employ and the Trustee shall not be responsible for any misconduct or negligence on the part of any such agent or attorney appointed with due care by it hereunder. SECTION 5.03. Trustee Not Responsible for Recitals, Disposition of Securities or Application of Proceeds Thereof. The recitals contained herein and in the Securities, except the Trustee's certificates of authentication, shall be taken as the statements of the Issuer, and the Trustee assumes no responsibility for the correctness of the same. The Trustee makes no representation as to the validity or sufficiency of this Indenture or of the Securities. The Trustee shall not be accountable for the use or application by the Issuer of any of the Securities or of the proceeds thereof. SECTION 5.04. Trustee and Agents May Hold Securities; Collections, etc. The Trustee or any agent of the Issuer or the Trustee, in its individual or any other capacity, may become the owner or pledgee of Securities with the same rights it would have if it were not the Trustee or such agent and, subject to Sections 5.8 and 5.13, if operative, may otherwise deal with the Issuer and receive, collect, hold and retain collections from the Issuer with the same rights it would have if it were not the Trustee or such agent. SECTION 5.05. Compensation and Indemnification of Trustee and Its Prior Claim. The Issuer covenants and agrees to pay to the Trustee from time to time, and the Trustee shall be entitled to, such compensation as shall be agreed in writing between the Issuer and the Trustee (which shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust) and the Issuer covenants and agrees to pay or reimburse the Trustee and each predecessor Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by or on behalf of it in accordance with any of the provisions of this Indenture (including the reasonable compensation and the expenses and disbursements of its counsel and of all agents and other persons not regularly in its employ) except any such expense, disbursement or advance as may arise from its negligence or bad faith. The Issuer also covenants to indemnify the Trustee and each predecessor Trustee for, and to hold it harmless against, any and all loss, damage, claim, liability or expense, including taxes (other than taxes based on the income of the Trustee) incurred without negligence or bad faith on its part, arising out of or in connection with the acceptance or administration of this Indenture or the trusts hereunder and its duties hereunder, including but not limited to the costs and expenses of defending itself against or investigating any claim or liability in connection with the exercise or performance of any of its 31 38 powers or duties hereunder. The obligations of the Issuer under this Section to compensate and indemnify the Trustee and each predecessor Trustee and to pay or reimburse the Trustee and each predecessor Trustee for expenses, disbursements and advances shall constitute additional indebtedness hereunder and shall survive the satisfaction and discharge of this Indenture. Such additional indebtedness shall be a senior claim to that of the Securities upon all property and funds held or collected by the Trustee as such, except funds held in trust for the payment of principal of or interest on particular Securities, and the Securities are hereby subordinated to such senior claim. When the Trustee incurs expenses or renders services in connection with an Event of Default specified in Section 4.01 or in connection with Article 4 hereof, the expenses (including the reasonable fees and expenses of its counsel) and the compensation for the service in connection therewith are intended to constitute expenses of administration under any bankruptcy law. SECTION 5.06. Right of Trustee to Rely on Officers' Certificate, etc. Subject to Sections 5.01 and 5.02, whenever in the administration of the trusts of this Indenture the Trustee shall deem it necessary or desirable that a matter be proved or established prior to taking or suffering or omitting any action hereunder, such matter (unless other evidence in respect thereof be herein specifically prescribed) may, in the absence of negligence or bad faith on the part of the Trustee, be deemed to be conclusively proved and established by an Officers' Certificate delivered to the Trustee, and such certificate, in the absence of negligence or bad faith on the part of the Trustee, shall be full warrant to the Trustee for any action taken, suffered or omitted by it under the provisions of this Indenture upon the faith thereof. SECTION 5.07. Persons Eligible for Appointment as Trustee. The Trustee hereunder shall at all times be a corporation organized and doing business under the laws of the United States of America or of any State or the District of Columbia having a combined capital and surplus of at least $50,000,000, and which is authorized under such laws to exercise corporate trust powers and is subject to supervision or examination by Federal, State or District of Columbia authority. Such corporation shall have its principal place of business in The City of New York if there be such a corporation in such location willing to act upon reasonable and customary terms and conditions. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the aforesaid supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. In case at any time the Trustee shall cease to be eligible in 32 39 accordance with the provisions of this Section, the Trustee shall resign immediately in the manner and with the effect specified in Section 5.08. The provisions of this Section 5.07 are in furtherance of and subject to Section 310(a) of the TIA. SECTION 5.08. Resignation and Removal; Appointment of Successor Trustee. (a) The Trustee may at any time resign by giving written notice of resignation to the Issuer. Upon receiving such notice of resignation, the Issuer shall promptly appoint a successor trustee by written instrument in duplicate, executed by authority of the Board of Directors, one copy of which instrument shall be delivered to the resigning Trustee and one copy to the successor trustee. If no successor trustee shall have been so appointed and have accepted appointment within 30 days after the giving of such notice of resignation, the resigning trustee may petition any court of competent jurisdiction for the appointment of a successor trustee, or any Securityholder who has been a bona fide Holder of a Security or Securities for at least six months may, subject to the provisions of Section 4.12, on behalf of himself and all others similarly situated, petition any such court for the appointment of a successor trustee. Such court may thereupon, after such notice, if any, as it may deem proper and prescribe, appoint a successor trustee. (b) In case at any time any of the following shall occur: (i) the Trustee shall fail to comply with the provisions of Section 310(b) of the TIA after written request therefor by the Issuer or by any Securityholder who has been a bona fide Holder of a Security or Securities for at least six months; or (ii) the Trustee shall cease to be eligible in accordance with the provisions of Section 5.07 and shall fail to resign after written request therefor by the Issuer or by any such Securityholder; or (iii) the Trustee shall become incapable of acting, or shall be adjudged a bankrupt or insolvent, or a receiver or liquidator of the Trustee or of its property shall be appointed, or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation; then, in any such case, (1) the Issuer may remove the Trustee and appoint a successor trustee by written instrument, in duplicate, executed by order of the Board of Directors of the Issuer, one copy of which instrument shall be delivered 33 40 to the Trustee so removed and one copy to the successor trustee (or if no successor trustee shall have been so appointed and have accepted appointment within 30 days after the giving of such notice from the Issuer, such removed trustee may petition any court of competent jurisdiction for the appointment of a successor trustee), or, (2) subject to the provisions of Section 4.12, any Securityholder who has been a bona fide Holder of a Security or Securities for at least six months may on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor trustee. Such court may thereupon, after such notice, if any, as it may deem proper and prescribe, remove the Trustee and appoint a successor trustee. (c) The Holders of a majority in aggregate principal amount of the Securities at the time outstanding may at any time remove the Trustee and appoint a successor trustee by delivering to the Trustee so removed, to the successor trustee so appointed and to the Issuer the evidence provided for in Section 6.01 of the action in that regard taken by the Securityholders (or if the trustee has been removed but no successor trustee shall have been so appointed and have accepted appointment within 30 days after the provision of such evidence, such removed trustee may petition any court of competent jurisdiction for the appointment of a successor trustee). (d) Any resignation or removal of the Trustee and any appointment of a successor trustee pursuant to any of the provisions of this Section 5.08 shall become effective upon acceptance of appointment by the successor trustee as provided in Section 5.09. (e) The Issuer shall give notice of each resignation and each removal of the Trustee and each appointment of a successor trustee by mailing written notice of such event by first-class mail, postage prepaid, to the Holders of Securities affected as their names and addresses appear in the Security register. Each notice shall include the name of the successor trustee and the address of its principal corporate trust office. SECTION 5.09. Acceptance of Appointment by Successor Trustee. Any successor trustee appointed as provided in Section 5.08 shall execute and deliver to the Issuer and to its predecessor trustee an instrument accepting such appointment hereunder, and thereupon the resignation or removal of the predecessor trustee shall become effective and such successor trustee, without any further act, deed or conveyance, shall become vested with all rights, powers, duties and obligations of its predecessor hereunder, with like effect as if originally named as trustee herein; but, nevertheless, on the written request of the 34 41 Issuer or of the successor trustee, upon payment of its charges then unpaid, the trustee ceasing to act shall, subject to Section 9.04, pay over to the successor trustee all moneys at the time held by it hereunder and shall execute and deliver an instrument transferring to such successor trustee all such rights, powers, duties and obligations. Upon request of any such successor trustee, the Issuer shall execute any and all instruments in writing for more fully and certainly vesting in and confirming to such successor trustee all such rights and powers. Any trustee ceasing to act shall, nevertheless, retain a prior claim upon all property or funds held or collected by such trustee to secure any amounts then due it pursuant to the provisions of Section 5.05. Upon acceptance of appointment by a successor trustee as provided in this Section 5.09, the Issuer shall mail notice thereof by first-class mail to the Holders of Securities at their last addresses as they shall appear in the Security register. If the acceptance of appointment is substantially contemporaneous with the resignation, then the notice called for by the preceding sentence may be combined with the notice called for by Section 5.08. If the Issuer fails to mail such notice within 10 days after acceptance of appointment by the successor trustee, the successor trustee shall cause such notice to be mailed at the expense of the Issuer. SECTION 5.10. Merger, Conversion, Consolidation or Succession to Business of Trustee. Any corporation into which the Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any corporation succeeding to the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder, provided that such corporation shall be qualified under the provisions of Section 310(b) of the TIA and eligible under the provisions of Section 5.07, without the execution or filing of any paper or any further act on the part of any of the parties hereto, anything herein to the contrary notwithstanding. In case at the time such successor to the Trustee shall succeed to the trusts created by this Indenture any of the Securities shall have been authenticated but not delivered, any such successor to the Trustee may adopt the certificate of authentication of any predecessor Trustee and deliver such Securities so authenticated; and, in case at that time any of the Securities shall not have been authenticated, any successor to the Trustee may authenticate such Securities either in the name of any predecessor hereunder or in the name of the successor trustee; and in all such cases such certificate shall have the full force which it is anywhere in the Securities or in this Indenture provided that the certificate of the Trustee shall have; provided, that the right to adopt the certificate of authentication of any predecessor Trustee or to authenticate Securities in the name of any predecessor 35 42 Trustee shall apply only to its successor or successors by merger, conversion or consolidation. SECTION 5.11. Preferential Collection of Claims Against the Issuer. (a) Subject to the provisions of this Section, if the Trustee shall be or shall become a creditor, directly or indirectly, secured or unsecured, of the Issuer within three months prior to a default, as defined in subsection (c) of this Section, or subsequent to such a default, then, unless and until such default shall be cured, the Trustee shall set apart and hold in a special account for the benefit of the Trustee individually, the Holders of the Securities and the Holders of other indenture securities (as defined in this Section): (1) an amount equal to any and all reductions in the amount due and owing upon any claim as such creditor in respect of principal or interest, effected after the beginning of such three months' period and valid as against the Issuer and its other creditors, except any such reduction resulting from the receipt or disposition of any property described in subsection (a)(2) of this Section, or from the exercise of any right of set-off which the Trustee could have exercised if a petition in bankruptcy had been filed by or against the Issuer upon the date of such default; and (2) all property received by the Trustee in respect of any claim as such creditor, either as security therefor, or in satisfaction or composition thereof, or otherwise, after the beginning of such three months' period, or an amount equal to the proceeds of any such property, if disposed of, subject, however, to the rights, if any, of the Issuer and its other creditors in such property or such proceeds. Nothing herein contained, however, shall affect the right of the Trustee: (A) to retain for its own account (i) payments made on account of any such claim by any person (other than the Issuer) who is liable thereon, (ii) the proceeds of the bona fide sale of any such claim by the Trustee to a third person, and (iii) distributions made in cash, securities or other property in respect of claims filed against the Issuer in bankruptcy or receivership or in proceedings for reorganization pursuant to Title 11 of the United States Code or applicable state law; 36 43 (B) to realize, for its own account, upon any property held by it as security for any such claim, if such property was so held prior to the beginning of such three months' period; (C) to realize, for its own account, but only to the extent of the claim hereinafter mentioned, upon any property held by it as security for any such claim, if such claim was created after the beginning of such three months' period and such property was received as security therefor simultaneously with the creation thereof, and if the Trustee shall sustain the burden of proving that at the time such property was so received the Trustee had no reasonable cause to believe that a default as defined in Subsection (c) of this Section would occur within three months; or (D) to receive payment on any claim referred to in paragraph (B) or (C), against the release of any property held as security for such claim as provided in such paragraph (B) or (C), as the case may be, to the extent of the fair value of such property. For the purposes of paragraphs (B), (C) and (D) property substituted after the beginning of such three months' period for property held as security at the time of such substitution shall, to the extent of the fair value of the property released, have the same status as the property released, and, to the extent that any claim referred to in any of such paragraphs is created in renewal of or in substitution for or for the purpose of repaying or refunding any pre-existing claim of the Trustee as such creditor, such claim shall have the same status as such pre-existing claim. If the Trustee shall be required to account, the funds and property held in such special account and the proceeds thereof shall be apportioned between the Trustee, the Securityholders and the Holders of other indenture securities in such manner that the Trustee, the Securityholders and the Holders of other indenture securities realize, as a result of payments from such special account and payments of dividends on claims filed against the Issuer in bankruptcy or receivership or in proceedings for reorganization pursuant to Title 11 of the United States Code or applicable State law, the same percentage of their respective claims, figured before crediting to the claim of the Trustee anything on account of the receipt by it from the Issuer of the funds and property in such special account and before crediting to the respective claims of the Trustee, the Securityholders and the Holders of other indenture securities dividends on claims filed against the Issuer in bankruptcy or receivership or in proceedings for reorganization pursuant to Title 11 of the United States Code or applicable State law, but after crediting 37 44 thereon receipts on account of the indebtedness represented by their respective claims from all sources other than from such dividends and from the funds and property so held in such special account. As used in this paragraph, with respect to any claim, the term "dividends" shall include any distribution with respect to such claim, in bankruptcy or receivership or in proceedings for reorganization pursuant to Title 11 of the United States Code or applicable State law, whether such distribution is made in cash, securities or other property, but shall not include any such distribution with respect to the secured