<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 16, 1997
REGISTRATION NO. 333-36855
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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CHANCELLOR MEDIA CORPORATION
(Exact name of registrant as specified in its charter)
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<TABLE>
<S> <C> <C>
DELAWARE 4832 75-2247099
(State or other jurisdiction (Primary Standard Industrial (IRS Employer
of incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
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<TABLE>
<S> <C>
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)
</TABLE>
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Copies to
JOHN D. WATSON, JR., ESQ.
MARK D. SPOTO, ESQ.
ALYSSA R. HARVEY, ESQ.
LATHAM & WATKINS
1001 PENNSYLVANIA AVENUE, N.W., SUITE 1300
WASHINGTON, D.C. 20004-2505
(202) 637-2200
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time 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. [ ]
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.
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<PAGE> 2
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. A total of 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 October 15, 1997, the last sale price of the Common Stock on The Nasdaq
National Market (symbol: "AMFM") was $55.25 per share.
------------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 6 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 OCTOBER 16, 1997.
<PAGE> 3
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-3 (the "Registration
Statement") under the Securities Act with respect to the offering. 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 offering, 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
Stock Market. Reports, proxy materials and other information concerning the
Company can also be inspected and copied at the office of The Nasdaq Stock
Market, 1735 K Street, N.W., Washington, D.C. 20006-1500.
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
This Prospectus, including documents incorporated by reference, contains
"forward-looking statements" within the meaning of Section 27A of the Securities
Act and Section 21E of the Exchange Act. 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.
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<PAGE> 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
The Company is one of the largest radio broadcasting companies in the
United States. Upon consummation of all Pending Transactions (as defined), the
Company will own and operate 99 radio stations (73 FM and 26 AM) in 21 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 markets. On a pro forma basis after giving effect to the
Pending Transactions, 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 will add 13
stations (10 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.
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.
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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 (as defined) 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 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-
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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."
RECENT DEVELOPMENTS
For a further discussion of the transactions described below, see "Business
and Properties."
THE CHANCELLOR MERGER
- - 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"), (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"
and, together with the Parent Merger, the "Chancellor 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/CHANCELLOR MEDIA TRANSACTIONS
- - Since January 1, 1997, Evergreen (and, after September 5, 1997, Chancellor
Media) and its subsidiaries have completed (i) the acquisition of 17 radio
stations for a net purchase price of approximately $1.14 billion, (ii) the
exchange of seven stations for five stations and $6.0 million in cash and
(iii) the disposition of 10 radio stations for $269.3 million in cash and a
promissory note for $18.0 million.
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 OPTION. On August 6, 1997, Evergreen and Chancellor paid $3.0
million to Bonneville International Corporation ("Bonneville") for an option
to exchange three of the Company's stations in Los Angeles and Washington,
D.C. plus an additional $57.0 million in cash for three of Bonneville's
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<PAGE> 7
stations in New York, Los Angeles and Houston (the "Bonneville Option"). The
Bonneville Option was exercised on October 1, 1997, and definitive exchange
documentation is presently being negotiated.
- - 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"). The SFX Exchange is currently under review by the
Antitrust Division of the United States Department of Justice (the "DOJ")
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended
(the "HSR Act"), and accordingly, there can be no assurance as to whether or
when the SFX Exchange may ultimately be consummated.
- - 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 $376.1 million at September 30,
1997 (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 and its
subsidiaries of approximately $212 million at September 30, 1997 would be
assumed or refinanced 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 HSR Act. In connection with its review
under the HSR Act, the DOJ has issued a second request for information
concerning the Katz Acquisition. The Company is in the process of providing
that information. There can be no assurance as to whether or when the Katz
Acquisition may ultimately be consummated.
The foregoing transactions other than the Katz Acquisition are collectively
referred to as the "Pending Transactions." 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/Chancellor Media 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. This Prospectus relates to resales of the $3.00 Convertible
Preferred Stock.
- - 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).
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<PAGE> 8
- - CRBC SUBORDINATED NOTES OFFERING. On June 24, 1997, CRBC issued and sold its
8 3/4% Senior Subordinated Notes due 2007 (the "8 3/4% 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.
All amounts outstanding under the CRBC Restated Credit Agreement were repaid
with borrowings under the Senior Credit Facility at the closing of the
Chancellor Merger.
- - CHANCELLOR INTERIM FINANCING. On July 2, 1997, Chancellor borrowed funds
under an interim loan of $170.0 million (the "Chancellor Interim
Financing"). The Chancellor Interim Financing was repaid at the closing of
the Chancellor Merger with borrowings under the Senior Credit Facility that
had previously been distributed to EMHC.
- - STATION SALES PROCEEDS. The cash proceeds of radio station dispositions
have totalled $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 6 for a discussion of certain factors
that should be considered carefully in evaluating an investment in the
Securities.
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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% 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 and the
Financing Transactions, but without giving effect to the Katz Acquisition, 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 may be required to borrow up to $165.0 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 and the Company also expects to assume or refinance approximately
$212 million of debt of Katz and its subsidiaries. See "Business and
Properties -- Recent Developments -- Pending Transactions -- 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
6
<PAGE> 10
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 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 and the Financing Transactions, but without giving
effect to the Katz Acquisition, 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 Denver Acquisition and the SFX
Exchange, and the approval for each of these transactions (except the Denver
Acquisition) has become a final, nonappealable order, (ii) the waiting periods
required under the HSR Act for the Gannett Acquisition, the Bonneville Option
and the Denver Acquisition have expired or been terminated, and (iii) the
waiting periods required under the HSR Act for the SFX Exchange and the Katz
Acquisition have 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 or the Katz Acquisition 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 the Katz Acquisition 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
7
<PAGE> 11
these stations may limit the ability of the Company to successfully pursue other
opportunities for a period of time.
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 8 3/4% 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.
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.
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")
8
<PAGE> 12
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 and the Katz Acquisition. 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.
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. As
a result of such subordination, in the event of the Company's insolvency,
liquidation,
9
<PAGE> 13
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 and the Financing
Transactions, but without giving effect to the Katz Acquisition. 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.
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
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<PAGE> 14
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 $3.00 CONVERTIBLE PREFERRED STOCK
The Company does not intend to list the $3.00 Convertible Preferred Stock
on any public exchange and there can be no assurance that any market for the
$3.00 Convertible Preferred Stock will develop or, if one does develop, that it
will be maintained. If an active market for the $3.00 Convertible Preferred
Stock fails to develop or be sustained, the trading price of the $3.00
Convertible Preferred Stock could be adversely affected. The $3.00 Convertible
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 $3.00 Convertible
Preferred Stock or that an active public market for the $3.00 Convertible
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. Additionally, three
directors of Chancellor Media are also principals or executive officers of Hicks
Muse. Accordingly, 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.
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<PAGE> 15
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.
<TABLE>
<CAPTION>
SIX MONTHS SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED ENDED
--------------------------------------------- JUNE 30, JUNE 30,
1992 1993 1994 1995 1996 1996 1997
------ ------- ------ ------- ------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
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 $ --
</TABLE>
- ---------------
(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.
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<PAGE> 16
BUSINESS AND PROPERTIES
The Company is one of the largest radio broadcasting companies in the
United States. Upon consummation of all Pending Transactions, the Company will
own and operate 99 radio stations (73 FM and 26 AM) in 21 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 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 13 stations (10 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 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
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<PAGE> 17
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 8 3/4% Notes and the 8 3/4% 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/CHANCELLOR MEDIA TRANSACTIONS
Since January 1, 1997, Evergreen (and, after September 5, 1997, Chancellor
Media) 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 seven stations for five stations and $6.0 million in cash and (iii)
the sale or other disposition of 10 radio stations for $269.3 million in cash
and a promissory note for $18.0 million.
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.
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
14
<PAGE> 18
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,
the Company changed the format of the new KYLD-FM to the format previously
operated on the old 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"). On October 7, 1997, the Company applied the net proceeds from
the disposition of WLUP-FM of $80.0 million in cash, plus an additional $3.5
million in cash and various other direct acquisition costs, in a deferred
exchange of WLUP-FM for KZPS-FM and KDGE-FM in Dallas (the "Chicago/Dallas
Exchange"). The Company had previously operated KDGE-FM and KZPS-FM under time
brokerage agreements effective August 1, 1997.
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.
15
<PAGE> 19
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/Chancellor Media Transactions."
COMPLETED CHANCELLOR TRANSACTIONS
Between January 1, 1997 and the date of completion of the Chancellor
Merger, Chancellor 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
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
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."
16
<PAGE> 20
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.
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 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 WNSR-FM in New York, KLDE-FM in Houston and KBIG-FM in Los Angeles. The
Bonneville Option was exercised by the Company on October 1, 1997, and
definitive exchange documentation is presently being negotiated. The Company has
entered time brokerage agreements relating to these stations, which were
effective on October 1, 1997 for WTOP-AM, KZLA-FM, WGMS-FM, KLDE-FM and KBIG-FM,
and effective on October 10, 1997 for WNSR-FM.
The Gannett Acquisition, the Denver Acquisition, the SFX Exchange and the
Bonneville Option are referred to collectively herein as the "Pending
Transactions."
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
17
<PAGE> 21
market shares in the representation of radio and television stations and cable
television systems, in a tender offer transaction valued at approximately $376.1
million at September 30, 1997.
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 and its subsidiaries of approximately $212 million at
September 30, 1997 would be assumed or refinanced as part of the Katz
Acquisition. 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 transactions 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. This Prospectus
relates to resales of the $3.00 Convertible Preferred Stock.
On June 24, 1997, CRBC completed its private offering of the 8 3/4% Notes.
The net proceeds of the offering of 8 3/4% 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.
The foregoing transactions are referred to collectively as the "Financing
Transactions."
18
<PAGE> 22
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 October 13,
1997.
<TABLE>
<CAPTION>
RANKING OF
STATION'S STATION RANKING
MARKET BY AUDIENCE TARGET IN TARGET
MARKET(1) REVENUE(2) STATION SHARE(%)(3) STATION FORMAT DEMOGRAPHICS DEMOGRAPHICS(4)
- ------------------------ ---------- ----------- ----------- --------------------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
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 Persons 5
Hits 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
KDGE-FM 3.0 Alternative Rock Persons 5
18-34
KZPS-FM 3.8 Classic Rock Persons 4
25-54
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
</TABLE>
19
<PAGE> 23
<TABLE>
<CAPTION>
RANKING OF
STATION'S STATION RANKING
MARKET BY AUDIENCE TARGET IN TARGET
MARKET(1) REVENUE(2) STATION SHARE(%)(3) STATION FORMAT DEMOGRAPHICS DEMOGRAPHICS(4)
- ------------------------ ---------- ----------- ----------- --------------------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
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
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
</TABLE>
- ---------------
N/M: Not meaningful
+ Indicates station to be disposed in a Pending Transaction.
(1) Actual city of license may differ from metropolitan market served in
certain cases.
(2) Ranking of principal radio market served by the station among all U.S.
radio broadcast markets by aggregate 1996 gross radio broadcasting revenue
as reported by James H. Duncan, Duncan's Radio Market Guide (1997 ed.).
20
<PAGE> 24
(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.
(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.
<TABLE>
<CAPTION>
RANKING OF
STATION'S STATION RANKING
MARKET BY AUDIENCE TARGET IN TARGET
MARKET(1) REVENUE(2) STATION SHARE(%)(3) STATION FORMAT DEMOGRAPHICS DEMOGRAPHICS(4)
- --------------------- ---------- ----------- ----------- ------------------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Los Angeles, CA 1 KBIG-FM 2.4 Adult Contemporary Persons 14
25-54
New York, NY 2 WNSR-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
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
</TABLE>
- ---------------
N/M: Not meaningful
(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, the Company 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.
21
<PAGE> 25
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, 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.
22
<PAGE> 26
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, 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 -- Antitrust
Matters."
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.
