<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 5, 1998
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
CLEAR CHANNEL COMMUNICATIONS, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
TEXAS 74-1787539
(State or other jurisdiction (I.R.S. Employer
of Identification
incorporation or organization) No.)
</TABLE>
200 CONCORD PLAZA, SUITE 600
SAN ANTONIO, TEXAS 78216
(210) 822-2828
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
L. LOWRY MAYS
CLEAR CHANNEL COMMUNICATIONS, INC.
200 CONCORD PLAZA, SUITE 600
SAN ANTONIO, TEXAS 78216
(210) 822-2828
(Name, address, including zip code, and telephone number
including area code, of agent for service)
------------------------
COPIES TO:
STEPHEN C. MOUNT, ESQ. HOWARD L. ELLIN, ESQ.
Akin, Gump, Strauss, Hauer & Feld, Skadden, Arps, Slate, Meagher & Flom
L.L.P. LLP
1500 NationsBank Plaza 919 Third Avenue
300 Convent Street New York, New York 10022
San Antonio, Texas 78205
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF SECURITIES TO THE PUBLIC:
AS PROMPTLY AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION
STATEMENT WHICH RELATES TO THE MERGER OF UH MERGER SUB, INC., A WHOLLY OWNED
SUBSIDIARY OF CLEAR CHANNEL COMMUNICATIONS, INC., WITH AND INTO UNIVERSAL
OUTDOOR HOLDINGS, INC. PURSUANT TO THE MERGER AGREEMENT DESCRIBED HEREIN.
------------------------
If the securities being registered on this Form are offered in connection
with the formation of a holding company and there is compliance with General
Instruction G, check the following box. / /
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED PROPOSED
TITLE OF EACH CLASS OF AMOUNT TO BE MAXIMUM OFFERING MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PRICE PER SHARE OFFERING PRICE REGISTRATION FEE
<S> <C> <C> <C> <C>
19,350,000 SHARES
COMMON STOCK, $0.10 PAR VALUE........... (1) N.A. $1,455,762,593(2) $169,492(3)
</TABLE>
(1) Based on the maximum number of shares of Clear Channel Common Stock to be
issued in the Merger assuming the exercise of all currently outstanding
options to purchase Universal Common Stock immediately prior to the
effective time of the Merger.
(2) Estimated solely for the purpose of calculating the registration fee
required by Section 6(b) of the Securities Act of 1933, as amended (the
"Securities Act"), and computed pursuant to Rule 457(f) under the Securities
Act by multiplying $50.40625, the average of the high and low sale prices of
Universal Common Stock on December 29, 1997, as quoted on the Nasdaq
National Market, by 28,880,597, the number of shares of Universal Common
Stock outstanding at the close of business on December 24, 1997, assuming
the exercise of all then outstanding options to purchase Universal Common
Stock immediately prior to the effective time of the Merger.
(3) Pursuant to Section 14(g)(1)(B) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), the fee of $259,958 paid by Universal in
connection with the filing on November 12, 1997, of its preliminary proxy
statement relating to the Merger has been credited against the registration
fee payable by Clear Channel in connection with the offering hereunder.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE
ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
UNIVERSAL OUTDOOR HOLDINGS, INC.
January 6, 1998
Dear Stockholder:
You are cordially invited to attend the Special Meeting of Stockholders of
Universal Outdoor Holdings, Inc. ("Universal") to be held on February 6, 1998 at
10:00 a.m., local time, at 135 South LaSalle Street, 43rd Floor, Chicago,
Illinois (the "Special Meeting").
The purpose of the Special Meeting is to consider a proposal to approve and
adopt an Agreement and Plan of Merger, dated as of October 23, 1997 (the "Merger
Agreement"), among Universal, Clear Channel Communications, Inc. ("Clear
Channel") and UH Merger Sub, Inc., a wholly owned subsidiary of Clear Channel
("Sub"), which provides that Sub will merge (the "Merger") with and into
Universal, as a result of which Universal will become a wholly owned subsidiary
of Clear Channel.
Subject to the terms and conditions of the Merger Agreement, each share of
common stock, par value $0.01 per share, of Universal ("Universal Common Stock")
outstanding immediately prior to the effective time of the Merger will be
converted into 0.67 shares of common stock, par value $0.10 per share, of Clear
Channel ("Clear Channel Common Stock"). Cash will be paid in lieu of any
fractional share of Clear Channel Common Stock.
It is intended that Universal stockholders will not recognize gain or loss
for federal income tax purposes to the extent Clear Channel Common Stock is
received in the Merger in exchange for Universal Common Stock, although the
receipt of cash in lieu of fractional shares will be taxable.
Attached to this letter is a Proxy Statement/Prospectus which will provide
you with a detailed description of the terms of the Merger, the Merger Agreement
and the transactions contemplated thereby, and other important information
relating to Universal, Clear Channel and Sub. Please read the Proxy
Statement/Prospectus carefully and in its entirety. If you have any questions
about the Special Meeting or the Merger, please call Morrow & Co., Inc. our
proxy solicitation agent, toll free at (800) 662-5200 or collect at (212)
754-8000.
FOR THE REASONS DESCRIBED IN THE ACCOMPANYING PROXY STATEMENT/PROSPECTUS,
YOUR BOARD OF DIRECTORS (I) HAS DETERMINED THAT THE MERGER AND THE MERGER
AGREEMENT ARE IN THE BEST INTERESTS OF UNIVERSAL AND ITS STOCKHOLDERS, (II) HAS
APPROVED THE MERGER AND ADOPTED THE MERGER AGREEMENT AND (III) RECOMMENDS THAT
YOU VOTE IN FAVOR OF APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AT THE
SPECIAL MEETING.
In determining that the Merger and the Merger Agreement are in the best
interests of Universal and its stockholders and to recommend approval and
adoption of the Merger Agreement, your Board of Directors has carefully reviewed
and considered the terms and conditions of the Merger Agreement, as well as
other factors. In addition, the Board of Directors has received the opinions of
BT Alex. Brown Incorporated and Bear Stearns & Co., Inc., Universal's financial
advisors, to the effect that, based upon and subject to the various
considerations set forth therein, as of the date of such opinions, the
consideration to be paid to Universal's stockholders in connection with the
Merger was fair from a financial point of view to Universal's stockholders. The
full text of such opinions are set forth as Annexes II and III, respectively, to
the accompanying Proxy Statement/Prospectus.
Universal Common Stock is quoted on the Nasdaq National Market and, as a
result, holders of Universal Common Stock will not be entitled to appraisal
rights under the Delaware General Corporation Law in connection with the Merger.
Your vote is important, regardless of the number of shares you own. Approval
and adoption of the Merger Agreement requires an affirmative vote of holders of
a majority of the outstanding shares of Universal Common Stock. Accordingly, on
behalf of your Board of Directors, I urge you to complete, date and sign the
accompanying proxy and return it promptly in the enclosed postage-paid envelope.
This will not prevent you from attending the Special Meeting or voting in
person, but will assure that your vote is
<PAGE>
counted if you are unable to attend the Special Meeting. You may revoke your
proxy at any time by filing a written notice of revocation with, or by
delivering a duly executed proxy bearing a later date to, the Secretary of
Universal at Universal's main office prior to the Special Meeting or by
attending the Special Meeting and voting in person.
On behalf of your Board of Directors, I thank you for your support and urge
you to vote FOR approval and adoption of the Merger Agreement.
PLEASE DO NOT SEND ANY CERTIFICATES WITH YOUR PROXY CARD.
Sincerely,
[SIG]
DANIEL L. SIMON
CHIEF EXECUTIVE OFFICER AND PRESIDENT
<PAGE>
UNIVERSAL OUTDOOR HOLDINGS, INC.
311 SOUTH WACKER DRIVE, SUITE 6400
CHICAGO, ILLINOIS 60606
------------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON FEBRUARY 6, 1998
------------------------
TO THE HOLDERS OF COMMON STOCK OF UNIVERSAL OUTDOOR HOLDINGS, INC.:
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders of Universal
Outdoor Holdings, Inc., a Delaware corporation ("Universal"), will be held on
February 6, 1998, at 10:00 a.m., local time at 135 South LaSalle Street, 43rd
Floor, Chicago, Illinois (the "Special Meeting"), for the following purpose:
To consider and vote upon a proposal to approve and adopt an Agreement
and Plan of Merger, dated as of October 23, 1997 (the "Merger Agreement"),
among Universal, Clear Channel Communications, Inc. ("Clear Channel") and UH
Merger Sub, Inc., a wholly owned subsidiary of Clear Channel ("Sub"),
pursuant to which (a) each outstanding share of Universal common stock will
be converted into 0.67 shares of Clear Channel common stock and (b)
Universal will become a wholly owned subsidiary of Clear Channel, all as
more fully described in the accompanying Proxy Statement/ Prospectus.
A copy of the Merger Agreement is attached to the accompanying Proxy
Statement/Prospectus as Annex I.
Only stockholders of record at the close of business on December 24, 1997
are entitled to notice of, and to vote at, the Special Meeting and at any and
all adjournments or postponements thereof.
Stockholders are cordially invited to attend the Special Meeting. It is
important that your shares of Universal common stock be represented at the
Special Meeting regardless of the number of shares you hold. You are urged to
cast your vote by marking, dating and signing the enclosed proxy card and
returning it in the enclosed business reply envelope. No postage is required if
mailed in the United States. If you wish to vote in accordance with the
recommendation of the Board of Directors of Universal, all you need to do is
date and sign the proxy card and return it in the enclosed envelope.
If you are a stockholder of record and plan to attend, please mark the
appropriate box on the enclosed proxy card. If you are a stockholder whose
shares are registered with a bank, brokerage firm or other record holder and you
plan to attend the Special Meeting, please request an admission card by writing
to Universal Outdoor Holdings, Inc., Attn: Paul G. Simon, 311 South Wacker
Drive, Suite 6400, Chicago, Illinois, 60606. Evidence of your stock ownership,
which you can obtain from your bank, brokerage firm or other record holder, must
accompany your letter. To assure timely processing, please mail your request so
that Universal receives it by January 26, 1998. An admittance card in your name
will be mailed to you promptly. Any stockholder who does not have a ticket may
still register at the door; however, those whose shares are held by a bank,
brokerage firm or other record holder must also bring proof of stock ownership.
By order of the Board of Directors,
[SIG]
PAUL G. SIMON
VICE PRESIDENT, GENERAL COUNSEL
AND SECRETARY
January 6, 1998
Your vote is important. Please complete and return your proxy promptly.
THE AFFIRMATIVE VOTE OF HOLDERS OF A MAJORITY OF THE OUTSTANDING SHARES OF
UNIVERSAL COMMON STOCK IS REQUIRED FOR APPROVAL AND ADOPTION OF THE MERGER
AGREEMENT. REGARDLESS OF WHETHER YOU PLAN TO ATTEND THE SPECIAL MEETING, PLEASE
SIGN, DATE AND RETURN THE ENCLOSED PROXY IN THE ENVELOPE PROVIDED. PLEASE DO NOT
SEND STOCK CERTIFICATES AT THIS TIME.
<PAGE>
UNIVERSAL OUTDOOR HOLDINGS, INC.
PROXY STATEMENT
---------------------
CLEAR CHANNEL COMMUNICATIONS, INC.
PROSPECTUS
SHARES OF COMMON STOCK,
PAR VALUE $0.10 PER SHARE
------------------------
This Proxy Statement/Prospectus is being furnished to the holders of common
stock, par value $0.01 per share ("Universal Common Stock"), of Universal
Outdoor Holdings, Inc., a Delaware corporation ("Universal"), in connection with
the solicitation of proxies by the Board of Directors of Universal (the
"Universal Board") for use at a Special Meeting of stockholders of Universal to
be held on February 6, 1998 at 10:00 a.m., local time, at 135 South LaSalle
Street, 43rd Floor, Chicago, Illinois, or at any adjournment or postponement
thereof (the "Special Meeting").
This Proxy Statement/Prospectus relates to the Agreement and Plan of Merger,
dated as of October 23, 1997 (the "Merger Agreement"), among Universal, Clear
Channel Communication, Inc., a Texas corporation ("Clear Channel"), and UH
Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of Clear
Channel ("Sub"), which provides for the merger of Sub with and into Universal
(the "Merger"), with Universal surviving as a wholly owned subsidiary of Clear
Channel. Subject to the terms and conditions of the Merger Agreement, each share
of Universal Common Stock outstanding immediately prior to the Effective Time
(as hereinafter defined) of the Merger will be converted into (the "Merger
Consideration") 0.67 shares (the "Conversion Number") of common stock, par value
$0.10 per share, of Clear Channel ("Clear Channel Common Stock"). Cash will be
paid in lieu of any fractional share of Clear Channel Common Stock.
The consummation of the Merger is subject, among other things, to (i) the
approval and adoption of the Merger Agreement by holders of a majority of the
outstanding shares of Universal Common Stock; and (ii) the receipt of certain
regulatory approvals. A copy of the Merger Agreement is attached hereto as Annex
I.
This Proxy Statement/Prospectus also constitutes the Prospectus of Clear
Channel filed as part of a Registration Statement on Form S-4 (including the
exhibits and amendments thereto, the "Registration Statement") with the
Securities and Exchange Commission (the "SEC") under the Securities Act of 1933,
as amended (the "Securities Act"), relating to the shares of Clear Channel
Common Stock to be issued in the Merger. It is anticipated that approximately
19,287,858 shares of Clear Channel Common Stock will be issued in the Merger,
representing approximately 16.4% of the shares of Clear Channel Common Stock
expected to be issued after giving effect to the consummation of the Merger
(assuming no other issuances of Clear Channel Common Stock).
Clear Channel Common Stock is listed for trading under the symbol "CCU" on
the New York Stock Exchange (the "NYSE"), and Universal Common Stock is quoted
on the Nasdaq National Market under the symbol "UOUT." On October 22, 1997, the
last trading day prior to the execution of the Merger Agreement, the last
reported sale prices of Clear Channel Common Stock and Universal Common Stock,
as reported on the NYSE Composite Transactions Tape and the National Association
of Securities Dealers Automated Quotation System ("NASDAQ") National Market
System-Registered Trademark-("NASDAQ/NMS"), were $63.375 per share and $41.50
per share, respectively. On January 2, 1998, the last reported sale prices of
Clear Channel Common Stock and Universal Common Stock, as reported on the NYSE
Composite Transactions Tape and the NASDAQ/NMS, respectively, were $77.5625 per
share and $50.75 per share, respectively, and the equivalent pro forma sale
price of Universal Common Stock (determined by multiplying the last reported
sale price of Clear Channel Common Stock by the Conversion Number) was $51.9669
per share.
FOR A DESCRIPTION OF CERTAIN SIGNIFICANT CONSIDERATIONS IN CONNECTION WITH
THE MERGER AND RELATED MATTERS DESCRIBED IN THIS PROXY STATEMENT/PROSPECTUS, SEE
SECTION 5, "RISK FACTORS" BEGINNING ON PAGE 17.
This Proxy Statement/Prospectus and the accompanying form of proxy are first
being mailed to stockholders of Universal on or about January 7, 1998.
--------------------------
THE SECURITIES TO BE ISSUED PURSUANT TO THIS PROXY STATEMENT/PROSPECTUS HAVE
NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR
ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROXY STATEMENT/PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Proxy Statement/Prospectus is January 6, 1998.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
----------- -----
<C> <C> <S> <C>
1. AVAILABLE INFORMATION..................................................................................... 1
2. INCORPORATION OF DOCUMENTS BY REFERENCE................................................................... 2
3. CAUTIONARY STATEMENT...................................................................................... 3
4. SUMMARY................................................................................................... 4
(a) The Companies.................................................................................. 4
(b) The Special Meeting............................................................................ 5
(c) The Merger and the Merger Agreement............................................................ 6
(d) UNIVERSAL OUTDOOR HOLDINGS, INC................................................................ 12
(e) CLEAR CHANNEL COMMUNICATIONS, INC.............................................................. 13
(f) Summary Unaudited Pro Forma Financial Data..................................................... 14
(g) Comparative Per Share Data of Universal and Clear Channel...................................... 15
(h) Market Prices and Dividends.................................................................... 16
5. RISK FACTORS.............................................................................................. 17
6. THE SPECIAL MEETING....................................................................................... 26
(a) Purpose........................................................................................ 26
(b) Record Date; Voting Rights..................................................................... 26
(c) Quorum......................................................................................... 26
(d) Proxies........................................................................................ 26
(e) Solicitation of Proxies........................................................................ 27
(f) Required Vote.................................................................................. 27
(g) Share Ownership of Management.................................................................. 27
7. THE MERGER................................................................................................ 29
(a) General........................................................................................ 29
(b) Background of the Merger....................................................................... 29
(c) Clear Channel Reasons for the Merger........................................................... 32
(d) Universal Reasons for the Merger; Recommendation of the Universal Board........................ 33
(e) Opinions of Financial Advisors................................................................. 35
(f) Interests of Certain Persons in the Transaction................................................ 45
(g) Voting Agreement............................................................................... 47
(h) Resale Agreement............................................................................... 47
(i) Certain U.S. Federal Income Tax Consequences................................................... 48
(j) Anticipated Accounting Treatment............................................................... 49
(k) Regulatory Approvals........................................................................... 49
(l) Percentage Ownership Interest of Universal Stockholders After the Merger....................... 50
(m) Absence of Appraisal Rights.................................................................... 50
(n) Stock Exchange Listing......................................................................... 51
(o) Certain Consequences of the Merger............................................................. 51
(p) Management After the Merger.................................................................... 51
(q) Conduct of the Business of Universal if the Merger Is Not Consummated.......................... 51
(r) Resales of Clear Channel Common Stock.......................................................... 51
8. OTHER TERMS OF THE MERGER AGREEMENT....................................................................... 52
(a) Conversion of Shares in the Merger............................................................. 52
(b) Exchange Agent; Procedures for Exchange of Certificates........................................ 52
(c) No Fractional Shares........................................................................... 54
(d) Representations and Warranties................................................................. 55
(e) Conduct of Business Pending the Merger......................................................... 56
(f) Other Covenants................................................................................ 58
(g) No Solicitation................................................................................ 59
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
SECTION PAGE
----------- -----
(h) Conditions Precedent to the Merger............................................................. 60
<C> <C> <S> <C>
(i) Universal Stock Options and Warrants........................................................... 61
(j) Employee Matters............................................................................... 62
(k) Indemnification; Directors' and Officers'...................................................... 62
(l) Termination.................................................................................... 63
(m) Fees and Expenses.............................................................................. 64
(n) Termination Fee................................................................................ 64
(o) Amendment...................................................................................... 65
(p) Waiver......................................................................................... 65
9. UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS............................................... 66
10. COMPARISON OF THE RIGHTS OF HOLDERS OF UNIVERSAL COMMON STOCK AND CLEAR CHANNEL COMMON STOCK..............
85
(a) Authorized Capital............................................................................. 85
(b) Number of Directors; Election of Directors; Removal; Vacancies................................. 85
(c) Charter Amendments............................................................................. 86
(d) By-law Amendments.............................................................................. 86
(e) Advance Notice of Director Nominations and New Business........................................ 87
(f) Special Meetings............................................................................... 87
(g) Cumulative Voting.............................................................................. 87
(h) Stockholder Action Without a Meeting........................................................... 87
(i) Required Vote for Certain Transactions......................................................... 88
(j) State Takeover Legislation..................................................................... 88
(k) Standard of Conduct for Directors.............................................................. 89
(l) Indemnification of Directors and Officers...................................................... 90
(m) Limitation of Personal Liability of Directors and Officers..................................... 92
(n) Appraisal Rights............................................................................... 92
(o) Preemptive Rights.............................................................................. 93
(p) Denial of Voting Rights........................................................................ 93
(q) Payment of Dividends........................................................................... 93
(r) Inspection of Books and Records................................................................ 93
11. BUSINESS OF UNIVERSAL..................................................................................... 95
12. BUSINESS OF CLEAR CHANNEL................................................................................. 99
13. BENEFICIAL OWNERSHIP OF UNIVERSAL COMMON STOCK............................................................ 105
14. BENEFICIAL OWNERSHIP OF CLEAR CHANNEL COMMON STOCK........................................................ 106
15. STOCKHOLDER PROPOSALS FOR 1998 ANNUAL MEETING............................................................. 107
16. EXPERTS................................................................................................... 108
17. LEGAL OPINIONS............................................................................................ 110
</TABLE>
<TABLE>
<S> <C>
ANNEXES
ANNEX I MERGER AGREEMENT
ANNEX II OPINION OF BT ALEX. BROWN & SONS INCORPORATED
ANNEX III OPINION OF BEAR STEARNS & CO., INC.
ANNEX IV.A SIMON VOTING AGREEMENT
ANNEX IV.B CLINGEN VOTING AGREEMENT
ANNEX V RESALE AGREEMENT
ANNEX VI EMPLOYMENT AGREEMENT
</TABLE>
ii
<PAGE>
1. AVAILABLE INFORMATION
Universal and Clear Channel are subject to the informational requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information with
the SEC. Such reports, proxy statements and other information may be inspected
and copied at the public reference facilities maintained by the SEC at Room
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the
following Regional Offices of the SEC: Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661; and 7 World Trade Center, Suite 1300, New
York, New York 10048. Copies of such material may also be obtained from the
Public Reference Section of the SEC at 450 Fifth Street, N.W., Washington D.C.
20549, at prescribed rates. The SEC also maintains a World Wide Web site that
contains reports, proxy and information statements, and other information
regarding registrants (including Universal and Clear Channel) that file
electronically with the SEC (http://www.sec.gov). Universal Common Stock is
listed on NASDAQ/NMS and reports, proxy statements and other information
relating to Universal can be inspected and copied at the offices of the
NASDAQ/NMS at 1735 K Street, N.W., Washington, D.C. 20006. Clear Channel Common
Stock is listed on the NYSE and reports, proxy statements and other information
relating to Clear Channel can be inspected and copied at the NYSE, 20 Broad
Street, New York, New York 10005.
This Proxy Statement/Prospectus does not contain all of the information set
forth in the Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the SEC. Reference is made to the
Registration Statement and the exhibits thereto for further information.
Exhibits to the Registration Statement that are omitted from the Proxy
Statement/Prospectus may also be obtained at the SEC's World Wide Web site
described above. Statements contained or incorporated by reference herein
concerning the provisions of any agreement or other document filed as an exhibit
to the Registration Statement or otherwise filed with the SEC are not
necessarily complete, and readers are referred to the copy so filed for more
detailed information, each such statement being qualified in its entirety by
such reference.
THIS PROXY STATEMENT/PROSPECTUS INCORPORATES BY REFERENCE DOCUMENTS THAT ARE
NOT PRESENTED HEREIN OR DELIVERED HEREWITH. COPIES OF SUCH DOCUMENTS (OTHER THAN
EXHIBITS THERETO WHICH ARE NOT SPECIFICALLY INCORPORATED BY REFERENCE HEREIN)
ARE AVAILABLE, WITHOUT CHARGE, TO ANY PERSON, INCLUDING ANY BENEFICIAL OWNER OF
SHARES OF UNIVERSAL COMMON STOCK OR CLEAR CHANNEL COMMON STOCK TO WHOM THIS
PROXY STATEMENT/PROSPECTUS IS SENT, UPON WRITTEN OR ORAL REQUEST TO, IN THE CASE
OF DOCUMENTS RELATING TO UNIVERSAL, UNIVERSAL OUTDOOR HOLDINGS, INC., ATTN: PAUL
G. SIMON, 311 SOUTH WACKER DRIVE, SUITE 6400, CHICAGO, ILLINOIS 60606, TELEPHONE
(312) 431-0822 AND, IN THE CASE OF DOCUMENTS RELATING TO CLEAR CHANNEL, CLEAR
CHANNEL COMMUNICATIONS, INC., ATTN: MR. HOUSTON LANE, 200 CONCORD PLAZA, SUITE
600, SAN ANTONIO, TEXAS 78216, TELEPHONE (210) 822-2828. IN ORDER TO ENSURE
DELIVERY OF DOCUMENTS PRIOR TO THE SPECIAL MEETING, ANY SUCH REQUEST SHOULD BE
MADE NOT LATER THAN JANUARY 26, 1998.
1
<PAGE>
2. INCORPORATION OF DOCUMENTS BY REFERENCE
The following documents heretofore filed with the SEC pursuant to the
Exchange Act are incorporated herein by reference:
1. the Universal Proxy Statement on Schedule 14A dated May 13, 1997 (File No.
000-20823);
2. the Universal Annual Report on Form 10-K for the year ended December 31,
1996 (File No. 000-20823);
3. the Universal Quarterly Reports on Form 10-Q for the quarters ended March
31, 1997, June 30, 1997 and September 30, 1997 (File No. 000-20823);
4. the description of the Universal Common Stock contained in the Registration
Statement on Form 8-A filed under the Exchange Act on June 6, 1996 and
amended by Amendment No. 1 on July 17, 1996 (File No. 000-20823);
5. the Universal Current Reports on Form 8-K dated July 31, 1997 and October
30, 1997 (File No. 000-20823);
6. the Clear Channel Proxy Statement on Schedule 14A dated March 10, 1997 (File
No. 1-9645);
7. the Clear Channel Annual Report on Form 10-K for the year ended December 31,
1996 (File No. 1-9645);
8. the Clear Channel Quarterly Reports for the quarters ended March 31, 1997,
June 30, 1997 and September 30, 1997 (File No. 1-9645);
9. the description of the Clear Channel Common Stock contained in the
Registration Statement on Form 8-A filed under the Exchange Act on October
19, 1994 (File No. 1-9645); and
10. the Clear Channel Current Reports on Form 8-K dated May 24, 1996, June 5,
1996, April 17, 1997, October 14, 1997, November 3, 1997 and December 22,
1997 (File No. 1-9645).
All reports and other documents filed by either Universal or Clear Channel
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to
the date of this Proxy Statement/Prospectus and prior to the date of the Special
Meeting shall be deemed to be incorporated by reference herein and to be a part
hereof from the dates of filing of such reports and documents. Any statement
contained in a document incorporated or deemed to be incorporated by reference
herein shall be deemed to be modified or superseded for purposes of this Proxy
Statement/Prospectus to the extent that a statement contained herein, or in any
other subsequently filed document that also is incorporated or deemed to be
incorporated by reference herein, modifies or supersedes the earlier statement.
Any statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Proxy Statement/Prospectus.
------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR REPRESENTATIONS
WITH RESPECT TO THE MATTERS DESCRIBED IN THIS PROXY STATEMENT/PROSPECTUS OTHER
THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE HEREIN, AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY UNIVERSAL OR CLEAR CHANNEL. THIS PROXY STATEMENT/PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY
SECURITIES, NOR DOES IT CONSTITUTE THE SOLICITATION OF A PROXY IN ANY
JURISDICTION TO OR FROM ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE ANY SUCH OFFER
OR SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS PROXY
STATEMENT/PROSPECTUS NOR ANY DISTRIBUTION OF SECURITIES HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF UNIVERSAL OR CLEAR CHANNEL SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
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3. CAUTIONARY STATEMENT
When used in this Proxy Statement/Prospectus with respect to Universal, the
words "estimate," "project," "intend," "expect" and similar expressions are
intended to identify forward-looking statements. Readers are cautioned not to
place undue reliance on these forward-looking statements, which speak only as of
the date of this Proxy Statement/Prospectus. Such statements are subject to
risks and uncertainties that could cause actual results to differ materially
from those contemplated in such forward-looking statements. Such risks and
uncertainties include those risks, uncertainties and risk factors identified
under "RISK FACTORS" herein and under the heading "Management's Discussion and
Analysis of Financial Condition and Results of Operations" that is in the
Universal 1996 Annual Report to stockholders of Universal and that is
incorporated by reference in the Universal Annual Report on Form 10-K for the
fiscal year ended December 31, 1996. Universal does not undertake any obligation
to publicly release any revisions to these forward-looking statements to reflect
events or circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
When used in this Proxy Statement/Prospectus with respect to Clear Channel,
the words "estimate," "project," "intend," "expect" and similar expressions are
intended to identify forward-looking statements. Readers are cautioned not to
place undue reliance on these forward-looking statements, which speak only as of
the date of this Proxy Statement/Prospectus. Such statements are subject to
risks and uncertainties that could cause actual results to differ materially
from those contemplated in such forward-looking statements. Such risks and
uncertainties include those risks, uncertainties and risk factors identified
under the heading "RISK FACTORS" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" that is in the Clear Channel
Annual Report on Form 10-K for the fiscal year ended December 31, 1996. Clear
Channel does not undertake any obligation to publicly release any revisions to
these forward-looking statements to reflect events or circumstances after the
date hereof or to reflect the occurrence of unanticipated events.
As used in this Proxy Statement/Prospectus, unless the context otherwise
clearly requires: "Universal" refers to Universal Outdoor Holdings, Inc. and its
consolidated subsidiaries, and "Clear Channel" refers to Clear Channel
Communications, Inc. and its consolidated subsidiaries. All information
contained in this Proxy Statement/Prospectus with respect to Clear Channel and
Sub has been provided by Clear Channel. Unless otherwise stated, all information
contained in this Proxy Statement/Prospectus gives effect to a five-for-four
split of Clear Channel Common Stock effected on February 22, 1994, a two-for-one
split of Clear Channel Common Stock effected on November 30, 1995 and a
two-for-one split of Clear Channel Common Stock effected on December 2, 1996.
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4. SUMMARY
THE FOLLOWING IS A SUMMARY OF CERTAIN INFORMATION CONTAINED ELSEWHERE OR
INCORPORATED BY REFERENCE IN THIS PROXY STATEMENT/PROSPECTUS. REFERENCE IS MADE
TO, AND THIS SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, THE MORE DETAILED
INFORMATION CONTAINED ELSEWHERE OR INCORPORATED BY REFERENCE IN THIS PROXY
STATEMENT/PROSPECTUS AND THE ANNEXES HERETO.
------------------------
STOCKHOLDERS OF UNIVERSAL ARE URGED TO READ THIS PROXY STATEMENT/PROSPECTUS,
THE ANNEXES HERETO AND THE DOCUMENTS INCORPORATED BY REFERENCE HEREIN IN THEIR
ENTIRETY.
------------------------
(A) THE COMPANIES
UNIVERSAL. Universal is a leading outdoor advertising company operating
approximately 34,000 advertising display faces in four large regions: the
Midwest (Chicago, Minneapolis/St. Paul, Indianapolis, Milwaukee and Des Moines),
Florida (Orlando, Jacksonville, Ocala and the Atlantic Coast and Gulf Coast
areas of Florida), the Midsouth (Evansville (IN), Dallas, Memphis/Tunica and
Chattanooga (TN) and Myrtle Beach (SC)) and the East (New York, Washington,
D.C., Baltimore, Philadelphia, Northern New Jersey, Wilmington (DE), Salisbury
(MD) and Hudson Valley (NY)). Universal's advertising display face inventory
includes transit display faces and kiosks in shopping malls, in addition to
billboards and other outdoor display faces. Universal believes that the
diversity of its advertising display inventory throughout its markets provides
its customers with a unique opportunity to select a variety of media and outlets
in delivering their marketing messages. Universal's customer base is also highly
diversified, with no one category of customers accounting for more than 16.0% of
net revenues for the six months ended June 30, 1997. Universal was incorporated
in Delaware in 1991. Universal is a holding company with no business holdings of
its own. Universal conducts its business operations through its wholly owned
subsidiary, Universal Outdoor, Inc. ("UOI") and its consolidated subsidiaries.
The mailing address of the principal executive offices of Universal is 311 South
Wacker Drive, Suite 6400, Chicago, Illinois 60606; its telephone number is (312)
431-0822.
CLEAR CHANNEL. Clear Channel, which began operations in 1972, is a
diversified media company that owns or programs radio and television stations
and is one of the largest domestic outdoor advertising companies based on its
total advertising display inventory. In addition, Clear Channel owns a 50%
equity interest in the Australian Radio Network Pty. Ltd., which operates radio
stations in Australia, a one-third equity interest in the New Zealand Radio
Network, which operates radio stations throughout New Zealand, and a 32.3%
non-voting equity interest in Heftel Broadcasting Corporation (Nasdaq National
Market symbol: "HBCCA") ("Heftel"), a leading domestic Spanish-language radio
broadcaster.
The radio stations currently owned or programmed by Clear Channel are
principally located in the South, Southeast, Southwest, Northeast and Midwest.
These radio stations employ a wide variety of programming formats, such as
News/Talk/Sports, Country, Adult Contemporary, Urban and Album Rock. The
television stations currently owned or programmed by Clear Channel are located
in the South, Southeast, Northeast and Midwest. Additionally, Clear Channel
operates eleven radio networks serving Oklahoma, Texas, Iowa, Kentucky,
Virginia, Alabama, Tennessee, Florida and Pennsylvania. In 1996, Clear Channel
derived approximately 62% of its net broadcasting revenue from radio operations
and approximately 38% from television operations.
Clear Channel, through its acquisition of Eller Media Corporation ("Eller
Media") on April 10, 1997, is one of the largest domestic outdoor advertising
companies, serving 16 major domestic markets. For the three months ended
September 30, 1997, Clear Channel derived approximately 42% of its net revenue
from radio operations, approximately 20% from television operations, and
approximately 38% from outdoor advertising operations.
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Clear Channel has its principal executive offices at 200 Concord Plaza,
Suite 600, San Antonio, Texas 78216; its telephone number is (210) 822-2828.
SUB. Sub is a wholly owned subsidiary of Clear Channel that was formed to
facilitate consummation of the Merger and has conducted no activities other than
in connection with the Merger and the Merger Agreement. The principal offices of
Sub are located at 200 Concord Plaza, Suite 600, San Antonio, Texas 78216 and
its telephone number is (210) 822-2828.
THE COMBINED COMPANY. With respect to the combined company, including (i)
pro forma adjustments for Clear Channel's acquisitions of certain assets from
Paxson Communications Corp. (the "Paxson Radio Acquisition") and of
approximately 93% of the outstanding common stock of Eller Media and (ii) the
Universal Acquisitions (as defined), approximately 79.2% of the pro forma
combined revenues for the year ending December 31, 1996, were attributable to
Clear Channel and 20.8% were attributable to Universal. As of September 30,
1997, approximately 65.0% of the pro forma assets of the combined company were
attributable to Clear Channel and 35.0% were attributable to Universal. See
"Unaudited Pro Forma Combined Condensed Financial Statements."
(B) THE SPECIAL MEETING
PURPOSE. The Special Meeting will be held on February 6, 1998, at 10:00
a.m., local time, at 135 South LaSalle Street, 43rd Floor, Chicago, Illinois, or
at any adjournment or postponement thereof, to consider and vote upon a proposal
to approve and adopt the Merger Agreement. The Universal By-Laws (as defined
herein) provide that no business except that referred to in the accompanying
Notice of Special Meeting may be transacted at the Special Meeting. See Section
6(a) , "THE SPECIAL MEETING-- Purpose."
RECORD DATE; VOTING RIGHTS. Only holders of record of Universal Common Stock
at the close of business on December 24, 1997 (the "Record Date") are entitled
to receive notice of and to vote at the Special Meeting. At the close of
business on December 24, 1997, there were 26,814,815 shares of Universal Common
Stock outstanding, each of which entitles the registered holder thereof to one
vote. See Section 6(b), "THE SPECIAL MEETING--Record Date; Voting Rights."
QUORUM. The presence in person or by proxy of the holders of a majority of
the Universal Common Stock at the Special Meeting will constitute a quorum for
the transaction of business. Abstentions and broker non-votes will count in
determining whether a quorum is present at the Special Meeting. See Section
6(c), "THE SPECIAL MEETING--Quorum."
REQUIRED VOTE. Approval and adoption of the Merger Agreement will require
the affirmative vote of holders of a majority of the outstanding shares of
Universal Common Stock. See Section 6(f), "THE SPECIAL MEETING--Required Vote."
PROXIES. An abstention will have the effect of a vote cast against approval
and adoption of the Merger Agreement. Brokers who hold shares of Universal
Common Stock as nominees will not have discretionary authority to vote such
shares in the absence of instructions from the beneficial owners thereof. Broker
nonvotes will have the same effect as votes cast against approval and adoption
of the Merger Agreement. See Section 6(d), "THE SPECIAL MEETING--Proxies."
SHARE OWNERSHIP OF MANAGEMENT. At the close of business on December 12,
1997, directors and executive officers of Universal and their affiliates were
the beneficial owners of an aggregate of approximately 7,902,625 (approximately
27.5%) of the shares of Universal Common Stock then outstanding (including
2,173,579 Management Warrants (as defined herein) and 67,549 of the Stock Awards
(as defined herein) granted on December 10, 1997 and 4,825 of the Stock Awards
granted on January 5, 1998). See Section 6(g), "THE SPECIAL MEETING--Share
Ownership of Management" and Section 7(f), "THE MERGER--Interests of Certain
Persons in the Transaction."
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(C) THE MERGER AND THE MERGER AGREEMENT
GENERAL. At the Effective Time (as defined below) of the Merger, Sub will be
merged with and into Universal, with Universal continuing as the surviving
corporation (the "Surviving Corporation") and a wholly owned subsidiary of Clear
Channel. As a result of the Merger, the separate corporate existence of Sub will
cease and Universal will succeed to and assume all the rights and all
obligations of Sub in accordance with the Delaware General Corporation Law (the
"DGCL"). Subject to the terms and conditions of the Merger Agreement, each share
of Universal Common Stock outstanding immediately prior to the Effective Time
will be converted into 0.67 shares of Clear Channel Common Stock. Cash will be
paid in lieu of any fractional share of Clear Channel Common Stock. See Section
8(c), "OTHER TERMS OF THE MERGER AGREEMENT--No Fractional Shares."
The Merger will become effective at the time of filing of the Certificate of
Merger with the Secretary of State of the State of Delaware. The filing of the
Certificate of Merger will occur as soon as practicable following the
satisfaction or waiver of the conditions set forth in the Merger Agreement. As
used in the Merger Agreement and herein, the time the Merger becomes effective
will be the "Effective Time." See Section 8(h), "OTHER TERMS OF THE MERGER
AGREEMENT--Conditions Precedent to the Merger."
WARRANTS; OPTIONS. With respect to each outstanding Management Warrant or
Incentive Option (as defined below), as of the Effective Time, such Management
Warrant or Incentive Option, as the case may be, shall be cancelled in exchange
for the number of shares of Clear Channel Common Stock equal to the product of
(X) the difference between (i) the total number of shares of Universal Common
Stock subject to such Management Warrant or Incentive Option, as the case may
be, and (ii) the number obtained by dividing (A) the aggregate exercise price of
such Management Warrant or Incentive Option, as the case may be, by (B) $41.50
and (Y) 0.67. All of the Management Warrants are held by Messrs. Daniel L.
Simon, Chief Executive Officer, President and a director of Universal, and Brian
T. Clingen, Vice President, Chief Financial Officer and a director of Universal.
Accordingly, it is anticipated that Messrs. Daniel L. Simon and Brian T. Clingen
will receive, in exchange for the cancellation of their Management Warrants,
approximately 1,088,705 and approximately 192,136 shares of Clear Channel Common
Stock, respectively. In 1997, Universal also granted 44,000 options to acquire
shares of Universal Common Stock to a senior level employee of Universal (the
"Incentive Options"). See Section 7(f), "THE MERGER--Interests of Certain
Persons in the Transaction," Section 8(i), "OTHER TERMS OF THE MERGER
AGREEMENT--Universal Stock Options and Warrants" and Section 13, "BENEFICIAL
OWNERSHIP OF UNIVERSAL COMMON STOCK."
In 1997, Universal granted 93,300 options to certain members of management
under its 1997 Equity Incentive Plan ("Employee Options"). No such Employee
Options are held by any directors or executive officers of Universal. Employee
Options outstanding as of the Effective Time, whether or not then exercisable,
shall be cancelled in exchange for a single cash payment equal to the product of
(i) the total number of shares of Universal Common Stock subject to such
Employee Option and (ii) the excess, if any, of $41.50 over the exercise price
per share of such Employee Option. See Section 7(f), "THE MERGER-- Interests of
Certain Persons in the Transaction," Section 8(i), "OTHER TERMS OF THE MERGER
AGREEMENT--Universal Stock Options and Warrants" and Section 13, "BENEFICIAL
OWNERSHIP OF UNIVERSAL COMMON STOCK."
UNIVERSAL REASONS FOR THE MERGER; RECOMMENDATION OF THE UNIVERSAL BOARD. The
Universal Board's recommendation is based upon a number of factors described in
this Proxy Statement/Prospectus. The Universal Board has determined that the
Merger and the Merger Agreement are in the best interests of Universal and its
stockholders and has approved the Merger and the Merger Agreement. THE UNIVERSAL
BOARD RECOMMENDS THAT THE STOCKHOLDERS OF UNIVERSAL VOTE IN FAVOR OF APPROVAL
AND ADOPTION OF THE MERGER AGREEMENT AT THE SPECIAL MEETING. See
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Section 7(d), "THE MERGER--Universal Reasons for the Merger; Recommendation of
the Universal Board."
CLEAR CHANNEL REASONS FOR THE MERGER. For the reasons described in this
Proxy Statement/Prospectus, the Clear Channel Board (as defined herein) has
determined that the Merger and the Merger Agreement are in the best interests of
Clear Channel and its stockholders and has approved the Merger Agreement. See
Section 7(c), "THE MERGER--Clear Channel Reasons for the Merger."
OPINIONS OF UNIVERSAL'S FINANCIAL ADVISORS. BT Alex. Brown Incorporated
("Alex Brown") and Bear Stearns & Co., Inc. ("Bear Stearns") have acted as
financial advisors to Universal in connection with the Merger and have each
delivered their respective opinions, dated October 23, 1997, to the Universal
Board to the effect that, based upon and subject to the various considerations
set forth therein, as of the date of such opinions, the consideration to be paid
to Universal's stockholders in connection with the Merger was fair from a
financial point of view to Universal's stockholders. The full texts of Alex
Brown's and Bear Stearns' written opinions, each of which sets forth a
description of the assumptions made, matters considered and limitations on the
review undertaken, are attached hereto as Annexes II and III, respectively, and
should be read carefully and in their entirety. Alex Brown's and Bear Stearns'
opinions are directed only to the fairness of the consideration to be paid to
Universal stockholders in connection with the Merger from a financial point of
view. Alex Brown's and Bear Stearns' opinions do not address any other aspect of
the Merger or related transactions and do not constitute a recommendation to any
stockholder of Universal as to how such stockholder should vote at the Special
Meeting. See Section 7(e), "THE MERGER--Opinions of Financial Advisors."
INTERESTS OF CERTAIN PERSONS IN THE TRANSACTION. In considering the
recommendation of approval and adoption of the Merger Agreement by the Universal
Board, the stockholders of Universal should be aware that certain directors and
executive officers of Universal may be deemed to have conflicts of interest with
respect to the Merger, and that such interests, together with other relevant
factors, were considered by the Universal Board in recommending the approval and
adoption of the Merger Agreement to the stockholders of Universal.
In connection with the Merger, Daniel L. Simon entered into an Employment
Agreement (as defined) pursuant to which Mr. Simon will become Vice Chairman and
Chief Operating Officer of the Surviving Corporation, Eller Media, their
respective subsidiaries and affiliate companies and any successor company or
affiliates of Clear Channel which are in the business of outdoor advertising
(collectively, "Clear Channel Outdoor"). In addition, Mr. Simon and Brian T.
Clingen, who beneficially own and have the sole right to vote and dispose of an
aggregate of 7,743,399 shares of Universal Common Stock, each entered into a
Voting Agreement (as defined) with Clear Channel pursuant to which each of them
agreed to vote all of his shares of Universal Common Stock in favor of approval
and adoption of the Merger Agreement and not to sell any of their shares of
Universal Common Stock prior to the Effective Time. Mr. Simon also entered into
a Resale Agreement (as defined) with Clear Channel restricting his ability to
sell Clear Channel Common Stock for a period beginning on the Effective Time and
ending on the earlier of (i) the date Mr. Simon is no longer an officer or
director of Clear Channel or any of its subsidiaries and (ii) two years
following the Effective Time. The Resale Agreement also restricts the ability of
Mr. Simon to buy or sell shares of Clear Channel Common Stock prior to the
Effective Time of the Merger.
Mr. Simon and Mr. Clingen hold all of the outstanding Management Warrants.
On or about the date of the Merger Agreement, Messrs. Simon and Clingen
irrevocably forfeited Management Warrants with respect to an aggregate of
173,499 shares of Universal Common Stock and may, prior to the Effective Time,
forfeit up to an additional 6,501 Management Warrants. In the Merger, each of
the outstanding Management Warrants will be converted into shares of Clear
Channel Common Stock. On December 10, 1997, Universal granted 33,774 and 33,775
Stock Awards to Cindy Ogle, Vice President of Operations of Universal, and Paul
G. Simon, Vice President, General Counsel and Secretary of Universal,
respectively and will grant 4,825 Stock Awards to Ms. Ogle on or about January
1, 1998. A portion of these Stock
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Awards will be fully vested upon the date of grant, including all of Mr. Simon's
Stock Awards and 22,709 of Ms. Ogle's. The remaining Stock Awards will vest one
year from the date of grant. No Stock Awards will be made to any other directors
or executive officers of Universal. As of the Effective Time, all of the Stock
Awards (which shall remain subject to any applicable restrictions) will be
converted in the Merger into shares of Clear Channel Common Stock.
See Sections 7(f), (g) and (h), "THE MERGER--Interests of Certain Persons in the
Transaction," "--Voting Agreement," "--Resale Agreement" and Section 8(i),
"OTHER TERMS OF THE MERGER AGREEMENT--Universal Stock Options and Warrants."
CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES. It is a condition to the
consummation of the Merger that Universal receive an opinion from its tax
counsel, Skadden, Arps, Slate, Meagher & Flom LLP, and that Clear Channel
receive an opinion from its tax counsel, Akin, Gump, Strauss, Hauer & Feld,
L.L.P., to the effect that, for federal income tax purposes, the Merger will
constitute a "reorganization" within the meaning of Section 368(a) of the Code
and no gain or loss will be recognized by Clear Channel, Sub, Universal or
generally by the Universal stockholders as a result of the Merger. It is
expected that such opinions will provide that the Merger will be tax free to the
Universal stockholders except to the extent: (a) a Universal stockholder
receives cash in lieu of fractional shares of Clear Channel Common Stock and (b)
Universal is deemed to pay any expenses (including certain transfer taxes) which
are a liability of a Universal stockholder. See Section 7(i), "THE
MERGER--Certain U.S. Federal Income Tax Consequences" and Section 8(h), "OTHER
TERMS OF THE MERGER AGREEMENT--Conditions Precedent to the Merger."
ANTICIPATED ACCOUNTING TREATMENT. The Merger is expected to be treated for
accounting purposes as a purchase. As a result, the assets and liabilities of
Universal will be adjusted to their estimated fair values with the unallocated
purchase price reflected as goodwill. See Section 7(j), "THE MERGER--Anticipated
Accounting Treatment."
ABSENCE OF APPRAISAL RIGHTS. Under the DGCL, the stockholders of Universal
are not entitled to appraisal rights with respect to the Merger. See Section
7(m), "THE MERGER--Absence of Appraisal Rights."
TERMINATION OF THE MERGER AGREEMENT. The Merger Agreement may be terminated
and abandoned at any time prior to the Effective Time, whether before or after
any approval by the stockholders of Universal of the matters presented in
connection with the Merger:
(i) by mutual written consent of Clear Channel and Universal;
(ii) by either Clear Channel or Universal if the stockholders of
Universal fail to approve the Merger;
(iii) by either Clear Channel or Universal if (A) the Effective Time has
not occurred on or prior to August 30, 1998, PROVIDED that the party seeking
to terminate the Merger Agreement must not have breached in any material
respect its obligations under the Merger Agreement in any manner that shall
have proximately contributed to the failure to consummate the Merger on or
before such date, (B) a statute, rule, regulation or executive order has
been enacted, entered or promulgated prohibiting the consummation of the
Merger substantially on the terms contemplated in the Merger Agreement, or
(C) an order, decree, ruling or injunction has been entered permanently
restraining, enjoining or otherwise prohibiting the consummation of the
Merger substantially on the terms contemplated in the Merger Agreement and
such order, decree, ruling or injunction has become final and
non-appealable, PROVIDED that the party seeking to terminate the Merger
Agreement must have used its reasonable best efforts to remove such
injunction, order or decree, ruling or injunction;
(iv) by Clear Channel if the Universal Board (A) withdraws, modifies or
amends in any respect adverse to Clear Channel its approval or
recommendation of the Merger Agreement or any of the
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transactions contemplated therein, (B) fails to include in this Proxy
Statement/Prospectus when mailed the recommendation of the Universal Board,
or (C) recommends to its stockholders any Acquisition Proposal (as defined)
of a person other than Clear Channel;
(v) by Universal (A) if the Universal Board determines to accept an
Acquisition Proposal that it has determined in good faith, after
consultation with its outside legal counsel and financial advisors, to be
more favorable to Universal stockholders than the transactions contemplated
by the Merger Agreement, (B) if the Universal Board takes any action
described in clause (iv) above, or (C) upon notice to Clear Channel,
authorized by the Universal Board, if at any time during the period between
the date of the Merger Agreement and the two days prior to the Effective
Time, the average of the Clear Channel Common Stock closing prices, regular
way, on the NYSE for any fifteen (15) consecutive trading day period is less
than or equal to $49.85 (the "Floor Price") and, in the event the Custom
Index (as defined) at the time of any such calculation declines from the
date of the Merger Agreement, the amount by which the percentage decrease in
the average of the Clear Channel Common Stock from $62.3125 exceeds the
percentage decrease, if any, in the Custom Index from $36.0375 is greater
than or equal to 20 percentage points; PROVIDED, HOWEVER, Clear Channel may,
subject to certain conditions, increase the Conversion Number (and therefore
the number of shares to be issued in the Merger) such that each share of
Universal Common Stock to be converted into the Merger will receive Clear
Channel Common Stock with a value of $41.50.
See Section 8(l), "OTHER TERMS OF THE MERGER AGREEMENT--Termination."
FEES AND EXPENSES; TERMINATION FEE. Other than certain termination fees, all
costs and expenses incurred in connection with the Merger Agreement and the
transactions contemplated hereby will be paid by the party incurring such
expenses.
In addition to any other amounts that may be payable or become payable
pursuant to the provisions described herein, if the Merger Agreement is
terminated pursuant to the provisions described in clause (iv) under "OTHER
TERMS OF THE MERGER AGREEMENT--Termination" hereof, and Clear Channel or Sub is
not then in material breach of its obligations under the Merger Agreement, then
Universal will promptly, but in no event later than one business day after the
termination of the Merger Agreement (or from time to time after the Closing Date
(as defined)), reimburse Clear Channel and Sub for all documented out-of-pocket
expenses and fees in an amount not to exceed $1.5 million, whether incurred
prior to, on or after the date of the Merger Agreement, in connection with the
Merger and the consummation of all transactions contemplated by the Merger
Agreement, PROVIDED that in no event will any payment be due pursuant to the
terms described in this paragraph if a fee is payable pursuant to the terms
described below, and if a fee becomes payable pursuant to such provisions below
following such time as a payment has been made as described in this paragraph,
then the amount of such prior expense reimbursement payment will be credited
against, and will reduce, the fee otherwise payable.
If the Merger Agreement is terminated either pursuant to the provisions
described in:
(A) subclause (A) or (B) of clause (v) under "OTHER TERMS OF THE MERGER
AGREEMENT--Termination"; or
(B) subclause (A) of clause (iii) under "OTHER TERMS OF THE MERGER
AGREEMENT--Termination" and in such case, (1) prior to such date (x) the
Universal Board has not taken any of the actions as contemplated by the
provisions described in clauses (A), (B) or (C) of clause (iv) under "OTHER
TERMS OF THE MERGER AGREEMENT--Termination" such that Clear Channel could
have terminated the Merger Agreement but elected not to and (y) either (i)
the Special Meeting has been held and the approval of the stockholders at
the Special Meeting has not been obtained or (ii) the Special Meeting has
not been held as of the date of such termination as a result of Universal
delaying such meeting in accordance with the provisions of Section 5.2(a) of
the Merger Agreement, and (2) on or prior to twelve months after the
termination of the Merger Agreement,
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Universal enters into an agreement with a person regarding a transaction the
proposal of which would otherwise qualify as an Acquisition Proposal under
Section 5.11 of the Merger Agreement and such transaction is subsequently
consummated;
then in any such event, Universal will, promptly following, but in no event
later than one business day after (a) in the case of clause (A) above, the date
of such termination and (b) in the case of clause (B) above, the consummation of
the Acquisition Proposal, pay Clear Channel a fee of $40 million in cash. Only
one fee in the aggregate of $40 million will be payable pursuant to the terms
described in this paragraph.
See Section 8(m) and (n), "OTHER TERMS OF THE MERGER AGREEMENT--Fees and
Expenses" and "--Termination Fee."
NO SOLICITATION. Pursuant to the Merger Agreement, Universal has agreed that
it will not, directly or indirectly, solicit, initiate, encourage (including by
way of furnishing information) or knowingly facilitate any Acquisition Proposal,
or engage or participate in negotiations or substantive discussions relating to
any Acquisition Proposal and will use its reasonable best efforts not to permit
any of its directors, officers, employees, advisors, representatives or other
agents to, directly or indirectly, take any such action, PROVIDED that Universal
may engage in discussions or negotiations with, or furnish information
concerning Universal and its subsidiaries, to, any third party that makes an
Acquisition Proposal if the Universal Board concludes in good faith after
consultation with its outside legal counsel that the failure to take such action
would be reasonably likely to be inconsistent with the fiduciary duties of the
Universal Board to Universal or Universal's stockholders under applicable law.
See Section 8(g), "OTHER TERMS OF THE MERGER AGREEMENT--No Solicitation."
