<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported)
April 17, 1997
Clear Channel Communications, Inc.
(Exact name of registrant as specified in its charter)
Texas
(State of Incorporation)
1-9645 74-1787539
(Commission File Number) (I.R.S. Employer Identification No.)
200 Concord Plaza, Suite 600
San Antonio, Texas 78216
(210) 822-2828
(Address and telephone number of principal executive offices)
<PAGE> 2
Item 2.(a)
On April 10, 1997, Clear Channel Communications, Inc. (the "Company" or
"Registrant"), acquired by purchase approximately 93% of the outstanding stock
of Eller Media Corporation ("Eller" or "Eller Media"). Eller Media's operations
include approximately 50,000 outdoor advertising display faces in 15 major
metropolitan markets including Los Angeles, Sacramento, San Diego and San
Francisco, CA; Chicago, IL; Dallas/Ft. Worth, Houston, San Antonio and El Paso,
TX; Miami and Tampa, FL; Atlanta, GA ; Cleveland, OH; Milwaukee, WI and Phoenix,
AZ. Eller Media was not an affiliate of the Registrant.
The purchase price for the approximately 93% of Eller Media's outstanding
capital stock was determined based upon an arms-length negotiation considering
the potential cash flows to be generated by the outdoor advertising structures,
consideration of the markets in which the billboards are located, management,
personnel, and the overall operation of the facilities as a going concern. As
consideration for the stock acquired, the Company paid cash of approximately
$325 million and issued Common Stock ("Common Stock") of the Company in the
aggregate value of approximately $298 million (6,643,636 shares at an agreed
value of $44.8625 per share) in a private transaction. In addition, the Company
issued options to purchase 1,468,182 shares of the Company's Common Stock in
connection with the assumption of Eller Media's outstanding stock options.
These options have an aggregate estimated fair value of approximately $51
million. In addition, the Company retired approximately $417 million of Eller
Media long-term debt, which was refinanced at the closing date using the
Company's credit facility.
The Company granted to the former Eller Media stockholders certain demand and
piggyback registration rights relating to the shares of Common Stock received by
them. The holders of the approximately 7% of the outstanding capital stock of
Eller Media, not purchased by the Company, have the right to put such stock to
the Company for 1,081,469 shares of the Company's Common Stock until April 10,
2002. From and after April 10, 2004, the Company will have the right to call in
this minority interest stake in Eller Media for 1,081,469 shares of its Common
Stock.
Sources of funds utilized in completing this acquisition were provided by the
Company's revolving long-term line of credit facility by and between
NationsBank of Texas, N.A., as agent, the Registrant and the banks named
therein.
Item 2.(b)
The assets of Eller Media were being utilized by Eller Media for the purpose of
outdoor advertising. Registrant intends to continue such use.
<PAGE> 3
Item 7.(a)-1 Historical Financial Statements
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders' of
Eller Media Corporation:
We have audited the accompanying consolidated balance sheets of ELLER MEDIA
CORPORATION (EMC) (a Delaware corporation), formerly EMC Group, Inc. and
subsidiaries as of December 31, 1996 and 1995, and the related consolidated
statements of operations, stockholders' equity and cash flows for the year ended
December 31, 1996, and for the period from inception (August 18, 1995) to
December 31, 1995. In addition, we have audited the accompanying combined
statements of operations and cash flows of Eller Investment Company, Inc. (EIC)
and the accompanying consolidated statements of operations and cash flows of PMG
Holdings, Inc. and subsidiaries (PMG), the predecessors of EMC, for the period
from January 1, 1995 to August 17, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of EMC as of December 31, 1996
and 1995, and the results of their operations and their cash flows for the year
ended December 31, 1996, and for the period from inception (August 18, 1995) to
December 31, 1995, and the combined statements of operations and cash flow of
EIC and the consolidated statements of operations and cash flow of PMG for the
period from January 1, 1995 to August 17, 1995, in conformity with generally
accepted accounting principles.
ARTHUR ANDERSEN LLP
Phoenix, Arizona,
March 14, 1997
<PAGE> 4
ELLER MEDIA CORPORATION
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PAR VALUE AND SHARE DATA)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1995 1996
------------ ------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents................................. $ 2,453 $ 873
Accounts receivable, net of allowance for doubtful
accounts of $2,274 and $1,791 at December 31, 1995 and
1996, respectively..................................... 30,510 35,627
Prepaid land leases and other assets...................... 10,077 10,774
-------- --------
Total current assets.............................. 43,040 47,274
PREPAID LAND LEASES AND OTHER, net of current portion....... 4,593 8,378
PROPERTY AND EQUIPMENT, net (Note 4)........................ 448,345 460,066
DEFERRED LOAN FEES, net of accumulated amortization of $442
and $48 at December 31, 1995 and 1996, respectively (Note
5)........................................................ 8,725 2,762
DEFERRED TAX ASSET (Note 8)................................. 8,979 10,520
GOODWILL, net of accumulated amortization of $1,334 and
$4,711 December 31, 1995 and 1996, respectively........... 130,164 131,678
-------- --------
$643,846 $660,678
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable.......................................... $ 5,930 $ 4,638
Accrued liabilities....................................... 25,652 32,667
Current portion of long-term debt (Note 5)................ 10,176 12,320
Current portion of capitalized lease obligations (Note
6)..................................................... 1,039 1,060
Accrued interest.......................................... 4,229 3,378
-------- --------
Total current liabilities......................... 47,026 54,063
LONG-TERM DEBT, net of current portion (Note 5)............. 394,336 399,403
CAPITALIZED LEASE OBLIGATIONS, net of current portion (Note
6)........................................................ 1,960 1,822
OTHER LIABILITIES........................................... 11,398 13,007
COMMITMENTS AND CONTINGENCIES (Notes 5, 9, 10 and 11)
STOCKHOLDERS' EQUITY (Notes 2 and 7):
Preferred stock; $.01 par value; 2,000 shares
authorized............................................. -- --
Class A common stock; $.01 par value; 10,000 shares
authorized, 1,916 and 1,917 shares issued and
outstanding at December 31, 1995 and 1996,
respectively........................................... 1 1
Additional paid-in capital................................ 191,659 213,297
Deferred compensation..................................... -- (15,240)
Accumulated deficit....................................... (2,534) (5,675)
-------- --------
Total stockholders' equity........................ 189,126 192,383
-------- --------
$643,846 $660,678
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
<PAGE> 5
ELLER MEDIA CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PREDECESSORS
------------------------
EIC PMG
JANUARY 1, JANUARY 1, AUGUST 18,
1995 1995 1995
TO TO TO YEAR ENDED
AUGUST 17, AUGUST 17, DECEMBER 31, DECEMBER 31,
1995 1995 1995 1996
---------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
GROSS REVENUES.............................. $15,439 $141,778 $ 92,183 $270,413
AGENCY COMMISSIONS.......................... (1,720) (18,163) (11,505) (33,381)
------- -------- -------- --------
Net revenues...................... 13,719 123,615 80,678 237,032
OPERATING EXPENSES:
Cost of sales............................. 5,796 50,456 32,754 91,615
Selling, general and administrative
expense................................ 1,901 22,599 15,477 43,924
Corporate overhead........................ 2 8,881 3,900 10,204
Depreciation and amortization............. 2,148 22,769 14,468 40,269
Noncash compensation expense (Notes 7 and
11).................................... -- -- -- 6,300
------- -------- -------- --------
Operating income.................. 3,872 18,910 14,079 44,720
INTEREST EXPENSE............................ 3,240 27,629 13,616 35,626
LOSS ON DISPOSITION OF FIXED ASSETS AND
OTHER, net................................ 497 4,860 2,997 6,721
------- -------- -------- --------
INCOME (LOSS) BEFORE PROVISION FOR INCOME
TAXES..................................... 135 (13,579) (2,534) 2,373
(BENEFIT FROM) PROVISION FOR INCOME TAXES... -- (3,858) -- 977
------- -------- -------- --------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM..... 135 (9,721) (2,534) 1,396
EXTRAORDINARY LOSS ON DEBT EXTINGUISHMENT,
net of tax benefit of $3,153 (Note 5)..... -- -- -- (4,537)
------- -------- -------- --------
Net income (loss)................. $ 135 $ (9,721) $ (2,534) $ (3,141)
======= ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE> 6
ELLER MEDIA CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(DOLLARS IN THOUSANDS, EXCEPT SHARES)
<TABLE>
<CAPTION>
CLASS A
COMMON STOCK TOTAL
-------------- PAID-IN DEFERRED ACCUMULATED STOCKHOLDERS'
SHARES STOCK CAPITAL COMPENSATION DEFICIT EQUITY
------ ----- -------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, August 18, 1995
(inception)....................... -- $-- $ -- $ -- $ -- $ --
Issuance of common stock.......... 1,916 1 191,659 -- -- 191,660
Net loss.......................... -- -- -- -- (2,534) (2,534)
----- --- -------- -------- ------- --------
BALANCE, December 31, 1995.......... 1,916 1 191,659 -- (2,534) 189,126
Valuation of stock options........ -- -- 21,540 (21,540) -- --
Amortization of deferred
compensation................... -- -- -- 6,300 -- 6,300
Issuance of common stock.......... 1 -- 98 -- -- 98
Net loss.......................... -- -- -- -- (3,141) (3,141)
----- --- -------- -------- ------- --------
BALANCE, December 31, 1996.......... 1,917 $ 1 $213,297 $(15,240) $(5,675) $192,383
===== === ======== ======== ======= ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE> 7
ELLER MEDIA CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PREDECESSORS
------------------------
EIC PMG
JANUARY 1, JANUARY 1, AUGUST 18,
1995 1995 1995
TO TO TO YEAR ENDED
AUGUST 17, AUGUST 17, DECEMBER 31, DECEMBER 31,
1995 1995 1995 1996
---------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)..................... $ 135 $ (9,720) $ (2,534) $ (3,141)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities --
Depreciation and amortization...... 2,728 22,768 14,467 40,267
Loss on disposition of fixed
assets........................... -- 4,860 2,928 6,721
Loss on debt extinguishment........ -- -- -- 7,690
Noncash compensation expense....... -- -- -- 6,300
Changes in assets and liabilities, net
of effect of acquisitions --
Accounts receivable, net........... (54) (7,089) 1,453 (5,117)
Prepaid land leases and other
assets........................... (210) 31,004 2,561 (11,050)
Accounts payable, accrued and other
liabilities...................... (129) (5,172) (1,681) 6,480
------- -------- -------- ---------
Net cash provided by operating
activities.................. 2,470 36,651 17,194 48,150
------- -------- -------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment... (409) (8,218) (5,662) (51,351)
Proceeds from sale of fixed assets.... -- 9,711 531 139
Purchase of PMG and EIC, net of cash
acquired (Note 2).................. -- -- (520,441) --
------- -------- -------- ---------
Net cash (used in) provided by
investing activities........ (409) 1,493 (525,572) (51,212)
------- -------- -------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on long-term debt and
capitalized lease obligations...... (1,351) (37,757) (12,731) (425,290)
Proceeds from issuance of common
stock.............................. -- -- 163,160 98
Proceeds from issuance of debt........ -- -- 369,502 429,501
Payments for deferred loan fees....... -- -- (9,100) (2,825)
------- -------- -------- ---------
Net cash (used in) provided by
financing activities........ (1,351) (37,757) 510,831 1,484
------- -------- -------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS........................... 709 387 2,453 (1,580)
CASH AND CASH EQUIVALENTS, beginning of
period................................ 491 -- -- 2,453
------- -------- -------- ---------
CASH AND CASH EQUIVALENTS, end of
period................................ $ 1,200 $ 387 $ 2,453 $ 873
======= ======== ======== =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE> 8
ELLER MEDIA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) BASIS OF PRESENTATION:
The accompanying consolidated financial statements include the accounts of
Eller Media Corporation (the Company) and its subsidiaries, Eller Investment Co.
(EIC) and PMG Holdings, Inc. and subsidiaries (PMG) and Target Media Group LLP,
a partnership in which the Company indirectly held an 83.127% interest as of
December 31, 1995, and wholly owned as of December 31, 1996. All material
intercompany transactions have been eliminated. The Company is engaged in the
business of providing rental space on outdoor advertising structures and
production services for outdoor advertisements in major metropolitan areas in
the United States.
EIC and PMG were acquired by the Company on August 18, 1995 (the Purchase
Date). The Company's consolidated statement of operations and cash flows for the
year ended December 31, 1995, include the operations of the Company since its
inception (August 18, 1995) and the operations of EIC and PMG since the Purchase
Date. Accordingly, the accompanying financial statements for the period January
1, 1995 to August 17, 1995, of EIC and PMG (the Predecessors), and the Company
are not comparable in all material respects since those financial statements
report results of operations and cash flows for separate entities.
(2) FORMATION OF THE COMPANY:
Acquisition of EIC, PMG and Initial Capitalization
On August 18, 1995, the Company was formed to acquire EIC and PMG. The
Company exchanged 284 shares of common stock for all outstanding stock of EIC in
a transaction that was valued at approximately $28.5 million. Prior to its
acquisition by the Company, EIC was an outdoor advertising firm with operations
in Phoenix, Arizona, Atlanta, Georgia and El Paso, Texas with annual net
revenues of approximately $22.0 million. The shares issued to the former owners
of EIC represent approximately 15% of the issued and outstanding stock of the
Company. Simultaneously, with the acquisition of EIC, the Company issued 1,632
shares of common stock (approximately 85% of the issued and outstanding stock of
the Company) in exchange for cash totaling approximately $163.1 million.
The acquisition of EIC was accounted for using the purchase method of
accounting. The purchase price of approximately $28.5 million was allocated to
assets and liabilities based on their estimated fair values as of the date of
acquisition. The cost in excess of fair values was approximately $32.4 million
and is recorded as goodwill in the accompanying consolidated balance sheets.
The Company, concurrent with its formation on August 18, 1995, executed a
stock purchase agreement with General Electric Capital Corporation to purchase
all of the stock of PMG for $519.2 million in cash. Prior to its acquisition by
EMC, PMG was an outdoor advertising firm with operations in several major cities
in the United States and annual revenues of approximately $177.0 million. This
transaction was accounted for using the purchase method of accounting. The
purchase price was allocated to assets and liabilities based on their estimated
fair values as of the date of acquisition. The cost in excess of fair values was
approximately $107.9 million and is recorded as goodwill in the accompanying
consolidated balance sheets.
The Chase Manhattan Bank, N.A. (Chase), as an agent for a group of banks,
provided the Company with $440.0 million in senior secured facilities comprised
of a seven year $65.0 million revolving line of credit facility, a seven year
$250.0 million term loan facility, and an eight-and-a-half year $125.0 million
term loan facility to finance a portion of PMG, to refinance certain existing
indebtedness, and to provide for general corporate purposes (see Note 5).
<PAGE> 9
ELLER MEDIA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Pro Forma Results of Operations
Both the formation of the Company and the EIC and PMG acquisitions (the
Acquisitions) were effective as of August 18, 1995. The following unaudited pro
forma information includes the combined results of operations of the Company and
its predecessors for the year ended December 31, 1995, as adjusted for interest
expense and depreciation and amortization expense resulting from the
Acquisitions. This information is for informational purposes only and is not
necessarily indicative of future operating results.
<TABLE>
<CAPTION>
PRO FORMA
JANUARY 1,
1995
TO
DECEMBER 31,
1995
------------
<S> <C>
Net revenues............................ $218,012
========
Operating income........................ $ 42,987
========
Net loss................................ $ (1,909)
========
</TABLE>
(3) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Cash Equivalents
The Company considers all highly liquid investments with an initial
maturity of three months or less to be cash equivalents.
Fair Value of Short-Term Instruments
The carrying values of cash and cash equivalents, receivables, accounts
payable and accrued liabilities approximate fair values due to the short-term
maturities of these instruments.
Revenue Recognition
The Company provides outdoor advertising services under the terms of
contracts covering periods up to three years, which are generally billed
monthly. Revenues for outdoor advertising space rental are recognized ratably
over the contract terms. Consistent with industry practice, the portion of
December billings pertaining to January space sales has been recognized in
operating income of December. Revenues from design, production and certain other
services are recognized as the services are provided. All costs are recognized
in the period in which the related services are provided.
Prepaid Land Leases
Prepaid land leases represent amounts paid for leases of land occupied by
outdoor advertising structures. Prepaid land leases are amortized on a straight
line basis over the term of the related lease period.
<PAGE> 10
ELLER MEDIA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Property and Equipment
Property and equipment are recorded at cost. The Company expenses repairs
and maintenance when incurred and capitalizes betterments and improvements which
extend the useful life of property and equipment. Depreciation is computed on a
straight-line basis over the following useful lives:
<TABLE>
<S> <C>
Buildings................................................... 40 years
Advertising displays and structures......................... 5-15 years
Machinery and equipment..................................... 3-7 years
Vehicles.................................................... 3-5 years
Furniture, fixtures, computers and equipment................ 3-7 years
</TABLE>
Goodwill
Goodwill represents the excess of consideration paid over the fair market
values of identifiable net assets acquired. Goodwill is amortized on a
straight-line basis over 40 years. Goodwill and other long-lived assets are
periodically evaluated utilizing undiscounted estimated future cash flows to
determine if an impairment has occurred in accordance with the provisions of
Statement of Financial Accounting Standards No. 121 (SFAS No. 121), Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of. As of December 31, 1996, SFAS No. 121 did not have a material impact on the
Company's financial position or results of operations.
Supplemental Cash Flow Information
Cash paid for interest for the period January 1, 1995 through August 17,
1995, was approximately $2.2 million and $0.2 million for EIC and PMG,
respectively. In addition, capital lease obligations incurred by PMG during that
period were approximately $0.7 million. Cash paid for interest for the period
August 18, 1995 through December 31, 1995, and for the year ended December 31,
1996, was approximately $9.7 million and $35.0 million, respectively. In
addition, capital lease obligations incurred by the Company during these periods
totaled approximately $0.5 million and $2.8 million, respectively, for various
equipment and automobiles. In connection with the acquisition of EIC, the
Company issued 284 shares of stock in exchange for all of the outstanding stock
of EIC, which was valued at approximately $28.5 million. The Company also
obtained financing in connection with the acquisition of PMG, and refinanced
approximately $44.6 million of existing debt, warrants and preferred stock with
a portion of the proceeds.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles necessarily requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reported
period. Actual amounts may differ from these estimates.
<PAGE> 11
ELLER MEDIA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(4) PROPERTY AND EQUIPMENT:
Property and equipment consist of the following at December 31 (dollars in
thousands):
<TABLE>
<CAPTION>
1995 1996
-------- --------
<S> <C> <C>
Advertising structures...................................... $412,110 $448,181
Land........................................................ 7,676 11,878
Buildings................................................... 16,916 17,184
Vehicles.................................................... 6,890 8,242
Machinery and equipment..................................... 4,429 4,734
Furniture and fixtures...................................... 6,189 10,824
Construction-in-process..................................... 6,846 7,679
-------- --------
461,056 508,722
Less: accumulated depreciation.............................. (12,711) (48,656)
-------- --------
$448,345 $460,066
======== ========
</TABLE>
Included in loss on disposition of fixed assets and other are losses from
the disposition (takedowns) of certain advertising structures. Total losses on
takedowns for the Company for the period August 18, 1995 through December 31,
1995 and for the year ended December 31, 1996, were $2.9 million and $6.2
million, respectively. In addition, total losses on takedowns for PMG for the
period January 1, 1995 through August 17, 1995, were approximately $4.9 million.
(5) LONG-TERM DEBT:
In connection with the financing discussed in Note 2, on August 18, 1995,
the Company entered into separate credit facilities, collectively the old credit
facility (Old Credit Facility). This Old Credit Facility had A and B Tranche
Notes with a group of banks for whom Chase acted as agent (Agent). The Tranche A
Notes mature June 2002, with interest payable quarterly, at the Agent's prime
rate plus 1.25% (9.75% at December 31, 1995), or at London Interbank Offered
Rate (LIBOR) plus 2.50% (blended rate of 8.28% at December 31, 1995). The
Tranche B Notes, mature in December 2003, with interest payable quarterly at the
Lender's prime rate plus 2.00% (10.50% at December 31, 1995), or at LIBOR plus
3.25% (9.13% at December 31, 1995). Use of the prime or LIBOR based rates is at
the Company's option, selected periodically, in advance. Borrowings may be used
for general corporate purposes, including working capital requirements,
acquisitions and refinancing existing indebtedness.
The Old Credit Facility also had a revolving line of credit due June 2002,
providing for up to $65.0 million in borrowings that may be used for general
corporate purposes, including working capital requirements, acquisitions and
refinancing existing indebtedness. Interest is payable quarterly at the Agent's
prime rate plus 1.25% (9.75% at December 31, 1995), or at LIBOR plus 2.50%
(blended rate of 8.28% at December 31, 1995).
In November 1996, the Company refinanced the Old Credit Facility with a New
Credit Facility (New Credit Facility). The New Credit Facility has new Tranche A
(New Tranche A) and new Tranche B (New Tranche B) notes. The New Tranche A notes
mature in September 2003, with interest payable quarterly, at the Agent's prime
rate plus 0.625% (8.875% at December 31, 1996), or at LIBOR plus 1.875% (7.375%
at December 31, 1996). The New Tranche B notes mature in December 2004, with
interest payable quarterly, at the Agent's prime rate plus 1.5% (9.75% at
December 31, 1996), or at LIBOR plus 2.75% (8.25% at December 31, 1996). Rates
used and use of borrowings are similar to those under the A and B Tranches in
the Old Credit Facility.
<PAGE> 12
ELLER MEDIA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The New Credit Facility also consists of a revolving line of credit,
providing for up to $200.0 million in borrowings, interest payable quarterly at
the Agent's prime rate plus 0.625% (8.875% at December 31, 1996), or at LIBOR
plus 1.875% (blended rate of 7.50% at December 31, 1996). Available uses of the
revolving line of credit are similar to those under the Old Credit Facility's
revolving line of credit.
As part of the Old Credit Facility and New Credit Facility, the Company may
issue letters of credit to be used for various vendor contracts. As of December
31, 1995 and 1996, total letters of credit outstanding were approximately $11.7
million and $9.0 million, respectively.
As a result of the above financings, the Company has entered into interest
rate swap, interest rate collar and interest rate cap agreements (the
Agreements) to reduce the impact of changes in interest rates on its floating
rate long-term debt. The following is a summary of the Company's outstanding
Agreements as of December 31:
<TABLE>
<CAPTION>
1995
- ---------------------------------------------------------------------------------------------------
COMPANY'S NOTIONAL VALUE
INSTRUMENT EFFECTIVE RATE (DOLLARS IN THOUSANDS)
---------- -------------- ----------------------
<S> <C> <C>
Collar................................................... 7.33% - 10.48% $110,000
Collar................................................... 7.00% - 10.48% 50,000
Collar................................................... 7.73% - 10.48% 25,000
Callable swap............................................ 8.44% 100,000
Cap...................................................... 12.48% 8,775
Cap...................................................... 11.98% 11,000
--------
$304,775
========
1996
- ---------------------------------------------------------------------------------------------------
Collar................................................... 6.80% - 9.95% $110,000
Collar................................................... 6.47% - 9.95% 50,000
Collar................................................... 7.20% - 9.95% 25,000
Callable swap............................................ 7.91% 100,000
Knock-out swap........................................... 7.78% 50,000
Knock-out swap........................................... 7.76% 25,000
Cap...................................................... 11.95% 6,525
Cap...................................................... 11.70% 10,000
--------
$376,525
========
</TABLE>
The Agreements effectively change the Company's interest rate exposure on a
portion of its floating rate notes ($402.0 million and $408.5 million at
December 31, 1995 and 1996, respectively) to a weighted average fixed rate
ceiling of approximately 9.90% and 9.10% at December 31, 1995 and 1996,
respectively, and mature through 2000. As a result of the Agreements and
interest rate on debt not protected by such Agreements, the Company incurred
interest cost at an average rate of approximately 8.80% and 8.25% for the years
ended December 31, 1995 and 1996, respectively. The Company is exposed to credit
loss in the event of nonperformance by other parties (various banks) on the
Agreements. However, management believes that, based on high credit worthiness
of these counterparties, nonperformance is unlikely.
As the Company utilizes these Agreements for hedging purposes, amounts paid
to obtain these Agreements, if any, are capitalized into prepaid land leases and
other in the accompanying consolidated balance sheets and amortized over the
life of the specific Agreement.
The knock-out swaps have options which enable other parties to cancel such
Agreements if the Company's effective interest rate exceeds 8.30% and 8.71% for
the $25.0 million and the $50.0 million knock-out swaps, respectively, at
December 31, 1996. The callable swap at December 31, 1996, has an option which
<PAGE> 13
ELLER MEDIA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
would enable another party to cancel the Agreement. The fair value of interest
rate swaps, caps and collars (used for hedging purposes) are based on quoted
market prices, where available. If quoted market prices are not available, fair
values are based on quoted market prices of comparable instruments. The fair
value to the Company of these instruments was approximately $1.0 million at
December 31, 1996.
The financings restrict the Company and its subsidiaries from, among other
things (i) incurring additional indebtedness, (ii) creating liens, (iii) paying
dividends (other than dividends paid to the Company by its subsidiaries), and
(iv) permitting any part of the Company's business to be sold, leased or
conveyed to an unrelated party. The financings also restrict the Company's
ability to make capital expenditures and investments, and require that certain
financial ratios be met. The Company has granted a security interest in
substantially all of its assets to the Agent in connection with the financings.
As part of the financing of the Old Credit Facility, the Company paid
approximately $9.1 million in loan costs. These costs have been written off as
of December 31, 1996 and have been recorded as an extraordinary loss. In
connection with the financing of the New Credit Facility, the Company paid
approximately $2.9 million in loan costs, which are being amortized on a
straight-line basis over the period of the financing.
Long-term debt consists of the following at December 31, (dollars in
thousands):
<TABLE>
<CAPTION>
1995 1996
-------- --------
<S> <C> <C>
Old Credit Facility's Tranche A term loan notes............. $250,000 $ --
Old Credit Facility's Tranche B term loan notes............. 125,000 --
Old Credit Facility's revolving line of credit.............. 27,000 --
New Credit Facility's Tranche A term loan notes............. -- 200,000
New Credit Facility's Tranche B term loan notes............. -- 150,000
New Credit Facility's revolving line of credit.............. -- 58,500
Various notes payable, bearing interest from 6.5% to 9%,
maturing through July 2001; partially secured by certain
assets of the Company..................................... 2,512 3,223
-------- --------
404,512 411,723
Less: current maturities.................................... (10,176) (12,320)
-------- --------
$394,336 $399,403
======== ========
</TABLE>
The carrying amount of the long-term debt is estimated to approximate fair
value as the actual interest rates are consistent with rates estimated to be
currently available for debt of similar terms and remaining maturities.
Aggregate principal payments on long-term debt for the years ending
December 31 are as follows (dollars in thousands):
<TABLE>
<S> <C>
1997........................................................ $ 12,320
1998........................................................ 22,714
1999........................................................ 33,154
2000........................................................ 74,925
2001........................................................ 56,610
Thereafter.................................................. 212,000
--------
$411,723
========
</TABLE>
(6) CAPITALIZED LEASE OBLIGATIONS:
The Company leases certain equipment under capital leases. As such, the
equipment has been capitalized and is being depreciated over the lease term or
the estimated useful life of the equipment.
<PAGE> 14
ELLER MEDIA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Future minimum lease payments under capitalized lease obligations for the
years ending December 31 are as follows (dollars in thousands):
<TABLE>
<S> <C>
1997........................................................ $ 1,276
1998........................................................ 993
1999........................................................ 594
2000........................................................ 367
2001........................................................ 121
-------
Total minimum lease payments...................... 3,351
Less: amount representing interest (at rates ranging from
7.0% to 13.5%)............................................ (469)
-------
Present value of minimum lease payments..................... 2,882
Less: current portion....................................... (1,060)
-------
$ 1,822
=======
</TABLE>
(7) STOCK OPTIONS:
The Company has granted to members of their Board of Directors 4.5 shares
of common stock at an exercise price of $0.1 million per share, which vest
immediately upon grant. The Company has also granted to certain key employees
nonqualified base options to purchase 121.098 and 127.928 at December 31, 1995
and 1996, respectively, shares of the Company's common stock at an exercise
price of $0.1 million per share, which approximated fair value at the date of
grant. These options are subject to various vesting provisions and certain
accelerated vesting provisions in the event of the sale of the Company. The
options expire five years from grant date.
At the Company's inception, certain key employees were granted performance
options (the Performance Options) to purchase 89.614 shares of common stock
which also have an exercise price of $0.1 million per share and expire in 2002.
The Performance Options, however, become exercisable only when certain
performance conditions relating to an investor rate of return are met. During
1996, available evidence indicated that the performance criteria were likely to
be met and the Company incurred approximately $5.9 million in noncash
compensation expense related to the vested portion of the Performance Options
pursuant to Accounting Principles Board No. 25 (APB No. 25), Accounting for
Stock Issued to Employees. In addition, the Company determined that upon the
sale of the Company, it would eliminate the performance criteria.
In October 1996, the Company established the 1996 Equity Plan (the Equity
Plan) to provide incentives for officers, employees and consultants of the
Company through the granting of options and other awards. The Company reserved
approximately 42 shares of the authorized common stock of the Company to be
issued under the Equity Plan. As of December 31, 1996, no options or awards have
been granted under the Equity Plan.
The following pro forma disclosures of net income are made assuming the
Company had accounted for the stock options pursuant to the provision of
Statement of Financial Accounting Standards No. 123 (SFAS No. 123), Accounting
for Stock-Based Compensation. The December 31, 1996 pro forma disclosure is
adjusted to eliminate any noncash compensation related to the Performance
Options recorded in the accompanying consolidated statement of operations
pursuant to the provisions of APB No. 25 (dollars in thousands).
<TABLE>
<CAPTION>
1995 1996
------- -------
<S> <C> <C>
As Reported................................................. $(2,534) $(3,141)
======= =======
Pro Forma................................................... $(3,028) $ (323)
======= =======
</TABLE>
<PAGE> 15
ELLER MEDIA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The fair value of each option is estimated on the date of grant using the
Black-Scholes options pricing model with the following weighted average
assumptions used for grants in 1995 and 1996: risk-free interest rates between
5.48% and 6.03% and expected lives of 3 to 5 years. The dividend yield and
volatility factors assumed for determining fair values were zero.
A summary of the status of the Company's stock options at December 31, 1995
and 1996, and changes during the years then ended is presented in the following
table:
<TABLE>
<CAPTION>
1995 1996
-------------------- --------------------
WEIGHTED WEIGHTED
AVERAGE AVERAGE
EXERCISE EXERCISE
OPTIONS PRICE OPTIONS PRICE
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Outstanding at inception (August 18,
1995) and January 1, 1996............. -- $ -- 215.212 $100,000
Granted............................... 215.212 100,000 6.830 100,000
Exercised............................. -- -- -- --
Canceled.............................. -- -- -- --
-------- -------- -------- --------
Outstanding at end of year.............. 215.212 $100,000 222.042 $100,000
======== ======== ======== ========
Exercisable at end of year.............. 45.566 $100,000 75.242 $100,000
======== ======== ======== ========
Weighted Average Fair Value per share of
Options Granted....................... $ 25.771 $ 25.992
======== ========
</TABLE>
(8) INCOME TAXES:
The Company computes it income taxes in accordance with Statement of
Financial Accounting Standards No. 109 (SFAS No. 109), Accounting for Income
Taxes. Deferred income taxes are provided for differences between results of
operations for financial reporting purposes and income tax purposes.