23
<PAGE> 27
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), (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:
<TABLE>
<CAPTION>
DATE OF EXPIRATION DATE
STATION MARKET(1) ACQUISITION FREQUENCY OF FCC LICENSE
------- --------- ----------- ---------- ----------------
<S> <C> <C> <C> <C>
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-FMS 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
WNSR-FMS 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-FMS Chicago, IL Pending 107.5 MHz 12/03
WGCI-AMS 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
KZPS-FM Dallas, TX 10/97 92.5 MHz 8/05
KDGE-FM Dallas, TX 10/97 94.5 MHz 8/05
KHKS-FMS Dallas, TX Pending 106.1 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-FMS Houston, TX Pending 92.9 MHz 8/05
KKBQ-AMS Houston, TX Pending 790 kHz 8/05
KLDE-FMS 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
</TABLE>
24
<PAGE> 28
<TABLE>
<CAPTION>
DATE OF EXPIRATION DATE
STATION MARKET(1) ACQUISITION FREQUENCY OF FCC LICENSE
------- --------- ----------- ---------- ----------------
<S> <C> <C> <C> <C>
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-FMS 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 10/05
KOY-AM Phoenix, AZ 9/97 550 kHz 10/05
KYOT-FM Phoenix, AZ 9/97 95.5 MHz 10/05
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-FMS Nassau/Suffolk
(Long Island), NY Pending 102.3 MHz 6/98
WBLI-FMS Nassau/Suffolk
(Long Island), NY Pending 106.1 MHz 6/98
WHFM-FMS Nassau/Suffolk
(Long Island), NY Pending 95.3 MHz 6/98
WGBB-AMS Nassau/Suffolk
(Long Island), NY Pending 1240 kHz 6/98
</TABLE>
25
<PAGE> 29
<TABLE>
<CAPTION>
DATE OF EXPIRATION DATE
STATION MARKET(1) ACQUISITION FREQUENCY OF FCC LICENSE
------- --------- ----------- ---------- ----------------
<S> <C> <C> <C> <C>
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*
</TABLE>
- ---------------
* Indicates pending renewal application.
S Indicates station to be acquired in a Pending Transaction.
+ Indicates station to be disposed in a Pending Transaction.
(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 the Company, CMHC and CMCLA 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 the Company, CMHC or CMCLA.
The Communications Act and FCC rules also generally prohibit the common
ownership, operation or control of a radio broadcast station and a television
broadcast station serving 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.
Because of these multiple ownership rules and the cross-interest policy
described below, a purchaser of the Company's Common Stock who acquires an
attributable interest in the Company may violate the FCC's
26
<PAGE> 30
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, sponsorship
identification, and technical operations (including limits on radio frequency
radiation). In addition, licensees must develop and implement programs designed
to promote equal employment opportuni-
27
<PAGE> 31
ties. 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.
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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.
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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.
The Company 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.
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If the Company 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), the Company 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. The Company 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, the Company 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 the Company is or would be rendered insolvent by virtue of
the dividend or distribution, or if the declaration, payment or distribution
would contravene the Company's Amended and Restated Certificate of Incorporation
as then in effect. The Company'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 the Company, subject to the payment in full, or until provision
has been made for the payment in full, of all claims of creditors of the
Company, 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 the
Company. Neither a consolidation or merger of the Company with another entity
nor a sale or transfer or all or part of the Company's assets for cash,
securities or other property will be considered a liquidation, dissolution or
winding up of the Company.
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 the Company or any entity
controlled by the Company will have no voting rights.
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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 the Company'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, the Company 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 the Company 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 the Company'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 the
Company, 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):
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
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
</TABLE>
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 the
Company unless the closing price of the Company'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, the Company 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
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the event that the Company has failed to pay accrued and unpaid dividends on the
$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 the Company 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, the Company 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 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 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
the Company 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
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
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.
The Company 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
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<PAGE> 37
Price is so reduced, the Company shall mail to holders of record of the $3.00
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.
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 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 the
Company, 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 the
Company 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 the Company 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.
The Company 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 the Company'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 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
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<PAGE> 38
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 Evergreen on June 10, 1997 or
who became a director of the Company 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 $3.00
Convertible Preferred Stock, but would not constitute a Change of Control. The
Company could in the future, enter into transactions including certain
recapitalizations of the Company, 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 the
Company, 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 the Company 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 the Company.
EXCHANGE
Shares of $3.00 Convertible Preferred Stock will be exchangeable at the
option of the Company, 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 the Company's Exchange Debentures in
redemption of and in exchange for shares of $3.00 Convertible Preferred Stock,
provided certain conditions are met. See "Description of the Exchange
Debentures." 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 the Company 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 the Company's ability to cause the exchange of the $3.00 Convertible
Preferred Stock for Exchange Debentures. The ability of the Company 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.
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<PAGE> 39
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
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<PAGE> 40
(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.
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<PAGE> 41
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.
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<PAGE> 42
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:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
---- ----------
<S> <C>
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
</TABLE>
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, and the Financing
Transactions,
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<PAGE> 43
but without giving effect to the Katz Acquisition, $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.
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BOOK-ENTRY PROCEDURES
The description of book-entry procedures in this Prospectus includes
summaries of certain rules and operating procedures of the DTC that affect
transfers of interests in the global certificate or certificates issued in
connection with sales of $3.00 Convertible Preferred Stock made pursuant to this
Prospectus. Substantially all of the shares of $3.00 Convertible Preferred Stock
were issued as fully registered securities registered in the name of Cede & Co.
(as nominee for the DTC). Fully registered global $3.00 Convertible Preferred
Stock certificates (collectively, the "Global Certificate") were issued,
representing such $3.00 Convertible Preferred Stock, and were deposited with the
DTC.
So long as DTC, or its nominee, is the registered owner or holder of the
$3.00 Convertible Preferred Stock, DTC or such nominee, as the case may be, will
be considered the sole owner or holder of the $3.00 Convertible Preferred Stock
represented by such Global Certificate for all purposes. No beneficial owner of
an interest in the Global Certificate will be able to transfer that interest
except in accordance with DTC's procedures, in addition to those provided for
under the Certificate of Designation.
Payments of the liquidation preference or redemption price and dividends on
the Global Certificate will be made to DTC or its nominee, as the case may be,
as the registered owner thereof. Neither the Company nor the Transfer Agent will
have any responsibility or liability for any aspect of the records relating to
or payments made on account of beneficial ownership in the Global Certificate or
for maintaining, supervising or reviewing any records relating to such
beneficial ownership interest.
The Company expects that DTC or its nominee, upon receipt of any payment of
the liquidation preference or redemption price and dividends in respect of the
Global Certificate will credit participants' accounts with payments in amounts
proportionate to their respective beneficial interests in the principal amounts
of the Global Certificate as shown on the records of DTC or its nominee. The
Company also expects that payments by participants to owners of beneficial
interests in the Global Certificate held through such participants will be
governed by standing instructions and customary practice, as is now the case
with securities held for the accounts of customers registered in the names of
nominees for such customers. Such payments will be the responsibility of such
participants.
Transfers between participants in DTC will be effected in the ordinary way
in accordance with DTC rules and will be settled in clearinghouse funds. If a
holder requires physical delivery of a Certificated Security for any reason,
including to sell shares of $3.00 Convertible Preferred Stock to persons in
states that require physical delivery of the certificate evidencing the shares
of $3.00 Convertible Preferred Stock, or to pledge such securities, such holder
must transfer its interest in the Global Certificate, in accordance with the
normal procedures of DTC and with the procedures set forth in the Certificate of
Designation.
DTC has advised the Company that it will take any action permitted to be
taken by a holder of $3.00 Convertible Preferred Stock only at the direction of
one or more participants to whose account the DTC interests in the Global
Certificate are credited and only in respect of such shares of $3.00 Convertible
Preferred Stock as to which such participant or participants has or have given
such direction.
DTC has advised the Company as follows: DTC is a limited purpose trust
company organized under the laws of the State of New York, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the
Uniform Commercial Code and a "Clearing Agency" registered pursuant to the
provisions of Section 17A of the Exchange Act. DTC was created to hold
securities for its participants and facilitate the clearance and settlement of
securities transactions between participants through electronic book-entry
changes in accounts of its participants, thereby eliminating the need for
physical movement of certificates. Participants include securities brokers and
dealers, banks, trust companies and clearing corporations and dealers and trust
companies that clear through or maintain a custodial relationship with a
participant, either directly or indirectly ("indirect participants").
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of interests in the Global Certificate among participants of DTC, it
is under no obligation to perform such procedures, and such procedures may be
discontinued at any time. Neither the Company nor the Transfer Agent have any
responsibility for the performance by DTC or its participants or indirect
participants of their respective obligations under the rules and procedures
governing their operations.
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<PAGE> 45
DESCRIPTION OF CAPITAL STOCK
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 (the "Chancellor Media Certificate") provides that the issuance
of any shares of Class A Common Stock will require the unanimous affirmative
vote of the Board of Directors of Chancellor Media. 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 Chancellor Media Certificate that would
increase or decrease the aggregate number of authorized shares of any class,
increase or decrease the par value of the shares of any class, or modify or
change the powers, preferences or special rights of the shares of any class so
as to affect such class adversely.
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 the Chancellor Media Certificate and Bylaws may have
the effect of preventing, discouraging or delaying any change of control of
Chancellor Media 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 Chancellor Media. In addition, the
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<PAGE> 46
Chancellor Media Certificate provides for three classes of directors serving for
staggered three-year terms. Under the Delaware General Corporation Law,
directors on a classified board may only be removed by shareholders for cause.
This provision could also impede the success of any attempt to effect a change
of control of Chancellor Media.
Chancellor Media 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
The Chancellor Media Certificate restricts the ownership and voting of
Chancellor Media's capital stock, including its Common Stock, in accordance with
the Communications Act and the rules of the FCC, to prohibit ownership of more
than 25% of Chancellor Media's outstanding capital stock (or control of more
than 25% of the voting power it represents) by or for the account of aliens,
foreign governments, or non-U.S. corporations or corporations otherwise subject
to control by such persons or entities. The Chancellor Media Certificate also
prohibits any transfer of Chancellor Media's capital stock that would cause
Chancellor Media to violate this prohibition. In addition, the Chancellor Media
Certificate authorizes the Board of Directors of Chancellor Media to adopt such
provisions as its deems necessary to enforce these prohibitions.
Other Provisions
The holders of Common Stock and Class A Common Stock are not entitled to
preemptive or similar rights. The shares of Common Stock are not subject to
redemption or a sinking fund.
No single shareholder of Chancellor Media holds more than 50.0% of the
combined voting power of Chancellor Media. See "Risk Factors -- Control of the
Company." As a result, a holder of an "attributable" interest in Chancellor
Media may violate the FCC's multiple ownership rules or cross interest rules if
such holder also has an "attributable" interest (or, in some cases, a
"meaningful" nonattributable interest) in other television or radio stations, or
in daily newspapers, depending on the number and location of those radio or
television stations or daily newspapers. Such a stockholder may also be
restricted in the companies in which such stockholder may invest. See "Business
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.
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<PAGE> 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
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<PAGE> 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
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<PAGE> 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):
<TABLE>
<CAPTION>
YEAR DIVIDEND
---- --------
<S> <C>
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
</TABLE>
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."
CMCLA CAPITAL STOCK
The authorized capital stock of CMCLA as of September 15, 1997 consists of
1,000 shares of common stock, par value $.01 per share, all of which are owned
of record and beneficially by CMHC, and 10,000,000 shares of preferred stock,
par value $.01 per share, 1,000,000 of which are designated 12 1/4% Preferred
Stock with an initial liquidation value of $119.444944 per share, of which
1,000,000 shares are issued and outstanding, and 3,600,000 of which are
designated 12% Preferred Stock with a stated liquidation value of $100.00 per
share, of which 2,117,629 shares are issued and outstanding.
12 1/4% PREFERRED STOCK
Dividends. Holders of the 12 1/4% Preferred Stock are entitled to receive,
when, as and if declared by the Board of Directors of CMCLA, out of funds
legally available therefor, dividends on each share of 12 1/4% Preferred Stock
at a rate per annum equal to 12 1/4% of the then effective liquidation
preference per share of the 12 1/4% Preferred Stock, payable quarterly. If any
dividend payable on any dividend payment date on or before February 15, 2001 is
not declared or paid in full in cash on such dividend payment date, the amount
not paid on such dividend payment date will be added to the liquidation
preference of the 12 1/4% Preferred Stock on such dividend payment date and will
be deemed paid in full and will not
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<PAGE> 50
accumulate. After February 15, 2001, dividends may be paid only in cash out of
funds legally available therefor.