CONDITIONS PRECEDENT TO THE MERGER. The obligations of Universal, Clear
Channel and Sub to consummate the Merger are subject, among other things, to the
satisfaction or waiver of certain conditions, including without limitation: (i)
approval and adoption of the Merger Agreement by the requisite vote of the
stockholders of Universal; (ii) there not having been enacted or entered any
statute, rule, regulation, executive order, decree, injunction or restraining
order prohibiting the consummation of the Merger and there not having been
commenced or threatened any action or proceeding by any governmental entity
seeking to prevent or delay, or challenging the consummation of, the Merger or
seeking damages in connection therewith; (iii) the expiration or termination of
any waiting period applicable to the consummation of the Merger under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), and the obtaining of all other consents and approvals required to be
obtained by Universal and Clear Channel, except where the failure to obtain such
approvals would not have a Material Adverse Effect (as defined in Section 8.3(j)
of the Merger Agreement); (iv) the effectiveness of the Registration Statement
and the absence of a stop order suspending such effectiveness; (v) the listing
on the NYSE, subject only to official notice of listing, of the shares of Clear
Channel Common Stock to be issued in the Merger and (vi) Universal and Clear
Channel having received an opinion of Skadden, Arps, Slate, Meagher & Flom LLP
and Akin, Gump, Strauss, Hauer & Feld, L.L.P., respectively, relating to certain
tax matters.
The obligation of Universal to consummate the Merger is also subject to the
satisfaction or waiver of certain additional conditions, including with respect
to the accuracy of the representations and warranties of Clear Channel and the
performance in all material respects of the obligations and covenants of Clear
Channel under the Merger Agreement.
The obligation of Clear Channel and Sub to consummate the Merger is also
subject to the satisfaction or waiver of certain additional conditions,
including with respect to the accuracy of the representations and warranties of
Universal and the performance in all respects or in all material respects, as
the case may be, of the obligations and covenants of Universal under the Merger
Agreement.
See Section 8(h), "OTHER TERMS OF THE MERGER AGREEMENT--Conditions Precedent
to the Merger."
10
<PAGE>
COMPARISON OF THE RIGHTS OF HOLDERS OF UNIVERSAL COMMON STOCK AND CLEAR
CHANNEL COMMON STOCK. Upon consummation of the Merger, holders of Universal
Common Stock will become holders of Clear Channel Common Stock. Universal is a
Delaware corporation and Clear Channel is a Texas corporation. Following the
Merger, the rights of all former holders of Universal Common Stock will be
governed by the Clear Channel Charter (as defined herein), the Clear Channel
Bylaws (as defined herein) and the laws of Texas. See Section 10, "COMPARISON OF
THE RIGHTS OF HOLDERS OF UNIVERSAL COMMON STOCK AND CLEAR CHANNEL COMMON STOCK."
PERCENTAGE OWNERSHIP INTEREST OF UNIVERSAL STOCKHOLDERS AFTER THE MERGER.
Based on the number of shares of Clear Channel Common Stock outstanding on
December 12, 1997 and assuming the issuance of approximately 19,287,858 shares
of Clear Channel Common Stock in connection with the Merger, after giving effect
to the consummation of the Merger there will be approximately 117,454,935 shares
of Clear Channel Common Stock issued, of which the stockholders of Universal
will own approximately 16.4%.
RISK FACTORS. FOR A DESCRIPTION OF CERTAIN SIGNIFICANT CONSIDERATIONS IN
CONNECTION WITH THE MERGER AND RELATED MATTERS DESCRIBED IN THIS PROXY
STATEMENT/PROSPECTUS, SEE SECTION 5, "RISK FACTORS."
11
<PAGE>
(D) UNIVERSAL OUTDOOR HOLDINGS, INC.
SELECTED HISTORICAL FINANCIAL DATA
The selected financial information presented below for the five years ended
December 31, 1996 and for the nine months ended September 30, 1997 and 1996 have
been derived from, and should be read in conjunction with, the audited
consolidated financial statements and other financial information contained in
Universal's Annual Report on Form 10-K for the year ended December 31, 1996 and
the unaudited consolidated interim financial information contained in
Universal's Quarterly Report on Form 10-Q for the nine months ended September
30, 1997, including the notes thereto, which are incorporated by reference
herein. See Section 1, "AVAILABLE INFORMATION" and Section 2, "INCORPORATION OF
DOCUMENTS BY REFERENCE."
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
----------------------------------------------------- --------------------
1992 1993 1994 1995 1996 1996 1997(4)
--------- --------- --------- --------- --------- --------- ---------
IN THOUSANDS (EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Gross revenues........................................ $ 27,896 $ 28,710 $ 33,180 $ 38,101 $ 84,939 $ 50,308 $ 167,611
Net revenues(1)....................................... 24,681 25,847 29,766 34,148 76,138 44,882 152,748
Direct advertising expenses........................... 10,383 10,901 11,806 12,864 26,468 16,033 59,789
General and administrative expenses................... 3,530 3,357 3,873 4,645 10,648 4,810 13,959
Depreciation and amortization......................... 7,817 8,000 7,310 7,402 18,286 9,207 42,989
Non cash compensation for common stock warrants and
options............................................. 9,000 9,000 1,581
Operating income...................................... 2,951 3,589 6,777 9,237 11,736 5,832 34,430
Interest expense...................................... 9,591 9,299 11,809 12,894 19,567 12,320 34,368
Other (expense) income, net........................... 291 (351) (134) (46) (1,398) (1,677) 464
Income (loss) before extraordinary item(2)............ (6,349) (6,061) (5,166) (3,703) (9,229) (8,165) 526
Income (loss) before income tax....................... (6,349) (9,321) (5,166) (3,703) (35,803) (9,565) 526
Net income (loss) per share........................... (0.83) (1.22) (0.67) (0.48) (2.27) (0.67) 0.02
Weighted average common and equivalent shares
outstanding......................................... 7,654 7,654 7,654 7,654 15,787 14,432 26,180
OTHER DATA:
After-tax cash flow(3)................................ 1,468 1,939 2,144 3,699 18,057 10,042 45,096
Capital expenditures.................................. 2,352 2,004 5,671 5,620 7,178 4,313 14,024
SEPTEMBER 30,
--------------------
<CAPTION>
1996 1997
--------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital.............................................................................................. $ 6,363 $ 31,883
Total assets................................................................................................. 195,281 921,700
Total long-term debt......................................................................................... 131,721 503,947
Common stockholders' equity.................................................................................. 44,344 302,420
</TABLE>
- ------------------------------
(1) Net revenues are gross revenues less agency commissions.
(2) Extraordinary item represents loss on early extinguishment of debt.
(3) Defined as net income before unusual items plus depreciation, amortization
and non-cash compensation. After tax cash flow is not presented as a measure
of operating results and does not purport to represent cash provided by
operating activities. After-tax cash flow should not be considered in
isolation or as a substitute for measures of performance prepared in
accordance with generally accepted accounting principles.
(4) Amounts include financial results beginning June 3, 1997 from operations
acquired pursuant to the Penn Acquisition and beginning July 24, 1997 from
operations acquired pursuant to the Allied Acquisition.
12
<PAGE>
(E) CLEAR CHANNEL COMMUNICATIONS, INC.
SELECTED HISTORICAL FINANCIAL DATA
The selected historical financial information presented below for the five
years ended December 31, 1996 has been derived from the consolidated financial
statements of Clear Channel, which have been audited by Ernst & Young, LLP,
independent auditors. The selected financial information as of September 30,
1997 and for the nine months ended September 30, 1997 and 1996 has been derived
from unaudited consolidated financial statements of Clear Channel. In the
opinion of management of Clear Channel, the unaudited financial statements from
which such information is derived contain all adjustments (consisting only of
normal recurring adjustments) necessary for the fair presentation of the
financial position and the results of operations for these periods. Operating
results for the nine months ended September 30, 1997 or 1996 are not necessarily
indicative of the results that may be expected for the full fiscal year. The
following selected financial information should be read in conjunction with the
consolidated financial statements and notes thereto of Clear Channel, which are
incorporated herein by reference. See Section 1, "AVAILABLE INFORMATION" and
Section 2, "INCORPORATION OF DOCUMENTS BY REFERENCE."
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
----------------------------------------------------- --------------------
1992 1993 1994 1995 1996 1996 1997
--------- --------- --------- --------- --------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA(1):
Net revenue............................ $ 84,485 $ 121,118 $ 178,053 $ 250,059 $ 351,739 $ 238,416 $ 469,176
Operating expenses..................... 55,812 78,925 105,380 137,504 198,332 135,401 266,542
Depreciation and amortization.......... 12,253 17,447 24,669 33,769 45,790 32,365 80,216
--------- --------- --------- --------- --------- --------- ---------
Operating Income....................... 16,420 24,746 48,004 78,786 107,617 70,650 122,418
Corporate expenses..................... 2,890 3,464 5,100 7,414 8,527 5,648 13,699
--------- --------- --------- --------- --------- --------- ---------
Operating income....................... 13,530 21,282 42,904 71,372 99,090 65,002 108,719
Interest expense....................... (4,739) (5,390) (7,669) (20,752) (30,080) (19,778) (51,804)
Other income (expense)................. (1,217) (196) 1,161 (803) 2,230 666 7,641
--------- --------- --------- --------- --------- --------- ---------
Income before income taxes............. 7,574 15,696 36,396 49,817 71,240 45,890 64,556
Income tax (expense) benefit........... (3,281) (6,573) (14,387) (20,292) (28,386) (17,427) (31,641)
--------- --------- --------- --------- --------- --------- ---------
Income before equity in net income
(loss) of, and other income from
nonconsolidated affiliates............ 4,293 9,123 22,009 29,525 42,854 28,463 32,915
Equity in net income (loss) of, and
other income from, nonconsolidated
affiliates............................ -- -- -- 2,489 (5,158) (6,628) 8,387
--------- --------- --------- --------- --------- --------- ---------
Net income............................. $ 4,293 $ 9,123 $ 22,009 $ 32,014 $ 37,696 $ 21,835 $ 41,302
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Net income per common share............ $ .07 $ .15 $ .32 $ .46 $ .50 $ 0.30 $ 0.47
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Weighted average common shares and
common share equivalents
outstanding........................... 59,320 62,202 69,326 70,201 74,649 73,558 87,564
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
OTHER DATA:
After-tax cash flow(2)................. $ 17,147 $ 26,638 $ 46,866 $ 71,140 $ 107,318 $ 68,101 $ 137,106
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
After-tax cash flow per share(3)....... $ .29 $ .43 $ .68 $ 1.01 $ 1.44 $ 0.93 $ 1.57
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
<CAPTION>
SEPTEMBER 30,
--------------------
1996 1997
--------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents..................................................................... $ 17,910 $ 35,178
Total assets.................................................................................. 1,230,961 2,791,205
Long-term debt, net of current maturities..................................................... 651,880 897,588
Shareholders' equity.......................................................................... 497,198 1,697,875
</TABLE>
- ------------------------------
(1) The comparability of results of operations is affected by acquisitions
consummated in each of the periods presented.
(2) Defined as net income before unusual items plus depreciation, amortization
of intangibles (including non-consolidated affiliates) and deferred taxes.
After-tax cash flow is not presented as a measure of operating results and
does not purport to represent cash provided by operating activities.
After-tax cash flow should not be considered in isolation or as a substitute
for measures of performance prepared in accordance with generally accepted
accounting principles.
(3) Defined as after-tax cash flow divided by weighted average common shares and
common share equivalents outstanding.
13
<PAGE>
(F) SUMMARY UNAUDITED PRO FORMA FINANCIAL DATA
The following summary unaudited pro forma financial data gives effect to the
Merger, which will be accounted for as a purchase in accordance with generally
accepted accounting principles. The statement of operations data assumes that
the Merger had been consummated at the beginning of the periods presented, and
the balance sheet data assumes that the Merger had been consummated on September
30, 1997. The unaudited pro forma combined financial data does not reflect any
cost savings and other synergies anticipated by Clear Channel management as a
result of the Merger and is not necessarily indicative of the results of
operations or the financial position which would have occurred had the Merger
been consummated on the dates indicated, nor is it necessarily indicative of
future results of operations or financial position. The unaudited pro forma
combined data should be read in conjunction with the historical consolidated
financial statements of Clear Channel and Universal and the Unaudited Pro Forma
Combined Condensed Financial Statements, including the notes thereto,
incorporated by reference or appearing elsewhere in this Proxy
Statement/Prospectus. See Section 1, "AVAILABLE INFORMATION," Section 2,
"INCORPORATION OF DOCUMENTS BY REFERENCE" and Section 9, "UNAUDITED PRO FORMA
COMBINED CONDENSED FINANCIAL STATEMENTS."
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, 1996 SEPTEMBER 30, 1997
------------------------------------- ------------------------------------------
CLEAR CLEAR
CHANNEL AND CHANNEL AND
CLEAR UNIVERSAL UNIVERSAL
CHANNEL(1) UNIVERSAL(2) PRO FORMA CLEAR CHANNEL(1) PRO FORMA
PRO FORMA PRO FORMA MERGER PRO FORMA UNIVERSAL MERGER
----------- ----------- ----------- ---------------- ----------- -----------
IN THOUSANDS (EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenue............................. $ 670,481 $ 176,611 $ 847,092 $ 603,922 $ 152,748 $ 756,670
Operating income........................ 106,752 25,957 99,253 107,228 34,430 120,058
Income (loss) from continuing
operations............................. (22,773) (20,089) (76,318) 7,617 526 (13,457)
Income (loss) from continuing operations
per common and common equivalent
share.................................. $ (0.28) $ (0.75) $ 0.08 $ (0.12)
OTHER DATA:
After-tax cash flow(3).................. $ 138,253 $ 39,729 $ 177,982 $ 141,418 $ 45,096 $ 186,514
After-tax cash flow per share(4)........ $ 1.68 $ 1.75 $ 1.59 $ 1.69
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
------------------------------------------
CLEAR
CHANNEL AND
UNIVERSAL
CLEAR CHANNEL(1) PRO FORMA
PRO FORMA UNIVERSAL MERGER
---------------- ----------- -----------
IN THOUSANDS
<S> <C> <C> <C>
BALANCE SHEET DATA:
Total assets............................................................ $3,420,205 $ 921,700 $5,256,360
Long-term debt, net of current.......................................... 1,526,588 503,947 2,045,535
Shareholders' equity.................................................... 1,697,876 302,420 2,899,751
</TABLE>
- ------------------------------
(1) Statement of Operations data assumes the acquisition of Eller Media and the
Paxson Radio Acquisition occured at the beginning of the respective periods
and the balance sheet data assumes the Paxson Radio Acquisition occurred on
September 30, 1997.
(2) Assumes the acquisitions of Ad-Sign, Inc. and Image Media, Naegele, POA,
Memphis/Tunica, Revere and Matthew (in each case, as defined herein, and
together, the "Universal Acquisitions") occurred on January 1, 1996.
(3) Defined as net income before unusual items plus depreciation, amortization
of intangibles (including non-consolidated affiliates) and deferred taxes.
After-tax cash flow is not presented as a measure of operating results and
does not purport to represent cash provided by operating activities.
After-tax cash flow should not be considered in isolation or as a substitute
for measures of performance prepared in accordance with generally accepted
accounting principles.
(4) Defined as after-tax cash flow divided by weighted average common shares and
common share equivalents outstanding.
14
<PAGE>
(G) COMPARATIVE PER SHARE DATA OF UNIVERSAL AND CLEAR CHANNEL
The following table sets forth certain earnings and book value per share
data for Universal and Clear Channel on historical and pro forma bases. The pro
forma data was derived from the Unaudited Pro Forma Combined Condensed Financial
Statements appearing elsewhere herein, which give effect to the Merger as a
purchase in accordance with generally accepted accounting principles as if the
Merger had been consummated at the beginning of the periods presented for
purposes of operating income data and at September 30, 1997 for purposes of
balance sheet data. Book value data for all pro forma presentations is based
upon the number of outstanding shares of Clear Channel Common Stock adjusted to
include the shares of Clear Channel Common Stock to be issued in the Merger. The
information set forth below should be read in conjunction with the historical
consolidated financial statements of Clear Channel and of Universal and the
Unaudited Pro Forma Combined Condensed Financial Statements, including the notes
thereto, incorporated by reference or appearing elsewhere in this Proxy
Statement/Prospectus. See Section 1, "AVAILABLE INFORMATION," Section 2,
"INCORPORATION OF DOCUMENTS BY REFERENCE" and Section 9, "UNAUDITED PRO FORMA
COMBINED CONDENSED FINANCIAL STATEMENTS."
PER SHARE DATA
<TABLE>
<CAPTION>
AS OF OR FOR THE AS OF OR FOR THE
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, 1996 SEPTEMBER 30, 1997
----------------- -------------------
<S> <C> <C>
CLEAR CHANNEL--HISTORICAL
Income (loss) from continuing operations per common and common equivalent
share.................................................................. $ 0.50 $ 0.47
Cash dividend declared per share......................................... -- --
Shareholder's equity (book value) per share.............................. 6.88 19.39
UNIVERSAL--HISTORICAL
Income (loss) from continuing operations per common and common equivalent
share.................................................................. $ (0.58) $ 0.02
Cash dividends declared per share........................................ -- --
Shareholders' equity (book value) per share.............................. 14.38 11.55
CLEAR CHANNEL AND UNIVERSAL PRO FORMA MERGER(1)
Income (loss) from continuing operations per common and common equivalent
share.................................................................. $ (0.75) $ (0.12)
Cash dividends declared per share........................................ -- --
Shareholders' equity (book value) per share.............................. n/a (2) 26.34
</TABLE>
- ------------------------
(1) Assumes the Universal Acquisitions.
(2) This information is not presented since a pro forma balance sheet at
December 31, 1996 is not required.
15
<PAGE>
(H) MARKET PRICES AND DIVIDENDS
Universal Common Stock is quoted on the Nasdaq National Market under the
symbol "UOUT." Clear Channel Common Stock is listed for trading on the NYSE
under the symbol "CCU." The following table sets forth, for the periods
indicated, the range of the high and low sale prices of Universal Common Stock
and Clear Channel Common Stock, as reported on the NASDAQ/NMS and the NYSE
Composite Transactions Tape, respectively. No dividends have been declared or
paid by Universal or Clear Channel on any class of their respective capital
stock.
<TABLE>
<CAPTION>
UNIVERSAL CLEAR CHANNEL
COMMON STOCK COMMON STOCK
-------------------- --------------------
HIGH LOW HIGH LOW
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
1994
First Quarter....................................................... $ NA $ NA $ 10.095 $ 7.925
Second Quarter...................................................... NA NA 9.78 8.095
Third Quarter....................................................... NA NA 13.00 9.03
Fourth Quarter...................................................... NA NA 12.94 10.315
1995
First Quarter....................................................... $ NA $ NA $ 15.125 $ 12.531
Second Quarter...................................................... NA NA 17.375 13.438
Third Quarter....................................................... NA NA 20.438 15.406
Fourth Quarter...................................................... NA NA 22.06 18.125
1996
First Quarter....................................................... $ NA $ NA $ 29.13 $ 20.50
Second Quarter...................................................... NA NA 43.00 27.00
Third Quarter....................................................... 36.500 15.75 44.56 36.56
Fourth Quarter...................................................... 38.250 22.75 44.38 31.00
1997
First Quarter....................................................... $ 33.500 $ 19.75 $ 49.63 $ 34.25
Second Quarter...................................................... 38.500 22.125 63.38 42.75
Third Quarter....................................................... 38.000 30.50 69.00 57.25
Fourth Quarter...................................................... 53.375 35.125 79.875 55.50
</TABLE>
Set forth below are the last reported sale prices of Universal Common Stock
and Clear Channel Common Stock on October 22, 1997, the last trading day prior
to the execution of the Merger Agreement, and on January 2, 1998, as well as the
equivalent pro forma sale prices of Universal Common Stock on such dates, as
determined by multiplying the applicable reported sale price on January 2, 1998
of Clear Channel Common Stock by the Conversion Number. See Section 5, "RISK
FACTORS--Fluctuation in Value of Merger Consideration" and "--Dilution."
<TABLE>
<CAPTION>
UNIVERSAL CLEAR CHANNEL UNIVERSAL
COMMON STOCK COMMON STOCK EQUIVALENT
-------------- -------------- -----------
<S> <C> <C> <C>
October 22, 1997..................................................... $ 41.500 $ 63.375 $ 42.461
January 2, 1998...................................................... $ 50.750 $ 77.563 $ 51.967
</TABLE>
Following the Effective Time, shares of Clear Channel Common Stock are
expected to continue to be traded on the NYSE, and shares of Universal Common
Stock will cease to be quoted on the Nasdaq National Market.
THE MARKET PRICE OF SHARES OF CLEAR CHANNEL COMMON STOCK INHERENTLY IS
SUBJECT TO FLUCTUATION. THEREFORE, THE MARKET VALUE OF THE SHARES OF CLEAR
CHANNEL COMMON STOCK THAT HOLDERS OF SHARES OF UNIVERSAL COMMON STOCK WILL
RECEIVE IN THE MERGER MAY INCREASE OR DECREASE PRIOR TO THE EFFECTIVE TIME. IN
CONSIDERING WHETHER TO APPROVE AND ADOPT THE MERGER AGREEMENT, THE STOCKHOLDERS
OF UNIVERSAL SHOULD CONSIDER, AMONG OTHER THINGS, THE POSSIBLE FLUCTUATION IN
THE MARKET PRICE OF CLEAR CHANNEL COMMON STOCK. SEE SECTION 5, "RISK
FACTORS--FLUCTUATION IN VALUE OF THE MERGER CONSIDERATION."
16
<PAGE>
5. RISK FACTORS
In considering whether to approve and adopt the Merger Agreement, the
stockholders of Universal should consider, among other things, the following
matters:
RISKS RELATING TO THE MERGER
INTEGRATION OF THE BUSINESS OF CLEAR CHANNEL AND UNIVERSAL
The Merger involves the integration of two companies that have previously
operated independently. As soon as practicable following the Merger, Clear
Channel intends to integrate certain aspects of the operations of Universal into
its outdoor advertising operations. However, there can be no assurance that
Clear Channel will successfully integrate the operations of Universal with those
of Clear Channel or that all of the benefits expected from such integration will
be realized. Any delays or unexpected costs incurred in connection with such
integration could have an adverse effect on Clear Channel's business, operating
results or financial position. Moreover, the Universal Bonds and the Universal
Credit Agreement (each as defined herein), to the extent they remain
outstanding, contain restrictive covenants which may limit the ability of Clear
Channel to integrate the separate operations. See "--Restrictions Imposed by
Universal's Indebtedness." Additionally, there can be no assurance that the
operations, management and personnel of the two companies will be compatible or
that Clear Channel or Universal will not experience the loss of key personnel.
Furthermore, upon consummation of the Merger, a new management team of Clear
Channel's outdoor advertising operations will be formed, with Karl Eller
remaining as Chairman and Chief Executive Officer of Clear Channel Outdoor and
Daniel L. Simon becoming Vice President and Chief Operating Officer of Clear
Channel Outdoor.
SIGNIFICANT STOCKHOLDERS
Upon completion of the Merger, assuming no additional shares of Clear
Channel Common Stock are issued, the two principal stockholders of Clear
Channel, L. Lowry Mays, Chairman, Chief Executive Officer and a director of
Clear Channel, and B. J. McCombs, a director of Clear Channel, will own
beneficially approximately 22% of the outstanding shares of Clear Channel Common
Stock. As a result, Messrs. Mays and McCombs will be able to exert significant
influence over the outcome of elections of Clear Channel's directors and other
matters requiring the vote or consent of the stockholders of Clear Channel.
Clear Channel and Messrs. Mays and McCombs are parties to a Buy-Sell Agreement
restricting the disposition of shares of Clear Channel Common Stock owned by
Messrs. Mays and McCombs.
FLUCTUATION IN VALUE OF MERGER CONSIDERATION
The ratio at which Clear Channel Common Stock will be exchanged for shares
of Universal Common Stock pursuant to the Merger Agreement was determined in
arms-length negotiations between Clear Channel and Universal. On October 22,
1997, the last full trading day prior to the execution of the Merger Agreement,
the last reported sale price per share for the Clear Channel Common Stock was
$63.375, and the last reported sale price per share for the Universal Common
Stock was $41.50.
The market price of shares of Clear Channel Common Stock is subject to
fluctuation. The price of Clear Channel Common Stock at the Effective Time, as
well as the prices at the date of this Proxy Statement/Prospectus and at the
date of the Special Meeting, may vary as a result of changes in the business,
operations or prospects of Clear Channel, market assessments of the likelihood
the Merger will be consummated and the timing thereof, general market and
economic conditions and other factors. Because the exchange ratio is fixed in
the Merger Agreement, it will not be adjusted in the event of an increase or
decrease in the market price of Clear Channel Common Stock or in the event of
changes in the operations or prospects of Clear Channel or Universal. However,
Universal may terminate the Merger Agreement if (i) the average closing prices
of Clear Channel Common Stock for any fifteen (15) consecutive trading days is
equal to or less than $49.85 (representing a decline of more than 20% from the
17
<PAGE>
closing price on the day the Merger Agreement was entered into) and (ii) if
Clear Channel Common Stock declines more than 20% of the decline, if any, of a
non-weighted index of five media stocks; PROVIDED, THAT Clear Channel may,
subject to certain conditions, increase the Conversion Number (and therefore the
number of shares to be issued in the Merger) such that each share of Universal
Common Stock to be converted into the Merger will receive Clear Channel Common
Stock with a value of $41.50. See Section 8(l) "OTHER TERMS OF THE MERGER
AGREEMENT--Termination."
DILUTION
In connection with the Merger, former Universal stockholders will be issued
approximately 19,287,858 shares of Clear Channel Common Stock and will hold
approximately 16.4% of the then outstanding Clear Channel Common Stock as of the
Effective Time, assuming no additional shares of Clear Channel Common Stock have
been issued.
NECESSITY OF RECEIVING REGULATORY APPROVALS PRIOR TO THE MERGER; POSSIBLE
DIVESTITURES AND OPERATING RESTRICTIONS.
The consummation of the Merger is conditioned upon the expiration or
termination of the applicable waiting period under the HSR Act. The antitrust
and competition agencies in the United States assert jurisdiction to review the
Merger for compliance and, if they were to deem warranted, to challenge all or
certain aspects of the Merger by seeking to block the transactions or to impose
conditions on the Merger. Under the applicable law and regulations, the Merger
may not be consummated until notifications have been given, certain information
has been furnished to the Federal Trade Commission (the "FTC") and the
applicable waiting period has expired or been terminated. On October 30, 1997,
Universal and Clear Channel filed notification and report forms under the HSR
Act with the FTC and the Antitrust Division of the United States Department of
Justice (the "DOJ"). On November 26, 1997, Universal and Clear Channel received
a request for additional information from the DOJ and accordingly, the waiting
period will terminate 20 days after Universal and Clear Channel each
"Substantially Comply" with such request. There can be no assurance that an
injunction will not be issued before or after receipt of stockholder approval by
a court of competent jurisdiction enjoining consummation of the Merger. Pursuant
to the terms of the Merger Agreement, Clear Channel has proffered its
willingness (x) to sell or otherwise dispose of, or hold separate and agree to
sell or otherwise dispose of, such assets, categories of assets or businesses of
Universal or Clear Channel or either's respective subsidiaries, (y) terminate
such existing relationships and contractual rights and obligations and (z) amend
or terminate such existing licenses or other intellectual property agreements
(and, in each case, to enter into agreements with the relevant Government
Antitrust Entity (as defined herein) giving effect thereto) in each case with
respect to the foregoing clauses (x), (y) or (z), if such action is necessary or
reasonably advisable for the purpose of avoiding or preventing any action by any
Government Antitrust Entity which would restrain, enjoin or otherwise prevent or
materially delay consummation of the transactions contemplated by the Merger
Agreement prior to the deadline specified in the Merger Agreement. See Section
8(f), "OTHER TERMS OF THE MERGER AGREEMENT--Other Covenants-- Filings; Other
Action." The combined enterprise therefore may be required to divest assets, or
agree to various operating restrictions before or after receipt of stockholder
approval, in order to obtain the necessary authorizations and approvals of the
Merger or to assure that governmental authorities do not seek to block the
Merger. Such requested divestitures could be material to the business of the
combined enterprise or have a material adverse effect on the results of
operations of the combined entity. There can be no assurance that the
consummation of any such divestitures could be effected at a fair market price
or that the reinvestment of the proceeds therefrom would produce for the
combined enterprise operating profit at the same level as the divested product
lines or a commensurate rate of return on the amount of its investment. There
also can be no assurance that any operating restrictions imposed would not
adversely affect the value of the combined enterprise. See Section 7(k), "THE
MERGER--Regulatory Approvals."
18
<PAGE>
INTERESTS OF CERTAIN PERSONS IN THE TRANSACTION.
In considering the recommendation of the Merger Agreement by the Universal
Board, the stockholders of Universal should be aware that certain directors and
executive officers of Universal may be deemed to have conflicts of interest with
respect to the Merger. Such interests, together with other relevant factors,
were considered by the Universal Board in recommending approval and adoption of
the Merger Agreement to the stockholders of Universal and approving the Merger
and the Merger Agreement. See Section 7(f), "THE MERGER--Interests of Certain
Persons in the Transaction."
RISK FACTORS RELATING TO CLEAR CHANNEL
FINANCIAL LEVERAGE
Clear Channel had at September 30, 1997 borrowings under its Credit Facility
(the "Credit Facility") and other long term debt outstanding of approximately
$897.6 million and stockholders' equity of $1,697.9 million. As of September 30,
1997, Universal had approximately $503.9 million of long-term debt outstanding.
Clear Channel has borrowed and expects to continue borrowing to finance
acquisitions of broadcasting and other media-related and outdoor advertising
properties and for other corporate purposes. On April 10, 1997, in connection
with the Eller Media Acquisition (as defined herein), Clear Channel amended its
Credit Facility, increasing the amount it may borrow to $1.750 billion at
floating rates (currently LIBOR plus 0.40%). Future acquisitions of radio and
television stations and other media-related and outdoor advertising properties
effected in connection with the implementation of Clear Channel's acquisition
strategy are expected to be financed from increased borrowings under the Credit
Facility, other debt or equity financings and cash flow from operations. See
"--Risk of Acquisition Strategy; Capital Requirements."
Because of the amount of Clear Channel's indebtedness, a significant portion
of Clear Channel's operating income is required for debt service. Clear
Channel's leverage could make it vulnerable to an increase in interest rates or
a downturn in the operating performance of its radio and television stations or
in general economic conditions. The Credit Facility contains certain financial
and operational covenants and other restrictions with which Clear Channel must
comply, including limitations on capital expenditures, the incurrence of
additional indebtedness, payment of cash dividends, and requirements to maintain
certain financial ratios.
GOVERNMENT REGULATION
BROADCASTING. The domestic broadcasting industry is subject to extensive
federal regulation which, among other things, requires approval by the Federal
Communications Commission ("FCC") for the issuance, renewal, transfer and
assignment of broadcasting station operating licenses and limits the number of
broadcasting properties Clear Channel may own. The Telecommunications Act of
1996 (the "1996 Act"), which became law on February 8, 1996, creates significant
new opportunities for broadcasting companies but also creates uncertainties as
to how the FCC and the courts will enforce and interpret the 1996 Act.
Clear Channel's business will continue to be dependent upon acquiring and
maintaining broadcasting licenses issued by the FCC, which are issued for a
maximum term of eight years. Although it is rare for the FCC to deny a renewal
application, there can be no assurance that future renewal applications will be
approved, or that renewals will not include conditions or qualifications that
could adversely affect Clear Channel's operations. Moreover, governmental
regulations and policies may change over time and there can be no assurance that
such changes would not have a material adverse impact upon Clear Channel's
business, financial condition and results of operations. For example, the FCC
currently is considering whether to revise its policy with regard to television
Local Marketing Agreements ("LMAs") and there can be no guarantee that Clear
Channel will be able to program stations under existing LMAs for the
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remainder of their current terms, extend existing LMAs beyond their current
terms, or to enter into LMAs in other markets in which Clear Channel owns and
operates television stations.
ANTITRUST. An important element of Clear Channel's growth strategy involves
the acquisition of additional radio stations and other media-related and outdoor
advertising properties, many of which are likely to require antitrust review by
the FTC and the DOJ prior to such acquisition. Following passage of the 1996
Act, the DOJ has become more aggressive in reviewing proposed acquisitions of
radio stations and radio station networks, particularly in instances where the
proposed acquiror already owns one or more radio station properties in a
particular market and the acquisition involves another radio station in the same
market. Recently, the DOJ has obtained consent decrees requiring radio station
divestitures in a particular market based on allegations that acquisitions would
lead to unacceptable concentration levels. The DOJ has also been active in
reviewing proposed acquisitions of outdoor advertising properties. There can be
no assurance that the DOJ or the FTC will not seek to bar Clear Channel from
acquiring additional radio or television stations or other media-related and
outdoor advertising properties in any market where Clear Channel already has a
significant position.
ENVIRONMENTAL. As the owner, lessee or operator of various real properties
and facilities, Clear Channel is subject to various federal, state and local
environmental laws and regulations. Historically, compliance with such laws and
regulations has not had a material adverse effect on Clear Channel's business.
There can be no assurance, however, that compliance with existing or new
environmental laws and regulations will not require Clear Channel to make
significant expenditures in the future.
RISK OF ACQUISITION STRATEGY; CAPITAL REQUIREMENTS
Clear Channel intends to pursue growth through the opportunistic acquisition
of broadcasting companies, radio and television station groups, individual radio
and television stations, outdoor advertising companies, individual outdoor
advertising display faces, or other assets that Clear Channel believes are best
suited to the purpose of assisting its customers in marketing their products and
services. Clear Channel routinely reviews potential acquisitions. It is likely
that Clear Channel will continue to experience significant expansion in the
future. As a result, Clear Channel's management will be required to effectively
manage a rapidly expanding and significantly larger portfolio of broadcasting
and outdoor advertising properties. Clear Channel's acquisition strategy
involves numerous other risks, including difficulties in the integration of
operations and systems, the diversion of management's attention from other
business concerns and the potential loss of key employees of acquired companies
or stations. There can be no assurance such acquisitions will benefit Clear
Channel.
The consummation of domestic broadcasting acquisitions, including all
pending acquisitions, requires FCC approval with respect to the transfer of the
broadcast license of the acquired station. There can be no assurance that the
FCC will approve pending or future acquisitions, or that Clear Channel will be
able to consummate such acquisitions.
Clear Channel will face competition from other broadcasting and outdoor
advertising companies for available acquisition opportunities. In addition, if
the prices sought by sellers of broadcasting and outdoor advertising properties
continue to rise, Clear Channel may find fewer acceptable acquisition
opportunities. In addition, the purchase price of possible acquisitions could
require additional debt or equity financing on the part of Clear Channel. See
"--Financial Leverage." Additional indebtedness could increase Clear Channel's
leverage and make Clear Channel more vulnerable to economic downturns and may
limit its ability to withstand competitive pressures. Additional equity
financing could result in dilution to the existing holders of the Clear Channel
Common Stock. There can be no assurance that Clear Channel will have sufficient
capital resources to complete acquisitions, that acquisitions can be completed
on terms acceptable to Clear Channel or that any acquisitions that are completed
can be integrated successfully into Clear Channel.
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Clear Channel frequently evaluates strategic opportunities both within and
outside its existing lines of business and from time to time enters into letters
of intent. Clear Channel expects from time to time to pursue additional
acquisitions and may decide to dispose of certain businesses. Such acquisitions
or dispositions could be material. The Merger Agreement does not prohibit or
require the consent of Universal for Clear Channel to enter into agreements for
or to consummate such acquisitions.
COMPETITION; BUSINESS
Clear Channel's three business segments are in highly competitive
industries. Clear Channel's radio and television stations and outdoor
advertising properties compete for audiences and advertising revenues with other
radio and television stations and outdoor advertising companies, as well as with
other media, such as newspapers, magazines, cable television, and direct mail,
within their respective markets. Audience ratings and market shares are subject
to change and any adverse change in a particular market could have a material
adverse effect on Clear Channel's revenue in that market. Future operations are
further subject to many variables which could have an adverse effect upon Clear
Channel's financial performance. These variables include economic conditions,
both general and relative to the broadcasting industry; shifts in population and
other demographics; the level of competition for advertising dollars;
fluctuations in operating costs; technological changes and innovations; changes
in labor conditions; and changes in governmental regulations and policies and
actions of federal regulatory bodies. Although Clear Channel believes that each
of its business segments is able to compete effectively in its respective
markets, there can be no assurance that Clear Channel will be able to maintain
or increase its current audience ratings and advertising revenues.
NEW TECHNOLOGIES
The FCC is considering ways to introduce new technologies to the radio
broadcast industry, including satellite and terrestrial delivery of digital
audio broadcasting and the standardization of available technologies which
significantly enhance the sound quality of AM broadcasts. Clear Channel is
unable to predict the effect any such new technology will have on Clear
Channel's financial condition or results of operations. On April 3, 1997, the
FCC announced that it had adopted rules that will allow television broadcasters
to provide digital television ("DTV") to consumers. The FCC also adopted a table
of allotments for DTV, which will provide eligible existing broadcasters with a
second channel on which to provide DTV service. The allotment plan is based on
the use of channels 2-51, although the "core" DTV spectrum will be between
channels 2-46 or 7-51. Ultimately, the FCC plans to recover the channels
currently used for analog broadcasting and will decide at a later date the use
of the spectrum ultimately recovered. Television broadcasters will be allowed to
use their channels according to their best business judgment. Such uses can
include multiple standard definition program channels, data transfer,
subscription video, interactive materials, and audio signals, although
broadcasters will be required to provide a free digital video programming
service that is at least comparable to today's analog service. Broadcasters will
not be required to air "high definition" programming or, initially, to simulcast
their analog programming on the digital channel. Affiliates of ABC, CBS, NBC and
FOX in the top 10 television markets will be required to be on the air with a
digital signal by May 1, 1999. Affiliates of those networks in markets 11-30
will be required to be on the air with a digital signal by November 1, 1999, and
remaining commercial broadcasters within five years. The FCC stated that
broadcasters will remain public trustees and that it will issue a notice to
determine the extent of broadcasters' future public interest obligations. Clear
Channel will incur considerable expense in the conversion to DTV and is unable
to predict the extent or timing of consumer demand for any such DTV services.
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RISKS RELATING TO OUTDOOR ADVERTISING
GOVERNMENT REGULATION
OUTDOOR ADVERTISING. The outdoor advertising industry is subject to
governmental regulation at the federal, state and local level. Federal law,
principally the Highway Beautification Act of 1965, encourages states, by the
threat of withholding federal appropriations for the construction and
improvement of highways within such states, to implement legislation to restrict
billboards located within 660 feet of, or visible from, interstate and primary
highways except in commercial or industrial areas. All of the states have
implemented regulations at least as restrictive as the Highway Beautification
Act, including the prohibition on the construction of new billboards adjacent to
federally-aided highways and the removal at the owner's expense and without any
compensation of any illegal signs on such highways. The Highway Beautification
Act, and the various state statutes implementing it, require the payment of just
compensation whenever governmental authorities require legally erected and
maintained billboards to be removed from federally-aided highways.
The states and local jurisdictions have, in some cases, passed additional
and more restrictive regulations on the construction, repair, upgrading, height,
size and location of, and, in some instances, content of advertising copy being
displayed on outdoor advertising structures adjacent to federally-aided highways
and to other thoroughfares. Such regulations, often in the form of municipal
building, sign or zoning ordinances, specify minimum standards for the height,
size and location of billboards. In some cases, the construction of new
billboards or relocation of existing billboards is prohibited. Some
jurisdictions also have restricted the ability to enlarge or upgrade existing
billboards, such as converting form wood to steel or from non-illuminated to
illuminated structures. From time to time governmental authorities order the
removal of billboards by the exercise of eminent domain.
Amortization of billboards has also been adopted in varying forms in certain
jurisdictions. Amortization permits the billboard owner to operate its billboard
as a non-conforming use for a specified period of time, after which it must
remove or otherwise conform its billboards to the applicable regulations at its
own cost without any compensation. Amortization and other regulations requiring
the removal of billboards without compensation have been subject to litigation
in state and federal courts and cases have reached differing conclusions as to
the constitutionality of these regulations. On March 22, 1995, following
litigation over an ordinance and a municipal charter amendment, Naegele Outdoor
Advertising ("Naegele"), Universal's predecessor in interest, entered into an
agreement with the City of Jacksonville to remove 711 billboard faces over a
twenty year period starting January 1, 1995 and ending December 31, 2014. Under
the agreement, Naegele and the City of Jacksonville have agreed on the removal
of 445 preselected faces, including 167 (100%) of its 8-sheet faces. Management
of Universal has control over the selection and removal of an additional 156
faces. Additionally, the removals are staggered over 20 years, with management
having substantial input on which signs are removed and some rights of
substitution and rebuilding of outdoor advertising structures in the
Jacksonville market. The combined company would assume all of Universal's
obligations under this agreement. Some local jurisdictions, within Clear
Channel's existing markets (Tampa, Houston and San Francisco) have adopted
amortization ordinances. The Houston ordinance has been the subject of
litigation for over five years and is currently not being enforced. An ordinance
in the Tampa market is also currently the subject of litigation. Clear Channel
believes that its operations will not be materially affected by either of these
ordinances even if they are enforced. Clear Channel's operations have not been
materially affected by the San Francisco amortization ordinances since its signs
conform to effective ordinances and state law currently prevents effectiveness
of other ordinances which require removal of signs without compensation. There
can be no assurance that Clear Channel and Universal will be successful in
negotiating acceptable arrangements in circumstances in which their displays are
subject to removal or amortization, and what effect, if any, such regulations
may have on Clear Channel's and Universal's operations.
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In addition, Clear Channel and Universal are unable to predict what
additional regulations may be imposed on outdoor advertising in the future.
Legislation regulating the content of billboard advertisements and additional
billboard restrictions have been introduced in Congress from time to time in the
past. Changes in laws and regulations affecting outdoor advertising at any level
of government could have a material adverse effect on Clear Channel and
Universal. On February 1, 1991, Naegele entered into a consent judgement to
settle a complaint brought by the Minnesota Attorney General under Minnesota
antitrust laws pursuant to which Naegele and its successors are prohibited from
purchasing outdoor advertising displays in the Minneapolis/St. Paul market from
other operators of outdoor advertising displays until February 1, 2001. The
consent judgement also generally prohibits Universal from entering into property
leases in excess of 15 years. The consent judgement does not affect Universal's
ability to continue to develop and build new advertising displays in the
Minneapolis/St. Paul market. Additionally, Universal can purchase displays from
brokers or other non-operators.
TOBACCO AND ALCOHOL ADVERTISING. In August 1996, the U.S. Food and Drug
Administration ("FDA") issued final regulations governing certain marketing
practices in the tobacco industry, including a prohibition of tobacco product
billboard advertisements within 1,000 feet of schools and playgrounds and a
requirement that all tobacco product advertisements on billboards be in black
and white and contain only text. These regulations, which were due to become
effective in August 1997, were challenged recently by members of the tobacco and
advertising industry in a lawsuit brought in North Carolina federal district
court. In that case, the court upheld the authority of the FDA to regulate
tobacco products by limiting access of such products to persons under 18 years
of age and by requiring tobacco manufacturers to label such products in
accordance with FDA regulations. Nevertheless, the court struck down the FDA
restrictions on the promotion and advertising of tobacco products. Both industry
and the FDA have appealed this decision. Arguments before the Fourth Circuit
were heard on August 11, 1997, and it is unclear what action an appellate court
will take in this matter. To date, the FDA's regulations covering promotion and
advertising of tobacco products have not become effective and no decision by the
court has been reached. On a pro forma basis assuming the Eller Media
Acquisition occurred on January 1, 1996, (but excluding the Merger), less than
14% and 9% of Clear Channel's outdoor advertising 1996 net revenues were derived
from tobacco and alcohol advertising, respectively. Less than 11% and 5% of
Universal's 1996 net revenues were derived from tobacco advertising and alcohol
advertising, respectively.
Regardless of whether the FDA is found to have jurisdiction over tobacco
promotion and advertising, and thus have the ability to place limits on
billboard advertising, it appears that the FTC has begun to take regulatory
action in this area. The FTC has wide-ranging authority over advertising
practices, and it is within its regulatory authority to investigate unfair and
deceptive trade practices, including advertising, pertaining to FDA-regulated
products. In May 1997, the FTC charged the R.J. Reynolds Company ("R.J.
Reynolds") with unfair trade practices regarding the promotion of tobacco
products to children through the use of the "Joe Camel" advertising campaign.
The FTC sought an order that would, among other things, prohibit R.J. Reynolds
from using the "Joe Camel" campaign to advertise to children and require R.J.
Reynolds to institute corrective advertising to discourage persons under age 18
from smoking. In July 1997, it was reported that R.J. Reynolds decided to
terminate the "Joe Camel" campaign. The remaining issues in the litigation are
still pending. While the action against R.J. Reynolds was not focused directly
on billboard advertising, because of increasing regulatory and political
pressure it is possible that the FTC may take further action to limit the
content and placement of outdoor advertising, including, without limitation, the
content and placement of outdoor advertising relating to the sale of tobacco
products to children.
Outdoor advertising of tobacco products also may be affected by state law or
city regulations. For example, California and Texas have passed legislation to
restrict tobacco billboard advertising near locations frequented by children.
The Texas law levies a tax on tobacco billboards to raise money for tobacco
education programs. Part of the recent settlement agreement between the State of
Florida and certain members of the tobacco industry includes the discontinuation
of all billboard advertising for
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tobacco products in the State of Florida. Other states are considering
state-wide bans on tobacco billboard advertising or may do so in the future.
Some cities are proposing even broader restrictions. For instance, a San
Francisco Board of Supervisors committee recently proposed a complete ban on
outdoor tobacco advertising, including a ban on billboards, kiosks and, even
private business window displays.
With regard to city governments, in 1995, the Court of Appeals for the
Fourth Circuit upheld the validity of a Baltimore city ordinance prohibiting the
placement of outdoor advertisements of cigarettes in publicly visible locations,
such as billboards, signboards and sides of buildings. Subsequently, the United
States Supreme Court declined to review an appeal of this case. Following the
Baltimore ordinance, several city governments have introduced legislation to ban
outdoor tobacco advertising near schools and other locations where children are
likely to assemble or to ban tobacco billboard advertising citywide. The City of
Chicago, where both Clear Channel and Universal transact business, has recently
enacted a ban on tobacco and alcohol billboard advertising in certain parts of
the city. The Chicago ordinance is being challenged in court. In addition, the
City Council of New York City recently passed a bill which bars outdoor tobacco
advertising within 1,000 feet of schools, playgrounds, day care centers, youth
centers and amusement arcades.
County governments also have taken action in this area. A local council in
Anne Arundel County, Maryland voted to ban most tobacco billboard advertising in
the county. Similarly, King County, Washington and a company that owns almost
all of the billboard display faces in the county have entered into an agreement
whereby the company will voluntarily discontinue all tobacco advertising on
billboards throughout the county. It is likely that other state, city, or local
governments have or will pass similar ordinances to limit outdoor advertising of
tobacco products in the future.
In addition to the decisions mentioned above, certain cigarette
manufacturers who are defendants in numerous class action suits throughout the
U.S. have proposed an out of court settlement with respect to such suits that
includes restrictions on billboard advertising by these and other cigarette
manufacturers. It has been reported that, as a part of the proposed settlement,
the tobacco industry will agree to a complete ban on all outdoor advertising,
such as on billboards, in stadiums, and in store window displays. The proposed
settlement agreement is pending before Congress. Recently, President Clinton and
Congressional leaders met to discuss bipartisan cooperation on tobacco control
legislation in an effort to work out a compromise.
There can be no assurance as to the effect of these regulations, potential
legislation or settlement discussions on Clear Channel's and Universal's
business and on their net revenues and financial position. A reduction in
billboard advertising by the tobacco industry would cause an immediate reduction
in Clear Channel's and Universal's direct revenue from such advertisers and
would simultaneously increase the available space on the existing inventory of
billboards in the outdoor advertising industry. This could in turn result in a
lowering of outdoor advertising rates in each of Clear Channel's and Universal's
outdoor advertising markets or limit the ability of industry participants to
increase rates for some period of time.
Any regulatory change or settlement agreement restricting Clear Channel's
and Universal's or the tobacco industry's ability to utilize outdoor advertising
for tobacco products could have a material adverse effect on Clear Channel and
Universal.
RISKS RELATING TO UNIVERSAL
RESTRICTIONS IMPOSED BY UNIVERSAL'S INDEBTEDNESS
The indentures (the "Indentures") governing Universal's 9 3/4% Senior
Subordinated Notes due 2006 and 9 3/4% Series B Senior Subordinated Notes due
2006 (the "Universal Bonds") contain restrictions on UOI's ability to incur
additional indebtedness, create liens, pay dividends, sell assets and make
acquisitions and enter into transactions with affiliated entities. UOI currently
has approximately $325 million outstanding under the Universal Bonds. Under the
Indentures governing the Universal Bonds, the Merger will
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constitute a Change of Control (as defined therein) requiring Universal to
permit holders of such Bonds to put them to Universal for consideration equal to
101% of the face amount thereof (plus accrued and unpaid interest). In the event
that all of the Universal Bonds were put, Clear Channel would have to provide
the funding necessary to satisfy such obligations. There can be no assurances
that Clear Channel would have the funds available to satisfy such obligations.
In the event that such put rights are not exercised in full, the remaining
outstanding Universal Bonds would continue to contain restrictive covenants that
may limit the ability of Clear Channel to integrate the separate outdoor
advertising businesses. If Clear Channel were to attempt to repurchase the
Universal Bonds, the holders of such Bonds would likely require them to pay a
substantial premium to the face value. There can be no assurances that Clear
Channel would have adequate funds to repurchase the Universal Bonds or that the
bondholders would tender their Universal Bonds in response to any offer. There
can be no assurance that UOI and its subsidiaries will be able to comply with
the provisions of the Indentures, and such provisions may restrict the ability
of Universal to dividend its earnings to Clear Channel or any of its
subsidiaries and may restrict the ability of Universal and Clear Channel Outdoor
to integrate their operations. Universal believes that Clear Channel intends to
repay and terminate UOI's existing bank credit facility (the "Universal Credit
Agreement") at the Effective Time. UOI currently has outstanding approximately
$180 million under the Universal Credit Agreement. There can be no assurance
that Clear Channel will be able to repay such obligations. In the event that
such facility were to remain outstanding, there would be additional restrictions
on the operations of Universal's business and the ability of Clear Channel and
Universal to integrate their operations. See "--Integration of the Businesses of
Clear Channel and Universal."
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6. THE SPECIAL MEETING
(A) PURPOSE
At the Special Meeting, the stockholders of Universal will be asked to
consider and vote on a proposal to approve and adopt the Merger Agreement.
The Universal Board has determined that the Merger and the Merger Agreement
are in the best interests of Universal and its stockholders and has approved the
Merger and the Merger Agreement. THE UNIVERSAL BOARD RECOMMENDS THAT THE
STOCKHOLDERS OF UNIVERSAL VOTE IN FAVOR OF APPROVAL AND ADOPTION OF THE MERGER
AGREEMENT AT THE SPECIAL MEETING. See Section 7(d), "THE MERGER--Universal
Reasons for the Merger; Recommendation of the Universal Board." For a discussion
of the interests that certain directors and executive officers of Universal have
with respect to the Merger in addition to their interests as stockholders of
Universal generally, and information regarding the treatment of equity-based
awards and other rights of certain members of the Universal Board, see Section
7(f), "THE MERGER--Interests of Certain Persons in the Transaction." Such
interests, together with other relevant factors, were considered by the
Universal Board in making its recommendation and approving the Merger and the
Merger Agreement.
The Universal By-Laws provide that no business except that referred to in
the accompanying Notice of Special Meeting may be transacted at the Special
Meeting.
(B) RECORD DATE; VOTING RIGHTS
Only holders of record of shares of Universal Common Stock at the close of
business on the Record Date, December 24, 1997, are entitled to receive notice
of and to vote at the Special Meeting. At the close of business on the Record
Date, there were 26,814,815 shares of Universal Common Stock outstanding, each
of which entitles the registered holder thereof to one vote.
(C) QUORUM
The presence in person or by proxy of the holders of a majority of the
Universal Common Stock at the Special Meeting will constitute a quorum for the
transaction of business.
Broker non-votes and shares of Universal Common Stock represented by proxies
that are marked "abstain" will be counted as shares present for purposes of
determining the presence of a quorum on all matters.
In the event that a quorum is not present at the Special Meeting, it is
expected that the meeting will be adjourned or postponed to solicit additional
proxies.
(D) PROXIES
All shares of Universal Common Stock represented by properly executed
proxies that are received in time for the Special Meeting and have not been
revoked will be voted in accordance with the instructions indicated in such
proxies. If no instructions are indicated, such shares will be voted in favor of
approval and adoption of the Merger Agreement. In addition, the persons
designated in such proxy will have discretion to vote on any matters incident to
the conduct of the Special Meeting. If Universal proposes to adjourn the Special
Meeting, the persons named in the enclosed proxy card will vote all shares for
which they have voting authority (other than those that have been voted against
approval and adoption of the Merger Agreement) in favor of such adjournment.
Holders of Universal Common Stock are requested to complete, sign, date and
promptly return the enclosed proxy card in the postage-prepaid envelope provided
for such purpose to ensure that their shares are voted. Brokers who hold shares
of Universal as nominees will not have discretionary authority to vote such
shares in the absence of instructions from the
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beneficial owners thereof. Broker nonvotes will not be counted as votes cast,
but will have the same effect as votes cast against approval and adoption of the
Merger Agreement.
Any proxy in the enclosed form may be revoked by the stockholder executing
it at any time prior to its exercise by filing with the Secretary of Universal a
revoking instrument or by a duly executed proxy bearing a later date. The powers
of the proxy holders will be suspended if the person executing the proxy attends
the Special Meeting in person and so requests. Attendance at the Special Meeting
will not, in itself, constitute the revocation of a proxy.
If the Special Meeting is postponed or adjourned for any reason, at any
subsequent reconvening of the Special Meeting, all proxies will be voted in the
same manner as such proxies would have been voted at the initial convening of
the Special Meeting (except for any proxies that theretofore effectively have
been revoked or withdrawn), notwithstanding that they may have been voted on the
same or any other matter at a previous meeting.