The components of the provision for deferred income taxes for the period
from August 18, 1995 to December 31, 1995, and for the year ended December 31,
1996, are (dollars in thousands):
<TABLE>
<CAPTION>
1996 1995
------- ----
<S> <C> <C>
Current
Federal................................................... $ -- $ --
State..................................................... -- --
------- ----
Total current provision........................... -- --
Deferred.................................................... -- 977
------- ----
Total provision................................... $ -- $977
======= ====
</TABLE>
<PAGE> 16
ELLER MEDIA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The components of net deferred taxes at December 31, 1995 and 1996, were as
follows (dollars in thousands):
<TABLE>
<CAPTION>
1995 1996
------- -------
<S> <C> <C>
Deferred tax asset
Current:
Net allowance for doubtful accounts.................... $ 956 $ 1,135
Other current accruals................................. 532 395
Long-term:
Accrued property taxes................................. 1,025 900
Accrued worker's compensation and self insurance....... 3,787 4,739
Accrued acquisition reserves........................... 5,279 4,348
Net operating loss..................................... 2,803 6,326
Deferred compensation.................................. -- 2,583
Capital lease obligation............................... 765 386
Other accruals......................................... 3,244 3,493
------- -------
Total deferred tax assets......................... 18,391 24,305
------- -------
Deferred tax liabilities
Current:
Other current reserves................................. 28 48
Long-term:
Depreciation........................................... 4,892 8,798
Other accruals......................................... 524 1,921
------- -------
Total deferred tax liabilities.................... 5,444 10,767
------- -------
Net deferred tax asset................................. 12,947 13,538
Valuation allowance.................................... 3,968 3,018
------- -------
Adjusted net deferred tax asset........................ $ 8,979 $10,520
======= =======
</TABLE>
SFAS No. 109 requires a reduction of deferred tax assets by a valuation
allowance if, based on the weight of available evidence, it is more likely than
not that some portion or all of the deferred tax assets will not be realized.
Some of the Company's net operating loss (NOL) carryovers are subject to
Internal Revenue Code Section 382; accordingly, the utilization of the Company's
net operating loss carryforwards are subject to annual limitations.
Additionally, the net operating losses begin expiring in the year 2010 for
federal income tax purposes.
The provision for income taxes differs from the amount computed by applying
the statutory federal income tax rate to income before income taxes. The sources
and tax effects of the differences were as follows for the period from August
18, 1995 to December 31, 1995, and for the year ended December 31, 1996:
<TABLE>
<CAPTION>
1995 1996
---- ----
<S> <C> <C>
Federal statutory tax rate.................................. (34.00)% 34.00%
Consolidated state taxes, net of federal benefit............ (6.00) 7.00
Valuation allowance......................................... 29.04 (40.03)
Amortization of goodwill.................................... 10.51 55.38
Other permanent differences................................. 0.45 (15.18)
------- -------
Effective tax rate.......................................... --% 41.17%
======= =======
</TABLE>
<PAGE> 17
ELLER MEDIA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(9) RETIREMENT PLAN:
The Company sponsors a 401(k) plan that allows contributions up to 15% of
compensation for eligible employees. Participation in the plan is available to
salaried employees and to certain hourly employees. Employees covered by
collective bargaining units and nonresident aliens are not eligible. The Company
may make a match in a discretionary percentage (normally 15%) of the first 8% of
compensation that a participant contributes. The Company may also make a
discretionary annual contribution to be allocated to participant accounts based
on their compensation, subject to certain IRS limitations. The Company made
payments to the 401(k) plan in the sum of approximately $0.4 million for the
period August 18, 1995 through December 31, 1995, and $0.3 million for the year
ended December 31, 1996.
(10) COMMITMENTS AND CONTINGENCIES:
Legal Matters
In the normal course of business, the Company is subject to certain
administrative proceedings and litigation. In management's opinion, the outcome
of such matters will not materially affect the financial position or results of
operations of the Company.
In various areas in which the Company operates, outdoor advertising is the
object of restrictive and, in some cases, prohibitive zoning and other
regulatory provisions, either enacted or proposed. The impact to the Company of
loss of displays due to governmental action has been somewhat mitigated by
federal and state laws mandating compensation for such loss and constitutional
restraints.
Operating Leases
The Company leases its offices, paint shop facilities and the majority of
the land occupied by its advertising structures under operating lease
agreements. Rent expense under operating leases of approximately $17.9 million
and $52.0 million was recorded for the period from August 18, 1995 through
December 31, 1995, and for the year ended December 31, 1996, respectively. In
addition, rent expense under operating leases for the period January 1, 1995
through August 17, 1995, of approximately $3.1 and $26.7 million were recorded
for EIC and PMG, respectively. Future minimum lease payments under these
building and billboard operating leases for the years ended December 31 are
expected to be as follows (dollars in thousands):
<TABLE>
<S> <C>
1997........................................................ $ 29,597
1998........................................................ 23,452
1999........................................................ 19,938
2000........................................................ 15,602
2001........................................................ 12,549
--------
$101,138
========
</TABLE>
Insurance
The Company utilizes various forms of insurance coverages for workers'
compensation, medical, automobile and general liability. However, as part of its
risk management program, the Company is effectively self-insured for a
significant portion of these losses. Provisions for losses expected under these
programs are recorded based upon the Company's estimates of the fully-developed
aggregate liability for claims incurred. These estimates utilize the Company's
prior experience and actuarial assumptions provided by the Company's insurance
carriers. The total estimated liability for these losses at December 31, 1995
and 1996, was $9.2 million and $12.1 million, respectively, and is included in
accrued liabilities in the accompanying consolidated balance sheets.
<PAGE> 18
ELLER MEDIA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(11) PHANTOM STOCK PLAN:
The Company established a phantom stock plan (the Phantom Stock Plan),
effective June 1, 1996, for certain key employees pursuant to which it
authorized an aggregate of 150 units of phantom common stock equivalent to
14.378 shares of common stock. As of December 31, 1996, there were 90 units,
equivalent to 8.627 shares of common stock, outstanding. The units vest at the
end of a five year period after their grant date, subject to continued
employment and achievement of certain financial performance criteria, and are
payable in cash in an amount equal to the value at vesting of the number of
shares of common stock equivalent to the number of units. During 1996, the
Company incurred approximately $0.4 million of noncash compensation expense
related to these options.
(12) SUBSEQUENT EVENTS:
In February 1997, the Company entered into a definitive agreement with
Clear Channel Communications (Clear Channel), a publicly held entity, to
purchase the Company for $1.15 billion. The transaction is structured as a
purchase with the consideration to be paid including cash and stock; Clear
Channel will pay approximately $750 million in cash and $400 million in stock
for the Company. As a result of this purchase, the Company expects to incur
approximately $18.0 million in noncash compensation expense during the first
quarter 1997 related to the acceleration of certain vesting provisions of the
Performance Options and the Phantom Stock Plan.
In March 1997, a lawsuit was filed against the Company in the Superior
Court of the State of California. The complaint alleges that the Company and its
predecessor, PMG, breached contractual and other duties to the plaintiff. The
complaint requests compensatory damages for approximately $50.0 million. The
Company has not answered the complaint. A preliminary assessment by outside
counsel indicates that the Company potentially has several defenses that would
preclude a finding of liability and that the plaintiff's damage claim is
comprised principally of alleged lost profits which are likely to be very
difficult to recover.
<PAGE> 19
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
PMG Holdings, Inc. and Subsidiaries:
We have audited the accompanying consolidated balance sheet of PMG
HOLDINGS, INC. AND SUBSIDIARIES as of December 31, 1994, and the related
consolidated statements of operations, changes in stockholders' deficit and cash
flows for the year then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of PMG
Holdings, Inc. and subsidiaries as of December 31, 1994, and the results of
their operations and their cash flows for the year then ended in conformity with
generally accepted accounting principles.
KPMG PEAT MARWICK LLP
April 27, 1995.
Stamford, Connecticut
<PAGE> 20
PMG HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1994
(DOLLARS IN THOUSANDS)
<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS:
Accounts receivable:
Trade, net of allowance for doubtful accounts of
$1,980................................................ $ 27,210
Other..................................................... 880
Prepaid expenses.......................................... 7,709
Other current assets...................................... 807
--------
Total current assets.............................. 36,606
--------
PROPERTY, PLANT AND EQUIPMENT:
Advertising structures.................................... 396,544
Site and building leases.................................. 114,658
Furniture, fixtures and equipment......................... 15,893
Yard stores and work-in-process........................... 5,366
Land...................................................... 6,689
Buildings and improvements................................ 3,218
--------
542,368
LESS:
Accumulated depreciation.................................. 74,932
Reserve for structure takedown (Note 3)................... 24,453
--------
Net property, plant and equipment................. 442,983
DEFERRED TAX ASSET (Note 7)................................. 29,622
OTHER ASSETS................................................ 3,813
--------
$513,024
========
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable.......................................... $ 5,664
Accrued expenses.......................................... 21,363
Other current liabilities................................. 494
Current portion of long-term debt (Note 4)................ 1,387
--------
Total current liabilities......................... 28,908
LONG-TERM DEBT (Note 4)..................................... 3,231
NOTE PAYABLE (Note 4)....................................... 557,422
GECC INTERCOMPANY ACCOUNT................................... (9,188)
ACCRUED LIABILITIES......................................... 620
--------
Total liabilities................................. 580,993
COMMITMENTS AND CONTINGENCIES (Note 11)
STOCKHOLDERS' DEFICIT (Note 1):
Common stock.............................................. --
Preferred stock........................................... 2
Additional paid-in capital................................ 248
Accumulated deficit....................................... (68,219)
--------
Total stockholders' deficit....................... (67,969)
--------
$513,024
========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE> 21
PMG HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1994
(DOLLARS IN THOUSANDS)
<TABLE>
<S> <C>
REVENUE:
Gross revenue............................................. $203,065
Less commissions and continuity discounts................. 25,790
--------
Net revenue....................................... 177,275
OPERATING EXPENSES:
Cost of sales............................................. 75,427
Selling, general and administrative expense............... 45,859
Depreciation and amortization............................. 33,733
--------
Operating income.................................. 22,256
--------
INTEREST EXPENSE............................................ 50,325
PROVISION FOR LOSS ON STRUCTURES (Note 3)................... 8,000
OTHER INCOME, net........................................... 7,064
--------
LOSS BEFORE PROVISION FOR INCOME TAXES...................... (29,005)
INCOME TAX BENEFIT (Note 7)................................. 9,950
--------
Net loss.......................................... $(19,055)
========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE> 22
PMG HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT
YEAR ENDED DECEMBER 31, 1994
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONAL
COMMON PREFERRED PAID-IN ACCUMULATED
STOCK STOCK CAPITAL DEFICIT TOTAL
------ --------- ---------- ----------- --------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1993.......... $ 8 $2 $340 $(49,063) $(48,713)
Merger with New PMG Group, Inc........ (8) -- (92) (101) (201)
Net loss.............................. -- -- -- (19,055) (19,055)
--- -- ---- -------- --------
Balance at December 31, 1994.......... $-- $2 $248 $(68,219) $(67,969)
=== == ==== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE> 23
PMG HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1994
(DOLLARS IN THOUSANDS)
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.................................................. $(19,055)
Adjustments to reconcile net loss to net cash provided by
operating activities --
Depreciation and amortization.......................... 33,733
Provision for loss on structures....................... 8,000
Provision for doubtful accounts........................ 1,035
Gain on disposition of assets.......................... (2,264)
Interest capitalized................................... 214
Changes in assets and liabilities --
Increase in net accounts receivable, trade............. (1,924)
Decrease in other receivables.......................... 6,908
Increase in prepaid expenses........................... (1,885)
Decrease in other assets............................... 3,146
Decrease in deferred tax assets........................ 8,497
Increase in accounts payable........................... 4,112
Decrease in accrued expenses........................... (5,135)
Increase in other liabilities.......................... 382
--------
Net cash provided by operating activities......... 35,764
--------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property, plant and equipment....... 12,783
Purchase of property, plant and equipment................. (10,124)
Acquisition of outdoor entities........................... (11,449)
--------
Net cash used in investing activities............. (8,790)
--------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in GECC intercompany account................... 1,808
Net change in note payable to GECC........................ (27,212)
Repayment of debt and capital leases...................... (1,369)
Repurchase of common stock................................ (201)
--------
Net cash used in financing activities............. (26,974)
--------
Net decrease in cash........................................ --
Cash at beginning of year................................... --
--------
Cash at end of year......................................... $ --
========
Supplemental disclosures of cash flow information:
Cash paid during the year for interest to third parties... $ (99)
========
Cash paid during the year for interest to GECC on motor
vehicle leases......................................... $ (238)
========
Cash received during the year for taxes from third
parties................................................ $ 7,427
========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE> 24
PMG HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(1) ORGANIZATION AND DESCRIPTION OF BUSINESS:
PMG Holdings, Inc. and subsidiaries (the "Company") is a wholly-owned
subsidiary of General Electric Capital Corporation ("GECC"). The Company's
primary operating subsidiary is Patrick Media Group, Inc. ("Group").
The Company entered into the PMG Agreement and Plan of Restructuring on
March 28, 1991 (the "Restructuring Agreement") with GECC and other stock and
noteholders. Pursuant to the Restructuring Agreement, GECC received 1 share of
new Class C common stock of the Company (having supermajority voting power) and
warrants to purchase (for a nominal exercise price) additional shares of Class C
common stock representing 75% of the equity of the Company.
The Company continued to be in default on its debt obligations to GECC
under the Restructuring Agreement and on September 23, 1992, GECC began a series
of recapitalizations whereby it first exercised its warrants and acquired a
direct equity interest of approximately 79% in the Company. After exercising its
warrants, GECC held all of the 1,616,001 issued shares of the Class C common
stock and 107,733 shares of the Class B common stock of the Company. The
remaining 323,200 shares of Class B common stock were held by various third
party investors. Additionally, Group assumed the debt and other obligations owed
to GECC by the Company, which obligations were then guaranteed by the Company,
in a taxable exchange for the discharge of certain intercompany notes between
Group and the Company. GECC then acquired 2,500 shares of preferred stock (par
value $1.00) issued by Group for $250.
The transaction was accounted for as a purchase as of September 30, 1992.
Property, plant and equipment was recorded at its net fair market value of
$520,896 based upon an independent appraisal. All other assets were stated at
their carrying value. GECC increased its direct equity interest in the Company
to 81% in January 1993.
On September 28, 1994, the Company was again recapitalized in a non-taxable
transaction by merging with New PMG Group, Inc., a wholly-owned subsidiary of
GECC, pursuant to an Agreement and Plan of Merger dated September 28, 1994 (the
"Merger Agreement"). Pursuant to the Merger Agreement: (i) each of the 430,933
outstanding shares of Class B common stock of the Company were converted into
the right to receive $0.46 per share, and subsequently canceled and retired;
(ii) all of the 100 outstanding shares of common stock issued by New PMG Group,
Inc. held by GECC, were converted into 100 shares of common stock of the
Company; and (iii) the issued and outstanding shares of Class C common stock of
the Company, all of which were owned by GECC, were canceled and retired. The
Company was the surviving entity in the merger.
Also pursuant to the Merger Agreement, the capitalization of the Company
was amended such that the total authorized capital of the Company at December
31, 1994 is 1,000 shares of common stock with par value of $0.01 (100 shares
issued and held by GECC), and 1,000 shares of preferred stock with par value of
$1.00 (all unissued).
On March 1, 1995, the Company, Group and GECC entered into the
Recapitalization Loan Amendment (the "Recapitalization") to further the
recapitalization of the Company. Prior to the Recapitalization, Group's issued
stock consisted of 1,000 shares of common stock (par value $1.00) and 2,500
shares of preferred stock (par value $1.00). Pursuant to the Recapitalization,
the Company surrendered 991 shares of common stock in Group to Group which were
subsequently canceled, and GECC contributed all of the 2,500 shares of preferred
stock in Group together with approximately $190,000 of Group's outstanding debt
obligations, to Group in exchange for 991 shares of common stock issued by Group
in a non-taxable transaction. The 2,500 shares of preferred stock in Group were
also canceled. The debt obligation of Group to GECC as of March 1, 1995 was
approximately $375,000 after giving effect to the Recapitalization which
continues to be in default.
<PAGE> 25
PMG HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
As of December 31, 1994, the Company had issued outstanding warrants to
purchase 1,280 shares of Class B common stock, all of which were held by one
employee as discussed in note 11.
On March 10, 1995, GECC purchased pursuant to a foreclosure sale, all of
the outstanding warrants from the employee, at which time the warrants were
returned to the Company and deemed canceled.
Description of the Business
The Company provides outdoor advertising displays primarily to advertisers
in major metropolitan areas in the United States.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Basis of Presentation
The accompanying consolidated financial statements of the Company include
the accounts and results of operations of the Company and its wholly owned
subsidiaries, and Target Media Group LLP, a partnership in which the Company
indirectly holds a 83.127% interest. All significant intercompany transactions
have been eliminated.
Under the terms of the partnership agreement, all income will be allocated
based upon ownership percentage while any losses will accrue only to PMG Target
Media Holdings, Inc., a wholly owned subsidiary of the Company and the general
partner of Target Media Group LLP.
Revenue
Consistent with industry practice, the portion of December billings
pertaining to January space sales has been recognized in operating income of
December.
Deferred revenue is recorded for the fair value of assets received in
non-monetary transactions. Revenue is recognized on a monthly basis over the
showing period.
Property, Plant and Equipment
Property, plant and equipment is carried at allocated cost. As discussed in
note 1, property, plant and equipment in place at September 30, 1992 was fair
valued and a new cost basis was established. The fair value for site leases was
computed by valuing the differential between the site lease rentals and the
corresponding fair market rental over the estimated lease term including
expected renewals. Depreciation is provided on the straight-line method over the
estimated useful lives of the respective assets as follows:
<TABLE>
<S> <C>
Buildings................................................... 40 years
Shelters.................................................... 10 years
Structure faces, transit displays........................... 5 years
Advertising structures...................................... 16 years
Leasehold improvements...................................... 5 years
Furniture, fixtures, computers and equipment................ 5 years
Software applications....................................... 5 years
Trucks and autos............................................ 4 years
</TABLE>
Site leases are amortized straight-line over their composite estimated
remaining useful lives, generally 23 years. The capitalized excess of fair
market value of building leases greater than future payments are amortized
straight-line over 16 years.
<PAGE> 26
PMG HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
Losses on structures which existed at September 30, 1992 are charged
against a reserve which was initially established at $26,000 in purchase
accounting at September 30, 1992. $8,000 of additional reserves were provided in
1994.
The Company allocates the excess of purchase price over the estimated fair
value of net assets acquired to structure and site leases in acquisitions
accounted for as a purchase.
Taxes
General Electric Company, the ultimate parent of GECC, files a consolidated
U.S. federal income tax return which includes the Company and its subsidiaries.
The provisions for estimated taxes payable/receivable include the effect of the
Company and its subsidiaries on the consolidated return.
Prepaid Expenses
Prepaid expenses primarily represent site lease rentals which have been
paid in advance. Rental payments are made according to the contractual terms of
individual leases and are amortized to site lease rental expense over the
payment period.
Supplier Rebates
Rebates and discounts from suppliers are recognized as a reduction of
operating expenses in the period of utilization.
(3) RESERVE FOR STRUCTURE TAKEDOWN:
A summary of activity for the reserve for structure takedown is as follows:
<TABLE>
<S> <C>
Balance at beginning of the year............................ $23,974
Reserves added during the year.............................. 8,000
Losses incurred during the year............................. (7,521)
-------
Balance at end of year...................................... $24,453
=======
</TABLE>
(4) DEBT:
Debt at December 31, 1994, consists of the following:
<TABLE>
<S> <C>
8.5% note payable by Target Media Group LLP................. $ 1,663
6.0% promissory notes payable, due 1996..................... 701
Installment note payable, prime plus 1.5%, due 1996......... 218
Capitalized leases.......................................... 2,019
Other, due in 1995.......................................... 17
--------
Total............................................. 4,618
Less current term installments, including $622 for
capitalized leases........................................ 1,387
--------
Long-term debt.............................................. $ 3,231
========
Note payable to GECC........................................ $557,422
========
</TABLE>
The Company's note facility with GECC was established under the Revolving
Credit, Term Loan and Deferred Interest Loan Agreement dated September 15, 1986.
As discussed in note 1 the Company continues to be in default on its debt
obligations to GECC. All amounts due to GECC were consolidated into the
<PAGE> 27
PMG HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
outstanding note facility. The debt obligation is treated as if it were a demand
note and is repaid based on the availability of the free cash flow of the
Company.
Interest on the note facility is paid quarterly in arrears in an amount
equal to 1.50% plus the greater of (i) the highest prime or base rate of
interest published by any of five major commercial banks, as defined, or (ii)
the most recent published annual yield on 90-day commercial paper. Such rate
shall be determined quarterly on the last day of each preceding quarter. The
effective interest rate on the note facility for the year ended December 31,
1994, was 9.25%.
On March 1, 1995, in connection with the recapitalization begun in 1992,
described in note 1, GECC converted approximately $190,000 of the outstanding
note facility to equity, with the remaining debt obligation being approximately
$375,000 as of that date after giving effect to the Recapitalization.
Under the terms of a note agreement between Target Media Group LLP and a
lender, all repayments of principal are deferred until 2000. Payments for
interest, at 8.50% of the outstanding loan balance and unpaid interest, are
deferred up to an aggregate balance of $1,770, at which time interest on the
balance above $1,770 must be paid. The repayment of the note is guaranteed by
the minority partner. Interest payments deferred were $215 in 1994.
The promissory notes were issued in connection with the acquisition of Blue
Wallscapes, Inc. in April 1993. The notes are repayable in equal monthly
installments, plus interest, through May 1996.
The installment note was issued in connection with the acquisition of
Mobile Outdoor Media in March 1993. The note is repayable in 36 equal monthly
installments, plus interest through March 1996. Principal balances outstanding
under the promissory and installment notes may be reduced by certain amounts
upon the occurrence of specified events as defined in the note agreements.
The aggregate maturities of term debt and capital leases, for the five
years subsequent to December 31, 1994 are as follows:
<TABLE>
<CAPTION>
TERM CAPITAL
DEBT LEASES
------ -------
<S> <C> <C>
1995........................................................ $ 765 $ 759
1996........................................................ 171 782
1997........................................................ -- 572
1998........................................................ -- 234
1999........................................................ -- 99
Thereafter.................................................. 1,663 --
------ ------
Total............................................. $2,599 2,446
======
Less amounts representing interest.......................... 427
------
Present value of capital lease payments..................... $2,019
======
</TABLE>
(5) TRANSACTIONS WITH PARENT:
GECC provides a note facility to fund working capital and other financing
requirements.
<PAGE> 28
PMG HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
The Company has made payments to (received payment from) GECC and its
affiliates for the year ended December 31, 1994 as follows:
<TABLE>
<S> <C>
Taxes....................................................... $(26,642)
Interest.................................................... 50,103
Vehicle leases.............................................. 844
Corporate services.......................................... 560
</TABLE>
Interest expense is recognized monthly and is included as a component of
the outstanding note payable balance. Current income taxes recoverable are
reflected as a component of the GECC intercompany account. Separate cash
payments are not made for taxes or interest from GECC transactions.
At December 31, 1994, the Company owed $12 to GECC for cumulative preferred
dividends. At December 31, 1994, the Company owed $50 to GECC for the 107,733
shares of Class B common stock repurchased in 1994.
(6) SALE OF BRANCH ASSETS:
In October 1994, an agreement was reached to sell the Company's Rochester
branch operations and assets, except for cash and accounts receivable, for
$5,000 resulting in an approximate loss of $4,020. This loss was recognized in
1994 and included in other income. In February 1995, as a result of a Phase II
environmental study conducted in conjunction with the aforementioned sale, it
was determined that there is contamination resulting from previously removed
underground tanks. If remediation is required by governmental authorities, the
Company would be responsible for all remediation costs associated with this
site. The appropriate governmental authorities have been informed with respect
to the contamination but have not yet imposed remediation requirements on the
Company. Management cannot predict with certainty the total cost of the cleanup
if cleanup is required, however, estimates range from $50-$500. No accrual has
been made as of December 31, 1994 for this required remediation. The Company
will retain title to the associated land and building until the environmental
issues are resolved, although the sale of the other assets and operations is
proceeding.
In connection with the Restructuring Agreement described in note 1, the
Company received a note issued by Alabama Outdoor Advertising, Inc. ("AOA")
relating to the sale of its Alabama branch. The note was assigned a fair value
of $5,000 in connection with the purchase accounting described in note 1. AOA
defaulted under the terms of the note in 1993. The Company foreclosed on the
note, and disposed of the equity of AOA during 1994, resulting in proceeds of
$12,250 to the Company, including a $1,146 note resulting in a gain of $7,002,
subject to certain working capital adjustments. The aforementioned gain was
included in other income in 1994.
(7) INCOME TAXES:
The Company has recorded an income tax benefit of $9,950 in 1994. This
amount has been determined in accordance with the intercompany income tax
sharing arrangement between the Company and GECC. Taxes receivable from parent,
included as a component of the GECC intercompany amount, represents amounts
owing from GECC relating to a portion of current tax benefits attributable to
the Company under the income tax sharing arrangement. The Company has a net
deferred tax asset of $29,622 at December 31, 1994.
<PAGE> 29
PMG HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
The deferred tax asset arises primarily from Federal net operating losses
and minimum tax credits including amounts carried forward from years prior to
GECC exercising its warrant rights in September 1992. This asset is partially
offset by deferred tax liabilities resulting from differences in book and tax
depreciation which have arisen subsequent to September 1992. Management has
concluded, based upon the expected implementation of certain tax planning
strategies, that the net deferred tax asset is fully realizable.
(8) NON-CASH INVESTING AND FINANCING ACTIVITIES:
The Company purchased several businesses in 1994:
<TABLE>
<S> <C>
Fair value of fixed assets acquired......................... $ 11,449
Net working capital acquired................................ 562
Cash paid for assets........................................ (12,011)
--------
Notes assumed............................................... $ --
========
</TABLE>
Capital lease obligations of $238 were incurred in 1994 when the Company
entered into leases, primarily for automobiles, with a GECC affiliated company.
(9) RETIREMENT PLANS:
The Company has two defined benefit plans covering substantially all union
employees in its Cleveland, San Francisco, Chicago, Milwaukee and Dallas
branches. The plans also allow for voluntary contributions by participants.
Benefits provided by these plans are based primarily on years of service.
Assets are invested in insurance deposit annuity contracts.
The following table summarizes the defined benefit plans' funded status as
of December 31, 1993, the latest date available:
<TABLE>
<S> <C>
Actuarial present value of the vested accumulated benefit
obligation................................................ $ 883
======
Projected benefit obligation................................ $1,098
Fair value of plan assets................................... (947)
------
Projected benefit obligation in excess of plan assets....... 151
Unrecognized net loss....................................... (190)
Unrecognized net transition obligation...................... (65)
------
Prepaid pension cost........................................ $ (104)
======
</TABLE>
The net periodic pension cost for 1993 was $115.
The weighted average discount rate used in determining the actuarial
present value of the projected benefit obligation and the expected long-term
rate of return on assets was 7.50% in 1993. The actuarial valuations also
include assumptions for salary increases. The Company's funding policy for the
defined benefit plans is to fund the minimum contributions as required by law.
The Company also sponsors a defined contribution (401k) plan that allows
contributions of 1% to 15% of base compensation for eligible employees.
Participation in this plan is available to salaried employees and to certain
groups of hourly employees. Employees covered by collective bargaining units are
not eligible. The Company matches the employer contribution, at its discretion,
in amounts equal to approximately 10% of the employee's contribution up to 8%
subject to certain regulatory wage base limits. The Company also contributes, at
its discretion, an annual contribution based on the Company's year-end results
up to a maximum Social Security integration level. Total costs of the plan to
the Company for 1994 were $473.
<PAGE> 30
PMG HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
Pursuant to collective bargaining agreements covering certain employees,
the Company made payments to, and charged to expense, one Company sponsored plan
and 34 multi-employer pension and welfare plans in the sum of $1,922 in 1994.
(10) MAJOR CUSTOMERS:
A significant source of the Company's revenues is from the tobacco and
distilled beverage industries which provided, respectively, 14% and 12% of total
gross revenues in 1994. One tobacco company provided 8% of total gross revenues
in 1994.
(11) COMMITMENTS AND CONTINGENCIES:
Lease Commitments
The Company's leases for structure sites are generally cancelable on less
than one year's notice and are excluded from the schedule below. Total site
lease expense in 1994 was $33,858.
Future minimum lease payments under noncancelable operating leases for
facilities, transportation and other equipment as of December 31, 1994 are:
<TABLE>
<CAPTION>
YEARS ENDING DECEMBER 31,
-------------------------
<S> <C>
1995........................................................ $ 4,344
1996........................................................ 4,236
1997........................................................ 3,252
1998........................................................ 2,202
1999........................................................ 1,090
Subsequent.................................................. 4,525
-------
Total minimum lease payments................................ $19,649
=======
</TABLE>
Total rental expense for noncancelable operating leases in 1994 was $5,339.
The Company leases substantially all of its vehicles from a wholly-owned
subsidiary of GECC. The lease terms are generally five years and require the
annual payment of all insurance and maintenance expenses. The leases are
capitalized and included as a component of furniture, fixtures and equipment. A
summary of the leased vehicles follows:
<TABLE>
<S> <C>
Capitalized leases.......................................... $3,238
Less accumulated depreciation............................... 1,282
------
Net lease value............................................. $1,956
======
</TABLE>
Letters of Credit
At December 31, 1994, the Company had outstanding irrevocable letters of
credit in the aggregate face amount of $11,663. The majority of these letters of
credit, $10,023, support the Company's casualty, liability and workers
compensation self-insurance programs. The remaining letters of credit support
payment and performance obligations. Performance under the letters of credit is
guaranteed by GECC.
Litigation
The Company, together with GECC, are co-defendants in an action brought by
an employee of the Company. The employee has alleged that the Company's actions
in foreclosing upon warrants for common stock and consummating the Merger
Agreement were a violation of the employee's employment contract and a warrant
agreement between the Company and the employee. Management believes the
employee's claims are without merit.
<PAGE> 31
PMG HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
In various areas in which the Company operates, outdoor advertising is the
object of restrictive and, in some cases, prohibitive zoning and other
regulatory provisions, either enacted or proposed. The impact on the Company of
loss of displays due to governmental action has been mitigated by federal and
state laws mandating compensation for such loss and constitutional restraints.
Although the Company cannot predict the outcome of existing litigation or the
enactment of zoning and other regulatory provisions concerning outdoor
advertising, the Company, to date, has incurred no significant losses from the
removal of outdoor advertising structures resulting from litigation or
governmental enactments without just compensation.
The Company also has been named as a defendant in an employment
discrimination suit by a former employee, claiming damages of up to $800.
While the ultimate resolution of the above matters is uncertain, management
believes the ultimate outcome will not have a material adverse effect on the
financial position of the Company.
<PAGE> 32
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
Eller Investment Company, Inc.:
We have audited the accompanying combined balance sheet of ELLER INVESTMENT
COMPANY, INC. (an Arizona corporation) as of December 31, 1994, and the related
combined statements of operations, stockholders' deficit and cash flows for the
year then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of Eller Investment
Company, Inc. as of December 31, 1994, and the results of its operations and
cash flows for the year then ended in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
PHOENIX, ARIZONA,
MARCH 9, 1995.
<PAGE> 33
ELLER INVESTMENT COMPANY, INC.
COMBINED BALANCE SHEET
DECEMBER 31, 1994
<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS:
Cash...................................................... $ 490,553
Accounts receivable, net of allowance for doubtful
accounts of $72,000.................................... 2,638,430
Prepaid land leases and other assets...................... 741,442
-----------
Total current assets.............................. 3,870,425
PREPAID LAND LEASES, net of current portion................. 179,100
PROPERTY AND EQUIPMENT, net (Note 3)........................ 34,869,672
DEFERRED LOAN FEES, net of accumulated amortization of
$181,691.................................................. 3,334,078
GOODWILL AND OTHER INTANGIBLE ASSETS, net of accumulated
amortization of $1,354,966 (Note 4)....................... 3,745,455
-----------
$45,998,730
===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable.......................................... $ 510,794
Accrued liabilities....................................... 1,593,762
Current portion of advertising obligation................. 500,000
Notes payable to OSI (Note 6)............................. 1,088,218
Current portion of long-term debt (Note 7)................ 3,450,000
Current portion of capitalized lease obligations (Note
8)..................................................... 267,638
-----------
Total current liabilities......................... 7,410,412
ADVERTISING OBLIGATION, net of current portion.............. 551,600
LONG-TERM DEBT, net of current portion (Note 7)............. 35,550,000
CAPITALIZED LEASE OBLIGATIONS, net of current portion (Note
8)........................................................ 952,740
-----------
Total liabilities................................. 44,464,752
-----------
COMMITMENTS AND CONTINGENCIES (Note 12)
SERIES A-1 PREFERRED STOCK (Note 9)......................... 1,700,000
-----------
SERIES B PREFERRED STOCK (Note 9)........................... 1,500,000
-----------
STOCKHOLDERS' DEFICIT (Note 10):
Class B common stock...................................... 200
Accumulated deficit....................................... (2,895,122)
Warrants outstanding...................................... 2,000,000
Class A common stock, held in treasury.................... (771,100)
-----------
Total stockholders' deficit....................... (1,666,022)
-----------
$45,998,730
===========
</TABLE>
The accompanying notes are an integral part of this combined balance sheet.