portion, if any, of such claim. The court in which such bankruptcy, receivership or proceeding for reorganization is pending shall have jurisdiction (i) to apportion between the Trustee, the Securityholders and the Holders of other indenture securities, in accordance with the provisions of this paragraph, the funds and property held in such special account and the proceeds thereof, or (ii) in lieu of such apportionment, in whole or in part, to give to the provisions of this paragraph due consideration in determining the fairness of the distributions to be made to the Trustee, the Securityholders and the Holders of other indenture securities with respect to their respective claims, in which event it shall not be necessary to liquidate or to appraise the value of any securities or other property held in such special account or as security for any such claim, or to make a specific allocation of such distributions as between the secured and unsecured portions of such claims, or otherwise to apply the provisions of this paragraph as a mathematical formula. Any Trustee who has resigned or been removed after the beginning of such three months' period shall be subject to the provisions of this subsection (a) as though such resignation or removal had not occurred. If any Trustee has resigned or been removed prior to the beginning of such three months' period, it shall be subject to the provisions of this subsection (a) if and only if the following conditions exist: (i) the receipt of property or reduction of claim which would have given rise to the obligation to account, if such Trustee had continued as trustee, occurred after the beginning of such three months' period; and (ii) such receipt of property or reduction of claim occurred within three months after such resignation or removal. (b) There shall be excluded from the operation of this Section a creditor relationship arising from: (1) the ownership or acquisition of securities issued under any indenture, or any security or securities 38 45 having a maturity of one year or more at the time of acquisition by the Trustee; (2) advances authorized by a receivership or bankruptcy court of competent jurisdiction or by this Indenture for the purpose of preserving any property which shall at any time be subject to the lien of this Indenture or of discharging tax liens or other prior liens or encumbrances thereon, if notice of such advances and of the circumstances surrounding the making thereof is given to the Securityholders at the time and in the manner provided in this Indenture; (3) disbursements made in the ordinary course of business in the capacity of trustee under an indenture, transfer agent, registrar, custodian, paying agent, fiscal agent or depositary, or other similar capacity; (4) an indebtedness created as a result of services rendered or premises rented or an indebtedness created as a result of goods or securities sold in a cash transaction as defined in subsection (c)(3) below; (5) the ownership of stock or of other securities of a corporation organized under the provisions of Section 25(a) of the Federal Reserve Act, as amended, which is directly or indirectly a creditor of the Issuer; or (6) the acquisition, ownership, acceptance or negotiation of any drafts, bills of exchange, acceptances or obligations which fall within the classification of self-liquidating paper as defined in subsection (c)(4) of this Section. (c) As used in this Section: (1) the term "default" shall mean any failure to make payment in full of the principal of or interest upon any of the Securities or upon the other indenture securities when and as such principal or interest becomes due and payable; 39 46 (2) the term "other indenture securities" shall mean securities upon which the Issuer is an obligor (as defined in the TIA) outstanding under any other indenture (i) under which the Trustee is also trustee, (ii) which contains provisions substantially similar to the provisions of Subsection (a) of this Section, and (iii) under which a default exists at the time of the apportionment of the funds and property held in said special account; (3) the term "cash transaction" shall mean any transaction in which full payment for goods or securities sold is made within seven days after delivery of the goods or securities in currency or in checks or other orders drawn upon banks or bankers and payable upon demand; (4) the term "self-liquidating paper" shall mean any draft, bill of exchange, acceptance or obligation which is made, drawn, negotiated or incurred by the Issuer for the purpose of financing the purchase, processing, manufacture, shipment, storage or sale of goods, wares or merchandise and which is secured by documents evidencing title to, possession of, or a lien upon the goods, wares or merchandise or the receivables or proceeds arising from the sale of the goods, wares or merchandise previously constituting the security, provided the security is received by the Trustee simultaneously with the creation of the creditor relationship with the Issuer arising from the making, drawing, negotiating or incurring of the draft, bill of exchange, acceptance or obligation; and (5) the term "Issuer" shall mean any obligor upon the Securities. (d) Notwithstanding any provision in this Indenture to the contrary, for purposes of this Section 5.11, the term "Trustee" shall include any separate trustee or co-trustee that may be appointed to act as trustee hereunder. SECTION 5.12. Reports by Trustee to Holders. Within 60 days after each May 15 beginning with the May 15 following the date of this Indenture, the Trustee shall, if required by Section 313(a) of the TIA, mail to each Holder a 40 47 brief report dated as of such May 15 that complies with Section 313(a) of the TIA. The Trustee also shall comply with Section 313(b) of the TIA. A copy of each report at the time of its mailing to the Holders shall be mailed to the Issuer and filed with the SEC and each securities exchange, if any, on which the Securities are listed. The Issuer shall promptly notify the Trustee whenever the Securities become listed on any securities exchange. ARTICLE 6 CONCERNING THE SECURITYHOLDERS SECTION 6.01. Evidence of Action Taken by Securityholders. Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Securityholders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Securityholders in person or by agent duly appointed in writing; and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Trustee. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and (subject to Sections 5.01 and 5.02) conclusive in favor of the Trustee and the Issuer, if made in the manner provided in this Article. SECTION 6.02. Proof of Execution of Instruments and of Holding of Securities. Subject to Sections 5.01 and 5.02, the fact and date of the execution of any instrument by any Securityholder or his agent or proxy, or the authority of such an agent or proxy to execute such an instrument may be proved (a) by the affidavit of a witness of such execution, or (b) by a certificate of a notary public (or other officer authorized by law to take acknowledgments of deeds) as to such execution, or (c) in accordance with such reasonable rules and regulations as may be prescribed by the Trustee or in such manner as shall be satisfactory to the Trustee. The holding of Securities shall be proved by the Security register or by a certificate of the registrar thereof. SECTION 6.03. Holders to Be Treated as Owners. Prior to due presentment of a Security for registration of transfer, the Issuer, the Trustee and any agent of the Issuer or the Trustee may deem and treat the person in whose name any Security shall be registered upon the Security register as the absolute owner of such Security (whether or not such Security shall be overdue and notwithstanding any notation of ownership or other writing thereon) for the 41 48 purpose of receiving payment of or on account of the principal of and, subject to the provisions of this Indenture, interest on such Security and for all other purposes; and neither the Issuer nor the Trustee nor any agent of the Issuer or the Trustee shall be affected by any notice to the contrary. All such payments so made to any such person, or upon his order, shall be valid, and, to the extent of the sum or sums so paid, effectual to satisfy and discharge the liability for moneys payable upon any such Security. SECTION 6.04. Securities Owned by Issuer Deemed Not Outstanding. In determining whether the Holders of the requisite aggregate principal amount of Outstanding Securities have concurred in any direction, consent or waiver under this Indenture, Securities which are owned by the Issuer or any other obligor on the Securities or by any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Issuer or any other obligor on the Securities shall be disregarded and deemed not to be Outstanding for the purpose of any such determination, except that for the purpose of determining whether the Trustee shall be protected in relying on any such direction, consent or waiver only Securities which the Trustee knows are so owned shall be so disregarded. Securities so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgee's right so to act with respect to such Securities and that the pledgee is not the Issuer or any other obligor upon the Securities or any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Issuer or any other obligor on the Securities. In case of a dispute as to such right, the advice of counsel shall be full protection in respect of any decision made by the Trustee in accordance with such advice. Upon request of the Trustee, the Issuer shall furnish to the Trustee promptly an Officers' Certificate listing and identifying all Securities, if any, known by the Issuer to be owned or held by or for the account of any of the above-described Persons; and, subject to Sections 5.01 and 5.02, the Trustee shall be entitled to accept such Officers' Certificate as conclusive evidence of the facts therein set forth and of the fact that all Securities not listed therein are Outstanding for the purpose of any such determination. SECTION 6.05. Right of Revocation of Action taken. At any time prior to (but not after) the evidencing to the Trustee, as provided in Section 6.01, of the taking of any action by the Holders of the percentage in aggregate principal amount of the Securities specified in this Indenture in connection with such action, any Holder of a Security the serial number of which is shown by the evidence to be included among the serial numbers of the Securities the Holders of which have consented to such action may, by filing written notice at the Corporate Trust Office and upon proof of holding as provided in this Article, 42 49 revoke such action so far as concerns such Security. Except as aforesaid any such action taken by the Holder of any Security shall be conclusive and binding upon such Holder and upon all future Holders and owners of such Security and of any Securities issued in exchange or substitution therefor or on registration or transfer thereof, irrespective of whether or not any notation in regard thereto is made upon any such Security. Any action taken by the Holders of the percentage in aggregate principal amount of the Securities specified in this Indenture in connection with such action shall be conclusively binding upon the Issuer, the Trustee and the Holders of all the Securities. SECTION 6.06. Record Date for Consents and Waivers. The Issuer may, but shall not be obligated to, direct the Trustee to establish a record date for the purpose of determining the Persons entitled to (i) waive any past default with respect to the Securities in accordance with Section 4.10, (ii) consent to any supplemental indenture in accordance with Section 7.02 or (iii) waive compliance with any term, condition or provision of any covenant hereunder (if the Indenture should expressly provide for such waiver). If a record date is fixed, the Holders of Securities on such record date, or their duly designated proxies, and any such Persons, shall be entitled to waive any such past default, consent to any such supplemental indenture or waive compliance with any such term, condition or provision, whether or not such Holder remains a Holder after such record date; provided, however, that unless such waiver or consent is obtained from the Holders, or duly designated proxies, of the requisite principal amount of Outstanding Securities prior to the date which is the 90th day after such record date, any such waiver or consent previously given shall automatically and without further action by any Holder be canceled and of no further effect. ARTICLE 7 SUPPLEMENTAL INDENTURES SECTION 7.01. Supplemental Indentures Without Consent of Securityholders. The Issuer, when authorized by a resolution of its Board of Directors, and the Trustee may from time to time and at any time enter into an indenture or indentures supplemental hereto (which shall conform to the provisions of the TIA as in force at the date of the execution thereof) for one or more of the following purposes: (a) to convey, transfer, assign, mortgage or pledge to the Trustee as security for the Securities any property or assets; 43 50 (b) to evidence the succession of another corporation to the Issuer, or successive successions, and the assumption by the successor corporation of the covenants, agreements and obligations of the Issuer pursuant to Article 8; (c) to add to the covenants of the Issuer such further covenants, restrictions, conditions or provisions as its Board of Directors and the Trustee shall consider to be for the protection or benefit of the Holders of Securities, and to make the occurrence, or the occurrence and continuance, of a default in any such additional covenants, restrictions, conditions or provisions an Event of Default permitting the enforcement of all or any of the several remedies provided in this Indenture as herein set forth; provided that in respect of any such additional covenant, restriction, condition or provision such supplemental indenture may provide for a particular period of grace after default (which period may be shorter or longer than that allowed in the case of other defaults) or may provide for an immediate enforcement upon such an Event of Default or may limit the remedies available to the Trustee upon such an Event of Default or may limit the right of the Holders of a majority in aggregate principal amount of the Securities to waive such an Event of Default; (d) to cure any ambiguity or to correct or supplement any provision contained herein or in any supplemental indenture which may be defective or inconsistent with any other provision contained herein or in any supplemental indenture or to make such other provisions in regard to matters or questions arising under this Indenture or under any supplemental indenture as the Board of Directors may deem necessary or desirable, provided that no such action shall adversely affect the interests of the Holders of the Securities; or (e) to provide for adjustment of conversion rights pursuant to Section 13.05; and The Trustee is hereby authorized to join in the execution of any such supplemental indenture, to make any further appropriate agreements and stipulations which may be therein contained and to accept the conveyance, transfer, assignment, mortgage or pledge of any property thereunder, but the Trustee shall not be obligated to enter into any such supplemental indenture which affects the Trustee's own rights, duties, immunities or liabilities under this Indenture or otherwise. Any supplemental indenture authorized by the provisions of this Section may be executed without the consent of the Holders of any of the Securities at the time Outstanding, notwithstanding any of the provisions of Section 7.02. 44 51 SECTION 7.02. Supplemental Indentures with Consent of Securityholders. With the consent (evidenced as provided in Article 6) of the Holders of not less than a majority in aggregate principal amount of the Securities at the time Outstanding (or prior to any exchange of Securities for Convertible Preferred Stock, with the consent of holders of not less than a majority of the outstanding shares of Convertible Preferred Stock), the Issuer, when authorized by a resolution of its Board of Directors, and the Trustee may, from time to time and at any time, enter into an indenture or indentures supplemental hereto (which shall conform to the provisions of the TIA as in force at the date of execution thereof) for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of any supplemental indenture or of modifying in any manner the rights of the Holders of the Securities; provided that no such supplemental indenture shall (a) extend the final maturity of any Security, or reduce the principal amount thereof or premium, if any, thereon, or reduce the rate or extend the time of payment of interest thereon, or any premium payable upon the redemption thereof, or change the place of payment where, or the coin or currency in which, any principal, premium, interest is payable, or reduce or alter the method of computation of any amount payable on redemption or repayment thereof (or the time at which any such redemption may be made), or impair or affect the right of any Securityholder to institute suit for the payment or conversion thereof or materially and adversely affect the right to convert the Securities in accordance with Article 13 or the right of the Holders to require redemption in accordance with Article 14, in each case, without the consent of the Holder of each Security so affected; provided no consent of any Holder of any Security shall be necessary under this Section 7.02 to permit the Trustee and the Issuer to execute supplemental indentures pursuant to Section 7.01(e) and Section 13.05 of this Indenture; or (b) reduce the aforesaid percentage in principal amount of Outstanding Securities, the consent of the Holders of which is required for any such supplemental indenture, without the consent of the Holders of each Security so affected; or (c) reduce the percentage of Securities necessary to consent to waive any past default under this Indenture to less than a majority, without the consent of the Holders of each Security so affected, or (d) modify the provisions of Article 12 hereof or any other provision hereof relating to subordination of the Securities in any manner adverse to the Securityholders without the consent of the Holder of each Security so affected, or (e) modify any of the provisions of this Section or Section 4.10, except to increase any such percentage or to provide that certain other provisions of this Indenture cannot be modified or waived without the consent of the Holder of each Security affected thereby; provided, that this clause shall not be deemed to require the consent of any Holder with respect to changes in the references to "the Trustee" and concomitant changes in this Section, or the deletion of this proviso, in accordance with the requirements of Sections 5.08, 5.09, 5.10 and 7.02. 