(E) SOLICITATION OF PROXIES
Proxies are being solicited hereby on behalf of the Universal Board. The
cost of proxy solicitation for the Special Meeting, including the reasonable
expenses of brokers, fiduciaries and other nominees in forwarding solicitation
material to beneficial owners, will be borne by Universal. In addition to
solicitation by mail, directors, officers and employees of Universal may solicit
proxies personally or by telephone, facsimile transmission or otherwise. Such
directors, officers and employees will not be additionally compensated for such
solicitation but may be reimbursed for out-of-pocket expenses incurred in
connection therewith. If undertaken, the expense of such solicitation would be
nominal. Universal has retained Morrow & Co., Inc., at an estimated cost of
approximately $4,000, plus reimbursement of out-of pocket expenses, to assist in
solicitation of proxies. Arrangements will be made with brokerage houses and
other custodians, nominees, fiduciaries and stockholders of record to forward
proxy solicitation materials to the beneficial owners of stock held of record by
such persons. Universal may reimburse such solicitors for reasonable
out-of-pocket expenses incurred in connection with such solicitation.
IN CONNECTION WITH THE MEETING, HOLDERS OF UNIVERSAL COMMON STOCK SHOULD NOT
RETURN TO UNIVERSAL ANY STOCK CERTIFICATES WITH THEIR PROXY CARDS.
(F) REQUIRED VOTE
Approval and adoption of the Merger Agreement will require the affirmative
vote of holders of a majority of the outstanding shares of Universal Common
Stock.
An abstention will have the effect of a vote cast against approval and
adoption of the Merger Agreement. Brokers who hold shares of Universal Common
Stock as nominees will not have discretionary authority to vote such shares in
the absence of instructions from the beneficial owners thereof. Broker non-votes
will have the same effect as votes cast against the Merger Agreement.
(G) SHARE OWNERSHIP OF MANAGEMENT
At the close of business on December 12, 1997, directors and executive
officers of Universal and their affiliates were the beneficial owners of an
aggregate of approximately 7,902,625 (approximately 27.5%) of the shares of
Universal Common Stock then outstanding (including 2,173,579 Management Warrants
and 67,549 of the Stock Awards granted on December 10, 1997 and 4,825 of the
Stock Awards granted on January 5, 1998). See Section 13, "BENEFICIAL OWNERSHIP
OF UNIVERSAL COMMON STOCK," Section 8(i), "OTHER TERMS OF THE MERGER
AGREEMENT--Universal Stock Options and Warrants" and Section 7(f), "THE
MERGER--Interests of Certain Persons in the Transaction." In connection with the
Merger Agreement, Daniel L. Simon, Chief Executive Officer, President and a
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director of Universal, and Brian T. Clingen, Vice President, Chief Financial
Officer and a director of Universal have each entered into a voting agreement
with Clear Channel pursuant to which each of them agreed to vote all of his
shares of Universal Common Stock in favor of approval and adoption of the Merger
Agreement. See Section 7(g), "THE MERGER--Voting Agreement" and Section 13
"BENEFICIAL OWNERSHIP OF UNIVERSAL COMMON STOCK"
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7. THE MERGER
THE DESCRIPTION OF THE MERGER AND THE MERGER AGREEMENT CONTAINED IN THIS
PROXY STATEMENT/PROSPECTUS DESCRIBES THE MATERIAL TERMS OF THE MERGER AGREEMENT
BUT DOES NOT PURPORT TO BE COMPLETE AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO THE MERGER AGREEMENT, A COPY OF WHICH IS ATTACHED HERETO AS ANNEX I
AND INCORPORATED HEREIN BY REFERENCE.
(A) GENERAL
At the Effective Time of the Merger, Sub will be merged with and into
Universal, with Universal surviving as a wholly owned subsidiary of Clear
Channel. As a result of the Merger, the separate corporate existence of Sub will
cease and Universal will succeed to all the rights and all obligations of Sub in
accordance with the DGCL. Subject to the terms and conditions of the Merger
Agreement, each share of Universal Common Stock outstanding immediately prior to
the Effective Time will be converted into 0.67 shares of Clear Channel Common
Stock. Cash will be paid in lieu of any fractional share of Clear Channel Common
Stock. See Section 8(a), "OTHER TERMS OF THE MERGER AGREEMENT--Conversion of
Shares in the Merger."
The Merger will become effective upon the filing of the Certificate of
Merger with the Secretary of State of the State of Delaware. The filing of the
Certificate of Merger will occur as soon as practicable following the
satisfaction or waiver of the conditions set forth in the Merger Agreement. See
Section 8(h), "OTHER TERMS OF THE MERGER AGREEMENT--Conditions Precedent to the
Merger."
(B) BACKGROUND OF THE MERGER
In response to significant changes in production technology and economies of
scale which can be realized from the control of larger inventories of
billboards, the United States outdoor advertising industry has undergone
significant consolidation over the past three years. The industry-wide
consolidation was accelerated by greater access to the capital markets by
several large companies in the outdoor advertising business (including
Universal). Commencing in 1993, bank debt availability increased to the industry
as a result of the improved perception of the outdoor advertising business by
the banking community. Shortly thereafter, the public debt markets, and
beginning in 1996, the public equity markets, could be accessed by the larger
outdoor advertising companies.
In early 1995, management of Universal became interested in the assets of
Patrick Media Group, Inc. ("Patrick Media"). Universal's interest was based upon
the complementary fit with its pre-existing markets and the opportunity to
expand into new markets in the Southeast and the Southwest. In June 1995, as
part of an auction process, Universal bid for Patrick Media. Universal was
unsuccessful in its bid for Patrick Media, which was ultimately sold to Eller
Investment Company. On August 17, 1995, Eller Media was formed through the
combination of Patrick Media and Eller Investment Company.
By late 1996, Universal had taken advantage of the greater access to the
capital markets and had expanded into the Southeast and the Mid-Atlantic
markets. As such, a potential combination of the Universal and Eller Media
businesses was even more compelling to Universal. Therefore, in late 1996,
Universal, based upon its understanding that Eller Media was considering an
initial public offering of its common stock, contacted Eller Media's largest
investor, Hellman & Friedman, to discuss a possible acquisition. After brief
conversations regarding a possible acquisition of the stock of Eller Media,
negotiations broke off.
On April 10, 1997, Clear Channel acquired 93% of the then outstanding stock
of Eller Media for a total consideration of approximately $623 million (plus
assumption of debt). Eller Media is currently a subsidiary of Clear Channel
which holds all of Clear Channel's outdoor advertising assets.
In late April 1997, Jeffrey S. Amling, Managing Director of Alex Brown, on
behalf of Universal, held preliminary discussions with L. Lowry Mays, Chairman
and Chief Executive Officer of Clear Channel,
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about the possibility of merging Clear Channel and Universal. After Clear
Channel expressed an interest in pursuing further discussions, Alex Brown
informed Daniel L. Simon, President and Chief Executive of Universal, and Brian
T. Clingen, Chief Financial Officer of Universal, of Clear Channel's interest
and the merits of pursuing a possible transaction. Michael Goldberg and Frank
Bynum, Jr., directors of Universal and partners of Kelso & Co. ("Kelso"), then a
significant stockholder of Universal, were also informed of the discussions. On
April 30, Lowry Mays and Randall Mays, Chief Financial Officer of Clear Channel,
and Mr. Goldberg and Mr. Bynum of Kelso and Jeffrey S. Amling of Alex Brown met
over dinner to discuss general information concerning Clear Channel, Eller Media
and Universal.
Preliminary discussions continued throughout May and into early June of 1997
between Alex Brown and Mr. Goldberg and Mr. Bynum, on behalf of Universal, and
Randall Mays, on behalf of Clear Channel. These exploratory discussions focused
primarily on the relative strengths of the businesses and developing trends in
the outdoor advertising industry. On June 9, 1997, at its regularly scheduled
board meeting, Mr. Goldberg informed the Universal Board that he and Mr. Bynum
had been in contact with representatives of Clear Channel and had a meeting
scheduled for the following day. The Universal Board authorized Mr. Goldberg and
Mr. Bynum to proceed with discussions and to report back to the Universal Board.
On June 10, 1997, Lowry Mays and Randall Mays met with Mr. Goldberg and Mr.
Bynum in New York and indicated a willingness to enter into discussions
regarding a possible combination of their respective outdoor advertising
businesses. Between June 10, 1997 and June 16, 1997, Mr. Goldberg and Mr. Bynum
and Randall Mays engaged in a number of discussions regarding the possible terms
of a transaction, including the form of consideration to be paid and the tax
treatment of the potential transaction.
At a special meeting of the Universal Board in New York on June 17, 1997,
the possibility of a transaction was discussed with the Universal Board
(excluding Mr. Simon who was meeting with Clear Channel at the time). The
Universal Board was briefed by management, its financial advisors, Kelso, Bear
Stearns and Alex Brown, as well as outside counsel, on information pertaining to
Clear Channel, including its value, trading history and business, various
transaction structures and the type of consideration that might be proposed and
the legal and regulatory issues that might arise if Universal was to proceed
with a transaction. At this meeting, the Universal Board decided to proceed with
discussions with Clear Channel, and designated Mr. Goldberg and Mr. Bynum to
head the negotiations for Universal.
From June 17, 1997 to June 27, 1997, members of senior management of
Universal, Mr. Goldberg, Mr. Bynum and Universal's financial advisors, and
members of senior management of Clear Channel held numerous meetings to discuss
the terms of a potential combination and the basis for the integration of the
two businesses. On June 17, 1997, Daniel L. Simon and L. Lowry Mays, Mark P.
Mays, President of Clear Channel, Randall Mays and Karl Eller, President and
Chairman of Eller Media and a director of Clear Channel, met in San Antonio to
discuss the strategy for integrating the two outdoor advertising businesses and
the responsibility of various members of management in the combined company. The
parties were unable to reach agreement on these issues and agreed to discuss
these points further. On June 25, 1997, Mr. Goldberg and Mr. Bynum met with
Randall Mays over dinner to further refine the terms of a possible transaction.
On June 26 and June 27, Randall Mays met in New York at the offices of Kelso,
with Mr. Clingen, Mr. Goldberg, Mr. Bynum and representatives of Alex Brown to
attempt to reach agreement on terms of a transaction. Although negotiations were
extensive, the parties failed to reach agreement on a potential transaction. In
addition to differences in expectation as to value, the parties were unable to
reach agreement on the strategic and operating direction of the combined
company, the form of consideration which would be paid in the transaction and
other related matters. Although the negotiations with respect to valuation did
not proceed past a preliminary stage, Universal's position was that any
stock-for-stock transaction should contain at least a 20% premium to the
unaffected price of Universal Common Stock and adequate protection against an
adverse movement in Clear Channel's stock price. As a result, the discussions
were terminated on July 9, 1997.
Following the termination of discussions on July 9, 1997, Kelso sold its
shares of Universal in a secondary offering (which also included a primary
offering of 2,109,105 shares and sales by Daniel L.
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Simon and Brian T. Clingen of 275,000 and 137,500 shares, respectively) on
August 20, 1997 at a gross price of $35.00 per share. Mr. Goldberg resigned from
the Universal Board following consummation of this offering.
On September 18, 1997, Daniel L. Simon and Karl Eller met over breakfast in
Chicago. At such meeting, Mr. Eller proposed that Universal and Clear Channel
reopen discussions regarding a combination of Universal and Clear Channel.
At a regularly scheduled meeting of the Universal Board on September 24,
1997, Daniel L. Simon briefed the Universal Board on his discussions with Mr.
Eller and the possibility that Clear Channel might be prepared to make a new
proposal regarding a potential transaction. A discussion of the strategic fit
between the two outdoor businesses and the basic terms of a potential
combination ensued. The Universal Board and Mr. Goldberg (who had previously
resigned from the Universal Board) discussed whether or not they should continue
discussions in light of the failure of the parties to come to closure in July of
1997. A decision was made to await a proposal from Clear Channel and to respond
to any request for information that would facilitate such proposal. From
September 25 to October 6, Mr. Clingen and Randall Mays had discussions
regarding an outline of the basic financial terms of a transaction and exchanged
preliminary due diligence information. These discussions included matters
relating to the transaction structure, the form of consideration and the
appropriate exchange ratio for a potential business combination. Early in the
week of October 6, 1997, Universal and Clear Channel reached an understanding
that assuming the remaining issues could be resolved, including those issues
that had led to the cessation of discussions in July 1997, the parties would be
preliminarily prepared to negotiate a stock-for-stock merger in which
stockholders of Universal would receive approximately 0.67 shares of Clear
Channel Common Stock for each share of Universal Common Stock.
On October 7, 1997, Mr. Simon met with Lowry Mays and Randall Mays in San
Antonio to discuss integration and management of the two outdoor businesses. At
that meeting, it was agreed that if the parties could conclude a merger
agreement, Mr. Simon would serve as Chief Operating Officer and Mr. Eller would
serve as Chairman of the combined outdoor advertising businesses. It was also
agreed that Mr. Simon would have primary responsibility for the transition
period. At the conclusion of that meeting, Mr. Simon and Lowry Mays agreed to
proceed with the diligence of each other and to begin negotiations of a merger
agreement. From October 8, 1997 to October 12, 1997, members of senior
management of both Universal and Clear Channel held a number of telephonic
discussions to exchange information on Universal and Clear Channel including
certain operational, financial and personnel information relating to their
respective businesses. From October 13, 1997 to October 15, 1997, members of
senior management of Clear Channel and Eller Media and members of senior
management of Universal (along with its financial advisors) met in Chicago to
conduct due diligence on Universal and Clear Channel, respectively. The two
companies and their advisors also engaged in a business review including
preliminary analysis of cost and revenue benefits that could be achieved by a
merger.
During the week of October 13, 1997, Universal retained Alex Brown and Bear
Stearns, respectively, to represent Universal as financial advisors in any
potential transaction with Clear Channel. Alex Brown and Bear Stearns had
previously represented Universal as financial advisors in a variety of offerings
and acquisitions.
From October 16, 1997 to October 19, 1997, members of senior management of
Clear Channel and Universal continued their respective due diligence focusing on
follow-up information from their meetings earlier that week. Negotiations
between members of senior management of both Universal and Clear Channel
continued for the next week concerning the terms of a merger agreement including
those issues that had led to the cessation of discussions in July 1997.
On October 20, 1997, a meeting was held at the office of Skadden, Arps,
Slate, Meagher & Flom (Illinois) at which management of each of Universal and
Clear Channel, Universal's financial advisors and outside counsel to each of
Universal and Clear Channel were present to negotiate and agree on the terms
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of a definitive agreement. Negotiations continued between the parties through
October 23, 1997. Concurrently, the parties continued and completed their
respective due diligence reviews of the other party. During this period, Mr.
Clingen and Mr. Simon continued to be in contact with the other members of the
Universal Board briefing them on the progress of negotiations, the status of the
transaction and the major remaining issues. Concurrently the parties negotiated
a series of arrangements with Mr. Simon relating to Mr. Simon's role with the
new company, his commitment to vote his shares in favor of the Merger and his
commitment to retain a significant portion of the shares he would receive in the
merger for a period of up to two years.
At a special meeting of the Universal Board on October 23, 1997, Mr. Simon
and Mr. Clingen presented the terms of the Merger, the proposed corporate
structure and organization, identified potential synergies from the combination,
the challenges of combining the corporate cultures of Universal and Clear
Channel and the need for regulatory approvals. Representatives of Alex Brown and
Bear Stearns presented their respective fairness opinions and reviewed with the
Universal Board a financial analysis of the proposed stock-for-stock merger with
Clear Channel. Paul G. Simon, Vice President, General Counsel and Secretary of
Universal, and outside legal counsel summarized the terms and conditions of the
Merger Agreement and reviewed antitrust and other legal considerations related
to the Merger. The Universal Board discussed these issues along with the results
of due diligence, potential synergies, strategic fit, financial results and
projections, accounting issues, personnel issues, timing and pricing
considerations related to the proposed Merger and other terms of the Merger and
the Merger Agreement as well as the reasons for the proposed Merger (outlined
below under "Universal Reasons for the Merger"). Mr. Bynum participated in most
of the discussion but excused himself prior to the conclusion of the discussion
and the vote of the Universal Board. The Universal Board by unanimous vote of
those members present approved the Merger and the Merger Agreement.
The Clear Channel Board also met on October 23, 1997 to discuss the Merger
and the Merger Agreement and the results of due diligence, potential synergies,
strategic fit, financial results and projections, accounting issues, personnel
issues, timing and pricing considerations related to the proposed Merger and
other terms of the Merger and the Merger Agreement as well as the reasons for
the proposed Merger (outlined below under "Clear Channel Reasons for the
Merger.") The Clear Channel Board by unanimous vote of those members present
approved the Merger and the Merger Agreement.
Following the meetings of their respective Boards of Directors, Universal
and Clear Channel executed the Merger Agreement on October 23, 1997 and publicly
announced the Merger on Thursday evening, October 23, 1997.
(C) CLEAR CHANNEL REASONS FOR THE MERGER
The Board of Directors of Clear Channel (the "Clear Channel Board") believes
that the terms of the Merger Agreement are fair to and in the best interest of
Clear Channel and its stockholders. Accordingly, the Clear Channel Board has
unanimously approved the Merger Agreement. In reaching its determination, the
Clear Channel Board consulted with Clear Channel management, as well as its
financial and legal advisors, and considered a number of factors, including
without limitation, the following:
(i) the Merger provides opportunities for economies of scale and other
operating efficiencies and synergies, particularly in terms of the
integration of office facilities and the increased presence of outdoor
advertising of Clear Channel and Universal;
(ii) the Merger appears to provide significant enhanced benefits to
Clear Channel and its stockholders;
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(iii) the combined entity will have greater competitive strengths and
financial resources to better compete with other national media and outdoor
advertising companies, and will have new opportunities for further expansion
in the outdoor advertising business;
(iv) the combined entity diversifies revenue and after-tax cash flow
across a larger number of geographic markets, thereby reducing reliance on
any individual market;
(v) the combined entity will give Clear Channel an operating presence in
a number of domestic markets in which it does not now operate;
(vi) the complementary nature of the combined entities' operations in
radio, television and outdoor advertising media; and
(vii) the terms of the Merger Agreement.
In view of the wide variety of factors considered in connection with its
evaluation of the Merger, the Clear Channel Board did not find it practical to,
and did not, quantify or otherwise attempt to assign relative weights to the
specific factors considered in reaching its determination.
(D) UNIVERSAL REASONS FOR THE MERGER; RECOMMENDATION OF THE UNIVERSAL BOARD
THE UNIVERSAL BOARD HAS DETERMINED THAT THE MERGER AND THE MERGER AGREEMENT
ARE IN THE BEST INTERESTS OF UNIVERSAL AND ITS STOCKHOLDERS AND HAS APPROVED THE
MERGER AND THE MERGER AGREEMENT. THE UNIVERSAL BOARD RECOMMENDS THAT THE
STOCKHOLDERS OF UNIVERSAL VOTE IN FAVOR OF APPROVAL AND ADOPTION OF THE MERGER
AGREEMENT AT THE SPECIAL MEETING.
The Universal Board believes the Merger offers Universal and its
stockholders an opportunity to participate in a diversified media company that
combines Clear Channel's historical strength in radio and television with a
significant outdoor advertising business. The Universal Board believes that the
combined revenues of Universal and Clear Channel, the potential for significant
cost savings, the complementary nature of a radio, television and outdoor
advertising media, and the increased geographic presence in outdoor advertising
that would result from the Merger are compelling reasons for the combination of
Universal and Clear Channel. In addition, the outdoor advertising industry has
for several years been going through a period of great consolidation. As the
number of companies in the industry has decreased, the size of the remaining
entities has grown significantly.
The decision of the Universal Board to approve the Merger and the Merger
Agreement and to recommend approval and adoption of the Merger Agreement by the
holders of Universal Common Stock was based upon a number of factors. The
following are the material factors considered by the Universal Board, certain of
which factors contained both positive and negative elements:
(i) the Universal Board's understanding of the present and anticipated
environment in the outdoor advertising industry, the increased competition
among major, national firms, and the continued consolidation within the
industry;
(ii) the Universal Board's consideration of information concerning the
financial condition, results of operations, prospects and businesses of
Universal and Clear Channel, including the revenues and cash flows of the
companies, their complementary businesses, and increased geographic
presence, the consensus of research analysts' 1997 earnings per share
estimates for Universal and Clear Channel, the recent stock market
performance of Universal Common Stock and Clear Channel Common Stock and the
ratio of Universal's Common Stock price to Clear Channel's Common Stock
price over various periods;
(iii) current industry, economic and market conditions;
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(iv) the complementary fit, recognized by the Universal Board since its
attempt to acquire a substantial portion of such assets in 1995 (see Section
7(b), "--Background of the Merger"), between Universal's outdoor advertising
markets (primarily in the Northeast, Midwest and Florida) and Clear
Channel's outdoor advertising markets (primarily on the West Coast,
Southeast and Texas and parts of Florida) needed to create a true nationwide
outdoor advertising business;
(v) the Universal Board's belief that the combination of Universal's
outdoor advertising and Clear Channel's radio and television broadcasting
media will result in a significant asset mix, revenue diversity and the
opportunity for cross selling and cross marketing advertising media,
providing additional value and risk spreading;
(vi) the Universal Board's belief that the Merger would enable Universal
to benefit from Clear Channel's strong national sales force in the outdoor
advertising business and Clear Channel to benefit from Universal's strength
in the local outdoor advertising sales arena;
(vii) the risks associated with attempting to combine an outdoor
advertising business with a television and radio business;
(viii) the complementary business plans of each of Universal and Clear
Channel to focus internationally and embark upon global expansion and the
Universal Board's belief that the Merger will facilitate acquisitions
relative to Universal as a stand-alone company due to a lower cost of
capital and greater cost reduction opportunities;
(ix) the financial and business prospects for the combined business,
including general information relating to possible synergies, and operating
efficiencies and consolidations, including the possibility that such
synergies might not be achieved or that the two companies could not be
successfully integrated;
(x) financial information indicating that the proposed exchange ratio of
Clear Channel Common Stock for Universal Common Stock provided for each
share of Universal Common Stock $42.461 in the form of Clear Channel Common
Stock, based on its last reported sale price as reported on the NYSE
Composite Transactions Tape on Wednesday, October 22, 1997, the last trading
day prior to execution of the Merger Agreement representing a premium of
2.3% over the last reported sale price of Universal Common Stock on such
date and a premium of 17.9% over the trading price of Universal Common Stock
thirty days prior thereto (September 22, 1997);
(xi) the value associated with Clear Channel Common Stock to be received
by stockholders of Universal in the Merger and the relative valuation of a
combined diversified company verses Universal as a stand-alone outdoor
advertising company considering that Clear Channel might not be able to
retain its relatively high stock multiple in the future;
(xii) the opinion of its outside legal counsel that the Merger could be
accomplished on a tax-free basis;
(xiii) presentations from, and discussions with, senior executives of
Clear Channel, representatives of its outside legal counsel and
representatives of Alex Brown and Bear Stearns regarding the business,
financial, accounting and legal due diligence with respect to Clear Channel
and the terms and conditions of the Merger Agreement, and discussions with
its advisors of the possible reactions of anti-trust regulators to the
proposed Merger. See Section 7(i) and (e), "THE MERGER--Certain U.S. Federal
Income Tax Consequences" and, "--Opinions of Financial Advisors";
(xiv) the corporate governance aspects of the Merger, including that
Daniel L. Simon would join the Clear Channel Board, that Mr. Simon would
serve as Vice Chairman and Chief Operating Officer of Clear Channel Outdoor
and that Mr. Simon would play a lead role in the transition period during
which the separate outdoor advertising businesses would be integrated. The
Universal Board, while recognizing that these arrangements presented certain
potential conflicts of interests to the person
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involved, and considering these interests in connection with its approval of
the Merger Agreement, believed that this would be beneficial in integrating
the two companies and in achieving potential benefits of the combination;
(xv) the Universal Board's recognition that certain members of the
Universal Board and of Universal's management have interests in the Merger
that are in addition to and not necessarily aligned with the interests in
the Merger of holders of Universal Common Stock, which interests were
considered in connection with its approval of the Merger and the Merger
Agreement;
(xvi) the analysis of Alex Brown and Bear Stearns and the Universal
Board's receipt of opinions from Alex Brown and Bear Stearns dated October
23, 1997 that, as of such date and subject to the various considerations set
forth therein, the consideration to be paid to Universal stockholders in the
Merger was fair from a financial point of view to Universal stockholders (a
copy of the Alex Brown and Bear Stearns written opinions, dated October 31,
1997 and October 23, 1997, respectively, setting forth the assumptions and
qualifications made, facts considered and the scope of the reviews
undertaken are attached hereto as Annexes II and III, respectively, and are
incorporated by reference herein. Stockholders of Universal are encouraged
to read the opinions of Alex Brown and Bear Stearns carefully and in their
entirety). See Sections 7(b) and (e), "THE MERGER--Background of the Merger"
and "--Opinions of Financial Advisors"; and
(xvii) the risks associated with Clear Channel's business summarized under
Section 5, "RISK FACTORS."
The foregoing discussion of the information and factors considered by the
Universal Board is not intended to be exhaustive. In view of the wide variety of
factors considered, the Universal Board did not assign relative weights to the
factors discussed above or determine that any factor was of particular
importance. Rather, the Universal Board viewed its positions and recommendation
as being based upon the totality of the information presented.
THE UNIVERSAL BOARD RECOMMENDS THAT THE STOCKHOLDERS OF UNIVERSAL VOTE IN
FAVOR OF APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AT THE SPECIAL MEETING.
(E) OPINIONS OF FINANCIAL ADVISORS
ALEX BROWN. In connection with the Merger, Universal retained Alex Brown to
act as financial advisor and to render an opinion as to the fairness to
Universal, from a financial point of view, of the consideration to be paid by
Clear Channel to the holders of the Universal Common Stock. At a meeting of the
Universal Board held on October 23, 1997, Alex Brown presented their conclusions
and oral opinion and thereafter delivered a written opinion dated October 31,
1997 (the "Alex Brown Opinion") to the effect that the consideration payable by
Clear Channel to the Universal stockholders under the Merger Agreement is fair,
from a financial point of view, to Universal.
THE FULL TEXT OF THE ALEX BROWN OPINION, WHICH SETS FORTH THE ASSUMPTIONS
MADE, MATTERS CONSIDERED AND LIMITS ON THE REVIEW UNDERTAKEN, IS ATTACHED HERETO
AS ANNEX II AND IS INCORPORATED HEREIN BY REFERENCE. STOCKHOLDERS ARE URGED TO
READ SUCH OPINION IN ITS ENTIRETY. ALEX BROWN HAS CONSENTED TO THE INCLUSION OF
ITS OPINION LETTER IN THIS PROXY STATEMENT/PROSPECTUS AND REFERENCES THERETO
UNDER THIS SECTION. IN GIVING SUCH CONSENT, ALEX BROWN DOES NOT ADMIT THAT IT
COMES WITHIN THE CATEGORY OF PERSONS WHOSE CONSENT IS REQUIRED UNDER, AND ALEX
BROWN DOES NOT ADMIT THAT IT IS AN "EXPERT" WITH RESPECT TO, ANY PART OF THIS
PROXY STATEMENT/PROSPECTUS FOR PURPOSES OF THE SECURITIES ACT AND THE RULES AND
REGULATIONS THEREUNDER. UNIVERSAL STOCKHOLDERS ARE URGED TO READ THE ALEX BROWN
OPINION IN ITS ENTIRETY. THE ALEX BROWN OPINION IS ADDRESSED TO THE UNIVERSAL
BOARD, IS DIRECTED ONLY TO THE CONSIDERATION TO BE PAID IN THE MERGER AND DOES
NOT CONSTITUTE A RECOMMENDATION TO ANY UNIVERSAL STOCKHOLDER AS TO HOW SUCH
STOCKHOLDER SHOULD VOTE AT THE SPECIAL MEETING. THE SUMMARY OF THE ALEX BROWN
OPINION SET FORTH IN THIS PROXY STATEMENT/PROSPECTUS
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DESCRIBES THE MATERIAL ASPECTS OF SUCH OPINION AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO THE FULL TEXT OF SUCH OPINION.
In arriving at its opinion, Alex Brown reviewed the Merger Agreement and
certain publicly available financial information and certain internal financial
analyses and other information furnished to Alex Brown by Universal and Clear
Channel. Alex Brown held discussions with members of the senior management of
Universal and Clear Channel regarding the business and prospects of their
respective companies. In addition, Alex Brown (i) reviewed the reported price
and trading activity for the Universal Common Stock and Clear Channel Common
Stock, (ii) compared certain financial and stock market information for
Universal and Clear Channel with similar information for certain selected
companies within the radio broadcasting, television broadcasting, and outdoor
advertising industries whose securities are publicly traded, (iii) reviewed the
financial terms of certain recent business combinations which were deemed
comparable in whole or in part, (iv) analyzed historical and projected financial
information for Universal and Clear Channel, and (v) performed such other
studies and analyses and considered such other factors as they deemed
appropriate. Alex Brown assumed the accuracy, completeness and fairness of the
financial and other information on which it relied in rendering its opinion and
did not independently verify such information. With respect to the information
relating to the prospects and future business plans of Universal and Clear
Channel, Alex Brown assumed that such information reflects the best currently
available estimates and judgments of the managements of Universal and Clear
Channel as to the likely future financial performance of their respective
companies. In addition, Alex Brown did not make, nor was it furnished with, an
independent evaluation or appraisal of the assets of Universal or Clear Channel.
The opinion of Alex Brown is based on market, economic and other conditions as
they existed and could have been evaluated as of October 23, 1997.
The Alex Brown Opinion is directed only to the fairness from a financial
point of view of the Merger Consideration in the Merger. Alex Brown was not
asked to consider, nor did it express any opinion with respect to, the fairness
of any other transaction. The Alex Brown Opinion does not constitute a
recommendation to any stockholder as to how such stockholder should vote at the
Special Meeting.
It should be understood that, although subsequent developments may affect
the Alex Brown Opinion, Alex Brown does not have any obligation to update,
revise or reaffirm its opinion, and Universal's obligation to consummate the
Merger is not conditioned upon an update of the Alex Brown Opinion.
The following is a summary of the material factors considered and principal
financial analyses performed by Alex Brown to arrive at the Alex Brown Opinion.
ANALYSIS OF CERTAIN OTHER PUBLICLY TRADED COMPANIES. Alex Brown compared
financial information, relating to Clear Channel and Universal and the proposed
Merger Consideration, to corresponding data and ratios of certain
publicly-traded radio broadcasting (the "Selected Radio Broadcasting
Companies"), television broadcasting companies (the "Selected Television
Broadcasting Companies"), and outdoor advertising companies (the "Selected
Outdoor Advertising Companies"). The radio broadcasting companies included in
this analysis were American Radio Systems Corporation, Chancellor Media
Corporation, Clear Channel, Emmis Broadcasting Corporation, Heftel Broadcasting
Corporation, Jacor Communications, Inc., Saga Communications, Inc., SFX
Broadcasting, Inc., and Westinghouse/CBS. The television broadcasting companies
included in this analysis were Clear Channel, Granite Broadcasting Corporation,
Lin Television Corporation, Sinclair Broadcast Group, Telemundo Group, Inc.,
Univision Communications, Inc., and Young Broadcasting Corporation. The outdoor
advertising companies included in this analysis were Outdoor Systems, Inc. and
Lamar Advertising Company. The information included, among other things, (i)
equity market valuation ("Equity Market Value"), (ii) Equity Market Value plus
long-term debt less cash and equivalents ("Adjusted Market Value"), (iii) the
ratio of net debt to earnings before interest, taxes, depreciation and
amortization ("EBITDA"), and (iv) the ratio of Adjusted Market Value to various
measures of financial performance, including projected revenues and EBITDA. Alex
Brown noted that the range of the ratio of net debt to 1997 projected EBITDA for
the Selected Radio Broadcasting
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Companies was from 2.2 times to 8.6 times, with a mean of 5.4 times, for the
Selected Television Broadcasting Companies was from 2.0 times to 9.0 times, with
a mean of 5.2 times, and for the Selected Outdoor Advertising Companies was from
5.2 times to 5.4 times, with a mean of 5.3 times, as compared to 4.6 times for
Clear Channel and 4.4 times for Universal. Alex Brown noted that the range of
Adjusted Market Value as a multiple of 1997 projected EBITDA for the Selected
Radio Broadcasting Companies was from 15.4 times to 35.8 times, with a mean of
20.8 times, for the Selected Television Broadcasting Companies was from 10.6
times to 25.9 times, with a mean of 16.6 times, and for the Selected Outdoor
Advertising Companies was from 14.6 times to 15.2 times, with a mean of 14.9
times, versus comparable multiples of 22.0 times for Clear Channel and 14.0
times for Universal and a transaction multiple of 14.2 times, assuming a
transaction value of $42.46 per share. Alex Brown noted that the range of
Adjusted Market Value as a multiple of 1998 projected EBITDA for the Selected
Radio Broadcasting Companies was from 13.8 times to 28.8 times, with a mean of
17.3 times, for the Selected Television Broadcasting Companies was from 9.6
times to 22.2 times, with a mean of 14.2 times, and for the Selected Outdoor
Advertising Companies was from 13.0 times to 13.6 times, with a mean of 13.3
times, versus comparable multiples of 19.1 times for Clear Channel and 12.3
times for Universal and a transaction multiple of 12.2 times, assuming a
transaction value of $42.46 per share. Alex Brown noted that the range of
Adjusted Market Value as a multiple of 1997 projected Revenues for the Selected
Radio Broadcasting Companies was from 4.4 times to 13.0 times, with a mean of
7.2 times, for the Selected Television Broadcasting Companies was from 2.9 times
to 9.4 times, with a mean of 6.1 times, and for the Selected Outdoor Advertising
Companies was from 6.4 times to 6.7 times, with a mean of 6.6 times, versus
comparable multiples of 8.8 times for Clear Channel and 7.2 times for Universal
and a transaction multiple of 6.9 times, assuming a transaction value of $42.46
per share. Alex Brown noted that the range of Adjusted Market Value as a
multiple of 1998 projected Revenues for the Selected Radio Broadcasting
Companies was from 3.7 times to 11.3 times, with a mean of 6.5 times, for the
Selected Television Broadcasting Companies was from 2.7 times to 8.1 times, with
a mean of 5.5 times, and for the Selected Outdoor Advertising Companies was from
6.0 times to 6.2 times, with a mean of 6.1 times, versus comparable multiples of
8.1 times for Clear Channel and 6.6 times for Universal and a transaction
multiple of 6.2 times, assuming a transaction value of $42.46 per share.
COMPARABLE RADIO AND OUTDOOR MERGER AND ACQUISITION TRANSACTIONS. Alex
Brown analyzed a number of radio station and radio group acquisitions in terms
of the acquisition price and the multiple of broadcast cash flow. On a 1997
broadcast cash flow basis, the multiples on 16 selected 1996 announced
transactions ranged from 8.1 times to 13.7 times, with a mean of 10.4 times. On
a 1998 broadcast cash flow basis, the multiples on six selected 1997 announced
transactions ranged from 11.3 times to 18.8 times, with a mean of 14.5 times.
Additionally, Alex Brown analyzed a number of outdoor advertising acquisitions
in terms of the acquisition price and the multiple of EBITDA. On a 1996 EBITDA
basis, the multiples on five selected 1995 and 1996 announced transactions
ranged from 6.9 times to 8.7 times, with a mean of 8.0 times. On a 1998 EBITDA
basis, the multiples on four selected 1997 announced transactions ranged from
7.6 times to 10.1 times, with a mean of 9.0 times. Alex Brown noted that, based
upon an implied purchase price per Universal share of $42.46, the 1997 EBITDA
transaction multiple is 14.2 times and the 1998 EBITDA transaction multiple is
12.2 times. Alex Brown further noted that the 1997 EBITDA multiple of 14.2 times
represents a 24.6% premium to Clear Channel's purchase of Eller Media at 11.4
times 1997 EBITDA.
DISCOUNTED CASH FLOW ANALYSIS. Alex Brown also performed a discounted cash
flow analysis of Universal. The analysis was based upon projections made
available to Alex Brown by the management of Universal and was based upon
discount rates ranging from 11.0% to 13.0% determined through a weighted average
cost of capital analysis and terminal EBITDA multiples ranging from 11.0 to 13.0
times which Alex Brown thought to be appropriate based upon precedent
transactions, current trading multiples of comparable companies and upon various
industry analysts' estimates. Alex Brown added the present value of the
discounted free cash flows to the present value of the terminal value to arrive
at total enterprise values ranging from approximately $1.729 billion to $1.957
billion.
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STOCK PRICE ANALYSIS. Alex Brown reviewed and analyzed the performance of
the per share market prices and the trading volume of Universal and Clear
Channel over various time periods, including (i) from October 22, 1996 to
October 22, 1997; (ii) from January 1, 1997 to October 22, 1997; and (iii) for
Universal Common Stock, from July 23, 1996 (its initial public offering) to
October 22, 1997. Alex Brown also reviewed the historic stock price performance
and trading history of certain other publicly traded outdoor advertising
companies, Outdoor Systems, Inc. ("Outdoor Systems") and Lamar Advertising
Company ("Lamar"), from their respective initial public offerings (April 24,
1996 for Outdoor Systems and August 1, 1996 for Lamar) to October 22, 1997 for
Outdoor Systems and October 16, 1997 for Lamar and reviewed the historic stock
price performance of Universal Common Stock versus common stock of Outdoor
Systems and Lamar for the period August 15, 1997 to October 22, 1997. Alex Brown
also analyzed and reviewed the historic exchange ratio of 0.67 shares of Clear
Channel for each share of Universal over the period from October 22, 1996 to
October 22, 1997. Alex Brown also noted that, based upon the closing price of
Clear Channel Common Stock on October 22, 1997 of $63.375, the Merger
Consideration implied a Universal stock price of $42.46 per share, or a premium
of (i) $0.96 or 2.3% over the closing per share sale price of Universal on
October 22, 1997 of $41.50; and (ii) $6.96 or 17.9% over the closing per share
sale price of Universal thirty days prior (September 22, 1997).
CONTRIBUTION ANALYSIS. Alex Brown analyzed the contribution of each of
Universal and Clear Channel to certain income statement and balance sheet
categories of the pro forma combined company, including revenues and EBITDA.
This contribution analysis was then compared to the pro forma ownership
percentage of Universal and Clear Channel stockholders in the combined company.
Alex Brown observed that the Universal stockholders are expected to receive
approximately 17.8% of the relative total enterprise value, assuming a
transaction value of $42.46 per share. Alex Brown noted that for the period
ending June 30, 1997, it was estimated that Universal and Clear Channel will
have contributed 23.0% and 77.0%, respectively, of the combined revenues and
27.5% and 72.5%, respectively, of the combined EBITDA. For the period ended
December 31, 1997, Alex Brown noted that it is estimated that Universal and
Clear Channel will have contributed 27.8% and 72.2%, respectively, of the
combined revenues and 32.0% and 68.0%, respectively, of the combined EBITDA. For
the period ended December 31, 1998, Alex Brown noted that it is estimated that
Universal and Clear Channel will have contributed 24.0% and 76.0%, respectively,
of the combined revenues and 27.6% and 72.4%, respectively, of the combined
EBITDA.
The summary set forth above does not purport to be a complete description of
the analyses performed by Alex Brown in arriving at its opinion. The preparation
of a fairness opinion involves various determinations as to the most appropriate
and relevant methods of financial analysis and the application of these methods
to the particular circumstances and, therefore, such an opinion is not readily
susceptible to summary description. Accordingly, notwithstanding the separate
factors summarized above, Alex Brown believes that its analyses must be
considered as a whole and that selecting portions of its analyses and the
factors considered by it, without considering all analyses and factors, could
create an incomplete view of the evaluation process underlying its opinion. In
performing its analyses, Alex Brown made numerous assumptions with respect to
industry performances, business and economic conditions and other matters. The
analyses performed by Alex Brown are not necessarily indicative of actual values
or future results, which may be significantly more or less favorable than
suggested by such analyses.
Alex Brown is a nationally recognized investment bank that is involved
regularly in the valuation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings and private placements and
valuations for estate, corporate and other purposes. Alex Brown regularly
publishes research reports regarding Universal and Clear Channel and the radio
broadcasting, television broadcasting, and outdoor advertising industries and
the businesses and securities of publicly owned companies in those industries
and makes a market in securities issued by Universal and Clear Channel.
Alex Brown has previously acted as financial advisor to Universal in
connection with various capital raising transactions and other matters,
including serving as the lead managing underwriter in the July 1996 initial
public offering of Universal Common Stock, as the lead managing underwriter in
the October 1996
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follow-on offering of Universal Common Stock, as a co-managing underwriter in
the November 1996 offering of Senior Subordinated Notes of UOI, and as financial
advisor to Universal in its October 1996 acquisition of Outdoor Advertising
Holdings, Inc. In addition, Alex Brown acted as financial advisor to Clear
Channel in the past in connection with various capital raising transactions and
other matters, including serving as the lead-managing underwriter in three
follow-on offerings of Clear Channel Common Stock, one follow-on offering of
common stock of Heftel, a Clear Channel affiliate, as a co-managing underwriter
in an offering of debentures of Clear Channel, and Alex Brown is currently
serving as financial advisor in connection with a potential acquisition under
consideration by Clear Channel.
Pursuant to a letter agreement dated October 7, 1997 (the "Engagement
Letter"), Universal engaged Alex Brown to provide investment banking advice and
services to Universal in connection with Universal's review and analysis of a
potential business combination with Clear Channel. Universal agreed to pay Alex
Brown a fee of $1,000,000 if Alex Brown delivered a fairness opinion requested
by Universal in connection with a proposed business combination. Universal also
agreed to reimburse Alex Brown for reasonable out-of-pocket expenses, including
fees and disbursements of counsel, incurred by Alex Brown in carrying out its
duties under the Engagement Letter, and to pay Alex Brown its customary per diem
charges for the services of any officers that assist in, or provide testimony in
connection with any action, suit or proceeding relating to the engagement of
Alex Brown by Universal. In addition, Alex Brown will receive an additional fee
of $4,000,000 for completion of the Merger. The terms of the fee arrangement
with Alex Brown, which Alex Brown and Universal believe are customary in
transactions of this nature, were negotiated at arm's length between Universal
and Alex Brown and the Universal Board was aware of such arrangement.
BEAR STEARNS. At the meeting of the Universal Board on October 23, 1997,
Bear Stearns rendered its oral opinion to the Universal Board that, as of such
date, and subject to the assumptions and qualifications set forth therein, the
consideration to be paid to Universal stockholders in the proposed Merger was
fair from a financial point of view to Universal stockholders. Bear Stearns has
also delivered a written opinion to the Universal Board, dated October 23, 1997
(the "Bear Stearns Opinion"), that, as of such date, the consideration to be
paid to Universal stockholders in the proposed Merger was fair from a financial
point of view to Universal stockholders.
THE FULL TEXT OF THE BEAR STEARNS OPINION, WHICH SETS FORTH THE ASSUMPTIONS
MADE, MATTERS CONSIDERED AND LIMITS ON THE REVIEW UNDERTAKEN, IS ATTACHED HERETO
AS ANNEX III AND IS INCORPORATED HEREIN BY REFERENCE. BEAR STEARNS HAS CONSENTED
TO THE INCLUSION OF ITS OPINION LETTER IN THIS PROXY STATEMENT/ PROSPECTUS AND
REFERENCES THERETO UNDER THIS SECTION. IN GIVING SUCH CONSENT, BEAR STEARNS DOES
NOT ADMIT THAT IT COMES WITHIN THE CATEGORY OF PERSONS WHOSE CONSENT IS REQUIRED
UNDER, AND BEAR STEARNS DOES NOT ADMIT THAT IT IS AN "EXPERT" WITH RESPECT, TO
ANY PART OF THIS PROXY STATEMENT/PROSPECTUS FOR PURPOSES OF THE SECURITIES ACT
AND THE RULES AND REGULATIONS THEREUNDER. UNIVERSAL STOCKHOLDERS ARE URGED TO
READ THE BEAR STEARNS OPINION IN ITS ENTIRETY. THE BEAR STEARNS OPINION IS
INTENDED FOR THE BENEFIT AND USE OF THE UNIVERSAL BOARD AND DOES NOT CONSTITUTE
A RECOMMENDATION OF THE MERGER OVER OTHER COURSES OF ACTION THAT MAY BE
AVAILABLE TO UNIVERSAL AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY HOLDER OF
UNIVERSAL COMMON STOCK AS TO HOW TO VOTE SHARES IN CONNECTION WITH THE MERGER.
THE BEAR STEARNS OPINION DOES NOT ADDRESS UNIVERSAL'S UNDERLYING BUSINESS
DECISION TO PURSUE THE MERGER. IN RENDERING ITS OPINION, BEAR STEARNS DID NOT
SOLICIT, AND WAS NOT AUTHORIZED TO SOLICIT, THIRD PARTY ACQUISITION INTEREST IN
UNIVERSAL. IN ADDITION, BEAR STEARNS DID NOT EXPRESS ANY OPINION AS TO THE PRICE
OR RANGE OF PRICES AT WHICH SHARES OF CLEAR CHANNEL COMMON STOCK MAY TRADE
SUBSEQUENT TO THE CONSUMMATION OF THE MERGER. THE SUMMARY OF THE BEAR STEARNS
OPINION SET FORTH IN THIS PROXY STATEMENT/PROSPECTUS DESCRIBES THE MATERIAL
ASPECTS OF SUCH OPINION AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE
FULL TEXT OF SUCH OPINION.
The form and amount of consideration to be paid by Clear Channel pursuant to
the Merger Agreement were determined by arm's-length negotiations between
Universal and Clear Channel and were not based on any recommendation by Bear
Stearns, although Bear Stearns provided advice to Universal from time to time
with respect thereto. Except as noted above, no limitations were imposed by
Universal
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with respect to the investigations made or the procedures followed by Bear
Stearns in rendering its opinion.
In the course of performing its reviews and analyses for rendering its
opinion, Bear Stearns: (i) reviewed the Merger Agreement; (ii) reviewed
Universal's Annual Report to Stockholders and Annual Report on Form 10-K for the
year ended December 31, 1996, its Quarterly Reports on Form 10-Q for the periods
ended March 31, 1997 and June 30, 1997, its unaudited balance sheet as of August
31, 1997 and its Prospectus for the Sale of 5,500,000 Common Shares, dated
August 15, 1997; (iii) reviewed Clear Channel's Annual Report to Stockholders
and Annual Report on Form 10-K for the year ended December 31, 1996, its
Quarterly Reports on Form 10-Q for the periods ended March 31, 1997 and June 30,
1997, its Prospectus for the Issuance of 8,000,000 Common Shares, dated
September 12, 1997, and its Prospectus to offer $300 million aggregate principal
amount of 7.25% Debentures due October 15, 2027, dated October 9, 1997; (iv)
reviewed certain operating and financial information, including projections,
provided to Bear Stearns by the senior management of Universal and Clear Channel
relating to Universal's and Clear Channel's businesses and future prospects,
respectively; (v) met with certain members of Universal's and Clear Channel's
senior managements to discuss each company's operations, historical financial
statements and future prospects; (vi) reviewed the historical prices, trading
volumes and valuation parameters of the shares of Universal Common Stock and
Clear Channel Common Stock; (vii) reviewed publicly available financial data,
stock market performance data and valuation parameters of companies which Bear
Stearns deemed generally comparable to Universal and Clear Channel; (viii)
reviewed the terms of recent mergers and acquisitions involving companies which
Bear Stearns deemed generally comparable to Universal and the Merger; and (ix)
conducted such other studies, analyses, inquiries and investigations as Bear
Stearns deemed appropriate.
In the course of its review, Bear Stearns relied upon and assumed, without
independent verification, the accuracy and completeness of the financial and
other information provided to it by Universal and Clear Channel. With respect to
Universal's and Clear Channel's projected financial results and potential
synergies that could be achieved upon consummation of the Merger, Bear Stearns
assumed that they had been reasonably prepared on bases reflecting the best
currently available estimates and judgments of the senior managements of
Universal and Clear Channel as to the expected future performance of Universal
and Clear Channel, respectively. Bear Stearns did not assume any responsibility
for the independent verification of any such information or of the projections
provided to it, and Bear Stearns further relied upon the assurances of the
senior managements of Universal and Clear Channel that they were unaware of any
facts that would make the information or projections provided to Bear Stearns
incomplete or misleading. In arriving at its opinion, Bear Stearns did not
perform or obtain any independent appraisal of the assets or liabilities of
Universal and Clear Channel, nor was it furnished with any such appraisals. The
Bear Stearns Opinion was necessarily based on economic, market and other
conditions, and the information made available to it, as of the date of such
opinion. Bear Stearns assumed that the Merger will qualify as a tax-free
"reorganization" within the meaning of Section 368(a) of the Code.
In connection with preparing and rendering its opinion, Bear Stearns
performed a variety of valuation, financial and comparative analyses. The
summary of such analyses, as set forth below, does not purport to be a complete
description of the analyses underlying the Bear Stearns Opinion. The preparation
of a fairness opinion is a complex process and is not necessarily susceptible to
summary description. Bear Stearns believes that its analyses must be considered
as a whole, and that selecting portions of its analyses and the factors
considered by it without considering all such factors and analyses, could create
an incomplete view of the processes underlying the Bear Stearns Opinion.
Moreover, the estimates contained in such analyses are not necessarily
indicative of actual values or predictive of future results or values, which may
be significantly more or less favorable than those suggested by such analyses.
In addition, analyses relating to the value of businesses or securities do not
purport to be appraisals or necessarily reflect the prices at which businesses
or securities actually may be sold. Accordingly, such estimates are inherently
subject to substantial uncertainties.
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The following is a summary of the material valuation, financial and
comparative analyses presented by Bear Stearns to the Universal Board on October
23, 1997 in connection with its opinion as of such date. For purposes herein,
the term "New Clear Channel" is used by Bear Stearns to refer to Clear Channel
pro forma after giving effect to the Merger.
TRANSACTION VALUE. To exemplify the nominal value of the Merger
Consideration (the "Transaction Equity Value") Bear Stearns assumed that holders
of Universal Common Stock would receive 0.67 shares of Clear Channel Common
Stock plus cash for fractional shares. Based on the closing price for Clear
Channel Common Stock of $63.69 on October 21, 1997, Bear Stearns calculated a
per share Transaction Equity Value of $42.67. Based upon fully diluted shares of
approximately 28.069 million, the Transaction Equity Value totals approximately
$1,197.7 million. To calculate the nominal value of the enterprise value of the
Merger Consideration (the "Transaction Enterprise Value"), Bear Stearns added
net debt of $531.2 million ($537. 6 million Universal total debt less $6.4
million Universal cash and cash equivalents as of August 31, 1997, pro forma for
certain pending acquisitions) to the Transaction Equity Value for a Transaction
Enterprise Value of approximately $1,728.9 million. Bear Stearns noted that the
actual value of the consideration to be received by holders of Universal Common
Stock would depend on various factors including the future prices for the shares
of Clear Channel Common Stock.
TRANSACTION VALUATION MATRIX. Bear Stearns prepared a Transaction Valuation
Matrix to illustrate a range of hypothetical prices for the Clear Channel Common
Stock and, based on the Conversion Number, the value of the consideration
received by the Universal stockholders in the Merger. Bear Stearns then used the
Transaction Valuation Matrix to demonstrate the range of transaction multiples
of revenues, earnings before interest, taxes, depreciation and amortization
("EBITDA") and after tax cash flow being received by holders of the Universal
Common Stock based on (i) $63.38, the closing price of the Clear Channel Common
Stock on October 22, 1997, (ii) $50.70, representing the closing price of the
Clear Channel Common Stock on October 22, 1997 less a 20% decline in value to
reflect the right of Universal to terminate the transaction, assuming no
decrease in the Custom Index (consisting of Westinghouse, Cox Radio, Inc.,
Lamar, Outdoor Systems, and Chancellor Media Corporation, as set forth in the
Merger Agreement), and (iii) a range of prices for the Clear Channel Common
Stock ranging from $46.30 to $52.09 as suggested by the Comparable Sum of the
Parts Illustration (see below) implying a multiple of estimated 1997 EBITDA in
the Transaction of 14.1x, 12.1x and 11.5 to 12.3x, respectively.
STOCK TRADING HISTORY. Bear Stearns reviewed the performance of the per
share stock market price and volume levels of Clear Channel Common Stock for the
twelve month period from October 20, 1996 to October 21, 1997 and the
performance of the per share stock market price and volume levels of Universal
Common Stock since its initial public offering ("Universal IPO") on July 23,
1996 through October 21, 1997. Bear Stearns reviewed the relative performance of
the per share stock market price of Clear Channel Common Stock and compared such
per share market price movements to the relative market price movements of
selected publicly-traded radio broadcasting companies and the Standard & Poor's
index of 400 industrial companies (the "S&P 400"). Such radio broadcasting
companies included American Radio Systems Corporation, Emmis Broadcasting
Corporation, Cox Radio, Inc., SFX Broadcasting, Inc., Jacor Communications,
Inc., Chancellor Media Corporation and Saga Communications, Inc. (collectively,
the "Radio Comparable Index"). Bear Stearns also reviewed the relative
performance of the per share stock market price of Clear Channel Common Stock
and compared such per share market price movements to the relative market price
movements of selected publicly-traded television broadcasting companies and
outdoor advertising companies. Such television broadcasting companies included
Granite Broadcasting Corporation, LIN Television Corporation, Sinclair Broadcast
Group, Inc., Young Broadcasting, Inc., and Hearst-Argyle Television, Inc.
(collectively, the "Television Comparable Index"). Such outdoor advertising
companies included Lamar and Outdoor Systems (collectively, the "Outdoor
Comparable Index"). Bear Stearns also reviewed the nominal per share market
price movements of Universal Common Stock and Clear Channel Common Stock since
the Universal IPO, and calculated the average implied exchange ratios for the
trailing quarters ended September 30, 1996, December 31, 1996, March 31, 1997,
June 30,
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1997 and September 30, 1997 to be 0.68, 0.81, 0.63, 0.60, and 0.56,
respectively. Bear Stearns also reviewed the historical per share stock market
price of Universal Common Stock and compared such per share market price
movements to the historical per share stock market price of Clear Channel Common
Stock multiplied by the Conversion Number for the period from the Universal IPO
through October 22, 1997. Bear Stearns noted that the implied acquisition price
per Universal Common Share based upon the per share stock market closing price
for Clear Channel Common Stock on October 21, 1997 reflected an approximate 2.3%
premium, and that the premium was 21.3% to Universal's per share stock market
closing price of $35.00 as of September 26, 1997.