<PAGE> 34
ELLER INVESTMENT COMPANY, INC.
COMBINED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
DECEMBER 31,
1994
------------
<S> <C>
ADVERTISING REVENUES........................................ $12,942,911
AGENCY COMMISSIONS AND DISCOUNTS............................ (1,350,668)
-----------
Net revenues...................................... 11,592,243
-----------
OPERATING EXPENSES, excluding depreciation and amortization:
Cost of sales and production.............................. 5,256,136
Selling, general and administrative....................... 1,366,995
Depreciation and amortization............................. 1,713,407
-----------
Operating income.................................. 3,255,705
INTEREST EXPENSE AND FINANCE COST AMORTIZATION.............. 2,636,960
MANAGEMENT FEES AND OTHER EXPENSE........................... 204,825
-----------
Income before income taxes and extraordinary
item............................................. 413,920
PROVISION FOR INCOME TAXES.................................. 80,420
-----------
Income before extraordinary item.................. 333,500
EXTRAORDINARY ITEM -- Loss on extinguishment of debt........ (2,172,997)
-----------
Net loss.......................................... $(1,839,497)
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 35
ELLER INVESTMENT COMPANY, INC.
COMBINED STATEMENT OF STOCKHOLDERS' DEFICIT
<TABLE>
<CAPTION>
CLASS B CLASS A CLASS A
COMMON COMMON COMMON
CLASS B SHARES STOCK SHARES TOTAL
COMMON ISSUED AND ACCUMULATED WARRANTS HELD IN HELD IN STOCKHOLDERS'
STOCK OUTSTANDING DEFICIT OUTSTANDING TREASURY TREASURY DEFICIT
------- ----------- ----------- ----------- ----------- -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT
DECEMBER 31, 1993................... $200 20,000 $ (458,750) $ -- $(1,100,000) 2,004 $(1,558,550)
Dividends on preferred stock......... -- -- (267,975) -- -- -- (267,975)
Retirement of treasury stock......... -- -- (328,900) -- 328,900 (599) --
Issuance of Class B common stock
warrants as consideration for
deferred loan fees................. -- -- -- 2,000,000 -- -- 2,000,000
Net loss............................. -- -- (1,839,497) -- -- -- (1,839,497)
---- ------ ----------- ---------- ----------- ------ -----------
BALANCE AT
DECEMBER 31, 1994.................. $200 20,000 $(2,895,122) $2,000,000 $ (771,100) 1,405 $(1,666,022)
==== ====== =========== ========== =========== ====== ===========
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
<PAGE> 36
ELLER INVESTMENT COMPANY, INC.
COMBINED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
DECEMBER 31,
1994
------------
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.................................................. $ (1,839,497)
Adjustments to reconcile net loss to net cash provided by
operating activities --
Depreciation............................................ 1,171,507
Amortization of deferred loan fees...................... 492,639
Amortization of goodwill and other intangible assets.... 541,900
Extraordinary item -- loss on extinguishment of debt.... 2,172,997
Revenue recorded under Circle K advertising
obligation............................................. (428,450)
Changes in assets and liabilities, net of effect of
acquisition --
Accounts receivable, net................................ (1,459,365)
Prepaid land leases and other assets.................... (533,662)
Deferred tax benefit.................................... 128,200
Accounts payable and accrued liabilities................ 701,146
------------
Net cash provided by operating activities.......... 947,415
------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment....................... (276,363)
Acquisition of property and equipment from OSI............ (22,335,588)
------------
Net cash used in investing activities.............. (22,611,951)
------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on long-term debt................................ (8,347,000)
Payment of fee to CIBC.................................... (3,000,000)
Reimbursement from OSI for payments on long-term debt and
fee to CIBC............................................. 6,752,563
Proceeds from long-term debt.............................. 27,355,000
Payment of deferred loan fees and acquisition costs....... (1,532,749)
Proceeds from notes payable to OSI........................ 1,088,218
Principal payments on capitalized lease obligations....... (229,622)
Payment of dividends...................................... (267,975)
Redemption of preferred stock............................. (300,000)
------------
Net cash provided by financing activities.......... 21,518,435
------------
NET DECREASE IN CASH........................................ (146,101)
------------
CASH, beginning of year..................................... 636,654
------------
CASH, end of year........................................... $ 490,553
============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest.................................... $ 2,163,215
============
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING
ACTIVITIES:
Capitalized lease obligations incurred.................... $ 1,450,000
============
Class B common stock warrants issued as consideration for
deferred loan fees...................................... $ 2,000,000
============
Retirement of 599 shares of Class A common stock held in
treasury................................................ $ 328,900
============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 37
ELLER INVESTMENT COMPANY, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
(1) ORGANIZATION AND BASIS OF PRESENTATION:
Organization and Basis of Presentation
Eller Investment Company, Inc. and Eller Holdings, Inc. (collectively, the
"Company") are both majority owned subsidiaries under the control of Loel
Ranches, Inc. The accompanying 1994 financial statements include the combined
accounts of Eller Investment Company, Inc. and Eller Holdings, Inc. Eller
Investment Company, Inc. includes the consolidated accounts of its wholly owned
subsidiaries, Eller Outdoor Advertising Company, Eller Outdoor of El Paso, Inc.
and Eller Outdoor Advertising Company of Atlanta.
In July 1994, Eller Holdings, Inc. ("Eller Holdings") was merged into Eller
Investment Company, Inc. ("Eller Investment"). In conjunction with this merger,
Eller Investment exchanged one share of its Class A and Class B common stock for
every five shares of the same class stock of Eller Holdings. Eller Investment
also exchanged one share of its Series A-1 and Series B preferred stock for
every share of the same class stock of Eller Holdings. The non-class common
stock of Eller Investment was retired. The accounts of Eller Holdings and Eller
Investment have been combined in the accompanying statements of operations,
stockholders' equity and cash flows as if the merger had taken place at December
31, 1993.
The Company is engaged in the business of providing rental space on outdoor
advertising structures and production services for outdoor advertisements in the
metropolitan Phoenix, El Paso and Atlanta areas.
Acquisition
Effective December 31, 1994, Eller Outdoor of Atlanta, which was
incorporated as a wholly owned subsidiary of Eller Investment during 1994,
acquired the outdoor advertising structures and other property and equipment
located in Atlanta, Georgia from Outdoor Systems, Inc. ("OSI"). In accordance
with APB No. 16, Accounting for Business Combinations, this acquisition has been
accounted for as a purchase. The aggregate cash consideration paid for these
assets, including certain legal and other transaction costs, was approximately
$22.3 million. Approximately $21.8 million of the acquisition cost has been
allocated to advertising displays and structures and the remaining $585,000 has
been allocated to other property and equipment that was acquired.
In addition to the assets described in the preceding paragraph, the
accounts receivable and prepaid land leases related to OSI's Atlanta operation
were acquired. Accounts receivable of approximately $722,000 and prepaid land
leases of approximately $365,000 were acquired in return for the Notes Payable
to OSI described in Note 6. The following unaudited pro forma summary presents
the combined results of operations as if the acquisition had occurred at the
beginning of 1994, after giving effect to certain adjustments, including
amortization of deferred loan fees and interest expense on the acquisition debt
and depreciation expense on the acquired assets. These pro forma results have
been prepared for comparative purposes only and do not purport to be indicative
of what would have occurred had the acquisition been made at that date or of
results which may occur in the future.
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Net revenues................................................ $19,522
=======
Loss before extraordinary item.............................. $ (106)
=======
</TABLE>
During 1994, the Company experienced significant growth by means of the
merger and acquisition discussed above. As a result, the Company has grown from
total net assets of approximately $7.8 million at December 31, 1993 to $46.0
million at December 31, 1994.
Prior to the July 1994 merger discussed above, the Company had a financing
arrangement with Canadian Imperial Bank of Commerce ("CIBC"; see Note 7) under
the terms of which the Company and OSI, a competing outdoor advertising company,
were jointly liable for advances made to both parties to fund the
<PAGE> 38
ELLER INVESTMENT COMPANY, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
acquisition of certain assets of Gannett Outdoor Co. of Arizona ("Gannett") by
each Company. Additionally, the Company was obligated to reimburse OSI for
interest expense on other debt that OSI incurred to fund the acquisition. To
afford the Company the ability to operate independently of OSI, the financing
arrangement with CIBC and the obligation to OSI were terminated in July 1994,
resulting in the loss on extinguishment of debt of $2.2 million recorded in the
accompanying financial statements. The accumulated deficit of $2.9 million
recorded as of December 31, 1994, and the net loss of $1.8 million recorded for
the year then ended are largely the result of this transaction. A new financing
agreement was entered into between CIBC and the Company subsequent to the
termination of the initial agreement.
(2) SIGNIFICANT ACCOUNTING POLICIES:
Revenue Recognition
The Company provides outdoor advertising services under the terms of
contracts covering periods up to 36 months, which are generally billed monthly.
Revenues for outdoor advertising space rental is recognized ratably over the
contract term. Revenues from design, production and certain other services are
recognized as the services are provided. All costs are recognized in the period
in which the related services are provided.
Prepaid Land Leases
Prepaid land leases represents amounts paid for leases of land occupied by
outdoor advertising structures prior to the period for which the amounts are
due. Prepaid land leases are amortized on a straight-line basis over the term of
the related lease period.
Property and Equipment
Property and equipment are recorded at cost. Depreciation is computed on a
straight-line basis over the following useful lives:
<TABLE>
<S> <C>
Advertising displays and structures......................... 15 years
Machinery and equipment..................................... 3 to 5 years
Vehicles.................................................... 3 years
Furniture and fixtures...................................... 3 years
</TABLE>
Deferred Loan Fees
Deferred loan fees are amortized over the terms of the related loans.
Goodwill
Goodwill represents the excess of consideration paid over the fair market
values of identifiable net assets acquired. Goodwill is amortized on a
straight-line basis over 40 years.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles necessarily requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reported
period. Actual amounts may differ from these estimates.
<PAGE> 39
ELLER INVESTMENT COMPANY, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(3) PROPERTY AND EQUIPMENT:
Property and equipment consists of the following at December 31, 1994:
<TABLE>
<S> <C>
Advertising structures...................................... $39,831,708
Land........................................................ 728,239
Building.................................................... 171,196
Vehicles.................................................... 576,000
Machinery and equipment..................................... 267,904
Furniture and fixtures...................................... 556,764
Construction-in-process..................................... 89,195
-----------
42,221,006
Less: accumulated depreciation.............................. (7,351,334)
-----------
$34,869,672
===========
</TABLE>
(4) GOODWILL AND OTHER INTANGIBLE ASSETS:
Included in goodwill and other intangible assets is $3.4 million of
unamortized goodwill, which represents the excess of consideration paid over the
fair market value of identifiable net assets acquired.
Also included in goodwill and other intangible assets is the unamortized
cost of payments for certain covenants not to compete. The Company paid $399,965
in 1993 to the Series A-1 and Series B preferred stockholders for their
agreement not to compete or invest in any outdoor advertising business in Texas
for two years. In conjunction with the purchase of the Class A common stock in
1993 from The Circle K Corporation ("Circle K"), $400,000 of the purchase price
was allocated to an agreement of Circle K not to compete with the Company in
Texas for two years. These covenants are being amortized on a straight-line
basis over their two year life. The unamortized balance at December 31, 1994, of
$299,987 is included in goodwill and other intangible assets in the accompanying
combined balance sheet.
(5) CIRCLE K ADVERTISING OBLIGATION:
In conjunction with the acquisition of the El Paso operation in 1993, all
shares of the Company's Class A common stock were acquired from Circle K by the
Company and held in treasury. Circle K, which was a major shareholder, also
agreed not to compete with the Company in Texas for two years. As consideration
for the stock and covenant not to compete, the Company agreed to provide $1.5
million of advertising services, at market value, to Circle K over a three year
period.
During 1994, the Company provided approximately $430,000 of advertising
services, at market value, under the agreement, and the balance of advertising
services yet to be provided as of December 31, 1994 was $1.1 million.
The Class A common shares held in treasury are pledged as security to
Circle K for performance under this advertising agreement, and are to be
released and retired quarterly as advertising services are provided. During
1994, 599 shares were released and retired.
<PAGE> 40
ELLER INVESTMENT COMPANY, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(6) NOTES PAYABLE TO OSI:
In conjunction with the acquisition described in Note 1, the Company
entered into the following note payable agreements with OSI:
<TABLE>
<S> <C>
Note payable issued in conjunction with acquisition of
prepaid land leases, unsecured, interest at 7%, principal
and interest due August 31, 1995.......................... $ 365,803
Note payable issued in conjunction with acquisition of
accounts receivable, unsecured, interest at 7%, principal
and interest due August 31, 1995. In April 1995, Eller may
return any uncollected receivables to OSI for full credit
against the note payable.................................. 722,415
----------
$1,088,218
==========
</TABLE>
(7) LONG-TERM DEBT:
At December 31, 1993, $13.2 million was outstanding under a credit
agreement with CIBC, the proceeds from which the Company used to purchase the
assets of Gannett in 1992. Under the terms of the agreement, the Company was
obligated to pay all outstanding principal and interest on December 31, 1995. An
additional fee of $3.0 million was also due on that date, which was being
accrued on a straight-line basis over the term of the contract. The Company had
related agreements with OSI whereby OSI was obligated to repay a portion of the
principal and interest and a portion of the additional fee. Additionally, the
Company was obligated to reimburse OSI for interest expense that OSI incurred on
debt related to the acquisition of Gannett.
In July 1994, Eller obtained a new credit agreement with CIBC and the
credit agreement with CIBC described above was terminated. The unaccrued portion
of the additional $3.0 million fee, unamortized deferred loan fees from the
previous credit agreement and the settlement with OSI related to the obligation
described above resulted in the loss on extinguishment of debt of $2.2 million
recorded in the accompanying financial statements.
In conjunction with the acquisition of assets in Atlanta from OSI in
December 1994, the existing credit agreement with CIBC was amended. The amended
credit agreement provides the Company with up to $40.0 million, of which $39.0
million was outstanding at December 31, 1994. The agreement provides for a
floating interest rate based on the Company's leverage ratio (ratio of debt to
operating cash flow, as defined). As draws on the credit agreement are made, the
Company elects the rate of interest to be based on either the banks' base rate
or the LIBOR rate at the time of the draw. The rate of interest varies from 2.50
to 3.25 percent over the banks' base rate or from 3.75 to 4.50 percent over
LIBOR, depending on the leverage ratio for the most recently completed fiscal
quarter. At December 31, 1994, all draws outstanding were at LIBOR + 4.50
percent, with $20.0 million carrying an interest rate of 10.40 percent and $19.0
million carrying an interest rate of 10.60 percent.
The credit agreement has an excess cash flow recapture provision whereby
the $40.0 million commitment is reduced by 50-65 percent of excess cash flow, as
defined, at the end of each fiscal year. The credit agreement also has an annual
commitment fee of 0.5 percent of the unused portion of the commitment.
All obligations under the credit agreement are collateralized by all
tangible and intangible assets of the Company and a pledge of 100 percent of the
stock of the Company, Loel Ranches, Inc. (Loel) and the parent company of Loel.
The majority stockholder has guaranteed up to $4.5 million of the amounts
outstanding under the credit agreement.
Under the credit agreement, the Company is required to comply with certain
financial covenants, including a maximum leverage ratio, minimum cash flow to
debt service and fixed charge coverage ratios. Compliance with these covenants
is not required until fiscal 1995. There are also certain limitations on
indebtedness, dividends, management, mergers, capital expenditures and certain
other transactions.
<PAGE> 41
ELLER INVESTMENT COMPANY, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
The warrants discussed in Note 10 were issued to CIBC in conjunction with
the funds provided by CIBC during 1994. As discussed in Note 10, the estimated
value of the warrants of $2.0 million are included in the deferred loan fees
balance of $3.5 million in the accompanying financial statements, which are
being amortized over the six-year life of the credit agreement.
Maturities of principal under the credit agreement for the years ended
December 31 are as follows:
<TABLE>
<S> <C>
1995........................................................ $ 3,450,000
1996........................................................ 4,900,000
1997........................................................ 5,810,000
1998........................................................ 6,900,000
1999........................................................ 8,800,000
2000........................................................ 9,140,000
-----------
39,000,000
Less: current portion....................................... 3,450,000
-----------
$35,550,000
===========
</TABLE>
(8) CAPITALIZED LEASE OBLIGATION:
On February 1, 1994, the Company acquired certain advertising structures
through a capital lease agreement. In accordance with Statement of Financial
Accounting Standards No. 13, Accounting for Leases, the acquired advertising
structures have been recorded at the present value of the future minimum lease
payments and are being depreciated over their estimated useful life of 15 years.
The lease agreement requires monthly payments of $28,711 through January 1999,
after which time the Company will own the assets. The Company can exercise its
option to acquire the assets at any time prior to January 1999 through payment
of the remaining lease obligation, and can terminate the agreement after June 1,
1997.
(9) PREFERRED STOCK:
At December 31, 1994, there were 20,000 and 15,000 shares authorized of
$.01 par value Series A-1 and Series B preferred stock, respectively, and 17,000
shares of Series A-1 and 14,997 shares of Series B preferred stock issued and
outstanding. Both classes of preferred stock have a liquidation preference equal
to their redemption value ($100 per share), are entitled to cumulative dividends
of 8 percent on the redemption value, are non-voting, and are non-convertible.
Scheduled redemptions of Series A-1 preferred stock for the years ended
December 31 are as follows:
<TABLE>
<S> <C>
1995........................................................ $ 300,000
1996........................................................ 400,000
1997........................................................ 500,000
1998........................................................ 500,000
----------
$1,700,000
==========
</TABLE>
The Series B preferred stock is scheduled to be redeemed prior to December
1998. The redemption of both the Series A-1 and Series B preferred stock is
subject to certain restrictions established in the CIBC credit agreement.
(10) STOCKHOLDERS' DEFICIT
The Company's $0.01 par value nonvoting Class A common stock has a
liquidation preference of $500 per share. There were 2,000 shares authorized at
December 31, 1994.
<PAGE> 42
ELLER INVESTMENT COMPANY, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
There were 25,000 shares of the Company's $0.01 par value Class B common
stock authorized at December 31, 1994.
Two warrants for the purchase of 2,223 aggregate shares of the Company's
Class B common stock were issued to CIBC in conjunction with the funds provided
by CIBC during 1994. The warrants enable the holder to purchase the stock for
$0.01 per share and expire in July through December of 2004. The warrants
include a put option whereby the holder may require the Company, at any time, to
purchase the warrants for a put price, as defined. The warrants also contain a
provision whereby the holder may require the Company to issue a public offering
of its stock, including the stock represented by the warrants. In the case such
a request is made by the warrant holder, the Company may elect to call the
warrants at 105 percent of the put price. The current put price for both
warrants of $2.0 million has been recorded as deferred loan fees in the
accompanying combined financial statements.
(11) INCOME TAXES:
The Company accounts for income taxes under the provisions of Statement of
Financial Accounting Standards No. 109 ("SFAS 109"), Accounting for Income
Taxes. SFAS 109 requires the use of an asset and liability approach in
accounting for income taxes. Deferred tax assets and liabilities are recorded
based on the differences between the financial statement and tax bases of assets
and liabilities and the tax rates in effect when these differences are expected
to reverse. Should income tax rates legislatively change, the deferred tax
assets and liabilities will be adjusted in the period of change.
The Company has a net deferred tax asset, which arises primarily from net
operating loss carryforwards for federal income tax purposes. The Company has
net operating loss carryforwards of approximately $3.5 million, the majority of
which expire in 2009. SFAS 109 requires the reduction of deferred tax assets by
a valuation allowance if, based on the weight of the available evidence, it is
more likely than not that some or all of the deferred tax assets will not be
realized. The Company has recorded a valuation allowance equal to its net
deferred tax asset. Accordingly, the net losses recorded in the accompanying
statements of operations have not been reduced by any income tax benefit.
The provision for income taxes of $80,420 recorded in the accompanying
financial statements results from the elimination of the net deferred tax asset
recorded on the books of Eller Holdings prior to the merger discussed in Note 1.
(12) COMMITMENTS AND CONTINGENCIES:
The Company has a qualified salary-reduction plan ("Plan") under Section
401(k) of the Internal Revenue Code covering certain employees of the Company
upon their attainment of age 21 and completion of one year of service. The
participants may elect to have up to 12 percent of their compensation
contributed to the Plan. The employee's contribution, up to 3 percent of
compensation, is matched by the Company. During 1994, the Company contributions
to the Plan totaled approximately $16,000.
The Company has entered into management agreements with the parent company
of Loel. For the year ended December 31, 1994, $200,000 in management fee
expense has been recorded. Beginning in 1995, the management agreement calls for
annual management fees of $300,000.
In the normal course of business, the Company is subject to certain
administrative proceedings and litigation. In management's opinion, the outcome
of such matters will not materially affect the financial position of the
Company.
The Company is also subject, from time to time, to audit by various taxing
authorities reviewing the Company's income, property, sales, use and payroll
taxes. Management believes that any findings from such audits will not have a
material impact on its financial statements.
<PAGE> 43
ELLER INVESTMENT COMPANY, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Eller Outdoor of Atlanta, Inc. has entered into a letter of intent
agreement with a key employee. Under the terms of the agreement, the Company has
committed to the payment in 1995 of $350,000 in bonuses, in return for a
three-year employment commitment from the employee.
The Company leases its offices, paint shop facilities and the majority of
the land occupied by its advertising structures under noncancelable operating
lease agreements. Rent expense under operating leases of approximately $2.3
million was recorded for the year ended December 31, 1994. Future minimum lease
payments under these noncancelable operating leases for the years ended December
31 are as follows:
<TABLE>
<S> <C>
1995........................................................ $ 2,511,987
1996........................................................ 2,394,771
1997........................................................ 2,128,228
1998........................................................ 1,730,444
1999........................................................ 1,061,425
Thereafter.................................................. 1,981,400
-----------
$11,808,255
===========
</TABLE>
<PAGE> 44
Item 7.(b) Unaudited Pro Forma Financial Information
The following pro forma financial information gives effect to the acquisition
of Eller Media by the Company. The unaudited pro forma condensed consolidated
statement of operations is based on the historical results of operations of
Eller Media and the Company, giving effect to the acquisition under the
purchase method of accounting as if the acquisition had been consummated on
January 1, 1996. The unaudited pro forma condensed consolidated balance sheet
is based on historical financial positions of Eller Media and the Company and
gives effect to the acquisition under the purchase method of accounting as if
the acquisition had been consummated on December 31, 1996. The adjustments in
the accompanying notes to the pro forma condensed consolidated statements of
operations and balance sheet are based on a preliminary purchase price
allocation.
This pro forma financial information may not be indicative of the results of
operations or financial position that actually would have occurred if the
acquisition had been consummated on the dates indicated, or those results of
operations or financial position which may be obtained in the future.
<PAGE> 45
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
CLEAR CHANNEL COMMUNICATIONS, INC. AND SUBSIDIARIES
AND ELLER MEDIA CORPORATION
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Year ended December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
The Company/
The Company Eller Media Pro Forma Eller Media
Historical(1) Historical(2) Adj.(3) Pro Forma
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Net revenue $ 351,739 $ 237,032 $ -- $ 588,771
Operating expenses 198,332 141,839 -- 340,171
Depreciation and
amortization 45,790 40,269 23,895 109,954
Corporate general and
admin. expenses 8,527 10,204 -- 18,731
-------------- -------------- -------------- --------------
Operating income 99,090 44,720 (23,895) 119,915
Interest expense 30,080 35,626 10,071 75,777
Other income(expense) 2,230 (6,721) -- (4,491)
-------------- -------------- -------------- --------------
Income(loss) before
income taxes 71,240 2,373 (33,966) 39,647
Income tax (expense)
benefit (28,386) (977) 5,259 (24,104)
-------------- -------------- -------------- --------------
Income before equity
in net income (loss) of,
and other income from,
nonconsolidated
affiliates 42,854 1,396 (28,707) 15,543
Equity in net income
(loss) of , and other
income from, nonconsol-
idated affiliates (5,158) -- -- (5,158)
-------------- -------------- -------------- --------------
Income (loss)
from continuing
operations $ 37,696 $ 1,396 $ (28,707) $ 10,385
============== ============== ============== ==============
Income
from continuing
operations per
common share $ .50 $ .13
============== ==============
Weighted average common
and common share
equivalents
outstanding 74,649 7,835 82,484
============== ============== ==============
</TABLE>
<PAGE> 46
NOTES TO UNAUDITED
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
CLEAR CHANNEL COMMUNICATIONS, INC. AND SUBSIDIARIES
AND ELLER MEDIA CORPORATION
YEAR ENDED DECEMBER 31, 1996
(1) Historical Condensed Consolidated Statement of Operations for the Company.
(2) Historical Condensed Consolidated Statement of Operations for
Eller Media.
(3) Represents the pro forma effect of the acquisition of Eller Media assuming
it was acquired January 1, 1996.
<TABLE>
<CAPTION>
Increase
(Decrease)
Income
(in Thousands)
--------------
<S> <C>
(a) Increase in amortization of goodwill of $20,818
resulting from the additional goodwill created
by the acquisition and a decrease in amortizable
life from 40 years (Eller Media) to 25 years
(the Company) and additional depreciation of
$3,077 related to the adjustment of fixed assets
to fair value. $(23,895)
(b) Increase in interest expense due to a higher amount
of average debt outstanding which was partially offset
by a lower average interest rate (6.2% average rate
for the Company and 8.8% for Eller Media in 1996). $(10,071)
(c) Tax effect of the above adjustments to depreciation
and interest expense at the Company's effective
tax rate of 40%. $ 5,259
(d) Increase in weighted average common and common share
equivalents outstanding resulting from the issuance of
shares of the Company's Common Stock and the issuance
of options to purchase shares of the Company's Common
Stock to shareholders of Eller Media to effect the
acquisition. 7,835
</TABLE>
The Company granted to the former Eller Media stockholders certain demand and
piggyback registration rights relating to the shares of Common Stock received by
them. The holders of the approximately 7% of the outstanding capital stock of
Eller Media, not purchased by the Company, have the right to put such stock to
the Company for 1,081,469 shares of the Company's Common Stock until April 10,
2002. From and after April 10, 2004, the Company will have the right to call in
this minority interest stake in Eller Media for 1,081,469 shares of its Common
Stock. If such right would have been exercised on April 10, 1997, the Company
would have issued additional shares of its Common Stock with an aggregate value
of $48.5 million (assuming a price of $44.8625 per share) and recorded a
corresponding increase in goodwill. The annual amortization of goodwill
associated therewith would decrease the Company's net income by $1.9 million or
$.02 per share; however such would have no effect on after tax cash flow. A $1
per share change in the market price of the Company's Common Stock would cause
a $1.1 million change in goodwill.
The proforma statement of operations excludes the effect of nonrecurring
charges related to the acquisition.
<PAGE> 47
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
CLEAR CHANNEL COMMUNICATIONS, INC. AND SUBSIDIARIES
AND ELLER MEDIA CORPORATION
(UNAUDITED)
(IN THOUSANDS)
December 31, 1996
<TABLE>
<CAPTION>
The Company/
The Company Pro Forma Eller Media
Historical(4) Eller Media(5) Adjs.(6) Pro Forma
---------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash
equivalents $ 16,701 $ 873 -- $ 17,574
Accounts
receivable, net 79,183 35,627 -- 114,810
Film rights - current 14,188 -- -- 14,188
Other current assets 3,092 10,774 -- 13,866
-------------- -------------- -------------- --------------
Total Current Assets 113,164 47,274 -- 160,438
Property, Plant &
equipment, net 147,838 460,066 46,156 654,060
Intangible assets:
Network affiliation
agreements 33,727 -- -- 33,727
Licenses and goodwill 764,233 136,389 471,913 1,372,535
Covenants
not-to-compete 22,992 -- -- 22,992
Other intangible assets 8,712 2,810 (2,810) 8,712
-------------- -------------- -------------- --------------
829,664 139,199 469,103 1,437,966
Less accumulated
amortization (78,646) (4,759) 4,759 (78,646)
-------------- -------------- -------------- --------------
751,018 134,440 473,862 1,359,320
Other assets:
Notes receivable 52,750 -- -- 52,750
Film rights -
noncurrent, net of
accumulated amort 13,437 -- -- 13,437
Equity investments
in, and advances
to, nonconsolidated
affiliates 230,660 -- -- 230,660
Other assets 10,808 8,378 -- 19,186
Other investments 5,037 -- -- 5,037
-------------- -------------- -------------- --------------
TOTAL ASSETS $ 1,324,712 $ 650,158 $ 520,018 $ 2,494,888
============== ============== ============== ==============
LIABILITIES
Current liabilities:
Accounts payable $ 9,865 $ 4,638 -- 14,503
Accrued interest 6,272 3,378 -- 9,650
Accrued expenses 8,236 33,727 6,633 48,596
Accrued income and
other taxes -- -- -- --
Deferred income 1,300 -- -- 1,300
Current portion
of long-term debt 1,479 12,320 (12,320) 1,479
Current portion of
film rights liability 16,310 -- -- 16,310
-------------- -------------- -------------- --------------
Total Current
Liabilities 43,462 54,063 (5,687) 91,838
Long-Term Debt 725,132 399,403 337,649 1,462,184
Film Rights Liability 13,797 -- -- 13,797
Deferred Income Taxes 11,283 (10,520) 18,462 19,225
Other liabilities 11,250 14,829 -- 26,079
Minority Interest 6,357 -- 13,289 19,646
Shareholders' equity:
Preferred Stock -- -- --
Common Stock 7,699 1 663 8,363
Additional paid-in
capital 398,622 213,297 134,727 746,646
Retained earnings/
(accumulated deficit) 106,055 (5,675) 5,675 106,055
Other 1,226 (15,240) 15,240 1,226
Cost of shares held
in treasury (171) -- -- (171)
-------------- -------------- -------------- --------------
Total Shareholders'
Equity 513,431 192,383 156,305 862,119
-------------- -------------- -------------- --------------
TOTAL LIABILITIES
AND SHAREHOLDERS'
EQUITY $ 1,324,712 $ 650,158 $ 520,018 $ 2,494,888
============== ============== ============== ==============
</TABLE>
<PAGE> 48
NOTES TO UNAUDITED
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
CLEAR CHANNEL COMMUNICATIONS, INC. AND SUBSIDIARIES
AND ELLER MEDIA CORPORATION
DECEMBER 31, 1996
(4) Historical Condensed Consolidated Balance Sheet as of December 31, 1996 for
the Company.
(5) Historical Condensed Consolidated Balance Sheet as of December 31, 1996
for Eller Media.
(6) On April 10, 1997, the Company purchased approximately 92.7% of the
outstanding shares of common stock of Eller Media in exchange for approximately
$325 million cash, $298 million in Common Stock of the Company and issued
options to purchase 1,468,182 shares of the Company's Common Stock (estimated
fair value of $51 million). In addition, the Company refinanced approximately
$417 million in long-term debt related to the Eller Media Credit Facility
(approximately $408 million at December 31, 1996). Adjustments to reflect the
application of the purchase method of accounting and the issuance of the related
consideration (as if the acquisition had been consummated December 31, 1996) are
as follows:
<TABLE>
<CAPTION>
Increase
(Decrease)
<S> <C>
Property, plant, equipment, net $ 46,156
Licenses & goodwill 471,913
Deferred loan fees (2,810)
Accumulated Amortization (4,759)
Accrued expenses 6,633
Current portion of long-term debt (12,320)
Long-term debt 337,649
Deferred tax liability 18,462
Minority interest 13,289
Common stock, par value 663
Additional paid-in capital 134,727
Retained earnings (accumulated deficit) 5,675
Deferred compensation 15,240
</TABLE>
Item 7.(c) -- Exhibits
See index to exhibits following "Signatures."
<PAGE> 49
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Clear Channel Communications, Inc.
Date April 17, 1997 By /s/L. LOWRY MAYS
L. Lowry Mays, Chairman/
Chief Executive Officer
Date April 17, 1997 By /s/HERBERT W. HILL, JR.
Herbert W. Hill, Jr.
Senior Vice President/
Chief Accounting Officer
<PAGE> 50
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
(a) 3.1 -- Articles of Incorporation, as amended, of Registrant
(m) 3.1.1 -- Articles of Amendment to the Articles of Incorporation of Clear
Channel Communications, Inc.