Ranking. The 12 1/4% Preferred Stock ranks, with respect to dividend
rights and distribution rights on liquidation, winding-up and dissolution (a)
senior to the common stock of CMCLA, to the 12% Preferred Stock and to each
other class of capital stock or series of preferred stock that may in the future
be established by the Board of Directors of CMCLA the terms of which do not
expressly provide that it ranks senior to or on a parity with the 12 1/4%
Preferred Stock, (b) on a parity with each other class of capital stock or
series of preferred stock that may in the future be established by the Board of
Directors of CMCLA the terms of which expressly provide that such class or
series will rank on a parity with the 12 1/4% Preferred Stock and (c) junior to
each class of capital stock or series of preferred stock that may in the future
be established by the Board of Directors of CMCLA the terms of which expressly
provide that such class or series will rank senior to the 12 1/4% Preferred
Stock.
Optional Redemption. The 12 1/4% Preferred Stock is redeemable (subject to
contractual and other restrictions with respect thereto, including limitations
under the Senior Credit Facility, the 9 3/8% Indenture and the 8 3/4% Indenture,
and to the legal availability of funds therefor), in whole or in part at any
time on and after February 15, 2001 at the option of the Board of Directors of
CMCLA, at the redemption prices (expressed as percentages of the then effective
liquidation preference thereof) set forth below, if redeemed during the
twelve-month period commencing on February 15 of each of the years set forth
below, plus accumulated and unpaid dividends to the date of redemption:
<TABLE>
<CAPTION>
YEAR DIVIDEND
---- --------
<S> <C>
2001........................................................ 106.125%
2002........................................................ 104.900
2003........................................................ 103.675
2004........................................................ 102.450
2005........................................................ 101.225
2006 and thereafter......................................... 100.000
</TABLE>
In addition, on or prior to February 15, 1999, CMCLA may, at its option,
use the net cash proceeds of any Public Equity Offering (as defined in the
certificate of designation for the 12 1/4% Preferred Stock) to redeem the
12 1/4% Preferred Stock, in part, at a redemption price equal to 111.025% of the
then effective liquidation preference if redeemed during the twelve-month period
commencing on February 15, 1997 and 109.8% of the then effective liquidation
preference if redeemed during the twelve-month period commencing on February 15,
1998, plus, in each case, accumulated and unpaid dividends to the date of
redemption; provided, however, that after any such redemption from the proceeds
of a Public Equity Offering, the shares of 12 1/4% Preferred Stock outstanding
must equal at least 75% of the aggregate number of shares of 12 1/4% Preferred
Stock originally issued; provided further, that any such redemption must occur
on or prior to 60 days after receipt by CMCLA of the proceeds of the Public
Equity Offering.
Mandatory Redemption. The 12 1/4% Preferred Stock is subject to mandatory
redemption (subject to contractual and other restrictions with respect thereto
and to the legal availability of funds therefor) in whole on February 15, 2008,
at a price equal to the then effective liquidation preference thereof, plus all
accumulated and unpaid dividends to the date of redemption.
Voting Rights. Holders of the 12 1/4% Preferred Stock have no voting
rights except as otherwise required by law; provided that CMCLA may not
authorize any class of capital stock that ranks senior to or on a parity with
the 12 1/4% Preferred Stock and may not, subject to certain exceptions, effect a
merger or sale of substantially all of its assets, without the affirmative vote
of holders of at least a majority of the shares of 12 1/4% Preferred Stock then
outstanding voting or consenting, as the case may be, as one class and, provided
further, that the holders of 12 1/4% Preferred Stock, voting together as a
single class, shall have the right to elect the lesser of two directors and that
number of directors constituting 25% of the Board of Directors of CMCLA upon the
occurrence of certain events including, but not limited to, the failure by CMCLA
on or after February 15, 2001 to pay cash dividends in full on the 12 1/4%
Preferred Stock for six or more quarterly dividend
47
<PAGE> 51
periods, whether or not consecutive, the failure by CMCLA to discharge any
mandatory redemption or repayment obligation with respect to the 12 1/4%
Preferred Stock, the failure by CMCLA to make a Change of Control Offer (as
defined in the certificate of designation for the 12 1/4% Preferred Stock), the
breach or violation of one or more of the covenants contained in the certificate
of designation for the 12 1/4% Preferred Stock or the failure CMCLA to repay at
final stated maturity, or the acceleration of the final stated maturity of
certain indebtedness of CMCLA (including indebtedness under the Senior Credit
Facility, the 9 3/8% Notes and the Original Notes (and, assuming consummation of
the Exchange Offer, the Exchange Notes).
Change of Control. The certificate of designation for the 12 1/4%
Preferred Stock provides that, upon the occurrence of a Change of Control (as
defined below), each holder will have the right to require that CMCLA repurchase
all or a portion of such holder's 12 1/4% Preferred Stock in cash at a purchase
price equal to 101% of the then current effective liquidation preference
thereof, plus an amount in cash equal to all accumulated and unpaid dividends
per share to the date of repurchase. If the repurchase of the 12 1/4% Preferred
Stock would violate or constitute a default under the Senior Credit Facility,
the 9 3/8% Indenture, or other indebtedness of CMCLA, then pursuant to the
certificate of designation for the 12 1/4% Preferred Stock, CMCLA will either
(A) repay in full all such indebtedness and terminate all commitments
outstanding under the Senior Credit Facility or (B) obtain the requisite
consents, if any, under the Senior Credit Facility, the 9 3/8% Indenture, or
such other indebtedness required to permit the repurchase of 12 1/4% Preferred
Stock. In an offer by CMCLA to repurchase the 12 1/4% Preferred Stock at the
holder's option upon a Change of Control, CMCLA will comply with Section 14(e)
of the Exchange Act and the rules and regulations promulgated thereunder, as
then in effect.
"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
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 Hicks Muse or any of its
affiliates, officers and directors or to Steven Dinetz (the "Permitted
Holders"); or (ii) a majority of the Board of Directors of Chancellor Media,
CMHC or CMCLA 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 Chancellor Media, CMHC or CMCLA.
"Continuing Director" means, as of the date of determination, any Person
who (i) was a member of the Board of Directors of CRBC on February 26, 1996,
(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.
With respect to the sale of "all or substantially all" of the assets of
CMCLA, which would constitute a Change of Control for purposes of the
certificate of designation for the 12 1/4% 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 the Company and, therefore, it may be
unclear whether a Change of Control has occurred and whether the 12 1/4%
Preferred Stock is subject to a Change of Control Offer.
Certain Covenants. The certificate of designation for the 12 1/4%
Preferred Stock contains covenants customary for securities comparable to the
12 1/4% Preferred Stock, including covenants that restrict the ability of CMCLA
and its subsidiaries to incur additional indebtedness, pay dividends and make
certain other restricted payments, and merge or consolidate with any other
person or sell, assign, transfer, lease, convey or otherwise dispose of all or
substantially of the assets of CMCLA.
Exchange. CMCLA may, at its option, subject to certain conditions,
including its ability to incur additional indebtedness under the 9 3/8%
Indenture and the Senior Credit Facility, on any scheduled dividend payment
date, exchange the 12 1/4% Preferred Stock, in whole but not in part, for its
12 1/4% Subordinated
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<PAGE> 52
Exchange Debentures due 2008 (the "12 1/4% Exchange Debentures"). Holders of the
12 1/4% Preferred Stock will be entitled to receive $1.00 principal amount of
12 1/4% Exchange Debentures for each $1.00 in liquidation preference of 12 1/4%
Preferred Stock including, to the extent necessary, 12 1/4% Exchange Debentures
in principal amounts of less than $1,000.
The 12 1/4% Exchange Debentures, if issued, will be issued under an
indenture (the "12 1/4% Exchange Indenture") between CRBC and U.S. Trust Company
of Texas, N.A., as Trustee (as supplemented, the "12 1/4% Exchange Debenture
Trustee"). The 12 1/4% Exchange Debentures will be unsecured obligations of
CMCLA, ranking subordinate in right of payment to all senior indebtedness of
CMCLA, including the 9 3/8% Notes, the Notes and the indebtedness under the
Senior Credit Facility. Interest on the 12 1/4% Exchange Debentures will accrue
at the same rate per annum as the stated dividend rate on the 12 1/4% Preferred
Stock. The 12 1/4% Exchange Debentures will be redeemable, at CMCLA's option, in
whole at any time or in part from time to time, after an initial period, at
redemption prices equivalent to those relating to the optional redemption of the
12 1/4% Preferred Stock. The 12 1/4% Exchange Indenture provides that upon the
occurrence of a change of control of CMCLA (as defined therein), each holder
will have the right to require that CMCLA repurchase all or a portion of such
holder's 12 1/4% Exchange Debentures at a purchase price equal to 101% of the
principal amount thereof plus accrued interest, if any, to the date of
repurchase. The 12 1/4% Exchange Indenture contains certain customary covenants
for securities comparable to the 12 1/4% Exchange Debentures, including
covenants restricting the incurrence of additional indebtedness, the issuance of
subsidiary preferred stock, the making of certain restricted payments, the
creation of dividend and other payment restrictions affecting subsidiaries,
certain transactions with affiliates, and the lines of business in which CMCLA
and its subsidiaries may be engaged.
12% PREFERRED STOCK
Dividends. Holders of the 12% Preferred Stock are entitled to receive,
when, as and if declared by the Board of Directors of CMCLA, out of funds
legally available therefor, dividends on each share of 12% Preferred Stock at a
rate per annum equal to 12%, subject to increase in certain circumstances of the
then effective liquidation preference per share of the 12% Preferred Stock,
payable semi-annually. All dividends on the 12% Preferred Stock are cumulative.
CMCLA, at its option, may pay dividends on any dividend payment date occurring
on or before January 15, 2002 either in cash or in additional shares of 12%
Preferred Stock. After January 15, 2002, dividends may be paid only in cash out
of funds legally available therefor.
Ranking. The 12% Preferred Stock ranks with respect to dividend rights and
rights on liquidation, winding-up and dissolution, (a) senior to the common
stock of CMCLA and to each other class of capital stock or series of preferred
stock that may in the future be established by the Board of Directors of CMCLA
the terms of which expressly provide that it ranks junior to or on a parity with
the 12% Preferred Stock, (b) on a parity with each other class of capital stock
or series of preferred stock that may in the future be established by the Board
of Directors of CMCLA the terms of which expressly provide that such class or
series will rank on a parity with the 12% Preferred Stock and (c) junior to the
12 1/4% Preferred Stock and to each class of capital stock or series of
preferred stock that may in the future be established by the Board of Directors
of CMCLA the terms of which do not expressly provide that such class or series
will rank junior to the 12 1/4% Preferred Stock.
Optional Redemption. The 12% Preferred Stock is redeemable (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 on or
after January 15, 2002 at the option of CMCLA, at the redemption prices
(expressed as percentages of the then effective liquidation preference thereof)
set forth below, if redeemed during the twelve-month period
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<PAGE> 53
commencing on January 15 of each of the years set forth below, plus accumulated
and unpaid dividends to the date of redemption:
<TABLE>
<CAPTION>
YEAR DIVIDEND
---- --------
<S> <C>
2002........................................................ 106.00%
2003........................................................ 104.80%
2004........................................................ 103.60%
2005........................................................ 102.40%
2006........................................................ 101.20%
2007 and thereafter......................................... 100.00%
</TABLE>
In addition, on or prior to January 15, 2000, CMCLA may, at its option, use the
net cash proceeds of any Public Equity Offering (as defined in the certificate
of designation for the 12% Preferred Stock) to redeem the 12% Preferred Stock,
in part, at a redemption price equal to 112% of the then effective liquidation
preference, plus, in each case, accumulated and unpaid dividends to the date of
redemption; provided, however, that after any such redemption from the proceeds
of a Public Equity Offering, there must be at least $150.0 million aggregate
liquidation preference of 12% Preferred Stock outstanding; provided further,
that any such redemption must occur on or prior to 60 days after receipt by
CMCLA of the proceeds of the Public Equity Offering.
Mandatory Redemption. The 12% Preferred Stock is also be subject to
mandatory redemption (subject to contractual and other restrictions with respect
thereto and to the legal availability of funds therefor) in whole on January 15,
2009 at a price equal to the then effective liquidation preference thereof, plus
all accumulated and unpaid dividends to the date of redemption.