45 52 Upon the request of the Issuer, accompanied by a copy of a resolution of the Board of Directors (which resolution may provide general terms or parameters for such action and may provide that the specific terms of such action may be determined in accordance with or pursuant to an Issuer Order) certified by the Secretary or an Assistant Secretary of the Issuer authorizing the execution of any such supplemental indenture, and upon the filing with the Trustee of evidence of the consent of Securityholders and other documents, if any, required by Section 6.01 the Trustee shall join with the Issuer in the execution of such supplemental indenture unless such supplemental indenture affects the Trustee's own rights, duties, immunities or liabilities under this Indenture or otherwise, in which case the Trustee may in its discretion, but shall not be obligated to, enter into such supplemental indenture. It shall not be necessary for the consent of the Securityholders under this Section to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such consent shall approve the substance thereof. Promptly after the execution by the Issuer and the Trustee of any supplemental indenture pursuant to the provisions of this Section, the Issuer shall mail a notice thereof by first-class mail to the Holders of Securities at their addresses as they shall appear on the registry books of the Issuer, setting forth in general terms the substance of such supplemental indenture. Any failure of the Issuer to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such supplemental indenture. SECTION 7.03. Effect of Supplemental Indenture. Upon the execution of any supplemental indenture pursuant to the provisions hereof, this Indenture shall be and be deemed to be modified and amended in accordance therewith and the respective rights, limitations of rights, obligations, duties and immunities under this Indenture of the Trustee, the Issuer and the Holders of Securities shall thereafter be determined, exercised and enforced hereunder subject in all respects to such modifications and amendments, and all the terms and conditions of any such supplemental indenture shall be and be deemed to be part of the terms and conditions of this Indenture for any and all purposes. SECTION 7.04. Documents to Be Given to Trustee. The Trustee, subject to the provisions of Sections 5.01 and 5.02, may receive an Officers' Certificate and an Opinion of Counsel as conclusive evidence that any such supplemental indenture complies with the applicable provisions of this Indenture. SECTION 7.05. Notation on Securities in Respect of Supplemental Indentures. Securities authenticated and delivered after the execution of any 46 53 supplemental indenture pursuant to the provisions of this Article may bear a notation in form approved by the Trustee as to any matter provided for by such supplemental indenture. If the Issuer or the Trustee shall so determine, new Securities so modified as to conform, in the opinion of the Trustee and the Board of Directors, to any modification of this Indenture contained in any such supplemental indenture may be prepared by the Issuer, authenticated by the Trustee and delivered in exchange for the Securities then Outstanding. ARTICLE 8 CONSOLIDATION, MERGER, SALE OR CONVEYANCE SECTION 8.01. Covenant Not to Merger, Consolidate, Sell or Convey Property Except Under Certain Conditions. The Issuer covenants that it will not merge with or into or consolidate with any other corporation or sell, convey, transfer or lease all or substantially all of its assets to any Person and the Issuer shall not permit any Person to consolidate with or merge into the Issuer or sell, convey or lease all or substantially all of its assets to the Issuer, unless (i) either the Issuer (in the case of a merger) shall be the continuing corporation, or the successor corporation or the Person which acquires by sale or conveyance substantially all the assets of the Issuer (if other than the Issuer) shall be a corporation or partnership organized under the laws of the United States of America or any State thereof and shall expressly assume the due and punctual payment of the principal of and interest on all the Securities, according to their tenor, and the due and punctual performance and observance of all of the covenants and conditions of this Indenture to be performed or observed by the Issuer and shall have provided for conversion rights in accordance with Section 13.05, by supplemental indenture satisfactory to the Trustee, executed and delivered to the Trustee by such corporation or partnership; and (ii) the Issuer, such Person or such successor corporation or partnership, as the case may be, shall not, immediately after such merger or consolidation, or such sale or conveyance, be in default in the performance of any such covenant or condition and, immediately after giving effect to such transaction, no Event of Default, and no event which, after notice or lapse of time or both, would become an Event of Default, shall have happened and be continuing. SECTION 8.02. Successor Corporation or Partnership Substituted. In case of any such consolidation, merger, sale or conveyance, and following such an assumption by the successor corporation or partnership, such successor corporation or partnership shall succeed to and be substituted for the Issuer, with the same effect as if it had been named herein. 47 54 Such successor corporation or partnership may cause to be signed, and may issue either in its own name or in the name of the Issuer prior to such succession any or all of the Securities issuable hereunder which theretofore shall not have been signed by the Issuer and delivered to the Trustee; and, upon the order of such successor corporation or partnership, instead of the Issuer, and subject to all the terms, conditions and limitations in this Indenture prescribed, the Trustee shall authenticate and shall deliver any Securities which previously shall have been signed and delivered by the officers of the Issuer to the Trustee for authentication, and any Securities which such successor corporation or partnership thereafter shall cause to be signed and delivered to the Trustee for that purpose. All of the Securities so issued shall in all respects have the same legal rank and benefit under this Indenture as the Securities theretofore or thereafter issued in accordance with the terms of this Indenture as though all of such Securities had been issued at the date of the execution hereof. In case of any such consolidation, merger, sale, lease or conveyance such changes in phraseology and form (but not in substance) may be made in the Securities thereafter to be issued as may be appropriate. In the event of any such sale or conveyance (other than a conveyance by way of lease) the Issuer or any successor corporation or partnership which shall theretofore have become such in the manner described in this Article shall be discharged from all obligations and covenants under this Indenture and the Securities and may be liquidated and dissolved. SECTION 8.03. Opinion of Counsel to Trustee. The Trustee, subject to the provisions of Sections 5.01 and 5.02, may receive an Opinion of Counsel prepared in accordance with Section 10.05 as conclusive evidence that any such consolidation, merger, sale, lease or conveyance, and any such assumption, and any such liquidation or dissolution, complies with the applicable provisions of this Indenture. ARTICLE 9 SATISFACTION AND DISCHARGE OF INDENTURE; UNCLAIMED MONEYS SECTION 9.01. Satisfaction and Discharge of Indenture. If at any time (a) the Issuer shall have paid or caused to be paid the principal of and interest on all the Securities Outstanding hereunder, as and when the same shall have become due and payable, or (b) the Issuer shall have delivered to the Trustee for cancellation all Securities theretofore authenticated (other than any Securities 48 55 which shall have been destroyed, lost or stolen and which shall have been replaced or paid as provided in Section 2.07) or (c)(i)(x) all such Securities not theretofore delivered to the Trustee for cancellation shall have become due and payable, or (y) are by their terms to become due and payable within one year or are to be called for redemption within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption, and (ii) the Issuer shall have irrevocably deposited or caused to be deposited with the Trustee as trust funds the entire amount in cash (other than moneys repaid by the Trustee or any paying agent to the Issuer in accordance with Section 9.04) or U.S. Government Obligations maturing as to principal and interest at such times and in such amounts as will insure the availability of cash, or a combination thereof, 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 the principal and interest on all Securities on each date that such principal or interest is due and payable; and if, in any such case, the Issuer shall also pay or cause to be paid all other sums payable hereunder by the Issuer, then this Indenture shall cease to be of further effect (except as to (i) rights of registration of transfer, conversion and exchange of Securities, and the Issuer's right of optional redemption, (ii) substitution of apparently mutilated, defaced, destroyed, lost or stolen Securities, (iii) rights of the Holders of Securities to receive payments of principal thereof and interest upon the original stated due dates therefor (but not upon acceleration), (iv) the rights, obligations and immunities of the Trustee hereunder, including any right to compensation and indemnification under Section 5.05 and, (v) the rights of the Holders of Securities as beneficiaries hereof with respect to the property so deposited with the Trustee payable to all or any of them), and the Trustee, on demand of the Issuer accompanied by an Officers' Certificate and an Opinion of Counsel stating that the provisions of this Section have been complied with and at the cost and expense of the Issuer, shall execute proper instruments acknowledging such satisfaction of and discharging this Indenture, provided, that the rights of Holders of the Securities to receive amounts in respect of principal of and interest on the Securities held by them shall not be delayed longer than required by then-applicable mandatory rules or policies of any securities exchange upon which the Securities are listed. In addition, in connection with the satisfaction and discharge pursuant to clause (c)(i)(y) above, the Trustee shall give notice to the Holders of Securities of such satisfaction and discharge. The Issuer agrees to reimburse the Trustee for any costs or expenses thereafter reasonably and properly incurred and to compensate the Trustee for any services thereafter reasonably and properly rendered by the Trustee in connection with this Indenture or the Securities. Notwithstanding the satisfaction and discharge of this Indenture, the obligations of the Issuer to the Trustee under Section 5.05 shall survive. 49 56 SECTION 9.02. Application by Trustee of Funds Deposited for Payment of Securities. Subject to Section 9.04 all moneys and securities deposited with the Trustee pursuant to Section 9.01 shall be held in trust and applied by it to the payment, either directly or through any paying agent (including the Issuer acting as its own paying agent), to the Holders of the particular Securities for the payment or redemption of which such moneys or securities have been deposited with the Trustee, of all sums due and to become due thereon for principal and interest; but such moneys or securities need not be segregated from other funds except to the extent required by law. SECTION 9.03. Repayment of Moneys Held by Paying Agent. In connection with the satisfaction and discharge of this Indenture with respect to Securities, all moneys then held by any paying agent under the provisions of this Indenture shall, upon written demand of the Issuer, be repaid to it or paid to the Trustee and thereupon such paying agent shall be released from all further liability with respect to such moneys. SECTION 9.04. Return of Moneys Held by Trustee and Paying Agent Unclaimed for Two Years. Any moneys deposited with or paid to the Trustee or any paying agent for the payment of the principal of or interest on any Security and not applied but remaining unclaimed for two years after the date upon which such principal or interest shall have become due and payable, shall, upon the written request of the Issuer and unless otherwise required by mandatory provisions of applicable escheat or abandoned or unclaimed property law, be repaid to the Issuer by the Trustee or such paying agent, and the Holder of the Securities shall, unless otherwise required by mandatory provisions of applicable escheat or abandoned or unclaimed property laws, thereafter look only to the Issuer for any payment which such Holder may be entitled to collect, and all liability of the Trustee or any paying agent with respect to such moneys shall thereupon cease; provided, however, that the Trustee or such paying agent, before being required to make any such repayment with respect to moneys deposited with it for any payment, shall at the expense of the Issuer, mail by first-class mail to Holders of such Securities at their addresses as they shall appear on the Security register, notice, that such moneys remain and that, after a date specified therein, which shall not be less than thirty days from the date of such mailing, any unclaimed balance of such money then remaining will be repaid to the Issuer. SECTION 9.05. Indemnity for U.S. Governmental Obligations. The Issuer 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 9.01 or the principal or interest received in respect of such obligations. 50 57 ARTICLE 10 MISCELLANEOUS PROVISIONS SECTION 10.01. Partners, Incorporators, Stockholders, Officers and Directors of Issuer Exempt from Individual Liability. No recourse under or upon any obligation, covenant or agreement contained in this Indenture, or in any Security, or because of any indebtedness evidenced thereby, shall be had against any incorporator, as such, or against any past, present or future stockholder, officer or director, as such, of the Issuer or of any partner of the Issuer or of any successor, either directly or through the Issuer or any successor, under any rule of law, statute or constitutional provision or by the enforcement of any assessment or by any legal or equitable proceeding or otherwise, all such liability being expressly waived and released by the acceptance of the Securities by the Holders thereof and as part of the consideration for the issue of the Securities. SECTION 10.02. Provisions of Indenture for the Sole Benefit of Parties and Securityholders. Nothing in this Indenture or in the Securities, expressed or implied, shall give or be construed to give to any person, firm or corporation, other than the parties hereto and their successors and the holders of Senior Indebtedness and the Holders of the Securities, any legal or equitable right, remedy or claim under this Indenture or under any covenant or provision herein contained, all such covenants and provisions being for the sole benefit of the parties hereto and their successors, the holders of Senior Debt and the Holders of the Securities. SECTION 10.03. Successors and Assigns of Issuer Bound by Indenture. All the covenants, stipulations, promises and agreements in this Indenture contained by or in behalf of the Issuer shall bind its successors and assigns, whether so expressed or not. SECTION 10.04. Notices and Demands on Issuer, Trustee and Securityholders. Any notice or demand which by any provision of this Indenture is required or permitted to be given or served by the Trustee or by the Holders of Securities to or on the Issuer may be given or served by being deposited postage prepaid, first-class mail (except as otherwise specifically provided herein) addressed (until another address of the Issuer is filed by the Issuer with the Trustee) to Evergreen Media Corporation, 433 East Las Colinas Boulevard, Suite 1130, Irving, TX 75039, Attention: Corporate Secretary, with a copy to Latham & Watkins, 1001 Pennsylvania Avenue, N.W., Suite 1300, Washington, D.C., 20004, Attention: John D. Watson, Jr., Esq. Any notice, direction, request or demand by the Issuer or any Securityholder to or upon the Trustee shall be deemed to have been sufficiently given or made, for all purposes, if given or 51 58 made at the Corporate Trust Office, Attention: Corporate Trust Trustee Administration. Where this Indenture provides for notice to Holders, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to each Holder entitled thereto, at his last address as it appears in the Security register. In any case where notice to Holders is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Holder shall affect the sufficiency of such notice with respect to other Holders. Where this Indenture provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. In case, by reason of the suspension of or irregularities in regular mail service, it shall be impracticable to mail notice to the Issuer and Securityholders when such notice is required to be given pursuant to any provision of this Indenture, then any manner of giving such notice as shall be satisfactory to the Trustee shall be deemed to be a sufficient giving of such notice. SECTION 10.05. Officers' Certificates and Opinions of Counsel; Statements to Be Contained Therein. Upon any application or demand by the Issuer to the Trustee to take any action under any of the provisions of this Indenture, the Issuer shall furnish to the Trustee an Officers' Certificate stating that all conditions precedent provided for in this Indenture relating to the proposed action have been complied with and an Opinion of Counsel stating that in the opinion of such counsel all such conditions precedent have been complied with, except that in the case of any such application or demand as to which the furnishing of such documents is specifically required by any provision of this Indenture relating to such particular application or demand, no additional certificate or opinion need be furnished. Each certificate or opinion provided for in this Indenture and delivered to the Trustee with respect to compliance with a condition or covenant provided for in this Indenture shall include (a) a statement that the person making such certificate or opinion has read such covenant or condition, (b) 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, (c) a