(a) 3.2 -- Amended and Restated Bylaws of Registrant
(a) 4 -- Buy-Sell Agreement among Clear Channel Communications, Inc., L.
Lowry Mays, B. J. McCombs, John M. Schaefer and John W. Barger
dated May 31, 1977.
(a) 10.1 -- Incentive Stock Option Plan of Clear Channel Communications, Inc.
as of January 1, 1984.
(b) 10.2 -- Television Asset Purchase Agreement dated January 27, 1992, by
and between Chase Broadcasting of Memphis, Inc. and Clear Channel
Television, Inc.
(b) 10.3 -- Radio Asset Purchase Agreement dated January 31, 1992, by and
between Noble Broadcasting of Connecticut, Inc. and Clear Channel
Radio, Inc.
(b) 10.4 -- Radio Asset Purchase Agreement dated April 19, 1992, by and
between Edens Broadcasting, Inc. and Clear Channel Radio, Inc.
(k) 10.33 -- Radio Asset Purchase Agreement dated January 31, 1993, by and
between KHFI Venture, LTD. and Clear Channel Radio, Inc.
(l) 10.34 -- Radio Asset Purchase Agreement dated December 28, 1992, by and
between Westinghouse Broadcasting Company, Inc. and Clear Channel
Radio, Inc.
(c) 10.5 -- Radio Asset Purchase Agreement dated December 23, 1992, by and
between Inter-Urban Broadcasting of New Orleans Partnership and
Snowden Broadcasting, Inc.
(d) 10.6 -- Television Asset Purchase Agreement dated August 19, 1993, by and
between Television Marketing Group of Memphis, Inc. and Clear
Channel Television, Inc.
(e) 10.7 -- Radio Asset Purchase Agreement April 1, 1993, by and Capital
Broadcasting of Virginia, Inc. and Clear Channel Radio, Inc.
(f) 10.8 -- Television Asset Purchase Agreement dated August 31, 1993, by and
between Nationwide Communications, Inc. and Clear Channel
Television, Inc.
(g) 10.9 -- Radio Asset Merger Agreement dated March 22, 1994, by and between
Metroplex Communications, Inc. and Clear Channel Radio, Inc.
<PAGE> 51
(h) 10.10 -- Radio Partnership Interest Purchase Agreement dated April 5,
1994, by and between Cook Inlet Communications, Inc. and WCC
Associates and Clear Channel Radio, Inc.
(i) 10.11 -- Television Asset Purchase Agreement dated September 12,1994, by
and between Heritage Broadcasting Company of New York, Inc. and
Clear Channel Television, Inc. and Clear Channel Television
Licenses, Inc.
(j) 10.12 -- Radio Asset Purchase Agreement dated November 17,1994, by and
between Noble Broadcast of Houston, Inc. and Clear Channel Radio,
Inc.
(k) 10.13 -- Australian Radio Network Shareholders Agreement dated February,
1995, by and between APN Broadcasting Investments Pty Ltd,
Australian Provincial Newspapers Holdings Limited, APN
Broadcasting Pty Ltd and Clear Channel Radio, Inc. and Clear
Channel Communications, Inc.
(l) 10.14 -- $600,000,000 Amended and Restated Credit Agreement Among Clear
Channel Communications, Inc., Certain Lenders, and NationsBank of
Texas, N.A., as Administrative Lender, dated October 19, 1995.
(m) 10.15 -- Clear Channel Communications, Inc. 1994 Incentive Stock Option
Plan.
(m) 10.16 -- Clear Channel Communications, Inc. 1994 Nonqualified Stock Option
Plan.
(m) 10.17 -- Clear Channel Communications, Inc. Directors' Nonqualified Stock
Option Plan.
(m) 10.18 -- Option Agreement for Officer
10.19 -- Employment Agreement between Clear Channel Communications, Inc.
and L. Lowry Mays
(o) 10.20 -- Stock Purchase Agreement dated as of March 4, 1996 by and among
US Radio Stations, L.P., Blackstone USR Capital Partners L.P.,
Blackstone USR Offshore Capital Partners L.P., Blackstone Family
Investment Partnership II L.P., BCP Radio L.P., BCP Offshore
Radio L.P., US Radio Inc., Clear Channel Communications of
Memphis, Inc. and Clear Channel Communications, Inc.
(p) 10.21 -- Asset Purchase Agreement, dated as of May 9, 1996, by and among
REP New England G.P., REP Southeast G.P., REP Ft. Myers G.P., REP
Rhode Island G.P., REP Florida G.P., REP WHYN G.P., REP WWBB
G.P., S.E. Licensee G.P., REP WCKT G.P. and RI Licensee G.P.,
Radio Station Management, Inc., Clear Channel Radio, Inc., and
Clear Channel Radio Licenses, Inc.
(q) 10.22 -- Tender Offer between Clear Channel Radio, Inc. and Heftel
Broadcasting Corporation dated June 1, 1996
(q) 10.23 -- Stock Purchase Agreement between Clear Channel Radio, Inc. and
Certain Shareholders of Heftel Broadcasting Corporation dated
June 1, 1996.
(r) 10.24 -- Agreement and Plan of Merger Between Clear Channel
Communications, Inc. ("PARENT") and Tichenor Media System, Inc.
("TICHENOR") dated July 9, 1996
(s) 10.25 -- Second Amended and Restated Credit Agreement among Clear Channel
Communications, Inc., certain Lenders and NationsBank, N.A., as
Administrative Lender (dated August 1, 1996).
(n) 10.26 -- Stock Purchase Agreement By and Among Clear Channel
Communications, Inc., Eller Media Corporation and the
Stockholders of Eller Media Corporation Dated February 25, 1997.
10.27 -- Amendment to Stock Purchase Agreement By and Among Clear Channel
Communications, Inc., Eller Media Corporation and the Stockholders
of Eller Media Corporation Dated April 10, 1997.
10.28 -- Registration Rights Agreement By and Among Clear Channel
Communications, Inc., and the Stockholders of Eller Media
Corporation, Dated April 10, 1997.
10.29 -- Escrow Agreement By and Among Clear Channel Communications, Inc.,
Paul Meyer ("Stockholder Representative"), EM Holdings LLC, and
Chase Trust Company of California, Dated April 10, 1997.
10.30 -- Stockholders Agreement By and Among Eller Media Corporation,
Clear Channel Communications, Inc., and EM Holdings LLC Dated
April 9, 1997.
21 -- Subsidiaries of Registrant, Clear Channel Communications, Inc.
23.1 -- Consent of Arthur Andersen LLP.
23.2 -- Consent of KPMG Peat Marwick LLP.
<PAGE> 52
(a) -- Incorporated by reference to the exhibits of the Company's Registration
Statement on Form S-1(Reg. No. 289161) dated April 19, 1984.
(b) -- Incorporated by reference to the Registrant's Form 8-K dated July 14,
1992.
(c) -- Incorporated by reference to the Registrant's Form 10-Q dated May 12,
1993.
(d) -- Incorporated by reference to the Registrant's Form 8-K dated September
2, 1993.
(e) -- Incorporated by reference to the Registrant's Form 10-Q dated November
1, 1993.
(f) -- Incorporated by reference to the Registrant's Form 8-K dated October
27, 1993.
(g) -- Incorporated by reference to the Registrant's Form 8-K dated October
26, 1994.
(h) -- Incorporated by reference to the Registrant's Form 10-Q dated November
14 1994.
(i) -- Incorporated by reference to the Registrant's Form 8-K dated December
14, 1994.
(j) -- Incorporated by reference to the Registrant's Form 8-K dated January
13, 1995.
(k) -- Incorporated by reference to the Registrant's Form 8-K dated May 26,
1995.
(l) -- Incorporated by reference to the Registrant's Form 10-Q dated November
14, 1995.
(m) -- Incorporated by reference to the Registrant's Form S-8 dated November
20, 1995.
(n) -- Incorporated by reference to the Registrant's Form 10-K dated March 31,
1997.
(o) -- Incorporated by reference to the Registrant's Form 8-K dated May 4,
1996.
(p) -- Incorporated by reference to the Registrant's Form 8-K dated June 5,
1996.
(q) -- Incorporated by reference to the Registrant's Form S-3 dated June 14,
1996.
(r) -- Incorporated by reference to Heftel Broadcasting Corporation's
Amendment 2 to Form SC 14D1/A dated July 9, 1996.
(s) -- Incorporated by reference to Heftel Broadcasting Corporation's
Amendment 4 to Form SC 14D1/A dated August 5, 1996.
<PAGE> 1
EXHIBIT 10.27
EXECUTION COPY
AMENDMENT TO
STOCK PURCHASE AGREEMENT
THIS AMENDMENT TO STOCK PURCHASE AGREEMENT (this "Amendment"),
dated as of April 10, 1997, is by and among Clear Channel Communications, Inc.,
a Texas corporation ("Purchaser"), Eller Media Corporation, a Delaware
corporation (the "Company"), and those persons listed on Exhibit A hereto
(individually, including both option holders and stockholders as identified on
such exhibit, each a "Stockholder" and collectively, the "Stockholders"), being
the beneficial owners of all shares, and all options to acquire shares, of
capital stock of the Company issued and outstanding on the date hereof.
RECITALS
WHEREAS, the Stockholders as a group own all of the shares of
Common Stock, par value $.01 per share, of the Company, issued and outstanding
or issuable pursuant to options outstanding on the date hereof, with each
Stockholder owning or having the right to acquire the number of shares set
forth opposite such Stockholder's name on Exhibit A;
WHEREAS, Purchaser, the Company and certain of the
Stockholders are parties to that certain Stock Purchase Agreement, dated as of
February 25, 1997 (the "Stock Purchase Agreement"); and
WHEREAS, Purchaser, the Company and the Stockholders now
desire to amend the Stock Purchase Agreement in the manner set forth below.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and mutual
covenants hereinafter contained, the parties hereto agree to amend the Stock
Purchase Agreement as follows:
1. Definitions. Capitalized terms used herein without definition
shall have the meanings given such terms in the Stock Purchase Agreement.
2. Amendments to the Stock Purchase Agreement.
(a) Exhibits.
(i) Exhibit A is hereby amended and restated in
its entirety to read in the form attached hereto as Exhibit A.
(ii) Exhibit B is hereby amended and restated in
its entirety to read in the form attached hereto as Exhibit B.
<PAGE> 2
(iii) Exhibit C is hereby amended and restated in
its entirety to read in the form attached hereto as Exhibit C.
(iv) Exhibit E is hereby amended and restated in
its entirety to read in the form attached hereto as Exhibit E.
(v) Exhibit F is hereby amended and restated in
its entirety to read in the form attached hereto as Exhibit F.
(vi) Exhibit H - New Stockholders Agreement, in
the form attached hereto as Exhibit H, is hereby appended as Exhibit H to the
Stock Purchase Agreement.
(vii) The exhibit index on page (iii) of the Stock
Purchase Agreement is hereby amended to add the following exhibits:
"Exhibit H - Form of New Stockholders Agreement."
(b) Disclosure Letter. The Disclosure Letter is hereby
amended and restated in its entirety to read in the form of Disclosure Letter
attached hereto. Changes in the Disclosure Letter attached hereto from the
Disclosure Letter delivered in connection with the Stock Purchase Agreement are
amendments to the Disclosure Letter for purposes of Section 15(a) of the Stock
Purchase Agreement.
(c) Definitions.
(i) The following definition of "ADCO Claim"
shall be added to Section 1 of the Stock Purchase Agreement:
"`ADCO Claim' has the meaning specified in Section 12(a)(i) of
this Agreement."
(ii) The definition of "Average Share Price"
appearing in Section 1 of the Stock Purchase Agreement is hereby amended to
read in its entirety as follows:
"`Average Share Price'" shall mean $44.8625."
(iii) The definition of "Company Stock Option
Agreements" appearing in Section 1 of the Stock Purchase Agreement is hereby
amended to read in its entirety as follows:
"`Company Stock Option Agreements' shall mean the Company
stock option agreements listed on Schedule 3(b) of this Agreement, as
such agreements may hereafter be amended and restated as contemplated
by Schedule 6(d) of this Agreement."
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<PAGE> 3
(iv) The definition of "Escrow Agreement"
appearing in Section 1 of the Stock Purchase Agreement is hereby amended to
read in its entirety as follows:
"`Escrow Agreement' shall mean that certain Escrow Agreement,
dated as of the Closing Date, by and among Purchaser, Holdings, the
Stockholder Representative and the Escrow Agent, substantially in the
form of Exhibit C attached hereto."
(v) The definition of "Escrowed Shares" appearing
in Section 1 of the Stock Purchase Agreement is hereby amended to read in its
entirety as follows:
"`Escrowed Shares' shall mean a number of shares of Purchaser
Common Stock and any other securities or property deposited with the
Escrow Agent pursuant to this Agreement and the Escrow Agreement."
(vi) The following definition of "Holdings" shall
be added to Section 1 of the Stock Purchase Agreement:
"`Holdings' shall mean EM Holdings LLC, an Arizona limited
liability company."
(vii) The following definition of "New Stockholders
Agreement" shall be added to Section 1 of the Stock Purchase Agreement:
"`New Stockholders Agreement' shall mean that certain
Stockholders Agreement, dated as of April 9, 1997, by and among
Purchaser, the Company and Holdings, substantially in the form of
Exhibit H attached hereto."
(viii) The following definition of "Phantom Stock
Agreements" shall be added to Section 1 of the Stock Purchase Agreement:
"`Phantom Stock Agreements' shall mean the Company phantom
stock agreements listed on Schedule 3(b) of this Agreement, as such
agreements may hereafter be amended and restated and/or documented as
contemplated by Schedule 6(d) of this Agreement."
(ix) The definition of "Phantom Stock Units"
appearing in Section 1 of the Stock Purchase Agreement is hereby amended to
read in its entirety as follows:
"`Phantom Stock Units' shall mean the aggregate number of
units of phantom stock issuable pursuant to the terms of the Phantom
Stock Agreements."
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<PAGE> 4
(x) The following definition of "Retained Shares"
shall be added to Section 1 of the Stock Purchase Agreement:
"`Retained Shares' shall mean 140.450 shares of Company Common
Stock owned by Holdings which will not be sold to Purchaser on the
Closing Date."
(d) Sale of Shares; Purchase Price.
(i) Section 2(a) of the Stock Purchase Agreement
is hereby amended to read in its entirety as follows:
"(a) Sale of Shares. On the terms and subject to
the conditions set forth in this Agreement and, subject to the
immediately following sentence hereof, each Stockholder hereby
severally agrees to sell, assign and transfer to Purchaser, and
Purchaser hereby agrees to purchase from such Stockholder, on the
Closing Date, the number of shares of Company Common Stock owned by
such Stockholder on the date hereof as set forth opposite such
Stockholder's name on Exhibit B hereto (excluding the Retained
Shares), plus such number of additional shares of Company Common Stock
as will hereafter be acquired by such Stockholder prior to the Closing
Date upon the exercise of Company Stock Options held by such
Stockholder as set forth on Exhibit B, for the aggregate consideration
set forth on Exhibit B opposite such Stockholder's name, subject to
the Escrow Agreement provided for in Section 2(d). In the event any
Optionee who on the date hereof is an employee of the Company does not
fully exercise Company Stock Options as listed opposite such
Optionee's name on Exhibit B under the column "Value of Stock
Consideration" on or prior to the Closing Date, Purchaser hereby
agrees to assume such options pursuant to Section 2(c) hereof and no
shares of Purchaser Common Stock will be issuable at Closing in
respect of the unexercised portion of such Company Stock Options. The
Retained Shares will not be sold to Purchaser at Closing. As used
herein, `Shares' shall mean the aggregate number of shares of Company
Common Stock to be sold by the Stockholders and purchased by the
Purchaser pursuant to this Section 2."
(ii) Section 2(b)(i) of the Stock Purchase
Agreement is hereby amended to read in its entirety as follows:
"(i) In consideration of the transactions
contemplated by this Agreement, Purchaser shall pay to the
Stockholders, the Optionees and the Phantom Stock Grantees an
aggregate purchase price (the `Purchase Price') equal to (A)
$325,329,131 (the `Cash Consideration') in cash (without interest),
payable in immediately available funds, plus (B) a number of shares of
Purchaser Common Stock (the `Stock Consideration') determined as set
forth in subsection (ii) of this Section 2(b), subject to the Escrow
Agreement described in Section 2(d) hereof. The Purchase Price shall
be allocated among the Stockholders, the Optionees and the Phantom
Stock Grantees, and allocated for the payment of expenses pursuant to
Section 22 hereof in the manner set forth on
4
<PAGE> 5
Exhibit B hereto; provided, however, that Purchaser shall pay the
portion of the Stock Consideration to be paid to the Phantom Stock
Grantees as set forth on Exhibit B hereto in accordance with the terms
of the Phantom Stock Agreements."
(iii) Section 2(b)(ii) of the Stock Purchase
Agreement is hereby amended to read in its entirety as follows:
"(ii) The Stock Consideration shall equal the
number of shares of Purchaser Common Stock obtained as a result of
dividing $351,482,592 by the Average Share Price.
(iv) Section 2(d) of the Stock Purchase Agreement
is hereby amended to read in its entirety as follows:
"(d) Escrow Agreement. In order to establish a
procedure for the satisfaction of any claims by Purchaser for
indemnification pursuant to Section 12 hereof, the Stockholder
Representative and Holdings shall enter into the Escrow Agreement with
Purchaser pursuant to which, among other things, (i) Purchaser shall
deposit with the Escrow Agent a number of shares of Purchaser Common
Stock to be received by the Stockholders pursuant to Section 2(b)
equal to $40 million divided by the Average Share Price multiplied by
the sum of the percentages set forth opposite the names under the
caption "Stockholders" on Exhibit F hereto, (ii) rights with respect
to a number of shares of Purchaser Common Stock issuable upon the
exercise of Restated Options equal to $40 million divided by the
Average Share Price multiplied by the sum of the percentages set forth
opposite the names under the caption "Optionees" on Exhibit F hereto,
shall be made subject to an escrow fund pursuant to the Escrow
Agreement, and (iii) rights with respect to a number of shares of
Purchaser Common Stock issuable upon the exercise of certain rights
granted in the New Stockholders Agreement equal to $40 million divided
by the Average Share Price multiplied by the percentage set forth
opposite the name under the caption "Retained Shares" on Exhibit F
hereto, shall be made subject to an escrow fund pursuant to the terms
of the Escrow Agreement. The Escrowed Shares shall be available to
secure, in accordance with the Escrow Agreement, and shall be the sole
source of payment of, the Stockholders' indemnity obligations under
Section 12 hereof. All costs of the escrow shall be paid one-half by
the Purchaser, on the one hand, and one-half by the Stockholders
collectively, on the other, all as further provided in the Escrow
Agreement."
(v) Section 2(e) is hereby added to the Stock
Purchase Agreement to read in its entirety as follows:
"(e) Phantom Stock Agreements. On the Closing
Date, Purchaser shall assume and agree to perform the terms of the
Phantom Stock Agreements in the same manner and to the same extent
that the Company would
5
<PAGE> 6
be required to perform such agreements had the transactions
contemplated by this Agreement not been consummated."
(e) Representations and Warranties of the Stockholders.
Section 4(a) of the Stock Purchase Agreement is hereby amended to read in its
entirety as follows:
"(a) Title; Agreements. Except for the
Stockholders Agreement and the New Stockholders Agreement (in the case
of Holdings), and except with respect to Optionees who do not exercise
their Company Stock Options on or prior to the Closing Date, and
except with respect to the lien of the Escrow Agreement, such
Stockholder holds of record and holds beneficially the number of
shares of Company Common Stock set forth opposite its or his name on
Exhibit A, free and clear of any and all Encumbrances or other
restrictions on transfer. Except for the Stockholders Agreement and
other than this Agreement and the New Stockholders Agreement (in the
case of Holdings), such Stockholder is not a party to any voting
trust, proxy or other agreement or understanding with respect to any
capital stock of the Company."
(f) Covenants of the Stockholders, the Company and
Purchaser.
(i) Section 6(d) of the Stock Purchase Agreement
is hereby amended to read in its entirety as follows:
"(d) Conduct of Business. From and after the date
hereof and until the Closing Date, the Company shall conduct and cause
the business of the Subsidiaries to be conducted in the ordinary
course, consistent with the present conduct of their business. During
such period of time, except upon the prior written consent of
Purchaser, the Company shall not and shall not permit any Subsidiaries
to: (i) amend its Certificate of Incorporation or By-Laws or
comparable organizational documents (except to the extent reflected in
the Disclosure Letter); (ii) except as disclosed on Schedule 6(d)
hereto, issue any additional shares of capital stock or issue, sell or
grant any option or right to acquire or otherwise dispose of or commit
to dispose of any of its authorized but unissued capital stock or
other corporate securities (except upon exercise of Company Stock
Options currently outstanding); (iii) declare or pay any dividends or
make any other distribution in cash or property on its capital stock
or other equity interests, except to the Company or a Subsidiary; (iv)
except as disclosed on Schedule 6(d) hereto, repurchase or redeem any
shares of its stock or other equity interests; (v) except as disclosed
on Schedule 6(d), voluntarily incur any obligation or liability,
except obligations and liabilities incurred in the ordinary course of
business or permitted by clause (x) below; (vi) except as disclosed on
Schedule 6(d), enter into any employment agreement or alter any bonus,
profit-sharing, incentive, or other compensation arrangement for any
of its officers or directors (other than make changes which do not
increase the compensation or benefits provided by the foregoing), or
otherwise materially change personnel policies, compensation programs
or benefit plans, except for
6
<PAGE> 7
changes in the ordinary course of business; (vii) mortgage, pledge, or
otherwise encumber any part of its assets, tangible or intangible,
except Permitted Encumbrances; (viii) sell, transfer or acquire any
properties or assets, tangible or intangible, other than in the
ordinary course of business, and except as set forth in Schedule 6(d)
hereto; (ix) except as set forth on Schedule 6(d) hereto, merge or
consolidate with any corporation, acquire control or acquire any
capital stock or other securities, or all or substantially all of the
assets, of any other corporation or business entity, or take any steps
incident to or in furtherance of any such actions whether by entering
into an agreement providing therefor or otherwise; (x) other than the
ADCO Note and except in connection with the transactions set forth on
Schedule 6(d) hereto or to fund working capital requirements arising
in the ordinary course of business consistent with the 1997 budget
heretofore provided to Purchaser (the `1997 Budget'), incur
Indebtedness in excess of the level outstanding at December 31, 1996;
(xi) incur any capital expenditures beyond those set forth in the 1997
Budget; or (xii) take any other action not contemplated hereby which
would cause any of the representations and warranties made by the
Company and the Stockholders in this Agreement not to be true and
correct in all material respects on and as of the Closing Date with
the same force and effect as if such representations and warranties
had been made on and as of the Closing Date."
(ii) Section 6(f)(i) of the Stock Purchase
Agreement is hereby amended to read in its entirety as follows:
"(i) On the day following the Closing Date,
Purchaser shall appoint Karl Eller to its Board of Directors, and
shall thereafter cause Karl Eller to be included in the annual slate
of directors to be proposed by the management of Purchaser until such
time as either Purchaser owns less than a majority of the Company
Common Stock or Karl Eller is no longer the Chief Executive Officer or
Chairman of the Board of the Company."
(g) Conditions Precedent to Purchaser's Obligation.
Section 7(g) of the Stock Purchase Agreement is hereby amended to read in its
entirety as follows:
"(g) Purchaser shall have received the opinion of
Latham & Watkins, counsel for the Company, the opinion of Meyer,
Hendricks, Bivens & Moyes, counsel for a certain Stockholder, and the
opinion of Heller, Ehrman, White & McAuliffe, counsel for certain
other Stockholders, as to such matters to be mutually agreed upon."
(h) Closing Date; Closing. Section 9(c) of the Stock
Purchase Agreement is hereby amended to delete clause (ix) and to add the
following paragraphs:
"(ix) Prior to the Closing Date, Purchaser, the
Company and Holdings shall enter into the New Stockholders Agreement."
7
<PAGE> 8
(i) Indemnification.
(i) Section 12(a)(i) of the Stock Purchase
Agreement is hereby amended to read in its entirety as follows:
"(i) Each of the Stockholders severally (on a pro
rata basis as provided in the Escrow Agreement), but not jointly,
agrees to indemnify and hold Purchaser and its Affiliates harmless
from and against any and all losses, claims, demands, liabilities,
obligations, damages, deficiencies, assessments, judgments, payments,
penalties, costs and expenses (including without limitation reasonable
attorneys' fees, any amounts paid in investigation, defense or
settlement of any of the foregoing and interest) (herein, `Damages')
incurred in connection with, arising out of, resulting from or
incident to, (A) any breach of any representation or warranty (as
updated pursuant to Section 15 hereof and as in effect on the Closing
Date) made by the Company and the Stockholders in this Agreement
(other than the representations and warranties made in Section 4(a)
hereof), (B) any breach of any covenant or agreement made by the
Company and the Stockholders in this Agreement, (C) any liability or
obligation which the Company or its Subsidiaries pays or becomes
obligated to pay after December 31, 1996 and prior to twelve months
after the Closing Date in respect of costs of defense, settlement or
resolution of any litigation matter which has been disclosed on
Schedule 3(p) to this Agreement, to the extent, and only to the
extent, that such costs in the aggregate, after giving credit for any
insurance recoveries to which the Company or the Subsidiaries is
entitled, exceeds the aggregate amount of the Company's reserves
therefor on the Balance Sheet, (D) any Pre-Agreement Disclosure Matter
(as hereinafter defined) or (E) any claim by Richard Traverso, ADCO
Outdoor Advertising or Pacific Coast Display for any amount or
recovery in excess of, or in addition to, the express obligation of
the Company contained in the ADCO Note and the related Asset Purchase
Agreement, Security Agreement and Registration Rights Agreement, in
accordance with their respective terms, including, without limitation,
any claim, liability, expense or loss resulting from a recession of
the ADCO Note and the transactions concluded in connection therewith
(an `ADCO Claim'). The parties hereby acknowledge and agree that
after the Closing Date recourse against the Escrowed Shares
constitutes the sole remedy, at law or in equity, that Purchaser may
have against the Stockholders, and that the Escrowed Shares shall be
Purchaser's exclusive method of receiving indemnification from the
Stockholders, pursuant to this Section 12(a)(i). Notwithstanding the
foregoing, Purchaser may not receive any of the Escrowed Shares in
connection with Damages arising from breaches or inaccuracies pursuant
to this Section 12(a)(i) unless the aggregate of such Damages
indemnified against shall exceed $10 million, in which event such
indemnification shall be effective with respect to all Damages in
excess of such amount, and shall be limited to the Escrowed Shares;
provided, however, that the foregoing $10 million threshold will not
apply to any Damages from an ADCO Claim, as to which the
indemnification obligation of the Stockholders shall accrue from the
first dollar of Damages. For purposes of determining the
Stockholders'
8
<PAGE> 9
indemnification obligations pursuant to this Section 12(a)(i), each
representation and warranty stated in Sections 3 and 4 hereof shall be
deemed to exclude any materiality standard, materiality exception and
materiality qualification stated therein. The parties acknowledge
that the limitations on liability of the Stockholders in this Section
12(a)(i) contained were an essential inducement to the Stockholders to
cause them to enter into and perform this Agreement, and without which
they would not have done so."
(ii) Section 12(c) of the Stock Purchase Agreement
is hereby amended to read in its entirety as follows:
"(c) Damages. The term `Damages' as used in this
Section 12 is not limited to matters asserted by third parties against
any indemnified party, but includes Damages incurred or sustained by
any indemnified party in the absence of third party claims. Any
Damages otherwise due and payable under this Section 12 shall be (i)
decreased to the extent of any reduction of Tax liability that is
realizable by the indemnified party upon payment of an indemnifiable
loss and (ii) increased to the extent of any increase in Tax liability
that is imposed on the indemnified party upon the receipt of an
indemnity payment pursuant to this Section 12. In addition, Damages
shall be determined net of any insurance recoveries by any indemnified
party and shall be net of any indemnity to which the Company is
entitled pursuant to that certain Stock Purchase Agreement, dated as
of July 14, 1995, by and between Eller Investment Company, Inc., an
Arizona corporation, and General Electric Capital Corporation, a New
York corporation. In the case of the ADCO Claim, Damages shall
include reasonable reimbursement for the cost of the time which
employees of Purchaser and the Company spend in resolving the ADCO
Claim."
(iii) Section 12(d)(iv) is hereby added to the
Stock Purchase Agreement to read in its entirety as follows:
"(iv) Notwithstanding the foregoing, as to any
items identified as Pre-Agreement Disclosure Matters on Schedule 3(p),
and as to any item on Schedule 3(p) to the extent it could give rise
to a claim for Damages pursuant to Section 12(a)(i)(C) of this
Agreement (i) notice of the potential Claim hereby is deemed given for
purposes of Section 12(d), and (ii) Purchaser hereby is entitled to
take control of the defense of such matters and to employ and engage
attorneys to handle and defend the same and to compromise and settle
such action in such manner as it may deem necessary and appropriate,
all in accordance with Section 12(d)(i). Notice of the potential
Claim is also deemed given for the ADCO Claim, which will be defended
by the Stockholders as the indemnifying party in accordance with the
procedures set forth in Section 12(d)(i)."
9
<PAGE> 10
(j) Termination; Amendments to Disclosure Letter.
Section 15(b) of the Stock Purchase Agreement is hereby amended to read in its
entirety as follows:
"(b) Amendments to Disclosure Letter. Between the
date hereof and the Closing Date, the Company and the Stockholders may
add to the Disclosure Letter by notification in writing to Purchaser
of the matter to be added, which may be matters relating to events
first arising after the date of this Agreement (`Post-Agreement Date
Disclosure Matters') or may be matters which relate to events first
arising prior to the date of this Agreement and which, if not so added
to the Disclosure Letter, would constitute a breach of the
representations and warranties provided by the Company and the
Stockholders on the date of this Agreement (`Pre-Agreement Date
Disclosure Matters' and, collectively with the Post-Agreement Date
Disclosure Matters, the `New Disclosure Matters'); provided, however,
any additions or changes to Schedule 6(d) between the date hereof and
the Closing Date shall not constitute New Disclosure Matters. If the
aggregate dollar amount involved in the New Disclosure Matters exceeds
$5,000,000, Purchaser may, at its election by written notice to the
Company and the Stockholders on or before the Closing Date, either (i)
accept the Disclosure Letter as so modified and close the transactions
contemplated hereby, in which case the Disclosure Letter as so
modified will be deemed to have been delivered on or before the date
of this Agreement or (ii) terminate this Agreement. If the aggregate
dollar amount involved in the Pre-Agreement Date Disclosure Matters
exceeds $5,000,000, the Company and the Stockholders may terminate
this Agreement by written notice to Purchaser, unless Purchaser agrees
in writing that the aggregate indemnity obligation of the Stockholders
in respect of such Pre-Agreement Date Disclosure Matters pursuant to
Section 12(a)(i) will in all events be limited to $5,000,000. Nothing
contained herein will preclude Purchaser from alleging that any matter
disclosed in a proposed modification to the Disclosure Letter which is
not subject to quantification does not give rise to a right not to
close under this Agreement because of the inability of the Company and
the Stockholders to satisfy the condition set forth in Section 7(a)
hereof due to such New Disclosure Matter. Notwithstanding the
foregoing, it is understood that the Company will as soon as
practicable furnish to Purchaser its audited financial statements for
the year 1996 in substitution for its unaudited 1996 financial
statements (as contemplated by the definition `Financial Statements'),
and it is agreed that Purchaser shall have no right to object to such
substitution unless the audited 1996 financial statements contain
material adjustments or disclosures not contained in the unaudited
1996 financial statements."
(k) Entire Agreement. Section 18 of the Stock Purchase
Agreement is hereby amended to read in its entirety as follows:
"18. Entire Agreement. This Agreement together with
all exhibits and schedules hereto (including the Disclosure Letter as
updated pursuant to Section 15 hereof) represent the entire
understanding and agreement among the
10
<PAGE> 11
parties hereto with respect to the subject matter hereof and
supersedes all prior understandings and agreements, whether written or
oral, and can be amended, supplemented or changed, and any provision
hereof can be waived, only by written instrument making specific
reference to this Agreement signed by the party against whom
enforcement of any such amendment, supplement, modification or waiver
is sought, including, in the case of the Stockholders, all
Stockholders who are a party to this Agreement at the time such
enforcement is sought. No waiver of any of the provisions of this
Agreement shall be deemed or shall constitute a waiver of any other
provision hereof (whether or not similar), nor shall such waiver
constitute a continuing waiver unless otherwise expressly provided.