Voting Rights. Holders of the 12% Preferred Stock will have no voting
rights except as otherwise required by law; provided that CMCLA may not
authorize any class of capital stock that is senior to or on a parity with the
12% Preferred Stock (subject to an exception for the authorization of up to $50
million initial liquidation preference of Parity Stock) and may not, subject to
certain exceptions, effect a merger or sale of substantially all of its assets,
without the affirmative vote of holders of at least a majority of the shares of
12% Preferred Stock then outstanding voting or consenting, as the case may be,
as one class and, provided further, that the holders of 12% Preferred Stock,
voting together as a single class, shall have the right to elect the lesser of
two directors or that number of directors constituting 25% of the members of the
Board of Directors of CMCLA upon the occurrence of certain events including, but
not limited to, the failure by CMCLA on or after January 15, 2002 to pay cash
dividends in full on the 12% Preferred Stock for three or more quarterly
dividend periods, whether or not consecutive, the failure by CMCLA to discharge
any mandatory redemption or repayment obligation with respect to the 12%
Preferred Stock, the failure by CMCLA to make a Change of Control Offer (as
defined in the certificate of designation for the 12% Preferred Stock), the
breach or violation of one or more of the covenants contained in the certificate
of designation for the 12% Preferred Stock or the failure by CMCLA to repay at
final stated maturity, or the acceleration of the first stated maturity of
certain indebtedness of CMCLA, whether or not consecutive (including
indebtedness under the Senior Credit Facility, the 9 3/8% Notes and the 8 3/4%
Notes).
Change of Control. The certificate of designation for the 12% Preferred
Stock provides that, upon the occurrence of a change of control (which is
defined identically to the definition of "change of control" applicable to the
12 1/4% Preferred Stock), each holder will have the right to require that CMCLA
repurchase all or a portion of such holder's 12% Preferred Stock in cash at a
purchase price equal to 101% of the then current effective liquidation
preference thereof, plus an amount in cash equal to all accumulated and unpaid
dividends per share to the date of repurchase. If the repurchase of the 12%
Preferred Stock would violate or constitute a default under the certificate of
designation for the 12 1/4% Preferred Stock, the Senior Credit Facility, the
9 3/8% Indenture, or other indebtedness of CMCLA, then pursuant to the
certificate of designation for the 12% Preferred Stock, CMCLA will either (A)
repay in full all such indebtedness and terminate all commitments outstanding
under the Senior Credit Facility or (B) obtain the requisite consents, if any,
under the Senior Credit Facility, the 9 3/8% Indenture, or such other
indebtedness required to permit the repurchase of the 12% Preferred Stock. In an
offer by CMCLA to repurchase the 12% Preferred Stock at the holder's option
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<PAGE> 54
upon a Change of Control, CMCLA will comply with Section 14(e) of the Exchange
Act and the rules and regulations promulgated thereunder, as then in effect.
Certain Covenants. The certificate of designation of the 12% Preferred
Stock contains covenants customary for securities comparable to the 12%
Preferred Stock, including covenants that restrict the ability of CMCLA and its
subsidiaries to incur additional indebtedness, pay dividends and make certain
other restricted payments, and merge or consolidate with any other person or
sell, assign, transfer, lease, convey or otherwise dispose of all or
substantially of the assets of CMCLA.
Exchange. CMCLA may, at its option, subject to certain conditions,
including its ability to incur additional indebtedness under the 9 3/8%
Indenture and the Senior Credit Facility, on any scheduled dividend payment
date, exchange the 12% Preferred Stock, in whole but not in part, for its 12%
Subordinated Exchange Debentures due 2009 (the "12% Exchange Debentures").
Holders of the 12% Preferred Stock will be entitled to receive $1.00 principal
amount of 12% Exchange Debentures for each $1.00 in liquidation preference of
12% Preferred Stock including, to the extent necessary, 12% Exchange Debentures
in principal amounts of less than $1,000.
The 12% Exchange Debentures, if issued, will be issued under an indenture
(the "12% Exchange Indenture") between CRBC and U.S. Trust Company of Texas,
N.A., as Trustee (as supplemented, the "12% Exchange Debenture Trustee"). The
12% Exchange Debentures will be unsecured obligations of CMCLA, ranking
subordinate in right of payment to all senior indebtedness of CMCLA, including
the 9 3/8% Notes, the 8 3/4% Notes and the indebtedness under the Senior Credit
Facility. Interest on the 12% Exchange Debentures will accrue at the same rate
per annum as the stated dividend rate on the 12% Preferred Stock. The 12%
Exchange Debentures will be redeemable, at CMCLA's option, in whole at any time
or in part from time to time, after an initial period, at redemption prices
equivalent to those relating to the optional redemption of the 12% Preferred
Stock. The 12% Exchange Indenture provides that upon the occurrence of a change
of control (as defined therein) of CMCLA, each holder will have the right to
require that CMCLA repurchase all or a portion of such holder's 12% Exchange
Debentures at a purchase price equal to 101% of the principal amount thereof
plus accrued interest, if any, to the date of repurchase. The 12% Exchange
Indenture contains certain customary covenants for securities comparable to the
12% Exchange Debentures, including covenants restricting the incurrence of
additional indebtedness, the issuance of subsidiary preferred stock, the making
of certain restricted payment, the creation of dividend and other repayment
restrictions affecting subsidiaries, certain transactions with affiliates, and
the lines of business in which CMCLA and its subsidiaries may be engaged.
DESCRIPTION OF CERTAIN INDEBTEDNESS
SENIOR CREDIT FACILITY
On April 25, 1997, CMCLA (which was then known as EMCLA) closed its Second
Amended and Restated Loan Agreement (as amended from time to time, the "Senior
Credit Facility") with TD Securities (USA) Inc. as arranging agent, The Bank of
New York and Bankers Trust Company, as co-syndication agents, NationsBank of
Texas, N.A. and Union Bank of California, as co-documentation agents, Toronto
Dominion (Texas), Inc., as administrative agent (the "Administrative Agent"),
and the financial institutions party thereto (the "Lenders"). The Senior Credit
Facility initially provided for a maximum commitment of $1.75 billion, and upon
consummation of the Chancellor Merger, the aggregate commitment under the Senior
Credit Facility was increased to $2.50 billion. Loans under the Senior Credit
Facility consist of (i) a $900.0 million term loan facility (the "Term Loan
Facility") and (ii) a $1.60 billion revolving loan facility (the "Revolving Loan
Facility" and, collectively with the Term Loan Facility, the "Loans").
The following description of certain provisions of the Senior Credit
Facility does not purport to be complete and is qualified in its entirety by
reference to the full text of the Senior Credit Facility, a copy of which is
available from the Company on request.
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Term Loan Facility
The Term Loan Facility matures on June 30, 2005. The Term Loan Facility
requires scheduled annual reductions of the principal balance of the Term Loan
Facility outstanding on June 30, 2000, payable quarterly in equal quarterly
amounts, commencing on September 30, 2000 in the following percentages: (i) from
9/30/00 through and including 6/30/01, 15.00%; (ii) from 9/30/01 through and
including 6/30/02, 20.00%; (iii) from 9/30/02 through and including 6/30/03,
20.00%; (iv) from 9/30/03 through and including 6/30/04, 20.00%; and (v) from
9/30/04 through and including 6/30/05, 25.00%. Mandatory or optional prepayments
made by CMCLA against the Term Loan Facility will not affect the reduction
percentages set forth above.
Revolving Loan Facility
The Revolving Loan Facility matures on June 30, 2005. The Revolving Loan
Facility requires scheduled annual reductions of the Revolving Loan Commitment
(as defined in the Senior Credit Facility) as of June 30, 2000, payable
quarterly in equal quarterly amounts, commencing on September 30, 2000 in the
following percentages: (i) from 9/30/00 through and including 6/30/01, 15.00%;
(ii) from 9/30/01 through and including 6/30/02, 20.00%; (iii) from 9/30/02
through and including 6/30/03, 20.00%; (iv) from 9/30/03 through and including
6/30/04, 20.00%; and (v) from 9/30/04 through and including 6/30/05, 25.00%.
Voluntary reductions of the Revolving Loan Commitment made by CMCLA shall not
affect the reduction percentages set forth above.
Additional Facility Indebtedness
CMCLA has the ability to incur additional indebtedness ("Additional
Facility Indebtedness") in a principal amount not to exceed $250.0 million from
one or more of the Lenders or any other institution acceptable to the
Administrative Agent that agrees to extend such credit, provided that certain
conditions under the Senior Credit Facility are complied with. As of the date
hereof, CMCLA has not requested, and no Lender has issued, any commitment to
extend such Additional Facility Indebtedness to CMCLA.
Interest Rate
The Loans bear interest at a rate equal to, at CMCLA's option, (i) the
Prime Rate (as defined in the Senior Credit Facility) in effect from time to
time plus the Applicable Margin (as defined) (a "Prime Rate Loan") or (ii) the
Eurodollar Rate (as defined in the Senior Credit Facility) as determined by the
Administrative Agent for the respective interest period plus the Applicable
Margin (a "Eurodollar Loan"). The Applicable Margin is calculated based on
CMCLA's Total Leverage Ratio (as defined in the Senior Credit Facility)
according to the table set forth below:
<TABLE>
<CAPTION>
PRIME RATE EURODOLLAR RATE
TOTAL LEVERAGE RATIO APPLICABLE MARGIN APPLICABLE MARGIN
-------------------- ----------------- -----------------
<S> <C> <C>
Greater than 6.75..................................... 1.000% 2.000%
Greater than 6.50 but less than or equal to 6.75...... 0.750% 1.750%
Greater than 6.00 but less than or equal to 6.50...... 0.375% 1.375%
Greater than 5.50 but less than or equal to 6.00...... 0.125% 1.125%
Greater than 5.00 but less than or equal to 5.50...... 0.000% 0.875%
Greater than 4.50 but less than or equal to 5.00...... 0.000% 0.625%
Greater than 4.00 but less than or equal to 4.50...... 0.000% 0.500%
Less than or equal to 4.00............................ 0.000% 0.400%
</TABLE>
Fees
CMCLA is required to pay commitment fees on the aggregate unused amount of
the Available Revolving Loan Commitment (as defined in the Senior Credit
Facility) based on the Total Leverage Ratio for the most recent fiscal quarter
end. If the Total Leverage Ratio is greater than or equal to 5.50, the
corresponding commitment fee is 0.375%; if the Total Leverage Ratio is less than
5.50, the corresponding commitment fee is
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0.250%. The Administrative Agent will also receive such other customary fees as
have been separately agreed upon with the Company. CMCLA also is required to pay
fees for outstanding letters of credit drawn under the Senior Credit Facility at
a rate per annum on the amount of the Letter of Credit Obligations (as defined
in the Senior Credit Facility) equal to the Applicable Margin for Eurodollar
Loans plus an issuing bank fee of $2,000 for issuing, amending or renewing any
letter of credit.
Security and Guarantees
The Senior Credit Facility is secured by (i) a pledge of all capital stock
owned by CMCLA and its subsidiaries, (ii) a pledge of all capital stock of CMCLA
owned by CMHC, (iii) a non-recourse pledge of all capital stock of CMHC owned by
Chancellor Media, (iv) a pledge of all debt and equity securities of persons
engaged in any Non-Core Business (as defined in the Senior Credit Facility)
purchased by the Company, (v) a collateral assignment of all partnership
interests held by the subsidiaries of CMCLA, (vi) a collateral assignment of all
trust interests held by the subsidiaries of CMCLA, (vii) a collateral assignment
of all limited liability company interests held by CMCLA, (viii) a downstream
guarantee provided by CMHC and (ix) upstream guarantees provided by the
subsidiaries of CMCLA.
Covenants
The Senior Credit Facility contains customary restrictive covenants, which,
among other things and with certain exceptions, limit the ability of CMCLA to
incur additional indebtedness and liens in connection therewith, enter into
certain transactions with affiliates, pay dividends, consolidate, merge or
effect certain asset sales, issue additional stock, effect an asset swap, make
acquisitions and make capital expenditures and enter new lines of business.
Under the Senior Credit Facility, CMCLA is required to maintain specified
financial ratios, based on its Senior Leverage Ratio and Total Leverage Ratio
(in each case, as defined in the Senior Credit Facility), for specified periods
of time. Under the Senior Credit Facility, CMCLA must not exceed the following
ratios during the following periods of time:
<TABLE>
<CAPTION>
PERIOD ENDING SENIOR LEVERAGE RATIO TOTAL LEVERAGE RATIO
------------- --------------------- --------------------
<S> <C> <C>
4/25/97 through 12/31/97.......................... 6.50 to 1.00 7.00 to 1.00
1/1/98 through 12/31/98........................... 5.75 to 1.00 6.75 to 1.00
1/1/99 through 12/31/99........................... 5.00 to 1.00 6.00 to 1.00
1/1/00 through 12/31/00........................... 4.25 to 1.00 5.25 to 1.00
1/1/01 and thereafter............................. 4.00 to 1.00 5.00 to 1.00
</TABLE>
In the event that Chancellor Media, CMHC or CMCLA issues Subordinated
Indebtedness (as defined in the Senior Credit Facility), other than the
assumption or refinancing of the 9 3/8% Notes and the 8 3/4% Notes, the Senior
Leverage Ratio will be permanently reduced by 0.50.