statement that, in the opinion of such person, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to 52 59 whether or not such covenant or condition has been complied with and (d) a statement as to whether or not, in the opinion of such person, such condition or covenant has been complied with. Any certificate, statement or opinion of an officer of the Issuer may be based, insofar as it relates to legal matters, upon a certificate or opinion of or representations by counsel, unless such officer knows that the certificate or opinion or representations with respect to the matters upon which his certificate, statement or opinion may be based as aforesaid are erroneous, or in the exercise of reasonable care should know that the same are erroneous. Any certificate, statement or opinion of counsel may be based, insofar as it relates to factual matters, information with respect to which is in the possession of the Issuer, upon the certificate, statement or opinion of or representations by an officer or officers of the Issuer, unless such counsel knows that the certificate, statement or opinion or representations with respect to the matters upon which his certificate, statement or opinion may be based as aforesaid are erroneous, or in the exercise of reasonable care should know that the same are erroneous. Any certificate, statement or opinion of an officer of the Issuer or of counsel may be based, insofar as it relates to accounting matters, upon a certificate or opinion of or representations by an accountant or firm of accountants in the employ of the Issuer, unless such officer or counsel, as the case may be, knows that the certificate or opinion or representations with respect to the accounting matters upon which his certificate, statement or opinion may be based as aforesaid are erroneous, or in the exercise of reasonable care should know that the same are erroneous. Any certificate or opinion of any independent firm of public accountants filed with the Trustee shall contain a statement that such firm is independent. SECTION 10.06. Payments Due on Saturdays, Sundays and Legal Holidays. If the date of maturity of interest on or principal of the Securities or the date fixed for redemption or repayment of any Security or the last date on which a Holder of Securities has a right to convert his Securities shall not be a Business Day, then (notwithstanding any other provision of this Indenture or of the Securities) payment of interest or principal or conversion of the Securities need not be made on such date, but may be made on the next succeeding Business Day with the same force and effect as if made on the date of maturity or the date fixed for redemption or repayment or on such last day for conversion, and no interest shall accrue for the period after such date. 53 60 SECTION 10.07. Conflict of Any Provision of Indenture with Trust Indenture Act of 1939. If and to the extent that any provision of this Indenture limits, qualifies or conflicts with another provision (an "incorporated provision") included in this Indenture by operation of Sections 310 to 317, inclusive, of the TIA, such incorporated provision shall control. SECTION 10.08. Communications by Holders with Other Holders. Securityholders may communicate pursuant to Section 312(b) of the TIA with other Holders with respect to their rights under this Indenture or the Securities. The Issuer, the Trustee, the Registrar and any other person shall have the protection of Section 312(c) of the TIA. SECTION 10.09. New York Law to Govern. This Indenture and each Security shall be deemed to be a contract under the laws of the State of New York, and for all purposes shall be construed in accordance with the laws of said State, without regard to conflicts of law principles. SECTION 10.10. Counterparts. This Indenture may be executed in any number of counterparts, each of which shall be an original; but such counterparts shall together constitute but one and the same instrument. SECTION 10.11. Effect of Headings. The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof. ARTICLE 11 REDEMPTION OF SECURITIES SECTION 11.01. Right of Optional Redemption; Prices. The Issuer at its option may, at any time, redeem all, or from time to time any part of, the Securities upon payment of the optional redemption prices set forth in the form of Security attached as Exhibit A hereto, together with accrued interest to the date fixed for redemption. SECTION 11.02. Notice of Redemption; Partial Redemption. Notice of redemption to the Holders of Securities to be redeemed as a whole or in part shall be given by mailing notice of such redemption by first class mail, postage prepaid, at least 30 days and not more than 60 days prior to the date fixed for redemption to such Holders of Securities at their last addresses as they shall appear upon the registry books. Any notice which is mailed in the manner herein 54 61 provided shall be conclusively presumed to have been duly given, whether or not the Holder receives the notice. Failure to give notice by mail, or any defect in the notice to the Holder of any Security designated for redemption as a whole or in part shall not affect the validity of the proceedings for the redemption of any other Security. The notice of redemption to each such Holder shall identify the Securities to be redeemed (including the CUSIP number) and shall specify the principal amount of each Security held by such Holder to be redeemed, the date fixed for redemption, the applicable Redemption Price, the place or places of payment, that payment will be made upon presentation and surrender of such Securities, that interest accrued to the date fixed for redemption will be paid as specified in said notice and that on and after said date interest thereon or on the portions thereof to be redeemed will cease to accrue, and shall also specify the Conversion Price then in effect and the date on which the right to convert such Securities or the portions thereof to be redeemed will expire. In case any Security is to be redeemed in part only the notice of redemption shall state the portion of the principal amount thereof to be redeemed and shall state that on and after the date fixed for redemption, upon surrender of such Security, a new Security or Securities in principal amount equal to the unredeemed portion thereof will be issued. The notice of redemption of Securities to be redeemed at the option of the Issuer shall be given by the Issuer or, at the Issuer's request, by the Trustee in the name and at the expense of the Issuer. At least one Business Day prior to the redemption date specified in the notice of redemption given as provided in this Section, the Issuer will deposit with the Trustee or with one or more paying agents (or, if the Issuer is acting as its own paying agent, set aside, segregate and hold in trust as provided in Section 2.03) an amount of money sufficient to redeem on the redemption date all the Securities so called for redemption (other than those theretofore surrendered for conversion into Class A Common Stock) at the appropriate redemption price, together with accrued interest to but not including the date fixed for redemption. If any Security called for redemption is converted pursuant hereto, any money deposited with the Trustee or any paying agent or so segregated and held in trust for the redemption of such Security shall be paid to the Issuer upon the Issuer's written request, or, if then held by the Issuer, shall be discharged from such trust. If less than all the outstanding Securities are to be redeemed, the Issuer will deliver to the Trustee at least 70 days (or such shorter period as may be satisfactory to the Trustee) prior to the date fixed for redemption an Officers' Certificate stating the aggregate principal amount of Securities to be redeemed. If all of the outstanding Securities are to be redeemed, the Issuer will deliver to the 55 62 Trustee at least 45 days (or such shorter period as may be satisfactory to the Trustee) prior to the date fixed for redemption a copy of the notice of redemption the Issuer has delivered to the Holders. In case of a redemption at the election of the Issuer prior to the expiration of any restriction on such redemption, the Issuer shall deliver to the Trustee, prior to the giving of any notice of redemption to Holders pursuant to this Section, an Officers' Certificate stating that such restriction has been complied with. If less than all the Securities are to be redeemed, the Trustee shall select, by lot, pro rata or by such other manner as it shall deem appropriate and fair, Securities to be redeemed in whole or in part. Securities may be redeemed in part in multiples equal to the minimum authorized denomination for Securities or any multiple thereof. The Trustee shall promptly notify the Issuer in writing of the Securities selected for redemption and, in the case of any Securities selected for partial redemption, the principal amount thereof to be redeemed. For all purposes of this Indenture, unless the context otherwise requires, all provisions relating to the redemption of Securities shall relate, in the case of any Security redeemed or to be redeemed only in part, to the portion of the principal amount of such Security which has been or is to be redeemed. If any Security selected for partial redemption is surrendered for conversion after such selection, the converted portion of such Security shall be deemed (so far as may be) to be the portion selected for redemption. Upon any redemption of less than all the Securities, for purposes of the selection for redemption the Issuer and the Trustee may treat as Outstanding Securities surrendered for conversion during the period of 15 days next preceding the mailing of a notice of redemption, and need not treat as Outstanding any Security authenticated and delivered during such period in exchange for the unconverted portion of any Security converted in part during such period. SECTION 11.03. Payment of Securities Called for Redemption. If notice of redemption has been given as above provided, the Securities or portions of Securities specified in such notice shall become due and payable on the date and at the place stated in such notice at the applicable Redemption Price, together with interest accrued to and including the date fixed for redemption, and on and after said date (unless the Issuer shall default in the payment of such Securities at the Redemption Price, together with interest accrued to said date) interest on the Securities or portions of Securities so called for redemption shall cease to accrue and such Securities shall cease from and after the date fixed for redemption to be convertible into Class A Common Stock or, except as provided in Sections 2.04 and 9.04, to be entitled to any benefit or security under this Indenture, and the Holders thereof shall have no right in respect of such Securities except the right to receive the applicable Redemption Price thereof and unpaid interest to and 56 63 including the date fixed for redemption. On presentation and surrender of such Securities at a place of payment specified in said notice, said Securities or the specified portions thereof shall be paid and redeemed by the Issuer at the applicable Redemption Price, together with interest accrued thereon to and including the date fixed for redemption; provided that any payment of interest becoming due on or prior to the date fixed for redemption shall be payable to the Holders of such Securities registered as such on the relevant record date subject to the terms and provisions of Section 2.12 hereof. If any Security called for redemption shall not be so paid upon surrender thereof for redemption, the principal shall, until paid or duly provided for, bear interest from the date fixed for redemption at the rate of interest specified in such Security and such Security shall remain convertible into Class A Common Stock until the principal of such Security shall have been paid or duly provided for. Upon presentation of any Security redeemed in part only, the Issuer shall execute and the Trustee shall authenticate and deliver to or on the order of the Holder thereof, at the expense of the Issuer, a new Security or Securities, of authorized denominations, in principal amount equal to the unredeemed portion of the Security so presented. SECTION 11.04. Exclusion of Certain Securities from Eligibility for Selection for Redemption. Securities shall be excluded from eligibility for selection for redemption if they are identified by registration and certificate number in a written statement signed by an authorized officer of the Issuer and delivered to the Trustee at least 40 days prior to the last date on which notice of redemption may be given as being owned of record and beneficially by, and not pledged or hypothecated by either (a) the Issuer or (b) an entity specifically identified in such Officers' Certificate directly or indirectly controlling or controlled by or under direct or indirect common control with the Issuer. ARTICLE 12 SUBORDINATION OF SECURITIES SECTION 12.01. Agreement to Subordinate. The Issuer covenants and agrees, and each Holder of a Security issued hereunder by his acceptance thereof likewise covenants and agrees, that all Securities shall be issued subject to the provisions of this Article; and each Person holding any Security, whether upon original issue or upon transfer, assignment, substitution or exchange thereof accepts and agrees that the principal of and interest on all Securities issued 57 64 hereunder shall, to the extent and in the manner herein set forth, be subordinated and subject in right of payment to the prior payment in full of all Senior Debt. SECTION 12.02. Payments to Securityholders. No payment on account of principal of or interest on the Securities shall be made if at the time of such payment or immediately after giving effect thereto (1) there shall exist a default in any payment with respect to any Senior Debt or (2) there shall have occurred an event of default (as defined in such Senior Debt or in the instrument under which the same is outstanding, other than a default in the payment of amounts due thereon) with respect to any Senior Debt permitting the holders thereof to accelerate the maturity thereof, and such event of default shall not have been cured or waived or shall not have ceased to exist. Upon (i) any acceleration of the principal amount due on the Securities or (ii) any payment or distribution of assets of the Issuer of any kind or character, whether in cash, property or securities, to creditors upon any dissolution or winding-up or total or partial liquidation or arrangement or reorganization of the Issuer, whether voluntary or involuntary or in bankruptcy, insolvency, receivership or other proceedings, all amounts due or to become due upon all Senior Debt shall first be paid in full, or payment thereof provided for in accordance with its terms, before any payment is made on account of the principal or interest on the indebtedness evidenced by the Securities, and upon any such dissolution or winding-up or liquidation, arrangement or reorganization any payment or distribution of assets of the Issuer of any kind or character, whether in cash, property or securities, to which the Holders of the Securities or the Trustee under this Indenture would be entitled, except for the provisions hereof, shall be paid by the Issuer or by any receiver, trustee in bankruptcy, liquidating trustee, agent or other person making such payment or distribution, or by the Holders of the Securities or by the Trustee under this Indenture if received by them or it, directly to the holders of Senior Debt (pro rata to such holders on the basis of the respective amounts of Senior Debt held by such holders) or their respective representatives, or to the trustee or trustees under any indenture pursuant to which any instruments evidencing any of such Senior Debt may have been issued (the selection of any such recipient on behalf of any holder, in its individual capacity or otherwise, shall be at the sole discretion of the Trustee), as their respective interests may appear, to the extent necessary to pay all Senior Debt in full (including, without limitation, except to the extent, if any, prohibited by mandatory provisions of law, post-petition interest, in any such proceedings), after giving effect to any concurrent payment or distribution to or for the holders of Senior Debt, before any payment or distribution is made to the Holders of the indebtedness evidenced by the Securities or to the Trustee under this Indenture. 