Upon Closing, all rights and obligations under that certain letter,
dated February 25, 1997, regarding the ADCO Note shall terminate."
(l) Expenses. Section 22 of the Stock Purchase Agreement
is hereby amended to read in its entirety as follows:
"Expenses. Whether or not the transactions
contemplated hereby are consummated, (a) Purchaser shall pay all of
its legal, accounting and other out-of-pocket expenses incident to the
transactions contemplated hereby and (ii) the Stockholders and the
Phantom Stock Grantees shall pay their own and the Company's legal,
accounting and other out-of-pocket expenses incident to the
transactions contemplated hereby, provided however, that Purchaser, on
the one hand, and the Stockholders, on the other, shall divide and
share equally filing fees in connection with government filings
necessary to consummate the transactions contemplated hereby (provided
that if this Agreement is terminated, each party shall attempt to
obtain any available refunds of such fees or otherwise utilize such
fees in other transactions such that expense to the parties is
minimized)."
3. Effect of Amendment. Except as specifically provided herein,
this Amendment does not in any way affect or impair the terms and conditions of
the Stock Purchase Agreement, and all terms and conditions of the Stock
Purchase Agreement remain in full force and effect unless otherwise
specifically amended, waived or changed pursuant to the terms and conditions
hereof.
4. Additional Parties. By executing this Amendment below, each
party who was an original signatory to the Stock Purchase Agreement hereby
ratifies, approves and confirms the Stock Purchase Agreement in all respects,
except as amended by this Amendment, and each Stockholder who was not an
original signatory to the Stock Purchase Agreement hereby affirms the Stock
Purchase Agreement as so amended and hereby becomes a party thereto and agrees
to be bound thereby.
5. Applicable Law. This Amendment and the rights and obligations
of the parties hereto and all other aspects hereof shall be deemed to be made
under, and shall be governed by, and shall be construed and enforced in
accordance with, the laws of the State of Delaware.
11
<PAGE> 12
6. Counterparts. This Amendment may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which taken
together shall constitute one and the same instrument.
[SIGNATURE PAGES FOLLOW]
12
<PAGE> 13
IN WITNESS WHEREOF, the parties hereto have duly executed this
Amendment as of the date first above written.
PURCHASER
By
------------------------
Name:
Title:
ELLER MEDIA CORPORATION
By
------------------------
Name:
Title:
HELLMAN & FRIEDMAN
CAPITAL PARTNERS III, L.P.
By: Its General Partner,
H&F Investors III
By: Its Managing General Partner,
Hellman & Friedman Associates
III, L.P.
By: Its Managing General Partner,
H&F Investors III, Inc.
By:
---------------------------
Its:
<PAGE> 14
H&F ORCHARD PARTNERS III, L.P.
By: Its General Partner,
H&F Investors III
By: Its Managing General Partner,
Hellman & Friedman Associates
III, L.P.
By: Its Managing General Partner,
H&F Investors III, Inc.
By:
---------------------------
Its:
H&F INTERNATIONAL PARTNERS III, L.P.
By: Its General Partner,
H&F Investors III
By: Its Managing General Partner,
Hellman & Friedman Associates
III, L.P.
By: Its Managing General Partner,
H&F Investors III, Inc.
By:
---------------------------
Its:
EM HOLDINGS LLC
By:
---------------------------
Its:
------------------------------
H. Irving Grousbeck
<PAGE> 15
AMERICAN MEDIA MANAGEMENT, INC.
By:
----------------------------
Its:
-------------------------------
Richard Reiss, Jr.
-------------------------------
Glenn Krevlin, as Trustee fbo
Nina Krevlin, Glenn Krevlin,
Michael Krevlin and Jill Krevlin
-------------------------------
K. Tucker Andersen
-------------------------------
Bruce Halle
-------------------------------
Timothy J. Donmoyer
<PAGE> 16
---------------------------------
Karl Eller
---------------------------------
Paul J. Meyer
---------------------------------
Patricia Salas Pineda
EL DORADO INVESTMENT COMPANY
By:
------------------------------
Its:
---------------------------------
Steven G. Mihaylo
<PAGE> 1
EXHIBIT 10.28
EXECUTION COPY
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated
as of April 10, 1997, is entered into by and among Clear Channel
Communications, Inc., a Texas corporation (the "Company"), and the persons
listed on the signature pages hereof (the "Stockholders").
RECITALS
A. The Company and the Stockholders desire to enter into
this Agreement for the purpose of granting to the Stockholders certain rights
with respect to registering under the Securities Act of 1933, as amended,
shares of Common Stock, par value $.10 per share, of the Company.
B. The Common Stock is being acquired by the
Stockholders pursuant to the stock purchase (the "Transaction") contemplated by
the Stock Purchase Agreement, dated as of February 25, 1997, as amended, by and
among the Company, Eller Media Corporation, a Delaware corporation ("EMC"), and
the persons listed on Exhibit A thereto.
AGREEMENT
In consideration of the Recitals and mutual promises contained
herein, and other good and valuable consideration, the receipt and adequacy of
which are hereby acknowledged, the parties, intending to be legally bound,
hereby agree as follows:
1. Definitions. As used in this Agreement, the
following terms shall have the following meanings:
"Advice" shall have the meaning set forth in Section 4 hereof.
"Affiliate" means, with respect to any specified person, any
other person directly or indirectly controlling or controlled by or under
direct or indirect common control with such specified person. For the purposes
of this definition, "control" when used with respect to any specified person,
means the power to direct the management and policies of such person, directly
or indirectly, whether through the ownership of voting securities, by contract
or otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"Agreement" shall have the meaning set forth in the heading
hereof.
"Business Day" means any day that is not a Saturday, a Sunday
or a legal holiday on which banking institutions in the State of New York are
not required to be open.
<PAGE> 2
"Capital Stock" means, with respect to any person, any and all
shares, interests, participations or other equivalents (however designated) of
corporate stock issued by such person, including each class of common stock and
preferred stock of such person.
"Common Stock" means the Common Stock, par value $.10 per
share, of the Company issued to any Holder named on the signature pages hereof
in the Transaction or any other shares of capital stock or other securities of
the Company into which such shares of Common Stock shall be reclassified or
changed, including, by reason of a merger, consolidation, reorganization or
recapitalization. If the Common Stock has been so reclassified or changed, or
if the Company pays a dividend or makes a distribution on the Common Stock in
shares of capital stock or subdivides (or combines) its outstanding shares of
Common Stock into a greater (or smaller) number of shares of Common Stock, a
share of Common Stock shall be deemed to be such number of shares of stock and
amount of other securities to which a holder of a share of Common Stock
outstanding immediately prior to such change, reclassification, exchange,
dividend, distribution, subdivision or combination would be entitled.
"Company" shall have the meaning set forth in the heading
hereof.
"Company Common Stock" shall mean shares of Common Stock, par
value $.10 per share, of the Company.
"Delay Period" shall have the meaning set forth in Section
2(d) hereof.
"Demand Notice" shall have the meaning set forth in Section
2(a) hereof.
"Demand Registration" shall have the meaning set forth in
Section 2(b) hereof.
"Effectiveness Period" shall have the meaning set forth in
Section 2(d) hereof.
"EMC" shall have the meaning set forth in Recital B.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the SEC promulgated thereunder.
"H&F Funds" shall mean Hellman & Friedman Capital Partners
III, L.P., H&F Orchard Partners III, L.P. and H&F International Partners III,
L.P.
"Holder" means a person who owns Registrable Shares and is
either (i) a Stockholder, (ii) a Permitted Transferee or (iii) a Permitted
Assignee.
"Holdings" shall mean EM Holdings LLC, an Arizona limited
liability company.
"Holdings Agreement" shall mean the Stockholders Agreement,
dated as of April 8, 1997, by and among EMC, the Company and Holdings.
"Inclusion Notice" shall have the meaning set forth in Section
2(a) hereof.
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<PAGE> 3
"Indemnified Party" shall have the meaning set forth in
Section 7(c) hereof.
"Indemnifying Party" shall have the meaning set forth in
Section 7(c) hereof.
"Inspectors" shall have the meaning set forth in Section 4(l)
hereof.
"Interruption Period" shall have the meaning set forth in
Section 4 hereof.
"Losses" shall have the meaning set forth in Section 7(a)
hereof.
"Permitted Assignee" means a Holder who acquires (a) more than
$5 million in value of Common Stock at the date of transfer from a Holder, or
(b) Common Stock from a Holder in a transfer in which consent to assignment of
this Agreement is granted pursuant to Section 9(e), in either case in a
transfer exempt pursuant to Rule "4(1-1/2)" (or any similar private transfer
exemption), provided that in each case the transferee assumes and agrees to
perform and becomes a party to this Agreement.
"Permitted Transferees" means, as to any Holder, (A) any other
Holder, (B) any Affiliate or partner of a Stockholder (and in the case of a
general partner of a Stockholder, any partner of such general partner or its
partners or members); (C) any person who is the spouse or former spouse of, or
any lineal descendent (including adopted children) of, or any spouse of such
lineal descendant (including adopted children) of, or the grandparent, parent,
brother or sister of, or spouse of such brother or sister of, a Holder or
Permitted Transferee of such person; (D) upon the death of any Holder or any
Permitted Transferee of such person, the executors of the estate of such Holder
or Permitted Transferee, any of such Holder's or such Permitted Transferee's
heirs, testamentary trustees, devisees, or legatees; (E) any trust principally
for the benefit of one or more of the foregoing Holders or Permitted
Transferees (including a charitable lead or remainder trust); or (F) upon the
disability of any Holder or Permitted Transferee, any guardian or conservator
of such Holder or Permitted Transferee; provided that in each case such
transferee assumes and agrees to perform and becomes a party to this Agreement.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization
or government or any agency or political subdivision thereof.
"Piggyback Registration" shall have the meaning set forth in
Section 3(a) hereof.
"Prospectus" means the prospectus included in any Registration
Statement (including a prospectus that discloses information previously omitted
from a prospectus filed as part of an effective Registration Statement in
reliance upon Rule 430A), as amended or supplemented by any prospectus
supplement, with respect to the terms of the offering of any portion of the
Registrable Shares covered by such Registration Statement and all other
amendments and supplements to such prospectus, including post-effective
amendments, and all material incorporated by reference or deemed to be
incorporated by reference in such prospectus.
3
<PAGE> 4
"Records" shall have the meaning set forth in Section 4(l)
hereof.
"Registrable Shares" means shares of Common Stock unless (i)
they have been effectively registered under Section 5 of the Securities Act and
disposed of pursuant to an effective Registration Statement, or (ii) all of
such Common Stock of a Holder can be freely sold and transferred without
restriction under the volume limitation provisions of Rule 144 or Rule 145
under the Securities Act or any successor rule such that, after any such
transfer referred to in this clause (ii), such securities may be freely
transferred without restriction under the Securities Act. In addition, any
shares of Common Stock held by a Stockholder who owns Common Stock representing
more than 1% of the then outstanding Company Common Stock shall be considered
Registrable Shares. Further, no Holder who is not a Stockholder shall be
deemed to own Registrable Shares after three years from the date hereof. For
purposes of this definition, the H&F Funds shall be considered a single
Stockholder.
"Registration" means registration under the Securities Act of
an offering of Registrable Shares pursuant to a Demand Registration or a
Piggyback Registration.
"Registration Period" means, as to any Holder, the period
beginning on the date hereof and ending on the date when such Holder no longer
owns any Registrable Shares.
"Registration Statement" means any registration statement
under the Securities Act of the Company that covers any of the Registrable
Shares pursuant to the provisions of this Agreement, including the related
Prospectus, all amendments and supplements to such registration statement,
including pre- and post-effective amendments, all exhibits thereto and all
material incorporated by reference or deemed to be incorporated by reference in
such registration statement.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations of the SEC promulgated thereunder.
"Stockholders" shall have the meaning set forth in the heading
hereof.
"Transaction" shall have the meaning set forth in Recital B.
"Underwritten Offering" means a registration under the
Securities Act in which securities of the Company are sold to an underwriter
for reoffering to the public.
2. Demand Registration.
(a) Subject to the last sentence of this Section
2(a), any Holder or Holders shall have the right during the Registration
Period, by written notice (the "Demand Notice") given to the Company, to
request the Company to register under and in accordance with the provisions of
the Securities Act all or any portion of the Registrable Shares designated by
such Holders; provided, however, that the aggregate value (based on the closing
price per
4
<PAGE> 5
share of Common Stock at the respective dates of such notices) of Registrable
Shares requested to be registered pursuant to any Demand Notice and pursuant to
any related Inclusion Notices received pursuant to the following sentence shall
be at least $ 20 million. Upon receipt of any such Demand Notice, the Company
shall promptly (and in no event later than 15 days after receipt of such Demand
Notice) notify all other Holders of the receipt of such Demand Notice and allow
them the opportunity to include Registrable Shares held by them in the proposed
registration by submitting their own written notice to the Company no later
than 15 days after receipt of the notice from the Company of the Demand Notice
requesting inclusion of a specified number of such Holders' Registrable
Securities (the "Inclusion Notice"). In connection with any Demand
Registration in which more than one Holder participates, in the event that such
Demand Registration involves an Underwritten Offering and the managing
underwriter or underwriters participating in such offering advise in writing
the Holders of Registrable Shares to be included in such offering that the
total number of Registrable Shares to be included in such offering exceeds the
amount that can be sold in (or during the time of) such offering without
delaying or jeopardizing the success of such offering (including the price per
share of the Registrable Shares to be sold), then the amount of Registrable
Shares to be offered for the account of such Holders shall be reduced pro rata
on the basis of the number of Registrable Shares to be registered by each such
Holder. The Holders as a group shall be entitled to three Demand Registrations
pursuant to this Section 2. If any such Demand Registration does not become
effective or is not maintained for a period (whether or not continuous) of at
least 120 days (or such shorter period as shall terminate when all the
Registrable Shares covered by such Demand Registration (other than any shares
reserved for issuance upon exercise of the underwriters' overallotment option)
have been sold pursuant thereto), the affected Holders will be entitled to an
additional Demand Registration pursuant hereto. For purposes of the foregoing,
the 120-day period does not have to be consecutive and may be interrupted by
Delay Periods or Interruption Periods as set forth herein. It is agreed that
the registration of Registrable Shares pursuant to an Inclusion Notice shall
not be deemed to be a separate Demand Registration. Nothing in this Section
2(a) shall limit any rights pursuant to Section 3 hereof.
(b) The Company, within 45 days of the date on
which the Company receives a Demand Notice given by Holders in accordance with
Section 2(a) hereof, shall file with the SEC, and the Company shall thereafter
use commercially reasonable efforts to cause to be declared effective, a
Registration Statement on the appropriate form for the registration and sale,
in accordance with the intended method or methods of distribution, of the total
number of Registrable Shares specified by the Holders in such Demand Notice (a
"Demand Registration").
(c) The Company shall use commercially reasonable
efforts to cause the Registration Statement to be declared effective and to
keep each Registration Statement filed pursuant to this Section 2 continuously
effective and usable for the resale of the Registrable Shares covered thereby
until the earlier of (i) 120 days from the date on which the SEC declares such
Registration Statement effective (as such period may be extended pursuant to
this Section 2) and (ii) the date on which all the Registrable Shares covered
by such Registration Statement (other than any shares reserved for issuance
upon exercise of the underwriters' overallotment option) have been sold
pursuant to such Registration Statement.
5
<PAGE> 6
(d) Except with respect to the first Demand
Notice contemplated by Section 2(g) hereof, the Company shall be entitled to
postpone the filing of any Registration Statement otherwise required to be
prepared and filed by the Company pursuant to this Section 2 for a reasonable
period of time, but not in excess of 90 days (a "Delay Period"), if the Board
of Directors of the Company determines in good faith that the registration and
distribution of the Registrable Shares covered or to be covered by such
Registration Statement would materially interfere with any pending material
financing, acquisition or corporate reorganization or other material corporate
development involving the Company or any of its subsidiaries or would require
premature disclosure thereof and promptly gives the Holders written notice of
such determination, containing a general statement of the reasons for such
postponement and an approximation of the period of the anticipated delay;
provided, however, that (i) the aggregate number of days included in all Delay
Periods during any consecutive 12 months shall not exceed the aggregate of (x)
120 days minus (y) the number of days occurring during all Interruption Periods
during such consecutive 12 months and (ii) a period of at least 60 days shall
elapse between the termination of any Delay Period or Interruption Period and
the commencement of the immediately succeeding Delay Period. If the Company
shall so postpone the filing of a Registration Statement, the Holders of
Registrable Shares to be registered shall have the right to withdraw the
request for registration by giving written notice from the Holders of a
majority of the Registrable Shares that were to be registered to the Company
within 30 days after receipt of the notice of postponement or, if earlier, the
termination of such Delay Period (and, in the event of such withdrawal, such
request shall not be counted for purposes of determining the number of requests
for registration to which the Holders of Registrable Shares are entitled
pursuant to this Section 2). The time period for which the Company is required
to maintain the effectiveness of any Registration Statement shall be extended
by the aggregate number of days of all Delay Periods and all Interruption
Periods occurring during such Registration and such period and any extension
thereof is hereinafter referred to as the "Effectiveness Period." The Company
shall not be entitled to initiate a Delay Period or an Interruption Period
unless it shall (A) concurrently prohibit sales by all other security holders
under registration statements covering securities held by such other security
holders (excluding exercise of options pursuant to a Form S-8) and (B) forbid
purchases and sales in the open market by senior executives of the Company.
(e) Except with respect to the first Demand
Registration contemplated by Section 2(g) hereof, the Company shall not include
any securities that are not Registrable Shares in any Registration Statement
filed pursuant to this Section 2 without the prior written consent of the
Holders of a majority in number of the Registrable Shares held by Holders
covered by such Registration Statement, which consent shall not be unreasonably
withheld.
(f) Holders of a majority in number of the
Registrable Shares to be included in a Registration Statement pursuant to this
Section 2 may, at any time prior to the effective date of the Registration
Statement relating to such Registration, revoke such request by providing a
written notice to the Company revoking such request. The Holders of
Registrable Shares who revoke such request shall reimburse the Company for all
its out-of- pocket expenses incurred in the preparation, filing and processing
of the Registration Statement; provided, however, that, if such revocation was
pursuant to Section 2(d) (for a postponement) or was based on the Company's
failure to comply in any material respect with its obligations
6
<PAGE> 7
hereunder, such reimbursement shall not be required, and such registration
shall not count against the maximum number of Demand Registrations to which the
applicable Holders are entitled under Section 2(a). In addition, if pursuant
to the terms of this Section 2(f), the Holders reimburse the Company for its
out-of-pocket expenses incurred in the preparation, filing and processing of
any Registration Statement requested, and subsequently revoked by such
Holder(s), such registration shall not count against the maximum number of
Demand Registrations to which the applicable Holder(s) are entitled under
Section 2(a).
(g) Notwithstanding anything herein to the
contrary, the Stockholders hereby give their first Demand Notice to the Company
as set forth on Schedule I hereto, subject to their right to revoke such
request pursuant to Section 2(f), and understand and agree that the Company
intends to include authorized but unissued Company Common Stock for sale in
such Registration pursuant to a firm commitment Underwritten Offering. In the
event the managing underwriter or underwriters participating in such offering
advise in writing the Company and the Holders of Registrable Shares to be
included in such offering that the total number of Registrable Shares and
shares of Company Common Stock to be sold by the Company to be included in such
offering exceeds the amount that can be sold in (or during the time of) such
offering without delaying or jeopardizing the success of such offering
(including the price per share of the Registrable Shares and other shares of
Company Common Stock to be sold), then the amount of shares to be offered shall
be reduced in the following order of priority: (i) first, the amount of
Company Common Stock to be sold by the Company shall be reduced, to the extent
necessary, until such amount equals zero, and (ii) second, to the extent
necessary, the amount of Registrable Shares shall be reduced pro rata on the
basis of the number of Registrable Shares to be registered by each such Holder.
It is understood that the second Demand Notice may not be given for a period of
at least six months after the completion of the sale of Registrable Shares
effected pursuant to the first Demand Registration, and that the third Demand
Notice may not be given for a period of at least twelve months after the
completion of the sale of Registrable Shares effected pursuant to the second
Demand Registration, and that no Demand Notice will be given for a period of
120 days after the sale of any shares of Company Common Stock pursuant to a
Registration Statement in which the Holders have been given an opportunity to
participate as provided in Section 3(a) hereof and have either sold any shares
as part of such offering or have elected not to participate.
3. Piggyback Registration.
(a) Right to Piggyback. If at any time during
the Registration Period the Company proposes to file a registration statement
under the Securities Act with respect to a public offering of securities of the
same type as the Registrable Shares pursuant to a firm commitment Underwritten
Offering for cash for its own account (other than a registration statement (i)
on Form S-8 or any successor forms thereto, or (ii) filed solely in connection
with a dividend reinvestment plan or employee benefit plan of the Company or
its Affiliates) or for the account of any holder of securities of the same type
as the Registrable Shares (to the extent that the Company has the right to
include Registrable Shares in any registration statement to be filed by the
Company on behalf of such holder), then the Company shall give written notice
of such proposed filing to the Holders at least 10 days before the anticipated
filing date of such registration statement. Such notice shall offer the
Holders the opportunity to register such
7
<PAGE> 8
amount of Registrable Shares as they may request (a "Piggyback Registration").
Subject to Section 3(b) hereof, the Company shall include in each such
Piggyback Registration all Registrable Shares with respect to which the Company
has received written requests for inclusion therein within 10 days after notice
has been given to the Holders. Each Holder shall be permitted to withdraw all
or any portion of the Registrable Shares of such Holder from a Piggyback
Registration at any time prior to the effective date of such Piggyback
Registration; provided, however, that if such withdrawal occurs after the
filing of the Registration Statement with respect to such Piggyback
Registration, the withdrawing Holders shall reimburse the Company for the
portion of the registration expenses payable with respect to the Registrable
Shares so withdrawn.
(b) Priority on Piggyback Registrations. The
Company shall permit the Holders to include all such Registrable Shares on the
same terms and conditions as any similar securities, if any, of the Company
included therein. Notwithstanding the foregoing, if the Company or the
managing underwriter or underwriters participating in such offering advise the
Holders in writing that the total amount of securities requested to be included
in such Piggyback Registration exceeds the amount which can be sold in (or
during the time of) such offering without delaying or jeopardizing the success
of the offering (including the price per share of the securities to be sold),
then the amount of securities to be offered for the account of the Holders and
other holders of securities who have registration rights with respect thereto
shall be reduced (to zero if necessary) pro rata on the basis of the number of
common stock equivalents requested to be registered by each such Holder or
holder participating in such offering.
(c) Right to Abandon. Nothing in this Section 3
shall create any liability on the part of the Company to the Holders if the
Company in its sole discretion should decide not to file a registration
statement proposed to be filed pursuant to Section 3(a) hereof or to withdraw
such registration statement subsequent to its filing and prior to the later of
its effectiveness or the release of the Registrable Shares for public offering
by the managing underwriter, in the case of an underwritten public offering,
regardless of any action whatsoever that a Holder may have taken, whether as a
result of the issuance by the Company of any notice hereunder or otherwise.
(d) Priority Over Demand Registrations. If the
Company at any time within 15 days after receipt of a Demand Notice (or any
applicable Delay Period) notifies the Holders of its proposal to file a
Registration Statement covered by Section 3(a) hereof pursuant to which a
majority of shares to be sold will be sold by the Company (without regard to
any shares to be sold by the Holders), the Company's proposed filing and notice
thereof will take priority over the Demand Notice, and the Demand Notice will
be considered to have been revoked and will not be considered or counted as a
Demand Registration under Section 2. Subject to the provisions of Section
2(g), the revocation of the Demand Notice shall in no way affect or preclude a
new Demand Notice if the Company abandons the proposed registration as
contemplated by Section 3(c). The provisions of this Section 2(d) will not
apply to the first Demand Notice pursuant to Section 2(g) hereof.
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<PAGE> 9
4. Registration Procedures. In connection with the
registration obligations of the Company pursuant to and in accordance with
Sections 2 and 3 hereof (and subject to Sections 2 and 3 hereof), the Company
shall use commercially reasonable efforts to effect such registration to permit
the sale of such Registrable Shares in accordance with the intended method or
methods of disposition thereof, and pursuant thereto the Company shall (subject
to Sections 2 and 3 hereof):
(a) At least three business days before filing a
Registration Statement or Prospectus, furnish to the Holders (or their
representatives) who are participating in such Registration Statement and the
underwriters, if any, copies of all such documents (which may be drafts or
proofs) proposed to be filed, which documents will be subject to the review of
such Holders and such underwriters (and their respective counsel), and, in the
case of a Demand Registration, the Company will not file any Registration
Statement or amendment thereto or any Prospectus or any supplement thereof to
which the registering Holders or the underwriters, if any, shall reasonably
object;
(b) prepare and file with the SEC a Registration
Statement for the sale of the Registrable Shares on any form for which the
Company then qualifies or which counsel for the Company shall deem appropriate
in accordance with such Holders' intended method or methods of distribution
thereof, subject to Section 2(b) hereof, and, subject to the Company's right to
terminate or abandon a registration pursuant to Section 3(c) hereof, use
commercially reasonable efforts to cause such Registration Statement to become
effective and remain effective as provided herein;
(c) prepare and file with the SEC such amendments
(including post-effective amendments) to such Registration Statement, and such
supplements to the related Prospectus, as may be required by the rules,
regulations or instructions applicable to the Securities Act during the
applicable period in accordance with the intended methods of disposition
specified by the Holders of the Registrable Shares covered by such Registration
Statement, make generally available earnings statements satisfying the
provisions of Section 11(a) of the Securities Act (provided that the Company
shall be deemed to have complied with this clause if it has complied with Rule
158 under the Securities Act), and cause the related Prospectus as so
supplemented to be filed pursuant to Rule 424 under the Securities Act;
provided, however, that before filing a Registration Statement or Prospectus,
or any amendments or supplements thereto (other than reports required to be
filed by it under the Exchange Act), the Company shall furnish to the Holders
of Registrable Shares covered by such Registration Statement and their counsel
for their reasonable review and comment, copies of all documents required to be
filed;
(d) notify the Holders of any Registrable Shares
covered by such Registration Statement promptly and (if requested) confirm such
notice in writing, (i) when a Prospectus or any Prospectus supplement or
post-effective amendment has been filed, and, with respect to such Registration
Statement or any post-effective amendment, when the same has become effective,
(ii) of any request by the SEC for amendments or supplements to such
Registration Statement or the related Prospectus or for additional information
regarding such Holders, (iii) of the issuance by the SEC of any stop order
suspending the effectiveness of such
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<PAGE> 10
Registration Statement or the initiation of any proceedings for that purpose,
(iv) of the receipt by the Company of any notification with respect to the
suspension of the qualification or exemption from qualification of any of the
Registrable Shares for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose, and (v) of the happening of any
event that requires the making of any changes in such Registration Statement,
Prospectus or documents incorporated or deemed to be incorporated therein by
reference so that they will not contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary
to make the statements therein not misleading;
(e) use commercially reasonable efforts to obtain
the withdrawal of any order suspending the effectiveness of such Registration
Statement, or the lifting of any suspension of the qualification or exemption
from qualification of any Registrable Shares for sale in any jurisdiction in
the United States;
(f) furnish to the Holder of any Registrable
Shares covered by such Registration Statement, each counsel for such Holders
and each managing underwriter, if any, without charge, one conformed copy of
such Registration Statement, as declared effective by the SEC, and of each
post-effective amendment thereto, in each case including financial statements
and schedules and all exhibits and reports incorporated or deemed to be
incorporated therein by reference; and deliver, without charge, such number of
copies of the preliminary prospectus, any amended preliminary prospectus, each
final Prospectus and any post-effective amendment or supplement thereto, as
such Holder may reasonably request in order to facilitate the disposition of
the Registrable Shares of such Holder covered by such Registration Statement in
conformity with the requirements of the Securities Act;
(g) prior to any public offering of Registrable
Shares covered by such Registration Statement, use commercially reasonable
efforts to register or qualify such Registrable Shares for offer and sale under
the securities or Blue Sky laws of such jurisdictions as the Holders of such
Registrable Shares shall reasonably request in writing; provided, however, that
the Company shall in no event be required to qualify generally to do business
as a foreign corporation or as a dealer in any jurisdiction where it is not at
the time so qualified or to execute or file a general consent to service of
process in any such jurisdiction where it has not theretofore done so or to
take any action that would subject it to general service of process or taxation
in any such jurisdiction where it is not then subject;
(h) upon the occurrence of any event contemplated
by paragraph 4(d)(v) above, prepare a supplement or post-effective amendment to
such Registration Statement or the related Prospectus or any document
incorporated or deemed to be incorporated therein by reference and file any
other required document so that, as thereafter delivered to the purchasers of
the Registrable Shares being sold thereunder (including upon the termination of
any Delay Period), such Prospectus will not contain an untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading;
(i) use commercially reasonable efforts to cause
all Registrable Shares covered by such Registration Statement to be listed on
each securities exchange or automated
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<PAGE> 11
interdealer quotation system, if any, on which similar securities issued by the
Company are then listed or quoted;
(j) use commercially reasonable efforts to comply
with all applicable rules and regulations of the SEC and any securities
exchange or regulatory body;
(k) on or before the effective date of such
Registration Statement, provide the transfer agent of the Company for the
Registrable Shares with printed certificates for the Registrable Shares covered
by such Registration Statement which are in a form eligible for deposit with
The Depository Trust Company;
(l) if such offering is an Underwritten Offering,
make available for inspection by any Holder of Registrable Shares included in
such Registration Statement, any underwriter participating in any offering
pursuant to such Registration Statement, and any attorney, accountant or other
agent retained by any such Holder or underwriter (collectively, the
"Inspectors"), such financial and other records and other information,
pertinent corporate documents and properties of any of the Company and its
subsidiaries and Affiliates (collectively, the "Records"), as shall be
reasonably necessary to enable them to exercise their due diligence
responsibilities; provided, however, that the Records that the Company
determines, in good faith, to be confidential and which it notifies the
Inspector in writing are confidential shall not be disclosed to any Inspector
unless such Inspector signs a confidentiality agreement reasonably satisfactory
to the Company, which agreement shall permit the release of such Records if
such release is ordered pursuant to a subpoena or other order from a court of
competent jurisdiction; provided, however, that each Holder of Registrable
Shares agrees that it shall, promptly after learning that disclosure of such
Records is sought in a court having jurisdiction, give notice to the Company so
that the Company, at the Company's expense, may undertake appropriate action to
prevent disclosure of such Records; and
(m) if such offering is an Underwritten Offering,
enter into such agreements (including an underwriting agreement in form, scope
and substance as is customary in underwritten offerings) and take all such
other appropriate and reasonable actions requested by the Holders of a majority
of the Registrable Shares being sold in connection therewith (including those
reasonably requested by the managing underwriters) in order to expedite or
facilitate the disposition of such Registrable Shares, and in such connection,
(i) use commercially reasonable efforts to obtain opinions of counsel to the
Company and updates thereof (which counsel and opinions (in form, scope and
substance) shall be reasonably satisfactory to the managing underwriters and
counsel to the Holders of the Registrable Shares being sold), addressed to each
selling Holder of Registrable Shares covered by such Registration Statement and
each of the underwriters as to the matters customarily covered in opinions
requested in underwritten offerings and such other matters as may be reasonably
requested by such counsel and underwriters, (ii) use commercially reasonable
efforts to obtain "cold comfort" letters and updates thereof from the
independent certified public accountants of the Company (and, if necessary, any
other independent certified public accountants of any subsidiary of the Company
or of any business acquired by the Company for which financial statements and
financial data are, or are required to be, included in the Registration
Statement), addressed to each selling Holder of Registrable Shares covered by
the Registration Statement (unless such accountants
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<PAGE> 12
shall be prohibited from so addressing such letters by applicable standards of
the accounting profession) and each of the underwriters, such letters to be in
customary form and covering matters of the type customarily covered in "cold
comfort" letters in connection with underwritten offerings (iii) if requested
and if an underwriting agreement is entered into, provide indemnification
provisions and procedures substantially to the effect set forth in Section 7
hereof with respect to all parties to be indemnified pursuant to said Section.