Under the Senior Credit Facility, CMCLA may not, as of the end of any
fiscal quarter, allow its ratio of the sum of Operating Cash Flow plus the
Available Revolving Commitment (in each case, as defined in the Senior Credit
Facility) during the last fiscal four-quarter period to Pro Forma Fixed Changes
(as defined in the Senior Credit Facility) for the four-quarter period beginning
on the day following that fiscal quarter end, to be less than 1.05 to 1.00.
Under the Senior Credit Facility, CMCLA also is required to comply with
certain other financial tests, such as a specified ratio of Operating Cash Flow
to Cash Interest Expense (as each such term is defined in the Senior Credit
Facility).
Use of Proceeds
The Senior Credit Facility requires that the Net Proceeds from any
Permitted Asset Sale (in each case, as defined in the Senior Credit Facility) be
applied, at CMCLA's election, to the Term Loan Facility or the Revolving Loan
Facility or any combination thereof. In the alternative, CMCLA may elect to make
an
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<PAGE> 57
acquisition with the Net Proceeds, so long as CMCLA has entered into a contract
for such acquisition within 12 months from the date of such Permitted Asset Sale
and has concluded the purchase with 18 months from the date of such Permitted
Asset Sale. In addition, 50% of Net Proceeds from any Subordinated Indebtedness
issued by CMCLA, other than the assumption or refinancing of the 9 3/8% Notes
and the 8 3/4% Notes, must be applied, at CMCLA's election, to the Term Loan
Facility or the Revolving Loan Facility or any combination thereof. To the
extent that CMCLA elects to apply any amounts described in this paragraph to the
Revolving Loan Facility, the commitments under such facility will not be
permanently reduced and will be available for subsequent borrowing by CMCLA.
Events of Default
The Senior Credit Facility contains customary events of default, including
(i) the default in the payment of any interest, reimbursement amounts with
respect to letters of credit, or fees or other amounts payable to the Lenders
(other than principal) when due which is not cured within five days from the
date that such payment was due, (ii) the default in the payment of any principal
amount when due, (iii) the default in the performance or observance of certain
representations, warranties, covenants and agreements contained in the Senior
Credit Facility, (iv) a Senior Credit Facility Change of Control (as defined
below), (v) the entry of an order for relief, winding-up or liquidation under
Title 11 of the United States Code or similar federal or state laws against
Chancellor Media, CMHC or CMCLA, (vi) the voluntary commencement by CMCLA of
bankruptcy proceedings under Title 11 of the United States Code or similar
federal or state laws, or the commencement of involuntary bankruptcy proceedings
against CMCLA, which are not diligently contested or which continue undismissed
for a period of 45 consecutive days, (vii) the entry of a judgment against CMCLA
which, individually or when aggregated with other such judgments, exceeds $10
million, (viii) the failure to satisfy certain minimum employee benefit funding
standards, (ix) the acceleration of the maturity of (a) Subordinated
Indebtedness of CMCLA or (b) any other indebtedness of CMCLA in an aggregate
principal amount exceeding $3 million, (x) any event which would permit the
acceleration of such subordinated indebtedness or such other indebtedness which
has not been cured within any applicable cure period or waived in writing, (xi)
any event which does not permit acceleration of such Subordinated Indebtedness
or such other indebtedness but requires CMCLA to purchase or acquire such
Subordinated Indebtedness or such other indebtedness, (xii) any material default
under any Interest Hedge Agreement (as defined in the Senior Credit Facility)
with a notional principal amount of $6 million or more, (xii) the issuance by
the FCC of a revocation order based on alleged alien ownership of CMCLA, (xiii)
the final, non-appealable termination or revocation of any material FCC license
or failure to renew any such license, (xiv) the failure of any security document
or note under the Senior Credit Facility to be in effect, or (xv) the breach by
CMHC of the guarantee or stock pledge made by it pursuant to the Senior Credit
Facility.
A "Senior Credit Facility Change of Control" will be deemed to have
occurred under the Senior Credit Facility if (i) any Person (as defined in the
Senior Credit Facility), other than Scott K. Ginsburg, Matthew Devine, Kenneth
J. O'Keefe, James de Castro and Hicks Muse and its affiliates, shall
individually or collectively control more than 51% on a fully diluted basis of
the voting power of Chancellor Media or (ii) CMHC shall cease to own all of the
issued and outstanding common stock of CMCLA.
9 3/8% NOTES
The 9 3/8% Notes mature on October 1, 2004. Interest on the 9 3/8% Notes
accrue at the rate of 9 3/8% per annum and is payable semiannually. The 9 3/8%
Notes are unsecured obligations of CMCLA, ranking subordinate in right of
payment to all Senior Debt (as defined in the 9 3/8% Indentures) of CMCLA, and
rank pari passu with the 8 3/4% Notes.
CMCLA's subsidiaries fully and unconditionally guarantee the full and
prompt payment of principal of all interest on the 9 3/8% Notes, and of all
other obligations under the 9 3/8% Indenture. The indebtedness evidenced by each
such guarantee are subordinated to each guarantor's Senior Debt on the same
terms as the 9 3/8% Notes are subordinated to CMCLA's Senior Debt.
Prior to January 31, 1999 CMCLA may redeem the 9 3/8% Notes with the net
cash proceeds of one or more Public Equity Offerings (as defined in the 9 3/8%
Indenture) at a redemption price of 108.203% or
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<PAGE> 58
107.031% of the principal amount thereof, plus, in each case, accrued and unpaid
interest to the redemption date, during the respective 12-month periods
commencing on February 1, 1997 and 1998; provided, however, that after any such
redemption at least 75% of the aggregate principal amount of the 9 3/8% Notes
originally issued must be outstanding. CMCLA's ability to optionally redeem the
9 3/8% Notes is subject to restrictions contained in the Senior Credit Facility,
which limits the amount of debt subordinate to the indebtedness under the Senior
Credit Facility that may be redeemed by CMCLA.
Under the 9 3/8% Indenture, in the event of a change of control (as defined
in the 9 3/8% Indenture) of CMCLA, each holder of 9 3/8% Notes will have the
right to require CMCLA to repurchase, in whole or in part, such holder's 9 3/8%
Notes at a purchase price equal to 101% of their principal amount, plus accrued
and unpaid interest, if any to the date of repurchase.
The 9 3/8% Indenture contains certain restrictive covenants which, among
other things, impose limitations (subject to certain exceptions) on CMCLA with
respect to (i) the payment of dividends or other distributions on capital stock
and the purchase, redemption or retirement for value of shares of capital stock
as any warrants, options or other rights for shares of capital stock; (ii) the
incurrence of additional indebtedness; (iii) the incurrence of subsidiary
indebtedness; (iv) the repayment or redemption of subordinated indebtedness
other than in accordance with its scheduled repayment; (v) sales of assets by
CMCLA; (vi) asset swaps; (vii) transactions with stockholders and affiliates;
(viii) the restriction of certain payments by subsidiaries to their respective
parents; (ix) the creation of liens on the assets of CMCLA or its subsidiaries;
(x) the incurrence of indebtedness senior to the 9 3/8% Notes and subordinate to
other indebtedness of CMCLA; (xi) investments by CMCLA or its subsidiaries;
(xii) the issuance of preferred stock by any of CMCLA's subsidiaries; (xiii)
sales and leasebacks by CMCLA or its subsidiaries; (xiv) the guarantee of
indebtedness; (xv) the conduct of business other than the ownership and
operation of radio broadcast stations; and (xvi) the merger or sale of all or
substantially all the assets of CMCLA. Upon the happening of certain events of
default specified in the 9 3/8% Indenture, the trustee for the 9 3/8% Notes may,
and the trustee upon the request of holders of 25% in principal amount then
outstanding of the 9 3/8% Notes shall, or the holders of at least 25% in
principal amount of outstanding 9 3/8% Notes may, declare the principal amount
then outstanding of and accrued but unpaid interest, if any, on all of such
9 3/8% Notes to be due and payable. Upon the happening of certain other events
of default specified in the 9 3/8% Indenture, the unpaid principal of and
accrued but unpaid interest on all outstanding 9 3/8% Notes will automatically
become due and payable without any action by the trustee or the holders of the
9 3/8% Notes.
CMCLA may terminate its obligations under the 9 3/8% Indenture at any time,
and the obligations of the guarantors with respect thereto shall terminate, by
delivering all outstanding 9 3/8% Notes of the appropriate series to the
appropriate trustee for cancellation and paying all sums payable by it
thereunder. CMCLA, at its option, (i) will be discharged from any and all
obligations with respect to the 9 3/8% Notes delivered, and the guarantor will
be discharged from any and all obligations with respect to its guarantee of such
9 3/8% Notes, (except for certain obligations of CMCLA to register the transfer
or exchange of such 9 3/8% Notes, replace stolen, lost or mutilated 9 3/8%
Notes, maintain paying agencies and hold moneys for payment in trust) or (ii)
need not comply with certain of the restrictive covenants with respect to the
9 3/8% Indenture, in each case, if CMCLA, in addition to satisfying certain
other obligations, deposits with the appropriate trustee, in trust, U.S. legal
tender or U.S. Government Obligations (in each case, as defined in the 9 3/8%
Indenture) or a combination thereof which, through the payment of interest
thereon and principal in respect thereof in accordance with their terms, will be
sufficient to pay all the principal of and interest on 9 3/8% Notes to be
defeased on the dates such payments are due in accordance with the terms of
9 3/8% Notes as well as the trustee's fees and expenses.
8 3/4% NOTES
The 8 3/4% Notes mature on June 15, 2007. Interest on the 8 3/4% Notes
accrues at the rate of 8 3/4% per annum and is payable semiannually. The 8 3/4%
Notes are unsecured obligations of CMCLA, ranking subordinate in right of
payment to all Senior Debt (as defined in the 8 3/4% Indenture) of CMCLA, and
ranking pari passu in right of payment to the 9 3/8% Notes.
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<PAGE> 59
CMCLA's subsidiaries fully and unconditionally guarantee the full and
prompt payment of principal of all interest on the 8 3/4% Notes, and all other
obligations under the 8 3/4% Indenture. The indebtedness evidenced by each such
guarantee are subordinated to each guarantor's Senior Debt on the same terms as
the 8 3/4% Notes are subordinated to CMCLA's Senior Debt.
Prior to June 15, 2000, CMCLA may, at its option, redeem the 8 3/4% Notes
with the net cash proceeds of one or more Public Equity Offerings (as defined in
the 8 3/4% Indenture) at a redemption price equal to 108.75% of the principal
amount thereof, plus accrued and unpaid interest to the date of redemption;
provided, however, that after any such redemption the aggregate principal amount
of the 8 3/4% Notes originally issued is outstanding. CMCLA's ability to
optionally redeem the 8 3/4% Notes is subject to restrictions contained in the
Senior Credit Facility, which limits the amount of debt subordinate to the
indebtedness under the Senior Credit Facility that may be redeemed by CMCLA.
Under the 8 3/4% Indenture, in the event of a change of control (as defined
in the 8 3/8% Indenture) of CMCLA, each holder may have the right to require
CMCLA to repurchase all or a portion of such holders' 8 3/4% Notes at a purchase
price equal to 101% of the principal amount thereof, plus accrued interest, if
any, to the date of repurchase.