58 65 In the event that, notwithstanding the foregoing, any payment or distribution of assets of the Issuer of any kind or character, whether in cash, property or securities, prohibited by the foregoing provisions of this Section, shall be received by the Trustee under this Indenture or the Holders of the Securities before all Senior Debt is paid in full or provision is made for such payment in accordance with its terms, and if such fact shall, at or prior to the time of such payment or distribution, have been known to the Trustee, or such Holders as the case may be, then such payment or distribution shall be held in trust for the benefit of and shall be paid over or delivered to the holders of such Senior Debt or their respective representatives, or to the trustee or trustees under any indenture pursuant to which any instruments evidencing any of such Senior Debt may have been issued, as their respective interests may appear, for application to the payment of all Senior Debt remaining unpaid until all such Senior Debt shall have been paid in full in accordance with its terms, after giving effect to any concurrent payment or distribution to or for the holders of such Senior Debt. For purposes of this Article only, the words, "cash, property or securities" shall not be deemed to include shares of stock of the Issuer as reorganized or readjusted, or securities of the Issuer or any other corporation provided for by a plan of arrangement, reorganization or readjustment, the payment of which is subordinated (at least to the extent provided in this Article with respect to the Securities) to the payment of all Senior Debt which may at the time be outstanding; provided that (i) the Senior Debt is assumed by the new corporation, if any, resulting from any such arrangement, reorganization or readjustment, and (ii) the rights of the holders of the Senior Debt are not, without the consent of such holders, altered by such arrangement, reorganization or readjustment. The consolidation of the Issuer with, or the merger of the Issuer into, another corporation or the liquidation or dissolution of the Issuer following the conveyance or transfer of all or substantially all its assets to another corporation or partnership upon the terms and conditions provided in Article 8 shall not be deemed a dissolution, winding-up, liquidation or reorganization for the purposes of this Section if such other corporation or partnership shall, as a part of such consolidation, merger, conveyance or transfer, comply with the conditions stated in Article 8. Nothing in this Section shall apply to claims of, or payments to, the Trustee under or pursuant to Article 5, except as provided therein. This Section shall be subject to the further provisions of Section 12.05. SECTION 12.03. Subrogation of Securities. Subject to the payment in full of all Senior Debt, the Holders of the Securities shall be subrogated to the rights of the holders of Senior Debt to receive payments or distributions of cash, property or securities of the Issuer applicable to the Senior Debt until the principal of and interest on the Securities shall be paid in full; and, for the 59 66 purposes of such subrogation, no payments or distributions to the holders of the Senior Debt of any cash, property or securities to which the Holders of the Securities or the Trustee on their behalf would be entitled except for the provisions of this Article, and no payment over pursuant to the provisions of this Article to the holders of Senior Debt by Holders of the Securities or the Trustee on their behalf shall, as between the Issuer, its creditors other than holders of Senior Debt and the Holders of the Securities, be deemed to be a payment by the Issuer to or on account of the Senior Debt; and no payments or distributions of cash, property or securities to or for the benefit of the Securityholders pursuant to the subrogation provision of this Article, which would otherwise have been paid to the holders of Senior Debt shall be deemed to be a payment by the Issuer to or for the account of the Securities. The provisions of this Article are intended solely for the purpose of defining the relative rights of the Holders of the Securities, on the one hand, and the holders of the Senior Debt, on the other hand. Nothing contained in this Article or elsewhere in this Indenture or in the Securities is intended to or shall impair, as between the Issuer, its creditors other than the holders of Senior Debt, and the Holders of the Securities, the obligation of the Issuer, which is absolute and unconditional, to pay to the Holders of the Securities the principal of and interest on the Securities as and when the same shall become due and payable in accordance with their terms, or is intended to or shall affect the relative rights against the Issuer of Holders of the Securities and creditors of the Issuer other than the holders of the Senior Debt, nor shall anything herein or therein prevent the Holder of any Security or the Trustee on his behalf from exercising all remedies otherwise permitted by applicable law upon default under this Indenture, subject to the rights, if any, under this Article of the holders of Senior Debt in respect of cash, property or securities of the Issuer received upon the exercise of any such remedy. Upon any payment or distribution of assets of the Issuer referred to in this Article, the Trustee, subject to the provisions of Sections 5.01 and 5.02, and the Holders of the Securities shall be entitled to rely upon any order or decree made by any court of competent jurisdiction in which such insolvency, bankruptcy, dissolution, winding-up, liquidation, arrangement or reorganization proceedings are pending, or a certificate of the receiver, trustee in bankruptcy, liquidating trustee, agent or other person making such payment or distribution, delivered to the Trustee or to the Holders of the Securities, for the purpose of ascertaining the persons entitled to participate in such distribution, the holders of the Senior Debt and other indebtedness of the Issuer, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article. 60 67 SECTION 12.04. Authorization by Securityholders. Each Holder of a Security by his acceptance thereof authorizes the Trustee on his behalf to take such action as may be necessary or appropriate to effectuate the subordination provided in this Article and appoints the Trustee his attorney-in-fact for any and all such purposes. SECTION 12.05. Notice to Trustee. The Issuer shall give prompt written notice to the Trustee and to any paying agent of any fact known to the Issuer which would prohibit the making of any payment of moneys to or by the Trustee or any paying agent in respect of the Securities pursuant to the provisions of this Article. Regardless of anything to the contrary contained in this Article or elsewhere in this Indenture, the Trustee shall not be charged with knowledge of the existence of any Senior Debt or of any default or event of default with respect to any Senior Debt or of any other facts which would prohibit the making of any payment of moneys to or by the Trustee in respect of the Securities, unless and until the Trustee shall have received notice in writing at its Corporate Trust Office to that effect signed by an officer of the Issuer, or by a holder or agent of a holder of Senior Debt who shall have been certified by the Issuer or otherwise established to the reasonable satisfaction of the Trustee to be such holder or agent, or by the trustee under any indenture pursuant to which Senior Debt shall be outstanding, and, prior to the receipt of any such written notice, the Trustee shall, subject to Sections 5.01 and 5.02, be entitled to assume that no such facts exist; provided that if on a date at least two Business Days prior to the date upon which by the terms hereof any such moneys shall become payable for any purpose (including, without limitation, the payment of the principal of or interest on any Security) the Trustee shall not have received with respect to such moneys the notice provided for in this Section, then, regardless of anything herein to the contrary, the Trustee shall have full power and authority to receive such moneys and to apply the same to the purpose for which they were received, and shall not be affected by any notice to the contrary which may be received by it on or after such prior date. Regardless of anything to the contrary herein, nothing shall prevent (a) any payment by the Issuer or the Trustee to the Securityholders of amounts in connection with a redemption of Securities if (i) notice of such redemption has been given pursuant to Article 11 prior to the receipt by the Trustee of written notice as aforesaid, and (ii) such notice of redemption is given not earlier than 60 days before the redemption date, or (b) any payment by the Trustee to the Securityholders of amounts deposited with it pursuant to Section 9.01. The Trustee shall be entitled to rely on the delivery to it of a written notice by a person representing himself to be a holder of Senior Debt (or a trustee 61 68 on behalf of such holder) to establish that such notice has been given by a holder of Senior Debt or a trustee on behalf of any such Holder. In the event that the Trustee determines in good faith that further evidence is required with respect to the right of any Person as a holder of Senior Debt to participate in any payment or distribution pursuant to this Article, the Trustee may request such person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of Senior Debt held by such Person, the extent to which such Person is entitled to participate in such payment or distribution and any other facts pertinent to the rights of such Person under this Article, and if such evidence is not furnished the Trustee may defer any payment to such Person pending judicial determination as to the right of such Person to receive such payment. SECTION 12.06. Trustee's Relation to Senior Debt. The Trustee and any agent of the Issuer or the Trustee shall be entitled to all the rights set forth in this Article with respect to any Senior Debt which may at any time be held by it in its individual or any other capacity to the same extent as any other holder of Senior Debt and nothing in this Indenture shall deprive the Trustee or any such agent, of any of its rights as such holder. Nothing in this Article shall apply to claims of, or payments to, the Trustee under or pursuant to Section 5.06. With respect to the holders of Senior Debt, the Trustee undertakes to perform or to observe only such of its covenants and obligations as are specifically set forth in this Article, and no implied covenants or obligations with respect to the holders of Senior Debt shall be read into this Indenture against the Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior Debt and, subject to the provisions of Sections 5.01 and 5.02, the Trustee shall not be liable to any holder of Senior Debt if it shall in good faith pay over or deliver to Holders of Securities, the Issuer or any other Person moneys or assets to which any holder of Senior Debt shall be entitled by virtue of this Article or otherwise. The Trustee shall not be charged with knowledge of the existence of Senior Debt or of any facts that would prohibit any payment hereunder unless the Trustee shall have received notice to that effect at its Corporate Trust Office. SECTION 12.07. No Impairment of Subordination. No right of any present or future holder of any Senior Debt to enforce subordination as herein provided shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of the Issuer or by any act or failure to act, in good faith, by any such holder, or by any noncompliance by the Issuer with the terms, provisions and covenants of this Indenture, regardless of any knowledge thereof which any such holder may have or otherwise be charged with. 62 69 ARTICLE 13 CONVERSION OF SECURITIES SECTION 13.01. Conversion Privilege. A Holder of a Security may convert it into Class A Common Stock of the Issuer at any time prior to maturity at the Conversion Price then in effect, except that, with respect to any Security called for redemption, such conversion right shall terminate at the close of business on the Business Day immediately preceding the redemption date (unless the Issuer shall default in making the redemption payment then due, in which cash the conversion right shall terminate on the date such default is cured). The number of shares of Class A Common Stock issuable upon conversion of a Security is determined as follows: divide the principal amount to be converted by the Conversion Price in effect on the Conversion Date and round the result to the nearest 1/100th of a share. The initial Conversion Price is stated in the fifth paragraph on the reverse of the Securities and is subject to adjustment as provided in this Article 13 (which initial Conversion Price shall be equal to the Conversion Price in effect on the Exchange Date of the Convertible Preferred Stock). A Holder may convert a portion of a Security equal to $1,000 or any integral multiple thereof. Provisions of this Indenture that apply to conversion of all of a Security also apply to conversion of a portion of it. SECTION 13.02. Exercise of Conversion Privilege. In order to exercise the conversion privilege, the Holder of any Security to be converted shall surrender such Security to the Issuer at any time during usual business hours at its office or agency maintained for the purpose as provided in this Indenture, accompanied by a fully executed written notice, in substantially the form set forth on the reverse of the Security, that the Holder elects to convert such Security or a stated portion thereof constituting a multiple of the minimum authorized denomination thereof, and, if such Security is surrendered for conversion during the period between the close of business on any record date for such Security and the opening of business on the related interest payment date (unless such Security shall have been called for redemption on a redemption date within such period or on such interest payment date), accompanied also by payment of an amount equal to the interest payable on such interest payment date on the portion of the principal amount of the Security being surrendered for conversion. A Holder of any Security on a record date for such Security who converts such Security on the related interest payment date will receive the interest payable on such Security, and such converting Holder need not include a payment for any such interest upon surrender of such Security for conversion. Such notice shall also state the 63 70 name or names (with address) in which the certificate or certificates for shares of Class A Common Stock shall be issued. Securities surrendered for conversion shall be duly endorsed by, or be accompanied by a written instrument or instruments of transfer in form satisfactory to the Issuer and the Trustee duly executed by, the Holder or his attorney duly authorized in writing. As promptly as practicable after the receipt of such notice and the surrender of such Security as aforesaid, the Issuer shall, subject to the provisions of Section 13.07, issue and deliver at such office or agency to such Holder, or on his written order, a certificate or certificates for the number of full shares of Class A Common Stock issuable on such conversion of Securities in accordance with the provisions of this Article and cash, as provided in Section 13.03, in respect of any fraction of a share of Class A Common Stock otherwise issuable upon such conversion. Such conversion shall be deemed to have been effected immediately prior to the close of business on the date (herein called the "Date of Conversion") on which such notice shall have been received by the Issuer and such Security shall have been surrendered (together with any applicable payment in respect of interest) as aforesaid, and the Person or Persons in whose name or names any certificate or certificates for shares of Class A Common Stock shall be issuable upon such conversion shall be deemed to have become on the Date of Conversion the holder or holders of record of the shares represented thereby; provided that any such surrender on any date when the stock transfer books of the Issuer shall be closed shall constitute the person or persons in whose name or names the certificate or certificates for such shares are to be issued as the recordholder or holders thereof for all purposes at the opening of business on the next succeeding day on which such stock transfer books are open but such conversion shall nevertheless be at the Conversion Price in effect at the close of business on the date when such Security shall have been so surrendered with the conversion notice. In the case of conversion of a portion, but less than all, of a Security, the Issuer shall execute, and the Trustee shall authenticate and deliver to the Holder thereof, at the expense of the Issuer, a Security or Securities in the aggregate principal amount of the unconverted portion of the Security surrendered. Except as otherwise expressly provided in this Indenture, no payment or adjustment shall be made for interest accrued on any Security (or portion thereof) converted or for dividends or distributions on any Class A Common Stock issued upon conversion of any Security; provided that in the case of any Securities which are converted after the close of business on a relevant record date and on or prior to the next succeeding interest payment date, installments of interest which are due and payable on the next succeeding interest payment date shall be payable on such interest payment date notwithstanding such conversion (unless such Security shall have been called for redemption on a redemption date after the close of business on such record date and prior to the opening of business on such interest payment date) and such interest (whether or not punctually paid or duly provided for) shall be paid to the 64 71 Holder of such Securities registered as such at the close of business on the relevant record date according to their terms. SECTION 13.03. Fractional Shares. The Issuer will not issue fractional shares of Class A Common Stock upon conversion of Securities. In lieu thereof, in the sole discretion of the Board of Directors, either (i) such fractional interest will be rounded up to the next whole share or (ii) the Issuer shall pay a cash adjustment in respect of such fraction in an amount equal to the same fraction of Sale Price (as defined below) of the Class A Common Stock at the close of business on the day of conversion. In the absence of a Sale Price, the Board of Directors shall in good faith determine the current market price on such basis as it considers appropriate and such current market price shall be used to calculate the cash adjustment. As used herein, "SALE PRICE" means the last sale price of the Class A Common Stock (or if no sale price is reported, the average of the high and low bid prices) as reported by the principal national or regional stock exchange on which the Class A Common Stock is listed or, if the Class A Common Stock is not listed on a national or regional stock exchange, as reported by the NASDAQ or if the Class A Common Stock is not approved for quotation and trading on the NASDAQ as reported by the National Quotation Bureau Incorporated. If more than one Security shall be surrendered for conversion at one time by the same Holder, the number of full shares issuable upon conversion thereof shall be computed on the basis of the aggregate number of Securities, or the specified portions thereof to be converted, so surrendered. SECTION 13.04. Adjustment of Conversion Price. The Conversion Price shall be subject to adjustment from time to time as follows: (a) In case the Issuer shall (1) pay a dividend on any class of its capital stock in shares of Common Stock of any class, (2) subdivide its outstanding shares of Class A Common Stock into a greater number of shares or (3) combine its outstanding shares of Class A Common Stock into a smaller number of shares, the Conversion Price in effect immediately prior thereto shall be adjusted as provided below so that the Conversion Price thereafter shall be determined by multiplying the Conversion Price at which the Securities were theretofore convertible by a fraction, the denominator of which shall be the number of shares of Class A Common Stock outstanding immediately following such action and the numerator of which shall be the number of shares of Class A Common Stock outstanding immediately prior thereto. Such adjustment shall be made whenever any event listed above shall occur and shall become effective retroactively immediately, except as provided in subsection (e) below, after the record date in the case of a dividend and shall become effective immediately after the effective date in the case of a subdivision or combination. 