The above shall be done at each closing under such underwriting or similar
agreement, or as and to the extent required thereunder. In addition, the
Company agrees not to effect any public sale or distribution of Common Stock or
any securities convertible into or exchangeable or exercisable for Common
Stock, during the period commencing with the effective date of any underwritten
Demand or Piggyback Registration and until the earlier of (A) the abandonment
of such offering or (B) the termination of any "hold back" period reasonably
requested by the underwriters (with exceptions for issuances pursuant to
outstanding options, warrants, and convertible or exchangeable securities,
pursuant to employee and dividend reinvestment plans, and such other exceptions
as are customary or agreed with the managing underwriter).
The Company may require each Holder of Registrable
Shares covered by a Registration Statement to furnish such information
regarding such Holder and such Holder's intended method of disposition of such
Registrable Shares as it may from time to time reasonably request in writing.
If any such information is not furnished within a reasonable period of time
after receipt of such request, the Company may exclude such Holder's
Registrable Shares from such Registration Statement. In addition, the Company
may require each Holder of Registrable Shares covered by a Registration
Statement to agree not to effect any public sale or distribution of Common
Stock, or any securities convertible into or exchangeable or exercisable for
Common Stock, during the period commencing with the effective date of any
underwritten Demand or Piggyback Registration and until the earlier of (A) the
abandonment of such offering or (B) the termination of any "hold back" period
reasonably requested by the underwriters (with such exceptions as are customary
or agreed with the managing underwriter). In addition, if the Holders have
been given an opportunity to participate in a Registration Statement pursuant
to Section 3(a), any Holder who owns Registrable Shares representing 1% or more
of the then outstanding shares of Common Stock of the Company will agree, if so
requested by the Company, not to effect any public sale or distribution of
Common Stock, or any securities convertible into or exchangeable or exercisable
for Common Stock, during the period commencing with the effective date of any
underwritten Piggyback Registration and until the earlier of (A) the
abandonment of such offering or (B) 30 days after the effective date of such
Piggyback Registration; provided that each officer and director of the Company
who beneficially owns 1% or more of the then outstanding Company Common Stock
and each stockholder of the Company who owns "restricted" shares of Company
Common Stock (as defined in Rule 144) constituting 1% or more of the then
outstanding Company Common Stock agrees to the same hold-back arrangements.
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<PAGE> 13
Each Holder of Registrable Shares covered by a
Registration Statement agrees that, upon receipt of any notice from the Company
of the happening of any event of the kind described in Section 4(d)(ii),
4(d)(iii), 4(d)(iv) or 4(d)(v) hereof, that such Holder shall forthwith
discontinue disposition of any Registrable Shares covered by such Registration
Statement or the related Prospectus until receipt of the copies of the
supplemented or amended Prospectus contemplated by Section 4(h) hereof, or
until such Holder is advised in writing (the "Advice") by the Company that the
use of the applicable Prospectus may be resumed, and has received copies of any
amended or supplemented Prospectus or any additional or supplemental filings
which are incorporated, or deemed to be incorporated, by reference in such
Prospectus (such period during which disposition is discontinued being an
"Interruption Period") and, if requested by the Company, the Holder shall
deliver to the Company (at the expense of the Company) all copies then in its
possession, other than permanent file copies then in such holder's possession,
of the Prospectus covering such Registrable Shares at the time of receipt of
such request.
Each Holder of Registrable Shares covered by a
Registration Statement further agrees not to utilize any material other than
the applicable current preliminary prospectus or Prospectus in connection with
the offering of such Registrable Shares.
5. Registration Expenses. The costs, fees and expenses
incident to the Company's performance of or compliance with this Agreement,
including (i) all registration and filing fees, including NASD filing fees,
(ii) all fees and expenses of compliance with securities or Blue Sky laws,
including reasonable fees and disbursements of counsel in connection therewith,
(iii) printing expenses (including expenses of printing certificates for
Registrable Shares and of printing preliminary and final prospectuses if the
printing of prospectuses is requested by the Holders or the managing
underwriter, if any), (iv) messenger, telephone and delivery expenses, (v) fees
and disbursements of counsel for the Company, (vi) fees and disbursements of
all independent certified public accountants of the Company (including expenses
of any "cold comfort" letters required in connection with this Agreement) and
all other persons retained by the Company in connection with this Agreement and
the Registration Statement, (vii) all other costs, fees and expenses incident
to the Company's performance or compliance with this Agreement (excluding the
Company's internal direct and indirect expenses, any expenses which the Company
would otherwise incur, including the costs of its financial and other reporting
under the Exchange Act and filings made on its own behalf under the Securities
Act, any amounts payable by the Company on behalf of other sellers pursuant to
other registration rights agreements or otherwise, and discounts, commissions
and brokers' fees or fees of similar securities industry professionals and any
transfer taxes payable by the Company, which shall be borne by the Company),
shall be borne by the Holders and, if applicable, the Company, pro rata (based
on the number of Registrable Shares sold by such Holders in such offering as a
percentage of the total number of shares sold in the offering). The fees and
expenses of any persons retained by any Holder, including counsel for such
Holder, and any discounts, commissions or brokers' fees or fees of similar
securities industry professionals and any transfer taxes relating to the
disposition of the Registrable Shares by a Holder, will be payable by such
Holder.
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<PAGE> 14
6. Underwriting Requirements.
(a) Subject to Section 6(b) hereof, any Holder
giving a Demand Notice shall have the right, by written notice, to request that
any Demand Registration provide for an Underwritten Offering.
(b) In the case of any Underwritten Offering
pursuant to a Demand Registration, the Company shall select the institution or
institutions that shall manage or lead such offering, with the consent of the
Holders of a majority of the Registrable Shares covered by the Demand Notice to
be disposed of in connection therewith, which consent shall not be unreasonably
withheld. In the case of any Underwritten Offering pursuant to a Piggyback
Registration, the Company shall select the institution or institutions that
shall manage or lead such offering.
7. Indemnification.
(a) Indemnification by the Company. The Company
shall, without limitation as to time, indemnify and hold harmless, to the full
extent permitted by law, each Holder of Registrable Shares whose Registrable
Shares are covered by a Registration Statement or Prospectus, the officers,
directors and agents and employees of each of them, each Person who controls
each such Holder (within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act) and the officers, directors, agents and
employees of each such controlling person, to the fullest extent lawful, from
and against any and all losses, claims, damages, liabilities, judgment, costs
(including, without limitation, costs of preparation and reasonable attorneys'
fees) and expenses (collectively, "Losses"), as incurred, arising out of or
based upon any untrue or alleged untrue statement of a material fact contained
in such Registration Statement or Prospectus or in any amendment or supplement
thereto or in any preliminary prospectus, or arising out of or based upon any
omission or alleged omission of a material fact required to be stated therein
or necessary to make the statements therein not misleading, except insofar as
the same are based upon information furnished in writing to the Company by or
on behalf of such Holder expressly for use therein or by any underwriter in a
Demand Registration; provided, however, that the Company shall not be liable to
any such Holder to the extent that any such Losses arise out of or are based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in any preliminary prospectus if (i) having previously been
furnished by or on behalf of the Company with copies of the Prospectus, such
Holder failed to send or deliver a copy of the Prospectus with or prior to the
delivery of written confirmation of the sale of Registrable Shares by such
Holder to the person asserting the claim from which such Losses arise and (ii)
the Prospectus would have corrected in all material respects such untrue
statement or alleged untrue statement or such omission or alleged omission; and
provided further, however, that the Company shall not be liable in any such
case to the extent that any such Losses arise out of or are based upon an
untrue statement or alleged untrue statement or omission or alleged omission in
the Prospectus, if (x) such untrue statement or alleged untrue statement,
omission or alleged omission is corrected in all material respects in an
amendment or supplement to the Prospectus and (y) having previously been
furnished by or on behalf of the Company with copies of the Prospectus as so
amended or supplemented, such Holder thereafter fails to deliver such
Prospectus as so amended or
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<PAGE> 15
supplemented, prior to or currently with the sale of Registrable Shares. In
connection with any Underwritten Offering, the Company will also indemnify
underwriters, selling brokers, dealer managers and similar securities industry
professionals participating in the distribution, their officers and directors
and each Person who controls such Persons (within the meaning of Section 15 of
the Securities Act) to the same extent as provided above with respect to
indemnification of Holders of Registrable Shares, or on such other terms as are
reasonable and customary and requested by the managing underwriter.
(b) Indemnification by Holder of Registrable
Shares. In connection with any Registration Statement in which a Holder is
participating, such Holder shall furnish to the Company in writing such
information as the Company reasonably requests for use in connection with such
Registration Statement or the related Prospectus and agrees to indemnify, to
the full extent permitted by law, the Company, its directors, officers, agents
or employees, each Person who controls the Company (within the meaning of
Section 15 of the Securities Act and Section 20 of the Exchange Act) and the
directors, officers, agents or employees of such controlling Persons, from and
against all Losses as incurred arising out of or based upon any untrue or
alleged untrue statement of a material fact contained in such Registration
Statement or the related Prospectus or any amendment or supplement thereto, or
any preliminary prospectus, or arising out of or based upon any omission or
alleged omission of a material fact required to be stated therein or necessary
to make the statements therein not misleading, to the extent, but only to the
extent, that such untrue or alleged untrue statement or omission or alleged
omission is based upon any information so furnished in writing by or on behalf
of such Holder to the Company expressly for use in such Registration Statement
or Prospectus.
(c) If any Person shall be entitled to indemnity
hereunder (an "Indemnified Party"), indemnified party shall give prompt notice
to the party from which such indemnity is sought (the "Indemnifying Party") of
any claim or of the commencement of any proceeding with respect to indemnitee
party seeks indemnification or contribution pursuant hereto; provided, however,
that the delay or failure to so notify the indemnifying party shall not relieve
the indemnifying party from any obligation or liability except to the extent
that the indemnifying party has been prejudiced by such delay or failure. The
indemnifying party shall have the right, exercisable by giving written notice
to an indemnified party promptly after the receipt of written notice from such
indemnified party of such claim or proceeding, to assume, at the indemnifying
party's expense, the defense of any such claim or proceeding, with counsel
reasonably satisfactory to such indemnified party; provided, however, that (i)
an indemnified party shall have the right to employ separate counsel in any
such claim or proceeding and to participate in the defense thereof, but the
fees and expenses of such counsel shall be at the expense of such indemnified
party unless: (1) the indemnifying party agrees to pay such fees and expenses;
(2) the indemnifying party fails promptly to assume the defense of such claim
or proceeding or fails to employ counsel reasonably satisfactory to such
indemnified party; or (3) the named parties to any proceeding (including
impleaded parties) include both such indemnified party and the indemnifying
party, and such indemnified party shall have been advised by counsel that there
are likely to be one or more legal defenses available to it that are
inconsistent with those available to the indemnifying party or that a conflict
of interest is likely to exist among such indemnified party and any other
indemnified parties (in which case the indemnifying party shall not have the
right to assume the defense of such action on behalf of such indemnified
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<PAGE> 16
party); and (ii) subject to clause (3) above, the indemnifying party shall not,
in connection with any one such claim or proceeding or separate but
substantially similar or related claims or proceedings in the same
jurisdiction, arising out of the same general allegations or circumstances, be
liable for the fees and expenses of more than one firm of attorneys (together
with appropriate local counsel) at any time for all of the indemnified parties,
or for fees and expenses that are not reasonable. Whether or not such defense
is assumed by the indemnifying party, such indemnified party shall not be
subject to any liability for any settlement made without its consent. The
indemnifying party shall not consent to entry of any judgment or enter into any
settlement that does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such indemnified party of a release, in form and
substance reasonably satisfactory to the indemnified party, from all liability
in respect of such claim or litigation for which such indemnified party would
be entitled to indemnification hereunder.
(d) Contribution. If the indemnification
provided for in this Section 7 is unavailable to an indemnified party in
respect of any Losses (other than in accordance with its terms), then each
applicable indemnifying party, in lieu of indemnifying such indemnified party,
shall contribute to the amount paid or payable by such indemnified party as a
result of such Losses, in such proportion as is appropriate to reflect the
relative fault of the indemnifying party, on the one hand, and such indemnified
party, on the other hand, in connection with the actions, statements or
omissions that resulted in such Losses as well as any other relevant equitable
considerations. The relative fault of such indemnifying party, on the one
hand, and indemnified party, on the other hand, shall be determined by
reference to, among other things, whether any action in question, including any
untrue statement of a material fact or omission or alleged omission to state a
material fact, has been taken by, or relates to information supplied by, such
indemnifying party or indemnified party, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent any such
action, statement or omission. The amount paid or payable by a party as a
result of any Losses shall be deemed to include any legal or other fees or
expenses incurred by such party in connection with any investigation or
proceeding. The parties hereto agree that it would not be just and equitable
if contribution pursuant to this Section 7(d) were determined by pro rata
allocation or by any other method of allocation that does not take account of
the equitable considerations referred to in the this Section 7(d).
Notwithstanding the provision of this Section 7(d), an indemnifying party that
is a Holder shall not be required to contribute any amount which is in excess
of the amount by which the total proceeds received by such Holder from the sale
of the Registrable Shares sold by such Holder (net of all underwriting
discounts and commissions) exceeds the amount of any damages that such
indemnifying party has otherwise been required to pay by reason of such untrue
or alleged untrue statement or omission or alleged omission. No person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any Person who was not
guilty of such fraudulent misrepresentation.
8. Rule 144. The Company covenants that it will use all
reasonable commercial efforts to timely file the reports required to be filed
by it under the Securities Act or the Exchange Act (including but not limited
to the reports under Sections 13 and 15(d) of the Exchange Act referred to in
subparagraph (c)(1) of Rule 144 adopted by the SEC under the Securities Act)
and the rules and regulations adopted by the SEC thereunder (or if the Company
16
<PAGE> 17
is not required to file such reports, the Company will, upon the request of any
Holder of Registrable Shares, make publicly available other information), and
will take such further action as any Holder of Registrable Shares may
reasonably request, all to the extent required from time to time to enable such
Holder of Registrable Shares to sell Registrable Shares within the exemption
provided by (i) Rule 144 under the Securities Act, as such Rule may be amended
from time to time, or (ii) any similar rule or regulation hereafter adopted by
the SEC. Upon the request of any Holder of Registrable Shares, the Company
will deliver to such Holder a written statement as to whether it has complied
with such requirements.
9. Rights of Holdings. In the event that Holdings
receives any shares of Company Common Stock pursuant to and in accordance with
the terms of the Holdings Agreement, and so long as at least one other Holder
(which is not a Permitted Transferee or Permitted Assignee of Holdings) owns
Registrable Shares and this Agreement has not been terminated in accordance
with its terms, such shares received by Holdings shall then and thereafter for
purposes of this Agreement constitute Registrable Shares (subject to the
qualifications set forth in the definition of Registrable Shares) and Holdings
shall then and thereafter for purposes of this Agreement be a Holder in respect
of such Registrable Shares. Notwithstanding the foregoing, in respect of the
Demand Registration rights granted to Holders under Section 2 of this
Agreement, Holdings (and the Permitted Transferees and Permitted Assignees of
Holdings), as a Holder hereunder, shall not have the right to request any
Demand Registrations, but only the right to participate with other Holders in
such Demand Registrations in accordance with and subject to the provisions of
Section 2. Also, in respect of the termination provisions set forth in Section
10(a) below, the Registrable Shares owned by Holdings hereunder (or any
Permitted Transferee or Permitted Assignee thereof) shall not be Registrable
Shares for purposes of any determinations made thereunder.
10. Miscellaneous.
(a) Termination. Section 2 of this Agreement
shall terminate on the later of 2 years after the date of this Agreement or the
date when the H&F Funds collectively own less than 2,285,000 Registrable Shares
(appropriately adjusted for stock splits, combinations, stock dividends and
similar transactions). This Agreement and the obligations and rights of the
Company and the Holders hereunder (other than Section 7 hereof) shall terminate
on the earlier of (i) the first date on which there remains outstanding
Registrable Shares having a value (based on the closing price per share of
Common Stock) of less than $20 million and (ii) 5 years after the date of this
Agreement.
(b) Notices. All notices, requests, demands and
other communications which are required or may be given under this Agreement
shall be in writing and shall be deemed to have been duly given when received
if personally delivered; when transmitted if transmitted by telecopy,
electronic or digital transmission method; the day after it is sent, if sent
for next day delivery to a domestic address by recognized overnight delivery
service (e.g., Federal Express); and upon receipt, if sent by certified or
registered mail, return receipt requested. In each case, notice shall be sent
to each of the Stockholders at the address indicated below such Stockholder's
name on the signature pages hereto, and to the Company at the address indicated
below:
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<PAGE> 18
Clear Channel Communications, Inc.
200 Concord Plaza, Suite 600
San Antonio, Texas 78216
Attention: Randall T. Mays
Telecopy: (210) 822-2299
with a copy to:
Clear Channel Communications, Inc.
200 Concord Plaza, Suite 600
San Antonio, Texas 78216
Attention: Kenneth E. Wyker, Esq.
Telecopy: (210) 822-2299
Piper & Marbury L.L.P.
36 South Charles Street
Baltimore, Maryland 21201
Attention: R.W. Smith, Jr., Esq.
Telecopy: (410) 539-1700
or to such other address or to the attention of such other person as the
recipient party has specified by prior written notice to the sending party.
(c) Interpretation. When a reference is made in
this Agreement to Sections, such reference shall be to a Section of this
Agreement unless otherwise indicated. Headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the word "include", "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation". This Agreement shall not be construed for or
against either party by reason of the authorship or alleged authorship of any
provision hereof or by reason of the status of the respective parties. All
terms defined in this Agreement in the singular shall have the same comparable
meanings when used in the plural and vice versa, unless otherwise specified.
(d) Entire Agreement; No Third-Party
Beneficiaries. This Agreement constitutes the entire agreement and supersedes
all prior agreements and understandings, both written and oral, among the
parties with respect to the subject matter hereof and is not intended to confer
upon any person other than the parties hereto any rights or remedies hereunder.
(e) Assignment. Neither this Agreement nor any
of the rights, interests, or obligations hereunder shall be assigned (whether
by operation of law or otherwise) by any Holder without the consent of the
Company, or by the Company without the consent of Holders of at least a
majority in number of the Registrable Shares then outstanding; provided that
any Holder can assign its rights hereunder to a Permitted Transferee or
Permitted Assignee without the consent of the Company. Subject to the
preceding sentence, this Agreement will be binding upon, inure to the benefit
of and be enforceable by the parties and their respective
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<PAGE> 19
successors and assigns. In no event shall any transferee of Common Stock be
entitled, solely as a result of such transfer, to any of the benefits of this
Agreement or to enforce the same.
(f) Governing Law. This Agreement shall be
construed, interpreted and the rights of the parties determined in accordance
with the laws of the State of Delaware (without reference to the choice of law
provisions), except with respect to matters of law concerning the internal
corporate affairs of any corporate entity which is a party to or the subject of
this Agreement, and as to those matters the law of the jurisdiction under which
the respective entity derives its powers shall govern.
(g) Severability. Each party agrees that, should
any court or other competent authority hold any provision of this Agreement or
part hereof to be null, void or unenforceable, or order any party to take any
action inconsistent herewith or not to take an action consistent herewith or
required hereby, the validity, legality and enforceability of the remaining
provisions and obligations contained or set forth herein shall not in any way
be affected or impaired thereby. Upon any such holding that any provision of
this Agreement is null, void or unenforceable, the parties will negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in an acceptable manner to the end that the
transactions contemplated by this Agreement are consummated to the extent
possible. Except as otherwise contemplated by this Agreement, to the extent
that a party hereto took an action inconsistent herewith or failed to take
action consistent herewith or required hereby pursuant to an order or judgment
of a court or other competent authority, such party shall incur no liability or
obligation unless such party did not in good faith seek to resist or object to
the imposition or entering of such order or judgment.
(h) Injunctive Relief. The parties acknowledge
that it will be impossible to measure in money the damages that would be
suffered if the parties fail to comply with any of the obligations herein
imposed on them and that in the event of any such failure, an aggrieved person
or entity will be irreparably damaged and will not have an adequate remedy at
law. Any such person or entity shall, therefore, be entitled to injunctive
relief, including specific performance, to enforce such obligations, and if any
action should be brought in equity to enforce any of the provisions of this
Agreement, none of the parties shall raise the defense that there is an
adequate remedy at law.
(i) Attorneys' Fees. If any party to this
Agreement brings an action to enforce its rights under this Agreement, the
prevailing party shall be entitled to recover its costs and expenses, including
without limitation reasonable attorneys' fees, incurred in connection with such
action, including any appeal of such action.
(j) Cumulative Remedies. All rights and remedies
of any party hereto are cumulative of each other and of every other right or
remedy such party may otherwise have at law or in equity, and the exercise of
one or more rights or remedies shall not prejudice or impair the concurrent or
subsequent exercise of other rights or remedies.
19
<PAGE> 20
(k) Counterparts. This Agreement may be executed
in two or more counterparts, all of which shall be considered one and the same
instrument and shall become effective when executed and delivered by each of
the parties.
(l) Amendments and Waivers. Except as otherwise
provided herein, the provisions of this Agreement may not be amended, modified
or supplemented, and waivers or consents to departures from the provisions
hereof may not be given, unless the Company has obtained the written consent of
Holders of at least a majority in number of the Registrable Shares then
outstanding, or the Holders have obtained the written consent of the Company.
(m) Other Agreements. The Company shall not
enter into any registration rights agreements which are in conflict with the
provisions of this Agreement.
[SIGNATURE PAGES FOLLOW]
20
<PAGE> 21
IN WITNESS WHEREOF, the parties have executed this
Registration Rights Agreement as of the date first above written.
CLEAR CHANNEL COMMUNICATIONS, INC.
By:
----------------------------------------
Name:
Title:
HELLMAN & FRIEDMAN
CAPITAL PARTNERS III, L.P.
By: Its General Partner,
H&F Investors III
By: Its Managing General Partner,
Hellman & Friedman Associates
III, L.P.
By: Its Managing General Partner,
H&F Investors III, Inc.
By:
-------------------------
Its:
Address: One Maritime Plaza
12th Floor
San Francisco, CA 94111
<PAGE> 22
H&F ORCHARD PARTNERS III, L.P.
By: Its General Partner,
H&F Investors III
By: Its Managing General Partner,
Hellman & Friedman Associates
III, L.P.
By: Its Managing General Partner,
H&F Investors III, Inc.
By:
-------------------------
Its:
Address: One Maritime Plaza
12th Floor
San Francisco, CA 94111
H&F INTERNATIONAL PARTNERS III, L.P.
By: Its General Partner,
H&F Investors III
By: Its Managing General Partner,
Hellman & Friedman Associates
III, L.P.
By: Its Managing General Partner,
H&F Investors III, Inc.
By:
-------------------------
Its:
Address: One Maritime Plaza
12th Floor
San Francisco, CA 94111
----------------------------
H. Irving Grousbeck
Address: c/o Stanford University
Graduate School of Business Administration
Room L336
Stanford, CA 94305
<PAGE> 23
AMERICAN MEDIA MANAGEMENT, INC.
By:
----------------------------------------
Its:
Address: 1940 Webster Street
San Francisco, CA 94115
----------------------------
Richard Reiss, Jr.
Address: c/o Cumberland Associates
1114 Avenue of the Americas
New York, NY 10036
----------------------------
Glenn Krevlin, as Trustee fbo
Nina Krevlin, Glenn Krevlin,
Michael Krevlin and Jill Krevlin
Address: c/o Richard Reiss, Jr.
Cumberland Associates
1114 Avenue of the Americas
New York, New York 10036
----------------------------
K. Tucker Andersen
Address: c/o Richard Reiss, Jr.
Cumberland Associates
1114 Avenue of the Americas
New York, New York 10036
<PAGE> 24
----------------------------
Bruce Halle
Address: c/o Discount Tire Company
14631 North Scottsdale Road
Scottsdale, Arizona 85254
----------------------------
Timothy J. Donmoyer
Address: c/o Eller Media Corporation
2850 E. Camelback Road, Suite 300
Phoenix, AZ 85016
----------------------------
Patricia Salas Pineda
Address: c/o NUMMI
45500 Fremont Boulevard
Fremont, CA 94538
EL DORADO INVESTMENT COMPANY
By:_________________________
Its:
Address: c/o Eller Media Corporation
2850 E. Camelback Road, Suite 300
Phoenix, AZ 85016
<PAGE> 25
----------------------------
Steven G. Mihaylo
Address: 5710 North 25th Place
Phoenix, AZ 85016
EM HOLDINGS LLC
By:
-------------------------
Its:
Address: c/o Eller Media Corporation
2850 E. Camelback Road, Suite 300
Phoenix, AZ 85016
<PAGE> 1
EXHIBIT 10.29
EXECUTION COPY
ESCROW AGREEMENT
THIS ESCROW AGREEMENT, dated as of this 10th day of April,
1997 (this "Agreement"), is by and among Clear Channel Communications, Inc., a
Texas corporation ("Purchaser"), Paul J. Meyer, as stockholder representative
(the "Stockholder Representative") for each of the persons listed on Exhibit A
hereto and as each such person's attorney in fact and agent pursuant to Section
13(b) of the Stock Purchase Agreement (as defined below), EM Holdings LLC, an
Arizona limited liability company ("Holdings"), and Chase Trust Company of
California, a California corporation, as escrow agent (the "Escrow Agent").
RECITALS
A. Concurrently with the execution and delivery hereof,
Purchaser is acquiring 1793.504 of the issued and outstanding shares of capital
stock of Eller Media Corporation, a Delaware corporation (the "Company"),
pursuant to a Stock Purchase Agreement, dated as of February 25, 1997, as
amended (the "Stock Purchase Agreement"), by and among Purchaser, the Company
and those persons listed on Exhibit A thereto (individually, including Holdings
and both option holders and stockholders as identified on such exhibit, each a
"Stockholder" and collectively, the "Stockholders").
B. Purchaser and the Stockholders desire to set aside a
portion of the consideration to be paid to the Stockholders pursuant to Section
2(b) of the Stock Purchase Agreement, for the purpose of providing Purchaser
with a remedy in the event of a breach by the Company or the Stockholders of
the representations, warranties and covenants made in the Stock Purchase
Agreement.
C. Purchaser and the holders of Company Stock Options
(as defined in the Stock Purchase Agreement) which have not been exercised
prior to the Closing (as defined in the Stock Purchase Agreement) desire to set
aside rights to a portion of the Purchaser Common Stock (as defined in the
Stock Purchase Agreement) to be delivered to holders of Restated Options (as
defined in the Stock Purchase Agreement) upon exercise of such Restated Options
pursuant to the Option Assumption Agreements (as defined in the Stock Purchase
Agreement), for the purpose of providing Purchaser with a remedy in the event
of a breach by the Company or the Stockholders of the representations,
warranties and covenants made in the Stock Purchase Agreement.
D. Purchaser, Holdings and the Company have entered into
that certain Stockholders Agreement, dated as of April 8, 1997 (the
"Stockholders Agreement"), pursuant to which the Holdings Stockholders (as
defined in the Stockholders Agreement) have been granted certain put rights
(the "Put Right"), and obligated themselves with respect to certain purchase
rights (the "Redemption Right"), upon the terms and subject to the conditions
set forth therein.
E. Purchaser and Holdings desire to set aside rights to
a portion of the Purchaser Common Stock to be delivered to the Holdings
Stockholders upon exercise of the Put Right or the Redemption Right, as the
case may be, pursuant to the Stockholders Agreement,
<PAGE> 2
for the purpose of providing Purchaser with a remedy in the event of a breach
by the Company or the Stockholders of the representations, warranties and
covenants made in the Stock Purchase Agreement.
F. A material condition to the consummation of the
transactions contemplated by the Stock Purchase Agreement is that the parties
hereto enter into this Agreement.
AGREEMENT
NOW THEREFORE, in consideration of the mutual covenants and
premises contained herein and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties hereto agree
as follows:
1. Definitions. Except as hereinafter defined, capitalized terms
used in this Agreement will have the meanings assigned to such terms in the
Stock Purchase Agreement.
"Account" or "Accounts" shall mean ADCO Account(s) and/or
General Account(s).
"ADCO Account" shall have the meaning set forth in Section
4(a).
"ADCO Amount" shall mean $5 million.
"ADCO Contingent Shares" shall mean Contingent Shares
deposited in an ADCO Account.
"ADCO Initial Shares" shall mean a number of shares of
Purchaser Common Stock equal to (a) the ADCO Amount divided by the Average
Share Price, (b) multiplied by a fraction of which the numerator is the sum of
the percentages set forth opposite the names under the captions "Stockholders"
on Exhibit F, and of which the denominator is the sum of the percentages set
forth opposite the names under the captions "Stockholders," "Optionees," and
"Retained Shares" on Exhibit F.
"ADCO Prior Payment" shall mean, in the case of an Optionee or
Holdings, the product of multiplying (a) the respective numbers of Deposited
Contingent Shares previously deposited in such Holder's ADCO Account, by (b)
the Average Share Price.
"ADCO Required Amount" shall mean for an Optionee or for
Holdings the product of multiplying the ADCO Amount times the percentage set
forth opposite their respective names under the captions "Optionees" and
"Retained Shares," on Exhibit F.
"ADCO Required Number" shall mean for an Optionee or Holdings
such number of shares of Purchaser Common Stock as shall be the result of
dividing (a) his ADCO Undeposited Difference, by (b) the Average Share Price.
"ADCO shortfall" shall have the meaning set forth in Section
7(c).
2
<PAGE> 3
"ADCO Shortfall Responsibility" shall mean, for any Holder
with an ADCO Undeposited Difference after distribution of Escrow Funds pursuant
to Section 7(c), the product of multiplying (a) the amount of any ADCO
shortfall, up to the sum of all ADCO Undeposited Differences, by (b) a fraction
of which the numerator is such Holder's ADCO Undeposited Difference, and the
denominator is the sum of all ADCO Undeposited Differences, all as of the date
of distribution.
"ADCO Undeposited Difference" shall mean, at any time, in the
aggregate, the sum the ADCO Required Amounts for all Optionees and for
Holdings, less the aggregate amount of ADCO Prior Payments for all such
Holders; and for each Optionee or for Holdings, the ADCO Required Amount for
such Holder less his ADCO Prior Payments.
"Average Disbursement Share Price" shall mean the average
closing price of Purchaser Common Stock on the NYSE during the 10 trading days
beginning 13 trading days prior to, as applicable, (a) the date of any
disbursement of Escrowed Funds, or (b) the date of determination under Section
5 or 7.
"Claim" shall mean a claim for Damages incurred by Purchaser
pursuant to Section 12 of the Stock Purchase Agreement.
"Claim Date" shall have the meaning set forth in Section 5
hereof.
"Claim Expiration Time" shall mean the day prior to the first
anniversary of the Closing. If such day is not a Business Day or a trading day
on the NYSE, solely for purposes of the valuations required herein, the Escrow
Agent shall deem the Claim Expiration Time to be the next previous Business Day
which was a trading day on the NYSE.
"Claim Notice" shall have the meaning set forth in Section 5
hereof.
"Company" shall have the meaning set forth in Recital A
hereof.
"Contingent Shares" shall mean shares of Purchaser Common
Stock issued after the Closing on behalf of Optionees in respect of Restated
Options, and on behalf of Holdings in respect of the Put Right or the
Redemption Right, as the case may be.
"Damage Amount" shall have the meaning set forth in Section 5
hereof.
"Deposited Contingent Shares" shall mean at any time the
Contingent Shares deposited with the Escrow Agent.
"Escrow Agent" shall have the meaning set forth in the heading
hereof.
"Escrow Amount" shall mean $35 million.
"Escrowed Funds" shall have the meaning set forth in Section 4
hereof.
3
<PAGE> 4
"Escrowed Shares" shall mean the Initial Shares, the ADCO
Initial Shares, and any Deposited Contingent Shares.
"Exhibit F" shall mean Exhibit F to the Stock Purchase
Agreement.
"Final Instruction" shall have the meaning set forth in
Section 6 hereof.
"General Account" or "General Accounts" shall have the meaning
set forth in Section 4(a) hereof.
"Holders" shall mean the Stockholders, including Holdings with
respect to the Retained Shares.
"Holdings" shall have the meaning set forth in the heading
hereof.
"Indemnifiable Amount" shall mean those amounts for which
Purchaser is entitled to indemnity pursuant to Section 12(a) of the Stock
Purchase Agreement.
"Initial Shares" shall mean a number of shares of Purchaser
Common Stock equal to (a) the Escrow Amount divided by the Average Share Price,
(b) multiplied by a fraction of which the numerator is the sum of the
percentages set forth opposite the names under the caption "Stockholders" on
Exhibit F, and of which the denominator is the sum of the percentages set forth
opposite the names under the captions "Stockholders," "Optionees," and
"Retained Shares" on Exhibit F.