The 8 3/4% Indenture contains certain restrictive covenants which, among
other things, impose limitations (certain to certain exceptions) on CMCLA with
respect to (i) the payment of dividends or other distribution on capital stock
and the purchase, redemption or retirement for value of shares of capital stock
as any warrants, options or other rights for shares of capital stock; (ii) the
incurrence of additional indebtedness; (iii) the incurrence of subsidiary
indebtedness; (iv) the repayment or redemption of subordinated indebtedness
other than in accordance with its scheduled repayment; (v) sales of assets by
CMCLA; (vi) asset swaps; (vii) transactions with stockholders and affiliates;
(viii) the restriction of certain payments by subsidiaries to their respective
parents; (ix) the creation of liens on the assets of CMCLA or its subsidiaries;
(x) the incurrence of indebtedness senior to the 8 3/4% Notes and subordinate to
other indebtedness of CMCLA; (xi) investments by CMCLA or its subsidiaries;
(xii) the issuance of preferred stock by any of CMCLA's subsidiaries; (xiii)
sales and leasebacks by CMCLA or its subsidiaries; (xiv) the guarantee of
indebtedness; (xv) the conduct of business other than the ownership and
operation of radio broadcast stations; and (xvi) the merger or sale of all or
substantially all the assets of CMCLA. Upon the happening of certain events of
default specified in the 8 3/4% Indenture, the trustee for the 8 3/4% Notes may,
and the trustee, upon the request of holders of 25% in principal amount of the
8 3/4% Notes shall, or the holders of at least 25% in principal amount of
outstanding 8 3/4% Notes may, declare the principal of and accrued but unpaid
interest, if any, on all the 8 3/4% Notes to be due and payable. Upon the
occurrence of other events of default specified in the 8 3/4% Indenture, such
amount automatically becomes due and payable without any action of the trustee
of the holders of the 8 3/4% Notes.
CMCLA may terminate its obligations under the 8 3/4% Indenture at any time,
and the obligations of the guarantors with respect thereto shall terminate, by
delivering all outstanding 8 3/4% Notes of the appropriate series to the
appropriate trustee for cancellation and paying all sums payable by it
thereunder. CMCLA at its option, (i) will be discharged from any and all
obligations with respect to the 8 3/4% Notes delivered, and the guarantor will
be discharged from any and all obligations with respect to its guarantee of the
8 3/4% Notes, (except for certain obligations of CMCLA to register the transfer
or exchange of such 8 3/4% Notes, replace stolen, lost or mutilated 8 3/4%
Notes, maintain paying agencies and hold moneys for payment in trust) or (ii)
need not comply with certain restrictive covenants with respect to the 8 3/4%
Indenture, in each case, if CMCLA, in addition to satisfying certain other
obligations, deposits with the appropriate trustee, in trust, U.S. legal tender
or U.S. Government Obligations (as defined in the 8 3/4% Indenture) or a
combination thereof which, through the payment of interest thereon and principal
in respect thereof in accordance with their terms, will be sufficient to pay all
the principal of and interest on the 8 3/4% Notes on the dates such payments are
due in accordance with the terms of the 8 3/4% Notes as well as the trustee's
fees and expenses.
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6% EXCHANGE DEBENTURES
For a description of the 6% Convertible Subordinated Exchange Debentures
due 2012 issuable by Chancellor Media from time to time upon exchange of the
$3.00 Convertible Preferred Stock, see "Description of the Exchange Debentures."
12% EXCHANGE DEBENTURES
For a description of the 12% Subordinated Exchange Debentures due 2009
issuable by CMCLA from time to time upon exchange of the 12% Preferred Stock,
see "Description of Capital Stock -- CMCLA -- 12% Preferred Stock -- Exchange."
12 1/4% EXCHANGE DEBENTURES
For a description of the 12 1/4% Subordinated Exchange Debentures due 2008
issuable by CMCLA from time to time upon exchange of the 12 1/4% Preferred
Stock, see "Description of Capital Stock -- CMCLA -- 12 1/4% Preferred
Stock -- Exchange."
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. This
discussion also assumes that the Exchange Debentures will be treated as debt for
United States federal income tax consequences. However, no assurance can be
given in this regard since the characterization of the Exchange Debentures will
be determined based on the facts in existence at the time they are issued.
Therefore, depending on the facts in existence at the time the Exchange
Debentures are issued, the Exchange Debentures might constitute equity for
United States federal income tax consequences in which case the consequences
described below would differ. 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 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.
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DIVIDENDS ON $3.00 CONVERTIBLE PREFERRED STOCK
Dividends paid on the $3.00 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 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
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<PAGE> 62
treated as a dividend in the case of any redemption of stock: (i) in partial
liquidation of the Company, (ii) which is not pro rata as to all shareholders,
such as a redemption of the $3.00 Convertible Preferred Stock for cash or in
exchange for Exchange Debentures in each case 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"). In addition, in the case of
any redemption of stock that is treated as a dividend because the holding of
options was deemed to be stock ownership under the constructive ownership rules
of Section 318(a)(4) of the Code, the amount of the basis of such stock shall be
treated as an "extraordinary dividend." 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 for "qualified
preferred dividends." A "qualified preferred dividend" is any fixed dividend
payable with respect to any share of 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
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 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
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<PAGE> 63
amount. The Company intends to 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 (less any portion
thereof attributable to accumulated and declared but unpaid dividends which will
be taxable as a dividend to the extent of the Company's earnings and profits,
see "Dividends on $3.00 Convertible Preferred Stock") 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 (determined in a
manner described below for purposes of computing original issue discount, see,
"Original Issue Discount on Exchange Debentures") and be taxable as a dividend
(to the extent of the Company's current or accumulated earnings and profits). As
noted above, the "not essentially equivalent to a dividend" 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 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
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<PAGE> 64
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 would 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 would 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 less
the pro rata amount of any qualified stated interest allocable to the accrual
period. 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 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.
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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 (See "Original Issue Discount on Exchange Debenture"
for a discussion of having OID taxable as interest income). 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 at the time $3.00 Convertible Preferred Stock is exchanged for Exchange
Debentures or at the time a subsequent holder purchases the Exchange Debentures,
the tax basis 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, 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.
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
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<PAGE> 66
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 not
previously included in income or accrued and unpaid interest and OID on the
Exchange Debentures not previously included in income. 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 $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
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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.
INFORMATION REPORTING AND BACKUP WITHHOLDING
In general, information reporting requirements will apply to certain
payments of dividends, principal, interest, OID and to proceeds of certain sales
of the $3.00 Convertible Preferred Stock, Exchange Debentures or Common Stock,
as the case may be, other than payments to certain exempt recipients (such as
corporations). 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 payments of dividends
and interest, OID, 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.
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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.
<TABLE>
<CAPTION>
NUMBER OF SHARES OF COMMON STOCK
SHARES OF $3.00 ISSUABLE UPON CONVERSION
CONVERTIBLE OF $3.00 CONVERTIBLE PREFERRED
SELLING HOLDERS PREFERRED STOCK STOCK OR EXCHANGE DEBENTURES*
--------------- ---------------- ------------------------------
<S> <C> <C>
Highbridge International LDC........................... 205,000 205,000
Deutsche Morgan Grenfell, Inc.......................... 65,050 65,050
Northwestern Mutual Life Insurance Company(1).......... 75,000(2) 75,000
Salomon Brothers, Inc.................................. 17,200 17,200
NatWest Securities Ltd................................. 28,000 28,000
Fidelity Devonshire Trust Fidelity Equity-Income
Fund(3).............................................. 395,800 395,800
Variable Insurance Products Fund: Equity-Income
Portfolio(4)......................................... 187,200 187,200
Fidelity Advisor Series II: Fidelity Advisor Balanced
Fund(3).............................................. 58,000 58,000
Fidelity Management Trust Company on behalf of accounts
managed by it(4)..................................... 56,800 56,800
Pacific Life Insurance Company......................... 30,000 30,000
Lipper Convertibles, L.P............................... 136,300 136,300
Laterman Strategies 90's LLC........................... 21,900 21,900
Laterman & Co.......................................... 12,100 12,100
Offshore Strategies Ltd................................ 18,000 18,000
United National Insurance.............................. 2,000 2,000
Lincoln National Life Insurance........................ 83,595 83,595
Lincoln National Convertible Securities Fund........... 47,075 47,075
Weirton Trust.......................................... 12,525 12,525
Walker Art Center...................................... 4,805 4,805
Franklin & Marshall College............................ 1,500 1,500
GE Pension Trust....................................... 5,000 5,000
IBM Corporation Retirement Plan
Trust................................................ 28,500 28,500
Chrysler Corporation Employee #1 Pension Plan.......... 15,000 15,000
Putnam Convertible Income Growth Trust................. 72,000 72,000
Putnam Balanced Retirement Fund........................ 3,650 3,650
Employers' Reinsurance Corporation..................... 4,400 4,400
Putnam Funds Trust Putnam High Yield Total Return
Fund................................................. 550 550
Merrill Lynch Pierce Fenner & Smith, Inc............... 216,150 216,150
Alscott Investments, LLC............................... 16,500 16,500
Toronto Dominion (New York), Inc.(5)................... 169,800 169,800
Common Fund............................................ 42,000 42,000
Golden Rule Insurance Company.......................... 12,500 12,500
United States Olympic Foundation....................... 29,000 29,000
</TABLE>
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<TABLE>
<CAPTION>
NUMBER OF SHARES OF COMMON STOCK
SHARES OF $3.00 ISSUABLE UPON CONVERSION
CONVERTIBLE OF $3.00 CONVERTIBLE PREFERRED
SELLING HOLDERS PREFERRED STOCK STOCK OR EXCHANGE DEBENTURES*
--------------- ---------------- ------------------------------
<S> <C> <C>
OCM Convertible Trust.................................. 93,700 93,700
OCM Convertible Limited Partnership.................... 3,600 3,600
OCM Convertible Limited Partnership.................... 3,000 3,000
Delta Air Lines Master Trust........................... 49,500 49,500
State Employees' Retirement Fund of the State of
Delaware............................................. 27,200 27,200
Vanguard Convertible Securities Fund, Inc.............. 60,500 60,500
Hughes Aircraft Company Master Retirement Trust........ 30,700 30,700
Chrysler Corporation Master Retirement Trust........... 65,400 65,400
HSBC Securities Inc.................................... 30,500 30,500
LLT Ltd................................................ 2,950 2,950
Fox Family Portfolio Partnership....................... 2,700 2,700
Forest Fulcrum Fund Ltd................................ 43,450 43,450
Forest Fulcrum Fund LP................................. 68,900 68,900
KA Trading L.P......................................... 15,791 15,791
KA Management Ltd...................................... 13,909 13,909
Orrington Investments L.P.............................. 22,800 22,800
Orrington International Fund, Ltd...................... 12,200 12,200
R2 Investments, LDC.................................... 15,625 15,625
Pace Setter I, L.P..................................... 34,250 34,250
TQA Vantage Fund Ltd................................... 25,000 25,000
TQA Arbitrage Fund L.P................................. 10,000 10,000
TQA Leverage Fund L.P.................................. 12,500 12,500
TQA Vantage Plus Ltd................................... 12,500 12,500
The TCW Group, Inc..................................... 207,500 207,500
Dreyfus High Yield Securities Fund..................... 60,000 60,000
Baptist Health of South Florida........................ 3,170 3,170
Nicholas-Applegate Income & Growth Fund................ 41,310 41,310
Wake Forest University................................. 7,740 7,740
Engineers Joint Pension Fund........................... 4,970 4,970
Boston Museum of Fine Art.............................. 1,340 1,340
San Diego County Convertible........................... 41,850 41,850
Occidental College..................................... 2,890 2,890
Dunham & Associates Fund III........................... 400 400
San Diego City Retirement.............................. 9,930 9,930
Dunham & Associates Fund II............................ 900 900
Any other holder of $3.00 Convertible Preferred Stock
or future transferee from any such holder............ 2,878,425 2,878,425
--------- ------------
5,990,000 5,990,000
========= ============
</TABLE>
- ---------------
* No fractional shares of Common Stock will be issued as a result of
conversion, but in lieu thereof, such fractional interest will be paid in
cash.
(1) In the ordinary course of business, Northwestern Mutual Investment Services,
Inc., Robert W. Baird & Co. Incorporated, Baird/Mark Capital Group, and MGIC
Mortgage Securities Corporation, each of which is a broker-dealer and
affiliated with The Northwestern Mutual Life Insurance Company, may, from
time to time, have acquired or disposed of, or may in the future acquire or
dispose of, securities of Chancellor Media Corporation or its affiliates,
for such broker-dealers' own accounts or for the accounts of others. Other
affiliates of The Northwestern Mutual Life Insurance Company may, in the
ordinary course of business, effect transactions in the securities of
Chancellor Media Corporation or its affiliates.
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<PAGE> 70
Only security holdings of The Northwestern Mutual Life Insurance Company,
Northwestern Mutual Series Fund, Inc. and Mason Street Funds, Inc. are reflected
in the response to this questionnaire.
The Northwestern Mutual Life Insurance Company has in the past held
Chancellor Media Corporation of Los Angeles Preferred Stock, due 1/16/2049
(CUSIP 158910208), but does not currently hold any such securities.