ANALYSIS OF SELECTED PRECEDENT M&A TRANSACTIONS--OUTDOOR ADVERTISING. Bear
Stearns reviewed and analyzed the publicly available financial terms of eight
selected recent merger and acquisition transactions in the outdoor advertising
industry which, in Bear Stearns' judgment, were reasonably comparable to the
Merger, and compared the financial terms of such transactions to those of the
Merger. These eight transactions included: (i) Outdoor Systems acquisition of
National Advertising Company; (ii) Clear Channel's acquisition of Eller Media;
(iii) Universal's acquisition of Revere; (iv) Universal's acquisition of NOA
Holding Company; (vii) Eller Media's acquisition of Patrick Media; and (viii)
Infinity Broadcasting's acquisition of TDI Worldwide, Inc. (collectively, the
"Precedent Outdoor Advertising Transactions"). Bear Stearns reviewed the prices
paid in the Precedent Outdoor Advertising Transactions and analyzed various
operating and financial information and imputed valuation multiples and ratios.
Bear Stearns noted that none of the Precedent Outdoor Advertising Transactions
was identical to the Merger and that, accordingly, any analysis of the Precedent
Outdoor Advertising Transactions necessarily involved complex considerations and
judgments concerning differences in financial and operating characteristics and
other factors that would necessarily affect the acquisition value of Universal's
outdoor advertising operations versus the acquisition values of the companies to
which Universal's outdoor advertising operations were being compared. Bear
Stearns' analysis of the Precedent Outdoor Advertising Transactions indicated
that the range of Enterprise Value to last twelve months EBITDA multiples was
7.9x to 15.1x (10.4x, excluding the multiple of Outdoor Systems' acquisition of
National Advertising Company), yielding a harmonic mean of 9.8x.
ANALYSIS OF COMPARABLE PUBLICLY TRADED COMPANIES--OUTDOOR ADVERTISING. Bear
Stearns compared certain operating, financial, trading and valuation information
for Universal's and Clear Channel's outdoor advertising operations to certain
publicly available operating, financial, trading and valuation information of
two selected outdoor advertising companies, which, in Bear Stearns' judgment,
were comparable to Universal's outdoor advertising operations for purposes of
this analysis. These companies included Lamar and Outdoor Systems (collectively,
the "Comparable Outdoor Advertising Companies"). Bear Stearns' analysis of the
Comparable Outdoor Advertising Companies indicated that the Comparable Outdoor
Advertising Companies were trading in a range of Enterprise Value to pro forma
estimated 1997 and estimated 1998 EBITDA of 14.0x to 14.1x and 12.5x to 12.6x,
respectively, with harmonic means of 14.1x and 12.6x, respectively. Bear
Stearns' analysis of the Comparable Outdoor Advertising Companies indicated that
the Comparable Outdoor Advertising Companies were trading in a range of price to
pro forma estimated 1997 and estimated 1998 after-tax cash flow of 20.9x to
22.9x and 16.3x to 16.4x, respectively, with harmonic means of 21.8x and 16.3x,
respectively. Bear Stearns noted that none of the Comparable Outdoor Advertising
Companies is identical to Universal and that, accordingly, any analysis of the
Comparable Outdoor Advertising Companies necessarily involved complex
considerations and judgments concerning differences in financial and operating
characteristics and other factors that would necessarily affect the relative
trading and acquisition values of Universal's outdoor advertising operations
versus Comparable Outdoor Advertising Companies to which Universal's outdoor
advertising operations were being compared. Bear Stearns noted that for purposes
of analyzing the Comparable Sum of the Parts Illustration (described below), it
used these valuation multiples for the Comparable Outdoor Advertising Companies
as a basis for estimating the outdoor segment multiples in the Comparable Sum of
the Parts Illustration.
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RELATIVE CONTRIBUTION ANALYSIS. Bear Stearns calculated the relative
contribution by each of Universal and Clear Channel to the combined company
(both with and without taking into consideration estimated pre-tax potential
synergies of $7.5 million) with respect to, among other things, market value of
equity, enterprise value, net revenue, EBITDA, earnings before interest and
taxes ("EBIT") and after-tax cash flow. The results of each of these analyses
indicated that Universal would contribute 24.5% and 24.8% of the combined
company's 1997 and 1998 estimated after-tax cash flow, respectively, and 26.2%
of the combined company's 1997 and 1998 estimated EBITDA. Bear Stearns noted
that the analysis of relative contribution by each of Universal and Clear
Channel to the combined company after accounting for an estimated $7.5 million
in pre-tax potential synergies which could result from the Merger indicated that
Universal would contribute an estimated 24.2% and 24.5% of combined company's
1997 and 1998 estimated after-tax cash flow, respectively, and 25.8% of combined
company's 1997 and 1998 estimated EBITDA. By way of comparison, Bear Stearns
observed that the Conversion Number would result in holders of Universal Common
Stock receiving a 15.8% stake in the combined company.
HAS/GETS ANALYSIS. Bear Stearns also conducted a per share has/gets
analysis for 1997 and 1998 estimated after-tax cash flow per share for Universal
Common Stock and Clear Channel Common Stock, both with and without the assumed
$7.5 million of synergies. Bear Stearns calculated that after-tax cash flow per
share Universal Common Stock would decline 35.5% in 1997 from $2.62 per share
prior to the Merger to $1.69 per share subsequent to the Merger and would
decline 36.5% in 1998 from $3.30 per share prior to the Merger to $2.10 per
share subsequent to the Merger. After the assumed $7.5 million in synergies,
after-tax cash flow per share of Universal Common Stock would decline 34.7% in
1997 from $2.62 per share prior to the Merger to $1.71 per share subsequent to
the Merger and would decline 35.8% in 1998 from $3.30 per share prior to the
Merger to $2.12 per share subsequent to the Merger. In performing such per share
has/gets analyses, Bear Stearns did not take into account any share repurchases
which might be affected by Clear Channel due to inherent uncertainties as to the
timing, amount and repurchase prices associated with such share repurchases.
COMPARABLE SUM OF THE PARTS ILLUSTRATION. Bear Stearns prepared a
Comparable Sum of the Parts Illustration in which the combined company was
valued on a segment-by-segment basis based on multiples of comparable public
companies. The Comparable Sum of the Parts Illustration was prepared by: (i)
multiplying New Clear Channel's projected 1998 Radio Broadcast Cash Flow by a
range of multiples of 14.0x to 16.0x; adding the product of projected 1998
Television Broadcast Cash Flow multiplied by a range of multiples of 9.0x to
11.5x; and adding the product of projected 1998 Outdoor Cash Flow (pro forma for
the Merger) multiplied by a range of multiples from 12.0x to 12.5x; (ii)
subtracting corporate overhead, multiplied by a range of multiples from 6.0x to
8.0x to determine the Total Enterprise Value; (iii) subtracting $2,181.5 million
in the combined company's estimated Pro Forma Net Debt (total debt less cash and
equivalents); (iv) adding the estimated value of equity investments in
unconsolidated subsidiaries to determine the Total Equity Value, and (v)
dividing this amount by combined pro forma shares outstanding, calculating an
implied equity per share value of $46.30 to $52.09 for New Clear Channel Common
Stock representing a 17.8% to 27.0% discount to the Clear Channel Common Stock
per share price of $63.375 as of October 22, 1997. At a range of $46.30 to
$52.09 per share of New Clear Channel Common Stock, the implied range of equity
values of Universal Common Stock was $31.02 to $34.90 per share implying a range
of multiples of Implied Enterprise Value to 1997 EBITDA of 11.5x to 12.4x.
Bear Stearns compared certain operating, financial, trading and valuation
information for Clear Channel's radio broadcasting operations to certain
publicly available operating, financial, trading and valuation information of
seven selected radio broadcasting companies, which, in Bear Stearns' judgment,
were comparable to Clear Channel's radio broadcasting operations for purposes of
this analysis. These companies included American Radio Systems Corporation,
Chancellor Media Corporation, Cox Radio, Inc., Emmis Broadcasting Corporation,
Jacor Communications, Inc., Saga Communications, Inc. and SFX Broadcasting, Inc.
(collectively, the "Comparable Radio Broadcasting Companies"). Bear Stearns also
reviewed and analyzed, but excluded from the harmonic mean of various multiples
of the
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group of Comparable Radio Broadcasting Companies, American Radio Systems
Corporation and SFX Broadcasting, Inc., due to recently announced transactions
in which the companies are the subjects of pending acquisitions. Bear Stearns'
analysis of the Comparable Radio Broadcasting Companies indicated that the
Comparable Radio Broadcasting Companies were trading in a range of Enterprise
Value to pro forma estimated 1997 and estimated 1998 Broadcast Cash Flow of
13.4x to 18.3x and 12.0x to 15.9x, respectively, with harmonic means of 15.6x
and 13.5x, respectively. Bear Stearns noted that Clear Channel's Enterprise
Value as a multiple of pro forma estimated 1997 and estimate 1998 Broadcast Cash
Flow was 19.8x and 18.2x, respectively, which is at a premium to the Comparable
Radio Broadcasting companies. Bear Stearns noted that for purposes of analyzing
the Comparable Sum of the Parts Illustration (described above), it used the
valuation multiples for the Comparable Radio Broadcasting Companies as a basis
for estimating the radio broadcasting segment multiples in the Comparable Sum of
the Parts Illustration.
Bear Stearns compared certain operating, financial, trading and valuation
information for Clear Channel's television broadcasting operations to certain
publicly available operating, financial, trading and valuation information of
five selected television broadcasting companies, which, in Bear Stearns'
judgment, were comparable to Clear Channel's television broadcasting operations
for purposes of this analysis. These companies included Granite Broadcasting
Corporation, Hearst-Argyle Television, Inc., LIN Television Corporation,
Sinclair Broadcast Group, Inc. and Young Broadcasting, Inc. (collectively, the
"Comparable Television Broadcasting Companies"). Bear Stearns also reviewed and
analyzed, but excluded from the harmonic mean of various multiples of the group
of Comparable Television Broadcasting Companies, LIN Television Corporation, due
to a recently announced pending transaction. Bear Stearns' analysis of the
Comparable Television Broadcasting Companies indicated that the Comparable
Television Broadcasting Companies were trading in a range of Enterprise Value to
pro forma estimated 1997 and estimated 1998 Broadcast Cash Flow of 9.9x to 13.8x
and 9.1x to 12.7x, respectively, with harmonic means of 10.9x and 9.6x,
respectively. Bear Stearns noted that for purposes of analyzing the Comparable
Sum of the Parts Illustration (described above), it used these valuation
multiples for the Comparable Television Broadcasting Companies as a basis for
estimating the television broadcasting segment multiples in the Comparable Sum
of the Parts Illustration.
OTHER ANALYSES. Bear Stearns conducted such other analyses as it deemed
necessary, including reviewing historical and projected financial and operating
data for both Universal and Clear Channel and selected investment research
reports on each of Universal and Clear Channel, including information pertaining
to the estimated revenues and broadcast and outdoor cash flow for each of the
operating segments, assessing future acquisition and growth opportunities for
both companies and reviewing available information regarding the individual and
institutional holdings of Universal Common Stock and Clear Channel Common Stock.
Pursuant to the terms of its engagement letter, dated October 20, 1997,
Universal is obligated to pay Bear Stearns a fee of $2,000,000. Universal also
has agreed to reimburse Bear Stearns for its reasonable out-of-pocket expenses
up to $100,000, including fees and expenses of its legal counsel, and to
indemnify Bear Stearns and certain related persons against certain liabilities,
including liabilities under the Federal securities laws, relating to or arising
out of its engagement.
Bear Stearns has been previously engaged by Universal to provide certain
investment banking and financial advisory services in connection with the
Universal IPO on July 23, 1996 and subsequent offerings of equity and debt.
During the last two years, Bear Stearns earned compensation with respect to all
such services, other than the fees described in the preceding paragraph, of
approximately $12.1 million. In the ordinary course of business, Bear Stearns
may actively trade the equity securities of Universal for its own account and
for the account of its customers and, accordingly, may at any time hold a long
or short position in such securities.
Bear Stearns has been previously engaged by Clear Channel to provide certain
investment banking and financial advisory services in connection with an equity
offering in 1991. Additionally, Theodore H.
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Strauss, an officer of Bear Stearns, is a member of the Clear Channel Board. In
the ordinary course of business, Bear Stearns may actively trade the equity
securities of Clear Channel for its own account and for the account of its
customers and, accordingly, may at any time hold a long or short position in
such securities.
Bear Stearns is an internationally recognized investment banking firm and
was selected as financial advisor to Universal in connection with the Merger and
asked to assist Universal in the Merger negotiations and render its opinion in
connection with the Merger based on Bear Stearns' qualifications, expertise and
reputation in providing advice to companies in the media and communications
industries as well as its familiarity with Universal and Clear Channel. As part
of its investment banking business, Bear Stearns is regularly engaged in the
valuation of businesses and their securities in connection with mergers and
acquisition, negotiated underwritings, competitive bidding, secondary
distribution of listed and unlisted securities, private placements and valuation
for estate, corporate and other purposes.
(F) INTERESTS OF CERTAIN PERSONS IN THE TRANSACTION
STOCK-BASED AWARDS
WARRANTS. Messrs. Daniel L. Simon and Brian T. Clingen hold Management
Warrants with respect to 1,847,526 and 326,053 shares of Universal Common Stock,
respectively. Prior to the Effective Time, Messrs. Daniel L. Simon and Brian T.
Clingen irrevocably forfeited warrants with respect to an aggregate of 173,499
shares of Universal Common Stock and may prior to the Effective Time, forfeit up
to an additional 6,501 Management Warrants. With respect to each other
outstanding Management Warrant, as of the Effective Time, such Management
Warrant will be cancelled in exchange for the number of shares of Clear Channel
Common Stock equal to the product of (X) the difference between (i) the total
number of shares of Universal Common Stock subject to such Management Warrant
and (ii) the number obtained by dividing (A) the aggregate exercise price of
such Management Warrant by (B) $41.50 and (Y) 0.67. Accordingly, it is
anticipated that Messrs. Simon and Clingen will receive, in exchange for the
cancellation of their Management Warrants, approximately 1,088,705, and
approximately 192,136 shares of Clear Channel Common Stock, respectively.
OTHER STOCK AWARDS. On December 10, 1997, in order to incentivize employees
to remain with Universal and to render future services, Universal created two
types of stock awards ("Stock Awards"), 112,373 of which were granted on such
date to certain employees of Universal and 4,825 of which were granted on
January 5, 1998 (the aggregate amount of shares of such grants shall in no event
exceed 180,000), including 38,599 Stock Awards to Cindy Ogle, Vice President of
Operations of Universal, and 33,775 Stock Awards to Paul G. Simon, Vice
President, General Counsel and Secretary of Universal as follows: (i) Class I
awards will be of stock, which will be fully vested on the date of grant and
(ii) Class II awards will be of restricted stock, which will vest one year from
the date of grant and will be forfeited if an employee who is receiving such
restricted stock voluntarily terminates his or her employment prior to vesting.
A portion of these Stock Awards were fully vested upon the date of grant,
including all of Mr. Simon's awards and 22,709 of Ms. Ogle's. No Stock Awards
will be made to any other directors or executive officers of Universal. The
remaining Stock Awards will vest one year from the date of grant.
As of the Effective Time, all of the Stock Awards (which shall remain
subject to any applicable restrictions) will be converted in the Merger into
shares of Clear Channel Common Stock.
EMPLOYMENT AGREEMENT WITH DANIEL L. SIMON
In connection with the Merger, Daniel L. Simon entered into an employment
agreement (the "Em-ployment Agreement"), dated as of October 23, 1997 and
effective as of the Effective Time, pursuant to which Mr. Simon will become Vice
Chairman and Chief Operating Officer of Clear Channel Outdoor, for a period
beginning on the Effective Time and ending on August 18, 1999 (the "Term"). The
Employment
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Agreement provides for an annual base salary of $350,000 ("Base Salary") and an
annual bonus to be determined by the Clear Channel Board.
Mr. Simon's responsibilities as Chief Operating Officer shall include,
without limitation, such duties and functions as are customarily performed by
the Chief Operating Officer of a company of the size and nature of Universal and
Eller Media. Furthermore, Mr. Simon will also be responsible for managing the
transition relating to the Merger, including, but not limited to, integrating
the outdoor advertising business of Universal, Eller Media and Clear Channel
(the "Transition"). Mr. Simon's responsibilities relating to the Transition
shall include, without limitation, (a) proposing how to consolidate functions
such as accounting, human resources, legal, administration and marketing and
sales including proposing what functions will continue to be performed in the
office located in Chicago, (b) recommending a plan for assigning, hiring and
terminating personnel and determining employee compensation, and (c) performing
other general management functions relating to the operations of Clear Channel
Outdoor all subject to the review and approval by the Chief Executive Officer of
Clear Channel Outdoor.
In addition, the Employment Agreement provides that if Mr. Simon's
employment is terminated by him for Good Reason (as defined in the Employment
Agreement, including removal from his position as Vice Chairman and Chief
Operating Officer), he will continue to receive his Base Salary and employee
benefits for the remainder of the Term. Mr. Simon may terminate his employment
pursuant to the Employment Agreement without Good Reason upon providing four (4)
weeks' notice of such termination, and, in such event, he will be bound by a
noncompetition covenant for a period equal to the longer of one year or the
remainder of the Term.
The description of the Employment Agreement contained in this Proxy
Statement/Prospectus does not purport to be complete and is qualified in its
entirety by reference to the full text of the Employment Agreement, which is
attached hereto as Annex VI and is incorporated herein by reference.
INDEMNIFICATION
The Merger Agreement provides that all rights to indemnification and all
limitations on liability existing in favor of any officers, directors or
employees of Universal or any of its subsidiaries, and the heirs, executors,
trustees, fiduciaries and administrators of such officers, directors or
employees (collectively, "Indemnitees"), provided in the Universal Charter, the
Universal By-Laws or any agreement providing for indemnification by Universal or
any of its subsidiaries of any Indemnitee in effect on the date of the Merger
Agreement will survive the Merger and continue in full force and effect. The
Merger Agreement also provides that for six years after the Effective Time,
Clear Channel will, and will cause the Surviving Corporation to, to the fullest
extent permitted by applicable law, (i) indemnify and hold harmless the
Indemnities against all losses, expenses, claims, damages, liabilities,
judgments or amounts paid in settlement in respect to any threatened, pending or
completed claim, action, suit or proceeding relating to the fact that such
person is or was a director, officer or employee of Universal or any of its
subsidiaries and arising out of acts or omissions occurring on or prior to the
Effective Time and (ii) advance to such Indemnitees all expenses incurred in
connection with any imdemnifiable claim.
EMPLOYEE BENEFIT PLANS
Clear Channel has agreed, for a period of up to one year following the
Effective Time, to cause the Surviving Corporation and its subsidiaries to
provide all Universal employees as of the Effective Time who continue to be
employed by Universal coverage under group medical, dental, 401(k) savings,
disability insurance, life insurance, accidental death and disability, and
vacation plans or arrangements which are substantially similar to the plans
providing such benefits to the employees of Universal prior to the Effective
Time. However, Clear Channel may at its option at any time during such year
provide to such employees the aforementioned benefits in a form which are
substantially similar to the benefits provided to employees of Clear Channel at
such time.
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(G) VOTING AGREEMENT
In connection with the Merger Agreement, Daniel L. Simon, Chief Executive
Officer, President and a director of Universal, and Brian T. Clingen, Vice
President, Chief Financial Officer and a director of Universal (collectively,
the "Securityholders") have each entered into a Voting Agreement, dated as of
October 23, 1997 (the "Voting Agreement," and collectively the "Voting
Agreements"), with Clear Channel. The Securityholders entered into the Voting
Agreements as a condition to, and in consideration for, Clear Channel entering
into the Merger Agreement and received no other consideration for entering into
the Voting Agreements. Pursuant to the Voting Agreements, the Securityholders
agreed that during the period commencing on the date of the Voting Agreement and
continuing until the first to occur of the consummation of the Merger, the
termination of the Merger Agreement in accordance with its terms, and the
agreement of the Securityholders and Clear Channel to terminate the Voting
Agreements, at any annual, special or other meeting of Universal's stockholders,
and at any adjournment or adjournments thereof, and pursuant to any consent in
lieu of a meeting or otherwise, the Securityholders will vote (or cause to be
voted) all of the shares of Universal Common Stock held of record and
beneficially owned by the Securityholders (i) in favor of the Merger and the
approval and adoption of the terms contemplated by the Merger Agreement and any
actions required in furtherance thereof; (ii) against any action or agreement
that could result in a breach in any material respect of any covenant,
representation or warranty or any other obligation of Universal under the Voting
Agreements or the Merger Agreement; and (iii) against (A) any extraordinary
corporate transaction, such as a merger, rights offering, reorganization,
recapitalization or liquidation involving Universal or any of its subsidiaries
other than the Merger, (B) a sale or transfer of a material amount of assets of
Universal or any of its subsidiaries or the issuance of any securities of
Universal or any subsidiary, (C) any change in the executive officers or the
Universal Board, (D) any change in the present corporate structure or business
of Universal or (E) any action that is intended, or could reasonably be
expected, to materially impede, interfere with, delay, postpone or adversely
affect the Merger and the transactions contemplated by the Merger Agreement. See
Section 13, "BENEFICIAL OWNERSHIP OF UNIVERSAL COMMON STOCK."
The Securityholders also agreed not to (i) sell, transfer, pledge, encumber
or otherwise dispose of their Universal Common Stock, or enter into an agreement
to do any of the foregoing, and (ii) grant any proxies or power of attorney or
enter into a voting agreement or other arrangement with respect to their
Universal Common Stock, except as contemplated by the Voting Agreements.
In connection with the Voting Agreements, the Securityholders made certain
customary representations and warranties with respect to ownership of their
Universal Common Stock, and Clear Channel and the Securityholders each made
certain customary representations with respect to its authority to enter into
and perform its obligations under the Voting Agreements and the absence of
conflicts and requisite consents and approvals.
The description of the Voting Agreements contained in this Proxy
Statement/Prospectus does not purport to be complete and is qualified in its
entirety by reference to the full text of the Voting Agreements, which are
attached hereto as Annexes IV.A and IV.B and are incorporated herein by
reference.
(H) RESALE AGREEMENT
In connection with the Merger Agreement, Daniel L. Simon has entered into a
Resale Agreement, dated as of October 23, 1997 (the "Resale Agreement") with
Clear Channel. Mr. Simon entered into the Resale Agreement as a condition to,
and in consideration for, Clear Channel entering into the Merger Agreement and
received no other consideration for entering into the Resale Agreement. Pursuant
to the Resale Agreement, Mr. Simon has agreed during the period beginning on the
effective date of the Merger and ending on the earlier of (i) the date Mr. Simon
is no longer an officer or director of Clear Channel or any of its subsidiaries
and (ii) two years following the effective date of the Merger Agreement, that he
will
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not, directly or indirectly, offer, sell, sell short or otherwise dispose of any
shares of Clear Channel Common Stock or other capital stock of Clear Channel, or
any other securities convertible into, exchangeable or exercisable for Clear
Channel Common Stock or other capital stock of Clear Channel or derivative of
Clear Channel Common Stock or other capital stock of Clear Channel ("Clear
Channel Securities") owned by Mr. Simon, or request the registration for the
offer or sale of any of the foregoing, PROVIDED that during such period Mr.
Simon (a) may sell up to $75,000,000 of Clear Channel Common Stock in accordance
with applicable law and (b) may make Permitted Transfers (as defined in the
Resale Agreement) provided the transferee agrees to be bound by the Resale
Agreement. This restriction terminates if the Merger Agreement is terminated
prior to the consummation of the Merger. See Section 13, "BENEFICIAL OWNERSHIP
OF UNIVERSAL COMMON STOCK."
Mr. Simon has also agreed, during the period beginning on the date of the
Resale Agreement and ending on the date the Merger Agreement is terminated in
accordance with its terms or the Merger is consummated, not to, directly or
indirectly, purchase, offer to purchase, sell, offer to sell, sell short or
otherwise acquire or dispose of any Clear Channel Securities.
The foregoing restrictions do not apply to (i) Mr. Simon surrendering
Management Warrants exercisable for up to 180,000 shares of Universal Common
Stock to Universal, (ii) the grant by Universal of up to 180,000 options to
purchase Universal Common Stock or restricted stock to certain of its officers
and (iii) the exchange of such options described in (ii) above for Clear Channel
Common Stock or options to acquire Clear Channel Common Stock in the Merger.
The description of the Resale Agreement contained in this Proxy
Statement/Prospectus does not purport to be complete and is qualified in its
entirety by reference to the full text of the Resale Agreement, which is
attached hereto as Annex V and is incorporated herein by reference.
(I) CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES
THE FOLLOWING DISCUSSION IS INTENDED ONLY AS A DESCRIPTION OF THE MATERIAL
U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER AND DOES NOT PURPORT TO BE A
COMPLETE ANALYSIS OR DESCRIPTION OF ALL POTENTIAL TAX EFFECTS OF THE MERGER. THE
DISCUSSION DOES NOT ADDRESS ALL OF THE TAX CONSEQUENCES THAT MAY BE RELEVANT TO
PARTICULAR TAXPAYERS IN LIGHT OF THEIR PERSONAL CIRCUMSTANCES OR TO TAXPAYERS
SUBJECT TO SPECIAL TREATMENT UNDER THE CODE (INCLUDING, WITHOUT LIMITATION,
INSURANCE COMPANIES, FINANCIAL INSTITUTIONS, DEALERS IN SECURITIES, TAX-EXEMPT
ORGANIZATIONS, FOREIGN CORPORATIONS, FOREIGN PARTNERSHIPS OR OTHER FOREIGN
ENTITIES AND INDIVIDUALS WHO ARE NOT CITIZENS OR RESIDENTS OF THE UNITED STATES,
PERSONS WHO DO NOT HOLD SHARES OF UNIVERSAL COMMON STOCK AS CAPITAL ASSETS,
PERSONS WHO HOLD SHARES OF UNIVERSAL COMMON STOCK AS PART OF A "STRADDLE" OR A
"CONVERSION TRANSACTION" FOR U.S. FEDERAL INCOME TAX PURPOSES, AND INDIVIDUALS
WHO RECEIVED SHARES OF THE UNIVERSAL COMMON STOCK PURSUANT TO THE EXERCISE OF
EMPLOYEE STOCK OPTIONS OR OTHERWISE AS COMPENSATION).
NO INFORMATION IS PROVIDED HEREIN WITH RESPECT TO THE TAX CONSEQUENCES, IF
ANY, OF THE MERGER UNDER APPLICABLE FOREIGN, STATE, LOCAL AND OTHER TAX LAWS.
THE FOLLOWING DISCUSSION IS BASED ON THE PROVISIONS OF THE CODE, APPLICABLE
TREASURY REGULATIONS THEREUNDER, INTERNAL REVENUE SERVICE RULINGS AND JUDICIAL
DECISIONS, IN EFFECT AS OF THE DATE HEREOF. THERE CAN BE NO ASSURANCE THAT
FUTURE LEGISLATIVE, ADMINISTRATIVE OR JUDICIAL CHANGES OR INTERPRETATIONS WILL
NOT AFFECT THE ACCURACY OF THE STATEMENTS OR CONCLUSIONS SET FORTH HEREIN. ANY
SUCH CHANGE OR INTERPRETATION COULD APPLY RETROACTIVELY AND COULD AFFECT THE
ACCURACY OF SUCH DISCUSSION. NO RULINGS HAVE BEEN OR WILL BE SOUGHT FROM THE
INTERNAL REVENUE SERVICE CONCERNING THE TAX CONSEQUENCES OF THE MERGER.
EACH STOCKHOLDER OF UNIVERSAL IS URGED TO CONSULT SUCH STOCKHOLDER'S OWN TAX
ADVISOR AS TO THE SPECIFIC TAX CONSEQUENCES TO SUCH STOCKHOLDER OF THE MERGER,
INCLUDING THE APPLICATION OF FOREIGN, STATE, LOCAL AND OTHER TAX LAWS.
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A Universal stockholder will not recognize gain, loss or taxable income upon
receipt of shares of Clear Channel Common Stock in exchange for shares of
Universal Common Stock pursuant to the Merger except to the extent: (i) a
Universal Stockholder receives cash in lieu of fractional shares and (ii)
Universal is deemed to pay any expenses (including certain transfer taxes) which
are a liability of a Universal Stockholder. A Universal stockholder who receives
cash in lieu of a fractional share of Clear Channel Common Stock will be treated
as having received such fractional share and sold it for cash. Accordingly, such
stockholder will recognize gain or loss equal to the difference, if any, between
the amount of cash so received and the tax basis of the Universal Common Stock
allocable to such fractional share. Such gain or loss will constitute capital
gain or loss if the shares of Universal Common Stock were held as a capital
asset at the time of the Merger and will be long-term capital gain or loss if
the holding period for such shares was greater than one year at the time of the
Merger. Any capital gain recognized as a result of the Merger will be taxed at
rates applicable to capital gains. The tax rate applicable to capital gains of
an individual stockholder varies depending on the stockholder's holding period
for the shares. Pursuant to recently enacted legislation, in the case of an
individual, any such capital gain will be subject to a maximum federal income
tax rate of (A) 20% if the stockholder's holding period in such stock is more
than 18 months on the date of the Merger and (B) 28% if the stockholder's
holding period is more than one year but not more than 18 months on the date of
the Merger. The deductibility of capital losses is subject to limitations for
both individuals and corporations. Any amount deemed to be paid by Universal for
expenses (including certain transfer taxes) which are a liability of a Universal
stockholder will be treated as dividend income to such stockholder subject to
tax at ordinary income rates. A Universal stockholder will have a tax basis in
the shares of Clear Channel Common Stock received in the Merger in exchange for
shares of Universal Common Stock equal to the tax basis of the stockholder's
Universal Common Stock (less the tax basis allocable to any fractional share).
The holding period for such shares of Clear Channel Common Stock will include
the holding period of the stockholder's Universal Common Stock.
It is a condition to the consummation of the Merger that Universal receive
an opinion from its tax counsel, Skadden, Arps, Slate, Meagher & Flom LLP, and
that Clear Channel receive an opinion from its tax counsel, Akin, Gump, Strauss,
Hauer & Feld, L.L.P., to the effect that, for federal income tax purposes, the
Merger will constitute a "reorganization" within the meaning of Section 368(a)
of the Code and no gain or loss will be recognized by Clear Channel, Sub,
Universal or generally by the Universal stockholders as a result of the Merger.
It is expected that such opinions will provide that the Merger will be tax free
to the Universal stockholders except to the extent: (a) a Universal stockholder
receives cash in lieu of fractional shares of Clear Channel Common Stock and (b)
Universal is deemed to pay any expenses (including certain transfer taxes) which
are a liability of a Universal stockholder.
In rendering such opinions, Skadden, Arps, Slate, Meagher & Flom LLP and
Akin, Gump, Strauss, Hauer & Feld, L.L.P. may receive and rely upon
representations contained in certificates of Universal, Clear Channel and
others.
(J) ANTICIPATED ACCOUNTING TREATMENT
The Merger is expected to be treated for accounting purposes as a purchase.
As a result, the assets and liabilities of Universal will be adjusted to their
estimated fair values with the unallocated purchase price reflected as goodwill.
(K) REGULATORY APPROVALS
The consummation of the Merger is conditioned upon the expiration or
termination of the applicable waiting period (and any extension thereof) under
the HSR Act. The antitrust and competition agencies in the United States assert
jurisdiction to review the Merger for compliance and, if they were to deem
warranted, to challenge all or certain aspects of the Merger by seeking to block
the transaction or to impose conditions on the Merger. Under the applicable law
and regulations, the Merger may not be consummated until notifications have been
given, certain information has been furnished to the FTC and
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the applicable waiting period has expired or been terminated. On October 30,
1997, Universal and Clear Channel filed notification and report forms under the
HSR Act with the FTC and the DOJ. On November 26, 1997, Universal and Clear
Channel received a request for additional information from the DOJ and
accordingly, the waiting period will terminate 20 days after Universal and Clear
Channel each "Substantially Comply" with such request. Pursuant to the terms of
the Merger Agreement, Clear Channel has proffered its willingness (x) to sell or
otherwise dispose of, or hold separate and agree to sell or otherwise dispose
of, such assets, categories of assets or businesses of Universal or Clear
Channel or either's respective subsidiaries, (y) terminate such existing
relationships and contractual rights and obligations and (z) amend or terminate
such existing licenses or other intellectual property agreements (and, in each
case, to enter into agreements with the relevant Government Antitrust Entity
giving effect thereto) in each case with respect to the foregoing clauses (x),
(y) or (z), if such action is necessary or reasonably advisable for the purpose
of avoiding or preventing any action by any Government Antitrust Entity which
would restrain, enjoin or otherwise prevent or materially delay consummation of
the transactions contemplated by the Merger Agreement prior to the deadline
specified in the Merger Agreement. See Section 8(f), "OTHER TERMS OF THE MERGER
AGREEMENT--Other Covenants--Filings; Other Actions." The combined enterprise may
be required to divest assets, or agree to various operating restrictions before
or after receipt of stockholder approval, in order to obtain the necessary
authorizations and approvals of the Merger or to assure that governmental
authorities do not seek to block the Merger. There can be no assurance that the
consummation of any such divestitures could be effected at a fair market price
or that the reinvestment of the proceeds therefrom would produce for the
combined enterprise operating profit at the same level as the divested product
lines or a commensurate rate of return on the amount of its investment. There
also can be no assurance that any operating restrictions imposed would not
adversely affect the value of the combined enterprise.
At any time before or after the Effective Time, notwithstanding that the
waiting period under the HSR Act has expired, the FTC or the DOJ could take such
action under the antitrust laws as it deems necessary or desirable in the public
interest, including seeking to enjoin the consummation of the Merger or seeking
divestiture of substantial assets of Universal or Clear Channel. At any time
before or after the Effective Time, and notwithstanding that the waiting period
under the HSR Act has expired, any state could take such action under the
antitrust laws as it deems necessary or desirable in the public interest. Such
action could include seeking to enjoin the consummation of the Merger,
rescission of the Merger or seeking divestiture of substantial assets of
Universal or Clear Channel. Private persons may also seek to take legal action
under the antitrust laws under certain circumstances.
(L) PERCENTAGE OWNERSHIP INTEREST OF UNIVERSAL STOCKHOLDERS AFTER THE MERGER
In the Merger, stockholders of Universal will, from and after the Effective
Time, become stockholders of Clear Channel and thereby will continue to have an
indirect economic interest in Universal as a wholly owned subsidiary of Clear
Channel. Based on the number of shares of Clear Channel Common Stock outstanding
on December 12, 1997 and assuming the issuance of approximately 19,287,858
shares of Universal Common Stock in connection with the Merger, after giving
effect to the consummation of the Merger there will be approximately 117,454,935
shares of Clear Channel Common Stock issued, of which the stockholders
(including holders of Universal warrants and options) of Universal will own
approximately 16.4%, assuming no additional issuances of Clear Channel Common
Stock.
(M) ABSENCE OF APPRAISAL RIGHTS
Universal Common Stock is quoted on the Nasdaq National Market and, as a
result, holders of Universal Common Stock will not be entitled to appraisal
rights under the DGCL in connection with the Merger.
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(N) STOCK EXCHANGE LISTING
It is a condition to the consummation of the Merger that the shares of Clear
Channel Common Stock to be issued in the Merger be authorized for listing on the
NYSE, subject only to official notice of listing.
(O) CERTAIN CONSEQUENCES OF THE MERGER
As a result of the Merger, Sub will be merged with and into Universal and
Universal will become a wholly-owned subsidiary of Clear Channel. Following
consummation of the Merger, the Universal Common Stock will no longer be quoted
on the Nasdaq National Market, will be deregistered under the Exchange Act and
will no longer be publicly traded. Following consummation of the Merger, the
Universal Bonds will remain outstanding. As such and until such time as the
Universal Bonds shall cease to be outstanding or Clear Channel shall seek to
deregister such Universal Bonds, Universal shall remain obligated to file
periodic reports under the Exchange Act. See Section 5, "RISK
FACTORS--Restrictions Imposed by Universal's Indebtedness".
(P) MANAGEMENT AFTER THE MERGER
Upon consummation of the Merger, Universal will be a wholly owned subsidiary
of Clear Channel. Pursuant to the Merger Agreement, the directors of Sub
immediately prior to the Effective Time shall become the directors of the
Surviving Corporation until the earlier of their resignation or removal or until
their respective successors are duly elected and qualified, as the case may be.
The officers of Universal immediately prior to the Effective Time shall become
the officers of the Surviving Corporation until the earlier of their resignation
or removal or until their respective successors are duly elected and qualified,
as the case may be.
Clear Channel will cause Daniel L. Simon to be appointed to the Clear
Channel Board as of the Effective Time and to serve until the next annual
election of directors of Clear Channel. In connection with such election, Clear
Channel will take all necessary action to include Daniel L. Simon as a nominee
for the Clear Channel Board recommended by such Clear Channel Board for election
by Clear Channel's stockholders to such Board of Directors.
In addition, at the Effective Time, Daniel L. Simon will become the Vice
Chairman and Chief Operating Officer of Clear Channel Outdoor. Karl Eller, who
currently serves on the Clear Channel Board, will remain Chairman and Chief
Executive Officer of Clear Channel Outdoor. See Section 7(f), "THE
MERGER--Interests of Certain Persons in the Transaction."
(Q) CONDUCT OF THE BUSINESS OF UNIVERSAL IF THE MERGER IS NOT CONSUMMATED
If the Merger is not consummated, it is expected that the business and
operations of Universal will continue to be conducted substantially as they
currently are being conducted.
(R) RESALES OF CLEAR CHANNEL COMMON STOCK
All shares of Clear Channel Common Stock to be issued in the Merger will be
freely transferable, except that shares received by any person who may be deemed
to be an "affiliate" (as used in paragraphs (c) and (d) of Rule 145 under the
Securities Act, including, without limitation, directors and certain executive
officers) of Universal for purposes of such Rule 145 may not be resold except in
transactions permitted by such Rule 145 or as otherwise permitted under the
Securities Act.
Universal has agreed to deliver to Clear Channel a list setting forth the
names and addresses of all persons who are, at the time of the Special Meeting,
in Universal's reasonable judgment, "affiliates" (as used in the preceding
paragraph) of Universal.
Mr. Daniel L. Simon has also entered into a Resale Agreement with Clear
Channel restricting his ability to sell Clear Channel Common Stock. See Section
7(h), "THE MERGER--Resale Agreement."
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8. OTHER TERMS OF THE MERGER AGREEMENT
For the purposes of this Section 8 only, any capitalized terms not defined
in this Section shall have the meaning ascribed to them in the Merger Agreement.
(A) CONVERSION OF SHARES IN THE MERGER
As of the Effective Time, by virtue of the Merger and without any action on
the part of the holder of any shares of Universal Common Stock or any shares of
capital stock of Sub:
(i) each share of common stock, par value $0.01 per share, of Sub issued
and outstanding immediately prior to the Effective Time shall be converted
into and become one fully paid and non-assessable share of common stock, par
value $0.01 per share, of the Surviving Corporation;
(ii) each share of Universal Common Stock issued and held, immediately
prior to the Effective Time, in Universal's treasury or by any of
Universal's direct or indirect wholly owned subsidiaries, and each share of
Universal Common Stock that is owned by Clear Channel, Sub or any other
subsidiary of Clear Channel, shall automatically be cancelled and retired
and shall cease to exist, and no consideration shall be delivered in
exchange therefor; and
(iii) each share of Universal Common Stock issued and outstanding
immediately prior to the Effective Time (other than fractional shares and
shares to be cancelled as described in subparagraph (ii) above, of which as
of the date of this Proxy Statement/Prospectus there are none) shall be
converted into the Merger Consideration) 0.67 (the "Conversion Number") duly
authorized, validly issued and non-assessable shares of Clear Channel Common
Stock; PROVIDED, that cash will be paid in lieu of any fractional share of
Clear Channel Common Stock. See Section 8(c), "--No Fractional Shares."
All shares of Universal Common Stock converted as described in subparagraph
(iii) above will no longer be outstanding and will automatically be cancelled
and retired and will cease to exist, and each holder of a certificate which
immediately prior to the Effective Time represented outstanding shares of
Universal Common Stock will cease to have any rights with respect thereto,
except the right to receive the Merger Consideration. See Section 8(b),
"--Exchange Agent; Procedures for Exchange of Certificates."
(B) EXCHANGE AGENT; PROCEDURES FOR EXCHANGE OF CERTIFICATES
From and after the Effective Time, Clear Channel will make available to a
bank or trust company designated by Clear Channel and reasonably satisfactory to
Universal (the "Exchange Agent"), for the benefit of the holders of shares of
Universal Common Stock for exchange, through the Exchange Agent, certificates
evidencing such number of shares of Clear Channel Common Stock issuable to
holders of Universal Common Stock in the Merger pursuant to Section 2.3 of the
Merger Agreement (such certificates for shares of Clear Channel Common Stock,
together with any dividends or distributions with respect thereto and cash,
being hereinafter referred to as the "Exchange Fund"). The Exchange Agent will,
pursuant to irrevocable instructions, deliver the Clear Channel Common Stock
contemplated to be issued pursuant to Section 2.3 of the Merger Agreement and
any cash in lieu of fractional shares of Clear Channel Common Stock to which
such holders are entitled out of the Exchange Fund. Except as contemplated by
Section 2.4(g) of the Merger Agreement, the Exchange Fund will not be used for
any other purpose.
As promptly as practicable after the Effective Time, Clear Channel will
cause the Exchange Agent to mail to each holder of a certificate or certificates
which immediately prior to the Effective Time represented outstanding shares of
Universal Common Stock (the "Certificates") (i) a letter of transmittal (which
will be in customary form and will specify that delivery will be effected, and
risk of loss and title to the Certificates will pass, only upon proper delivery
of the Certificates to the Exchange Agent) and (ii) instructions for use in
effecting the surrender of the Certificates in exchange for certificates
evidencing
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shares of Clear Channel Common Stock, or cash in lieu of fractional shares of
Clear Channel Common Stock to which such holder is entitled. Upon surrender to
the Exchange Agent of a Certificate for cancellation, together with such letter
of transmittal, duly executed and completed in accordance with the instructions
thereto, and such other documents as may be reasonably required pursuant to such
instructions, the holder of such Certificate will be entitled to receive in
exchange therefor a certificate representing that number of whole shares of
Clear Channel Common Stock into which such holder's shares of Universal Common
Stock have been converted (and any cash in lieu of any fractional shares of
Clear Channel Common Stock to which such holder is entitled and any dividends or
other distributions to which such holder is entitled pursuant to Section 2.4(d)
of the Merger Agreement), and the Certificate so surrendered will be cancelled.
In the event of a transfer of ownership of shares of Universal Common Stock
which is not registered in the transfer records of Universal, shares of Clear
Channel Common Stock, cash in lieu of any fractional shares of Clear Channel
Common Stock to which such holder is entitled and any dividends or other
distributions to which such holder is entitled may be issued to a transferee if
the Certificate representing such shares of Universal Common Stock is presented
to the Exchange Agent, accompanied by all documents required to evidence and
effect such transfer and by evidence that any applicable stock transfer taxes
have been paid. Until surrendered, each Certificate will be deemed at all times
after the Effective Time to represent only the right to receive upon such
surrender the number of whole shares of Clear Channel Common Stock into which
the shares of Universal Common Stock formerly represented thereby have been
converted, cash in lieu of any fractional shares of Clear Channel Common Stock
to which such holder is entitled and any dividends or other distributions to
which such holder is entitled. See Section 8(c), "--No Fractional Shares."
No dividends or other distributions declared or made after the Effective
Time with respect to Clear Channel Common Stock with a record date after the
Effective Time will be paid to the holder of any unsurrendered Certificate with
respect to the shares of Clear Channel Common Stock represented thereby, and no
cash payment in lieu of any fractional shares will be paid to any such holder,
until the holder of such Certificate surrenders such Certificate. Subject to
applicable laws, following surrender of any such Certificate, there will be paid
to the holder of the certificates representing whole shares of Clear Channel
Common Stock issued in exchange therefor, without interest, (i) promptly, the
amount of any cash payable with respect to a fractional share of Clear Channel
Common Stock to which such holder is entitled and the amount of dividends or
other distributions with a record date after the Effective Time and theretofore
paid with respect to such whole shares of Clear Channel Common Stock and (ii) at
the appropriate payment date, the amount of dividends or other distributions,
with a record date after the Effective Time but prior to surrender and a payment
date occurring after surrender, payable with respect to such whole shares of
Clear Channel Common Stock.
Any portion of the Exchange Fund (including any shares of Clear Channel
Common Stock) which remains undistributed to the holders of Universal Common
Stock for six months after the Effective Time will be delivered to Clear
Channel, upon demand, and any holders of Universal Common Stock who have not
theretofore complied with the exchange provisions of the Merger Agreement will
thereafter look only to Clear Channel for the applicable Merger Consideration,
any cash in lieu of fractional shares of Clear Channel Common Stock to which
they are entitled and any dividends or other distributions with respect to the
Clear Channel Common Stock to which they are entitled. Any portion of the
Exchange Fund remaining unclaimed by holders of shares of Universal Common
Stock, as of a date which is immediately prior to such time as such amounts
would otherwise escheat to, or become property of, any government entity, will,
to the extent permitted by applicable law, become the property of Clear Channel
free and clear of any claims or interest of any person previously entitled
thereto.
None of the Exchange Agent, Clear Channel nor the Surviving Corporation will
be liable to any holder of shares of Universal Common Stock for any such shares
of Clear Channel Common Stock (or dividends or distributions with respect
thereto) or cash delivered to a public official pursuant to any abandoned
property, escheat or similar law.
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Each of the Surviving Corporation and Clear Channel will be entitled to
deduct and withhold from the consideration otherwise payable pursuant to the
Merger Agreement to any holder of shares of Universal Common Stock such amounts
as it is required to deduct and withhold with respect to the making of such
payment under the Code, or any provision of state, local or foreign tax law. To
the extent that amounts are so withheld by the Surviving Corporation or Clear
Channel, as the case may be, such withheld amounts will be treated for all
purposes of the Merger Agreement as having been paid to the holder of the shares
of Universal Common Stock in respect of which such deduction and withholding was
made by the Surviving Corporation or Clear Channel, as the case may be.
At the Effective Time, the stock transfer books of Universal will be closed
and there will be no further registration of transfers of shares of Universal
Common Stock thereafter on the records of Universal. From and after the
Effective Time, the holders of Certificates representing shares of Universal
Common Stock outstanding immediately prior to the Effective Time will cease to
have any rights with respect to such shares of Universal Common Stock, except as
otherwise provided in the Merger Agreement or by law. On or after the Effective
Time, any Certificates presented to the Exchange Agent or Clear Channel for any
reason will be converted into shares of Clear Channel Common Stock, any cash in
lieu of fractional shares of Clear Channel Common Stock to which the holders
thereof are entitled and any dividends or other distributions to which the
holders thereof are entitled.
STOCKHOLDERS OF UNIVERSAL SHOULD NOT FORWARD THEIR UNIVERSAL CERTIFICATES
WITH THE ENCLOSED PROXY CARD, NOR SHOULD THEY FORWARD THEIR UNIVERSAL
CERTIFICATES TO THE EXCHANGE AGENT UNTIL THEY HAVE RECEIVED THE PACKET OF
INFORMATION DESCRIBED ABOVE, INCLUDING THEIR LETTER OF TRANSMITTAL.
(C) NO FRACTIONAL SHARES
No certificates or scrip representing a fractional share of Clear Channel
Common Stock will be issued upon the surrender of Universal Certificates for
exchange, no Clear Channel dividend or other distribution will relate to any
such fractional share, and no such fractional share will entitle the owner
thereof to any voting or other rights of a stockholder of Clear Channel. In lieu
of any such fractional share, each holder of shares of Universal Common Stock
who would otherwise have been entitled thereto upon the surrender of Universal
Certificates for exchange will be paid cash (as described below).
As promptly as practicable following the Effective Time, the Exchange Agent
will determine the excess of (i) the number of whole shares of Clear Channel
Common Stock delivered to the Exchange Agent by Clear Channel pursuant to the
Merger Agreement over (ii) the aggregate number of whole shares of Clear Channel
Common Stock to be distributed to holders of Universal Common Stock pursuant to
the Merger Agreement (such excess being herein called the "Excess Shares").
Following the Effective Time, the Exchange Agent will, on behalf of former
stockholders of Universal, sell the Excess Shares at then prevailing prices on
the NYSE, all in the manner provided for in the Merger Agreement (as described
in the paragraph immediately below).
The sale of the Excess Shares by the Exchange Agent will be executed on the
NYSE through one or more member firms of the NYSE and will be executed in round
lots to the extent practicable. The Exchange Agent will use reasonable efforts
to complete the sale of the Excess Shares as promptly following the Effective
Time as, in the Exchange Agent's sole judgment, is practicable consistent with
obtaining the best execution of such sales in light of prevailing market
conditions. Until the net proceeds of such sale or sales have been distributed
to the holders of Universal Common Stock, the Exchange Agent will hold such
proceeds in trust for the holders of Universal Common Stock (the "Common Shares
Trust"). Universal will pay all commissions, transfer taxes and other
out-of-pocket transaction costs, including the expenses and compensation of the
Exchange Agent, incurred in connection with such sale of the Excess Shares. The
Exchange Agent will determine the portion of the Common Shares Trust to which
each holder of Universal Common Stock is entitled, if any, by multiplying the
amount of the aggregate net proceeds constituting the Common Shares Trust by a
fraction, the numerator of which will be the amount of the fractional share
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interest to which such holder of Universal Common Stock is entitled (after
taking into account all shares of Universal Common Stock held at the Effective
Time by such holder) and the denominator of which will be the aggregate amount
of fractional share interests to which all holders of Universal Common Stock are
entitled.
Notwithstanding the provisions described in the two preceding paragraphs,
the Surviving Corporation may elect at its option, exercised prior to the
Effective Time, in lieu of the issuance and sale of Excess Shares and the making
of the payments contemplated above, to pay each holder of Universal Common Stock
an amount in cash equal to the product obtained by multiplying (i) the
fractional share interest to which such holder (after taking into account all
shares of Universal Common Stock held at the Effective Time by such holder)
would otherwise be entitled by (ii) the closing price for a share of Clear
Channel Common Stock as reported on the NYSE Composite Transactions Tape (as
reported in THE WALL STREET JOURNAL, or, if not reported thereby, any other
authoritative source) on the closing date of the Merger.
As soon as practicable after the determination of the amount of cash, if
any, to be paid to holders of Universal Common Stock with respect to any
fractional share interests, the Exchange Agent will make available such amounts
to such holders of Universal Common Stock, subject to and in accordance with the
Merger Agreement. See Section 8(b), "--Exchange Agent; Procedures for Exchange
of Certificates."
(D) REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains various representations and warranties of
Clear Channel, Universal and Sub, relating, among other things, to the
following:
(i) their incorporation, existence, good standing, corporate power and
similar corporate matters;
(ii) their capitalization;
(iii) their authorization, execution, delivery and performance and the
enforceability of the Merger Agreement and related matters, the absence of
violations;
(iv) the documents and reports filed with the SEC ("SEC Reports") and
the accuracy and completeness of the information contained therein;
(v) the absence of undisclosed liabilities;
(vi) compliance with laws, ordinances and regulations;
(vii) environmental matters;
(viii) employee benefit matters;
(ix) the absence of certain material changes or events since June 30,
1997;
(x) pending or threatened investigations or litigation;
(xi) the Registration Statement and this Proxy Statement/Prospectus and
the accuracy and completeness of the information contained therein and
herein and in the Merger Agreement;
(xii) the lack of ownership of each other's stock; and
(xiii) tax matters.
In addition, the Merger Agreement contains various representations and
warranties of Universal relating, among other things, to the following:
(1) opinions of financial advisors;
(2) required vote of stockholders;
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(3) insurance;
(4) real property and title;
(5) collective bargaining agreements and labor;
(6) material contracts; and
(7) no applicable state takeover statutes/approval for purposes of
Section 203 of the DGCL.
The representations contained in the Merger Agreement are generally
qualified by references to "material adverse effect." In addition, all
representations and warranties of Clear Channel, Universal and Sub will not
survive the closing, I.E., they expire at the Effective Time.
(E) CONDUCT OF BUSINESS PENDING THE MERGER
Each of Clear Channel and Universal has agreed that prior to the Effective
Time or the date on which the Merger Agreement is earlier terminated in
accordance with its terms (the "Termination Date"), and except as otherwise
agreed to by the other parties to, or permitted by, the Merger Agreement, it
will, and will cause each of its Subsidiaries to, conduct its operations
according to their ordinary and usual course of business; however, this covenant
does not limit Clear Channel's ability to authorize or propose, or enter into,
any agreement with respect to any acquisitions or to issue any debt or equity
securities.
Universal has also agreed to, and to cause each of its subsidiaries to: (i)
use its reasonable best efforts to preserve intact its business organization and
goodwill in all material respects, keep available the services of its officers
and employees as a group, subject to changes in the ordinary course, and
maintain satisfactory relationships with customers, suppliers, distributors and
others having business dealings with it; and (ii) to notify Clear Channel of any
emergency or other change in the normal course of its respective businesses or
in the operation of its respective properties and of any complaints,
investigations or hearings (or communications indicating that the same may be
contemplated) of any governmental body or authority if such emergency, change,
complaint, investigation or hearing would have a Material Adverse Effect on
Universal. Universal has agreed that it will not adopt any amendments to its
corporate charter or by-laws.