65 72 (b) In case the Issuer shall issue (i) rights or warrants to all holders of Class A Common Stock entitling them (for a period expiring within 45 days after the record date for determining stockholders entitled to receive such rights or warrants) to subscribe for or purchase shares of its Common Stock of any class at a price per share less than the current market price per share of the Class A Common Stock (as determined pursuant to subsection (d) below) on the record date therefor (the "Current Market Price"), or in case the Issuer shall issue to all holders of its Class A Common Stock other securities convertible into or exchangeable for shares of its Common Stock of any class for a consideration per share of Common Stock deliverable upon conversion or exchange thereof less than the Current Market Price, then the Conversion Price in effect immediately prior thereto shall be adjusted as provided below so that the Conversion Price therefor shall be equal to the price determined by multiplying: (1) the Conversion Price at which the Securities were theretofore convertible by (2) a fraction, of which (A) the denominator shall be the sum of (i) the number of shares of Common Stock of all classes outstanding on the date of issuance of the convertible or exchangeable securities, rights or warrants and (ii) the number of additional shares of Common Stock offered for subscription or purchase or issuable upon such conversion or exchange, and (B) the numerator shall be the sum of (i) the number of shares of Common Stock of all classes outstanding on the date of issuance of such convertible or exchangeable securities, rights or warrants and (ii) the number of additional shares of Common Stock of all classes which the aggregate offering price of the number of shares of Common Stock so offered would purchase at the Current Market Price of the Class A Common Stock. Such adjustment shall be made whenever such convertible or exchangeable securities, rights or warrants are issued and shall become effective immediately, except as provided in subsection (e) below, after the record date for the determination of stockholders entitled to receive such securities. However, upon the expiration of any right or warrant to purchase Common Stock, the issuance of which resulted in an adjustment in the Conversion Price pursuant to this Section 13.04(b), if any such right or warrant 66 73 shall expire and shall not have been exercised, the Conversion Price shall be recomputed immediately upon such expiration and effective immediately upon such expiration shall be increased to the price it would have been (but reflecting any other adjustments to the Conversion Price made pursuant to the provisions of this Section 13.04 after the issuance of such rights or warrants) had the adjustment of the Conversion Price made upon the issuance of such rights or warrants been made on the basis of offering for subscription or purchase only that number of shares of Common Stock actually purchased upon the exercise of such rights or warrants. No further adjustment shall be made upon exercise of any right, warrant, convertible security or exchangeable security if any adjustment shall have been made upon issuance of such security. (c) In case the Issuer shall pay a dividend to all holders of Class A Common Stock (including any dividend paid in connection with a consolidation or merger in which the Company is the continuing company) of any shares of capital stock of the Company or its subsidiaries (other than its Common Stock of any class) or evidences of its indebtedness or assets (excluding (i) cash dividends payable solely in cash that may from time to time be fixed by the Board of Directors and (ii) dividends or distributions in connection with the liquidation, dissolution or winding up of the Issuer) or rights or warrants to subscribe for or purchase any of its securities or those of its subsidiaries or securities convertible or exchangeable for Common Stock (excluding those securities referred to in Section 13.04(b) above), then in each such case the Conversion Price in effect immediately prior thereto shall be adjusted as provided below so that the Conversion Price thereafter shall be equal to the price determined by multiplying (A) the Conversion Price in effect on the record date mentioned below by (B) a fraction, the numerator of which shall be the Current Market Price per share of Class A Common Stock on the record date mentioned below less the then fair market value (as determined by the Board of Directors, whose good faith determination shall be conclusive) as of such record date of the assets, evidences of indebtedness or securities so paid with respect to one share of Class A Common Stock, and the denominator of which shall be the Current Market Price per share of Class A Common Stock on such record date; provided that in the event the then fair market value (as so determined) so paid with respect to one share of Class A Common Stock is equal to or greater than the Current Market Price per share of Class A Common Stock on the record date mentioned above, in lieu of the foregoing adjustment, adequate provision shall be made so that each Holder shall have the right to receive the amount and kind of assets, evidences of indebtedness, or securities such Holder would have received had such Holder converted each such Security immediately prior to the record date for such dividend. Such adjustment shall be made whenever any such payment is made, and shall become effective retroactively immediately, subject to subsection (e) 67 74 below, after the record date for the determination of stockholders entitled to receive the payment. (d) For the purpose of any computation under subsections (b) and (c) above, the Current Market Price per share of Class A Common Stock on any date shall be deemed to be the average Sale Price for the 30 consecutive Trading Days commencing 45 Trading Days before the day in question. (e) In any case in which this Section shall require that an adjustment be made immediately following a record date, the Issuer may elect to defer the effectiveness of such adjustment (but in no event until a date later than the effective time of the event giving rise to such adjustment), in which case the Issuer shall, with respect to any Security converted after such record date and before such adjustment shall have become effective (i) defer making any cash payment pursuant to Section 13.03 or issuing to the Holder of such Security the number of shares of Class A Common Stock and other capital stock of the Issuer issuable upon such conversion in excess of the number of shares of Class A Common Stock and other capital stock of the Issuer issuable thereupon only on the basis of the Conversion Price prior to adjustment, and (ii) not later than five Business Days after such adjustment shall have become effective, pay to such Holder the appropriate cash payment pursuant to Section 13.03 and issue to such Holder the additional shares of Class A Common Stock and other capital stock of the Issuer issuable on such conversion. (f) In addition, no adjustment in the Conversion Price shall be required unless such adjustment would require an increase or decrease of at least 1% in the Conversion Price; provided that any adjustments which by reason of this subsection (f) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Section 13.04 shall be made to the nearest cent or to the 100th of a share, as the case may be. (g) Whenever the Conversion Price is adjusted as herein provided, the Issuer shall promptly (i) file with the Trustee and each conversion agent an Officers' Certificate setting forth the Conversion Price after such adjustment and setting forth in reasonable detail the facts requiring such adjustment and the calculations on which the adjustment is based, which certificate shall be conclusive evidence of the correctness of such adjustment and which shall be made available by the Trustee to the Holders of Securities for inspection thereof, (ii) mail or cause to be mailed a notice of such adjustment, setting forth the adjusted Conversion Price and the date on which such adjustment became or becomes effective, to each Holder of Securities at his address as the same appears on the registry books of the Issuer. 68 75 (h) To the extent permitted by law, the Issuer from time to time may reduce the Conversion Price by any amount for any period of at least 20 days, (or such other period as may then be required by applicable law) if the Board of Directors has made a determination in good faith that such reduction would be in the best interests of the Issuer, which determination shall be conclusive. No reduction in the Conversion Price pursuant to this Section 13.04(h) shall become effective unless the Issuer shall have mailed a notice, at least 15 days prior to the date on which such reduction is scheduled to become effective, to each Holder. Such notice shall be given by first class mail, postage prepaid, at such Holder's address as it shall appear on the registry books of the Issuer. Such notice shall state the amount per share by which the Conversion Price will be reduced and the period for which such reduction will be in effect. (i) At its option, the Issuer may make such reduction in the Conversion Price, in addition to those otherwise required by this Article 13, as the Board of Directors deems advisable to avoid or diminish any income tax to holders of Common Stock resulting from any dividend or distribution of stock (or rights to acquire stock) or from any event treated as such for income tax purposes; provided that any such reduction shall not be effective until written evidence of the action of the Board of Directors authorizing such reduction shall be filed with the secretary of the Issuer and notice thereof shall have been given by first class mail, postage prepaid, to each Holder at such holder's address as the same appears on the registry books of the Issuer. (j) In the event that, at any time as a result of an adjustment made pursuant to Section 13.04(a) or (c) above, the Holder of any Securities thereafter surrendered for conversion shall become entitled to receive any shares of the Issuer other than shares of the Class A Common Stock, thereafter the number of such other shares so receivable upon conversion of any Security shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the Class A Common Stock contained in Section 13.04(a) through 13.04(f) above, and the other provisions of this Article 13 with respect to the Class A Common Stock shall apply on like terms to any such other shares. SECTION 13.05. Continuation of Conversion Privilege in Case of Reclassification, Consolidation, Merger, Sale, Transfer or Share Exchange. If any transaction shall occur, including without limitation (i) any reclassification of shares of Class A Common Stock(other than a change in par value, or from par value to no par value, or from no par value to par value, or as a result of a subdivision or combination of the Common Stock), (ii) any consolidation or 69 76 merger of the Issuer with or into another person or any merger of another person into the Issuer (other than a merger that does not result in a reclassification, conversion, exchange or cancellation of the outstanding shares of Class A Common Stock), (iii) any sale or transfer of all or substantially all of the assets of the Issuer, or (iv) any compulsory share exchange, pursuant to any of which holders of Class A Common Stock shall be entitled to receive other securities, cash or other property, then appropriate provision shall be made so that the Holder of each Security then Outstanding shall have the right thereafter to convert such Security only into the kind and amount of the securities, cash or other property that would have been receivable upon such reclassification, consolidation, merger, sale, transfer, or share exchange by a holder of the number of shares of Class A Common Stock issuable upon conversion of such Security immediately prior to such reclassification, consolidation, merger, sale, transfer or share exchange and the Company shall not enter into any such reclassification, consolidation, merger, sale, transfer or share exchange unless the company formed by such consolidation or resulting from such merger or that acquires such assets or that acquires the Issuer's shares, as the case may be, shall make provisions in its certificate or articles of incorporation or other constituent document to establish such right. Such certificate or articles of incorporation or other constituent document shall provide for adjustments that, for events subsequent to the effective date of such certificate or articles of incorporation or other constituent documents, shall be as nearly equivalent as may be practicable to the relevant adjustments provided for in the preceding Section and in this Section. SECTION 13.06. Notice of Certain Events. In case: (a) the Issuer shall declare a dividend (or any other distribution) payable to the holders of its Common Stock of any class (other than (i) dividends payable solely in cash that may from time to time be fixed by the Board of Directors and paid out of the earned surplus of the Issuer or, if there shall be no earned surplus, out of net profits for the fiscal year in which the dividend is made and/or the preceding fiscal year, (ii) dividends or distributions in connection with the liquidation, dissolution or winding up of the Issuer and (iii) dividends payable in Class A Common Stock); or (b) the Issuer shall authorize the granting to the holders of its Common Stock of any class of rights or warrants to subscribe for or purchase any shares of stock of any class or of any other rights or warrants; or 70 77 (c) the Issuer shall authorize the granting to holders of its Common Stock of any class of securities convertible into or exchangeable for Class A Common Stock; or (d) the Issuer shall authorize any reclassification or change of the Class A Common Stock (other than a subdivision or combination of its outstanding shares of Class A Common Stock or a change in par value, or from par value to no par value, or from no par value to par value), or any consolidation or merger to which the Issuer is a party and for which approval of any stockholders of the Issuer is required, or the sale or conveyance of all or substantially all the property or business of the Issuer; or (e) there shall be proposed any voluntary or involuntary dissolution, liquidation or winding-up of the Issuer; then, the Issuer shall cause to be filed with the Trustee, and, if other than the Corporate Trust Office of the Trustee, at the office or agency maintained for the purpose of conversion of the Securities as provided in Section 2.03, and shall cause to be mailed to each Holder of Securities, at his address as it shall appear on the registry books of the Issuer, as promptly as possible but in any event at least 20 days before the date hereinafter specified (or the earlier of the dates hereinafter specified, in the event that more than one date is specified), a notice stating the date on which (1) a record is expected to be taken for the purpose of such dividend, distribution, rights or warrants or securities, or if a record is not to be taken, the date as of which the holders of Class A Common Stock or Common Stock, as applicable, of record to be entitled to such dividend, distribution, rights or warrants or securities, are to be determined, or (2) such reclassification, change, consolidation, merger, sale, transfer, conveyance, dissolution, liquidation or winding-up is expected to become effective and the date, if any is to be fixed, as of which it is expected that holders of Class A Common Stock of record shall be entitled to exchange their shares of Class A Common Stock for securities or other property deliverable upon such reclassification, change, consolidation, merger, sale, transfer, conveyance, dissolution, liquidation or winding-up. SECTION 13.07. Taxes on Conversion. The issuance and delivery of certificates for shares of Class A Common Stock on conversion of Securities shall be made without charge to the converting Holder of Securities for such certificates or for any documentary, stamp or similar taxes payable to the United States of America or any political subdivision or taxing authority thereof in respect of the issuance or delivery of such certificates; provided that the Issuer shall not be required to pay any tax which may be payable in respect of any transfer involved in the issuance of certificates for shares of Class A Common 71 78 Stock, and no such issue or delivery shall be made unless and until the Person requesting such issue or delivery has paid to the Issuer the amount of any such tax or has established, to the satisfaction of the Issuer, that such tax has been paid. SECTION 13.08. Issuer to Provide Common Stock. The Issuer covenants that it will reserve and keep available, free from preemptive rights, out of its authorized but unissued shares, solely for the purpose of issue upon conversion of Securities as herein provided, sufficient shares to provide for the conversion of the Securities from time to time as such Securities are presented for conversion. If any shares of Class A Common Stock to be reserved for the purpose of conversion of Securities hereunder require registration with or approval of any governmental authority under any Federal or State law before such shares may be validly issued or delivered upon conversion, then the Issuer covenants that it will in good faith and as expeditiously as possible endeavor to secure such registration or approval, as the case may be; provided that nothing in this Section shall be deemed to affect in any way the obligations of the Issuer to convert Securities into Class A Common Stock as provided in this Article. Before taking any action which would cause an adjustment reducing the Conversion Price below the then par value, if any, of the Class A Common Stock, the Issuer will take all corporate action which may, in the Opinion of Counsel, be necessary in order that the Issuer may validly and legally issue fully paid and non-assessable shares of Class A Common Stock at such adjusted Conversion Price. The Issuer covenants that all shares of Class A Common Stock which may be issued upon conversion of Securities will upon issue be duly and validly issued and fully paid and non-assessable by the Issuer and free of preemptive rights and that, if the Class A Common Stock is then listed on any national securities exchange, the shares of Class A Common Stock which may be issued upon conversion of Securities will be similarly listed at the time of such issuance. The Issuer covenants that, upon conversion of Securities as herein provided, there will be credited to Class A Common Stock par capital from the consideration for which