The Northwestern Mutual Life Insurance Company, Northwestern Mutual Series
Fund, Inc. and Mason Street Funds, Inc. (the latter two, affiliates of The
Northwestern Mutual Life Insurance Company) have, within the last three
years, held Chancellor Media Corporation of Los Angeles 12% PIK Preferred
Stock, due 1/15/2009 (CUSIP 158916205); their current holdings consist of:
<TABLE>
<S> <C>
The Northwestern Mutual Life Insurance Company 240,880 shares*
Mason Street Funds, Inc. 7,941 shares (High Yield Bond
Fund)
Northwestern Mutual Series Funds, Inc. 21,176 shares (High Yield Bond
Portfolio)
</TABLE>
* Includes 21,176 shares held in The Northwestern Mutual Life
Insurance Company Group Annuity Separate Account.
The Northwestern Mutual Life Insurance Company and its affiliates may, in
the ordinary course of business, take part in transactions involving the
real property of Chancellor Media Corporation or its affiliates.
In disclosing the foregoing information, The Northwestern Mutual Life
Insurance Company does not concede that such information necessarily
constitutes material relationships under S-K 507 that must be disclosed in
the Prospectus.
(2) Includes 20,000 shares held in The Northwestern Mutual Life Insurance
Company Group Annuity Separate Account.
(3) The entity is either an investment company or a portfolio of an investment
company registered under Section 8 of the Investment Company Act of 1940, as
amended, or a private investment account advised by Fidelity Management &
Research Company ("FMR Co."). FMR Co. is a Massachusetts corporation and an
investment advisor registered under Section 203 of the Investment Advisors
Act of 1940, as amended, and provides investment advisory services to each
of such Fidelity entities identified above, and to other registered
investment companies and to certain other funds which are generally offered
to a limited group of investors. FMR Co. is a wholly-owned subsidiary of FMR
Corp. ("FMR"), a Massachusetts corporation. The holdings are as of October
6, 1997.
(4) Shares indicated as owned by such entity are owned directly by various
private investment accounts, primarily employee benefit plans for which
Fidelity Management Trust Company ("FMTC") serves as trustee or managing
agent. FMTC is a wholly-owned subsidiary of FMR and a bank as defined in
Section 3(a)(6) of the Securities Exchange Act of 1934, as amended. These
holdings are as of October 6, 1997.
(5) One or more affiliates of Selling Holder have provided a variety of
commercial banking, investment banking and financial advisory services to
the Company and CMCLA, and expect to continue to provide such services to
the Company and CMCLA in the future. By disclosing this information the
Selling Holder does not concede that the provision of such services
necessarily constitutes a material relationship that must be disclosed in
this Prospectus
Based on information provided to the Company by the Selling Holders, none
of the Selling Holders has, or within the past three years has had, any
position, office or other material relationship with 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 $3.00 Convertible Preferred Stock,
the Exchange Debentures or the Common Stock, no estimate can be given as to the
amount of the $3.00 Convertible Preferred Stock, the Exchange Debentures or
67
<PAGE> 71
the Common Stock issuable upon conversion of the $3.00 Convertible 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.
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, Washington, D.C. Eric L. Bernthal, a former
director of Evergreen, is a partner of Latham & Watkins and owns options to
purchase 2,500 shares of Common Stock.
68
<PAGE> 72
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 (A Division of 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, 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.
69
<PAGE> 73
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. Current Reports on Form 8-K filed under the name of Evergreen 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; and Current Reports on Form 8-K filed under
the name of Chancellor Media Corporation, dated September 5, 1997
and filed September 17, 1997, as amended on Form 8-K/A, and dated
September 23, 1997 and filed September 29, 1997;
3. Evergreen's Quarterly Report on Form 10-Q for the quarters ended
March 31, 1997 and June 30, 1997;
4. 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;
5. Chancellor's and CRBC's Quarterly Report on Form 10-Q for the
quarters ended March 31, 1997 and June 30, 1997;
6. 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; and
7. The Definitive Joint Proxy Statement of Chancellor and Evergreen
dated August 1, 1997 and filed on August 4, 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 offering made hereby 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.
70
<PAGE> 74
======================================================
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
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information....................... ii
Prospectus Summary.......................... 1
Risk Factors................................ 6
Use of Proceeds............................. 11
Ratio of Earnings to Combined Fixed Charges
and Preferred Stock Dividends............. 12
Business and Properties..................... 13
Description of $3.00 Convertible
Exchangeable Preferred Stock.............. 30
Description of the Exchange Debentures...... 36
Book-Entry Procedures....................... 41
Description of Capital Stock................ 42
Description of Certain Indebtedness......... 51
Certain United States Federal Income Tax
Considerations............................ 57
Selling Holders............................. 65
Plan of Distribution........................ 68
Legal Matters............................... 68
Experts..................................... 69
Incorporation of Certain Documents by
Reference................................. 70
</TABLE>
======================================================
======================================================
CHANCELLOR MEDIA CORPORATION
5,990,000 SHARES
$3.00 CONVERTIBLE EXCHANGEABLE
PREFERRED STOCK
---------------------------
PROSPECTUS
---------------------------
OCTOBER 16, 1997
======================================================
<PAGE> 75
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.
<TABLE>
<CAPTION>
<S> <C>
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
========
</TABLE>
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
<PAGE> 76
ITEM 16. EXHIBITS
A. Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
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).
</TABLE>
II-2
<PAGE> 77
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
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.
</TABLE>
II-3
<PAGE> 78
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
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.
</TABLE>
II-4
<PAGE> 79
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
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 Exchange
Indenture.
</TABLE>
- ---------------
+ Filed herewith.
* Previously filed.
II-5
<PAGE> 80
(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.
(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.
II-6
<PAGE> 81
The Company hereby agrees to furnish supplementarily a copy of any omitted
schedule or exhibit to the Commission upon request.
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
<PAGE> 82
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 16, 1997.
CHANCELLOR MEDIA CORPORATION
By: /s/ MATTHEW E. DEVINE
----------------------------------
Matthew E. Devine
Senior Vice President and
Chief Financial Officer
POWERS OF ATTORNEY
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.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<C> <S> <C>
* Chairman of the Board October 16, 1997
- -----------------------------------------------------
Thomas O. Hicks
* President, Chief Executive October 16, 1997
- ----------------------------------------------------- Officer and Director
Scott K. Ginsburg (Principal Executive
Officer)
* Chief Operating Officer and October 16, 1997
- ----------------------------------------------------- Director
James E. de Castro
/s/ MATTHEW E. DEVINE Senior Vice President and October 16, 1997
- ----------------------------------------------------- Chief Financial Officer
Matthew E. Devine (Principal Financial Officer
and Principal Accounting
Officer)
* Director October 16, 1997
- -----------------------------------------------------
Thomas J. Hodson
* Director October 16, 1997
- -----------------------------------------------------
Perry J. Lewis
* Director October 16, 1997
- -----------------------------------------------------
Eric C. Neuman
* Director October 16, 1997
- -----------------------------------------------------
John H. Massey
</TABLE>
II-8
<PAGE> 83
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<C> <S> <C>
* Director October 16, 1997
- -----------------------------------------------------
Jeffrey A. Marcus
* Director October 16, 1997
- -----------------------------------------------------
Lawrence D. Stuart, Jr.
* Director October 16, 1997
- -----------------------------------------------------
Steven Dinetz
Director
- -----------------------------------------------------
Vernon E. Jordan Jr.
*By: /s/ MATTHEW E. DEVINE October 16, 1997
------------------------------------------------
Attorney-in-Fact
</TABLE>
II-9
<PAGE> 84
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
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).
</TABLE>
<PAGE> 85
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
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.
</TABLE>
<PAGE> 86
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
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.
</TABLE>
<PAGE> 87
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
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 Exchange
Indenture.
</TABLE>
<PAGE> 88
- ---------------
+ Filed herewith.
* Previously filed.
(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.
(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.
<PAGE> 1
EXHIBIT 4.31
NUMBER SHARES
CUSIP _________________
CHANCELLOR MEDIA CORPORATION
(INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE)
This is to certify that
is the owner of ________________________________________________________ SHARES
OF FULLY PAID AND NON-ASSESSABLE SHARES OF THE ABOVE CORPORATION'S $3.00
CONVERTIBLE EXCHANGEABLE PREFERRED STOCK, PAR VALUE $0.01 PER SHARE
transferable only on the books of the Corporation by the holder hereof
or by its duly authorized attorney upon surrender of this Certificate
properly endorsed. Reference is made hereby to the further provisions of this
Certificate set forth on the reverse hereof and such further provisions shall
for all purposes have the same effect as though fully set at this place.
This certificate is not valid until countersigned by the Transfer Agent
and registered by the Registrar.
Witness the seal of the Corporation and the signatures or the facsimile
thereof of its duly authorized officers.
Dated:
---------------------- ------------------------
Secretary Chief Executive Officer
Countersigned and Registered
THE BANK OF NEW YORK
Transfer Agent and Registrar
By:
--------------------------
Authorized Signature
<PAGE> 2
CHANCELLOR MEDIA CORPORATION
RESTRICTIONS ON TRANSFER AND VOTING: The Amended and Restated Certificate
of Incorporation of the Corporation provides that to the extent prohibited by
law, (i) the Corporation shall not issue in excess of 25% of its capital stock
outstanding at any time to or for the account of any "Alien" or "Aliens"; (ii)
the Corporation shall not permit the transfer on its books of any of its
capital stock to or for the account of any Alien if, after giving effect to
such transfer, the capital stock held by or for the account of any Alien or
Aliens would exceed 25% of the Corporation's capital stock outstanding at any
time; and (iii) no Alien or Aliens shall be entitled to vote or direct or
control the vote of more than 25% of the total voting power of all the shares
of capital stock of the Corporation outstanding and entitled to vote at any
time and from time to time. The term "Alien" means any person who is a citizen
of a country other than the United States; any entity organized under the laws
of a government other than the government of the United States or any state,
territory or possession thereof; a government other than the government of the
United States or of any state, territory or possession thereof; or a
representative of, or an individual or entity controlled by, any of the
foregoing.
The Corporation is authorized to issue shares of more than one class and to
issue shares in more than one series of at least one class. The Corporation
will furnish without charge to each receipt holder who so requests a statement
of the powers, designations, preferences and relative, participating, optional
or other specified rights of each class of stock or series thereof and the
qualifications, limitations or restrictions of such preference and/or rights,
including the Certificate of Designation of the $3.00 Convertible Exchangeable
Preferred Stock. Any such request should be addressed to Chancellor Media
Corporation, 433 East Las Colinas Boulevard, Suite 1130, Irving, Texas, 75039,
Attention: Treasurer.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT TO MIN ACT - Custodian
TEN ENT - as tenants by the ------ --------
entireties (Cust) (Minor)
JT TEN - as joint tenants with under Uniform Gift to
right of survivorship Minor Act
and not as tenants ------------
in common (State)
Additional abbreviations may also be used though not in the above list.
For value received, hereby sell(s), assign(s) and transfer(s) unto
-------- -----
- -------------------------------------------------------------------------------
(Please print or typewrite name, address including postal zip code and Social
Security or other identifying number of assignee)
------------------------------
shares represented by the certificate and all right thereunder and do(es)
hereby irrevocably constitute and appoint
--------------------------------------
attorney to transfer the said stock on the books of the within name Corporation
with full power of substitution in the premises.
Dated: Signature
------------------------------ ------------------------
NOTICE: The signature to this
assignment must correspond with
the name as written upon the face
of this certificate in every
particular, without alteration or
enlargement or any change
whatever.
Signature guaranteed by
=======================================================
THE FOLLOWING MUST BE EXECUTED BY THE ASSIGNEE OF THIS
CERTIFICATE BEFORE TRANSFER MAY BE MADE ON THE BOOKS OF
THE CORPORATION:
is an Alien (as defined above)
---
is not an Alien
---
and that, if any other person can vote or direct or
control the vote of such shares, or if such shares are
held for the account of any other person, to the best
of the undersigned's knowledge, such other person
is an Alien (as defined above)
---
is not an Alien
---
Dated Signature
----------------------- --------------
<PAGE> 1
EXHIBIT 5.1
[LATHAM & WATKINS LETTERHEAD]
October 16, 1997
Chancellor Media Corporation
433 East Las Colinas Boulevard
Irving, Texas 75039
Re: Chancellor Media Corporation (the "Company") Registration
Statement on Form S-3 (File No. 333-36885)
Ladies and Gentlemen:
In connection with the registration of resales of 5,990,000 shares of
$3.00 Convertible Exchangeable Preferred Stock with a liquidation preference of
$50.00 per share (the "Preferred Shares"), $299,500,000 in aggregate principal
amount of the 6% Convertible Subordinated Exchange Debentures due 2012 issuable
upon exchange of the Preferred Shares (the "Debentures") and the shares of
Common Shares initially issuable upon conversion of the Preferred Shares and
the Debentures (the "Common Shares" and together with the Preferred Shares and
the Debentures, the "Securities") under the Securities Act of 1933, as amended
(the "Act"), by Chancellor Media Corporation, a Delaware corporation (the
"Company"), on Form S-3 filed with the Securities and Exchange Commission (the
"Commission") on October 1, 1997, as amended on October 16, 1997 (the
"Registration Statement"), you have requested our opinion with respect to the
matters set forth below.