In addition, prior to the Effective Time or the Termination Date, and except
as may be agreed to by the parties to, or permitted by, the Merger Agreement,
Universal has agreed that it will not, and will not permit any of its
Subsidiaries to:
(i) authorize or pay any dividends on or make any distribution with
respect to its outstanding shares of stock;
(ii) except as previously disclosed in writing to Clear Channel or as
otherwise provided in the Merger Agreement, enter into or amend any
employment, severance or similar agreements or arrangements with any of
their respective directors or executive officers;
(iii) except as previously disclosed in writing to Clear Channel,
authorize, propose or announce an intention to authorize or propose, or
enter into an agreement with respect to, any merger, consolidation or
business combination, any acquisition of a material amount of assets or
securities, any disposition of assets or securities or any release or
relinquishment of any material contract rights not in the ordinary course of
business, except for (A) acquisitions previously disclosed in writing to
Clear Channel and Sub and (B) asset acquisitions for cash within the scope
of or related to Universal's existing business in which the aggregate
consideration is less than $5 million in any single acquisition or series of
related transactions and less than $25 million in the aggregate for all such
acquisitions, in each case which would not materially delay or impair the
ability of Universal to perform its obligations under the Merger Agreement;
(iv) (A) issue any shares of its capital stock, except upon exercise of
rights or options issued pursuant to existing employee incentive or benefit
plans, programs or arrangements and non-
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employee director plans (including, without limitation, shares issued in
connection with stock grants or awards or the exercise of rights or options
granted in the ordinary course of business consistent with past practice
pursuant to such plans, programs or arrangements) or (B) effect any stock
split not previously announced or (C) otherwise change its capitalization as
it existed on September 30, 1997, except as contemplated in the Merger
Agreement;
(v) grant, confer or award any options, warrants, conversion rights or
other rights not existing on the date of the Merger Agreement to acquire any
shares of its capital stock, except for grants of options, stock awards or
restricted stock under Universal's 1997 Equity Incentive Plan with respect
to not more than 180,000 shares;
(vi) except in the ordinary course of business in connection with
employee incentive and benefit plans, programs or arrangements in existence
on the date of the Merger Agreement, purchase or redeem any shares of its
stock or pay any cash bonuses in excess of 133% of Universal's reserves for
bonuses as of September 30, 1997, PROVIDED that Universal may adopt a bonus
plan to incentive employees to remain with Universal through and until the
Closing Date in an amount to be mutually agreed to by Clear Channel and
Universal;
(vii) except as contemplated by Section 5.4 or other provisions of the
Merger Agreement, amend in any significant respect the terms of their
respective employee benefit plans, programs or arrangements or any severance
or similar agreements or arrangements in existence on the date of the Merger
Agreement, or adopt any new employee benefit plans, programs or arrangements
or any severance or similar agreements or arrangements;
(viii) enter into any loan agreement;
(ix) except in connection with (A) acquisitions previously disclosed in
writing to Clear Channel or as contemplated pursuant to the provisions
described in clause (iii) above and (B) interest payments on any of
Universal's outstanding public debt, incur any additional indebtedness for
borrowed money, other than incurrences in an amount in the aggregate not to
exceed at any one time outstanding $1,000,000;
(x) incur any capital expenditures in excess of $15,000,000;
(xi) except with respect to sign location related contracts or leases,
sales or advertising contracts or other agreements contemplated by or
permitted pursuant to the Merger Agreement, enter into any material
agreement;
(xii) enter into an agreement with any Affiliate of Universal, any family
member of any Affiliate of Universal or any stockholder who owns more than
10% of the outstanding capital stock of Universal; and
(xiii) make any material Tax election or settle or compromise any material
Tax liability, other than in connection with currently pending proceedings
or other than in the ordinary course of business.
Further, except as otherwise agreed to by the parties to, or permitted by,
the Merger Agreement, Clear Channel has agreed to: (1) take all action necessary
to cause Sub to perform its obligations under the Merger Agreement and to
consummate the Merger on the terms and conditions set forth in the Merger
Agreement and (2) vote, and to cause Sub to vote, all shares of Universal Common
Stock, if any, beneficially owned by Sub or its affiliates in favor of adoption
and approval of the Merger and the Merger Agreement at the Special Meeting.
Each of Clear Channel and Universal also has agreed that it will not, and
will not permit any of its subsidiaries, as applicable, to agree, in writing or
otherwise, to take any of the foregoing actions pertaining to such party or take
any action which would make the representations or warranties of such party
contained in the Merger Agreement untrue.
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(F) OTHER COVENANTS
ACCESS TO INFORMATION; CONFIDENTIALITY
Universal also has agreed, as permitted by law, to afford to Clear Channel,
and to Clear Channel's officers, employees, accountants, counsel, financial
advisors and other representatives, reasonable access during normal business
hours, during the period prior to the Effective Time, to all the properties,
books, contracts, commitments and records of Universal and its subsidiaries, and
during such period, Universal will furnish promptly to Clear Channel: (a) a copy
of each report, schedule, registration statement and other document filed by it
or its subsidiaries during such period pursuant to the requirements of
applicable federal or state securities laws and (b) all other information
concerning its business, properties and personnel as Clear Channel may
reasonably request. Notwithstanding anything to the contrary in the Merger
Agreement, neither Universal nor any or its Subsidiaries will be required to
disclose any information to Clear Channel or its authorized representatives if
doing so could violate any federal, state, local or foreign law, rule or
regulation to which Universal or any of its Subsidiaries is subject. Clear
Channel will keep such information provided to it by Universal confidential in
accordance with the terms of the Confidentiality Agreement (as defined in the
Merger Agreement).
PROXY MATERIAL; REGISTRATION STATEMENT
Universal has agreed that it will: (i) as promptly as practicable, prepare
and file with the SEC, use its reasonable efforts to have cleared by the SEC and
thereafter mail to its stockholders as promptly as practicable, this Proxy
Statement/Prospectus that will be the same proxy statement/prospectus contained
in the Registration Statement and a form of proxy, in connection with the vote
of Universal's stockholders with respect to the Merger; (ii) use its reasonable
efforts to obtain the necessary approvals by its stockholders of the Merger
Agreement and the transactions contemplated thereby; and (iii) otherwise comply
in all material respects with all legal requirements applicable to such meeting.
Universal may, if it withdraws, modifies or changes its recommendation in
accordance with Section 5.3 of the Merger Agreement, delay the filing or
mailing, as the case may be, of this Proxy Statement/Prospectus or delay the
holding of the Special Meeting. In addition, Universal has agreed that it will,
upon reasonable advance notice, provide Clear Channel with all financial and
other data regarding Universal as may be reasonably requested by Clear Channel
in connection with the Registration Statement.
Clear Channel has agreed that it will, as promptly as practicable, prepare
and file with the SEC the Registration Statement, which will include this Proxy
Statement/Prospectus. Such Registration Statement will be used for the purposes
of registering with the SEC and with applicable state securities authorities the
issuance of Clear Channel Common Stock to holders of Universal Common Stock in
connection with the Merger. Clear Channel has also agreed to furnish such
information concerning Clear Channel as is necessary in order to cause this
Proxy Statement/Prospectus, insofar as it relates to Clear Channel, to prepare
this Proxy Statement/Prospectus in accordance with the provisions described in
the preceding paragraph. Clear Channel also agreed promptly to advise Universal
if, at any time prior to Special Meeting, any information provided by Clear
Channel in this Proxy Statement/Prospectus becomes incorrect or incomplete in
any material respect and to provide the information needed to correct such
inaccuracy or omission. Further, Clear Channel agreed to use its best efforts to
cause the Registration Statement to become effective under the Securities Act
and applicable state securities laws at the earliest practicable date and to
remain effective until the Effective Time.
FILINGS; OTHER ACTION
Universal and Clear Channel agreed in the Merger Agreement to (A) promptly
make their respective filings and thereafter make any other required submissions
under the HSR Act, (B) use reasonable efforts with one another in (i)
determining whether any filings are required to be made with, or consents,
permits,
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authorizations or approvals are required to be obtained from, any third party,
the United States government or any agencies, departments or instrumentalities
thereof or other governmental or regulatory bodies or authorities of federal,
state, local and foreign jurisdictions in connection with the execution and
delivery of the Merger Agreement and the consummation of the transactions
contemplated thereby and (ii) timely making all such filings and timely seeking
all such consents, permits, authorizations or approvals, and (C) use reasonable
efforts to take, or cause to be taken, all other actions and do, or cause to be
done, all other things necessary, proper or advisable to consummate and make
effective the transactions contemplated by the Merger Agreement including,
without limitation, taking all such further action as reasonably may be
necessary to resolve such objections, if any, as the FTC, the Antitrust Division
of the Department of Justice, state antitrust enforcement authorities or
competition authorities of any other nation or other jurisdiction or any other
person may assert under relevant antitrust or competition laws with respect to
the transactions contemplated by the Merger Agreement.
Clear Channel and Universal specifically agreed to take or cause to be taken
the following actions: (A) provide promptly to Governmental Entities with
regulatory jurisdiction over enforcement of any applicable antitrust laws
("Government Antitrust Entity") information and documents requested by any
Government Antitrust Entity or necessary, proper or advisable to permit
consummation of the transactions contemplated by the Merger Agreement; (B)
without in any way limiting the provisions described in the preceding clause,
file any Notification and Report Form and related material required under the
HSR Act as soon as practicable after the date of the Merger Agreement, and
thereafter use its reasonable efforts to certify as soon as practicable its
substantial compliance with any requests for additional information or
documentary material that may be made under the HSR Act; (C) the proffer by
Clear Channel of its willingness (i) to sell or otherwise dispose of, or hold
separate and agree to sell or otherwise dispose of, such assets, categories of
assets or businesses of Universal or Clear Channel or either's respective
Subsidiaries, (ii) terminate such existing relationships and contractual rights
and obligations and (iii) amend or terminate such existing licenses or other
intellectual property agreements (and, in each case, to enter into agreements
with the relevant Government Antitrust Entity giving effect thereto) in each
case with respect to the foregoing clauses (i), (ii) or (iii), if such action is
necessary or reasonably advisable for the purpose of avoiding or preventing any
action by any Government Antitrust Entity which would restrain, enjoin or
otherwise prevent or materially delay consummation of the transactions
contemplated by the Merger Agreement prior to the deadline specified in Section
7.1(b) of the Merger Agreement; and (D) Universal will take promptly, in the
event that any permanent or preliminary injunction or other order is entered or
becomes reasonably foreseeable to be entered in any proceeding that would make
consummation of the transactions contemplated thereby in accordance with the
terms of the Merger Agreement unlawful or that would prevent or delay
consummation of the transactions contemplated thereby, any and all steps
(including the appeal thereof, the posting of a bond or the taking of the steps
contemplated by clause (C) of this paragraph) necessary to vacate, modify or
suspend such injunction or order so as to permit such consummation prior to the
deadline specified in Section 7.1(b) of the Merger Agreement. Each of Universal
and Clear Channel will provide to the other copies of all correspondence between
it (or its advisors) and any Government Antitrust Entity relaying to the Merger
Agreement or any of the matters described in Section 5.9(b) of the Merger
Agreement. Universal and Clear Channel agreed to use their reasonable best
efforts to ensure that all telephonic calls and meetings with a Government
Antitrust Entity regarding the Merger or any of the antitrust matters described
in the preceding clauses will include representatives of both Universal and
Clear Channel. However, the Merger Agreement provides that no failure to obtain
termination of the waiting period under the HSR Act will constitute a breach
hereunder by Universal.
(G) NO SOLICITATION
The Merger Agreement provides that, from the date thereof until the
termination of such agreement, Universal will not, and will use its reasonable
efforts to ensure that the respective officers, directors, employees, advisors,
representatives or other agents of Universal or its Subsidiaries will not,
directly or
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indirectly, (a) solicit, initiate, encourage or take any other action to
knowingly facilitate, any Acquisition Proposal or (b) engage or participate in
negotiations or substantive discussions with, or disclose any non-public
information relating to Universal or its Subsidiaries or afford access to the
properties, books or records of Universal or its Subsidiaries to, any Person
that has made, or has indicated its interest in making or considering or
intending to make, an Acquisition Proposal, PROVIDED that to the extent the
Universal Board determines in good faith, after consultation with outside legal
counsel, that the failure to engage or participate in such negotiations or
discussions or provide such information or afford such access would be
reasonably likely to be inconsistent with the fiduciary duties of the Universal
Board under applicable law, Universal may furnish information and afford access
to any such Person with respect to Universal and its Subsidiaries and
participate in negotiations and enter into agreements with any such Person
regarding such Acquisition Proposal, PROVIDED that if the Universal Board
receives an Acquisition Proposal, then, subject to the fiduciary duties of the
Universal Board, Universal will promptly inform Clear Channel of the terms and
conditions of such proposal and the identity of the Person making it. The Merger
Agreement does not prohibit Universal or the Universal Board from taking and
disclosing to Universal's stockholders a position with respect to a tender or
exchange offer by a third party pursuant to Rules 14d-9 and 14e-2(a) promulgated
under the Exchange Act or from making such disclosure to Universal's
stockholders as may be required by applicable law.
For the purposes of the above summarized provision of the Merger Agreement,
"Acquisition Proposal" means any offer or proposal for a merger, consolidation,
recapitalization, liquidation, business combination or similar transaction
involving Universal or any of its Subsidiaries or the acquisition or purchase of
50% or more of the voting power of any class of equity securities of Universal
or any of its Subsidiaries, or any tender offer (including self-tenders) or
exchange offer that if consummated would result in any Person beneficially
owning 50% or more of the voting power of any class of equity securities of
Universal or any of its Subsidiaries, or a substantial portion of the assets of
Universal or any of its Subsidiaries outside of the ordinary course of business,
other than the transactions contemplated by the Merger Agreement.
(H) CONDITIONS PRECEDENT TO THE MERGER
The respective obligations of Clear Channel, Universal and Sub to consummate
the Merger are subject, among other things, to the satisfaction or waiver on or
prior to the Closing Date of the following conditions: (i) the effectiveness of
the Registration Statement and the absence of a stop order suspending the
effectiveness thereof and any proceedings for that purpose initiated by the SEC;
(ii) the approval of the Merger Agreement by the requisite affirmative vote of
the stockholders of Universal; (iii) no governmental entity having enacted,
entered, promulgated or enforced any statute, rule, regulation, executive order,
decree, ruling or injunction which is in effect and which seeks to prevent or
delay the transactions contemplated by the Merger Agreement or challenges any of
the terms of the Merger Agreement or seeks material damages in connection
therewith or otherwise prohibits the consummation of the transactions
contemplated by the Merger Agreement; (iv) the applicable waiting period under
the HSR Act having expired or been terminated; (v) the obtaining of all consents
and approvals (other than those required pursuant to or in connection with
antitrust laws) necessary for consummation of the transactions contemplated by
the Merger Agreement, other than those which, if not obtained, would not in the
aggregate have a Material Adverse Effect on Clear Channel, Sub or Universal, as
the case may be; (vi) the shares of Clear Channel Common Stock issuable pursuant
to the Merger Agreement having been authorized for listing on the NYSE, subject
only to official notice of issuance; (vii) Universal and Clear Channel having
received an opinion of Skadden, Arps, Slate, Meagher & Flom LLP and Akin, Gump,
Strauss, Hauer & Feld, L.L.P., respectively, relating to certain tax matters.
See Section 7(i), "THE MERGER--Certain U.S. Federal Income Tax Consequences."
The obligation of Clear Channel and Sub to consummate the Merger are subject
to the satisfaction or waiver by Clear Channel on or prior to the Closing Date
of the following further conditions: (i) the
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representations and warranties of Universal contained in the Merger Agreement
being true and correct in all respects as of the Effective Time with the same
effect as though made as of the Effective Time except for such exception and
qualification which, in the aggregate, for all such representations and
warranties would not have a Material Adverse Effect on Universal except (A) for
changes specifically permitted by the terms of the Merger Agreement and (B) that
the accuracy of representations and warranties that by their terms speak as of
the date of the Merger Agreement or some other date will be determined as of
such date, and (ii) Universal having performed in all material respects (except
with respect to the covenants described in subclauses (v) and (ix) of "--Conduct
of Business Pending the Merger" hereof which shall be performed in all respects)
all obligations and having complied with all covenants required by the Merger
Agreement to be performed or complied with by it prior to the Effective Time.
The obligation of Universal to consummate the Merger is further subject to
the conditions that: (i) the representations and warranties of Clear Channel
contained in the Merger Agreement being true and correct in all respects as of
the Effective Time with the same effect as though made as of the Effective Time
except (A) for changes specifically permitted by the terms of the Merger
Agreement and (B) that the accuracy of representations and warranties that by
their terms speak as of the date of the Merger Agreement or some other date will
be determined as of such date; and (ii) Clear Channel having performed in all
material respects all obligations and having complied with all covenants
required by the Merger Agreement to be performed or complied with by it prior to
the Effective Time.
(I) UNIVERSAL STOCK OPTIONS AND WARRANTS
Simultaneously with the Merger, each outstanding right to acquire shares of
Universal Common Stock pursuant to the 1996 Warrant Plan ("Management Warrants")
and each Incentive Option will automatically be cancelled and Clear Channel has
agreed to deliver to the holder of such Management Warrant or Incentive Option,
as the case may be, in exchange for the cancellation thereof, the number of
validly issued, fully paid and non-assessable shares of Clear Channel Common
Stock determined by multiplying (X) the difference between (i) the total number
of shares of Universal Common Stock subject to such Management Warrant or
Incentive Option, as the case may be, and (ii) the number obtained by dividing
(A) the aggregate exercise price of such Management Warrant or Incentive Option,
as the case may be, by, (B) $41.50 by (Y) 0.67.
Certain members of management of Universal hold Employee Options to acquire
93,300 shares of Universal Common Stock. No such options are held by any
directors or executive officers of Universal. Also simultaneously with the
Merger, each Employee Option that is outstanding immediately prior to the
Merger, whether or not then vested or exercisable, will, simultaneously with the
Merger, be cancelled in exchange for a single lump cash payment equal to the
product of (1) the number of shares of Universal Common Stock subject to such
Employee Option and (2) the excess, if any, of $41.50 over the exercise price
per share of such Employee Option.
Universal and Clear Channel have also agreed that each of their respective
employee incentive or benefit plans, programs and arrangements and non-employee
director plans will be amended, to the extent necessary and appropriate, to
reflect the transactions contemplated by the Merger Agreement, including, but
not limited to the conversion of shares of any awards of Universal Common Stock
or restricted stock under Universal's 1997 Equity Incentive Plan (but excluding
any stock options granted under such plan) held or to be awarded or paid
pursuant to such benefit plans, programs or arrangements into shares of Clear
Channel Common Stock on a basis consistent with the transactions contemplated by
the Merger Agreement. The actions to be taken by Universal and Clear Channel,
pursuant to the provision described in this Section (i) will include the
submission by Universal or Clear Channel of the amendments to the plans,
programs or arrangements referred to herein to their respective stockholders at
the Special Meeting or, as soon as practicable, at a meeting of Clear Channel's
stockholders, respectively, if such submission is determined to be necessary or
advisable by counsel to Universal or Clear Channel after consultation with one
another, PROVIDED that such approval will not be a condition to the consummation
of the Merger.
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<PAGE>
See Section 7(f), "THE MERGER--Interests of Certain Persons in the Transaction."
(J) EMPLOYEE MATTERS
For a period of no more than one year immediately following the Effective
Time, Clear Channel has agreed to cause the Surviving Corporation and its
Subsidiaries to provide to all active employees of Universal as of the Effective
Time who continue to be employed by Universal coverage under group medical,
dental, 401(k) savings, disability insurance, life insurance, accidental death
and disability, and vacation plans or arrangements which are, in the aggregate,
substantially similar to the plans providing such benefits to the employees of
Universal immediately prior to the Effective Time, PROVIDED that Clear Channel
may at its option at any time during such year provide to such employees the
aforementioned benefits in a form which are substantially similar to the
benefits provided to employees of Clear Channel at such time. Clear Channel also
agreed to, and to cause its Subsidiaries to, honor in accordance with their
terms all agreements, contracts, arrangements, commitments and understanding
described in Universal's SEC Reports.
Simultaneously with entering into the Merger Agreement, Clear Channel
entered into the Employment Agreement with Daniel L. Simon.
(K) INDEMNIFICATION; DIRECTORS' AND OFFICERS'
Clear Channel, Sub and Universal have agreed that all rights to
indemnification and all limitations on liability existing in favor of any
Indemnitee as provided in the Universal Charter or By-Laws or any Indemnity
Agreement will survive the Merger and continue in full force and effect. To the
extent permitted by (i) the DGCL, (ii) the Universal Charter and the Universal
By-Laws, or (iii) any Indemnity Agreement, advancement of Expenses pursuant to
the terms described therein will be mandatory rather than permissive and the
Surviving Corporation and Clear Channel will advance Costs in connection with
such indemnification. Clear Channel also has agreed to, and to cause the
Surviving Corporation to, expressly assume and honor in accordance with their
terms all Indemnity Agreements.
Clear Channel also has agreed that, for six years from and after the
Effective Time, it will, and will cause the Surviving Corporation to, to the
fullest extent permitted by applicable law, (i) indemnify and hold harmless the
individuals who on or prior to the Effective Time were officers, directors or
employees of Universal or any of its Subsidiaries, and the heirs, executors,
trustees, fiduciaries and administrators of such officers, directors or
employees against all losses, expenses, claims, damages, liabilities, judgments,
or amounts paid in settlement in respect to any threatened, pending or completed
claim, action, suit or proceeding, whether criminal, civil, administrative or
investigative based on, or arising out of or relating to the fact that such
person is or was a director, officer or employee of Universal or any of its
Subsidiaries and arising out of acts or omissions occurring on or prior to the
Effective Time (including, without limitation, in respect of acts or omissions
in connection with the Merger Agreement and the transactions contemplated
thereby) and (ii) advance to such persons all expenses incurred in connection
with any Indemnifiable Claim promptly after receipt of reasonably detailed
statements therefor, PROVIDED that, except as otherwise provided pursuant to any
Indemnity Agreement, the person to whom expenses are to be advanced provides an
undertaking to repay such advances if it is ultimately determined that such
person is not entitled to indemnification from Clear Channel or the Surviving
Corporation. The parties also agreed that, in the event any Indemnifiable Claim
is asserted or made within such six year period, all rights to indemnification
and advancement of expenses in respect of any such claim will continue until
such claim is disposed of or all judgments, orders, decrees or other rulings in
connection with such indemnifiable claim are fully satisfied. The parties agreed
that Clear Channel will not be liable for any settlement effected without its
written consent (which consent will not be unreasonably withheld or delayed). In
addition, except as otherwise may be provided pursuant to any Indemnity
Agreement, any indemnified party(s) as a group may retain only one law firm with
respect to each related matter except to the extent there is, in the
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<PAGE>
opinion of counsel to such person, under applicable standards of professional
conduct, a conflict on any significant issue between positions of any two or
more indemnified parties.
(L) TERMINATION
The Merger Agreement may be terminated and abandoned at any time prior to
the Effective Time, whether before or after any approval by the stockholders of
Universal of the matters presented in connection with the Merger:
(i) by mutual written consent of Clear Channel and Universal;
(ii) by either Clear Channel or Universal if the stockholders of
Universal fail to approve and adopt the Merger Agreement;
(iii) by either Clear Channel or Universal if (A) the Effective Time has
not occurred on or prior to August 30, 1998, PROVIDED that the party seeking
to terminate the Merger Agreement under the provisions described in this
clause (A) must not have breached in any material respect its obligations
under the Merger Agreement in any manner that shall have proximately
contributed to the failure to consummate the Merger on or before such date,
(B) a statute, rule, regulation or executive order has been enacted, entered
or promulgated prohibiting the consummation of the Merger substantially on
the terms contemplated in the Merger Agreement, or (C) an order, decree,
ruling or injunction has been entered permanently restraining, enjoining or
otherwise prohibiting the consummation of the Merger substantially on the
terms contemplated in the Merger Agreement and such order, decree, ruling or
injunction has become final and non-appealable, PROVIDED that the party
seeking to terminate the Merger Agreement under the provisions described in
this clause (C) must have used its reasonable best efforts to remove such
injunction, order or decree, ruling or injunction;
(iv) by Clear Channel if the Universal Board (A) withdraws, modifies or
amends in any respect adverse to Clear Channel its approval or
recommendation of the Merger Agreement or any of the transactions
contemplated therein, (B) fails to include in this Proxy
Statement/Prospectus when mailed the recommendation of the Universal Board,
or (C) recommends to its stockholders any Acquisition Proposal of a Person
other than Clear Channel;
(v) by Universal (A) if the Universal Board determines to accept an
Acquisition Proposal that it has determined in good faith, after
consultation with its outside legal counsel and financial advisor, to be
more favorable to Universal stockholders than the transactions contemplated
by the Merger Agreement, (B) if the Universal Board takes any action
described in clause (iv) above, or (C) upon notice to Clear Channel,
authorized by the Universal Board, if at any time during the period between
the date of the Merger Agreement and the two days prior to the Effective
Time, the average of the Clear Channel Common Stock closing prices, regular
way, on the NYSE for any fifteen (15) consecutive trading day period is less
than or equal to the Floor Price and, in the event the Custom Index at the
time of any such calculation declines from the date of the Merger Agreement,
the amount by which the percentage decrease in the average of the Clear
Channel Common Stock from $62.3125 exceeds the percentage decrease, if any,
in the Custom Index (as defined below) from $36.0375 is greater than or
equal to 20 percentage points PROVIDED that Universal may not terminate the
Merger Agreement under the provisions described in this clause (C) if (1)
Clear Channel elects within 5 business days of receipt of such notice to
increase the number of shares of Clear Channel Common Stock included in the
Merger Consideration such that the per share value of the Clear Channel
Common Stock consideration (valued at the Floor Price) is at least equal to
the per share consideration that would have been received if the Conversion
Number had been equal to a number such that the per share value of Universal
Common Stock is equal to $41.50, (2) the issuance of the additional shares
of stock does not necessitate a vote of the stockholders of Clear Channel to
approve such issuance, and (3) in the opinion of Skadden, Arps, Slate,
Meagher & Flom LLP and Akin, Gump, Strauss, Hauer & Feld, L.L.P., the
transaction as adjusted qualifies as a tax-free "reorganization"
63
<PAGE>
within the meaning of Section 368 of the Code, PROVIDED, FURTHER that no
right of termination will arise under clause (C) if, prior to the delivery
of notice by Universal to Clear Channel provided for as described in this
clause (C), the average of closing prices for a subsequent fifteen (15)
consecutive trading day period is not less than or equal to the Floor Price
or for the same period the amount by which the percentage decrease in the
average prices of the Clear Channel Common Stock exceeds the percentage
decrease in the Custom Index is not greater than or equal to 20 percentage
points.
The "Custom Index" is a non-weighted index consisting of the following
stocks:
<TABLE>
<CAPTION>
CLOSING PRICE
ON
OCTOBER 23,
COMPANY(1) 1997 SYMBOL
- ----------------------------------------------------------------- --------------- ---------
<S> <C> <C>
Westinghouse-CBS(2).............................................. $ 28.75 WX
Chancellor Broadcasting.......................................... 58 AMFM
Cox Radio Inc.................................................... 34.43750 CXR
Lamar Advertising Company........................................ 31 LAMR
Outdoor Systems.................................................. 28 OSI
Average Price.................................................... $ 36.03750
</TABLE>
- ------------------------
(1) When any company on this list is sold, it shall be deleted from the Custom
Index replaced with the common stock of a company operating in the radio
broadcasting industry mutually agreeable to both Universal and Clear Channel
which shall be substituted in the Custom Index on the date of the
termination of trading of the company being sold and the price on such day
of the common stock of the company being added to the Custom Index shall be
substituted for the price of the company being sold for the prior 14 days of
any calculation period.
(2) When CBS is spun off from Westinghouse, CBS shall be substituted in the
Custom Index for Westinghouse effective as of the date CBS commences trading
regular way and the price of CBS on such day shall be substituted for the
price of Westinghouse for the prior 14 days of any calculation period.
The party desiring to terminate the Merger Agreement pursuant to any of the
provisions summarized above must give written notice of such termination to the
other party.
(M) FEES AND EXPENSES
Except as described in Section 8(n) below, Universal and Clear Channel
agreed that all costs and expenses incurred in connection with the Merger
Agreement and the transactions contemplated thereby will be paid by the party
incurring such expenses.
(N) TERMINATION FEE
In addition to any other amounts that may be payable or become payable
pursuant to the provisions described in this Section, if the Merger Agreement is
terminated pursuant to the provisions described in clause (iv) under
"--Termination" hereof, and Clear Channel or Sub is not then in material breach
of its obligations under the Merger Agreement, then Universal will promptly, but
in no event later than one business day after the termination of the Merger
Agreement (or from time to time after the Closing Date), reimburse Clear Channel
and Sub for all documented out-of-pocket expenses and fees, whether incurred
prior to, on or after the date of the Merger Agreement, in connection with the
Merger and the consummation of all transactions contemplated by the Merger
Agreement, PROVIDED, that in no event will Universal be required to pay in
excess of an aggregate of $1.5 million pursuant to the provisions described in
this paragraph, PROVIDED, FURTHER that in no event will any payment be due
pursuant to the terms described in this paragraph if a fee is payable pursuant
to the terms described below, and if a fee becomes payable pursuant to such
provisions below following such time as a payment has been made pursuant to
64
<PAGE>
this paragraph, then the amount of such prior expense reimbursement payment will
be credited against, and will reduce, the fee otherwise payable under the
provisions described below.
If the Merger Agreement is terminated either pursuant to the provisions
described in:
(A) subclause (A) or (B) of clause (v) under "--Termination" hereof; or
(B) subclause (A) of clause (iii) under "--Termination" hereof and in
such case, (1) prior to such date (x) the Universal Board will have taken
any of the actions as contemplated by the provisions described in clauses
(A), (B) or (C) of clause (iv) under "--Termination" hereof such that Clear
Channel could have terminated the Merger Agreement but elected not to and
(y) either (i) the Special Meeting will have been held and the approval of
the stockholders at the Special Meeting will not have been obtained or (ii)
the Special Meeting will not have been held as of the date of such
termination as a result of Universal delaying such meeting in accordance
with the provisions of Section 5.2(a) of the Merger Agreement, and (2) on or
prior to twelve months after the termination of the Merger Agreement,
Universal enters into an agreement with a Person regarding a transaction the
proposal of which would otherwise qualify as an Acquisition Proposal under
Section 5.11 of the Merger Agreement and such transaction is subsequently
consummated;
then in any such event, Universal will, promptly following, but in no event
later than one business day after (a) in the case of clause (A) above, the date
of such termination and (b) in the case of clause (B) above, the consummation of
the third party Acquisition Proposal, pay Clear Channel a fee of $40 million in
cash. Only one fee in the aggregate of $40 million will be payable pursuant to
the terms described in this paragraph.
(O) AMENDMENT
At any time before or after approval by the stockholders of Universal of the
matters presented in connection with the Merger and prior to the Effective Time,
the Merger Agreement may be amended or supplemented in writing by Universal and
Clear Channel with respect to any of the terms contained in the Merger
Agreement, except that following approval by the stockholders of Universal,
there may be no amendment or change to the provisions of the Merger Agreement
with respect to any matter not permitted under applicable law without further
approval by the stockholders of Universal unless such approval is first
obtained.
(P) WAIVER
The Merger Agreement permits Universal, Clear Channel and Sub at any time
prior to the Effective Time, to: (i) extend the time for the performance of any
of the obligations or other acts of the other parties; (ii) waive any
inaccuracies in the representations and warranties contained therein or in any
document delivered pursuant thereto; and (iii) waive compliance with any of the
agreements or conditions of the other party contained therein, in each case
pursuant to a written instrument.
The failure of any party to the Merger Agreement to assert any of its rights
thereunder or otherwise will not constitute a waiver of those rights, nor will
any single or partial exercise thereof preclude any other or further exercise of
any other right, thereunder.
65
<PAGE>
9. UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
The following unaudited pro forma combined condensed financial statements
give effect to the Merger. For accounting purposes the Merger will be accounted
for as a purchase of Universal by Clear Channel; accordingly the net assets of
Universal have been adjusted to their estimated fair values based upon a
preliminary purchase price allocation.
The unaudited pro forma combined condensed statements of operations for the
nine months ended September 30, 1997 and for the year ended December 31, 1996
give effect to the Merger as if it had occurred at the beginning of each period
presented. The unaudited pro forma combined condensed balance sheet at September
30, 1997 gives effect to the Merger as if it occurred on September 30, 1997.
The unaudited pro forma combined condensed statements of operations were
prepared based upon the historical statements of operations of Clear Channel
adjusted to reflect the acquisition of Eller Media and the Paxson Radio
Acquisition as if such acquisitions had occurred at the beginning of each period
presented (Clear Channel Pro Forma) and the historical statements of operations
of Universal which for the year ended December 31, 1996 have been adjusted to
reflect acquisitions and other financing transactions as if such had occurred at
the beginning of 1996 (Universal Pro Forma). The unaudited pro forma combined
condensed balance sheet was prepared based upon the historical balance sheet of
Clear Channel adjusted to reflect the Paxson Radio Acquisition (Clear Channel
Pro Forma) and the historical balance sheet of Universal.
The unaudited pro forma combined condensed financial statements do not give
effect to any potential divestitures or regulatory costs that may be imposed by
a Governmental Entity as a condition for their approval of the Merger. See
Section 5, "RISK FACTORS--Necessity of Receiving Regulatory Approvals Prior to
the Merger; Possible Divestitures and Operating Restrictions."
The unaudited pro forma combined condensed financial statements should be
read in conjunction with the historical financial statements of Clear Channel
and Universal incorporated by reference herein.
The unaudited pro forma combined condensed financial statements are not
necessarily indicative of the actual results of operations or financial position
that would have occurred had the Merger and the above described acquisitions and
transactions of Clear Channel and Universal occurred on the dates indicated nor
are they necessarily indicative of future operating results or financial
position.
66
<PAGE>
CLEAR CHANNEL AND UNIVERSAL
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
(DOLLARS IN THOUSANDS)
SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
CLEAR CHANNEL
PRO FORMA AND UNIVERSAL
CLEAR CHANNEL UNIVERSAL MERGER PRO FORMA
PRO FORMA HISTORICAL ADJUSTMENT MERGER
------------- ---------- ----------- -------------
<S> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................................. $ 35,178 $ 17,762 $ -- $ 52,940
Accounts receivable, net.................................. 144,683 33,309 -- 177,992
Film rights--current...................................... 16,124 -- -- 16,124
Other current assets...................................... -- 15,253 -- 15,253
------------- ---------- ----------- -------------
Total Current Assets...................................... 195,985 66,324 -- 262,309
Property, plant & equipment, net.......................... 721,677 596,602 -- 1,318,279
Intangible Assets:
Network affiliation agreements............................ 33,727 -- -- 33,727
Licenses and goodwill..................................... 2,158,289 240,240 914,455 3,312,984
Covenants not-to-compete.................................. 24,592 -- -- 24,592
Other intangible assets................................... 13,002 18,534 -- 31,536
------------- ---------- ----------- -------------
2,229,610 258,774 914,455 3,402,839
Less accumulated amortization............................. (120,198) -- -- (120,198)
------------- ---------- ----------- -------------
2,109,412 258,774 914,455 3,282,641
Other Assets:
Deferred tax asset........................................ 10,520 -- -- 10,520
Film rights--noncurrent, net of accumulated amort......... 16,182 -- -- 16,182
Equity investments in, and advances to, nonconsolidated
affiliates.............................................. 273,326 -- -- 273,326
Other assets.............................................. 65,760 -- -- 65,760
Other investments......................................... 27,343 -- -- 27,343
------------- ---------- ----------- -------------
TOTAL ASSETS.............................................. $ 3,420,205 $ 921,700 $ 914,455 $ 5,256,360
------------- ---------- ----------- -------------
------------- ---------- ----------- -------------
</TABLE>
67
<PAGE>
CLEAR CHANNEL AND UNIVERSAL
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
(DOLLARS IN THOUSANDS)
SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
CLEAR CHANNEL
PRO FORMA AND UNIVERSAL
CLEAR CHANNEL UNIVERSAL MERGER PRO FORMA
PRO FORMA HISTORICAL ADJUSTMENT MERGER
------------- ---------- ----------- -------------
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C> <C> <C>
Current Liabilities:
Accounts payable.......................................... $ 12,877 $ 953 $ -- $ 13,830
Accrued interest.......................................... 2,037 -- -- 2,037
Accrued expenses.......................................... 37,523 33,488 -- 71,011
Accrued income and other taxes............................ 3,742 -- -- 3,742
Deferred income........................................... 1,380 -- -- 1,380
Current portion of long-term debt......................... 13,067 -- -- 13,067
Current portion of film rights liability.................. 16,989 -- -- 16,989
------------- ---------- ----------- -------------
Total Current Liabilities................................. 87,615 34,441 -- 122,056
Long-term debt............................................ 1,526,588 503,947 15,000 2,045,535
Film rights liability..................................... 17,857 -- -- 17,857
Deferred income taxes..................................... 15,840 79,961 -- 95,801
Deferred income--long-term................................ 10,075 -- -- 10,075
Other liabilities......................................... 43,241 931 -- 44,172
Minority interest......................................... 21,113 -- -- 21,113
Shareholders' Equity:
Preferred stock........................................... -- -- -- --
Common stock.............................................. 9,809 267 1,662 11,738
Additional paid-in capital................................ 1,540,072 369,776 830,170 2,740,018
Retained earnings/(accumulated deficit)................... 147,356 (77,754) 77,754 147,356
Other..................................................... 1,226 10,131 (10,131) 1,226
Cost of shares held in treasury........................... (587) -- -- (587)
------------- ---------- ----------- -------------
Total Shareholders' Equity................................ 1,697,876 302,420 899,455 2,899,751
------------- ---------- ----------- -------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY................ $ 3,420,205 $ 921,700 $ 914,455 $ 5,256,360
------------- ---------- ----------- -------------
------------- ---------- ----------- -------------
</TABLE>
68
<PAGE>
CLEAR CHANNEL AND UNIVERSAL
UNAUDITED PRO FORMA COMBINED CONDENSED
STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
CLEAR CHANNEL
PRO FORMA AND UNIVERSAL
CLEAR CHANNEL UNIVERSAL MERGER PRO FORMA
PRO FORMA PRO FORMA ADJUSTMENT MERGER
------------- ---------- ----------- -------------
<S> <C> <C> <C> <C>
Net revenue............................................... $ 670,481 $ 176,611 -- $ 847,092
Operating expenses........................................ 407,804 90,836 -- 498,640
Depreciation and amortization............................. 137,194 50,818 $ 42,456 230,468
Noncash compensation for management warrants.............. -- 9,000 (9,000) --
Corporate general and admin. expenses..................... 18,731 -- -- 18,731
------------- ---------- ----------- -------------
Operating income (loss)................................... 106,752 25,957 (33,456) 99,253
Interest expense.......................................... 114,775 44,235 -- 159,010
Other income (expense).................................... (4,328) (1,811) -- (6,139)
------------- ---------- ----------- -------------
Income (loss) before income taxes......................... (12,351) (20,089) (33,456) (65,896)
Income tax (expense) benefit.............................. (5,264) -- -- (5,264)
------------- ---------- ----------- -------------
Income (loss) before equity in net income (loss) of, and
other income from, nonconsolidated affiliates........... (17,615) (20,089) (33,456) (71,160)
Equity in net income (loss) of, and other income from,
nonconsolidated affiliates.............................. (5,158) -- -- (5,158)
------------- ---------- ----------- -------------
Income (loss) from continuing operations.................. $ (22,773) $ (20,089) $ (33,456) $ (76,318)
------------- ---------- ----------- -------------
------------- ---------- ----------- -------------
Income (loss) from continuing operations per common
share................................................... $ (.28) $ (.75)
------------- -------------
------------- -------------
Weighted average common and common share equivalents
outstanding............................................. 82,484 19,288 101,772
------------- ----------- -------------
------------- ----------- -------------
Other Data:
After tax cash flow....................................... $ 138,253 $ 39,729 $ -- $ 177,982
------------- ---------- ----------- -------------
------------- ---------- ----------- -------------
After tax cash flow per common share...................... $ 1.68 $ 1.75
------------- -------------
------------- -------------
</TABLE>
69
<PAGE>
CLEAR CHANNEL AND UNIVERSAL
UNAUDITED PRO FORMA COMBINED CONDENSED
STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
NINE MONTHS ENDED SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
CLEAR CHANNEL
PRO FORMA AND UNIVERSAL
CLEAR CHANNEL UNIVERSAL MERGER PRO FORMA
PRO FORMA HISTORICAL ADJUSTMENT MERGER
------------- ---------- ----------- -------------
<S> <C> <C> <C> <C>
Net revenue............................................... $ 603,922 $ 152,748 -- $ 756,670
Operating expenses........................................ 362,462 73,748 -- 436,210
Depreciation and amortization............................. 118,215 42,989 $ 23,181 184,385
Noncash compensation for incentive options................ -- 1,581 (1,581) --
Corporate general and admin. expenses..................... 16,017 -- -- 16,017
------------- ---------- ----------- -------------
Operating income (loss)................................... 107,228 34,430 (21,600) 120,058
Interest expense.......................................... 93,533 34,368 -- 127,901
Other income (expense).................................... 2,525 464 -- 2,989
------------- ---------- ----------- -------------
Income (loss) before income taxes......................... 16,220 526 (21,600) (4,854)
Income tax (expense) benefit.............................. (16,991) -- -- (16,991)
------------- ---------- ----------- -------------
Income (loss) before equity in net income (loss) of, and
other income from, nonconsolidated affiliates........... (771) 526 (21,600) (21,845)
Equity in net income (loss) of, and other income from,
nonconsolidated affiliates.............................. 8,388 -- -- 8,388
------------- ---------- ----------- -------------
Income (loss) from continuing operations.................. $ 7,617 $ 526 $ (21,600) $ (13,457)
------------- ---------- ----------- -------------
------------- ---------- ----------- -------------
Income (loss) from continuing operations per common
share................................................... $ .08 $ (.12)
------------- -------------
------------- -------------
Weighted average common and common share equivalents
outstanding............................................. 90,867 19,288 110,155
------------- ----------- -------------
------------- ----------- -------------
Other data:
After tax cash flow....................................... $ 141,418 $ 45,096 $ -- $ 186,514
------------- ---------- ----------- -------------
------------- ---------- ----------- -------------
After tax cash flow per common share...................... $ 1.59 $ 1.69
------------- -------------
------------- -------------
</TABLE>
70
<PAGE>
CLEAR CHANNEL AND UNIVERSAL
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
The Clear Channel and Universal unaudited pro forma combined condensed
financial statements reflect the Merger, accounted for as a purchase, as follows
(Amounts in thousands except per share amounts):
<TABLE>
<S> <C> <C>
Universal Common Stock outstanding at September 30, 1997 adjusted to
reflect the exercise of all outstanding options and warrants......... 28,787,847
Exchange ratio......................................................... 0.67
-
---------
Clear Channel Common Stock assumed to be issued in connection with the
Merger............................................................... 19,287,858
Estimated value per share.............................................. x $62.3125
-
---------
$1,201,875
Estimated transaction costs............................................ 15,000
-
---------
Total estimated purchase price....................................... $1,216,875
-
-
---------
---------
</TABLE>
For purpose of these statements the total estimated purchase price was
allocated as follows:
<TABLE>
<S> <C>
Total estimated purchase price.......................................... $1,216,875
Universal's net assets at September 30, 1997 adjusted for the
elimination of existing goodwill of $240,240.......................... 62,180
---------
Estimated excess purchase price (allocated to goodwill)................. $1,154,695
---------
---------
</TABLE>
The estimated excess purchase price allocated to goodwill of $1,154,695 will
be amortized over a 25 year period using the straight line method which will
result in annual goodwill amortization of $46,188 ($34,641 for the nine months
ended September 30, 1997).
The pro forma merger adjustments at September 30, 1997 are as follows:
<TABLE>
<CAPTION>
INCREASE
(DECREASE)
(IN THOUSANDS)
------------------
<S> <C>
Licenses and goodwill............................................................... $ 914,455
Long-term debt...................................................................... 15,000
Common stock........................................................................ 1,662
Additional paid-in capital.......................................................... 830,170
Retained earnings (accumulated deficit)............................................. 77,754
Other shareholders' equity.......................................................... (10,131)
</TABLE>
The pro forma merger adjustments for the year ended December 31, 1996 and
the nine months ended September 30, 1997 are as follows:
<TABLE>
<CAPTION>
INCREASE (DECREASE)
INCOME
(IN THOUSANDS)
----------------------
1996 1997
---------- ----------
<S> <C> <C>
Depreciation and amortization............................................. $ (42,456) $ (23,181)
Other income (expense).................................................... 9,000 1,581
</TABLE>
After-tax cash flow is defined as net income (loss) before unusual items
plus depreciation, amortization of intangibles (including non-consolidated
affiliates) and deferred taxes. After-tax cash flow is not presented as a
measure of operating results and does not purport to represent cash provided by
operating activities. After-tax cash flow should not be considered in isolation
or as a substitute for measures of performance prepared in accordance with
generally accepted accounting principles.
After-tax cash flow per share is defined as after-tax cash flow divided by
weighted average common shares and common share equivalents outstanding.
71
<PAGE>
CLEAR CHANNEL
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS)
SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
PAXSON
CLEAR CHANNEL RADIO PRO FORMA CLEAR CHANNEL
HISTORICAL HISTORICAL ADJUSTMENT(1) PRO FORMA
------------- ----------- ------------- -------------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................... $ 35,178 $ -- $ -- $ 35,178
Accounts receivable, net................................ 126,756 17,927 -- 144,683
Film rights--current.................................... 16,124 -- -- 16,124
Other current assets.................................... -- 1,356 (1,356) --
------------- ----------- ------------- -------------
Total Current Assets.................................... 178,058 19,283 (1,356) 195,985
Property, plant & equipment, net........................ 667,831 53,846 -- 721,677
Intangible assets:
Network affiliation agreements.......................... 33,727 -- -- 33,727
Licenses and goodwill................................... 1,601,062 240,078 317,149 2,158,289
Covenants not-to-compete................................ 24,592 -- -- 24,592
Other intangible assets................................. 13,002 -- -- 13,002
------------- ----------- ------------- -------------
1,672,383 240,078 317,149 2,229,610
Less accumulated amortization........................... (120,198) (32,642) 32,642 (120,198)
------------- ----------- ------------- -------------
1,552,185 207,436 349,791 2,109,412
Other assets:
Deferred tax asset...................................... 10,520 -- -- 10,520
Film rights--
noncurrent, net of accumulated amort.................. 16,182 -- -- 16,182
Equity investments in, and advances to, nonconsolidated
affiliates............................................ 273,326 -- -- 273,326
Other assets............................................ 65,760 1,828 (1,828) 65,760
Other investments....................................... 27,343 2,960 (2,960) 27,343
------------- ----------- ------------- -------------
TOTAL ASSETS............................................ $ 2,791,205 $ 285,353 $ 343,647 $ 3,420,205
------------- ----------- ------------- -------------
------------- ----------- ------------- -------------
LIABILITIES
Current liabilities:
Accounts payable........................................ $ 12,877 $ 3,272 $ (3,272) $ 12,877
Accrued interest........................................ 2,037 24 (24) 2,037
Accrued expenses........................................ 37,523 -- -- 37,523
Accrued income and other taxes.......................... 3,742 -- -- 3,742
Deferred income......................................... 1,380 -- -- 1,380
Current portion of long-term debt....................... 13,067 160 (160) 13,067
Current portion of film rights liability................ 16,989 -- -- 16,989
Payable due to Paxson Corp.............................. -- 22,911 (22,911) --
------------- ----------- ------------- -------------
Total Current Liabilities............................... 87,615 26,367 (26,367) 87,615
Long-term debt.......................................... 897,588 275 628,725 1,526,588
Film rights liability................................... 17,857 -- -- 17,857
Deferred income taxes................................... 15,840 -- -- 15,840
Deferred income--long-term.............................. 10,075 -- -- 10,075
Other liabilities....................................... 43,241 -- -- 43,241
Minority interest....................................... 21,113 -- -- 21,113
Shareholders' equity:
Preferred stock......................................... -- -- -- --
Common stock............................................ 9,809 -- -- 9,809
Additional paid-in capital.............................. 1,540,072 -- -- 1,540,072
Retained earnings/(accumulated deficit)................. 147,356 -- -- 147,356
Divisional equity....................................... -- 258,711 (258,711) --
Other................................................... 1,226 -- -- 1,226
Cost of shares held in treasury......................... (587) -- -- (587)
------------- ----------- ------------- -------------
Total Shareholders' Equity.............................. 1,697,876 258,711 (258,711) 1,697,876
------------- ----------- ------------- -------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY.............. $ 2,791,205 $ 285,353 $ 343,647 $ 3,420,205
------------- ----------- ------------- -------------
------------- ----------- ------------- -------------
</TABLE>
72
<PAGE>
CLEAR CHANNEL
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
CLEAR CHANNEL PAXSON
CLEAR CHANNEL ELLER MEDIA PRO FORMA ELLER MEDIA RADIO
HISTORICAL HISTORICAL ADJUSTMENT(1) PRO FORMA HISTORICAL
------------- ----------- ------------- ------------- -----------
<S> <C> <C> <C> <C> <C>
Net revenue $ 351,739 $ 237,032 $ -- $ 588,771 $ 81,710
Operating expenses................................. 198,332 141,839 -- 340,171 69,415
Depreciation and amortization...................... 45,790 40,269 23,895 109,954 10,203
Corporate general and admin. expense............... 8,527 10,204 -- 18,731 5,155
------------- ----------- ------------- ------------- -----------
Operating income (loss)............................ 99,090 44,720 (23,895) 119,915 (3,063)
Interest expense................................... 30,080 35,626 10,071 75,777 1,999
Other income (expense)............................. 2,230 (6,721) -- (4,491) 163
------------- ----------- ------------- ------------- -----------
Income (loss) before income taxes.................. 71,240 2,373 (33,966) 39,647 (4,899)
Income tax (expense) benefit....................... (28,386) (977) 5,259 (24,104) --
------------- ----------- ------------- ------------- -----------
Income (loss) before equity in net income (loss)
of, and other income from, nonconsolidated
affiliates....................................... 42,854 1,396 (28,707) 15,543 (4,899)
Equity in net income (loss) of, and other income
from, nonconsolidated affiliates................. (5,158) -- -- (5,158) --
------------- ----------- ------------- ------------- -----------
Income (loss) from continuing operations........... $ 37,696 $ 1,396 $ (28,707) $ 10,385 $ (4,899)
------------- ----------- ------------- ------------- -----------
------------- ----------- ------------- ------------- -----------
Income (loss) from continuing operations per common
share............................................ $ .50 $ .13
------------- -------------
------------- -------------
Weighted average common and common share
equivalents outstanding.......................... 74,649 7,835 82,484
------------- ------------- -------------
------------- ------------- -------------
<CAPTION>
PRO FORMA CLEAR CHANNEL
ADJUSTMENT(3) PRO FORMA
------------- -------------
<S> <C> <C>
Net revenue $ -- $ 670,481
Operating expenses................................. (1,782) 407,804
Depreciation and amortization...................... 17,037 137,194
Corporate general and admin. expense............... (5,155) 18,731
------------- -------------
Operating income (loss)............................ (10,100) 106,752
Interest expense................................... 36,999 114,775
Other income (expense)............................. -- (4,328)
------------- -------------
Income (loss) before income taxes.................. (47,099) (12,351)
Income tax (expense) benefit....................... 18,840 (5,264)
------------- -------------
Income (loss) before equity in net income (loss)
of, and other income from, nonconsolidated
affiliates....................................... (28,259) (17,615)
Equity in net income (loss) of, and other income
from, nonconsolidated affiliates................. -- (5,158)
------------- -------------
Income (loss) from continuing operations........... $ (28,259) $ (22,773)
------------- -------------
------------- -------------
Income (loss) from continuing operations per common
share............................................ $ (.28)
-------------
-------------
Weighted average common and common share
equivalents outstanding.......................... 82,484
-------------
-------------
</TABLE>
73
<PAGE>
CLEAR CHANNEL
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
NINE MONTHS ENDED SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
CLEAR CHANNEL PAXSON
CLEAR CHANNEL ELLER MEDIA PRO FORMA ELLER MEDIA RADIO
HISTORICAL HISTORICAL ADJUSTMENT(2) PRO FORMA HISTORICAL
------------- ----------- -------------- ------------- -----------
<S> <C> <C> <C> <C> <C>
Net revenue $ 469,176 $ 56,642 $ -- $ 525,818 $ 78,104
Operating expenses............................... 266,542 33,804 -- 300,346 63,362
Depreciation and amortization.................... 80,216 10,547 5,974 96,737 12,101
Corporate general and admin. expense............. 13,699 2,318 -- 16,017 4,059
------------- ----------- -------------- ------------- -----------
Operating income (loss).......................... 108,719 9,973 (5,974) 112,718 (1,418)
Interest expense................................. 51,804 8,565 2,518 62,887 1,370
Other income (expense)........................... 7,641 (4,082) -- 3,559 (1,034)
------------- ----------- -------------- ------------- -----------
Income (loss) before income taxes................ 64,556 (2,674) (8,492) 53,390 (3,822)
Income tax (expense) benefit..................... (31,642) (3) 1,315 (30,330) --
------------- ----------- -------------- ------------- -----------
Income (loss) before equity in net income (loss)
of, and other income from, nonconsolidated
affiliates..................................... 32,914 (2,677) (7,177) 23,060 (3,822)
Equity in net income (loss) of, and other income
from, nonconsolidated affiliates............... 8,388 -- -- 8,388 --
------------- ----------- -------------- ------------- -----------
Income (loss) from continuing operations......... $ 41,302 $ (2,677) $ (7,177) $ 31,448 $ (3,822)
------------- ----------- -------------- ------------- -----------
------------- ----------- -------------- ------------- -----------
Income (loss) from continuing operations per
common share................................... $ .47 $ .35
------------- -------------
------------- -------------
Weighted average common and common share
equivalents outstanding........................ 87,564 3,303 90,867
------------- -------------- -------------
------------- -------------- -------------
<CAPTION>
PRO FORMA CLEAR CHANNEL
ADJUSTMENT(4) PRO FORMA
-------------- -------------
<S> <C> <C>
Net revenue $ -- $ 603,922
Operating expenses............................... (1,246) 362,462
Depreciation and amortization.................... 9,377 118,215
Corporate general and admin. expense............. (4,059) 16,017
-------------- -------------
Operating income (loss).......................... (4,072) 107,228
Interest expense................................. 29,276 93,533
Other income (expense)........................... -- 2,525
-------------- -------------
Income (loss) before income taxes................ (33,348) 16,220
Income tax (expense) benefit..................... 13,339 (16,991)
-------------- -------------
Income (loss) before equity in net income (loss)
of, and other income from, nonconsolidated
affiliates..................................... (20,009) (771)
Equity in net income (loss) of, and other income
from, nonconsolidated affiliates............... -- 8,388
-------------- -------------
Income (loss) from continuing operations......... $ (20,009) $ 7,617
-------------- -------------
-------------- -------------
Income (loss) from continuing operations per
common share................................... $ .08
-------------
-------------
Weighted average common and common share
equivalents outstanding........................ 90,867
-------------
-------------
</TABLE>
74
<PAGE>
CLEAR CHANNEL
NOTES TO UNAUDITED
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS)
(1) Represents the pro forma effect of the acquisition of Paxson Radio.