the shares of Class A Common Stock issuable upon such conversion are issued an amount per share of Class A Common Stock so issued as determined by the Board of Directors, which amount shall not be less than the amount required by law and by the Issuer's certificate of incorporation, as amended, as in effect on the date of such conversion. For the purposes of this covenant the net proceeds received by the Issuer from the issuance and sale of the Securities converted, less any cash paid in respect of fractional share interests 72 79 upon such conversion, shall be deemed to be the amount of consideration for which the shares of Class A Common Stock issuable upon such conversion are issued. SECTION 13.09. Disclaimer of Responsibility for Certain Matters. Neither the Trustee nor any conversion agent or agent of the Trustee shall at any time be under any duty or responsibility to any Holder of Securities to determine whether any facts exist which may require any adjustment of the Conversion Price, or with respect to the Officers' Certificate referred to in Section 13.04(g) or 13.05, or with respect to the nature or extent of any such adjustment when made, or with respect to the method employed, or herein or in any supplemental indenture provided to be employed, in making the same. Neither the Trustee nor any conversion agent nor any agent of the Trustee shall be accountable with respect to the validity, registration, listing, or value (or the kind or amount) of any shares of Class A Common Stock, or of any securities or cash or other property, which may at any time be issued or delivered upon the conversion of any Security; and neither the Trustee nor any agent of the Trustee nor any conversion agent makes any representation with respect thereto. Neither the Trustee nor any conversion agent nor any agent of the Trustee shall be responsible for any failure of the Issuer to make any cash payment or to issue, register the transfer of or deliver any shares of Class A Common Stock or stock certificates or other securities or property upon the surrender of any Security for the purpose of conversion or, subject to Sections 5.01 and 5.02, to comply with any of the covenants of the Issuer contained in this Article. SECTION 13.10. Return of Funds Deposited for Redemption of Converted Securities. Any funds which at any time shall have been deposited by the Issuer or on its behalf with the Trustee or any other paying agent for the purpose of paying the principal of and interest on any of the Securities and which shall not be required for such purposes because of the conversion of such Securities, as provided in this Article, shall after such conversion, upon the written request of the Issuer, be repaid to the Issuer by the Trustee or such other paying agent. ARTICLE 14 RIGHT TO REQUIRE REDEMPTION SECTION 14.01. Right to Require Redemption. If at any time there shall occur any Change in Control (as defined below) of the Issuer, then each Holder shall have the right, at such Holder's option, to require the Issuer to redeem, pursuant to the offer described below (the "Change of Control Offer"), and upon 73 80 the exercise of such right the Issuer shall redeem, all or any part of such Holder's Securities that is $1,000 or any integral multiple thereof on a date (the "Repurchase Date") that is no earlier than 30 days nor later than 45 days from the date of the Issuer Notice (as defined below), other than as required by law, at a redemption price in cash equal to 101% of the principal amount thereof, plus accrued and unpaid interest to the Repurchase Date (the "Repurchase Price"). SECTION 14.02. Notices; Method of Exercising Redemption Right, etc. (a) Unless the Issuer shall have theretofore called for redemption all the Securities then Outstanding pursuant to Article 11 of the Indenture, on or before the 30th day after the date upon which the Issuer becomes aware that a Change in Control has occurred, the Issuer or, at the request of the Issuer, the Trustee, shall mail to all holders of record of the Securities a notice (the "Issuer Notice"), in the manner provided in Section 10.04, of the occurrence of the Change in Control and of the redemption right set forth herein arising as a result thereof, which notice shall govern the terms of the Change of Control Offer. The Issuer shall also deliver a copy of the Issuer Notice to the Trustee prior to or promptly after the mailing of such Issuer Notice. Each notice of a redemption right shall state: (1) the Repurchase Date; (2) the date by which the Securities with respect to which such right is being exercised and the irrevocable written notice referred to in Section 14.02(b) must be delivered to the Trustee; (3) the Repurchase Price; (4) a description of the procedure which a Holder must follow to exercise a redemption right including a form of the irrevocable written notice referred to in Section 14.02(b); and (5) the Conversion Price (as defined in Section 13.04 of the Indenture) then in effect, the date on which the right to convert the principal amount of the Securities to be redeemed will terminate and the place or places where such Securities may be surrendered for conversion. 74 81 No failure of the Issuer to give the foregoing notices or any defect therein shall limit any Holder's right to exercise a redemption right or affect the validity of the proceedings for the redemption of Securities. (b) To exercise a redemption right, a Holder shall deliver to the Trustee prior to the close of business on the Business Day prior to the Repurchase Date (i) irrevocable written notice of the Holder's exercise of such right, which notice shall set forth the name of the Holder, the amount of the Securities to be redeemed, a statement that an election to exercise the redemption right is being made thereby, and (ii) the Securities with respect to which the redemption right is being exercised, duly endorsed for transfer to the Issuer, together with such other customary documents as the Issuer may reasonably request. Securities held by a securities depositary may be delivered in such other manner as may be agreed to by such securities depositary and the Issuer or the Trustee. Such written notice shall be irrevocable. Subject to the provisions of paragraph (d) below, Securities surrendered for redemption together with such irrevocable written notice shall cease to be convertible from the date of delivery of such notice. If the Repurchase Date falls after the record date and before the following interest payment date, any Securities to be redeemed must be accompanied by payment of an amount equal to the interest thereon which the registered Holder thereof is to receive on such interest payment date, and, notwithstanding such redemption, such interest payment will be made by the Issuer to the registered Holder thereof on the applicable record date. (c) In the event a redemption right shall be exercised in accordance with the terms hereof, the Issuer shall on the Repurchase Date, to the extent lawful, (1) accept for payment all Securities or portions thereof properly tendered pursuant to the Change of Control Offer, (2) deposit with the paying agent an amount equal to the Repurchase Price in respect of all Securities or portions thereof so tendered and (3) deliver or cause to be delivered to the Trustee the Securities so accepted together with an Officers' Certificate stating the aggregate principal amount of Securities or portions thereof being purchased by the Issuer. The paying agent will promptly mail to each holder of Securities so tendered the Repurchase Price for such Securities, and the Trustee will promptly authenticate and mail (or cause to be transferred by book entry) to each Holder new Securities equal in aggregate principal amount to any unpurchased portion of the Securities surrendered, if any. (d) If any Security surrendered for redemption shall not be so redeemed on the Repurchase Date, such Security shall be convertible at any time from the Repurchase Date until redeemed and, until redeemed, shall continue to bear interest to the extent permitted by applicable law from the Repurchase Date at the 75 82 same rate borne by such Security. The Issuer shall pay to the Holder of such Security the additional amounts arising from this Section 14.02(d) at the same time that it pays the Repurchase Price, and if applicable such Security shall remain convertible into Class A Common Stock until the Repurchase Price plus any additional amounts owing on such Security shall have been paid or duly provided for. (e) Any Security which is to be redeemed only in part shall be surrendered at any office or agency of the Issuer designated for that purpose pursuant to Section 2.03 (with due endorsement by, or a written instrument of transfer in form satisfactory to the Issuer and the Trustee duly executed by, the Holder thereof or his attorney duly authorized in writing), and the Issuer shall execute, and the Trustee shall authenticate and deliver to the Holder of such Security without service charge, a new Security or Securities, of any authorized denomination as requested by such Holder, in aggregate principal amount equal to and in exchange for the unredeemed portion of the Security so surrendered. SECTION 14.03. Definitions. (a) A "Change in 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 Issuer to any Person or group of related Persons for purposes of Section 13(d) of the Exchange Act, (a "Group") other than to the Permitted Holders (as defined below); (ii) a majority of the Board of Directors of the Issuer shall consist of Persons who are not Continuing Directors (as defined below); 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 the Issuer. (b) "Continuing Director" means, as of the date of determination, any Person who (i) was a member of the Board of Directors of the Issuer on June 10, 1997 or becomes a director upon consummation of the Chancellor Merger, (ii) was nominated for election or elected to the Board of Directors 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. (c) "Permitted Holder" means (i) if the Chancellor Merger is not consummated, Scott K. Ginsburg and (ii) if the Chancellor Merger is consummated, from and after the effective date thereof, Scott K. Ginsburg, Hicks, Muse, Tate & Furst, Inc. or any of its Affiliates, officers and directors, and Steven Dinetz. 76 83 IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed, and their respective corporate seals to be hereunto affixed and attested, all as of June 16, 1997. EVERGREEN MEDIA CORPORATION By ------------------------------------- Name: Title: [CORPORATE SEAL] Attest: By ------------------------------------- Name: Title: THE BANK OF NEW YORK, as Trustee By ------------------------------------- Name: Title: [CORPORATE SEAL] Attest: By ------------------------------------- Name: Title: 77 84 EXHIBIT A [FORM OF FACE OF SECURITY] No. $ [CUSIP NO.] Evergreen Media Corporation 6% Convertible Subordinated Debentures Due 2012 Evergreen Media Corporation, (the "Issuer"), for value received hereby promises to pay to _________________ or registered assigns the principal sum of Dollars at the Issuer's office or agency for said purpose in the Borough of Manhattan, The City of New York, on June 15, 2012, in 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, and to pay interest, quarterly on March 15, June 15, September 15 and December 15 of each year and at maturity, on said principal sum in like coin or currency at the rate per annum set forth above beginning on the March 15, June 15, September 15 and December 15, as the case may be, next succeeding the date on which the Securities are issued in exchange for shares of the Issuer's $3.00 Convertible Exchangeable Preferred Stock (the "Preferred Stock") from the time of exchange of the Securities for the Preferred Stock (the "Securities Exchange Date") or from the most recent date to which interest has been paid or duly provided for on the Securities. The interest so payable on any March 15, June 15, September 15 and December 15 will, except as otherwise provided in the Indenture referred to on the reverse hereof, be paid to the person in whose name this Security is registered at the close of business on March 1, June 1, September 1 and December 1 preceding such March 15, June 15, September 15 and December 15, whether or not such day is a business day; provided that interest may be paid, at the option of the Issuer, by mailing a check therefor payable to the registered Holder entitled thereto at his last address as it appears on the Security register. Interest will be computed on the basis of a 360- day year of twelve 30-day months. Reference is made to the further provisions set forth on the reverse hereof, including without limitation provisions subordinating the payment of principal of, 85 premium, if any, and interest on the Securities to the payment in full of all Senior Debt as defined in said Indenture (as defined on the reverse hereof) and provisions giving the Holder hereof the right to convert this Security into Class A Common Stock of the Issuer on the terms and subject to the conditions and limitations referred to on the reverse hereof, as more fully specified in said Indenture. Such further provisions shall for all purposes have the same effect as though fully set forth at this place. This Security shall not be valid or obligatory until the certificate of authentication hereon shall have been duly signed by the Trustee acting under the Indenture. IN WITNESS WHEREOF, the Issuer has caused this instrument to be duly executed under its corporate seal. [Seal] ------------------------------------- 2 86 [FORM OF REVERSE OF SECURITY] Evergreen Media Corporation 6% Convertible Subordinated Debentures Due 2012 This Security is one of a duly authorized issue of debt securities of the Issuer, limited to up to the aggregate principal amount of $300,000,000 (except as otherwise provided in the Indenture defined below), issued or to be issued pursuant to an indenture dated as of June 16, 1997 (the "Indenture"), duly executed and delivered by the Issuer to The Bank of New York, Trustee (the "Trustee"). Reference is hereby made to the Indenture and all indentures supplemental thereto for a description of the rights, limitations of rights, obligations, duties and immunities thereunder of the Trustee, the Issuer and the Holders (the words "Holders" or "Holder" meaning the registered Holders or registered Holder) of the Securities. In case an Event of Default, as defined in the Indenture, shall have occurred and be continuing, the principal of all the Securities and interest accrued thereon may be declared due and payable, in the manner and with the effect, and subject to the conditions, provided in the Indenture. The Indenture provides that in certain events a declaration of default, a default, or the consequences of either of them may be waived by the Holders of a majority in aggregate principal amount of the Securities then outstanding except a default in the payment of principal of or premium, if any, or interest on any of the Securities or in respect of the conversion of any of the Securities. Any such consent or waiver by the Holder of this Security (unless revoked as provided in the Indenture) shall be conclusive and binding upon such Holder and upon all future Holders and owners of this Security and any Security which may be issued in exchange or substitution hereof, whether or not any notation thereof is made upon this Security or such other Securities. The Indenture permits the Issuer and the Trustee, with the consent of the Holders of not less than a majority in aggregate principal amount of the Securities at the time outstanding, evidenced as in the Indenture provided, to execute supplemental indentures adding any provisions to or changing in any manner or eliminating any of the provisions of the Indenture or of any supplemental indenture or modifying in any manner the rights of the Holders of the Securities; provided that no such supplemental indenture shall (a) extend the final maturity of any Security, or reduce the principal amount thereof or premium, if any, thereon, or reduce the rate or extend the time of payment of interest thereof, or 3 87 any premium payable on the redemption thereof, or change the place of payment where, or the coin or currency in which, any principal, premium or interest is payable, or reduce or alter the method of computation of any amount payable on redemption thereof (or the time at which such redemption may be made), or impair or affect the right of any Securityholder to institute suit for the payment or conversion thereof or materially and adversely affect the right to convert the Securities into Class A Common Stock of the Issuer or the right of the Holders of Securities to require redemption of the Securities, in each case, without the consent of the Holder of the Security so affected; or (b) reduce the aforesaid percentage of Securities, the consent of the Holders of which is required for any such supplemental indenture, without the consent of the Holders of each Security so affected, or (c) reduce the percentage of Securities necessary to consent to waive any past default under the Indenture to less than a majority, without the consent of the Holders of each Security so affected, or (d) modify the provisions of the Indenture relating to subordination of the Securities in any manner adverse to the Securityholders without the consent of the Holder of each Security so affected, or (e) modify any of the provisions of the Indenture relating to supplemental indentures or waivers of past defaults, except to increase any such percentage or to provide that certain other provisions of the Indenture cannot be modified or waived without the consent of the Holder of each Security affected thereby. The indebtedness evidenced by the Securities is, to the extent and in the manner provided in the Indenture, expressly subordinate and subject in right of payment to the prior payment in full of all Senior Debt of the Issuer as defined in the Indenture, whether outstanding at the date of the Indenture or thereafter incurred, and this Security is issued subject to the provisions of the Indenture with respect to such subordination. Each Holder of this Security, by accepting the same, agrees to and shall be bound by such provisions and authorizes the Trustee in his behalf to take such action as may be necessary or appropriate to effectuate the subordination so provided and appoints the Trustee his attorney-in-fact for such purpose. Subject to the provisions of the Indenture, the Holder of this Security has the right, at his option, at any time until and including, but not after the close of business on, June 15, 2012 (except that, in case this Security or a portion hereof shall be called for