In our capacity as your counsel in connection with such registration,
we are familiar with the proceedings taken or proposed to be taken by the
Company in connection with the registration of the Securities, and for the
purposes of this opinion, have assumed such proceedings will be timely
completed in the manner presently proposed. In addition, we have made such
legal and factual examinations and inquiries, including an examination of
originals or
<PAGE> 2
Chancellor Media Corporation
October 16, 1997
Page 2
copies certified or otherwise identified to our satisfaction of such documents,
corporate records and instruments, as we have deemed necessary or appropriate
for purposes of this opinion.
In our examination, we have assumed the genuineness of all signatures,
the authenticity of all documents submitted to us as originals, and the
conformity to authentic documents of all documents submitted to us as copies.
We are opining herein as to the effect on the subject transaction only
of the General Corporation Law of the State of Delaware and the internal laws
of the state of New York, and we express no opinion with respect to the
applicability thereto, or the effect thereon, of the laws of any other
jurisdiction or, in the case of Delaware, any other laws, or as to any matters
of municipal law or the laws of any local agencies within any state.
Subject to the foregoing, it is our opinion that:
1. The Preferred Shares had been duly authorized by all necessary
corporate action of the Company and is validly issued, fully paid and
nonassessable.
2. The Common Shares has been duly authorized by all necessary
corporate action of the Company and, upon issuance thereof upon conversion of
Preferred Shares or Debentures, as the case may be, in the manner contemplated
by the Registration Statement, will be validly issued, fully paid and
nonassessable.
3. The Debentures have been duly authorized by all necessary
corporate action of the Company and, when executed by the Trustee and upon
issuance thereof in exchange for the Preferred Shares in the manner
contemplated by the Registration Statement in accordance with the terms of the
Indenture, will constitute legally valid and binding obligations of the
Company, enforceable against the Company in accordance with their terms.
The opinions rendered in paragraph 3 relating to the legally valid and
binding nature of the Debentures are subject to the following exceptions,
limitations and qualifications: (i) the effect of bankruptcy, insolvency,
fraudulent conveyance, fraudulent transfer, reorganization, moratorium or other
similar laws now or hereafter in effect relating to or affecting the rights and
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) we express no opinion concerning the enforceability
of any waiver of rights or defenses contained in the Indenture.
<PAGE> 3
Chancellor Media Corporation
October 16, 1997
Page 3
To the extent that the obligations of the Company under the Indenture
may be dependent upon such matters, we assume for purposes of this opinion that
the Trustee under the Indenture is duly organized, validly existing and in good
standing under the laws of its jurisdiction of organization; that the Trustee
is duly qualified to engage in the activities contemplated by the Indenture
that the Indenture has been duly authorized, executed and delivered by the
Trustee and constitutes the legally valid and binding obligation of the Trustee
enforceable against the Trustee in accordance with its terms; that the Trustee
is in compliance, generally and with respect to acting as a trustee under each
of the Indenture, with all applicable laws and regulations; and that the
Trustee has the requisite organizational and legal power and authority to
perform its obligations under the Indenture.
We hereby consent to the filing of this opinion with the Commission as
an exhibit to the Registration Statement and the reference to our firm under the
heading "Legal Matters" in the Registration Statement.
Very truly yours,
/s/ LATHAM & WATKINS
<PAGE> 1
Exhibit 8.1
[LATHAM & WATKINS LETTERHEAD]
October 16, 1997
Chancellor Media Corporation
433 East Las Colinas Boulevard
Irving, Texas 75039
Re: Registration Statement on Form S-3 (File No. 333-36855)
Dear Sir or Madam:
You have requested our opinion concerning the material federal income
tax consequences generally applicable to the purchase, ownership and
disposition of the $3.00 Convertible Exchangeable Preferred Stock, par value
$.01 per share, of Chancellor Media Corporation which have been registered
under the Securities Act of 1933, as amended, in connection with the
Registration Statement on Form S-3 filed herewith (the "Registration
Statement").
The facts, as we understand them, and upon which with your permission
we rely in rendering the opinion expressed herein, are set forth in the
Registration Statement. Based on such facts, it is our opinion that the
material federal income tax consequences are accurately set forth under the
heading "Certain United States Federal Income Tax Considerations" in the
Registration Statement. No opinion is expressed as to any matter not discussed
therein.
This opinion is based on various statutory provisions, regulations
promulgated thereunder and interpretations thereof by the Internal Revenue
Service and the courts having jurisdiction over such matters all of which are
subject to change either prospectively or retroactively. Also, any variation
or difference in the facts from those set forth in the Registration Statement
may affect the conclusions stated herein.
<PAGE> 2
[LATHAM & WATKINS]
Chancellor Media Corporation
October 16, 1997
Page 2
This opinion is rendered to you solely for use in connection with the
Registration Statement. We consent to your filing this opinion as an exhibit to
the Registration Statement, and to the reference to our firm under the headings
"Certain United States Federal Income Tax Considerations" and "Legal Matters."
Very truly yours,
/s/ LATHAM & WATKINS
<PAGE> 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
October 16, 1997
<PAGE> 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
October 16, 1997
<PAGE> 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
October 16, 1997
<PAGE> 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
October 16, 1997
<PAGE> 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
October 16, 1997
<PAGE> 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
October 16, 1997
<PAGE> 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
October 16, 1997
<PAGE> 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
October 16, 1997
<PAGE> 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 October 16, 1997 of Chancellor
Media Corporation.
Arthur Andersen LLP
Washington, D.C.
October 16, 1997
<PAGE> 1
EXHIBIT 25.1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST
INDENTURE ACT OF 1939 OF A CORPORATION
DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A
TRUSTEE PURSUANT TO SECTION 305(b)(2) ____________
----------------------
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(Jurisdiction of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
48 Wall Street, New York, New York 10286
(Address of principal executive offices) (Zip Code)
CHANCELLOR MEDIA CORPORATION
(Exact name of obligor as specified in its charter)
Delaware 75-2247099
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
433 East Las Colinas Boulevard, Suite 1130
Irving, TX 75039
(Address of principal executive offices) (Zip Code)
-------------------------
6% Convertible Subordinated Exchange Debentures due 2012
(Title of the indenture securities)
<PAGE> 2
GENERAL
ITEM 1. General Information.
Furnish the following information as to the Trustee:
(a) Name and address of each examining or supervising authority to
which it is subject.
<TABLE>
<S> <C>
Superintendent of Banks of the State of 2 Rector Street, New York, N.Y. 10006,
New York and Albany, N.Y. 12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York, N.Y. 10045
Federal Deposit Insurance Corporation Washington, D.C. 20549
New York Clearing House Association New York, N.Y.
</TABLE>
(b) Whether it is authorized to exercise corporate trust powers:
Yes.
ITEM 2. Affiliations with Obligor
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None.
-----------------------------
ITEM 16. List of Exhibits:
Exhibits identified in parentheses below, on file with the
Commission, are incorporated herein by reference as an exhibit hereto, pursuant
to Rule 7a-29 under the Trust Indenture Act of 1939 (the "Act") and Rule 24 of
the Commission's Rules of Practice.
1. - A copy of the Organization Certificate of The Bank of New York
(formerly Irving Trust Company) as now in effect, which contains the
authority to commence business and a grant of powers to exercise
corporate trust powers. (See Exhibit 1 to Amendment No. 1 to Form T-1
filed with Registration Statement No. 33-6215, Exhibits 1a and 1b to
Form T-1 filed with Registration Statement No. 33-21672 and Exhibit 1
to Form T-1 filed with Registration Statement No. 33-29637.)
4. - A copy of the existing By-laws of the Trustee. (See Exhibit 4 to
Form T-1 filed with Registration Statement No. 33-31019.)
6. - The consent of the Trustee required by Section 321(b) of the Act.
(See Exhibit 6 to Form T-1, Registration Statement No. 33-44051.)
7. - A copy of the latest report of condition of the Trustee published
pursuant to law or to the requirements of its supervising or examining
authority.
1
<PAGE> 3
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New York, a
corporation organized and existing under the laws of the State of New York, has
duly caused this statement of eligibility to be signed on its behalf by the
undersigned, thereunto duly authorized, all in The City of New York, and State
of New York, on the 8th day of October, 1997.
The Bank of New York
By: /s/ REMO J. REALE
--------------------------
Remo J. Reale
Assistant Vice President
2
<PAGE> 4
EXHIBIT 7
Consolidated Report of Condition of
THE BANK OF NEW YORK
of 48 Wall Street, New York, N.Y. 10285
And Foreign and Domestic Subsidiaries, a member of the Federal Reserve
System, at the close of business June 30, 1997, published in accordance with a
call made by the Federal Reserve Bank of this District pursuant to the
provisions of the Federal Reserve Act.
<TABLE>
<CAPTION>
Dollar Amounts
in Thousands
<S> <C>
ASSETS
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coin ................... $ 7,769,502
Interest-bearing balances ............................................ 1,472,524
Securities:
Held-to-maturity securities .......................................... 1,080,234
Available-for-sale securities ........................................ 3,046,199
Federal funds sold and Securities purchased under
agreements to resell ................................................. 3,193,800
Loans and lease financing receivables:
Loans and leases, net of unearned income ..................35,352,045
LESS: Allowance for loan and lease losses ................... 625,042-
LESS: Allocated transfer risk reserve ............................429
Loans and leases, net of unearned income allowance,
and reserve ........................................................ 34,726,574
Assets held in trading accounts ........................................ 1,611,096
Premises and fixed assets (including capitalized leases) ............... 676,929
Other real estate owned ................................................ 22,460
Investments in unconsolidated subsidiaries and
associated companies ................................................. 209,959
Customers' liability to this bank on acceptances
outstanding .......................................................... 1,357,731
Intangible assets ...................................................... 720,883
Other assets ........................................................... 1,627,267
------------
Total assets ........................................................... $ 57,514,958
============
LIABILITIES
Deposits:
In domestic offices .................................................. $ 26,875,596
Noninterest-bearing .......................................11,213,657
Interest-bearing ..........................................15,661,939
In foreign offices, Edge and Agreement subsidiaries,
and IBFs ........................................................... 16,334,270
Noninterest-bearing ..........................................596,369
Interest-bearing ..........................................15,737,901
Federal funds purchased and Securities sold under
agreements to repurchase ............................................. 1,583,157
Demand notes issued to the U.S. Treasury ............................... 303,000
Trading liabilities .................................................... 1,308,173
Other borrowed money:
With remaining maturity of one year or less .......................... 2,383,570
With remaining maturity of more than one
year through three years ........................................... 0
With remaining maturity of more than three years...................... 20,679
Bank's liability on acceptances executed and outstanding ............... 1,377,244
Subordinated notes and debentures ...................................... 1,018,940
Other liabilities ...................................................... 1,732,792
------------
Total liabilities ...................................................... 52,937,421
------------
EQUITY CAPITAL
Common stock ........................................................... 1,135,284
Surplus ................................................................ 731,319
Undivided profits and capital reserves ................................. 2,721,258
Net unrealized holding gains (losses) on
available-for-sale securities ....................................... 1,948
Cumulative foreign currency translation adjustments ................... (12,272)
------------
Total equity capital ................................................... 4,577,537
------------
Total liabilities and equity capital ................................... $ 57,514,958
============
</TABLE>
I, Robert E. Keilman, Senior Vice President and Comptroller of the
above-named bank do hereby declare that this Report of Condition has been
prepared in conformance with the instructions issued by the Board of Governors
of the Federal Reserve System and is true to the best of my knowledge and
belief.
Robert E. Keilman
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
Thomas A. Renyl )
J. Carter Bacot ) Directors
Alan R. Griffith )
------------------------------------