Adjustments to reflect the application of the purchase method of accounting
and the payment of the related consideration of $628,725 as if the
acquisition had been consummated on September 30, 1997 are as follows:
<TABLE>
<CAPTION>
INCREASE
(DECREASE)
-----------
<S> <C>
Other current assets............................................................. $ (1,356)
Licenses and goodwill............................................................ 317,149
Accumulated amortization......................................................... 32,642
Other assets..................................................................... (1,828)
Other investments................................................................ (2,960)
Accounts Payable................................................................. (3,272)
Accrued interest................................................................. (24)
Current portion of long-term debt................................................ (160)
Payable due to Paxson Corp....................................................... (22,911)
Long-term debt................................................................... 628,725
Divisional equity................................................................ (258,711)
</TABLE>
75
<PAGE>
CLEAR CHANNEL
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
ELLER MEDIA ACQUISITION
YEAR ENDED DECEMBER 31, 1996
(1) 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)
--------------
<C> <S> <C>
(a) Increase in amortization of goodwill of $20,818 resulting from the $ (23,895)
additional goodwill created by the acquisition and a decrease in
amortizable life from 40 years (Eller Media) to 25 years (Clear
Channel) and additional depreciation of $3,077 related to the
adjustment of fixed assets to fair value.
(b) Increase in interest expense due to a higher amount of average debt (10,071)
outstanding which was partially offset by a lower average interest rate
(6.2% average rate for Clear Channel and 8.8% for Eller Media in 1996).
(c) Tax effect of the above adjustments to depreciation and interest expense 5,259
at Clear Channel's effective tax rate of 40%
(d) Increase in weighted average common and common share equivalents 7,835
outstanding resulting from the issuance of shares of Clear Channel
Common Stock and the issuance of options to purchase shares of Clear
Channel Common Stock to stockholders of Eller Media to effect the
acquisition.
</TABLE>
Clear Channel 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 Clear Channel, have the right to put such
stock to Clear Channel for 1,081,469 shares of Clear Channel Common Stock until
April 10, 2002. From and after April 10, 2004, Clear Channel 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,
Clear Channel 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 Clear Channel'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 Clear Channel Common Stock
would cause a $1.1 million change in goodwill.
The unaudited pro forma condensed consolidated statement of operations
excludes the effect of nonrecurring charges related to the acquisition.
76
<PAGE>
CLEAR CHANNEL
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS (CONTINUED)
NINE MONTHS ENDED SEPTEMBER 30, 1997
(2) Represents the pro forma effect of the acquisition of Eller Media assuming
it was acquired January 1, 1997.
<TABLE>
<CAPTION>
INCREASE
(DECREASE)
INCOME
(IN THOUSANDS)
--------------
<C> <S> <C>
(a) Increase in amortization of goodwill of $5,205 resulting from the $ (5,974)
additional goodwill created by the acquisition and a decrease in
amortizable life from 40 years (Eller Media) to 25 years (Clear
Channel) and additional depreciation of $769 related to the adjustment
of fixed assets to fair value.
(b) Increase in interest expense due to a higher amount of average debt (2,518)
outstanding which was partially offset by a lower average interest rate
(6% average rate for Clear Channel and 8.8% for Eller Media during the
first three months of 1997).
(c) Tax effect of the above adjustments to depreciation and interest expense 1,315
at Clear Channel's effective tax rate of 40%
(d) Increase in weighted average common and common share equivalents 3,303
outstanding resulting from the issuance of shares of Clear Channel
Common Stock and the issuance of options to purchase shares of Clear
Channel Common Stock to stockholders of Eller Media to effect the
acquisition.
</TABLE>
PAXSON RADIO ACQUISITION
YEAR ENDED DECEMBER 31, 1996
(3) Represents the pro forma effect of the Paxson Radio Acquisition assuming it
was acquired January 1, 1996.
<TABLE>
<CAPTION>
INCREASE
(DECREASE)
INCOME
(IN THOUSANDS)
--------------
<C> <S> <C>
(a) Elimination of option plan compensation expense resulting from the $ 1,782
elimination of the plan.
(b) Increase in amortization expense resulting from the additional goodwill (17,037)
created by the acquisition.
(c) Elimination of corporate general and administrative expenses resulting 5,155
from the elimination of the Paxson corporate office.
(d) Increase in interest expense (at an average interest rate of 6.2% in (36,999)
1996) due to additional borrowing under the Credit Facility to finance
the acquisition cost.
(e) Tax effect of the above adjustments at Clear Channel's effective tax 18,840
rate of 40%
</TABLE>
77
<PAGE>
CLEAR CHANNEL
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS (CONTINUED)
NINE MONTHS ENDED SEPTEMBER 30, 1997
(4) Represents the pro forma effect of the Paxson Radio Acquisition assuming it
was acquired January 1, 1997.
<TABLE>
<CAPTION>
INCREASE
(DECREASE)
INCOME
(IN THOUSANDS)
--------------
<C> <S> <C>
(a) Elimination of option plan compensation expense resulting from the $ 1,246
elimination of the plan.
(b) Increase in amortization expense resulting from the additional goodwill (9,377)
created by the acquisition.
(c) Elimination of corporate general and administrative expenses resulting 4,059
from the elimination of the Paxson corporate office.
(d) Increase in interest expense (at an average interest rate of 6.5% for (29,276)
the first nine months of 1997) due to additional borrowing under the
Credit Facility to finance the acquisition cost.
(e) Tax effect of the above adjustments at Clear Channel's effective tax 13,339
rate of 40%.
</TABLE>
78
<PAGE>
UNIVERSAL OUTDOOR HOLDINGS, INC.
PRO FORMA COMBINED STATEMENT OF OPERATIONS
(UNAUDITED)
Pro forma adjustments for all acquisitions are based upon preliminary
estimates, available information and certain assumptions that management of
Clear Channel deems appropriate. Final adjustments may differ from the pro forma
adjustments presented herein. The unaudited combined pro forma financial
information does not purport to present the actual financial position or results
of operations of Clear Channel had the transactions and events assumed therein
in fact occurred on the dates specified, nor are they necessarily indicative of
the results of operations that may be achieved in the future. The unaudited pro
forma combined financial information is based on certain assumptions and
adjustments described in the notes thereto and should be read in conjunction
with the notes to unaudited combined pro forma financial information and the
separate historical financial statements and notes which are contained elsewhere
herein. Income (loss) is shown before income taxes and extraordinary items
because Clear Channel has sufficient net operating loss carryforwards to offset
taxable income for the periods presented. Therefore, the presentation of income
taxes is neither required nor meaningful.
The unaudited pro forma adjustments reflect an allocation of a portion of
the total acquisition cost to goodwill and the establishment of acquisition
liabilities and deferred tax liabilities for the effects of the significant
differences between the tax basis of the assets acquired and the estimated fair
value of the assets, primarily property and equipment, recorded for financial
statement purposes. No deferred taxes are required to be recorded for amounts
allocated to nondeductible goodwill.
79
<PAGE>
UNIVERSAL OUTDOOR HOLDINGS, INC.
PRO FORMA COMBINED STATEMENTS OF OPERATIONS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1996
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
UNIVERSAL POA MEMPHIS
OUTDOOR AD-SIGN, INC NOA HOLDING ACQUISITION TUNICA ADDITIONAL REVERE
INC. AND IMAGE MEDIA COMPANY CORPORATION ACQUISITION ACQUISITIONS ACQUISITIONS
----------- --------------- ----------- ------------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net revenue........ $ 76,138 $ 842 $ 5,832 $ 35,815 $ 14,705 $ 1,166 $ 29,047
----------- ----- ----------- ------------- ----------- ------ -------------
Operating expenses:
Direct cost of
revenues....... 26,468 322 2,616 10,788 6,315 564 17,333
General and
administrative
expenses....... 10,648 100 1,459 9,613 2,743 304 4,118
Depreciation and
amortization... 18,286 160 1,053 6,004 1,546 38 5,542
Non cash
compensation
for common
stock
warrants....... 9,000 -- -- -- -- -- --
----------- ----- ----------- ------------- ----------- ------ -------------
64,402 582 5,128 26,405 10,604 906 26,993
----------- ----- ----------- ------------- ----------- ------ -------------
Operating Income... 11,736 260 704 9,410 4,101 260 2,054
Interest expense... 19,567 -- 468 5,558 89 52 3,392
Other expense...... 1,398 -- -- (21) -- (84) (8,410)
----------- ----- ----------- ------------- ----------- ------ -------------
Net income before
income taxes..... $ (9,229) $ 260 $ 236 $ 3,873 $ 4,012 $ 292 $ 7,072
----------- ----- ----------- ------------- ----------- ------ -------------
----------- ----- ----------- ------------- ----------- ------ -------------
<CAPTION>
NEW YORK/ NEW JULY AND OCTOBER PRO FORMA
JERSEY ACQUISITION OFFERINGS PRO FORMA AS OFFERING
ACQUISITION ADJUSTMENTS ADJUSTMENTS ADJUSTED ADJUSTMENTS AS ADJUSTED
------------- ------------------- ----------------- ------------ ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net revenue........ $ 8,943 $ 4,123(1)(2)(3) $ -- $ 176,611 $ -- $ 176,611
------ ------- -------- ------------ ------------- -----------
Operating expenses:
Direct cost of
revenues....... 3,558 2,024(1)(2)(3) -- 69,988 -- 69,988
General and
administrative
expenses....... 1,550 (9,687)(2)(3)(4) -- 20,848 -- 20,848
Depreciation and
amortization... 993 17,196(2)(3)(5) -- 50,818 -- 50,818
Non cash
compensation
for common
stock
warrants....... -- -- -- 9,000 -- 9,000
------ ------- -------- ------------ ------------- -----------
6,101 9,533 -- 150,654 -- 150,654
------ ------- -------- ------------ ------------- -----------
Operating Income... 2,842 (5,410) -- 25,957 -- 25,957
Interest expense... -- 37,869(2)(3)(6)(7) (23,938)(9) 43,057 1,178(10) 44,235
Other expense...... -- 8,928(2)(3)(8) -- 1,811 -- 1,811
------ ------- -------- ------------ ------------- -----------
Net income before
income taxes..... $ 2,842 $ (52,207) $ 23,938 $ (18,911) $ (1,178) $ (20,089)
------ ------- -------- ------------ ------------- -----------
------ ------- -------- ------------ ------------- -----------
</TABLE>
80
<PAGE>
NOTES TO UNIVERSAL UNAUDITED COMBINED PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)
The following explanations describe the assumptions used in determining the
pro forma adjustments necessary to present the pro forma results of operations
of Universal giving effect to the POA Acquisition(a) the Debt Tender Offers(b),
the execution of the New Credit Facility(c), the Memphis\Tunica Acquisition, the
Revere Acquisition, the Matthew Acquisition, the Additional Acquisitions(d), the
October Offerings(e), the December Offering(f) and the application of the
estimated net proceeds therefrom, and the net reduction in operating expenses of
the businesses acquired as if each had occurred at the beginning of the period.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1996
------------
<C> <S> <C>
1. POA Acquisition Corporation, a wholly owned subsidiary of OAH (as defined here-in) acquired
certain assets and liabilities in the outdoor advertising industry in Florida during May 1996.
The historical financial information includes revenues and expenses associated with the new
market prior to the acquisition:
$ 955
Net revenues..................................................................................
710
Direct cost of revenues.......................................................................
2. Prior to acquisition by Universal, Revere (as defined herein) disposed of certain assets and
liabilities in the outdoor advertising industry in Texas. The following entry eliminates
revenues and expenses associated with the Texas market prior to the acquisition:
$ (3,661)
Net revenue...................................................................................
(2,128)
Direct cost of revenues.......................................................................
(568)
General and administrative expenses...........................................................
(765)
Depreciation and amortization.................................................................
(367)
Interest expense..............................................................................
(853)
Other.........................................................................................
3. Entry records statement of operations activity of Revere from September 30, 1996 through the
date of closing (December 10, 1996):
$ 7,784
Net revenue...................................................................................
4,152
Direct cost of revenues.......................................................................
1,081
General and administrative expenses...........................................................
1,764
Depreciation and amortization.................................................................
770
Interest expense..............................................................................
848
Other.........................................................................................
</TABLE>
81
<PAGE>
NOTES TO UNIVERSAL UNAUDITED COMBINED PRO FORMA STATEMENT OF OPERATIONS
(CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1996
------------
4. Entry records reduction in general and administrative expenses relating to elimination of
certain duplicate corporate expenses, principally relating to employee costs and costs
relating to other corporate activities. Amounts have been determined based upon specific
employees identified for termination plus actual benefits costs incurred, and expenses
associated with leased facilities which will not be assumed or will be canceled upon
consummation of the acquisition.
<C> <S> <C>
$ 1,875
Naegele(g), Ad-Sign(h) and Image Media(i).....................................................
------------
------------
$ 2,100
POA Acquisition...............................................................................
1,000
Memphis/Tunica Acquisition....................................................................
255
Additional Acquisitions.......................................................................
------------
$ 3,355
------------
------------
$ 3,770
Revere Acquisition............................................................................
1,200
Matthew Acquisition...........................................................................
------------
$ 4,970
------------
------------
5. Entry records the increase in depreciation and amortization expense arising from purchase
accounting adjustments to advertising structures and goodwill amortized over a period of 15
years:
$ 460
Naegele, Ad-Sign and Image Media (acquired in March 1996).....................................
------------
------------
$ 8,480
POA Acquisition (acquired in October 1996)....................................................
3,101
Memphis/Tunica Acquisition (acquired in January 1997).........................................
236
Additional Acquisitions (acquired in September 1996)..........................................
------------
$ 11,817
------------
------------
$ 2,210
Revere Acquisition (acquired in December 1996)................................................
1,710
Matthew Acquisition (acquired in January 1997)................................................
------------
$ 3,920
------------
------------
6. Entry records additional interest expense at an assumed rate of 8.25% per annum to be incurred $ 5,604
in connection with the acquisition of Naegele, Ad-Sign and Image Media which occurred in March
of 1996 (debt incurred of $60.0 million less $1.4 million of interest expense for debt not
assumed)......................................................................................
------------
------------
</TABLE>
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<PAGE>
NOTES TO UNIVERSAL UNAUDITED COMBINED PRO FORMA STATEMENT OF OPERATIONS
(CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1996
------------
7. Entry to record additional interest expense at an assumed rate of 8.5% per annum in connection
with the Transactions:
<C> <S> <C>
$ 20,400
POA Acquisition (debt incurred of $240.0 million).............................................
6,018
Memphis/Tunica Acquisition (debt incurred of $70.8 million)...................................
646
Additional Acquisitions.......................................................................
------------
$ 27,064
(5,699)
Actual interest expense for POA Acquisition, Memphis/Tunica Acquisition and Additional
Acquisitions..................................................................................
------------
$ 21,365
------------
------------
$ 10,489
Revere Acquisition (debt incurred of $123.4 million)..........................................
3,400
Matthew Acquisition (debt incurred of $40.0 million)..........................................
------------
13,889
(3,392)
Actual interest expense for Revere Acquisition and Matthew Acquisition........................
------------
$ 10,497
------------
------------
8. Entry to reduce other income from Revere for the gain recognized on the sale of the Texas $ 8,933
markets.......................................................................................
------------
------------
9. Entry to record changes in interest expense:
$ (5,304)
Proceeds of $62.4 million from the offering of Class A Common Stock in July at an assumed rate
of 8.5%.......................................................................................
(2,550)
KEA V and KEP V and Kelso Designees (as hereafter defined) Investment of $30.0 million at an
assumed rate of 8.5%..........................................................................
(17,175)
October Equity Offering proceeds of $202.0 million at an assumed rate of 8.5%.................
2,813
October Notes of $225 million at 9.75% versus assumed rate of 8.5%............................
(1,771)
Refinanced 14% Series A Senior Secured Discount Notes due 2004 of $50 million at an assumed
rate of 9.75% for 10 of 12 months.............................................................
(677)
Refinanced 11% Series A Senior Secured Discount Notes due 2003 of $65 million at an assumed
rate of 9.75% for 10 of 12 months.............................................................
726
Amortization of financing costs...............................................................
------------
$ (23,938)
------------
------------
10. Entry to record the changes in interest expense:
$ 1,250
December Notes of $100 million at 9.75% versus an assumed rate of 8.5%........................
(72)
Amortization of deferred financing costs......................................................
------------
$ 1,178
------------
------------
</TABLE>
83
<PAGE>
NOTES TO UNIVERSAL UNAUDITED COMBINED PRO FORMA STATEMENT OF OPERATIONS
(CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1996
------------
11. The above pro-forma statement of operations do not reflect the following extraordinary losses
on the early retirement of debt:
<C> <S> <C>
14% Series A Senior Secured Discount Notes due 2004:
1,400
September 1996................................................................................
10,725
October 1996..................................................................................
11% Series A Senior Secured Discount Notes due 2003:
14,448
October 1996..................................................................................
------------
$ 26,573
------------
------------
</TABLE>
- ------------------------
(a) The POA Acquisition was consummated in October 1996. In the stock
transaction of Outdoor Advertising Holdings, Inc. ("OAH"), Universal
acquired approximately 6,337 advertising display faces consisting of
bulletins and posters in six markets in the Southeast United States,
including Orlando, Ocala, the East and Gulf Coast areas of Florida, Myrtle
Beach and Chattanooga.
(b) The Credit Facility consists of a commitment of $300 million which was
subsequently reduced to $225 million.
(c) The Debt Tender Offers consist of Universal completing a tender offer of its
June 1994 offering of $50 million of its 14% Senior Secured Discount Notes
due 2004 and a tender offer of its outstanding 11% Senior Notes due 2003.
(d) The Additional Acquisitions were consummated in September 1996. Universal
purchased certain assets of (i) Iowa Outdoor Displays for approximately $1.8
million in cash and (ii) The Chase Company for approximately $5.8 million in
cash. As a result of the Additional Acquisitions, Universal acquired
approximately 160 advertising display faces consisting of posters in and
around Des Moines and approximately 245 advertising display faces consisting
primarily of bulletins in and around Dallas.
(e) The October Offerings refers to the offering by UOI of $225 million of its
9 3/4 Senior Subordinated Notes due 2006 and the offering by Universal of
6.5 million shares of its Common Stock.
(f) The December Offering refers to the offering by UOI of $100 million of its
9 3/4 Senior Subordinated Notes due 2006 (the "December Notes") which notes
were subsequently exchanged in May, 1997 for $100,000,000 9 3/4 Series B
Senior Subordinated Exchange Notes due 2006 with identical terms to the
December Notes in a transaction registered under the Securities Act.
(g) Naegele was purchased in April 1996. In the stock transaction, Universal
acquired approximately 2,550 poster faces and 840 bulletin faces in the
Minneapolis/St. Paul, Minnesota and Jacksonville, Florida markets.
(h) Ad-Sign, Inc. was purchased in January 1996 in an asset transaction.
Universal acquired approximately 160 painted bulletin faces in the Chicago
market.
(i) Image Media, Inc. was purchased in March 1996 in an asset transaction.
Universal acquired approximately 18 painted bulletin and painted wall faces
in the Chicago market.
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<PAGE>
10. COMPARISON OF THE RIGHTS OF HOLDERS OF UNIVERSAL COMMON
STOCK AND CLEAR CHANNEL COMMON STOCK
As a result of the Merger, holders of Universal Common Stock will become
holders of Clear Channel Common Stock. Universal is a Delaware corporation and
Clear Channel is a Texas corporation. Following the Merger, the rights of all
former holders of Universal Common Stock will be governed by Clear Channel's
Restated Articles of Incorporation (the "Clear Channel Charter"), Clear
Channel's Second Amended and Restated Bylaws (the "Clear Channel Bylaws"), and
the laws of Texas. The following is a summary comparison of the material
differences between the rights of holders of Universal Common Stock and holders
of Clear Channel Common Stock and more particularly certain material differences
between certain provisions of the Clear Channel Charter and the Third Amended
and Restated Certificate of Incorporation of Universal (the "Universal
Charter"), the Clear Channel Bylaws and the Second Amended and Restated By-Laws
of Universal (the "Universal By-Laws"), and between certain provisions of the
DGCL and the Texas Business Corporation Act (the "TBCA"). This summary is
qualified in its entirety by reference to the full text of the Clear Channel
Charter, the Clear Channel Bylaws, the Universal Charter, and the Universal
By-Laws. For information on how to obtain copies of such documents, see Section
1 "Available Information." Furthermore, the description of the differences
between the DGCL and the TBCA is a summary only, does not purport to be a
complete description of the differences between the DGCL and TBCA, and is
qualified in its entirety by references to the DGCL and TBCA.
(A) AUTHORIZED CAPITAL
The total number of authorized shares of capital stock of Universal is
85,000,000, consisting of 75,000,000 shares of Universal Common Stock, par value
$0.01 per share, and 10,000,000 shares of preferred stock, par value $0.01 per
share. The total number of authorized shares of capital stock of Clear Channel
is 152,000,000, consisting of 150,000,000 shares of Clear Channel Common Stock,
par value $0.10 per share, and 2,000,000 shares of preferred stock, par value
$1.00 per share.
(B) NUMBER OF DIRECTORS; ELECTION OF DIRECTORS; REMOVAL; VACANCIES
The DGCL permits the charter or the by-laws of a corporation to contain
provisions governing the number and terms of directors. However, if the charter
contains provisions fixing the number of directors, such number may not be
changed without amending the certificate of incorporation. The Universal Charter
states that the number of directors shall not be less than three nor more than
nine. The Universal By-Laws state that the number of directors shall be
determined from time to time by resolution of the Universal Board. There are
currently 4 directors serving on the Universal Board.
The DGCL permits the charter or by-laws of a corporation to provide that
directors be divided into up to three classes, with the term of office of each
class of directors expiring in successive years. The Universal Charter provides
for the Universal Board to be divided into three classes, each of which is to be
composed as nearly as possible of one-third of the directors.
Under the DGCL, any director or the entire board may be removed, with or
without cause, by the holders of a majority of the shares entitled to vote at
any election of directors (or in the case of class voting, the holders of a
majority of the shares of that class), except in the case of a corporation with
a classified board. If a Delaware corporation has a classified board,
stockholders may remove a director or directors only for cause, unless the
charter otherwise provides.
Under the DGCL and the Universal By-Laws (unless otherwise provided in the
charter or by-laws), vacancies and newly created directorships may be filled by
a majority of the directors then in office or by a sole remaining director (even
though less than a quorum). However, the DGCL also provides that if the
directors then in office constitute less than a majority of the whole board, the
Court of Chancery may,
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<PAGE>
upon application of any stockholder or stockholders holding at least 10% of the
total number of shares at the time outstanding entitled to vote for directors,
order an election of directors to be held.
The Clear Channel Bylaws authorize no less than 1 and no more than 9
directors, with the exact number to be determined by the Clear Channel Board.
Under the TBCA, the bylaws or charter may provide that at any meeting of
stockholders called expressly for that purpose, any director or the entire board
may be removed, with or without cause, by vote of the holders of a majority of
the shares then entitled to vote at an election of directors, subject to further
restrictions on removal which may be contained in the bylaws. No further
restriction is contained in the Clear Channel Bylaws. The Clear Channel Bylaws
provide that a director may also be removed by unanimous written consent of the
stockholders.
Under the TBCA, any vacancy occurring in the board of directors may be
filled by the stockholders or by the affirmative vote of a majority of the
remaining directors. A directorship to be filled by reason of an increase in the
number of directors may be filled by the stockholders or by the board of
directors for a term of office continuing only until the next election of one or
more directors by the stockholders, provided that the board of directors may not
fill more than two such directorships during the period between any two
successive annual meetings of stockholders.
(C) CHARTER AMENDMENTS
Under the DGCL, the charter may be amended if (i) the board sets forth the
proposed amendment in a resolution, declares the advisability of the amendment
and directs that it be submitted to a vote at the meeting of stockholders and
(ii) the holders of at least a majority of shares of stock entitled to vote
thereon approve the amendment, unless the charter requires the vote of a greater
number of shares. The Universal Charter does not require the vote of a greater
number of shares. If the holders of the outstanding shares of a class are
entitled to vote as a class upon a proposed amendment, the holders of a majority
of the outstanding shares of such class must also vote in favor of the
amendment.
Under the TBCA, a corporation's charter may be amended if: (i) the board of
directors sets forth the proposed amendment in a resolution and directs that it
be submitted to a vote at a meeting of stockholders and (ii) the holders of at
least two-thirds of the outstanding shares entitled to vote on the amendment
approve it by affirmative vote, unless the charter otherwise requires the vote
of a different number of shares, which if lesser, must be at least a majority.
In addition, if the holders of any class or series of shares are entitled to
vote as a class or series thereon, such an amendment must be approved by the
affirmative vote of the holders of at least two-thirds of the shares within each
class or series of outstanding shares entitled to vote thereon, unless the
charter otherwise requires the vote of a different number of shares, which, if
lesser, must be at least a majority. The Clear Channel Charter does not provide
for such different amount for approval of an amendment to the Clear Channel
Charter.
(D) BY-LAW AMENDMENTS
Under the DGCL, the power to adopt, alter and repeal the by-laws is vested
in the stockholders, except to the extent that a corporation's charter or
by-laws vest it in the board of directors. However, the conferral of the power
to adopt, alter and repeal the by-laws upon the directors does not divest the
stockholders of their power to adopt, amend or repeal the by-laws. The Universal
Charter grants the Universal Board concurrent power with the stockholders to
make, alter, amend, change, add to or repeal the Universal By-Laws. The
Universal By-Laws may be altered, amended or repealed or new by-laws adopted (i)
by the affirmative vote of the holders of at least 66 2/3% of the total voting
power of all shares of stock of Universal entitled to vote in the election of
directors, considered as one class or (ii) by the Universal Board, at any
regular meeting of the stockholders or the Universal Board or at any special
meeting of the stockholders or of the Universal Board if notice of such
alteration, amendment, repeal or adoption of new by-laws be contained in the
notice of such special meeting.
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<PAGE>
Under the TBCA, a board of directors may amend or repeal a corporation's
bylaws, or adopt new bylaws, unless (i) the charter reserves such power
exclusively to stockholders, or (ii) the stockholders, in amending, repealing or
adopting a particular bylaw provision, expressly provide that the board may not
amend or repeal that bylaw. In addition, unless the charter or a bylaw adopted
by the stockholders provides otherwise as to all or some portion of a
corporation's bylaws, stockholders may amend the bylaws even though such bylaws
may also be amended by the board. The Clear Channel Charter and the Clear
Channel Bylaws do not otherwise so provide
(E) ADVANCE NOTICE OF DIRECTOR NOMINATIONS AND NEW BUSINESS
The Universal By-Laws require nominations of persons for election to the
Universal Board and submission of other business to be considered at a meeting
of stockholders to be either made or brought by or at the direction of the
Universal Board or made or brought by a stockholder of record who complies with
advance notice procedures set forth in the Universal By-Laws.
Neither the Clear Channel Charter nor Bylaws contain any provisions
regarding advance notice of nominations of persons for election to the Clear
Channel Board or submission of other business to be considered at a meeting of
stockholders of Clear Channel.
(F) SPECIAL MEETINGS OF STOCKHOLDERS
The DGCL provides that a special meeting of stockholders may be called by
the board of directors or by such person or persons as may be authorized by a
corporation's charter or by-laws. The Universal By-Laws provide that special
meetings may be called by the Chairman of the Board or the President of
Universal and shall be called by the Secretary of Universal at the direction of
a majority of the Universal Board.
Under the TBCA, in addition to the board of directors, the president or
other persons that are authorized in the corporation's charter or bylaws,
holders of not less than 10% of all the shares entitled to vote have the right
to call a special stockholders' meeting, unless the charter provides for a
number of shares greater than or less than 10%, in which event, special meetings
of the stockholders may be called by the holders of at least the percentage of
shares so specified in the charter, but in no event may the charter provide for
a number of shares greater than 50% as required to call a special stockholders
meeting. The Clear Channel Charter does not alter the statutory rule permitting
the call of a special meeting by holders of not less than 10%.
(G) CUMULATIVE VOTING
The DGCL permits cumulative voting for the election of directors if provided
by the charter, but the Universal Charter does not so provide.
The TBCA permits the cumulative voting for the election of directors unless
the charter expressly prohibits cumulative voting. The Clear Channel Charter
expressly prohibits cumulative voting.
(H) STOCKHOLDER ACTION WITHOUT A MEETING
Under the DGCL, unless the charter provides otherwise, any action to be
taken by stockholders may be taken without a meeting, without prior notice and
without a vote, if a consent in writing, setting forth the action so taken, is
signed by the holders of outstanding stock having not less than the minimum
number of votes that would be necessary to authorize or take such action at a
meeting at which all shares entitled to vote thereon were present and voted. The
Universal Charter provides that the stockholders of Universal have no ability to
take any action unless such action is taken at any annual or special meeting of
the stockholders.
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<PAGE>
Under the TBCA, any action to be taken by stockholders may be taken without
a meeting, without prior notice and without a vote if all stockholders entitled
to vote on the matter consent to the action in writing. If a corporation's
charter so provides, stockholder action may be taken under the TBCA by a consent
signed by the holders of outstanding stock having not less than the minimum
number of votes that would be necessary to authorize or take such action at a
meeting. The Clear Channel Charter provides for such stockholder consent by less
than unanimous written consent.
(I) REQUIRED VOTE FOR CERTAIN TRANSACTIONS
EXTRAORDINARY TRANSACTIONS. Except as provided below, and in certain other
limited circumstances, under the DGCL, a merger, a sale, lease, exchange or
other disposition of all or substantially all of the property of the corporation
(a "Disposition") not in the usual and regular course of the corporation's
business, or a dissolution of the corporation, are required to be approved by
the holders of a majority of the shares entitled to vote thereon, unless the
charter provides otherwise. In addition, under the DGCL, class voting rights
exist with respect to amendments to the charter that adversely affect the terms
of the shares of a class. Such class voting rights do not exist as to other
extraordinary matters, unless the charter provides otherwise.
Except as provided below, and in certain other limited circumstances, under
the TBCA, such transactions must be approved by at least two-thirds of the
shares entitled to vote thereon, unless the charter requires the vote of a
different number of shares which may not be less than a majority of the shares
entitled to vote thereon. If the holders of any class of shares are entitled to
vote as a class thereon, such a transaction must be approved by two-thirds of
the outstanding shares of such class and at least two-thirds of the outstanding
shares otherwise entitled to vote thereon.
ABSENCE OF REQUIRED VOTE FOR CERTAIN MERGERS. Under the DGCL no vote of the
stockholders of a corporation surviving a merger is required to approve a merger
if (i) the agreement of merger does not amend the charter of such corporation,
(ii) each share of stock of such corporation outstanding immediately before the
merger is to be an identical outstanding or treasury share of the surviving
corporation thereafter and (iii) the number of shares of common stock of such
corporation to be issued in the merger, if any, does not exceed 20% of the
number of shares outstanding immediately before the merger.
Under the TBCA, no vote of the stockholders of a corporation surviving a
merger is required to approve the merger if (i) such corporation is the sole
surviving corporation in the merger, (ii) the charter of such corporation will
not differ from its charter before the merger, (iii) each stockholder of such
corporation whose shares are outstanding immediately before the effective date
of the merger will hold the same number of shares, with identical designations,
preferences, limitations and relative rights, immediately after the effective
date of the merger, (iv) the voting power of the number of voting shares
outstanding immediately after the merger, plus the voting power of the number of
voting shares of such corporation to be issued in the merger, if any, does not
exceed 20% of the voting power of the total number of voting shares outstanding
immediately before the merger, (v) the number of participating shares (that is,
shares whose holders are entitled to participate without limitation in dividends
or other distributions) of such corporation to be issued in the merger, if any,
does not exceed 20% of the number of such shares outstanding immediately before
the merger, and (vi) the board of directors of the corporation adopts a
resolution approving the plan of merger.
(J) STATE TAKEOVER LEGISLATION
Section 203 of the DGCL prohibits a corporation from engaging in a "business
combination" (as herein defined) with an "interested stockholder" (defined
generally to mean a person who, together with his associates and affiliates,
owns, or if the person is an affiliate of the corporation did own within the
last three years, 15% or more of the outstanding voting stock of the
corporation) for a period of three years after the time of the transaction in
which the person became an interested stockholder, unless (i) prior to
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<PAGE>
such time, the board of directors of the corporation approved the business
combination or the transaction in which the stockholder became an interested
stockholder, (ii) upon consummation of the transaction that resulted in the
interested stockholder being such, the interested stockholder owned at least 85%
of the voting stock of the corporation outstanding at the time such transaction
commenced (subject to certain adjustments), or (iii) on or subsequent to the
date of the business combination, the board of directors and the holders of at
least two-thirds of the outstanding voting stock not owned by the interested
stockholder approve the business combination. The DGCL defines a "business
combination" generally as: (i) a merger or consolidation with the interested
stockholder or with any other corporation if the merger or consolidation is
caused by the interested stockholder; (ii) a sale or other disposition to or
with an interested stockholder of assets with an aggregate market value equal to
10% or more of either the aggregate market value of all assets of the
corporation or the aggregate market value of all of the outstanding stock of the
corporation; (iii) with certain exceptions, any transaction resulting in the
issuance or transfer by the corporation or any majority-owned subsidiary of any
stock of the corporation or such subsidiary to the interested stockholder; (iv)
any transaction involving the corporation or a majority-owned subsidiary that
has the effect of increasing the proportionate share of the stock of the
corporation or any such subsidiary owned by the interested stockholder; or (v)
any receipt by the interested stockholder of the benefit of any loans or other
financial benefits provided by the corporation or any majority-owned subsidiary.
Article Thirteen of the TBCA, effective September 1, 1997, imposes a special
voting requirement for the approval of certain business combinations and related
party transactions between public corporations and affiliated stockholders
unless the transaction or the acquisition of shares by the affiliated
stockholder is approved by the board of directors of the corporation prior to
the affiliated stockholder becoming an affiliated stockholder. Article Thirteen
prohibits certain mergers, sales of assets, reclassifications and other
transactions (defined as business combinations) between stockholders
beneficially owning 20% or more of the outstanding stock of a Texas public
corporation (such stockholders being defined as an affiliated stockholder) for a
period of three years following the stockholder acquiring shares representing
20% or more of the corporation's voting power unless two-thirds of the
unaffiliated stockholders approve the transaction at a meeting held no earlier
than six months after the stockholder acquires that ownership. The provisions
requiring such a vote of stockholders will not apply to any transaction with an
affiliated stockholder if the transaction or the purchase of shares by the
affiliated stockholder is approved by the board of directors before the
affiliated stockholder acquires beneficial ownership of 20% of the shares, or if
the affiliated stockholder was an affiliated stockholder, prior to December 31,
1996, and continued as such through the date of the transaction. Article
Thirteen does not contain the Delaware 85% unaffiliated share tender offer
exception. Article Thirteen contains an opt out provision that allows a
corporation to elect to opt out of the statute by adopting a bylaw or charter
amendment prior to December 31, 1997.
Universal is subject to Section 203 and, as such, Section 203 will apply to
business combinations in which it may be involved. In connection with the
Merger, the Universal Board approved the Merger Agreement and the transactions
contemplated thereby in satisfaction of the prior approval requirement of
Section 203 of the DGCL so that the provisions of Section 203 will not apply to
the Merger or any of the other transactions contemplated by the Merger
Agreement. Inasmuch as Clear Channel has not elected to opt out of Article
Thirteen of the TBCA, there will be no significant difference as a result of the
Merger between Universal's current susceptibility to, and its stockholders'
rights in the event of, a business combination or takeover and Clear Channel's
susceptibility to, and its stockholders' rights in the event of, a business
combination or takeover.
(K) STANDARD OF CONDUCT FOR DIRECTORS
Under Delaware law, the standards of conduct for directors have developed
through written opinions of the Delaware courts in cases decided by them.
Generally, directors of Delaware corporations are subject to a duty of loyalty
and a duty of care. The duty of loyalty has been said to require directors to
refrain from self-dealing. According to the Delaware Supreme Court, the duty of
care requires "directors...in managing
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<PAGE>
the corporate affairs...to use that amount of care which ordinarily careful and
prudent men would use in similar circumstances." Later case law has established
"gross negligence" as the test for breach of the standard for the duty of care
in the process of decision-making by directors of Delaware corporations.
Similarly, under Texas law, the standards of conduct for directors have
developed through written opinions of the Texas courts in cases decided by them.
However, Texas case law concerning standards of conduct for directors is not as
well developed as Delaware case law. Generally, directors of Texas corporations
are subject to a duty of loyalty and a duty of care. The duty of loyalty
prohibits a director from profiting at the expense of the corporation in
connection with the director's dealings with the corporation, third parties, and
stockholders. The duty of care requires directors to act in good faith and to
exercise the same degree of care and prudence that ordinary persons in a like
position under similar circumstances would use.
(L) INDEMNIFICATION OF DIRECTORS AND OFFICERS
Texas law and Delaware law have different provisions and limitations
regarding indemnification by a corporation of its officers, directors, employees
and agents.
SCOPE. Under the DGCL, indemnification rights are expressly nonexclusive. A
corporation is permitted to provide indemnification or advancement of expenses,
by a by-law provision, agreement or otherwise, against judgments, fines,
expenses and amounts paid in settlement actually and reasonably incurred by the
person in connection with such proceeding if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interest of
the corporation and with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. However, no
indemnification shall be made with respect to any matter as to which such person
is adjudged to be liable to the corporation, unless the court shall determine
that such person is entitled to indemnity.
The Universal Charter provides, in substance, that any person who was or is
a party or threatened to be made a party to any type of proceeding, by reason of
the fact that he or she is or was a director of Universal (and Universal, in the
discretion of the Universal Board, may so indemnify a person by reason of the
fact that he or she is or was an officer or employee of Universal or is or was
serving at the request of Universal in any other capacity for or on behalf of
Universal), will be indemnified by Universal to the full extent permitted by the
DGCL, against any liability or expense, actually or reasonably incurred by such
person in respect thereof; PROVIDED, HOWEVER, that Universal will not be
obligated to indemnify any such person: (i) with respect to the proceedings,
claims or actions initiated or brought voluntarily without the authorization or
consent of Universal by such person and not by way of defense; or (ii) for any
amounts paid in settlement of an action effected without the prior written
consent of Universal to such settlement.
Under the TBCA, a corporation is permitted to provide indemnification or
advancement of expenses, by a bylaw provision, agreement, security arrangement
or otherwise against judgments, penalties, fines, settlements and reasonable
expenses actually incurred by the person in connection with the proceeding.
However, if the person is found liable to the corporation, or if the person is
found liable on the basis he received an improper personal benefit,
indemnification under the TBCA is limited to the reimbursement of reasonable
expenses and no indemnification will be available if the person is found liable
for willful or intentional misconduct. The Clear Channel Charter requires that
Clear Channel indemnify directors and officers except in relation to matters in
which such director or officer is determined to be liable for negligence or
misconduct in performance of duty to the corporation.
ADVANCEMENT OF EXPENSES. The DGCL provides for the advancement of expenses
for such proceedings upon receipt of a similar undertaking, such undertaking,
however, need not be in writing. The DGCL does not require that such director
give an affirmation regarding his conduct in order to receive an advance of
expenses.
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Under the TBCA, reasonable court costs and attorneys' fees incurred by a
director who was, is, or is threatened to be made, a named defendant or
respondent in a proceeding because the person is or was a director of such
corporation may be paid or reimbursed by the corporation in advance of the final
disposition of the proceeding after the corporation receives (i) a written
affirmation by the director of his good faith belief that he has met the
standard of conduct necessary for indemnification under the TBCA and (ii) a
written undertaking by or on behalf of the director to repay the amount paid or
reimbursed if it is ultimately determined that he has not met those requirements
or indemnification for such expenses is precluded under the TBCA.
PROCEDURE FOR INDEMNIFICATION. The DGCL provides that a determination that
indemnification is appropriate under the DGCL shall be made (i) by a majority
vote of directors who are not party to the proceeding even though less than a
quorum, (ii) if there are no such directors, or if such directors so direct, by
special legal counsel, or (iii) by stockholder vote.
Similar to the DGCL, the TBCA provides that a determination that
indemnification is appropriate under Texas Law shall be made (i) by a majority
vote of a quorum consisting of directors who are not party to the proceeding,
(ii) if such a quorum cannot be obtained, by a special committee of the board of
directors consisting of at least two directors not party to the proceeding,
(iii) by special legal counsel, or (iv) by stockholder vote.
MANDATORY INDEMNIFICATION. Delaware law requires indemnification with
respect to any claim, issue or matter on which the director is successful on the
merits or otherwise, in the defense of the proceeding. Under the TBCA,
indemnification by the corporation is mandatory only if the director is wholly
successful on the merits or otherwise, in the defense of the proceeding.
INSURANCE. The DGCL and the TBCA both allow a corporation to purchase and
maintain insurance on behalf of any person who is or was a director, officer,
employee or agent of the corporation against any liability asserted against such
person and incurred by such person in such a capacity or arising out of his
status as such a person whether or not the corporation would have the power to
indemnify him against that liability. Under Texas law, a corporation may also
establish and maintain arrangements, other than insurance, to protect these
individuals, including a trust fund or surety arrangement. As noted above,
indemnification rights under Delaware law are expressly nonexclusive.
PERSONS COVERED. The DGCL provides substantially the same indemnification
rights to officers, employees and agents as it provides for directors. The TBCA
expressly and separately deals with the protection available for officers,
employees and agents. Such protections are similar to those provided to
directors.
STANDARD OF CARE. The standard of care required under both Delaware law and
Texas law is substantially the same. In general, directors are charged with the
duty in their decision-making process and oversight responsibilities to act as
would a reasonably prudent person in the conduct of such person's own affairs.
CONTINUITY OF INDEMNIFICATION. The DGCL contains a provision that expressly
provides that the statutory indemnification provisions (i) apply to a director
after he leaves the corporation for acts he performed while a director and (ii)
apply to the estate and personal representatives of the director. The TBCA does
not have a provision that expressly provides indemnification after a
directorship has terminated for acts or omissions which took place prior to such
termination.
STOCKHOLDER REPORT. The TBCA requires a report to the stockholders upon
indemnification or advancement of expenses. The DGCL does not have a similar
reporting requirement.
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(M) LIMITATION OF PERSONAL LIABILITY OF DIRECTORS AND OFFICERS
The DGCL provides that a corporation's charter may include a provision
limiting the personal liability of a director to the corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director.
However, no such provision can limit the liability of a director for (i) any
breach of the director's duty of loyalty to the corporation or its stockholders,
(ii) acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of the law, (iii) violation of certain provisions of the
DGCL, (iv) any transaction from which the director derived an improper personal
benefit, or (v) any act or omission prior to the adoption of such a provision in
the charter. The Universal Charter provides that Universal directors are not
personally liable to Universal or its stockholders for monetary damages for
breach of fiduciary duty as a director, except for liability (i) for any breach
of the director's duty of loyalty to Universal or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) pursuant to Section 174 of the DGCL, or (iv) for
any transaction from which the director derived an improper personal benefit.
However, such provisions do not limit the availability of equitable relief to
Universal or its stockholders.
Under Article 1302-7.06 ("Article 1302") of the Texas Miscellaneous
Corporation Laws Act, a corporation's charter may eliminate all monetary
liability of each director to the corporation or its stockholders for conduct in
the performance of such director's duties other than certain conduct
specifically excluded from protection. Article 1302 does not permit any
limitation of the liability of a director for (i) breaching the duty of loyalty
to the corporation or its stockholders, (ii) failing to act in good faith, (iii)
engaging in intentional misconduct or a known violation of law, (iv) obtaining
an improper personal benefit from the corporation, or (v) violating applicable
statutes which expressly provide for the liability of a director. The Clear
Channel Charter eliminates the monetary liability of Clear Channel's directors
to the fullest extent permitted by law.
(N) APPRAISAL RIGHTS
Under the DGCL, except as otherwise provided by the DGCL, stockholders have
the right to demand and receive payment in cash of the fair value of their stock
(as appraised pursuant to judicial proceedings) in the event of a merger or
consolidation in lieu of the consideration such stockholder would otherwise
receive in such transaction. However, except as otherwise provided by the DGCL a
stockholder does not have the right to demand payment of the fair value of his
shares ("appraisal rights") in connection with a merger or consolidation or in
the case of a Disposition (as defined in the DGCL) if (i) the shares of such
corporation are listed on a national securities exchange, designated as a
national market system security by the National Association of Securities
Dealers, Inc. ("NASD") or held of record by more than 2,000 stockholders or (ii)
such corporation will be the surviving corporation of the merger and no vote of
the stockholders of the surviving corporation is required to approve such merger
pursuant to Section 251 of the DGCL; provided, however, that a stockholder is
entitled to appraisal rights in the case of a merger or consolidation, if such
stockholder is required by the terms of an agreement of merger or consolidation
to accept in exchange for his shares anything other than (a) shares of stock of
the corporation surviving or resulting form such merger or consolidation, (b)
shares of any other corporation that at the effective date of the merger or
consolidation will be either listed on a national securities exchange or
designated as a national market system security by the NASD or held of record by
more than 2,000 stockholders, (c) cash in lieu of fractional shares of the
corporation described in the foregoing clauses (a) and (b), or (d) any
combination of the foregoing.
Similarly, under the TBCA, in general, a stockholder has (i) the right to
dissent from any plan of merger or consolidation or Disposition to which such
corporation is a party where a stockholder vote is required and (ii) appraisal
rights upon compliance with the statutory procedures. However, under Texas law,
a stockholder of a corporation does not have the right to dissent or to assert
appraisal rights if (i) the shares held by such stockholder are part of a class
or series of shares which are listed on a national securities exchange, or held
of record by not less than 2,000 holders, on the record date fixed to determine
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the stockholders entitled to vote on the plan of merger or consolidation or
Disposition and (ii) the stockholder is not required by the terms of the plan of
merger or consolidation or Disposition to accept for his shares any
consideration other than (a) shares of the corporation that, immediately after
the effective date of the merger, will be part of a class the shares of which
are (x) listed or authorized for listing upon official notice of issuance, on a
national securities exchange, or (y) held of record by not less than 2,000
holders or (b) cash in lieu of fractional shares otherwise entitled to be
received.
(O) PREEMPTIVE RIGHTS
Under the DGCL, a stockholder does not have preemptive rights unless such
rights are specifically granted in the corporation's charter. The Universal
Charter provides that no stockholder of Universal shall by reason of holding
shares of any class of stock have any preemptive or preferential right to
purchase or subscribe to any shares of any class of stock of Universal or to any
debt instruments or other securities convertible into any class of such stock.
Under the TBCA, preemptive rights exist automatically with respect to
unissued or treasury shares owned by the corporation, unless the charter limits
those rights. The Clear Channel Charter expressly denies any such preemptive
rights.
(P) DENIAL OF VOTING RIGHTS
The DGCL provides that holders of the outstanding shares of a class of stock
shall be entitled to vote as a class upon a proposed amendment to the charter,
whether or not entitled to vote thereon by the charter, if the amendment would
change the aggregate number of authorized shares or the par value of the class
or would adversely affect the powers, preferences or special rights of the
class.
The TBCA provides that holders of each class of shares, whether or not
entitled to vote by the charter, are entitled to vote as a class on proposed
amendment to the charter if the amendment would change the number of authorized
shares or the par value of the class, reclassify, cancel, or exchange shares of
the class, create a new class of shares having equal or superior preferences or
rights of the class or increase the rights of an already outstanding class, or
would adversely affect the powers, preferences or special rights of the class.
(Q) PAYMENT OF DIVIDENDS
Under the DGCL, a board of directors may authorize a corporation to make
distributions to its stockholders, subject to any restrictions in its charter,
either (i) out of surplus or (ii) if there is no surplus, out of net profits for
the fiscal year in which the dividend is declared and/or the preceding fiscal
year. Under the DGCL, no distribution out of net profits is permitted, however,
if, following the distribution, the corporation's capital is less than the
aggregate amount of capital represented by the issued and outstanding stock of
all classes having a preference upon the distribution of assets. The Universal
Charter does not further restrict the ability of the Universal Board to declare
dividends.
Under the TBCA, a board of directors may authorize a corporation to make
distributions to its stockholders out of its surplus, subject to any restriction
in its charter. Under the TBCA, no distribution is permitted if such
distribution exceeds the surplus of the corporation or would render the
corporation insolvent. The Clear Channel Charter does not further restrict the
ability of the Clear Channel Board to declare dividends.
(R) INSPECTION OF BOOKS AND RECORDS
Under the DGCL, any stockholder of a Delaware corporation may examine the
list of stockholders and any stockholder making a written demand may inspect any
other corporate books and records for any purpose reasonably related to the
stockholder's interest as a stockholder.
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Under the TBCA, any stockholder who holds at least 5% of all of the
outstanding shares of a corporation or that has held his shares for at least six
months will have the right to examine at any reasonable time, for any proper
purpose, the relevant books and records of account, minutes and share transfer
records of the corporation.
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11. BUSINESS OF UNIVERSAL
Universal is a leading outdoor advertising company operating approximately
34,000 advertising display faces in four large regions: the Midwest (Chicago,
Minneapolis/St. Paul, Indianapolis, Milwaukee and Des Moines), Florida (Orlando,
Jacksonville, Ocala and the Atlantic Coast and Gulf Coast areas of Florida), the
Midsouth (Evansville (IN), Dallas, Memphis /Tunica and Chattanooga (TN) and
Myrtle Beach (SC)) and the East (New York, Washington, D.C., Baltimore,
Philadelphia, Northern New Jersey, Wilmington (DE), Salisbury (MD) and Hudson
Valley (NY)). Universal's advertising display face inventory includes transit
display faces and kiosks in shopping malls, in addition to billboards and other
outdoor display faces. Universal believes that the diversity of its advertising
display inventory throughout its markets provides its customers with a unique
opportunity to select a variety of media and outlets in delivering their
marketing messages. Universal's customer base is also highly diversified, with
no one category of customers accounting for more than 16.0% of net revenues for
the six months ended June 30, 1997. Universal was incorporated in Delaware in
1991. Universal is a holding company with no business holdings of its own.
Universal conducts its business operations through its wholly owned subsidiary,
Universal Outdoor, Inc. ("UOI"), and UOI's consolidated subsidiaries. The
mailing address of the principal executive offices of Universal is 311 South
Wacker Drive, Suite 6400, Chicago, Illinois 60606; its telephone number is (312)
431-0822.
ACQUISITIONS
THE REVERE ACQUISITION. In December 1996, Universal acquired Revere Holding
Corp. for approximately $125 million in cash (the "Revere Acquisition"). As a
result of the Revere Acquisition, Universal acquired a total of approximately
8,853 advertising display faces located in markets on the east coast of the
United States, including Philadelphia, Washington, D.C., Salisbury and
Wilmington, as well as 1,917 transit display faces located in Baltimore and
1,582 kiosk displays located in malls throughout the United States.
THE MEMPHIS/TUNICA ACQUISITION. In January 1997, Universal acquired a total
of approximately 2,018 advertising display faces consisting of bulletins and
posters in and around Memphis, Tennessee and Tunica County, Mississippi for
approximately $71 million plus 100,000 shares of Universal Common Stock.
THE MATTHEW ACQUISITION. In January 1997, Universal acquired certain of the
assets of Matthew Outdoor Advertising Acquisition Co. L.P. ("Matthew") for
approximately $40 million in cash and the assumption by Universal of certain
liabilities of Matthew (the "Matthew Acquisition"). As a result of the Matthew
Acquisition, Universal acquired 1,035 advertising display faces located in three
markets, including metro New York, northern New Jersey and Hudson Valley.
THE PENN ACQUISITION. In February 1997, Universal agreed to acquire the
stock of Penn-Baltimore, Inc. from Lamar Advertising Company for $46.5 million
in cash (the "Penn Acquisition"). The Penn Acquisition was consummated in June
1997 and Universal acquired approximately 1,450 advertising display faces in the
Baltimore metropolitan area.
THE ALLIED ACQUISITION. In April 1997, Universal agreed to acquire certain
assets of Allied Outdoor Advertising, Inc. for $51.2 million in cash (the
"Allied Acquisition"). The Allied Acquisition was consummated in July 1997 and
Universal acquired approximately 90 advertising display faces in New York City
and New Jersey.
OTHER COMPLETED ACQUISITIONS. In September 1996, Universal purchased
certain assets of (i) Iowa Outdoor Displays for approximately $1.8 million in
cash and (ii) The Chase Company for approximately $5.8 million in cash. As a
result of these acquisitions, Universal acquired approximately 160 advertising
display faces consisting primarily of posters in and around Des Moines and
approximately 245 advertising display faces consisting primarily of bulletins in
and around Dallas.
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In February 1997, Universal acquired a total of approximately 135
advertising display faces located in and around Evansville, Indiana from
Ad-Craft, Inc. for approximately $5.5 million in cash. Universal also acquired
12 existing advertising display faces and 35 in process display faces in New
Jersey from David Klein Outdoor Advertising, Inc. for approximately $5.3 million
in cash.