"Net Number" shall mean, as to an Optionee, the number of
shares of Purchaser Common Stock issued upon any exercise of a Restated Option,
minus the number of shares which is equal to the result of dividing the
aggregate exercise price of the portion of the Restated Option which was
exercised by the closing price per share of Purchaser Common Stock on the NYSE
on the trading day prior to the date of exercise of the Restated Option.
"Optionees" shall mean Stockholders who at the date hereof
hold unexercised Restated Options.
"Prior Payment" shall mean, in the case of an Optionee or
Holdings, the product of multiplying (a) the respective numbers of Deposited
Contingent Shares previously deposited on behalf of such Holder in such
Holder's General Account, by (b) the Average Share Price.
"Pro rata in proportion to their respective ownership of
Escrowed Shares" shall mean, as of the date of determination, the balance(s)
remaining in such Stockholder's General Account(s) or ADCO Account(s), as the
case may be.
"Purchaser" shall have the meaning set forth in the heading
hereof.
"Put Right" shall have the meaning set forth in Recital D
hereof.
4
<PAGE> 5
"Redemption Right" shall have the meaning set forth in Recital
D hereof.
"Reduction Formula" shall mean that number of shares of
Purchaser Common Stock equal to the lesser of the result of (a) dividing a
Holder's Shortfall Responsibility (or ADCO Shortfall Responsibility, as the
case may be) by the Average Share Price (which is the number of shares which
otherwise would be required to be deposited in Escrow); and (b) dividing a
Holder's Shortfall Responsibility (or ADCO Shortfall Responsibility, as the
case may be) by the Average Disbursement Share Price as of the date of
determination (which is the number of shares, if available in the subject
Account, which otherwise would be required to be distributed from the Escrow to
satisfy the applicable Damage Amount).
"Required Amount" shall mean for an Optionee or for Holdings
the product of multiplying the Escrow Amount times the percentage set forth
opposite their respective names under the captions "Optionees" and "Retained
Shares," on Exhibit F.
"Required Number" shall mean for an Optionee or Holdings such
number of shares of Purchaser Common Stock as shall be the result of dividing
(a) his Undeposited Difference, by (b) the Average Share Price.
"reserve" shall have the meaning set forth in Section 7
hereof.
"Respective Percentages" shall mean the indicated respective
percentages set forth opposite a Stockholder's, Optionee's or Holdings' name on
Exhibit F.
"shortfall" shall have the meaning set forth in Section 7(d)
hereof.
"Shortfall Responsibility" shall mean, for any Holder with an
Undeposited Difference after distribution of Escrow Funds pursuant to Section
7(d), the product of multiplying (a) the amount of any shortfall, up to the
sum of all Undeposited Differences, by (b) a fraction of which the numerator is
such Holder's Undeposited Difference, and the denominator is the sum of all
Undeposited Differences, all as of the date of distribution.
"Stockholder Representative" shall have the meaning set forth
in the heading hereof.
"Stockholder" or "Stockholders" shall have the meaning set
forth in Recital A hereof.
"Stockholders Agreement" shall have the meaning set forth in
Recital D hereof.
"Stock Purchase Agreement" shall have the meaning set forth in
Recital A hereof.
"Total Escrow Amount" shall mean the ADCO Amount and the
Escrow Amount (or $40 million).
5
<PAGE> 6
"Undeposited Difference" shall mean, at any time, in the
aggregate, the sum of the Required Amounts for all Optionees and for Holdings,
less the aggregate amount of Prior Payments for all such Holders; and for each
Optionee or for Holdings, the Required Amount for such Holder less his Prior
Payments.
2. Appointment of Escrow Agent. Purchaser, Holdings and the
Stockholder Representative hereby designate and appoint Escrow Agent as escrow
agent for the purposes set forth herein, and the Escrow Agent hereby accepts
such appointment on the terms herein provided.
3. Deposit of Escrowed Shares.
(a) Simultaneously with the execution and delivery of
this Agreement, Purchaser, on behalf of the Stockholders and for the benefit of
Purchaser, shall deliver to the Escrow Agent one or more certificates
registered in the name of the Escrow Agent representing a number of shares of
Purchaser Common Stock equal to (i) the Initial Shares, and (ii) the ADCO
Initial Shares. In addition, the Optionees and Holdings hereby assign to the
Escrow Agent, for the benefit of Purchaser, their rights, as described in
Recitals C and E, to such number of Contingent Shares, as may be required of
each of the Optionees and Holdings hereunder. Upon such deposit, the duties
and obligations of each of the parties to this Agreement will commence.
(b) If, prior to the termination of this Agreement, any
Restated Options are exercised in whole or in part, a number of shares of
Purchaser Common Stock issuable upon such exercise equal to the lesser of (i)
the Net Number, or (ii) sum of the Required Number and the ADCO Required
Number, shall be delivered to the Escrow Agent and registered in the name of
the Escrow Agent, and such shares shall become and thereafter be Escrowed
Shares. Deposits first will be made to the ADCO Account and then to the
General Account. Notwithstanding the foregoing, the ADCO Required Number need
not be deposited if at the time of exercise there shall have been a final
distribution of Escrowed Funds pursuant to Section 7(c).
(c) If, prior to the termination of this Agreement, the
Put Right is exercised, in whole or in part, or the Redemption Right is
exercised, a number of shares of Purchaser Common Stock issuable upon such
exercise equal to the sum of the Required Number and the ADCO Required Number
shall be delivered to the Escrow Agent and registered in the name of the Escrow
Agent, and such shares shall become and thereafter be Escrowed Shares.
Deposits first will be made to the ADCO Account and then to the General
Account. Notwithstanding the foregoing, the ADCO Required Number need not be
deposited if at the time of exercise there shall have been a final distribution
of Escrowed Funds pursuant to Section 7(c).
4. Maintenance of Escrow.
(a) The Escrow Agent shall hold the Escrowed Shares in
escrow, and shall maintain and disburse the Escrowed Shares, pursuant to this
Agreement. The Escrow Agent shall establish separate accounts in respect of
any (i) Initial Shares (one for each Stockholder in respect of whom Initial
Shares were deposited), (ii) Deposited Contingent Shares other than
6
<PAGE> 7
ADCO Contingent Shares (one for each Optionee in respect of the exercise of
Restated Options and one for Holdings in respect of the exercise of the Put
Right or the Redemption Right) (the accounts in sub-paragraphs (i) and (ii)
individually a "General Account" and collectively, the "General Accounts"),
(iii) ADCO Initial Shares (one for each Stockholder in respect of whom ADCO
Initial Shares were deposited), and (iv) ADCO Contingent Shares (one for each
Optionee in respect of the exercise of Restated Options and one for Holdings in
respect of the exercise of the Put Right or the Redemption Right in each case
resulting in a deposit of ADCO Contingent Shares) (the accounts in
subparagraphs (iii) and (iv) individually an "ADCO Account" and collectively,
the "ADCO Accounts"), (v) and shall credit to such respective General Accounts
or ADCO Accounts, as the case may be, any stock splits or dividends payable in
stock or other securities, that are received with respect to such Initial
Shares, ADCO Initial Shares, or Deposited Contingent Shares.
(b) All stock splits or dividends payable in stock or
other securities that are made by Purchaser with respect to the Escrowed Shares
while such shares are held by the Escrow Agent shall be registered in the name
of the Escrow Agent, deposited in escrow and governed by this Agreement. The
Escrowed Shares, such stock or other dividends deposited in escrow and any cash
in lieu of fractional shares of Purchaser Common Stock are collectively
referred to in this Agreement as the "Escrowed Funds." All other dividends or
distributions made by Purchaser with respect to the Escrowed Shares while such
shares are held by the Escrow Agent shall be delivered to the Holders by the
Escrow Agent pro rata in accordance with their respective ownership of Escrowed
Shares at the time of such distribution, and such dividends or distributions
shall be made to each such Holder as soon as practicable after receipt by the
Escrow Agent of such dividends or distributions.
5. Purchaser's Right to Assert Claim to Escrowed Funds.
Purchaser shall have the right to make one or more Claims on or prior to the
Claim Expiration Time by delivering a notice of such Claim (a "Claim Notice")
to the Stockholder Representative and the Escrow Agent prior to such time (the
date of such notice, the "Claim Date"). If Purchaser asserts a Claim, such
Claim Notice shall state with particularity (i) the basis for the Claim,
together with sufficient facts relating thereto so that the Stockholder
Representative may reasonably evaluate such Claim, (ii) Purchaser's estimate of
the amount that equals the aggregate amount of such Indemnifiable Amount (the
"Damage Amount") (it being understood that such estimate shall not preclude
Purchaser from revising such Damage Amount by notice to the Stockholder
Representative and the Escrow Agent and thereafter such revised amount shall
become the Damage Amount for all purposes hereunder), and (iii) a calculation
of the number of Escrowed Shares to be disbursed from the Escrow Funds in
connection with such Damage Amount (for purposes of such calculation, each
share of Purchaser Common Stock shall be valued at the Average Disbursement
Share Price).
6. Determination of Valid Damage Amount; Final Instruction. For
purposes of this Agreement, a "Final Instruction" shall mean a written notice
given to the Escrow Agent directing the disbursement of Escrowed Funds in
respect of a Damage Amount (which had previously been set forth in a Claim
Notice properly delivered in accordance with the provisions of Section 5
hereof), and shall be signed both by Purchaser and by the Stockholder
Representative except as otherwise provided below in clause (b) or (d). A
Final Instruction shall
7
<PAGE> 8
be delivered to the Escrow Agent under the following circumstances, and
accompanied by the indicated documentation:
(a) If the Stockholder Representative disputes either the
validity, amount or calculation of the Claim and/or the Damage Amount, the
Stockholder Representative shall give written notice of such dispute to
Purchaser, with a copy to the Escrow Agent, within twenty (20) Business Days
after the delivery of the Claim Notice by Purchaser to the Stockholder
Representative. In such circumstances, no Final Instruction may be given to
the Escrow Agent except as provided in (c) or (d) below.
(b) If the Stockholder Representative fails to respond to
the Claim Notice within twenty (20) Business Days after the delivery to the
Stockholder Representative and the Escrow Agent of the Claim Notice, or if the
Stockholder Representative notifies the Escrow Agent that there is no dispute
with respect to the Claim and the Damage Amount, Purchaser shall have the right
to deliver to the Escrow Agent a Final Instruction, signed only by Purchaser,
with respect to the Claim and the Damage Amount.
(c) If the Stockholder Representative and Purchaser reach
an agreement with respect to the proper determination of the Claim and the
Damage Amount, the Stockholder Representative and Purchaser shall give to the
Escrow Agent a Final Instruction, signed by both the Stockholder Representative
and Purchaser, with respect to the Claim and the Damage Amount.
(d) If the Stockholder Representative and Purchaser are
unable to reach an agreement with respect to the proper determination of the
Claim and/or the Damage Amount, the disputed Claim and/or the Damage Amount
shall be submitted by Purchaser and the Stockholder Representative to court
action to be conducted New Castle County, State of Delaware, as provided in
Section 20 of the Stock Purchase Agreement. Upon final, non-appealable
resolution of such disputed Claim and/or the Damage Amount, either the
Stockholder Representative or Purchaser shall have the right to deliver to the
Escrow Agent a Final Instruction with respect to the Claim and the Damage
Amount based on and in compliance with the resolution of such court action,
signed only by the Stockholder Representative or by Purchaser, as the case may
be, and accompanied by a copy of any judgment or other court order with respect
thereto.
Upon receipt of a Final Instruction in accordance with this
Section, the Escrow Agent shall value the Escrowed Funds based on the valuation
procedures set forth in Section 8 hereof and shall distribute the Escrowed
Funds in accordance with Section 7 hereof. Notwithstanding anything to the
contrary in the foregoing, in no event shall the Escrow Agent distribute any
portion of the Escrowed Funds to Purchaser with respect to any Claim Notice
received by the Escrow Agent after the Claim Expiration Time.
The Stockholder Representative acknowledges that a Claim
Notice has been made in respect of the ADCO Claim (as defined in the Stock
Purchase Agreement) in the amount of the ADCO Amount, which Claim will be
treated as a disputed Claim subject to resolution as provided in Section 6(a).
The existence and estimation of the ADCO Claim (and the definition
8
<PAGE> 9
of the ADCO Amount) shall not preclude Purchaser from making an additional
Claim against the Escrow Amount in connection with the ADCO Claim, it being
understood that the Total Escrow Amount shall be available if and to the extent
required to satisfy the ADCO Claim (with amounts first being charged against
the ADCO Amount and thereafter against the Escrow Amount).
7. Distribution of Escrowed Funds.
(a) If Purchaser fails to make a Claim on or prior to the
Claim Expiration Time in accordance with Section 5 hereof or if any and all
Claims have been resolved and paid at such time, then as promptly as
practicable thereafter (and in no event later than ten (10) Business Days
following the Claim Expiration Time), the Escrow Agent shall deliver the
Escrowed Shares with all other Escrowed Funds relating to such Escrowed Shares
to the Holders pro rata in accordance with their respective ownership of
Escrowed Shares at the time of such distribution.
(b) If Purchaser timely makes a Claim or Claims as to
which there has been no Final Instruction by the expiration of the Claim
Expiration Time, the Escrow Agent promptly shall, at the Claim Expiration Time,
(i) multiply the aggregate Damage Amount of all such Claims by 110% (including
110% of the Damage Amount of the ADCO Claim (if any) less the sum of the
aggregate ADCO Undeposited Differences and the fair value determined as
provided in clause (iii) of this paragraph of all ADCO Accounts) (the
"reserve"), (ii) for each General Account, multiply the reserve by the
Respective Percentage applicable to the General Account (those opposite Holder
names under the caption "Stockholders" being applicable to Initial Shares
Accounts and those opposite Holder names under the captions "Optionees" and
"Retained Shares" being applicable to Deposited Contingent Share Accounts),
(iii) determine the fair value (which for each share of Purchaser Common Stock
shall be deemed to be the Average Disbursement Share Price) at the Claim
Expiration Time of each Holder's Account(s), and (iv) distribute to each Holder
the amount of any excess in his General Account(s) over the reserve applicable
to such General Account(s).
(c) Upon receipt of a Final Instruction with respect to
the ADCO Claim, the Escrow Agent promptly shall, on the date of such receipt,
(i) multiply the final Damage Amount for such ADCO Claim by the applicable
Respective Percentage(s) (as more particularly described in clause (b) (ii)
above), (ii) determine in accordance with Section 8 the fair value on such date
of each Holder's ADCO Account(s), (iii) distribute to each Holder the amount of
any excess of the amount(s) determined in (ii) over the amount(s) determined in
(i), and (iv) distribute the balance of property held in the ADCO Accounts to
Purchaser. If any portion of the Damages Amount relating to the ADCO Claim
shall remain unsatisfied as a result of ADCO Undeposited Differences in respect
of Optionees and/or Holdings (an "ADCO shortfall"), the Escrow Agent shall (x)
determine the amount thereof, up to the sum of all ADCO Undeposited
Differences, (y) calculate the ADCO Shortfall Responsibility of each Holder
with an ADCO Undeposited Difference, and (z) notify Purchaser and such Holders
of its determination. For each Holder with an ADCO Shortfall Responsibility,
Purchaser shall thereupon reduce the number of shares of Purchaser Common Stock
issuable upon exercise of such Holder's Restated Options or Put Right or
Redemption Right, as the case may be, by the number of shares determined by the
9
<PAGE> 10
Reduction Formula. To the extent the foregoing does not completely satisfy the
ADCO Claim, any balance will be satisfied from General Accounts, subject to
paragraph (d).
(d) After the Claim Expiration Time, upon receipt of a
Final Instruction with respect to all Claims, the Escrow Agent promptly shall,
on the date of such receipt, (i) multiply the final unsatisfied Damage Amount
(including the Damage Amount of the ADCO Claim less the sum (if any) of the
aggregate ADCO Undeposited Differences and the fair value determined in
accordance with clause (ii) of this paragraph) of all ADCO Accounts) by the
applicable Respective Percentage(s) (as more particularly described in clause
(b)(ii) above), (ii) determine in accordance with Section 8 the fair value on
such date of receipt of each Holder's Account(s), (iii) distribute to each
Holder the amount of any excess of the amount(s) determined in (ii) over the
amount(s) determined in (i), and (iv) distribute the balance of property held
in the General Accounts to Purchaser. If any portion of the Damage Amount
shall remain unsatisfied as a result of an Undeposited Difference in respect of
Optionees and/or Holdings (a "shortfall"), the Escrow Agent shall (x) determine
the amount thereof, up to the sum of all Undeposited Differences, (y) calculate
the Shortfall Responsibility of each Holder with an Undeposited Difference, and
(z) notify Purchaser and such Holders of its determinations. For each Holder
with a Shortfall Responsibility, Purchaser shall thereupon reduce the number of
shares of Purchaser Common Stock issuable upon exercise of such Holder's
Restated Options or Put Right or Redemption Right, as the case may be, by the
number of shares determined by the Reduction Formula.
8. Valuation of Escrowed Shares; Fractional Shares. For purposes
of determining the number of Escrowed Shares to be disbursed from the Escrow
Funds under this Agreement with respect to a Damage Amount, each share of
Purchaser Common Stock shall be valued at the Average Disbursement Share Price
and fractional shares shall be rounded to the nearest whole number.
9. Reliance by Escrow Agent; Liability of Escrow Agent. The
Escrow Agent shall be protected in acting upon any written notice, request,
waiver, consent, certificate, receipt, authorization or other paper or document
that the Escrow Agent believes to be genuine and what it purports to be. The
Escrow Agent may confer with its own corporate or outside legal counsel in the
event of any dispute or question as to the construction of any of the
provisions hereof, or its duties hereunder, and shall incur no liability and
shall be fully protected in acting in accordance with the written opinions of
such counsel. The duties of the Escrow Agent hereunder will be limited to the
observance of the express provisions of this Agreement. The Escrow Agent will
not be subject to, or be obliged to recognize, any other agreement between the
parties hereto or directions or instructions not specifically set forth as
provided for herein. The Escrow Agent will not make any payment or
disbursement from or out of the Escrow Funds that is not expressly authorized
pursuant to this Agreement. The Escrow Agent may rely upon and act upon any
instrument received by it pursuant to the provisions of this Agreement that it
reasonably believes to be genuine and in conformity with the requirements of
this Agreement. The Escrow Agent shall not be held liable for any error in
judgment made in good faith by an officer of the Escrow Agent unless it shall
be proved that the Escrow Agent was grossly negligent in ascertaining the
pertinent facts or acted intentionally in bad faith. The Escrow Agent will not
be liable for any action taken or not taken by it under the terms hereof in the
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<PAGE> 11
absence of breach of its obligations hereunder or gross negligence or willful
misconduct on its part. Anything in this Agreement to the contrary
notwithstanding, in no event shall the Escrow Agent be liable for special,
indirect or consequential loss or damage of any kind whatsoever (including, but
not limited to, lost profits), even if the Escrow Agent had been advised of the
likelihood of such loss or damage and regardless of the form of action.
10. Indemnification of Escrow Agent. Purchaser, on the one hand,
and the Stockholders collectively (and severally, pro rata in proportion to
their Respective Percentages) on the other, will indemnify and hold the Escrow
Agent harmless from and against any and all losses, costs, damages or expenses
(including, but not limited to, reasonable attorneys' fees) it may sustain by
reason of its service as Escrow Agent hereunder, and except such losses, costs,
damages or expenses (including, but not limited to, reasonable attorneys' fees)
incurred by reason of such acts or omissions for which the Escrow Agent is
liable or responsible under the last sentence of Section 9 hereof. Any
indemnification amounts payable pursuant to this Section 10 shall be paid
one-half by the Purchaser, on the one hand, and one-half by the Stockholders
collectively, on the other.
11. Stockholder Representative; Successor Stockholder
Representative.
(a) The Holders have made, constituted and appointed the
Stockholder Representative as their agent and authorized and empowered him to
fulfill the role of Stockholder Representative hereunder. In the event of the
resignation of the Stockholder Representative, the resigning Stockholder
Representative shall appoint a successor either from among the Stockholders or
who shall otherwise be acceptable to Purchaser and who shall agree in writing
to accept such appointment, and the resigning Stockholder Representative's
resignation shall not be effective until such a successor shall exist. The
Holders entitled to receive a majority of the Escrowed Shares may remove the
Stockholder Representative at any time. If a Stockholder Representative should
die or become incapacitated or be removed by the Holders pursuant to this
Section 12, his successor shall be appointed within 21 days of his death or
incapacity by the remaining Holders entitled to receive a majority of the
Escrowed Shares, and such successor either shall be a Stockholder or shall
otherwise be acceptable to Purchaser. If the Holders fail to appoint a
successor within such 21- day period, then Purchaser shall have the right to
appoint the successor from among the Stockholders. The choice of a successor
Stockholder Representative appointed in any manner permitted above shall be
final and binding upon all of the Holders. The decisions and actions of any
successor Stockholder Representative shall be, for all purposes, those of a
Stockholder Representative as if originally named herein.
(b) Each Holder has made, constituted and appointed the
Stockholder Representative as such person's true and lawful attorney in fact
and agent, for such person and in such person's name, (i) to receive all
notices and communications directed to such Holder under this Agreement and the
Stock Purchase Agreement, (ii) to execute and deliver any and all documents
required to be executed and delivered by such Holder pursuant to this Agreement
in order to effect the transactions contemplated hereby, and (iii) to execute
and deliver all instruments and documents of every kind incident to the
foregoing to all intents and purposes and with the same effect as such Holder
could do personally. Notwithstanding the foregoing, except with respect to
administrative and other ministerial tasks, the Stockholder Representative
11
<PAGE> 12
is required and entitled to act only at the written direction of Holders
entitled to receive a majority of the Escrowed Shares.
(c) It is acknowledged by the Holders appointing the
Stockholder Representative that the designation of the Stockholder
Representative as attorney-in-fact is coupled with an interest and is binding
upon such Holders notwithstanding the death, incapacity or dissolution of any
such Holder. If any such event shall occur prior to the completion of the
transactions contemplated by this Agreement, the Stockholder Representative is,
nevertheless, to the extent that he is legally able to do so, authorized and
directed to complete all transactions and act pursuant to this authority as if
such event had not occurred. Purchaser is entitled to deal solely with the
Stockholder Representative in connection with this Agreement and is entitled to
rely upon the provisions hereof and the authority granted to the Stockholder
Representative to act on behalf of the Holders.
(d) The Stockholder Representative's acceptance of his
duties under this Agreement is subject to the following terms and conditions,
which the parties hereto agree shall govern and control with respect to his
rights, duties, liabilities and immunities as Stockholder Representative (but
not in his capacity as a Stockholder or as an officer, director, or employee of
the Company):
(i) The Stockholder Representative makes no
representation and has no responsibility as to the validity of this Agreement
or of any other instrument referred to herein, or as to the correctness of any
statement contained herein, and he shall not be required to inquire as to the
performance of any obligation under this Agreement.
(ii) The Stockholder Representative shall be
protected in acting upon written notice, request, waiver, consent, receipt or
other paper or document, not only as to its due execution and the validity and
effectiveness of its provisions, but also as to the truth of any information
therein contained, which he in good faith believes to be genuine and what it
purports to be.
(iii) The Stockholder Representative shall not be
liable for any error of judgment, or for any act done or step taken or omitted
by him in good faith, or for any mistake of fact or law, or for anything which
he may do or refrain from doing in connection therewith, except his own gross
negligence or willful misconduct.
(iv) The Stockholder Representative may consult
with competent and responsible legal counsel selected by him, and he shall not
be liable for any action taken or omitted by him in good faith in accordance
with the advice of such counsel.
(v) The Holders shall bear pro rata all expenses
(including transfer taxes and other governmental charges) incurred by the
Stockholder Representative in connection with his duties hereunder and shall
indemnify him against and save him harmless from any and all claims,
liabilities, costs, payments and expenses, including fees of counsel (who may
be selected by the Stockholder Representative), for anything done or omitted by
him in the
12
<PAGE> 13
performance of this Agreement or the Stock Purchase Agreement, except as a
result of his own gross negligence or willful misconduct.
(vi) The Stockholder Representative shall have no
duties or responsibilities except those expressly set forth herein and in the
Stock Purchase Agreement. He shall not be bound by any modification of this
Agreement or the Stock Purchase Agreement unless in writing and signed by the
other parties hereto or thereto and if his duties as Stockholder Representative
hereunder or thereunder are affected, unless he shall have given prior written
consent thereto.
12. Fees and Expenses of the Escrow Agent. All fees of the Escrow
Agent for its services hereunder, together with any expenses reasonably
incurred by the Escrow Agent in connection with this Agreement, shall be paid
one- half by Purchaser, on the one hand, and one-half by the Holders
collectively, on the other.
13. Resignation of the Escrow Agent. The Escrow Agent may resign
from its duties hereunder by giving each of the parties hereto not less than
sixty (60) days prior written notice of the effective date of such resignation
(which effective date shall be at least sixty (60) days after the date such
notice is given). The parties hereto intend that a substitute Escrow Agent
will be appointed by mutual agreement of Purchaser and the Stockholder
Representative to fulfill the duties of the Escrow Agent hereunder for the
remaining term of this Agreement in the event of the Escrow Agent's
resignation. If on or before the effective date of such resignation, a
substitute Escrow Agent has not been appointed, the Escrow Agent will thereupon
deposit the Escrowed Funds into the registry of a court of competent
jurisdiction.
14. Successor Escrow Agent. Any corporation into which the Escrow
Agent in its individual capacity may be merged or converted or with which it
may be consolidated, or any corporation resulting from any merger, conversion
or consolidation to which the Escrow Agent in its individual capacity shall be
a party, or any corporation to which substantially all the corporate trust
business of the Escrow Agent in its individual capacity may be transferred,
shall be the Escrow Agent under this Agreement without further act.
15. Designees for Instructions. Purchaser, may, by notice to the
Escrow Agent, designate one or more persons who will execute notices and from
whom the Escrow Agent may take instructions hereunder. Such designations may
be changed from time to time upon notice to the Escrow Agent from Purchaser.
The Escrow Agent will be entitled to rely conclusively on any notices or
instructions from any person so designated by Purchaser.
16. Inspection. All property held as part of the escrow shall at
all times be clearly identified as being held by the Escrow Agent hereunder.
Any party hereto may at any time during the Escrow Agent's business hours (with
reasonable notice) inspect any records or reports relating to the Escrowed
Funds.
17. Voting of Escrowed Shares. With respect to any matter on
which the Escrowed Shares or any other shares of Purchaser Common Stock in the
Escrowed Funds are entitled to vote, the Escrow Agent shall seek voting
instructions from the Holders. With respect to Holders
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<PAGE> 14
who timely provide such instruction, the Escrow Agent shall vote the Escrowed
Shares that would be distributed to such Holders (assuming no Claim is made) in
accordance with the instructions received by such Holders, but shall not
otherwise vote such shares.
18. Notices. All notices, requests, demands and other
communications which are required or may be given under this Agreement shall be
in writing and shall be deemed to have been duly given when received if
personally delivered; when transmitted if transmitted by telecopy, electronic
or digital transmission method; the day after it is sent, if sent for next day
delivery to a domestic address by recognized overnight delivery service (e.g.,
Federal Express); and upon receipt, if sent by certified or registered mail,
return receipt requested. Notwithstanding the foregoing, a Claim Notice
delivered pursuant to Section 5 hereof and a Final Instruction provided
pursuant to Section 6 hereof shall be deemed to have been duly given only if
delivered personally, by recognized overnight delivery or by certified or
registered mail and if receipt of such Claim Notice or such Final Instruction,
as the case may be, was acknowledged in writing. In each case notice shall be
sent to:
(a) If to Purchaser: Clear Channel Communications, Inc.
200 Concord Plaza, Suite 600
San Antonio, Texas 78216
Attention: Randall T. Mays
Telephone: (210) 822-2828
Telecopy: (210) 822-2299
with a copy to: Clear Channel Communications, Inc.
200 Concord Plaza, Suite 600
San Antonio, Texas 78216
Attention: Kenneth E. Wyker, Esq.
Telephone: (210) 822-2828
Telecopy: (210) 822-2299
Piper & Marbury L.L.P.
36 South Charles Street
Baltimore, Maryland 21201
Attention: R.W. Smith, Jr., Esq.
Telephone: (410) 539-2530
Telecopy: (410) 576-1700
(b) If to the Stockholder Representative:
Paul J. Meyer, Esq.
c/o Eller Media Corporation
2850 East Camelback Road, Suite 300
Phoenix, Arizona 85016
Telephone: (602) 957-8116
Telecopy: (602) 381-5740
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<PAGE> 15
with a copy to: H & F Investors III, Inc.
One Maritime Plaza, 12th Floor
San Francisco, California 94111
Attention: John L. Bunce, Jr.
Telephone: (415) 788-5111
Telecopy: (415) 788-0176
Heller, Ehrman, White & McAuliffe
333 Bush Street
San Francisco, California 94104
Attention: Paul J. Mundie, Esq.
Telephone: (415) 772-6000
Telecopy: (415) 772-6168
Latham & Watkins
633 West Fifth Street, Suite 4000
Los Angeles, California 90071-2007
Attention: Thomas W. Dobson, Esq.
Telephone: (213) 485-1234
Telecopy: (213) 891-8763
(c) If to Holdings: Karl Eller
c/o Eller Media Corporation
2850 E. Camelback Road, Suite 300
Phoenix, Arizona 85016
Telephone: (602) 957-8116
Telecopy: (602) 957-8602
Scott S. Eller
c/o Eller Media Corporation
2850 E. Camelback Road, Suite 300
Phoenix, Arizona 85016
Telephone: (602) 957-8116
Telecopy: (602) 957-8602
with a copy to: Paul J. Meyer, Esq.
c/o Eller Media Corporation
2850 E. Camelback Road, Suite 300
Phoenix, Arizona 85016
Telephone: (602) 957-8116
Telecopy: (602) 957-8602
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<PAGE> 16
Latham & Watkins
633 West Fifth Street, Suite 4000
Los Angeles, California 90071
Attention: Thomas W. Dobson, Esq.
Telephone: (213) 485-1234
Telecopy: (213) 891-8763
(d) If to the Escrow Agent: Chase Trust Company of California
101 California St., Suite 2725
San Francisco, CA 94111
Attention: Hans H. Helley
Telephone: (415) 954-9506
Telecopy: (415) 693-8850
or to such other place and with such other copies as either party may designate
as to itself by written notice to the others.
19. Assignment; Binding Effect. Neither this Agreement nor any of
the rights or obligations hereunder may be assigned by any party without the
prior written consent of the other parties. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns.
20. Amendment and Termination. This Agreement may be amended or
modified by and upon written notice to the Escrow Agent given jointly by
Purchaser, Holdings and the Stockholder Representative, but the duties and
responsibilities of the Escrow Agent may not be increased without its written
consent. This Agreement will terminate on the date on which all the Escrowed
Funds have been distributed in accordance with the terms set forth herein.
21. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
22. Severability and Further Assurances. This Agreement
constitutes the entire agreement among the parties and supersedes all prior and
contemporaneous agreements and undertakings on the parties in connection
herewith. No failure or delay of the Escrow Agent in exercising any right,
power or remedy may be, or may be deemed to be, a waiver thereof; nor may any
single or partial exercise of any right, power or remedy preclude any other or
further exercise of any right, power or remedy. In the event that any one or
more of the provisions contained in this Agreement, shall, for any reason, be
held to be invalid, illegal or unenforceable in any respect, then to the
maximum extent permitted by law, such invalidity, illegality or
unenforceability shall not affect any other provision of this Agreement. Each
of the parties hereto shall, at the request of any other party, deliver to the
requesting party all further documents or other assurances as may reasonably be
necessary or desirable in connection with this Agreement.
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<PAGE> 17
23. Titles. The titles, captions or headings of the Sections
herein are for convenience of reference only and are not intended to be a part
of or to affect the meaning or interpretation of this Agreement.
24. Governing Law. This Agreement shall be construed and enforced
in accordance with the laws of the State of Delaware without regard to the
principles of conflicts of laws.