redemption and the Issuer shall not thereafter default in making due provision for the payment of the redemption price, such right shall terminate with respect to this Security or such portion hereof at the close of business on the Business Day prior to the date fixed for redemption), to convert the principal of this Security, or any portion thereof which is $1,000 or an integral multiple of $1,000, into fully paid and non-assessable shares of Class A Common Stock of 4 88 the Issuer, as said shares shall be constituted at the date of conversion, at the conversion price of $ * in principal amount of Securities for each share of such Class A Common Stock, or at the adjusted conversion price in effect at the date of conversion if an adjustment has been made, determined as provided in the Indenture, upon surrender of this Security to the Issuer at the office or agency of the Issuer maintained for that purpose in the Borough of Manhattan, The City of New York, together with a fully executed notice substantially in the form set forth at the foot hereof that the Holder elects so to convert this Security (or any portion hereof which is an integral multiple of $1,000) and, if this Security is surrendered for conversion during the period between the close of business on March 1, June 1, September 1 or December 1 in any year and the opening of business on the following March 15, June 15, September 15 or December 15 and has not been called for redemption on a redemption date within such period (or on such March 15, June 15, September 15 and December 15 or within five days after such period), accompanied by payment of an amount equal to the interest payable on such March 15, June 15, September 15 or December 15 on the principal amount of the Security being surrendered for conversion. Except as provided in the preceding sentence or as otherwise expressly provided in the Indenture, no payment or adjustment shall be made on account of interest accrued on this Security (or portion thereof) so converted or on account of any dividend or distribution on any such Common Stock issued upon conversion, but the Holder of record of this Security on March 1, June 1, September 1 or December 1 shall be entitled to receive interest on such Security on the succeeding March 15, June 15, September 15 or December 15 notwithstanding the conversion of such Security prior to such March 15, June 15, September 15 or December 15. Upon surrender for conversion as aforesaid, this Security shall be duly endorsed by, or be accompanied by instruments of transfer, in form satisfactory to the Issuer and the Trustee, duly executed by, the Holder or by his duly authorized attorney. The conversion price from time to time in effect is subject to adjustment as provided in the Indenture. No fractions of shares will be issued on conversion, but an adjustment in cash will be made for any fractional interest as provided in the Indenture. No reference herein to the Indenture and no provision of this Security or of the Indenture shall alter or impair the obligation of the Issuer, which is absolute and unconditional, to pay the principal of and premium, if any, and interest on this Security at the place, times, and rate, and in the currency, herein prescribed. - ---------------- (1) The conversion price will be the conversion price in effect for the Convertible Preferred Stock on the date of the exchange. 5 89 The Securities are issuable only as registered Securities without coupons in denominations of $1,000 and any integral multiple of $1,000. In the manner and subject to the limitations provided in the Indenture, this Security may be exchanged for a like aggregate principal amount of Securities of other authorized denominations. Upon due presentment for registration of transfer of this Security at the above-mentioned office or agency of the Issuer, a new Security or Securities of authorized denominations, for a like aggregate principal amount, will be issued to the transferee as provided in the Indenture. No service charge shall be made for any such transfer, but the Issuer may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto. The Securities may be redeemed at the option of the Issuer as a whole, or from time to time in part, on any date prior to maturity, upon mailing a notice of such redemption not less than 30 nor more than 60 days prior to the date fixed for redemption to the Holders of Securities to be redeemed, all as provided in the Indenture, at the following redemption prices (expressed in percentages of the principal amount) together in each case with accrued interest to the date fixed for redemption: If redeemed during the twelve-month period beginning immediately after September 15 of each year indicated,
YEAR REDEMPTION PRICE ---- ---------------- 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%
If at any time there shall occur any Change of Control as defined in the Indenture with respect to the Issuer, each Holder of Securities shall have the right, at such Holder's option but subject to the conditions set forth in the Indenture, to require the Issuer to redeem on the Repurchase Date as defined in the Indenture all or any part of such Holder's Securities that is $1,000 or an integral multiple thereof at a redemption price equal to 101% of the principal amount thereof plus accrued and unpaid interest to the Repurchase Date. 6 90 Subject to payment by the Issuer of a sum sufficient to pay the amount due on redemption, interest on this Security (or portion hereof if this Security is redeemed in part) shall cease to accrue upon the date duly fixed for redemption of this Security (or portion hereof if this Security is redeemed in part). The Issuer, the Trustee, and any authorized agent of the Issuer or the Trustee, may deem and treat the registered Holder hereof as the absolute owner of this Security (whether or not this Security shall be overdue and notwithstanding any notation of ownership or other writing hereon made by anyone other than the Issuer or the Trustee or any authorized agent of the Issuer or the Trustee), for the purpose of receiving payment of, or on account of, the principal hereof and premium, if any, and, subject to the provisions on the face hereof, interest hereon and for all other purposes, and neither the Issuer nor the Trustee nor any authorized agent of the Issuer or the Trustee shall be affected by any notice to the contrary. No recourse shall be had for the payment of the principal of or premium, if any, or the interest on this Security, for any claim based hereon, or otherwise in respect hereof, or based on or in respect of the Indenture or any indenture supplemental thereto, against any incorporator, shareholder, officer or director, as such, past, present or future, of the Issuer or of any successor corporation, either directly or through the Issuer or any successor corporation, whether by virtue of any constitution, statute or rule of law or by the enforcement of any assessment or penalty or otherwise, all such liability being, by the acceptance hereof and as part of the consideration for the issue hereof, expressly waived and released. This Security shall be construed for all purposes in accordance with the laws of the State of New York, without regard to conflicts of law principles. 7 91 [FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION] Dated: This is one of the Securities described in the within-mentioned Indenture. The Bank of New York, as Trustee ---------------------------------- Authorized Signatory [FORM OF CONVERSION NOTICE] To: Evergreen Media Corporation The undersigned owner of this Security hereby: (i) irrevocably exercises the option to convert this Security, or the portion hereof below designated, for shares of Class A Common Stock of Evergreen Media Corporation in accordance with the terms of the Indenture referred to in this Security and (ii) directs that such shares of Class A Common Stock deliverable upon the conversion, together with any check in payment for fractional shares and any Security(ies) representing any unconverted principal amount hereof, be issued and delivered to the registered Holder hereof unless a different name has been indicated below. If shares are to be delivered registered in the name of a person other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto. Any amount required to be paid by the undersigned on account of interest accompanies this Security. Dated ---------------------------------- Signature 8 92 Fill in for registration of shares if to be delivered, and of Securities if to be issued, otherwise than to and in the name of the registered Holder. ---------------------------------- Social Security or Other Taxpayer Identifying Number - ---------------------------------- (Name) - ---------------------------------- (Street Address) - ---------------------------------- (City, State and Zip Code) (Please print name and address) Principal Amount to be Converted: (if less than all) $ --------------------------------- 9 EX-12.1 6 COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES 1 EXHIBIT 12.1 CHANCELLOR MEDIA CORPORATION COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS (IN THOUSANDS)
PRO FORMA ACTUAL SIX ACTUAL SIX COMBINED MONTHS MONTHS YEAR YEAR ENDED DECEMBER 31, ENDED ENDED ENDED ------------------------------------------------- JUNE 30, JUNE 30, DECEMBER 31, 1992 1993 1994 1995 1996 1996 1997 1996 ------- -------- ------- ------- -------- ---------- ---------- ------------ Earnings: Income (loss) before income taxes........................ $(4,989) $(20,749) $ 39 $(5,658) $(19,090) $(20,200) $ 8,118 $(213,486) Fixed charges.................. 11,030 15,086 15,252 20,854 40,461 20,124 24,413 235,506 ------- -------- ------- ------- -------- -------- ------- --------- Less: Dividends on preferred stock of subsidiary.......... -- -- -- -- -- -- -- (59,077) ------- -------- ------- ------- -------- -------- ------- --------- Earnings as adjusted(A)........ 6,041 (5,663) 15,291 15,196 21,371 (76) 32,531 (37,057) ======= ======== ======= ======= ======== ======== ======= ========= Fixed Charges: Interest expense............... 10,112 13,878 13,809 19,199 37,527 19,039 22,741 $ 171,326 Amortization of deferred financing costs.............. 398 728 712 631 1,113 316 590 1,113 Dividends on preferred stock of subsidiary(1)................ -- -- -- -- -- -- -- 59,077 Rents under leases representative of an interest factor(2).................... 520 480 731 1,024 1,821 769 1,082 3,990 ------- -------- ------- ------- -------- -------- ------- --------- Fixed charges as adjusted........ 11,030 15,086 15,252 20,854 40,461 20,124 24,413 235,506 Preferred stock dividends(1)..... 1,140 7,317 7,431 7,431 5,877 3,715 1,075 39,492 ------- -------- ------- ------- -------- -------- ------- --------- Total fixed charges and preferred stock dividends(B)............. 12,170 22,403 22,683 28,285 46,338 23,839 25,488 274,998 ======= ======== ======= ======= ======== ======== ======= ========= Ratio of earnings to combined fixed charges and preferred stock dividends (A) divided by (B)............................ -- -- -- -- -- -- 1.28 -- Deficiency of earnings to combined fixed charges and preferred stock dividends (B) minus (A)...................... $ 6,129 $ 28,066 $ 7,392 $13,089 $ 24,967 $ 23,915 $ -- $ 312,055 PRO FORMA COMBINED SIX MONTHS ENDED JUNE 30, 1997 ---------- Earnings: Income (loss) before income taxes........................ $(81,934) Fixed charges.................. 118,679 -------- Less: Dividends on preferred stock of subsidiary.......... (30,194) -------- Earnings as adjusted(A)........ 6,551 ======== Fixed Charges: Interest expense............... $ 85,847 Amortization of deferred financing costs.............. 558 Dividends on preferred stock of subsidiary(1)................ 30,194 Rents under leases representative of an interest factor(2).................... 2,080 -------- Fixed charges as adjusted........ 118,679 Preferred stock dividends(1)..... 19,748 -------- Total fixed charges and preferred stock dividends(B)............. 138,427 ======== Ratio of earnings to combined fixed charges and preferred stock dividends (A) divided by (B)............................ -- Deficiency of earnings to combined fixed charges and preferred stock dividends (B) minus (A)...................... $131,876
- --------------- (1) Represents pretax earnings required to cover preferred stock dividends. (2) Management of Chancellor Media believes approximately one-third of rental and lease expense is representative of the interest component of rent expense. EX-23.2 7 CONSENT OF KPMG PEAT MARWICK LLP 1 EXHIBIT 23.2 INDEPENDENT AUDITORS' CONSENT The Board of Directors Chancellor Media Corporation: We consent to the incorporation by reference herein of our reports on the following financial statements: 1) the consolidated balance sheets of Evergreen Media Corporation as of December 31, 1995 and 1996 and the related consolidated statements of operations, stockholder's equity and cash flows for each of the years in the three-year period ended December 31, 1996; 2) the 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; 3) the 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; 4) the balance sheets of KKSF-FM/KDFC-FM and AM (A Division of the Brown Organization) as of December 31, 1995 and 1996 and the related statements of earnings and division equity and cash flows for the years then ended; (5) the 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; (6) the 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; and (7) the balance sheets of WDRQ 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. We also consent to the reference of our firm under the headings "Experts" in the Registration Statement. KPMG Peat Marwick LLP Dallas, Texas September 29, 1997 EX-23.3 8 CONSENT OF KPMG PEAT MARWICK LLP 1 EXHIBIT 23.3 INDEPENDENT AUDITORS' CONSENT The Board of Directors Chancellor Media Corporation: We consent to the incorporation by reference herein of our report relating to the consolidated balance sheets of WDAS-AM/FM (station owned and operated by Beasley FM Acquisition Corp.) as of December 31, 1996 and the related combined statements of earnings and station equity and cash flows for the year ended December 31, 1996, and the reference to our firm under the heading "Experts" in the Registration Statement. KPMG Peat Marwick LLP St. Petersburg, Florida September 29, 1997 EX-23.4 9 CONSENT OF PRICE WATERHOUSE LLP 1 EXHIBIT 23.4 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Prospectus constituting part of this Registration Statement on Form S-3 of Chancellor Media Corporation of our report dated May 2, 1997 relating to the financial statements of Century Chicago Broadcasting, L.P., which appears in the Current Report on Form 8-K of Evergreen Media Corporation dated May 30, 1997 and filed June 4, 1997. We also consent to the reference to us under the heading "Experts" in such Prospectus. PRICE WATERHOUSE LLP Chicago, Illinois September 29, 1997 EX-23.5 10 CONSENT OF ARTHUR ANDERSEN LLP 1 EXHIBIT 23.5 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation by reference in this Registration Statement on Form S-3 of Chancellor Media Corporation of our report dated May 8, 1997, (and to all references to our Firm) included in Evergreen Media Corporation's previously filed Form 8-K dated May 30, 1997 and filed June 4, 1997. Arthur Andersen LLP Chicago, Illinois September 29, 1997 EX-23.6 11 CONSENT OF COOPERS & LYBRAND LLP 1 EXHIBIT 23.6 CONSENT OF INDEPENDENT ACCOUNTANTS The Board of Directors Chancellor Media Corporation: We consent to the incorporation by reference in this Registration Statement on Form S-3 of Chancellor Media Corporation of our reports 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 and financial statement schedules of Chancellor 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, which reports appear in the Form 10-K dated March 28, 1997 filed by Chancellor Broadcasting Company. We also consent to the reference to our firm under the caption "Experts". Coopers & Lybrand L.L.P. Dallas, Texas September 29, 1997 EX-23.7 12 CONSENT OF COOPERS & LYBRAND LLP 1 EXHIBIT 23.7 CONSENT OF INDEPENDENT ACCOUNTANTS The Board of Directors Chancellor Media Corporation: We consent to the incorporation by reference in this Registration Statement on Form S-3 of Chancellor Media Corporation of our reports 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 and financial statement schedule 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, which reports appear in the Form 10-K dated March 28, 1997 filed by Chancellor Radio Broadcasting Company. We also consent to the reference to our firm under the caption "Experts". Coopers & Lybrand L.L.P. Dallas, Texas September 29, 1997 EX-23.8 13 CONSENT OF COOPERS & LYBRAND LLP 1 EXHIBIT 23.8 CONSENT OF INDEPENDENT ACCOUNTANTS The Board of Directors Chancellor Media Corporation: We consent to the incorporation by reference in this Registration Statement on Form S-3 of Chancellor Media Corporation of our reports dated March 24, 1997, on our audits of the consolidated statements of operations, changes in common stockholders' equity, cash flows and financial statement schedule of Trefoil Communications, Inc. and Subsidiaries for the period January 1, 1996 through February 13, 1996, which reports appear in the Form 10-K dated March 28, 1997 filed by Chancellor Broadcasting Company. We also consent to the reference to our firm under the caption "Experts". Coopers & Lybrand L.L.P. Dallas, Texas September 29, 1997 EX-23.9 14 CONSENT OF PRICE WATERHOUSE LLP 1 EXHIBIT 23.9 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Prospectus constituting part of this Registration Statement on Form S-3 of Chancellor Media Corporation of our report dated February 14, 1996 relating to the consolidated financial statements of Trefoil Communications, Inc., which appears on page 41 of the 1996 Annual Report on Form 10-K of Chancellor Broadcasting Company. We also consent to the incorporation by reference of our report on the Financial Statement Schedule, which appears on page S-10 of such Annual Report on Form 10-K. We also consent to the reference to us under the heading "Experts" in such Prospectus. Price Waterhouse LLP Los Angeles, California September 29, 1997 EX-23.10 15 CONSENT OF ARTHUR ANDERSEN LLP 1 EXHIBIT 23.10 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS The Board of Directors Chancellor Media Corporation: As independent public accountants, we hereby consent to the incorporation by reference of our report dated March 31, 1997 (and to all references to our Firm) in this Registration Statement on Form S-3 dated September 30, 1997 of Chancellor Media Corporation. Arthur Andersen LLP Washington, D.C. September 29, 1997 -----END PRIVACY-ENHANCED MESSAGE-----