In March 1997, Universal acquired a total of approximately 600 bus shelters
and panels in and around Memphis, Tennessee for approximately $8.5 million in
cash from TransAd, Inc.
In July 1997, Universal acquired a total of approximately 143 advertising
display faces in and around Memphis, Tennessee for approximately $2.4 million in
cash from Swaney Outdoor, Inc.
In September 1997, Universal acquired 325 display faces in and around
Chattanooga, Tennessee for approximately $2.4 million in cash from Visual
Consultants, Inc. and its subsidiary Visual Outdoor Advertising, Inc.
In October 1997, Universal acquired 178 display faces in the Tampa, Florida
area for $4.5 million in cash from Paxson Communications Corporation and 85
display faces in the Chicago, Illinois area for $4.0 million in cash from Royal
Outdoor Advertising.
THE GAESS ACQUISITION. In October 1997, Universal acquired substantially
all of the outdoor advertising assets of Great Outdoor, Inc., Media Outdoor
Advertising and Media Displays, Inc., collectively operating as Gaess Outdoor,
for approximately $18 million (the "Gaess Acquisition"). The Gaess Acquisition
further enhanced Universal's position in the metro New York and Northern New
Jersey market, adding 25 advertising display faces, a number of which are
located in high profile locations.
MATERIAL PENDING ACQUISITIONS.
THE NEW YORK SIGN ACQUISITION. In July 1997, Universal entered into a
letter of intent to acquire substantially all of the outdoor advertising assets
of New York Signs for approximately $9 million. Such acquisition will further
enhance Universal's position in New York City, adding 17 advertising display
faces.
The pending acquisition is subject to numerous conditions including the
negotiation of final acquisition agreements. There can be no assurance that any
of the pending acquisitions will be consummated or that they will not be delayed
due to antitrust clearance or other factors.
THE TMI ACQUISITION. On December 19, 1997, Universal entered into an
acquisition agreement to acquire (i) substantially all of the assets of
Transportation Media, Inc., Transportation Media of Colorado, Inc. and C.M.
Doolittle & Co. and (ii) the stock of Transportation Media of Texas, Inc. and
Transportation Media, Inc. of Georgia (the "TMI Acquisition"). The TMI
Acquisition will give Universal a presence in the airport static displays
market, adding approximately 2,228 advertising faces.
The TMI Acquisition is subject to numerous conditions including obtaining
certain consents and approvals. There can be no assurance that the TMI
Acquisition will be consummated or that it will not be delayed due to anti-trust
clearance or other factors.
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MARKETS
Universal has a significant presence in each of the regional markets in
which it operates. The following table sets forth, as of September 1997, certain
information with respect to Universal's outdoor markets:
<TABLE>
<CAPTION>
TOTAL
30-SHEET 8-SHEET DISPLAY
MARKET BULLETINS POSTERS POSTERS TRANSIT FACES
- ----------------------------------------------------------------- ----------- ----------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C>
MIDWEST:
Chicago........................................................ 707 -- 3,451 -- 4,158
Minneapolis/St. Paul........................................... 462 1,323 -- -- 1,785
Indianapolis................................................... 257 1,091 97 530 1,975
Milwaukee...................................................... 261 -- 325 -- 586
Des Moines..................................................... 86 571 9 -- 666
MIDSOUTH:
Evansville..................................................... 278 702 -- -- 980
Dallas......................................................... 269 -- 1,197 -- 1,466
Memphis........................................................ 744 1,194 161 668 2,767
Chattanooga.................................................... 332 659 -- -- 991
Myrtle Beach................................................... 722 478 -- -- 1,200
FLORIDA:
Orlando........................................................ 818 1,084 -- -- 1,902
Jacksonville................................................... 448 776 -- -- 1,224
Ocala.......................................................... 826 214 -- -- 1,040
Atlantic Coast................................................. 681 -- -- -- 681
Gulf Coast..................................................... 471 -- -- -- 471
EAST:
Philadelphia................................................... 357 2,079 -- 282 2,718
Washington..................................................... 86 580 -- 152 818
Salisbury...................................................... 403 477 -- 155 1,035
Wilmington..................................................... 160 906 36 -- 1,102
Baltimore...................................................... 205 1,211 -- 1,917 3,333
New York/New Jersey............................................ 466 554 20 -- 1,040
Total........................................................ 9,039 13,899 5,296 3,704 33,520(1)
----- ----------- ----- ----- ---------
----- ----------- ----- ----- ---------
</TABLE>
- ------------------------
(1) Includes 1,582 kiosk displays in malls throughout the United States.
INVENTORY
Universal operates three standard types of outdoor advertising display faces
and also has transit and mall advertising as follows:
(i) Bulletins generally are 14 feet high and 48 feet wide (672 square feet)
and consist of panels on which advertising copy is displayed. The advertising
copy is either hand painted onto the panels at the facilities of the outdoor
advertising company in accordance with design specifications supplied by the
advertiser and attached to the outdoor advertising structure, or is printed with
the computer-generated graphics on a single sheet of vinyl that is wrapped
around the structure. On occasion, to attract more attention, some of the panels
may extend beyond the linear edges of the display face and may include
three-dimensional embellishments. Because of their greater impact and higher
cost, bulletins are usually located on major highways.
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(ii) 30-Sheet Posters generally are 12 feet high by 25 feet wide (300 square
feet) and are the most common type of billboard. Advertising copy for 30-sheet
posters consists of lithographed or silk-screened paper sheets supplied by the
advertiser that are pasted and applied like wallpaper to the face of the
display, or single sheets of vinyl with computer-generated advertising copy that
are wrapped around the structure. Thirty-sheet posters are concentrated on major
traffic arteries.
(iii) Junior (8-Sheet) Posters usually are 6 feet high by 12 feet wide (72
square feet). Displays are prepared and mounted in the same manner as 30-sheet
posters, except that vinyl sheets are not typically used on junior posters. Most
junior posters, because of their smaller size, are concentrated on city streets
and target pedestrian traffic.
(iv) Transit Advertising generally consists of posters and frames displayed
on the sides of public buses operating on city streets.
(v) Mall Advertising generally consists of kiosks located in shopping malls.
Billboards generally are mounted on structures owned by the outdoor
advertising company and located on sites that are either owned or leased by it
or on which it has acquired a permanent easement. Billboard structures are
durable, have long useful lives and do not require substantial maintenance. When
disassembled, they typically can be moved and relocated at new sites.
Universal's outdoor advertising structures are made of steel and other durable
materials built to withstand variable climates, including the rigors of the
midwestern climate. Universal expects its structures to last 15 years or more
without significant refurbishment.
Additional information concerning Universal is included in the Universal
reports incorporated by reference in this Proxy Statement/Prospectus. See
Section 2, "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE" and Section 1,
"AVAILABLE INFORMATION."
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12. BUSINESS OF CLEAR CHANNEL
Clear Channel consists of three principal business segments--radio
broadcasting, television broadcasting and outdoor advertising. The radio segment
includes both stations for which Clear Channel is the licensee and stations for
which Clear Channel programs and/or sells air time under Local Marketing
Agreements ("LMAs") or Joint Sales Agreements ("JSAs"). The radio segment also
operates eleven networks. The television segment includes both television
stations for which Clear Channel is the licensee and stations programmed under
LMAs. The outdoor advertising segment has advertising display faces in 15 major
domestic markets.
INDUSTRY SEGMENTS
For the three months ended September 30, 1997, Clear Channel derived
approximately 42% of its net revenue from radio operations, approximately 20%
from television operations, and approximately 38% from outdoor advertising
operations.
Selected information relating to radio and television broadcasting for 1994,
1995 and 1996 is presented in the following table:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------
1994 1995 1996
-------------- -------------- --------------
<S> <C> <C> <C>
RADIO
Net broadcasting revenue.................... $ 95,862,834 $ 144,244,066 $ 217,189,250
Station operating expense................... 64,148,412 87,530,942 126,627,982
Depreciation................................ 5,664,700 6,973,801 8,916,495
Amortization of intangibles................. 6,659,726 13,007,026 18,839,820
-------------- -------------- --------------
Station operating income.................... $ 19,389,996 $ 36,732,297 $ 62,804,953
-------------- -------------- --------------
-------------- -------------- --------------
TELEVISION
Net broadcasting revenue.................... $ 82,189,748 $ 105,815,314 $ 134,549,604
Station operating expense................... 41,231,654 49,973,531 71,703,668
Depreciation................................ 6,974,404 8,406,025 10,419,895
Amortization of intangibles................. 5,369,710 5,382,030 7,613,554
-------------- -------------- --------------
Station operating income.................... $ 28,613,980 $ 42,053,728 $ 44,812,487
-------------- -------------- --------------
-------------- -------------- --------------
CONSOLIDATED
Net broadcasting revenue.................... $ 178,052,582 $ 250,059,380 $ 351,738,854
Station operating expense................... 105,380,066 137,504,473 198,331,650
Depreciation................................ 12,639,104 15,379,826 19,336,390
Amortization of intangibles................. 12,029,436 18,389,056 26,453,374
-------------- -------------- --------------
Station operating income.................... $ 48,003,976 $ 78,786,025 $ 107,617,440
-------------- -------------- --------------
-------------- -------------- --------------
</TABLE>
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Selected information related to the outdoor advertising segment for Eller
Media for 1996 is presented in the following table:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1996*
--------------
<S> <C>
Net Revenue................................................................... $ 237,032,000
Operating Expenses............................................................ 145,743,000
Depreciation and amortization and other noncash expenses...................... 46,569,000
--------------
Operating Income.............................................................. $ 44,720,000
--------------
--------------
</TABLE>
- ------------------------
* Eller Media was formed on August 17, 1995, through the combination of
Patrick Media and Eller Investment Company and was purchased by Clear
Channel in April 1997.
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RADIO BROADCASTING
The following table sets forth certain selected information with regard to
each of Clear Channel's 55 AM and 115 FM radio stations which it owned or
programmed, or for which it sold air time, as of December 12, 1997.
<TABLE>
<CAPTION>
AM STATIONS FM STATIONS TOTAL
--------------- --------------- ---------
<S> <C> <C> <C>
ARKANSAS
Little Rock................................................... -- 5 5
CALIFORNIA
Monterrey..................................................... 2(e) 4(e) 6
CONNECTICUT
New Haven..................................................... 2 1 3
FLORIDA
Florida Keys.................................................. -- 3 3
Ft. Myers/Naples.............................................. 1 4 5
Jacksonville.................................................. 2 4 6
Miami/Ft. Lauderdale.......................................... 3 5 8
Orlando....................................................... 2 4 6
Panama City................................................... 1 4 5
Pensacola..................................................... -- 2(c) 2
Tallahassee................................................... 1 4 5
Tampa/St. Petersburg.......................................... 4(b) 5 9
West Palm Beach............................................... 1 2 3
KENTUCKY
Louisville.................................................... 3 4 7
LOUISIANA
New Orleans................................................... 2 5 7
MASSACHUSETTS
Springfield................................................... 1 1 2
MICHIGAN
Grand Rapids.................................................. 2 4 6
NEW YORK
Albany........................................................ 1(a) 3(a) 4
NORTH CAROLINA
Winston-Salem................................................. 1 2 3
Raleigh....................................................... 1 4 5
OHIO
Cleveland..................................................... 1 2 3
OKLAHOMA
Oklahoma City................................................. 3(b) 4 7
Tulsa......................................................... 2(b) 4(b)(c) 6
PENNSYLVANIA
Lancaster..................................................... 1 1 2
Reading....................................................... 1 1 2
RHODE ISLAND
Providence.................................................... -- 2 2
SOUTH CAROLINA
Columbia...................................................... 1 3 4
TENNESSEE
Cookeville.................................................... 2 2 4
Memphis....................................................... 3 4 7
TEXAS
Austin........................................................ 1 3 4
El Paso....................................................... 1 2 3
Houston....................................................... 3(d) 4(b) 7
San Antonio................................................... 2 3(c) 5
VIRGINIA
Norfolk....................................................... -- 4 4
Richmond...................................................... 3 3 6
WISCONSIN
Milwaukee..................................................... 1 3 4
--- --- ---------
Total..................................................... 55 115 170
--- --- ---------
--- --- ---------
</TABLE>
- ------------------------------
(a) Stations owned by Radio Enterprises, Inc., in which Clear Channel owns an
80% interest.
(b) Includes one station programmed and operated under an LMA (FCC license not
owned by Clear Channel).
(c) Includes one station operated under a JSA (FCC license now owned by Clear
Channel).
(d) Includes two stations which are owned by CCC-Houston AM, Ltd., in which
Clear Channel owns an 80% interest.
(e) Stations operated under a LMA (FCC license not owned by Clear Channel).
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Clear Channel also owns the Kentucky News Network based in Louisville,
Kentucky, the Virginia News Network based in Richmond, Virginia, the Oklahoma
News Network based in Oklahoma City, Oklahoma, the Voice of Southwest
Agriculture Network based in San Angelo, Texas, the Clear Channel Sports Network
based both in College Station, Texas, and Des Moines, Iowa, the Alabama Radio
Network based in Birmingham, Alabama, the Tennessee Radio Network based in
Nashville, Tennessee, the University of Miami Sports Network based in Miami,
Florida, the Florida Radio Network based in Maitland, Florida, the University of
Florida Sports Network based in Gainesville, Florida and Orlando, Florida, and
the Penn State Sports Network based in West Palm Beach, Florida.
TELEVISION BROADCASTING
The following table sets forth certain selected information with regard to
each of Clear Channel's 18 television stations and one satellite station which
it owned or programmed as of December 12, 1997.
<TABLE>
<CAPTION>
NETWORK
MARKET AFFILIATION
- ----------------------------------------------------------------------------------- -----------
<S> <C>
ALBANY/SCHENECTADY/TROY, NEW YORK
WXXA-TV............................................................................ FOX
HARRISBURG/LEBANON/LANCASTER/YORK, PENNSYLVANIA
WHP-TV............................................................................. CBS
WLYH-TV(a)......................................................................... UPN
JACKSONVILLE, FLORIDA
WAWS-TV............................................................................ FOX
WTEV-TV(a)......................................................................... UPN
LITTLE ROCK, ARKANSAS
KLRT-TV............................................................................ FOX
KASN-TV(a)......................................................................... UPN
MEMPHIS, TENNESSEE
WPTY-TV............................................................................ ABC
WLMT-TV(a)......................................................................... UPN
MINNEAPOLIS, MINNESOTA
WFTC-TV............................................................................ FOX
MOBILE, ALABAMA/PENSACOLA, FLORIDA
WPMI-TV............................................................................ NBC
WJTC-TV(a)......................................................................... UPN
PROVIDENCE/NEW BEDFORD, RHODE ISLAND
WPRI-TV............................................................................ CBS
WNAC-TV(a)......................................................................... FOX
TUCSON, ARIZONA
KTTU-TV(b)......................................................................... UPN
TULSA, OKLAHOMA
KOKI-TV............................................................................ FOX
KTFO-TV(a)......................................................................... UPN
WICHITA, KANSAS
KSAS-TV............................................................................ FOX
SALINA, KANSAS
KAAS-TV(c)......................................................................... FOX
</TABLE>
- ------------------------
(a) LMA (FCC license not owned by Clear Channel).
(b) Station programmed by another party pursuant to an LMA.
(c) Satellite station of KSAS-TV in Wichita, Kansas.
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OUTDOOR ADVERTISING
The following table sets forth certain selected information with regard to
each of Clear Channel's outdoor advertising display faces as of August 18, 1997:
<TABLE>
<CAPTION>
TOTAL
DISPLAY
MARKET FACES(A)
- ------------------------------------------------------------------------------------ -----------
<S> <C>
ARIZONA:
Phoenix............................................................................. 365
CALIFORNIA:
Los Angeles(b)...................................................................... 7,127
San Diego........................................................................... 812
San Francisco/Oakland(c)............................................................ 9,506
Sacramento.......................................................................... 703
MIDWEST:
Chicago............................................................................. 6,430
Cleveland(d)........................................................................ 2,274
Milwaukee........................................................................... 1,158
SOUTHEAST:
Atlanta............................................................................. 1,525
Miami............................................................................... 2,088
Tampa(e)............................................................................ 2,038
TEXAS:
Dallas/Fort Worth................................................................... 3,048
El Paso............................................................................. 1,384
Houston............................................................................. 5,359
San Antonio......................................................................... 3,460
-----------
Total........................................................................... 47,277
-----------
-----------
</TABLE>
- ------------------------
(a) Display faces include 14' x 48' bulletins, 12' x 25' Premier Panels-TM-, 25'
x 25'Premier Plus Panels-TM- 12' x 25' 30-sheet posters, 6' x 12' 8-sheet
posters, and various transit displays.
(b) Includes Los Angeles, Orange, Riverside, San Bernardino and Ventura
counties.
(c) Includes San Francisco, Oakland, San Jose, Santa Cruz and Solano counties.
(d) Includes Akron and Canton.
(e) Includes Sarasota and Bradenton.
MATERIAL ACQUISITIONS
PAXSON RADIO ACQUISITION. On October 1, 1997, Clear Channel acquired six
radio news and sports networks and approximately 350 outdoor advertising display
faces from Paxson Communications Corp. ("Paxson"). On December 8, 1997, Clear
Channel acquired 43 radio stations from Paxson and certain affiliates of Paxson.
The total purchase price for such acquisitions was approximately $629 million in
cash. Prior to the consummation of the acquisition of the radio stations on
December 8, 1997, Clear Channel entered into a Commercial Time Brokerage
Agreement with respect to most of such radio stations and Commercial Time Sales
Agreements with respect to certain other radio stations. All of the radio
stations and display faces referred to above are located in Florida except for
four radio stations located in Tennessee.
In connection with the acquisitions of seven of the radio stations from
Paxson in the Jacksonville, Florida and the Mobile, Alabama/Pensacola, Florida
markets, Clear Channel received temporary waivers
103
<PAGE>
of the FCC's one-to-a-market rule which generally prohibits the common ownership
of radio and television stations in the same market. Such waivers are
conditioned upon the outcome of the FCC's pending ownership attribution
rulemaking proceeding. Some divestitures could be required at the conclusion of
the rulemaking proceeding. Should divestitures be necessary, Clear Channel will
be required to submit applications to the FCC seeking consent to sell any
nonconforming stations within six months following finality of the rulemaking.
On December 8, 1997, Clear Channel also acquired options from Paxson to
purchase two additional radio stations for approximately $3 million in cash.
Clear Channel and Paxson are parties to Commercial Time Sales Agreements with
respect to such stations. Some divestitures of Clear Channel radio stations will
likely be required to obtain FCC approval of the exercise of either of such
options.
ACQUISITION OF ELLER MEDIA. On April 10, 1997, Clear Channel acquired
approximately 93% of the then outstanding stock of Eller Media for a total
consideration of approximately $623 million, consisting of approximately $325
million in cash and 6,643,636 shares of Clear Channel Common Stock
(approximately $298 million in Clear Channel Common Stock based on a price per
share of $44.8625 per share) (the "Eller Media Acquisition"). Immediately
following the consummation of the Eller Media Acquisition, Clear Channel retired
approximately $417 million of Eller Media's outstanding bank debt through
borrowings under the Credit Facility. In addition, Clear Channel issued options
(with an estimated fair value of approximately $51 million) to purchase
1,468,182 shares of Clear Channel Common Stock in connection with the assumption
of Eller Media's outstanding stock options. Clear Channel also agreed to issue
147,858 shares of Clear Channel Common Stock pursuant to certain phantom stock
plan obligations assumed by Clear Channel as part of the Eller Media
Acquisition. The holders of the approximately 7% of the then outstanding capital
stock of Eller Media not purchased by Clear Channel have the right to require
Clear Channel to acquire such stock for 1,081,469 shares of Clear Channel Common
Stock until April 10, 2002. From and after April 10, 2004 (or before such date
upon the occurrence of certain events), Clear Channel will have the right to
acquire this minority interest stake in Eller Media for 1,081,469 shares of
Clear Channel Common Stock. For the twelve month period ended December 31, 1996,
Eller Media had net revenues, operating cash flow and an operating cash flow
margin of $237 million, $91 million and 38.5%, respectively. On April 29, 1997,
Karl Eller, the Chief Executive Officer of Eller Media, was appointed to the
Clear Channel Board. Mr. Eller currently is employed by Clear Channel to run
Eller Media as a subsidiary of Clear Channel pursuant to an employment contract
which is due to expire in approximately two years. In addition, Mr. Eller and
other members of the Eller Media management team have a significant stake in
Clear Channel's stock options through the conversion of existing Eller Media
stock options into options to purchase Clear Channel Common Stock.
Clear Channel frequently evaluates strategic opportunities both within and
outside its existing lines of business and from time to time enters into letters
of intent. Clear Channel expects from time to time to pursue additional
acquisitions and may decide to dispose of certain businesses. Such acquisitions
or dispositions could be material.
104
<PAGE>
13. BENEFICIAL OWNERSHIP OF UNIVERSAL COMMON STOCK
The table sets forth information as of December 12, 1997, regarding the
number and percentage of outstanding shares of Universal Common Stock
beneficially owned by (i) each director of Universal, (ii) each other executive
officer, (iii) all directors and executive officers of Universal as a group, and
(iv) each person known by Universal to own beneficially more than 5% of the
Universal Common Stock. Universal believes that each individual or entity named
has sole investment and voting power with respect to shares of Universal Common
Stock indicated as beneficially owned by them, except as otherwise noted.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP OF
UNIVERSAL COMMON STOCK
-------------------------
NUMBER OF PERCENT OF
NAME SHARES CLASS
- ---------------------------------------------------------------------- ---------- -------------
<S> <C> <C>
Daniel L. Simon(6).................................................... 7,583,391(1) 26.3%
Brian T. Clingen(6)................................................... 1,116,413(2) 3.9%
Paul G. Simon(6)...................................................... 88,627(3) (5)
Cindy Ogle(6)......................................................... 38,599(4) (5)
Frank K. Bynum, Jr.(7)................................................ 30,000 (5)
Michael J. Roche(8)................................................... 2,000 (5)
All directors and officers as a group (6 persons)..................... 7,902,625 27.5
</TABLE>
- ------------------------
(1) Daniel L. Simon's beneficial ownership includes 4,658,940 shares that he
owns directly, 32,520 shares held by the Simon Family Foundation of which he
is a director, 88,000 shares held by The Simon Family Limited Partnership of
which he is a general partner, 1,847,526 shares issuable to him upon
exercise of the Management Warrants, 630,352 shares over which he has voting
control pursuant to certain voting trust agreements with Brian T. Clingen,
and 326,053 shares issuable to Brian T. Clingen upon exercise of the
Management Warrants over which Daniel L. Simon has voting control pursuant
to certain voting trust agreements. Mr. Simon is party to the Voting
Agreement with Clear Channel. See Section 7(g), "THE MERGER--Voting
Agreement."
(2) Brian T. Clingen owns 630,352 shares directly, 35,000 shares held by The
Clingen Family Foundation of which he is a director, 326,053 shares issuable
to him upon exercise of the Management Warrants, and 125,008 shares held by
The Clingen Family Limited Partnership of which he is a general partner. The
voting rights for the shares directly held by Mr. Clingen and shares
issuable to him upon exercise of the Management Warrants have been granted
to Daniel L. Simon pursuant to a voting trust agreement.
(3) Paul G. Simon owns 88,627 shares directly including 33,775 shares issued to
him pursuant to the 1997 Equity Incentive Plan. See Sect. 7(f), "THE
MERGER--Interests of Certain Persons in the Transaction--Other Stock
Awards."
(4) Cindy Ogle owns 38,599 shares directly, including 33,774 issued to her on
December 10, 1997 and 4,825 shares to be issued to her on January 5, 1998,
in each case pursuant to the 1997 Equity Incentive Plan. See Sect. 7(f),
"THE MERGER--Interests of Certain Persons in the Transaction--Other Stock
Awards."
(5) Represents less than 1% of the Universal Common Stock.
(6) The business address for such person(s) is c/o Universal Outdoor, Inc., 311
South Wacker Drive, Suite 6400, Chicago, IL 60606.
(7) The business address for such person is c/o Kelso & Company, 320 Park
Avenue, 24th Floor, New York, NY 10022.
(8) The address for such person is 333 Beverly Road, E5-312-A, Hoffman Estates,
IL 60179.
105
<PAGE>
14. BENEFICIAL OWNERSHIP OF CLEAR CHANNEL COMMON STOCK
The table below sets forth certain information as of December 12, 1997 about
the persons and entities known to Clear Channel to own beneficially more than 5%
of Clear Channel's outstanding stock. Such information is based upon required
notices previously filed with the Clear Channel. Such shares are held in each
stockholder's name or in a nominee account.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP OF
CLEAR CHANNEL
COMMON STOCK
-------------------------
NUMBER OF PERCENT OF
NAME SHARES CLASS
- -------------------------------------------------------------------- ------------ -----------
<S> <C> <C>
L. Lowry Mays....................................................... 15,099,919(1) 15.4%
B.J. McCombs........................................................ 11,302,936(2) 11.5%
Putnam Investments.................................................. 8,950,113 9.1%
Pilgram Baxter Associates........................................... 5,351,900 5.5%
</TABLE>
- ------------------------
(1) Includes presently exercisable options to acquire 560,000 shares and 108,680
shares held by trusts of which he is trustee, but not beneficiary.
(2) Includes presently exercisable nonqualified options to acquire 40,000 shares
and 3,201,726 shares held by trusts of which he is trustee, but not
beneficiary.
106
<PAGE>
15. STOCKHOLDER PROPOSALS FOR 1998 ANNUAL MEETING
Any stockholder who wishes to submit a proposal to be presented at the 1998
Annual Meeting of stockholders must have forwarded such proposal to the
Secretary of Universal on or prior to December 12, 1997 to be eligible for
inclusion in Universal's proxy statement and form of proxy to be used in
connection with such Meeting.
107
<PAGE>
16. EXPERTS
The financial statements incorporated in this Prospectus by reference to the
Universal Annual Report on Form 10-K for the year ended December 31, 1996 and
the audited historical financial statements of (i) Universal included as Exhibit
99.2, (ii) the Statement of Revenues and Direct Expenses of Ad-Sign for the year
ended December 31, 1995 included as Exhibit 99.4, and (iii) the Financial
Statements of POA Acquisition Corporation as of September 30, 1996 and December
31, 1995 and 1994 and for the nine month period ended September 30, 1996 and for
each of the two years in the period ended December 31, 1995 included as Exhibit
99.5 of the Universal Current Report on Form 8-K dated July 31, 1997 (File No.
000-20823) have been so incorporated in reliance on the reports of Price
Waterhouse LLP, independent accountants, given on the authority of said firm as
experts in auditing and accounting.
The consolidated financial statements of NOA Holding Company as of May 31,
1995 and 1994, and for the three years in the period ended May 31, 1995,
included in the Current Report on Form 8-K of Universal dated July 31, 1997
(File No. 000-20823), have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon included therein and incorporated
herein by reference. Such financial statements have been incorporated herein by
reference in reliance upon such reports given upon the authority of such firm as
experts in accounting and auditing.
The Consolidated Financial Statements of Revere Holding Corp. and its
subsidiaries as of December 31, 1995 incorporated in this Proxy
Statement/Prospectus by reference to the Universal Current Report on Form 8-K
filed on July 31, 1997 (File No. 000-20823) have been audited by Arthur
Andersen, LLP, independent public accountants, as stated in their report, which
is incorporated herein by reference, and have been so incorporated in reliance
upon such report given upon the authority of such firm as experts in accounting
and auditing.
The consolidated financial statements (and schedules) of Clear Channel
included or incorporated by reference in Clear Channel's Annual Report on form
10-K for the year ended December 31, 1996, have been audited by Ernst & Young
LLP, independent auditors, as set forth in their reports thereon included or
incorporated by reference therein and incorporated herein by reference which, as
to the years 1995 and 1996, are based in part on the report of KPMG Peat Marwick
LLP ("KPMG"), independent auditors. The financial statements and schedules
referred to above are incorporated herein by reference in reliance upon such
reports given upon the authority of such firms as experts in accounting and
auditing.
The consolidated financial statements of Australian Radio Network Pty. Ltd.
not separately presented in Clear Channel's Annual Report on Form 10-K for the
year ended December 31, 1996, have been audited by KMPG, independent auditors,
as set forth in their report thereon included therein and incorporated herein by
reference. Such report referred to above is incorporated herein by reference in
reliance upon the authority of such firm as experts in accounting and auditing.
The financial statements incorporated in this Prospectus by reference to the
audited historical financial statements of Paxson Radio (a division of Paxson
Communications Corporation) for the year ended December 31, 1996 included in
Clear Channel's Form 8-K dated December 22, 1997 have been so incorporated in
reliance on the report of Price Waterhouse LLP, independent accountants, given
on the authority of said firm as experts in auditing and accounting.
The consolidated financial statements of Eller Media as of December 31, 1996
and 1995 and for the year ended December 31, 1996 and for the period from August
18, 1995 through December 31, 1995, together with the consolidated financial
statements of PMG Holdings, Inc. and subsidiaries and the combined financial
statements of Eller Investment Company, Inc. for the period from January 1, 1995
to August 17, 1995, incorporated by reference in this Prospectus and elsewhere
in the registration statement are included in Clear Channel's current report on
Form 8-K, filed on April 17, 1997, have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their report with respect
thereto, and are incorporated by reference herein.
108
<PAGE>
The combined financial statements of Eller Investment Company, Inc. as of
and for the periods ended December 31, 1994, incorporated by reference in this
prospectus and elsewhere in the registration statement are included in Clear
Channel's current report on Form 8-K, filed April 17, 1997, have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
report with respect thereto and are incorporated by reference herein.
The consolidated financial statements of PMG Holdings, Inc. and Subsidiaries
as of December 31, 1994 and for the year then ended included in Clear Channel's
Current Report on Form 8-K dated April 17, 1997, have been incorporated by
reference herein in reliance upon the report of KPMG Peat Marwick LLP,
independent certified public accountants, incorporated by reference herein, and
upon the authority of said firm as experts in accounting and auditing.
The consolidated financial statements of US Radio, Inc. for the years ended
December 31, 1995 and 1994, included in Clear Channel's current report on Form
8-K dated May 24, 1996, have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon included therein and incorporated
by reference herein. Such consolidated financial statements are incorporated
herein by reference in reliance upon such report given upon the authority of
such firm as experts in accounting and auditing.
The combined financial statements of Ragan Henry Communications Group, L.P.,
US Radio, L.P. and US Radio Stations, L.P. for the year ended December 31, 1994,
included in Clear Channel's current report on Form 8-K dated May 24, 1996 have
been audited by Ernst & Young LLP, independent auditors, as set forth in their
report thereon incorporated herein by reference. Such combined financial
statements are incorporated by reference herein in reliance upon such report
given upon the authority of such firm as experts in accounting and auditing.
The consolidated financial statements of Radio Equity Partners, L.P. and its
subsidiary as of December 31, 1995 and 1994, and for the years then ended have
been incorporated herein by reference in reliance upon the report of KPMG,
independent certified public accountants, appearing in Clear Channel's current
report on Form 8-K dated June 5, 1996, and upon the authority of said firm as
experts in accounting and auditing.
Representatives of Price Waterhouse LLP are expected to be present at the
Special Meeting to respond to appropriate questions and to make a statement if
they so desire.
109
<PAGE>
17. LEGAL OPINIONS
Certain legal matters relating to the validity of the shares of Clear
Channel Common Stock to be issued in the Merger will be passed upon by Akin,
Gump, Strauss, Hauer & Feld, L.L.P. In addition, Skadden, Arps, Slate, Meagher &
Flom LLP and Akin, Gump, Strauss, Hauer & Feld, L.L.P. will issue tax opinions
to Universal and Clear Channel, respectively, in connection with the Merger
Agreement.
YOU ARE URGED TO SIGN, DATE AND PROMPTLY MAIL THE ENCLOSED PROXY IN THE
PREPAID ENVELOPE PROVIDED FOR SUCH PURPOSE. PROMPT RETURN OF YOUR PROXY MAY SAVE
UNIVERSAL ADDITIONAL SOLICITATION EXPENSE.
WE ENCOURAGE ALL STOCKHOLDERS TO ATTEND THE SPECIAL MEETING ON FEBRUARY 6,
1998.
110
<PAGE>
ANNEX I
CONFORMED COPY
AGREEMENT AND PLAN OF MERGER
AMONG
CLEAR CHANNEL COMMUNICATIONS, INC.,
UH MERGER SUB, INC.
AND
UNIVERSAL OUTDOOR HOLDINGS, INC.
DATED AS OF OCTOBER 23, 1997
I-1
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C> <C>
ARTICLE I
THE MERGER
SECTION 1.1. The Merger............................................................................ II-5
SECTION 1.2. Closing............................................................................... II-5
SECTION 1.3. Effective Time........................................................................ II-5
SECTION 1.4. Effects of the Merger................................................................. II-6
SECTION 1.5. Certificate of Incorporation and By-Laws of the Surviving Corporation................. II-6
SECTION 1.6. Directors............................................................................. II-6
SECTION 1.7. Officers.............................................................................. II-6
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT
CORPORATIONS; EXCHANGE OF CERTIFICATES
SECTION 2.1. Capital Stock of Merger Sub........................................................... II-6
SECTION 2.2. Cancellation of Treasury Stock and Parent Owned Stock................................. II-6
SECTION 2.3. Conversion of Company Common Stock.................................................... II-6
SECTION 2.4. Exchange of Certificates.............................................................. II-7
SECTION 2.5. Stock Transfer Books.................................................................. II-10
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 3.1. Organization, Qualification, Etc...................................................... II-10
SECTION 3.2. Capital Stock......................................................................... II-10
SECTION 3.3. Corporate Authority Relative to this Agreement; No Violation.......................... II-11
SECTION 3.4. Reports and Financial Statements...................................................... II-12
SECTION 3.5. No Undisclosed Liabilities............................................................ II-12
SECTION 3.6. No Violation of Law................................................................... II-12
SECTION 3.7. Environmental Laws and Regulations.................................................... II-12
SECTION 3.8. No Undisclosed Employee Benefit Plan Liabilities or Severance Arrangements............ II-13
SECTION 3.9. Absence of Certain Changes or Events.................................................. II-14
SECTION 3.10. Investigations; Litigation............................................................ II-14
SECTION 3.11. Proxy Statement; Registration Statement; Other Information............................ II-14
SECTION 3.12. Lack of Ownership of Parent Common Stock.............................................. II-14
SECTION 3.13. Tax Matters........................................................................... II-15
SECTION 3.14. Opinion of Financial Advisor.......................................................... II-15
SECTION 3.15. Required Vote of the Company Stockholders............................................. II-15
SECTION 3.16. Insurance............................................................................. II-15
SECTION 3.17. Real Property; Title.................................................................. II-15
SECTION 3.18. Collective Bargaining Agreements and Labor............................................ II-16
SECTION 3.19. Material Contracts.................................................................... II-16
SECTION 3.20. Takeover Statute...................................................................... II-16
</TABLE>
I-2
<PAGE>
<TABLE>
<CAPTION>
PAGE
---------
<S> <C> <C>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
SECTION 4.1. Organization, Qualification, Etc...................................................... II-16
SECTION 4.2. Capital Stock......................................................................... II-17
SECTION 4.3. Corporate Authority Relative to this Agreement; No Violation.......................... II-17
SECTION 4.4. Reports and Financial Statements...................................................... II-18
SECTION 4.5. No Undisclosed Liabilities............................................................ II-18
SECTION 4.6. No Violation of Law................................................................... II-18
SECTION 4.7. Environmental Laws and Regulations.................................................... II-18
SECTION 4.8. No Undisclosed Employee Benefit Plan Liabilities or Severance Arrangements............ II-19
SECTION 4.9. Absence of Certain Changes or Events.................................................. II-19
SECTION 4.10. Investigations; Litigation............................................................ II-19
SECTION 4.11. Proxy Statement; Registration Statement; Other Information............................ II-19
SECTION 4.12. Lack of Ownership of the Company Common Stock......................................... II-19
SECTION 4.13. Tax Matters........................................................................... II-19
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS
SECTION 5.1. Conduct of Business by the Company or Parent.......................................... II-20
SECTION 5.2. Proxy Material; Registration Statement................................................ II-22
SECTION 5.3. Stockholders' Meeting................................................................. II-23
SECTION 5.4. Approvals and Consents; Cooperation................................................... II-23
SECTION 5.5. Access to Information; Confidentiality................................................ II-23
SECTION 5.6. Affiliates............................................................................ II-24
SECTION 5.7. Warrants; Stock Options............................................................... II-24
SECTION 5.8. 1994 Warrants......................................................................... II-24
SECTION 5.9. Filings; Other Action................................................................. II-25
SECTION 5.10. Further Assurances.................................................................... II-26
SECTION 5.11. No Solicitation....................................................................... II-26
SECTION 5.12. Director and Officer Liability........................................................ II-26
SECTION 5.13. Accountants' "Comfort" Letters........................................................ II-27
SECTION 5.14. Additional Reports.................................................................... II-28
SECTION 5.15. Plan of Reorganization................................................................ II-28
SECTION 5.16. Employment Agreements................................................................. II-28
SECTION 5.17. Parent Board of Directors............................................................. II-28
SECTION 5.18. Conveyance Taxes; Fees................................................................ II-28
SECTION 5.19. Public Announcements.................................................................. II-28
SECTION 5.20. Employee Matters...................................................................... II-28
ARTICLE VI
CONDITIONS TO THE MERGER
SECTION 6.1. Conditions to the Obligations of Each Party........................................... II-29
SECTION 6.2. Conditions to the Obligations of Parent and Merger Sub................................ II-30
SECTION 6.3. Conditions to the Obligations of the Company.......................................... II-30
</TABLE>
I-3
<PAGE>
<TABLE>
<CAPTION>
PAGE
---------
<S> <C> <C>
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
SECTION 7.1. Termination or Abandonment............................................................ II-30
SECTION 7.2. Amendment or Supplement............................................................... II-32
SECTION 7.3. Effect of Termination................................................................. II-32
SECTION 7.4. Fees and Expenses..................................................................... II-32
SECTION 7.5. Extension; Waiver..................................................................... II-33
ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.1. Nonsurvival of Representations........................................................ II-33
SECTION 8.2. Notices............................................................................... II-33
SECTION 8.3. Definitions........................................................................... II-34
SECTION 8.4. Counterparts.......................................................................... II-36
SECTION 8.5. Entire Agreement; No Third-Party Beneficiaries........................................ II-36
SECTION 8.6. Assignment............................................................................ II-36
SECTION 8.7. Governing Law......................................................................... II-36
SECTION 8.8. Enforcement........................................................................... II-36
SECTION 8.9. Severability.......................................................................... II-36
SECTION 8.10. Headings.............................................................................. II-37
SECTION 8.11. Finders or Brokers.................................................................... II-37
EXHIBIT A Form of Company Tax Opinion Representation Letter
EXHIBIT B Form of Parent Tax Opinion Representation Letter
EXHIBIT C Form of Simon Employment Agreement
EXHIBIT D Form of Stockholder Representation Letter
</TABLE>
I-4
<PAGE>
This AGREEMENT AND PLAN OF MERGER, dated October 23, 1997, is entered into
by and among Clear Channel Communications, Inc., a Texas corporation ("PARENT"),
UH Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of
Parent ("MERGER SUB"), and Universal Outdoor Holdings, Inc., a Delaware
corporation (the "COMPANY").
W I T N E S S E T H :
WHEREAS, the respective Boards of Directors of Parent, Merger Sub and the
Company have approved the acquisition of the Company by Parent upon the terms
and subject to the conditions set forth in this Agreement and Plan of Merger,
including, without limitation, the exhibits attached hereto (collectively, this
"AGREEMENT");
WHEREAS, the respective Boards of Directors of Parent, Merger Sub and the
Company have approved the merger of Merger Sub with and into the Company as set
forth below (the "MERGER") upon the terms and subject to the conditions set
forth in this Agreement, whereby each issued and outstanding share of common
stock, par value $0.01 per share, of the Company ("COMPANY COMMON STOCK"), other
than shares owned directly or indirectly by Parent or by the Company will be
converted into shares of common stock, par value $0.10 per share, of Parent
("PARENT COMMON STOCK") in accordance with the provisions of Article II of this
Agreement;
WHEREAS, for federal income tax purposes, the Merger is intended to qualify
as a reorganization under the provisions of Section 368(a) of the United States
Internal Revenue Code of 1986, as amended (the "CODE"); and
WHEREAS, Parent, Merger Sub and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger and also to prescribe certain conditions to the Merger.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements herein contained, and intending to be legally bound hereby,
Parent, Merger Sub and the Company hereby agree as follows:
ARTICLE I
THE MERGER
SECTION 1.1. THE MERGER. Upon the terms and subject to the conditions set
forth in this Agreement and the Delaware General Corporation Law (the "DGCL"),
Merger Sub shall be merged with and into the Company at the Effective Time (as
defined in Section 1.3) of the Merger. Following the Merger, the separate
corporate existence of Merger Sub shall cease, and the Company shall continue as
the surviving corporation (the "SURVIVING CORPORATION") and shall succeed to and
assume all the rights and obligations of Merger Sub in accordance with the DGCL.
SECTION 1.2. CLOSING. The closing of the Merger shall take place at 10:00
a.m. on a date to be specified by the parties which shall be no later than the
second business day after the satisfaction or waiver of the conditions set forth
in Article VI (the "CLOSING DATE") at the offices of Skadden, Arps, Slate,
Meagher & Flom, Chicago, Illinois, unless another date or place is agreed to in
writing by the parties hereto.
SECTION 1.3. EFFECTIVE TIME. On the Closing Date, the parties shall
execute and file in the office of the Secretary of State of Delaware a
certificate of merger (a "CERTIFICATE OF MERGER") executed in accordance with
the DGCL and shall make all other filings or recordings, if any, required under
DGCL. The Merger shall become effective at the time of filing of the Certificate
of Merger, or at such later time as is agreed upon by the parties hereto and set
forth therein (such time as the Merger becomes effective is referred to herein
as the "EFFECTIVE TIME").
I-5
<PAGE>
SECTION 1.4. EFFECTS OF THE MERGER. The Merger shall have the effects set
forth in the DGCL.
SECTION 1.5. CERTIFICATE OF INCORPORATION AND BY-LAWS OF THE SURVIVING
CORPORATION.
(a) The Certificate of Incorporation of the Company as in effect
immediately prior to the Effective Time shall become the Certificate of
Incorporation of the Surviving Corporation after the Effective Time, and
thereafter may be amended as provided therein and as permitted by law and
this Agreement.
(b) The By-Laws of the Company as in effect immediately prior to the
Effective Time shall become the By-Laws of the Surviving Corporation after
the Effective Time, and thereafter may be amended as provided therein and as
permitted by law and this Agreement.
SECTION 1.6. DIRECTORS. The directors of the Merger Sub immediately prior
to the Effective Time shall become the directors of the Surviving Corporation,
until the earlier of their resignation or removal or until their respective
successors are duly elected and qualified, as the case may be.
SECTION 1.7. OFFICERS. The officers of the Company immediately prior to
the Effective Time shall become the officers of the Surviving Corporation, until
the earlier of their resignation or removal or until their respective successors
are duly elected and qualified, as the case may be.
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT
CORPORATIONS; EXCHANGE OF CERTIFICATES
SECTION 2.1. CAPITAL STOCK OF MERGER SUB. As of the Effective Time, by
virtue of the Merger and without any action on the part of the holder of any
shares of Company Common Stock or any shares of capital stock of Merger Sub,
each share of common stock, par value $0.01 per share, of Merger Sub issued and
outstanding immediately prior to the Effective Time shall be converted into and
become one fully paid and nonassessable share of common stock, par value $0.01
per share, of the Surviving Corporation.
SECTION 2.2. CANCELLATION OF TREASURY STOCK AND PARENT OWNED STOCK. As of
the Effective Time, by virtue of the Merger and without any action on the part
of the holder of any shares of Company Common Stock or any shares of capital
stock of Merger Sub, each share of Company Common Stock issued and held,
immediately prior to the Effective Time, in the Company's treasury or by any of
the Company's direct or indirect wholly owned subsidiaries, and each share of
Company Common Stock that is owned by Parent, Merger Sub or any other subsidiary
of Parent, shall automatically be cancelled and retired and shall cease to
exist, and no consideration shall be delivered in exchange therefor.
SECTION 2.3. CONVERSION OF COMPANY COMMON STOCK. (a) As of the Effective
Time, by virtue of the Merger and without any action on the part of the holder
of any shares of Company Common Stock or any shares of capital stock of Merger
Sub, subject to this Section 2.3 and Section 2.4(f), each share of Company
Common Stock issued and outstanding immediately prior to the Effective Time
(other than shares to be cancelled in accordance with Section 2.2 (the
"Cancelled Shares")) shall be converted into (the "MERGER CONSIDERATION") 0.67
(the "CONVERSION NUMBER") duly authorized, validly issued and non-assessable
shares of Parent Common Stock ; PROVIDED, HOWEVER, that, in any event, if
between the date of this Agreement and the Effective Time, the outstanding
shares of Parent Common Stock shall have been changed into a different number of
shares or a different class, by reason of any stock dividend, subdivision,
reclassification, recapitalization, split, combination or exchange of shares,
the Conversion Number shall be correspondingly adjusted to the extent
appropriate to reflect such stock dividend, subdivision, reclassification,
recapitalization, split, combination or exchange of shares. As of the Effective
Time, all such shares of Company Common Stock shall no longer be outstanding and
shall automatically be cancelled and retired and shall cease to exist, and each
holder of a certificate or a certificate which immediately prior to the
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Effective Time represented outstanding shares of Company Common Stock shall
cease to have any rights with respect thereto, except the right to receive the
Merger Consideration.
SECTION 2.4. EXCHANGE OF CERTIFICATES. (a) EXCHANGE AGENT. From and after
the Effective Time, Parent shall make available to a bank or trust company
designated by Parent and reasonably satisfactory to the Company (the "EXCHANGE
AGENT"), for the benefit of the holders of shares of Company Common Stock for
exchange in accordance with this Article II, through the Exchange Agent,
certificates evidencing such number of shares of Parent Common Stock issuable to
holders of Company Common Stock in the Merger pursuant to Section 2.3 (such
certificates for shares of Parent Common Stock, together with any dividends or
distributions with respect thereto and cash, being hereinafter referred to as
the "EXCHANGE FUND"). The Exchange Agent shall, pursuant to irrevocable
instructions, deliver the Parent Common Stock contemplated to be issued pursuant
to Section 2.3 and the cash in lieu of fractional shares of Parent Common Stock
to which such holders are entitled to pursuant to Section 2.4(f) hereof out of
the Exchange Fund. Except as contemplated by Section 2.4(g) hereof, the Exchange
Fund shall not be used for any other purpose.
(b) EXCHANGE PROCEDURES. As promptly as practicable after the Effective
Time, Parent shall cause the Exchange Agent to mail to each holder of a
certificate or certificates which immediately prior to the Effective Time
represented outstanding shares of Company Common Stock (the "CERTIFICATES") (i)
a letter of transmittal (which shall be in customary form and shall specify that
delivery shall be effected, and risk of loss and title to the Certificates shall
pass, only upon proper delivery of the Certificates to the Exchange Agent) and
(ii) instructions for use in effecting the surrender of the Certificates in
exchange for certificates evidencing shares of Parent Common Stock, or cash in
lieu of fractional shares of Parent Common Stock to which such holder is
entitled pursuant to Section 2.4(f) hereof.
(c) EXCHANGE OF CERTIFICATES. Upon surrender to the Exchange Agent of a
Certificate for cancellation, together with such letter of transmittal, duly
executed and completed in accordance with the instructions thereto, and such
other documents as may be reasonably required pursuant to such instructions, the
holder of such Certificate shall be entitled to receive in exchange therefor a
certificate representing that number of whole shares of Parent Common Stock
which such holder's shares of Company Common Stock have been converted into
pursuant to this Article II (and any cash in lieu of any fractional shares of
Parent Common Stock to which such holder is entitled pursuant to Section 2.4(f)
and any dividends or other distributions to which such holder is entitled
pursuant to Section 2.4(d)), and the Certificate so surrendered shall forthwith
be cancelled. In the event of a transfer of ownership of shares of Company
Common Stock which is not registered in the transfer records of the Company,
shares of Parent Common Stock, cash in lieu of any fractional shares of Parent
Common Stock to which such holder is entitled pursuant to Section 2.4(f) and any
dividends or other distributions to which such holder is entitled pursuant to
Section 2.4(d) may be issued to a transferee if the Certificate representing
such shares of Company Common Stock is presented to the Exchange Agent,
accompanied by all documents required to evidence and effect such transfer and
by evidence that any applicable stock transfer taxes have been paid. Until
surrendered as contemplated by this Section 2.4, each Certificate shall be
deemed at all times after the Effective Time to represent only the right to
receive upon such surrender the number of whole shares of Parent Common Stock
into which the shares of Company Common Stock formerly represented thereby have
been converted, cash in lieu of any fractional shares of Parent Common Stock to
which such holder is entitled pursuant to Section 2.4(f) and any dividends or
other distributions to which such holder is entitled pursuant to Section 2.4(d).
(d) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES OF PARENT COMMON
STOCK. No dividends or other distributions declared or made after the Effective
Time with respect to Parent Common Stock with a record date after the Effective
Time shall be paid to the holder of any unsurrendered Certificate with respect
to the shares of Parent Common Stock represented thereby, and no cash payment in
lieu of any fractional shares shall be paid to any such holder pursuant to
Section 2.4(f), until the holder of such Certificate shall surrender such
Certificate. Subject to the effect of escheat, tax or other applicable laws,
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following surrender of any such Certificate, there shall be paid to the holder
of the certificates representing whole shares of Parent Common Stock issued in
exchange therefor, without interest, (i) promptly, the amount of any cash
payable with respect to a fractional share of Parent Common Stock to which such
holder is entitled pursuant to Section 2.4(f) and the amount of dividends or
other distributions with a record date after the Effective Time and theretofore
paid with respect to such whole shares of Parent Common Stock, and (ii) at the
appropriate payment date, the amount of dividends or other distributions, with a
record date after the Effective Time but prior to surrender and a payment date
occurring after surrender, payable with respect to such whole shares of Parent
Common Stock.
(e) NO FURTHER RIGHTS IN COMPANY COMMON STOCK. All shares of Parent Common
Stock issued upon conversion of the shares of Company Common Stock in accordance
with the terms hereof (including any cash paid pursuant to Section 2.4(d) or
(f)) shall be deemed to have been issued in full satisfaction of all rights
pertaining to such shares of Company Common Stock.
(f) NO FRACTIONAL SHARES. (i) No certificates or scrip representing
fractional shares of Parent Common Stock shall be issued upon the surrender for
exchange of Certificates, no dividend or distribution of Parent shall relate to
such fractional share interests and such fractional share interests will not
entitle the owner thereof to vote or to any rights of a stockholder of Parent.
(ii) As promptly as practicable following the Effective Time, the Exchange
Agent will determine the excess of (A) the number of whole shares of Parent
Common Stock delivered to the Exchange Agent by Parent pursuant to Section
2.4(a) over (B) the aggregate number of whole shares of Parent Common Stock to
be distributed to holders of Company Common Stock pursuant to Section 2.4(b)
(such excess being herein called the "Excess Shares"). Following the Effective
Time, the Exchange Agent will, on behalf of former stockholders of Company, sell
the Excess Shares at then prevailing prices on the New York Stock Exchange, Inc.
(the "NYSE"), all in the manner provided in Section 2.4(f)(iii).
(iii) The sale of the Excess Shares by the Exchange Agent will be executed on
the NYSE through one or more member firms of the NYSE and will be executed in
round lots to the extent practicable. The Exchange Agent will use reasonable
efforts to complete the sale of the Excess Shares as promptly following the
Effective Time as, in the Exchange Agent's sole judgment, is practicable
consistent with obtaining the best execution of such sales in light of
prevailing market conditions. Until the net proceeds of such sale or sales have
been distributed to the holders of Company Common Stock, the Exchange Agent will
hold such proceeds in trust for the holders of Company Common Stock (the "Common
Shares Trust"). The Surviving Corporation will pay all commissions, transfer
taxes and other out-of-pocket transaction costs, including the expenses and
compensation of the Exchange Agent incurred in connection with such sale of the
Excess Shares. The Exchange Agent will determine the portion of the Common
Shares Trust to which each holder of Company Common Stock is entitled, if any,
by multiplying the amount of the aggregate net proceeds comprising the Common
Shares Trust by a fraction, the numerator of which is the amount of the
fractional share interest to which such holder of Company Common Stock is
entitled (after taking into account all shares of Company Common Stock held at
the Effective Time by such holder) and the denominator of which is the aggregate
amount of fractional share interests to which all holders of Company Common
Stock are entitled.
(iv) Notwithstanding the provisions of Section 2.4(f)(ii) and (iii), the
Surviving Corporation may elect at its option, exercised prior to the Effective
Time, in lieu of the issuance and sale of Excess Shares and the making of the
payments hereinabove contemplated, to pay each holder of Company Common Stock an
amount in cash equal to the product obtained by multiplying (A) the fractional
share interest to which such holder (after taking into account all shares of
Company Common Stock held at the Effective Time by such holder) would otherwise
be entitled by (B) the closing price for a share of Parent Common Stock as
reported on the NYSE Composite Transaction Tape (as reported in THE WALL STREET
JOURNAL, or, if not reported thereby, any other authoritative source) on the
Closing Date, and, in such case, all references
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herein to the cash proceeds of the sale of the Excess Shares and similar
references will be deemed to mean and refer to the payments calculated as set
forth in this Section 2.4(f)(iv).
(v) As soon as practicable after the determination of the amount of cash, if
any, to be paid to holders of Company Common Stock with respect to any
fractional share interests, the Exchange Agent will make available such amounts
to such holders of Company Common Stock subject to and in accordance with the
terms of Section 2.4(d).