25. Tax Reporting. Unless otherwise required by Treasury
Regulations issued in the future, the parties will treat the Escrowed Shares
and any other shares of Purchaser Common Stock deposited with the Escrow Agent
hereunder for purposes of Section 468B(g) of the Internal Revenue Code of 1986,
as amended, and for all other income tax purposes as being owned by the Holders
during the period such shares are held in escrow, and therefore any income
earned on such shares during such period will be allocated and reported to the
Holders as such income is earned. The parties will make any elections or
filings required to characterize such shares in a manner consistent with the
preceding sentence. Each party to this Agreement (other than the Escrow
Agent), including the Stockholder Representative on behalf of each Stockholder,
shall provide a completed I.R.S. Form W-8 or Form W-9 to the Escrow Agent at
the signing of this Agreement. For purposes of reporting to tax authorities,
the Escrow Agent will treat all income earned by the escrow as paid upon
distribution. Purchaser, the Stockholder Representative, Holdings and the
Stockholders, jointly and severally, covenant and agree to indemnify and hold
the Escrow Agent harmless against all liability for tax withholding and/or
reporting for any payments made by the Escrow Agent pursuant to this Agreement
(it, being agreed; however, that as between the parties each is responsible for
its or his tax payments or reporting).
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties hereto have executed this
Escrow Agreement as of the date first written above.
CLEAR CHANNEL COMMUNICATIONS, INC.
By
--------------------------------------
Name:
Title:
EM HOLDINGS LLC
By
--------------------------------------
Karl Eller
Managing Member
CHASE TRUST COMPANY OF CALIFORNIA
By
--------------------------------------
Hans H. Helley
Assistant Vice President,
As Escrow Agent
----------------------------------------
Paul J. Meyer, as
Stockholder Representative
<PAGE> 1
EXHIBIT 10.30
EXECUTION COPY
STOCKHOLDERS AGREEMENT
THIS STOCKHOLDERS AGREEMENT (this "Agreement"), dated as of
April 9, 1997, is entered into by and among Eller Media Corporation, a Delaware
corporation (the "Company"), Clear Channel Communications, Inc., a Texas
corporation ("CCC"), and EM Holdings LLC, an Arizona limited liability company
("Holdings").
RECITALS
WHEREAS, the Company, CCC and the persons set forth on Exhibit
A thereto (the "Selling Stockholders") have entered into that certain Stock
Purchase Agreement, dated as of February 25, 1997, as amended (the "Stock
Purchase Agreement"), pursuant to which the Selling Stockholders have agreed to
sell to CCC, and CCC has agreed to purchase from the Selling Stockholders, an
aggregate of 1,793.504 shares of outstanding Common Stock, par value $.01 per
share ("Company Common Stock"), of the Company;
WHEREAS, as a result of the transactions contemplated by the
Stock Purchase Agreement, CCC will own 1,793.504 shares of Company Common Stock
and Holdings will own 140.450 shares of Company Common Stock; and
WHEREAS, Holdings, CCC and the Company desire to enter into
this Agreement to regulate certain aspects of their relationship and to provide
for, among other things, restrictions on the transfer or other disposition of
securities of the Company, and to agree with respect to certain other matters
as more fully set forth herein.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and mutual
covenants hereinafter contained, the parties hereto agree as follows:
1. Definitions. As used in this Agreement, the following terms
shall have the following meanings:
"Agreement" has the meaning specified in the heading of this
Agreement.
"Business Day" shall mean any weekday on which commercial
banks in New York City are open. Any action, notice or right which is to be
exercised or lapses on or by a given date which is not a Business Day may be
taken, given or exercised, and shall not lapse, until the end of the next
Business Day.
"CCC" has the meaning specified in the heading of this
Agreement.
<PAGE> 2
"CCC Common Stock" shall mean the Common Stock, par value $.10
per share, of CCC, as constituted on the date hereof. If the CCC Common Stock
is after the date hereof reclassified or changed into other shares of capital
stock or other securities or property, including by reason of a merger,
consolidation, reorganization or recapitalization, or if CCC pays a dividend or
makes a distribution on the CCC Common Stock in shares of capital stock or
other securities or property (excluding cash) or subdivides (or combines) its
outstanding shares of CCC Common Stock into a greater (or smaller) number of
shares of CCC Common Stock, a share of CCC Common Stock shall be deemed to be
such number of shares of stock and amount of other securities or property
(excluding cash) to which a holder of CCC Common Stock would be entitled if
such holder were a record holder of a share of CCC Common Stock on the date
hereof and continuously to the date of determination.
"CCC Stockholders" shall mean CCC and each of its direct and
indirect Permitted Transferees, so long as any such Person shall hold Company
Shares.
"Change of Control" shall mean (a) the sale, lease, transfer,
conveyance or other disposition (other than by way of merger or consolidation),
in one or a series of related transactions, of all or substantially all of the
assets of the Company and its subsidiaries, taken as a whole, (b) the
consummation of any transaction (including, without limitation, any merger or
consolidation) the result of which is that any "person" or "group" (as such
terms are defined in Section 13(d)(3) of the Exchange Act) becomes the
"beneficial owner" (as such term is defined in Rule 13d-3 and Rule 13d-5 under
the Exchange Act), directly or indirectly through one or more intermediaries,
of more than 50% of the voting power of the outstanding voting stock of the
Company, or (c) the adoption of a plan relating to the liquidation or
dissolution of the Company; provided, however, that a transaction in which the
Company becomes a subsidiary of another entity shall not constitute a Change of
Control if (a) the stockholders of the Company immediately prior to such
transaction "beneficially own" (as such term is defined in Rule 13d-3 and Rule
13d-5 under the Exchange Act), directly or indirectly through one or more
intermediaries, at least a majority of the voting power of the outstanding
voting stock of the Company immediately following the consummation of such
transaction and (b) immediately following the consummation of such transaction,
no "person" or "group" (as such terms are defined above), other than such other
entity (but including holders of equity interests of such other entity),
"beneficially owns" (as such term is defined above), directly or indirectly
through one or more intermediaries, more than 50% of the voting power of the
outstanding voting stock of the Company.
"Company" has the meaning specified in the heading of this
Agreement.
"Company Common Stock" has the meaning specified in the first
recital of this Agreement.
"Company Shares" shall mean the Company Common Stock as
constituted on the date hereof. If the Company Common Stock is after the date
hereof reclassified or changed into other shares of capital stock or other
securities or property, including by reason of a merger, consolidation,
reorganization or recapitalization, or if the Company pays a dividend or makes
a distribution on the Company Common Stock in shares of capital stock or other
securities or
2
<PAGE> 3
property (excluding cash) or subdivides (or combines) its outstanding shares of
Company Common Stock into a greater (or smaller) number of shares of Company
Common Stock, a share of Company Common Stock shall be deemed to be such number
of shares of stock and amount of other securities or property (excluding cash)
to which a holder of Company Common Stock would be entitled if such holder were
a record holder of a share of Company Common Stock on the date hereof and
continuously to the date of determination.
"Eller Stockholders" shall mean Scott Eller, Loel Ranches,
Inc., Red River Resources, Inc., Eller Family L.L.C., Elissa Eller Goodman,
Karl Eller and Joan Eller.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, and the rules and regulations promulgated thereunder.
"Holdings" has the meaning specified in the heading of this
Agreement.
"Holdings Stockholders" shall mean Holdings and each of its
direct and indirect Permitted Transferees, so long as any such Person shall
hold Company Shares.
"Permitted Transferee" shall mean:
(a) as to any Holdings Stockholder, (i) any Eller
Stockholder; (ii) any person who is the spouse or former spouse of, or any
lineal descendent of, or any spouse of such lineal descendant of, or the
grandparent, parent, brother or sister of, or spouse of such brother or sister
of, an Eller Stockholder or a Permitted Transferee of such person; (iii) upon
the death of any Eller Stockholder or any Permitted Transferee of such person,
the executors of the estate of such Eller Stockholder or Permitted Transferee,
any of such Eller Stockholder's or such Permitted Transferee's heirs,
testamentary trustees, devisees, or legatees; (iv) any trust principally for
the benefit of one or more of the Eller Stockholders or Permitted Transferees
(including a charitable lead or remainder trust); (v) upon the disability of
any Eller Stockholder or Permitted Transferee, any guardian or conservator of
such Eller Stockholder or Permitted Transferee or (vi) any other transferee
approved by CCC, provided that in each case such transferee assumes and agrees
to perform and becomes a party to this Agreement; and
(b) as to CCC, any transferee who assumes and agrees to
perform and becomes a party to this Agreement.
"Person" shall mean any individual, corporation, partnership,
limited liability company, joint venture association, joint-stock company,
trust, unincorporated organization or government or any agency or political
subdivision thereof.
"Put Date" has the meaning specified in Section 3(a)(ii) of
this Agreement.
"Put Notice" has the meaning specified in Section 3(a)(ii) of
this Agreement.
"Put Obligation" has the meaning specified in Section 3(a)(i)
of this Agreement.
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<PAGE> 4
"Put Option Shares" has the meaning specified in Section
3(a)(i) of this Agreement.
"Put Right" has the meaning specified in Section 3(a)(i) of
this Agreement.
"Redemption Date" has the meaning specified in Section
3(b)(ii) of this Agreement.
"Redemption Notice" has the meaning specified in Section
3(b)(ii) of this Agreement.
"Redemption Right" has the meaning specified in Section
3(b)(i) of this Agreement.
"Registration Rights Agreement" shall mean that certain
Registration Rights Agreement, dated as of the date hereof, among CCC and the
persons listed on the signature pages thereof, as the same may be amended,
modified, supplemented or restated from time to time.
"Securities Act" shall mean the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder.
"Selling Stockholders" has the meaning specified in the first
recital of this Agreement.
"Stockholders" shall mean each of the Holdings Stockholders
and the CCC Stockholders.
"Stock Purchase Agreement" has the meaning specified in the
first recital of this Agreement.
"Transfer" means, with respect to any security, any direct or
indirect, sale, assignment, hypothecation, pledge or other disposition of such
security or any interests therein.
"Transfer Price" shall mean, with respect to each Company
Share (or fraction thereof), the sum of (a) 7,700 shares of CCC Common Stock
(or the equivalent fraction thereof, as the case may be), subject to adjustment
as provided in the definition of CCC Common Stock and subject to the Escrow
Agreement (as defined in the Stock Purchase Agreement), plus, without
duplication, (b) any cash dividends or other cash distributions which would
have been payable to the holder of such Company Share (without interest
thereon), if, on the date hereof, he had become and remained until the date of
determination a record holder of such shares of CCC Common Stock, plus (c) any
cash payment in lieu of fractional shares that the holder of such Company Share
is entitled to receive pursuant to Section 3(c) hereof, less (d) any cash
dividends or other cash distributions paid to the holder of such Company Share
after the date hereof and until the date of determination (without interest
thereon).
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<PAGE> 5
2. Transfers of Company Shares.
(a) Restrictions Generally; Securities Act.
(i) Each Stockholder agrees that it will not,
directly or indirectly, Transfer any Company Shares except in accordance with
the terms of this Agreement. In the event a Transfer of any Company Shares is
attempted in violation of the provisions of this Agreement, such Transfer shall
be void and of no effect, the Company shall not register or have any obligation
to register the Transfer of such shares, and no dividend of any kind whatsoever
nor any distribution pursuant to liquidation or otherwise shall be paid by the
Company to the transferee in respect to such shares (all such dividends and
distributions being deemed waived by the transferee), and the voting rights of
such shares, if any, on any matter whatsoever, and all other rights in
connection with such shares, shall remain vested in the transferor during the
period commencing with such party's initial failure of compliance and ending
when compliance shall have occurred.
(ii) Each Stockholder agrees that, in addition to
the other requirements herein relating to Transfer, it will not Transfer any
Company Shares except pursuant to an effective registration statement under the
Securities Act, or pursuant to an available exemption from registration under
the Securities Act.
(b) Legends.
(i) Each certificate representing Company Shares
shall be endorsed with the following legends and such other legends as may be
required by applicable state securities laws:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
THE RESTRICTIONS, RIGHTS TO REPURCHASE AND RIGHTS TO REQUIRE
TRANSFERS CONTAINED IN A STOCKHOLDERS AGREEMENT, DATED AS OF
APRIL 9, 1997 (A COPY OF WHICH IS ON FILE WITH THE SECRETARY
OF THE ISSUER HEREOF)."
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE
SECURITIES LAWS, AND MAY BE OFFERED AND SOLD ONLY IF SO
REGISTERED OR IF AN EXEMPTION FROM SUCH REGISTRATION IS
AVAILABLE."
(ii) Any certificate issued at any time in
exchange or substitution for any certificate bearing such legends shall also
bear such legends, as applicable, unless in the opinion of counsel for the
Company, the Company Shares represented thereby are no longer subject to the
provisions of this Agreement or the restrictions imposed under the Securities
Act or state securities laws, in which case the applicable legend (or legends)
may be removed.
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<PAGE> 6
(c) Transfers by Stockholders. Each of the Stockholders
agrees that it will not Transfer any Company Shares except (i) pursuant to the
provisions of this Agreement or (ii) to a Permitted Transferee.
3. Put Right; Redemption Right.
(a) Put Right.
(i) At any time and from time to time commencing
on the date hereof and ending on the fifth anniversary of the date hereof, the
Holdings Stockholders, and each of them, shall have the right (a "Put Right"),
individually or together, to sell to CCC, in one or more transactions, in whole
or in part, any or all of the outstanding Company Shares then owned by such
Holdings Stockholders (the "Put Option Shares"), subject to the notice
provisions set forth in Section 3(a)(ii) hereof, and CCC shall be obligated to
purchase (a "Put Obligation") from such Holdings Stockholders the Put Option
Shares; provided, however, that the Holding Stockholders may only exercise the
Put Right on three occasions. The price per share of the Put Option Shares
shall equal the Transfer Price on the Put Date (as defined below).
(ii) In order to exercise the rights granted to
them pursuant to Section 3(a)(i) hereof, the Holdings Stockholder or Holdings
Stockholders who desire to exercise such rights (by action in accordance with
Section 8 hereof) shall notify CCC in writing (a "Put Notice") of the exercise
of their rights hereunder not less than ten (10) nor more than twenty (20) days
prior to the date fixed for such purchase. Such Put Notice shall state the
following:
(A) the purchase date (the "Put Date");
and
(B) the number of outstanding Company
Shares held by such Holdings Stockholder or Holdings Stockholders to be sold to
CCC.
(iii) In the event that as of any Put Date, CCC
shall not fully satisfy its Put Obligation on such Put Date, interest will
accrue from the date of default until the date that such Put Obligation and any
accrued interest thereon is satisfied in full, at the rate of 10% per annum (to
the extent permitted by law), compounded daily, on an amount equal to the
aggregate Transfer Price to be paid on the Put Date with respect to the Company
Shares to be purchased. Such interest will be payable in cash. All amounts
paid by CCC with respect to any outstanding Put Obligation shall be applied
first to any accrued but unpaid interest thereon.
(b) Redemption Right.
(i) At any time commencing on the seventh
anniversary of the date hereof and ending on the tenth anniversary of the date
hereof, CCC shall have the right (the "Redemption Right") to call for purchase
by CCC all, but not less than all, of the outstanding Company Shares then owned
by the Holdings Stockholders, subject to the notice provisions set forth in
Section 3(b)(ii) hereof; provided, however, that in the event that CCC or the
Company enters into any transaction or agreement which will result in a Change
of Control, such Redemption Right may be exercised by CCC immediately prior to
such Change of Control. The
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<PAGE> 7
price for each Company Share called for purchase by CCC shall equal the
Transfer Price on the Redemption Date (as defined below).
(ii) In order to exercise the rights granted to it
pursuant to Section 3(b)(i) hereof, CCC (by action in accordance with Section 8
hereof) shall notify the Holdings Stockholders in writing (the "Redemption
Notice") of the purchase of Company Shares hereunder not less than ten (10) nor
more than twenty (20) days prior to the date fixed for such redemption. The
Redemption Notice shall state the following:
(A) the redemption date (the "Redemption
Date");
(B) that all outstanding Company Shares
held by the Holdings Stockholders are to be purchased; and
(C) the requisite Transfer Price
deliverable upon redemption of each Company Share to be purchased.
(c) No Fractional Shares. No fractional shares of CCC
Common Stock shall be issued upon the purchase of any Company Shares. Instead
of any fractional interest in a share of CCC Common Stock which would otherwise
be deliverable upon the purchase of a Company Share, CCC shall pay the holder
of such share an amount in cash (computed to the nearest cent) equal to the
product of (i) the fraction of a share of CCC Common Stock to which such holder
would otherwise be entitled multiplied by (ii) the closing price of the CCC
Common Stock on the New York Stock Exchange (or such other securities exchange
or automated interdealer quotation system, if any, on which such securities are
then listed or quoted) on the trading date immediately prior to the Put Date or
the Redemption Date, as the case may be. If more than one share shall be
surrendered for purchase at one time, the number of full shares of CCC Common
Stock issuable upon purchase thereof shall be computed on the basis of the
aggregate number of Company Shares so surrendered.
(d) Deposit of Shares and Funds. CCC's obligation to
deliver the requisite Transfer Price in accordance with Section 3(a) and
Section 3(b) shall be deemed fulfilled if, on or before a Put Date or a
Redemption Date, as the case may be, CCC shall deposit, with a bank or trust
company, or an affiliate of a bank or trust company, having an office or agency
in New York City or Phoenix, Arizona and having a capital and surplus of at
least $500,000,000, the aggregate Transfer Price required to be delivered by
CCC pursuant to Section 3(a) or Section 3(b), upon the occurrence of the
related purchase or redemption, in trust for the account of the holders of the
shares to be purchased or redeemed (and so as to be and continue to be
available therefor), with irrevocable instructions and authority to such bank
or trust company that such shares and funds be delivered upon purchase or
redemption of the Company Shares to be purchased or called for redemption. Any
interest accrued on the Transfer Price shall be paid to CCC. Any amount of the
Transfer Price so deposited and unclaimed at the end of one year from such Put
Date or Redemption Date shall be repaid and released to CCC after which the
holder or holders of such Company Shares subject to purchase or called for
redemption shall look only to CCC for delivery of the requisite Transfer Price,
subject to escheat and similar abandoned property laws.
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<PAGE> 8
(e) Surrender of Certificates. Each holder of Company
Shares to be purchased or redeemed shall surrender the certificates evidencing
such shares (properly endorsed or assigned for transfer) to the bank or trust
company or affiliate thereof where CCC has deposited the Transfer Price
pursuant to Section 3(d), or, in the event no such deposit has been made, to
CCC at the office of CCC, and shall thereupon be entitled to receive the
Transfer Price payable pursuant to this Section 3 following such surrender and
following the date of such purchase or redemption. In the case fewer than all
the shares represented by any such surrendered certificate are to be purchased
pursuant to Section 3(a), a new certificate shall be issued at the expense of
CCC representing the unpurchased shares. If such notice of purchase or
redemption shall have been given, and if on the date fixed for purchase or
redemption, the requisite Transfer Price necessary for the purchase or
redemption shall have been either set aside by CCC separate and apart from its
other funds or assets in trust for the account of the holders of the shares to
be purchased or redeemed (and so as to be and continue to be available
therefor) or deposited with a bank or trust company or affiliate thereof as
provided in Section 3(d) hereof, then, notwithstanding that the certificates
evidencing any Company Shares to be purchased or redeemed shall not have been
surrendered, the shares represented thereby subject to purchase or redemption
shall be deemed no longer outstanding and all rights with respect to such
shares shall forthwith after such date cease and terminate, except for the
right of the holders to the requisite Transfer Price payable pursuant to this
Section 3 without interest upon surrender of their certificates therefor.
(f) Notice of Adjustments. Whenever the Transfer Price
is adjusted as herein provided, CCC shall:
(i) forthwith compute the adjusted Transfer Price
and prepare a certificate signed by the Chief Executive Officer, the Chief
Financial Officer, any Vice President, the Treasurer or the Controller of CCC
setting forth the adjusted Transfer Price, the method of calculation thereof in
reasonable detail and the facts requiring such adjustment and upon which such
adjustment is based, and file such certificate forthwith with the transfer
agent or agents for the Company Shares and the CCC Common Stock; and
(ii) mail a notice stating that the Transfer Price
has been adjusted, the facts requiring such adjustment and upon which such
adjustment is based and setting forth the adjusted Transfer Price to the
Holdings Stockholders at or prior to the time CCC mails an interim statement to
its stockholders covering the fiscal quarter during which the facts requiring
such adjustment occurred, but in any event within forty-five (45) days of the
end of such fiscal quarter.
(g) Payment of Taxes. CCC will pay any and all
documentary, stamp or similar issue or transfer taxes payable in respect of the
issue or delivery of shares of CCC Common Stock on the purchase or redemption
of Company Shares pursuant to this Section 3; provided, however, that CCC shall
not be required to pay any tax which may be payable in respect of any
registration of transfer involved in the issue or delivery of shares of CCC
Common Stock in a name other than that of the registered holder of Company
Shares purchased or redeemed or to be purchased or redeemed, and no such issue
or delivery shall be made unless
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<PAGE> 9
and until the person requesting such issue has paid to CCC the amount of any
such tax or has established, to the satisfaction of CCC, that such tax has been
paid.
(h) Reservation of Shares. CCC shall at all times
reserve and keep available, free from preemptive rights, out of the aggregate
of its authorized but unissued CCC Common Stock and its issued CCC Common Stock
held in its treasury, for the purpose of satisfying Put Obligations pursuant to
Section 3(a) or purchasing the Company Shares pursuant to Section 3(b), the
full number of shares of CCC Common Stock (or other securities or property)
then deliverable upon the exercise in full of the Put Right or the Redemption
Right, as the case may be.
4. Notice of and Covenant Regarding Corporate Events. The
Company and CCC shall give written notice to the Holdings Stockholders at least
thirty (30) days prior to any merger or consolidation to which the Company is a
party and in which it is not the surviving corporation or the adoption of a
plan relating to the liquidation or dissolution of the Company. Furthermore,
the Company and CCC agree that, prior to the fifth anniversary of the date
hereof, and other than in connection with a Change of Control, the Company will
not be a party to any merger or consolidation in which it is not the surviving
corporation, or adopt a plan of liquidation or dissolution.
5. Investment. The Holdings Stockholders:
(a) understand that the shares of CCC Common Stock to be
issued upon exercise of the Put Right and the Redemption Right have not been,
and will not be, except as contemplated by the Registration Rights Agreement,
registered under the Securities Act, or under any state securities laws, and,
upon exercise of the Put Right or the Redemption Right, as the case may be,
will be offered and sold in reliance upon federal and state exemptions for
transactions not involving any public offering;
(b) acknowledge that shares of CCC Common Stock to be
issued upon exercise of the Put Right and the Redemption Right will be acquired
solely for their own account and not with a view to the distribution thereof,
except in accordance with the Securities Act or as contemplated by the
Registration Rights Agreement;
(c) are sophisticated investors with knowledge and
experience in business and financial matters;
(d) have received certain information concerning CCC and
have had the opportunity to obtain additional information as desired in order
to evaluate the merits and the risks inherent in holding shares of CCC Common
Stock issuable upon exercise of the Put Right and the Redemption Right; and
(e) are able to bear the economic risk and lack of
liquidity inherent in holding shares of CCC Common Stock issuable upon exercise
of the Put Right and the Redemption Right.
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<PAGE> 10
6. Term. This Agreement shall terminate upon the earliest of (a)
the tenth anniversary of the date hereof, (b) the date on which the Holdings
Stockholders no longer own Company Shares, and (c) April 30, 1997, in the event
the transactions contemplated by the Stock Purchase Agreement have not been
consummated on or before such date.
7. Injunctive Relief. The parties acknowledge that it will be
impossible to measure in money the damages that would be suffered if the
parties fail to comply with any of the obligations herein imposed on them and
that in the event of any such failure, an aggrieved person or entity will be
irreparably damaged and will not have an adequate remedy at law. Any such
person or entity shall, therefore, be entitled to injunctive relief, including
specific performance, to enforce such obligations, and if any action should be
brought in equity to enforce any of the provisions of this Agreement, none of
the parties shall raise the defense that there is an adequate remedy at law.
8. Notices. Any notices or other communications required or
permitted hereunder, shall be sufficiently given if in writing and personally
delivered or sent by pre-paid first class mail, overnight courier, telex or
facsimile, addressed as follows or to such other address as the parties shall
have given notice of pursuant hereto:
In the case of the Company:
Eller Media Corporation
2850 E. Camelback Road, Suite 300
Phoenix, Arizona 85016
Attention: Paul J. Meyer, Esq.
Telecopy: (602) 381-5740
With a copy to:
Latham & Watkins
633 West Fifth Street, Suite 4000
Los Angeles, California 90071
Attention: Thomas W. Dobson, Esq.
Telecopy: (213) 891-8763
In the case of CCC or any CCC Stockholder:
Clear Channel Communications, Inc.
200 Concord Plaza, Suite 600
San Antonio, Texas 78216
Attention: Randall T. Mays
Telecopy: (210) 822-2299
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With a copy to:
Clear Channel Communications, Inc.
200 Concord Plaza, Suite 600
San Antonio, Texas 78216
Attention: Kenneth E. Wyker, Esq.
Telecopy: (210) 822-2299
Piper & Marbury L.L.P.
36 South Charles Street
Baltimore, Maryland 21201
Attention: R.W. Smith, Jr., Esq.
Telecopy: (410) 576-1700
In the case of any Holdings Stockholder:
Karl Eller
c/o Eller Media Corporation
2850 E. Camelback Road, Suite 300
Phoenix, Arizona 85016
Telecopy: (602) 957-8602
Scott S. Eller
c/o Eller Media Corporation
2850 E. Camelback Road, Suite 300
Phoenix, Arizona 85016
Telecopy: (602) 957-8602
With a copy to:
Paul J. Meyer, Esq.
c/o Eller Media Corporation
2850 E. Camelback Road, Suite 300
Phoenix, Arizona 85016
Telecopy: (602) 957-8602
Latham & Watkins
633 West Fifth Street, Suite 4000
Los Angeles, California 90071
Attention: Thomas W. Dobson, Esq.
Telecopy: (213) 891-8763
All such notices and communications shall be deemed to have been duly given:
when personally delivered; three Business Days after being deposited in the
mail, as aforesaid; next day, if by overnight courier with guaranteed delivery;
when answered back, if telexed; and when receipt is acknowledged, if
transmitted by facsimile.
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9. Entire Agreement. This Agreement and the other agreements
referred to herein represent the entire understanding and agreement among the
parties hereto with respect to the subject matter hereof and thereof and
supersedes all prior understandings and agreements, whether written or oral.
10. Amendments and Waivers. No modification, amendment or waiver
of any provision of this Agreement will be effective unless approved in writing
by the Company, CCC and the Holdings Stockholders owning a majority of the
Company Shares then subject to this Agreement. The failure of any party to
enforce any of the provisions of this Agreement will in no way be construed as
a waiver of such provisions and will not affect the right of such party
thereafter to enforce each and every provision of this Agreement in accordance
with its terms.
11. Successors and Assigns. This Agreement will bind and inure to
the benefit of and be enforceable by the Company and its successors and
assigns, and the Stockholders and the respective successors and assigns of each
of them so long as they hold Company Shares; provided, however, that nothing
contained herein shall be construed as granting any Stockholder the right to
Transfer any of its Company Shares except in accordance with this Agreement.
12. No Inconsistent Agreements. Neither the Company nor CCC will
hereafter enter into any agreement, arrangement or understanding with any
Person which expressly restricts the performance by the Company or CCC, as the
case may be, of their respective obligations hereunder, including, without
limitation, the respective obligations of the Company and CCC under Section 3
hereof.
13. Choice of Law.
(a) This Agreement shall be construed, interpreted and
the rights of the parties determined in accordance with the laws of the State
of Delaware (without reference to the choice of law provisions of Delaware law)
except with respect to matters of law concerning the internal corporate affairs
of any corporate entity which is a party to or the subject of this Agreement,
and as to those matters the law of the jurisdiction under which the respective
entity derives its powers shall govern.
(b) Each of the parties hereto irrevocably consents to
the service of any process, pleading, notices or other papers by the mailing of
copies thereof by registered, certified or first class mail, postage prepaid,
to such party at such party's address set forth herein, or by any other method
provided or permitted under Delaware law. Additionally, each party hereby
appoints RL&F Service Corp., One Rodney Square, Wilmington, Delaware 19810, as
agent for service of process in Delaware.
(c) Each party irrevocably and unconditionally agrees and
consents that any suit, action or other legal proceeding arising out of or
related to this Agreement shall be brought and heard in New Castle County,
State of Delaware, and each party irrevocably consents to personal jurisdiction
in any and all tribunals in said County.
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14. Severability. Each party agrees that, should any court or
other competent authority hold any provision of this Agreement or part hereof
to be null, void or unenforceable, or order any party to take any action
inconsistent herewith or not to take an action consistent herewith or required
hereby, the validity, legality and enforceability of the remaining provisions
and obligations contained or set forth herein shall not in any way be affected
or impaired thereby. Upon any such holding that any provision of this
Agreement is null, void or unenforceable, the parties will negotiate in good
faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in an acceptable manner to the end that the
transactions contemplated by this Agreement are consummated to the extent
possible. Except as otherwise contemplated by this Agreement, to the extent
that a party hereto took an action inconsistent herewith or failed to take
action consistent herewith or required hereby pursuant to an order or judgment
of a court or other competent authority, such party shall incur no liability or
obligation unless such party did not in good faith seek to resist or object to
the imposition or entering of such order or judgment.
15. Interpretation. When a reference is made in this Agreement to
Sections, such reference shall be to a Section of this Agreement unless
otherwise indicated. Headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. Whenever the word "include," "includes" or "including" are
used in this Agreement, they shall be deemed to be followed by the words
"without limitation." This Agreement shall not be construed for or against any
party by reason of the authorship or alleged authorship of any provision hereof
or by reason of the status of the respective parties. All terms defined in
this Agreement in the singular shall have the same comparable meanings when
used in the plural and vice versa, unless otherwise specified.
16. Attorneys' Fees. If any party to this Agreement brings an
action to enforce its rights under this Agreement, the prevailing party shall
be entitled to recover its costs and expenses, including without limitation
reasonable attorneys' fees, incurred in connection with such action, including
any appeal of such action.
17. Cumulative Remedies. All rights and remedies of any party
hereto are cumulative of each other and of every other right or remedy such
party may otherwise have at law or in equity, and the exercise of one or more
rights or remedies shall not prejudice or impair the concurrent or subsequent
exercise of other rights or remedies.
18. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which taken
together shall constitute one and the same instrument.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
ELLER MEDIA CORPORATION
By
-------------------------------------
Karl Eller
Chief Executive Officer
CLEAR CHANNEL COMMUNICATIONS, INC.
By
-------------------------------------
Randall T. Mays
Executive Vice President
EM HOLDINGS LLC
By
-------------------------------------
Karl Eller
Managing Member
<PAGE> 1
EXHIBIT 21
Subsidiaries of Registrant, Clear Channel Communications, Inc.
Name State of Incorporation
Clear Channel Communications of Memphis, Inc. Texas
Clear Channel Television, Inc. Nevada
Clear Channel Radio, Inc. Nevada
Clear Channel Management, Inc. Delaware
Clear Channel Radio Licenses, Inc. Nevada
Clear Channel Television Licenses, Inc. Nevada
Clear Channel Productions, Inc. Nevada
Clear Channel Metroplex, Inc. Nevada
Clear Channel Metroplex Licenses, Inc. Nevada
Clear Channel Holdings, Inc. Nevada
CCR Houston-Nevada, Inc. Nevada
Clear Channel Real Estate Nevada
<PAGE> 1
EXHIBIT 23.1
Consent of Arthur Andersen LLP
As independent public accountants, we hereby consent to the use of our reports
included in or made a part of this current report on Form 8-K. It should be
noted that we have not audited any consolidated financial statements of Eller
Media Corporation subsequent to December 31, 1996 or performed any audit
procedures subsequent to the date of the report.
ARTHUR ANDERSEN LLP
Phoenix, Arizona,
April 16, 1997
<PAGE> 1
EXHIBIT 23.2
Consent of KPMG Peat Marwick LLP
The Board of Directors
PMG Holdings, Inc.
We consent to the inclusion of our report dated April 27, 1995, with
respect to the consolidated balance sheet of PMG Holdings, Inc. and
subsidiaries as of December 31, 1994 and the related consolidated statements of
operations, changes in stockholders' deficit and cash flows for the year then
ended, which report appears in the Form 8-K of Clear Channel Communications,
Inc. dated April 17, 1997.
KPMG Peat Marwick LLP
Stamford, Connecticut
April 16, 1997