(g) TERMINATION OF EXCHANGE FUND. Any portion of the Exchange Fund
(including any shares of Parent Common Stock) which remains undistributed to the
holders of Company Common Stock for six months after the Effective Time shall be
delivered to Parent, upon demand, and any holders of Company Common Stock who
have not theretofore complied with this Article II shall thereafter look only to
Parent for the applicable Merger Consideration, any cash in lieu of fractional
shares of Parent Common Stock to which they are entitled pursuant to Section
2.4(f) and any dividends or other distributions with respect to the Parent
Common Stock to which they are entitled pursuant to Section 2.4(d). Any portion
of the Exchange Fund remaining unclaimed by holders of shares of Company Common
Stock as of a date which is immediately prior to such time as such amounts would
otherwise escheat to or become property of any government entity shall, to the
extent permitted by applicable law, become the property of Parent free and clear
of any claims or interest of any person previously entitled thereto.
(h) NO LIABILITY. None of the Exchange Agent, Parent nor the Surviving
Corporation shall be liable to any holder of shares of Company Common Stock for
any such shares of Parent Common Stock (or dividends or distributions with
respect thereto) or cash delivered to a public official pursuant to any
abandoned property, escheat or similar law.
(i) WITHHOLDING RIGHTS. Each of the Surviving Corporation and Parent shall
be entitled to deduct and withhold from the consideration otherwise payable
pursuant to this Agreement to any holder of shares of Company Common Stock such
amounts as it is required to deduct and withhold with respect to the making of
such payment under the Code, or any provision of state, local or foreign tax
law. To the extent that amounts are so withheld by the Surviving Corporation or
Parent, as the case may be, such withheld amounts shall be treated for all
purposes of this Agreement as having been paid to the holder of the shares of
Company Common Stock in respect of which such deduction and withholding was made
by the Surviving Corporation or Parent, as the case may be.
(j) LOST CERTIFICATES. If any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such Certificate to be lost, stolen or destroyed and, if required by the
Surviving Corporation, the posting by such person of a bond, in such reasonable
amount as the Surviving Corporation may direct, as indemnity against any claim
that may be made against it with respect to such Certificate, the Exchange Agent
will issue in exchange for such lost, stolen or destroyed Certificate the
applicable Merger Consideration, any cash in lieu of fractional shares of Parent
Common Stock to which the holders thereof are entitled pursuant to Section
2.4(f) and any dividends or other distributions to which the holders thereof are
entitled pursuant to this Agreement.
(k) FURTHER ASSURANCES. If, at any time after the Effective Time, the
Surviving Corporation shall consider or be advised that any deeds, bills of
sale, assignments, assurances or any other actions or things are necessary or
desirable to vest, perfect or confirm of record or otherwise in the Surviving
Corporation its right, title or interest in, to or under any of the rights,
properties or assets of either of the Merger Sub or the Company acquired or to
be acquired by the Surviving Corporation as a result of, or in connection with,
the Merger or otherwise to carry out this Agreement, the officers of the
Surviving Corporation shall be authorized to execute and deliver, in the name
and on behalf of each of the Merger Sub and the Company or otherwise, all such
deeds, bills of sale, assignments and assurances and to take and do, in such
names and on such behalves or otherwise, all such other actions and things as
may be necessary or desirable to vest, perfect or confirm any and all right,
title and interest in, to and under such rights, properties or assets in the
Surviving Corporation or otherwise to carry out the purposes of this Agreement.
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SECTION 2.5. STOCK TRANSFER BOOKS. At the Effective Time, the stock
transfer books of the Company shall be closed and there shall be no further
registration of transfers of shares of Company Common Stock thereafter on the
records of the Company. From and after the Effective Time, the holders of
Certificates representing shares of Company Common Stock outstanding immediately
prior to the Effective Time shall cease to have any rights with respect to such
shares of Company Common Stock, except as otherwise provided herein or by law.
On or after the Effective Time, any Certificates presented to the Exchange Agent
or Parent for any reason shall be converted into shares of Parent Common Stock,
any cash in lieu of fractional shares of Parent Common Stock to which the
holders thereof are entitled pursuant to Section 2.4(f) and any dividends or
other distributions to which the holders thereof are entitled pursuant to
Section 2.4(d).
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and Merger Sub as
follows:
SECTION 3.1. ORGANIZATION, QUALIFICATION, ETC. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has the corporate power and authority to own its
properties and assets and to carry on its business as it is now being conducted
and is duly qualified to do business and is in good standing in each
jurisdiction in which the ownership of its properties or the conduct of its
business requires such qualification, except for jurisdictions in which such
failure to be so qualified or to be in good standing would not in the aggregate
have a Material Adverse Effect on the Company. The copies of the Company's
charter and by-laws which have been delivered to Parent are complete and correct
and in full force and effect on the date hereof. Each of the Company's
Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation or organization,
has the power and authority to own its properties and to carry on its business
as it is now being conducted, and is duly qualified to do business and is in
good standing in each jurisdiction in which the ownership of its property or the
conduct of its business requires such qualification, except for jurisdictions in
which such failure to be so qualified or to be in good standing would not in the
aggregate have a Material Adverse Effect on the Company. The Company has
previously provided to Parent true and correct copies of the articles and
by-laws of each Material Subsidiary (as defined in Regulation S-K promulgated
under the Securities Act of 1933) and each such organizational document is in
full force and effect on the date hereof. All the outstanding shares of capital
stock of, or other ownership interests in, the Company's Subsidiaries are
validly issued, fully paid and non-assessable and are owned by the Company,
directly or indirectly, free and clear of all liens, claims, charges or
encumbrances, except for restrictions contained in credit agreements and similar
instruments to which the Company is a party. There are no existing options,
rights of first refusal, preemptive rights, calls or commitments of any
character relating to the issued or unissued capital stock or other securities
of, or other ownership interests in, any Subsidiary of the Company.
SECTION 3.2. CAPITAL STOCK. The authorized stock of the Company consists
of 75,000,000 shares of the Company Common Stock, and 10,000,000 shares of
preferred stock, par value $0.01 per share (the "COMPANY PREFERRED STOCK"). As
of October 22, 1997, 26,327,757 shares of the Company Common Stock and no shares
of the Company Preferred Stock were issued and outstanding. All the outstanding
shares of the Company Common Stock have been validly issued and are fully paid
and non-assessable. As of October 22, 1997, there were no outstanding
subscriptions, options, warrants, rights or other arrangements or commitments
obligating the Company to issue any shares of its stock other than:
(a) rights to acquire 2,177,078 shares of the Company Common Stock
pursuant to the Company Amended and Restated 1996 Warrant Plan (the "1996
WARRANT PLAN");
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(b) rights to acquire 387,200 shares of Company Common Stock pursuant to
the Warrant Agreement, dated June 30, 1994, between the Company and the
United States Trust Company of New York (the "1994 WARRANT AGREEMENT");
(c) options or other rights to receive or acquire 271,499 shares of
Company Common Stock pursuant to the 1997 Equity Incentive Plan (the "1997
INCENTIVE PLAN") which includes options, stock awards and restricted stock
awards to be granted under the 1997 Incentive Plan subsequent to the date
hereof in accordance with Section 5.1(a)(ix); and
(d) options or other rights issued to an employee of the Company to
acquire 44,000 shares of Company Common Stock (the "Employee Options").
Except for the issuance of shares of the Company Common Stock pursuant to
the options and other rights referred to in Sections 3.2(a)-(d) above and except
as provided for in 5.1(a), (viii) and (ix), since October 22, 1997, no shares of
the Company Common Stock have been issued.
SECTION 3.3. CORPORATE AUTHORITY RELATIVE TO THIS AGREEMENT; NO
VIOLATION. The Company has the corporate power and authority to enter into this
Agreement and to carry out its obligations hereunder. The execution and delivery
of this Agreement and the consummation of the transactions contemplated hereby
have been duly and validly authorized by the Board of Directors of the Company
and, except for the approval of its stockholders, no other corporate proceedings
on the part of the Company are necessary to authorize this Agreement and the
transactions contemplated hereby. The Board of Directors of the Company has
determined that the transactions contemplated by this Agreement are in the best
interest of its stockholders and to recommend to such stockholders that they
vote in favor thereof. This Agreement has been duly and validly executed and
delivered by the Company and, assuming this Agreement has been duly and validly
executed and delivered by the other parties hereto, this Agreement constitutes a
valid and binding agreement of the Company, enforceable against the Company in
accordance with its terms (except insofar as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' rights generally, or by principles governing the
availability of equitable remedies). The Company is not subject to or obligated
under any charter, bylaw or contract provision or any licenses, franchise or
permit, or subject to any order or decree, which would be breached or violated
by its executing or, subject to the approval of its stockholders, carrying out
this Agreement, except as otherwise previously disclosed in writing to Parent
and for any breaches or violations which would not, in the case of any contract
provision, license, franchise, permit, order or decree, in the aggregate, have a
Material Adverse Effect on the Company. Other than in connection with or in
compliance with the provisions of the DGCL, the Securities Act of 1933 (the
"SECURITIES ACT"), the Securities Exchange Act of 1934, as amended (the
"EXCHANGE ACT"), the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR ACT"), Section 4043 of ERISA (as defined in Section 3.8), any
other competition, antitrust and investment laws and the securities or blue sky
laws of the various states, and, other than the filing of the Certificate of
Merger with the Delaware Secretary of State and any necessary state filings to
maintain the good standing or qualification of the Surviving Corporation
(collectively, the "COMPANY REQUIRED APPROVALS"), no authorization, consent or
approval of, or filing with, any governmental body or authority is necessary for
the consummation by the Company of the transactions contemplated by this
Agreement, except for such authorizations, consents, approvals or filings, the
failure to obtain or make which would not, in the aggregate, have a Material
Adverse Effect on the Company; PROVIDED that the Company makes no representation
with respect to such of the foregoing as are required by reason of the
regulatory status of Parent or any of its Subsidiaries or facts specifically
pertaining to any of them.
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SECTION 3.4. REPORTS AND FINANCIAL STATEMENTS. The Company has previously
furnished to Parent true and complete copies of:
(a) the Company's Annual Report on Form 10-K filed with the Securities
and Exchange Commission (the "SEC") for the year ended December 31, 1996;
(b) the Company's Quarterly Reports on Form 10-Q filed with the SEC for
the quarters ended March 31, 1997 and June 30, 1997;
(c) the definitive proxy statement filed by the Company with the SEC on
May 13, 1997;
(d) each final prospectus filed by the Company with the SEC since July
23, 1996, except any final prospectus on Form S-8; and
(e) all Current Reports on Form 8-K filed by the Company with the SEC
since December 31, 1996.
Except as previously disclosed in writing to Parent, as of their respective
dates, such reports, proxy statement, and prospectuses (collectively, the
"COMPANY SEC REPORTS") (i) complied as to form in all material respects with the
applicable requirements of the Securities Act, the Exchange Act and the rules
and regulations promulgated thereunder and (ii) did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; PROVIDED, that the
foregoing clause (ii) shall not apply to the financial statements included in
the Company SEC Reports (which are covered by the following sentence). The
audited consolidated financial statements and unaudited consolidated interim
financial statements included in the Company SEC Reports (including any related
notes and schedules) fairly present the financial position of the Company and
its Subsidiaries as of the dates thereof and the results of operations and cash
flows for the periods or as of the dates then ended (subject, where appropriate,
to normal year-end adjustments), in each case in accordance with past practice
and generally accepted accounting principles in the United States ("GAAP")
consistently applied during the periods involved (except as otherwise disclosed
in the notes thereto and except that the unaudited financial statements therein
do not contain all of the footnote disclosures required by GAAP). Since July 23,
1996, the Company has timely filed all material reports, registration statements
and other filings required to be filed by it with the SEC under the rules and
regulations of the SEC.
SECTION 3.5. NO UNDISCLOSED LIABILITIES. Except as previously disclosed in
writing to Parent, neither the Company nor any of its Subsidiaries has any
liabilities or obligations of any nature, whether or not accrued, contingent or
otherwise, of a type required by GAAP to be reflected on a consolidated balance
sheet and has no indebtedness for borrowed money outstanding, except, in each
case, (a) liabilities, obligations or indebtedness reflected in any of the
Company SEC Reports or disclosed in writing to Parent and (b) liabilities,
obligations or indebtedness, which would not in the aggregate have a Material
Adverse Effect on the Company.
SECTION 3.6. NO VIOLATION OF LAW. The businesses of the Company and its
Subsidiaries are not being conducted in violation of any law, ordinance or
regulation of any governmental body or authority (provided that no
representation or warranty is made in this Section 3.6 with respect to
Environmental Laws (as defined in Section 3.7 below)) except (a) as described in
any of the Company SEC Reports and (b) for violations or possible violations
which would not in the aggregate have a Material Adverse Effect on the Company.
The Company and its Subsidiaries have all permits, licenses and governmental
authorizations material to ownership or occupancy of their respective properties
and assets and the carrying on of their respective businesses, except for such
permits, licenses and governmental authorizations the failure of which to have
would not have in the aggregate a Material Adverse Effect on the Company.
SECTION 3.7. ENVIRONMENTAL LAWS AND REGULATIONS. Except as described in
any of the Company SEC Reports, (a) the Company and each of its Subsidiaries is
in material compliance with all applicable
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federal, state, local and foreign laws and regulations relating to pollution or
protection of human health or the environment (including, without limitation,
ambient air, surface water, ground water, land surface or subsurface strata)
(collectively, "ENVIRONMENTAL LAWS"), except for non-compliance which would not
in the aggregate have a Material Adverse Effect on the Company, which compliance
includes, but is not limited to, the possession by the Company and its
Subsidiaries of material permits and other governmental authorizations required
under applicable Environmental Laws, and compliance with the terms and
conditions thereof, (b) neither the Company nor any of its Subsidiaries has
received written notice of, or, to the knowledge of the Company, is the subject
of, any actions, causes of action, claims, investigations, demands or notices by
any Person alleging liability under or non-compliance with any Environmental Law
or that the Company or any Subsidiary is a potentially responsible party at any
Superfund site or state-equivalent site ("ENVIRONMENTAL CLAIMS") which would in
the aggregate have a Material Adverse Effect on the Company, (c) to the
knowledge of the Company, there are no circumstances that are reasonably likely
to prevent or interfere with such material compliance in the future, (d) to the
knowledge of the Company, the Company and its Subsidiaries have not disposed of
or released hazardous materials (at a concentration or level which requires
remedial action under any Environmental Law) at any real property currently
owned or leased by the Company or any Subsidiary or at any other real property,
except for such disposals or releases as would not in the aggregate have a
Material Adverse Effect on the Company, and (e) neither the Company nor its
Subsidiaries have agreed to indemnify any predecessor or other party with
respect to any environmental liability, other than (i) customary indemnity
agreements contained in leases and licenses and (ii) such agreements as would
not in the aggregate have a Material Adverse Effect on the Company.
SECTION 3.8. NO UNDISCLOSED EMPLOYEE BENEFIT PLAN LIABILITIES OR SEVERANCE
ARRANGEMENTS. Except as described in any of the Company SEC Reports, all
"employee benefit plans," as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA") (including any multi-employer
plan as defined in Section 3(37) of ERISA), maintained or contributed to by the
Company or its Subsidiaries are in compliance with all applicable provisions of
ERISA, the Code and any other applicable laws and to the knowledge of the
Company, none of the Company nor its Subsidiaries with respect to such plans has
engaged in a "prohibited transaction" within the meaning of Section 4975 of the
Code or Title I, Part 4 of ERISA except for transactions (i) which are exempt
under applicable law, regulations and administrative exemptions or (ii) which in
the aggregate would not have a Material Adverse Effect on the Company, and the
Company and its Subsidiaries do not have any liabilities or obligations with
respect to any such employee benefit plans, whether or not accrued, contingent
(including any potential material withdrawal liability with respect to any such
multi-employer plans) or otherwise, except (a) as described in any of the
Company SEC Reports or previously disclosed in writing to Parent and (b) for
instances of non-compliance transactions or liabilities or obligations that
would not in the aggregate have a Material Adverse Effect on the Company. Except
with respect to awards granted (or granted subsequent to the date hereof in
accordance with the provision of Section 5.1(a)(ix) or (x)) under (i) the
Company 1997 Incentive Plan, (ii) 1996 Warrant Plan and (iii) 1994 Warrant
Agreement, no employee of the Company will be entitled to any additional
benefits or any acceleration of the time of payment or vesting of any benefits
under any employee incentive or benefit plan, program or arrangement as a result
of the transactions contemplated by this Agreement. The Company has previously
provided to Parent a true and correct copy of the Company's 401(k) plan and the
Form 5500 and the audit report (which fairly represents the financial condition
and results of operations of such plan) related thereto. The Company and its
Subsidiaries do not maintain any employee benefit pension plan which is subject
to Title IV of ERISA. The Company's 401(k) Plan is exempt from federal income
taxation under Section 501 of the Code, and, to the knowledge of the Company,
nothing has occurred with respect to the operation of such plan which could
cause the loss of such qualification or exemption or the imposition of any lien,
penalty, or tax under ERISA or the Code which would in the aggregate have a
Material Adverse Effect on the Company, and the Company and its Subsidiaries
have not received any material adverse notice concerning the 401(k) plan from
the Internal Revenue Service, the Department of Labor or the Pension
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Benefit Guaranty Corporation ("PBGC") within the four years preceding the date
of this Agreement. None of the Company nor any Subsidiary has incurred any
outstanding liability under Section 4062 of ERISA to the PBGC, to a trust
established under Section 4041 or 4042 of ERISA, or to a trustee appointed under
Section 4042 of ERISA, except for such liabilities as would not in the aggregate
have a Material Adverse Effect on the Company. None of the Company's employee
benefit plans contain any provisions which would prohibit the transactions
contemplated by this Agreement. As of the Closing Date, except for stock and
restricted stock awards described in Section 5.1(a)(ix), no payment that is owed
or may become due any director, officer, employee, or agent of the Company or a
Subsidiary will be non-deductible by the Company or any Subsidiary by reason of
Section 280G of the Code or under Section 4999 of the Code, except for such
liabilities or non-deductions as would not in the aggregate have a Material
Adverse Effect on the Company. Except as previously disclosed in writing to
Parent or as set forth in the Company SEC Reports, the Company has not prepaid
or prefunded any material welfare plan through a trust, reserve, premium
stabilization or similar account, other than pursuant to any insurance contract
which does not include a "fund" as defined in Sections 419(e)(3) and (4) of the
Code.
SECTION 3.9. ABSENCE OF CERTAIN CHANGES OR EVENTS. Other than as disclosed
in the Company SEC Reports or previously disclosed in writing to Parent, since
June 30, 1997, the businesses of the Company and its Subsidiaries have been
conducted in all material respects in the ordinary course and there has not been
any event, occurrence, development or state of circumstances or facts that has
had a Material Adverse Effect on the Company. Since June 30, 1997, no dividends
or distributions have been declared or paid on or made with respect to the
shares of capital stock or other equity interests of the Company or its
Subsidiaries nor have any such shares been repurchased or redeemed, other than
dividends or distributions paid to the Company or a Subsidiary.
SECTION 3.10. INVESTIGATIONS; LITIGATION. Except as described in any of
the Company SEC Reports or previously disclosed in writing to Parent:
(a) no investigation or review by any governmental body or authority
with respect to the Company or any of its Subsidiaries which would in the
aggregate have a Material Adverse Effect on the Company is pending nor has
any governmental body or authority notified the Company of an intention to
conduct the same; and
(b) there are no actions, suits or proceedings pending (or, to the
Company's knowledge, threatened) against or affecting the Company or its
Subsidiaries, or any of their respective properties at law or in equity, or
before any federal, state, local or foreign governmental body or authority,
which, in the aggregate, is reasonably likely to have a Material Adverse
Effect on the Company.
SECTION 3.11. PROXY STATEMENT; REGISTRATION STATEMENT; OTHER
INFORMATION. None of the information with respect to the Company or its
Subsidiaries to be included in the Proxy Statement (as defined in Section 5.2)
or the Registration Statement (as defined in Section 5.2) will, in the case of
the Proxy Statement or any amendments thereof or supplements thereto, at the
time of the mailing of the Proxy Statement or any amendments or supplements
thereto, and at the time of the Company Meeting (as defined in Section 5.3), or,
in the case of the Registration Statement, at the time it becomes effective,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading, except that no representation is made by the Company with respect to
information supplied in writing by Parent or any affiliate of Parent
specifically for inclusion in the Proxy Statement. The Proxy Statement will
comply as to form in all material respects with the provisions of the Exchange
Act and the rules and regulations promulgated thereunder.
SECTION 3.12. LACK OF OWNERSHIP OF PARENT COMMON STOCK. Neither the
Company nor any of its Subsidiaries owns any shares of Parent Common Stock or
other securities convertible into shares of Parent Common Stock (exclusive of
any shares owned by the Company's employee benefit plans).
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SECTION 3.13. TAX MATTERS. (a) All federal, state, local and foreign Tax
Returns required to be filed by or on behalf of the Company, each of its
Subsidiaries, and each affiliated, combined, consolidated or unitary group of
which the Company or any of its Subsidiaries is a member (a "COMPANY GROUP")
have been timely filed, and all returns filed are complete and accurate except
to the extent any failure to file or any inaccuracies in filed returns would
not, individually or in the aggregate, have a Material Adverse Effect on the
Company. All Taxes due and owing by the Company, any Subsidiary of the Company
or any Company Group have been paid, or adequately reserved for, except to the
extent any failure to pay or reserve would not, individually or in the
aggregate, have a Material Adverse Effect on the Company. There is no audit
examination, deficiency, refund litigation, proposed adjustment or matter in
controversy with respect to any Taxes due and owing by the Company, any
Subsidiary of the Company or any Company Group nor has the Company or any
Subsidiary filed any waiver of the statute of limitations applicable to the
assessment or collection of any Tax, in each case, which would, individually or
in the aggregate, have a Material Adverse Effect on the Company. All assessments
for Taxes due and owing by the Company, any Subsidiary of the Company or any
Company Group with respect to completed and settled examinations or concluded
litigation have been paid. Neither the Company nor any Subsidiary is a party to
any tax indemnity agreement, tax sharing agreement or other agreement under
which the Company or any Subsidiary could become liable to another person as a
result of the imposition of a Tax upon any person, or the assessment or
collection of such a Tax, except for such agreements as would not in the
aggregate have a Material Adverse Effect. As soon as practicable after the
public announcement of the Agreement, the Company will provide Parent with
written schedules of (i) the taxable years of the Company for which the statutes
of limitations with respect to federal income Taxes have not expired, and (ii)
with respect to federal income Taxes, those years for which examinations have
been completed, those years for which examinations are presently being
conducted, and those years for which examinations have not yet been initiated.
The Company and each of its Subsidiaries has complied in all material respects
with all rules and regulations relating to the withholding of Taxes, except to
the extent any such failure to comply would not, individually or in the
aggregate, have a Material Adverse Effect on the Company.
(b) Neither the Company nor any of its Subsidiaries knows of any fact or has
taken any action that could reasonably be expected to prevent the Merger from
qualifying as a reorganization within the meaning of Section 368(a) of the Code.
SECTION 3.14. OPINION OF FINANCIAL ADVISOR. The Board of Directors of the
Company has received the opinion of BT Alex Brown & Sons, Inc. and Bear Stearns
& Co., Inc., dated the date of this Agreement, to the effect that, as of such
date, the Merger Consideration is fair to the Company's stockholders from a
financial point of view. A copy of the written opinion of BT Alex Brown & Sons,
Inc. and Bear Stearns & Co., Inc. will be delivered to Parent as soon as
practicable after the date of this Agreement.
SECTION 3.15. REQUIRED VOTE OF THE COMPANY STOCKHOLDERS. The affirmative
vote of the holders of a majority of the outstanding shares of the Company
Common Stock is required to approve the Merger. No other vote of the
stockholders of the Company is required by law, the charter or By-Laws of the
Company or otherwise in order for the Company to consummate the Merger and the
transactions contemplated hereby.
SECTION 3.16. INSURANCE. The Company and its Subsidiaries have insurance
policies, including without limitation policies of life, fire, health and other
casualty and liability insurance, that are customary and appropriate for the
industry in which it operates and such policies are in full force and effect,
except for the failure to have or maintain in full force and effect such
policies as would not in the aggregate have a Material Adverse Effect on the
Company.
SECTION 3.17. REAL PROPERTY; TITLE. The Company has previously provided to
Parent a true and complete list of all real property owned by the Company or its
Subsidiaries which is material to the business of the Company and its
Subsidiaries taken as a whole. The Company has good and marketable
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title to all such properties except where the failure to have such title would
not in the aggregate have a Material Adverse Effect.
SECTION 3.18. COLLECTIVE BARGAINING AGREEMENTS AND LABOR. The Company has
previously provided to Parent all labor or collective bargaining agreements
which pertain to a material number of the employees of the Company and its
Subsidiaries. There are no pending complaints, charges or claims against the
Company or its Subsidiaries filed with any public or governmental authority,
arbitrator or court based upon the employment or termination by the Company of
any individual, except for such complaints, charges or claims which if adversely
determined would not in the aggregate have a Material Adverse Effect on the
Company.
SECTION 3.19. MATERIAL CONTRACTS. Except as set forth in the Company SEC
Reports, neither the Company nor any of its Subsidiaries is a party to or bound
by any "material contract" (as such term is defined in item 601(b)(10) of
Regulation S-K of the SEC) (all contracts of the type described in this Section
3.19 being referred to herein as "Company Material Contracts"). Each Company
Material Contract is valid and binding on the Company and is in full force and
effect, and the Company and each of its Subsidiaries have in all material
respects performed all obligations required to be performed by them to date
under each Company Material Contract, except where such noncompliance, in the
aggregate, would not have a Material Adverse Effect on the Company. Neither the
Company nor any of its Subsidiaries know of, or has received notice of, any
violation or default under any Company Material Contract except for such
violations or defaults as would not in the aggregate have a Material Adverse
Effect on the Company.
SECTION 3.20. TAKEOVER STATUTE. The Board of Directors of the Company has
approved this Agreement and the transactions contemplated hereby and, assuming
the accuracy of Parent's representation and warranty contained in Section 4.12,
such approval constitutes approval of the Merger and the other transactions
contemplated hereby by the Board of Directors of the Company under the
provisions of Section 203 of the DGCL such that Section 203 of the DGCL does not
apply to this Agreement and the transactions contemplated hereby. To the
knowledge of the Company, no other state takeover statute is applicable to the
Merger or the other transactions contemplated hereby.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub hereby jointly and severally represent and warrant to
the Company as follows:
SECTION 4.1. ORGANIZATION, QUALIFICATION, ETC. Each of Parent and Merger
Sub is a corporation duly organized, validly existing and in good standing under
the laws of its jurisdiction of organization and has the corporate power and
authority to own its properties and assets and to carry on its business as it is
now being conducted and is duly qualified to do business and is in good standing
in each jurisdiction in which the ownership of its properties or the conduct of
its business requires such qualification, except for jurisdictions in which such
failure to be so qualified or to be in good standing would not in the aggregate
have a Material Adverse Effect on Parent or Merger Sub. The copies of Parent's
Articles of Incorporation, as amended, and Amended and Restated By-laws and
Merger Sub's charter and by-laws which have been delivered to the Company are
complete and correct and in full force and effect on the date hereof. Each of
Parent's Subsidiaries is a corporation or partnership duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation or organization, has the power and authority to own its properties
and to carry on its business as it is now being conducted, and is duly qualified
to do business and is in good standing in each jurisdiction in which the
ownership of its property or the conduct of its business requires such
qualification, except for jurisdictions in which such failure to be so qualified
or to be in good standing would not in the aggregate have a Material Adverse
Effect on Parent or Merger Sub. All the outstanding shares of capital stock of,
or other ownership interests in, Parent's Subsidiaries and Merger Sub are
validly issued, fully paid and non-assessable and are owned by Parent, directly
or indirectly, free
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and clear of all liens, claims, charges or encumbrances, except for restrictions
contained in credit agreements and similar instruments to which Parent is a
party. There are no existing options (except for those set forth in Section 4.2
below), rights of first refusal, preemptive rights, calls or commitments of any
character relating to the issued or unissued capital stock or other securities
of, or other ownership interests in, any Subsidiary of Parent or Merger Sub.
SECTION 4.2. CAPITAL STOCK. The authorized capital stock of Parent
consists of 150,000,000 shares of Parent Common Stock, and 2,000,000 shares of
preferred stock, par value $1.00 per share ("PARENT PREFERRED STOCK"). The
shares of Parent Common Stock to be issued in the Merger or upon the exercise of
the Company stock options, warrants, conversion rights or other rights or upon
vesting or payment of other Company equity-based awards thereafter will, when
issued, be validly issued fully paid and non-assessable. As of October 22, 1997,
98,056,977 shares of Parent Common Stock and no shares of Parent Preferred Stock
were issued and outstanding. All the outstanding shares of Parent Common Stock
have been validly issued and are fully paid and non-assessable. As of October
22, 1997, there were no outstanding subscriptions, options, warrants, rights or
other arrangements or commitments obligating Parent to issue any shares of its
capital stock other than options and other rights to receive or acquire an
aggregate of 4,263,017 shares of Parent Common Stock pursuant to:
(a) the 1984 Incentive Stock Option Plan of Parent;
(b) the 1994 Incentive Stock Option Plan of Parent;
(c) the 1994 Non-Qualified Stock Option Plan;
(d) the Parent Director's Non-Qualified Stock Option Plan;
(e) the Stockholders Agreement, dated April 9, 1997, by and among
Parent, Eller Media Corporation, and EM Holdings, L.L.C.; and
(f) various other option agreements with officers or employees of the
Parent or the Parent's Subsidiaries, option assumption agreements, and
incentive compensation grants.
SECTION 4.3. CORPORATE AUTHORITY RELATIVE TO THIS AGREEMENT; NO
VIOLATION. Each of Parent and Merger Sub has the corporate power and authority
to enter into this Agreement and to carry out its obligations hereunder. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the
Boards of Directors of Parent and Merger Sub and no other corporate or
stockholder proceedings on the part of Parent or Merger Sub are necessary to
authorize this Agreement, the issuance of the Parent Common Stock and the other
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by Parent and Merger Sub and, assuming this Agreement has
been duly and validly executed and delivered by the other parties hereto, this
Agreement constitutes a valid and binding agreement of Parent and Merger Sub,
enforceable against each of them in accordance with its terms (except insofar as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights
generally, or by principles governing the availability of equitable remedies).
Neither Parent nor Merger Sub is subject to or obligated under any charter,
by-law or contract provision or any license, franchise or permit, or subject to
any order or decree, which would be breached or violated by its executing or
carrying out this Agreement, except for any breaches or violations which would
not, in the aggregate, have a Material Adverse Effect on Parent. Other than in
connection with or in compliance with the provisions of the DGCL, the Securities
Act, the Exchange Act, the HSR Act, Section 4043 of ERISA, any non-United States
competition, antitrust and investments laws and the securities or blue sky laws
of the various states, and, other than the filing of the Certificate of Merger
with the Delaware Secretary of State and any necessary state filings to maintain
the good standing or qualification of the Surviving Corporation (collectively,
the "PARENT REQUIRED APPROVALS"), no authorization, consent or approval of, or
filing with, any governmental body or authority is necessary for the
consummation by Parent of the transactions contemplated by this Agreement,
except for such authorizations, consents, approvals or filings, the failure to
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obtain or make which would not, in the aggregate, have a Material Adverse Effect
on Parent; PROVIDED that Parent makes no representation with respect to such of
the foregoing as are required by reason of the regulatory status of the Company
or any of its Subsidiaries or facts specifically pertaining to any of them.
SECTION 4.4. REPORTS AND FINANCIAL STATEMENTS. Parent has previously
furnished to the Company true and complete copies of:
(a) Parent's Annual Reports on Form 10-K filed with the SEC for each of
the years ended December 31, 1994 through 1996;
(b) Parent's Quarterly Reports on Form 10-Q filed with the SEC for the
quarters ended March 31, 1997 and June 30, 1997;
(c) each definitive proxy statement filed by Parent with the SEC since
December 31, 1994;
(d) each final prospectus filed by Parent with the SEC since December
31, 1994, except any final prospectus on Form S-8; and
(e) all Current Reports on Form 8-K filed by Parent with the SEC since
December 31, 1996.
As of their respective dates, such reports, proxy statements and
prospectuses (collectively, "PARENT SEC REPORTS") (i) complied as to form in all
material respect with the applicable requirements of the Securities Act, the
Exchange Act, and the rules and regulations promulgated thereunder and (ii) did
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading;
PROVIDED, that the foregoing clause (ii) shall not apply to the financial
statements included in the Parent SEC Reports (which are covered by the
following sentence). The audited consolidated financial statements and unaudited
consolidated interim financial statements included in the Parent SEC Reports
(including any related notes and schedules) fairly present the financial
position of Parent and its consolidated Subsidiaries as of the dates thereof and
the results of their operations and their cash flows for the periods or as of
the dates then ended (subject, where appropriate, to normal year-end
adjustments), in each case in accordance with past practice and GAAP
consistently applied during the periods involved (except as otherwise disclosed
in the notes thereto and except that the unaudited financial statements therein
do not contain all of the footnote disclosures required by GAAP). Since
September 30, 1996, Parent has timely filed all material reports, registration
statements and other filings required to be filed by it with the SEC under the
rules and regulations of the SEC.
SECTION 4.5. NO UNDISCLOSED LIABILITIES. Neither Parent nor any of its
Subsidiaries has any liabilities or obligations of any nature, whether or not
accrued, contingent or otherwise, of a type required by GAAP to be reflected on
a consolidated balance sheet except (a) liabilities or obligations reflected in
any of the Parent SEC Reports and (b) liabilities or obligations which would not
in the aggregate have a Material Adverse Effect on Parent.
SECTION 4.6. NO VIOLATION OF LAW. The businesses of Parent and its
Subsidiaries are not being conducted in violation of any law, ordinance or
regulation of any governmental body or authority (provided that no
representation or warranty is made in this Section 4.6 with respect to
Environmental Laws) except (a) as described in any of the Parent SEC Reports and
(b) for violations or possible violations which would not in the aggregate have
a Material Adverse Effect on Parent.
SECTION 4.7. ENVIRONMENTAL LAWS AND REGULATIONS. Except as described in
any of the Parent SEC Reports, (a) Parent and each of its Subsidiaries is in
material compliance with all applicable Environmental Laws, except for
non-compliance which would not in the aggregate have a Material Adverse Effect
on Parent, which compliance includes, but is not limited to, the possession by
Parent and its Subsidiaries of material permits and other governmental
authorizations required under applicable Environmental Laws, and compliance with
the terms and conditions thereof; (b) neither Parent nor any of its Subsidiaries
has received written notice of, or, to the knowledge of Parent, is the subject
of, any Environmental Claims
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which would in the aggregate have a Material Adverse Effect on Parent; and (c)
to the knowledge of Parent, there are no circumstances that are reasonably
likely to prevent or interfere with such material compliance in the future.
SECTION 4.8. NO UNDISCLOSED EMPLOYEE BENEFIT PLAN LIABILITIES OR SEVERANCE
ARRANGEMENTS. Except as described in any of the Parent SEC Reports, all
"employee benefit plans," as defined in Section 3(3) of ERISA, maintained or
contributed to by Parent or its Subsidiaries are in compliance with all
applicable provisions of ERISA and the Code, and Parent and its Subsidiaries do
not have any liabilities or obligations with respect to any such employee
benefit plans, whether or not accrued, contingent or otherwise, except (a) as
described in any of the Parent SEC Reports and (b) for instances of non-
compliance or liabilities or obligations that would not in the aggregate have a
Material Adverse Effect on Parent. No employee of Parent will be entitled to any
additional benefits or any acceleration of the time of payment or vesting of any
benefits under any employee incentive or benefit plan, program or arrangement as
a result of the transactions contemplated by this Agreement.
SECTION 4.9. ABSENCE OF CERTAIN CHANGES OR EVENTS. Other than as disclosed
in the Parent SEC Reports, since June 30, 1997 the businesses of Parent and its
Subsidiaries have been conducted in all material respects in the ordinary course
and there has not been any event, occurrence, development or state of
circumstances or facts that has had a Material Adverse Effect on Parent.
SECTION 4.10. INVESTIGATIONS; LITIGATION. Except as described in any of
the Parent SEC Reports or previously disclosed in writing to the Company:
(a) no investigation or review by any governmental body or authority
with respect to Parent or any of its Subsidiaries which would in the
aggregate have a Material Adverse Effect on Parent is pending nor has any
governmental body or authority notified Parent of an intention to conduct
the same; and
(b) there are no actions, suits or proceedings pending (or, to Parent's
knowledge, threatened) against or affecting Parent or its Subsidiaries, or
any of their respective properties at law or in equity, or before any
federal, state, local or foreign governmental body or authority which in the
aggregate is reasonably likely to have a Material Adverse Effect on Parent.
SECTION 4.11. PROXY STATEMENT; REGISTRATION STATEMENT; OTHER
INFORMATION. None of the information with respect to Parent or its Subsidiaries
to be included in the Proxy Statement (as defined in section 5.2) or the
Registration Statement (as defined in section 5.2) will, in the case of the
Proxy Statement or any amendments thereof or supplements thereto, at the time of
the mailing of the Proxy Statement or any amendments or supplements thereto, and
at the time of the Company Meeting, or, in the case of the Registration
Statement, at the time it becomes effective or at the time of any post-effective
amendment, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading, except that no representation is made by Parent with respect to
information supplied in writing by the Company or any affiliate of the Company
specifically for inclusion in the Proxy Statement. The Registration Statement
will each comply as to form in all material respects with the provisions of the
Exchange Act and the rules and regulations promulgated thereunder.
SECTION 4.12. LACK OF OWNERSHIP OF THE COMPANY COMMON STOCK. Neither
Parent nor any of its Subsidiaries owns any shares of the Company Common Stock
or other securities convertible into shares of the Company Common Stock
(exclusive of any shares owned by Parent's employee benefit plans).
SECTION 4.13. TAX MATTERS.
(a) All federal, state, local and foreign Tax Returns required to be filed
by or on behalf of Parent, each of its Subsidiaries, and each affiliated,
combined, consolidated or unitary group of which Parent or any of its
Subsidiaries is a member (a "PARENT GROUP") have been timely filed, and all
returns filed are
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complete and accurate except to the extent any failure to file or any
inaccuracies in filed returns would not, individually or in the aggregate, have
a Material Adverse Effect on Parent. All Taxes due and owing by Parent, any
Subsidiary of Parent or any Parent Group have been paid, or adequately reserved
for, except to the extent any failure to pay or reserve would not, individually
or in the aggregate, have a Material Adverse Effect on Parent. There is no audit
examination, deficiency, refund litigation, proposed adjustment or matter in
controversy with respect to any Taxes due and owing by Parent, any Subsidiary of
Parent or any Parent Group which would, individually or in the aggregate, have a
Material Adverse Effect on Parent. All assessments for Taxes due and owing by
Parent, any Subsidiary of Parent or any Parent Group with respect to completed
and settled examinations or concluded litigation have been paid. As soon as
practicable after the public announcement of the Merger Agreement, Parent will
provide the Company with written schedules of (i) the taxable years of Parent
for which the statutes of limitations with respect to federal income Taxes have
not expired, and (ii) with respect to federal income Taxes, those years for
which examinations have been completed, those years for which examinations are
presently being conducted, and those years for which examinations have not yet
been initiated. Parent and each of its Subsidiaries has complied in all material
respects with all rules and regulations relating to the withholding of Taxes,
except to the extent any such failure to comply would not, individually or in
the aggregate, have a Material Adverse Effect on Parent.
(b) Neither Parent nor any of its Subsidiaries knows of any fact or has
taken any action that could reasonably be expected to prevent the Merger from
qualifying as a reorganization within the meaning of Section 368(a) of the Code.
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS
SECTION 5.1. CONDUCT OF BUSINESS BY THE COMPANY OR PARENT. Prior to the
Effective Time or the date, if any, on which this Agreement is earlier
terminated pursuant to Section 7.1 (the "TERMINATION DATE"), and except as may
be agreed to by the other parties hereto or as may be permitted pursuant to this
Agreement:
(a) The Company:
(i) shall, and shall cause each of its Subsidiaries to, conduct its
operations according to their ordinary and usual course of business;
(ii) shall use its reasonable best efforts, and cause each of its
Subsidiaries to use its reasonable best efforts, to (A) preserve intact its
business organizations and goodwill in all material respects, (B) keep
available the services of its officers and employees as a group, subject to
changes in the ordinary course, and (C) maintain satisfactory relationships
with suppliers, distributors, customers and others having business
relationships with them;
(iii) shall notify Parent of any emergency or other change in the normal
course of its or its Subsidiaries' respective businesses or in the operation
of its or its Subsidiaries' respective properties and of any complaints,
investigations or hearings (or communications indicating that the same may
be contemplated) of any governmental body or authority if such emergency,
change, complaint, investigation or hearing would have a Material Adverse
Effect on the Company;
(iv) shall not authorize or pay any dividends on or make any
distribution with respect to its outstanding shares of stock;
(v) except as previously disclosed in writing to Parent or as otherwise
provided in this Agreement, shall not, and shall not permit any of its
Subsidiaries to, enter into or amend any employment, severance or similar
agreements or arrangements with any of their respective directors or
executive officers;
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(vi) except as previously disclosed in writing to Parent, shall not, and
shall not permit any of its Subsidiaries to, authorize, propose or announce
an intention to authorize or propose, or enter into an agreement with
respect to, any merger, consolidation or business combination any
acquisition of a material amount of assets or securities, any disposition of
assets or securities or any release or relinquishment of any material
contract rights not in the ordinary course of business, except for (A)
acquisitions previously disclosed in writing to Parent and Merger Sub and
(B) asset acquisitions for cash within the scope of or related to the
Company's existing business in which the aggregate consideration is less
than $5 million in any single acquisition or series of related transactions
and less than $25 million in the aggregate for all such acquisitions, in
each case which would not materially delay or impair the ability of the
Company to perform its obligations under this Agreement;
(vii) shall not propose or adopt any amendments to its corporate charter
or by-laws;
(viii) shall not, and shall not permit any of its Subsidiaries to, (A)
issue any shares of their capital stock, except upon exercise of rights or
options issued pursuant to existing employee incentive or benefit plans,
programs or arrangements and non-employee director plans (including, without
limitation, shares issued in connection with stock grants or awards or the
exercise of rights or options granted in the ordinary course of business
consistent with past practice pursuant to such plans, programs or
arrangements) or (B) effect any stock split not previously announced or (C)
otherwise change its capitalization as it existed on September 30, 1997,
except as contemplated herein;
(ix) shall not, and shall not permit any of its Subsidiaries to, grant,
confer or award any options, warrants, conversion rights or other rights,
not existing on the date hereof, to acquire any shares of its capital stock,
except for grants of options, stock awards or restricted stock under the
1997 Incentive Plan with respect to not more than 180,000 shares;
(x) shall not, and shall not permit any of its Subsidiaries to, except
in the ordinary course of business in connection with employee incentive and
benefit plans, programs or arrangements in existence on the date hereof,
purchase or redeem any shares of its stock or pay any cash bonuses in excess
of 133% of the Company's reserves for bonuses as of September 30, 1997;
PROVIDED, HOWEVER, the Company may adopt a bonus plan to incentive employees
to remain with the Company through and until the Closing Date in an amount
to be mutually agreed to by Parent and the Company;
(xi) shall not, and shall not permit any of its Subsidiaries to, except
as contemplated by this Section 5.1 or Section 5.4, amend in any significant
respect the terms of their respective employee benefit plans, programs or
arrangements or any severance or similar agreements or arrangements in
existence on the date hereof, or adopt any new employee benefit plans,
programs or arrangements or any severance or similar agreements or
arrangements;
(xii) shall not, and shall not permit any of its Subsidiaries to, enter
into any loan agreement;
(xiii) except in connection with (A) acquisitions previously disclosed in
writing to Parent or as contemplated pursuant to clause (vi) above and (B)
interest payments on any of the Company's outstanding public debt, shall
not, and shall not permit any of its Subsidiaries to, incur any additional
indebtedness for borrowed money, other than incurrences in an amount in the
aggregate not to exceed at any one time outstanding $1,000,000;
(xiv) shall not, and shall not permit any of its Subsidiaries to, incur
any capital expenditures in excess of $15,000,000;
(xv) shall not, and shall not permit any of its Subsidiaries to, except
with respect to sign location related contracts or leases, sales or
advertising contracts or other agreements contemplated by or permitted
pursuant to this Agreement, enter into any material agreement;
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(xvi) shall not, and shall not permit any of its Subsidiaries, to enter
into an agreement with any Affiliate of the Company, any family member of
any Affiliate of the Company or any stockholder who owns more than 10% of
the outstanding capital stock of the Company;
(xvii) shall not, and shall not permit any of its Subsidiaries to make any
material Tax election or settle or compromise any material Tax liability,
other than in connection with currently pending proceedings or other than in
the ordinary course of business; and
(xviii) shall not, and shall not permit any of its Subsidiaries to agree,
in writing or otherwise, to take any of the foregoing actions or take any
action which would make any representation or warranty in Article III hereof
untrue or incorrect.
(b) The Parent:
(i) shall, and shall cause each of its Subsidiaries to, conduct its
operations according to their ordinary and usual course of business;
PROVIDED, HOWEVER, that nothing contained in this proviso shall limit
Parent's ability to authorize or propose, or enter into, an agreement with
respect to any acquisitions or to issue any debt or equity securities;
(ii) shall take all action necessary to cause Merger Sub to perform its
obligations under this Agreement and to consummate the Merger on the terms
and conditions set forth in this Agreement;
(iii) shall and shall cause Merger Sub to vote all shares of Company
Common Stock, if any, beneficially owned by Merger Sub or its affiliates in
favor of adoption and approval of the Merger and this Agreement at the
Company Meeting (as defined in Section 5.3); and
(iv) shall not, and shall not permit any of its Subsidiaries to agree,
in writing or otherwise, to take any of the foregoing actions or take any
action which would make any representation or warranty in Article IV hereof
untrue or incorrect.
SECTION 5.2. PROXY MATERIAL; REGISTRATION STATEMENT. (a) The Company will
(i) as promptly as practicable following the date of this Agreement, prepare and
file with the SEC, will use its reasonable efforts to have cleared by the SEC
and thereafter mail to its stockholders as promptly as practicable, a proxy
statement that will be the same proxy statement/prospectus contained in the
Registration Statement (as hereinafter defined) and a form of proxy, in
connection with the vote of the Company's stockholders with respect to the
Merger (such proxy statement/prospectus, together with any amendments thereof or
supplements thereto, in each case in the form or forms mailed to the Company's
stockholders, is herein called the "PROXY STATEMENT"), (ii) use its reasonable
efforts to obtain the necessary approvals by its stockholders of this Agreement
and the transactions contemplated hereby and (iii) otherwise comply in all
material respects with all legal requirements applicable to such meeting. The
Company may, if it withdraws, modifies or changes its recommendation in
accordance with Section 5.3 below, delay the filing or mailing, as the case may
be, of the Proxy Statement or delay the holding of the Company Meeting (as
defined below in Section 5.3). In addition, the Company will upon reasonable
advance notice provide Parent with all financial and other data regarding the
Company as may be reasonably requested by Parent in connection with the
Registration Statement.
(b) Parent will as promptly as practicable following the date of this
Agreement, prepare and file with the SEC a registration statement of the Parent
on Form S-4 (such registration statement together with all and any amendments
and supplements thereto, being herein referred to as the "REGISTRATION
STATEMENT"), which shall include the Proxy Statement. Such Registration
Statement shall be used for the purposes of registering with the SEC and with
applicable state securities authorities the issuance of Parent Common Stock to
holders of Company Common Stock in connection with the Merger.
(c) The Parent shall furnish such information concerning the Parent as is
necessary in order to cause the Proxy Statement, insofar as it is related to the
Parent, to be prepared in accordance with Section 5.2(a). The Parent agrees
promptly to advise the Company if at any time prior to the Company Meeting any
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information provided by the Parent in the Proxy Statement becomes incorrect or
incomplete in any material respect, and to provide the information needed to
correct such inaccuracy or omission.
(d) The Parent shall use its best efforts to cause the Registration
Statement to become effective under the Securities Act and applicable state
securities laws at the earliest practicable date and to remain effective until
the Effective Time.
SECTION 5.3. STOCKHOLDERS' MEETING. The Company shall, in accordance with
applicable law and the Articles of Incorporation and the By-Laws of the Company,
and subject to the fiduciary duties of the Board of Directors of the Company,
duly call, give notice of, convene and hold a special meeting of its
stockholders (the "COMPANY MEETING") as promptly as practicable after the date
hereof for the purpose of voting upon the adoption of this Agreement and
considering and taking any other action upon this Agreement and the Merger and
such other matters as may be required at the Company Meeting and the Company
shall use its reasonable efforts to hold the Company Meeting as soon as
practicable after the date on which the Registration Statement becomes
effective. The Board of Directors of the Company shall recommend approval and
adoption of this Agreement and the Merger by the Company's stockholders;
PROVIDED, THAT, the Board of Directors of the Company may withdraw, modify or
change such recommendation if it has determined in good faith, after
consultation with outside legal counsel, that the failure to withdraw, modify or
change such recommendation would be reasonably likely to be inconsistent with
the fiduciary duties of the Board of Directors of the Company to the
stockholders under applicable law.
SECTION 5.4. APPROVALS AND CONSENTS; COOPERATION. (a) The Company and
Parent shall together, or pursuant to an allocation of responsibility to be
agreed upon between them:
(i) as soon as is reasonably practicable take all such action as may be
required under state blue sky or securities laws in connection with the
transactions contemplated by this Agreement;
(ii) promptly prepare and file with the NYSE and such other stock
exchanges as shall be agreed upon listing applications covering the shares
of Parent Common Stock issuable in the Merger or upon exercise of the
Company stock options, warrants, conversion rights or other rights or
vesting or payment of other Company equity-based awards and use its
reasonable best efforts to obtain, prior to the Effective Time, approval for
the listing of such Parent Common Stock, subject only to official notice of
issuance;
(iii) cooperate with one another in order to lift any injunctions or
remove any other impediment to the consummation of the transactions
contemplated herein; and
(iv) cooperate with one another in obtaining opinions of Skadden, Arps,
Slate, Meagher & Flom LLP, counsel to the Company, and Akin, Gump, Strauss,
Hauer, & Feld, L.L.P., counsel to Parent, dated as of the Closing Date and
the Effective Time, to the effect that the Merger qualifies as a
reorganization under the provisions of Section 368(a) of the Code. In
connection therewith, each of the Company and Parent shall deliver to
Skadden, Arps, Slate, Meagher & Flom LLP and Akin, Gump, Strauss, Hauer, &
Feld, L.L.P. representation letters substantially in the form attached
hereto as Exhibits A and B, respectively.
(b) Subject to the limitations contained in Section 5.2, the Company and
Parent shall each furnish to one another and to one another's counsel all such
information as may be required in order to effect the foregoing actions and each
represents and warrants to the other that no information furnished by it in
connection with such actions or otherwise in connection with the consummation of
the transactions contemplated by this Agreement will contain any untrue
statement of a material fact or omit to state a material fact required to be
stated in order to make any information so furnished, in light of the
circumstances under which it is so furnished, not misleading.
SECTION 5.5. ACCESS TO INFORMATION; CONFIDENTIALITY. As permitted by law,
the Company shall afford to Parent, and to Parent's officers, employees,
accountants, counsel, financial advisors and other
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representatives, reasonable access during normal business hours during the
period prior to the Effective Time to all the properties, books, contracts,
commitments and records of the Company and its subsidiaries, and during such
period, the Company shall furnish promptly to Parent (a) a copy of each report,
schedule, registration statement and other document filed by it or its
subsidiaries during such period pursuant to the requirements of applicable
federal or state securities laws and (b) all other information concerning its
business, properties and personnel as Parent may reasonably request.
Notwithstanding anything to the contrary in this Agreement, neither the Company
nor any or its Subsidiaries shall be required to disclose any information to
Parent or its authorized representatives if doing so could violate any federal,
state, local or foreign law, rule or regulation to which the Company or any of
its Subsidiaries is subject. The Parent will keep such information provided to
it by the Company confidential in accordance with the terms of the
Confidentiality Agreement, dated October 6, 1997, between the Parent and the
Company (the "CONFIDENTIALITY AGREEMENT").
SECTION 5.6. AFFILIATES. The Company shall, prior to the Effective Time,
deliver to Parent a list (reasonably satisfactory to counsel for Parent),
setting forth the names and addresses of all persons who are, at the time of the
Company Meeting, in the Company's reasonable judgment, "affiliates" of the
Company for purposes of Rule 145 under the Securities Act. The Company shall
furnish such information and documents as Parent may reasonably request for the
purpose of reviewing such list.
SECTION 5.7. WARRANTS; STOCK OPTIONS. (a) Simultaneously with the Merger,
each outstanding right to acquire shares of the Company Common Stock pursuant to
the 1996 Warrant Plan ("MANAGEMENT WARRANTS") and each Employee Option shall
automatically be cancelled and Parent shall deliver to the holder of such
Management Warrants or Employee Option, as the case may be, in exchange for the
cancellation thereof, the number of validly issued, fully paid and
non-assessable shares of Parent Common Stock determined by multiplying (X) the
difference between (i) the total number of shares of Company Common Stock
subject to such Management Warrant or Employment Option, as the case may be, and
(ii) the number obtained by dividing (A) the aggregate exercise price of such
Management Warrant or Employee Option, as the case may be, by, (B) $41.50 by (Y)
0.67.
(b) The Company and Parent agree that each of their respective employee
incentive or benefit plans, programs and arrangements and non-employee director
plans shall be amended, to the extent necessary and appropriate, to reflect the
transactions contemplated by this Agreement, including, but not limited to the
conversion of shares of any awards of Company Common Stock or restricted stock
under the 1997 Incentive Plan (but excluding any stock options granted under
such plan) held or to be awarded or paid pursuant to such benefit plans,
programs or arrangements into shares of Parent Common Stock on a basis
consistent with the transactions contemplated by this Agreement. The actions to
be taken by the Company and Parent pursuant to this Section 5.7 shall include
the submission by the Company or Parent of the amendments to the plans, programs
or arrangements referred to herein to their respective stockholders at the
Company Meeting or, as soon as practicable, at a meeting of Parent stockholders,
respectively, if such submission is determined to be necessary or advisable by
counsel to the Company or Parent after consultation with one another; PROVIDED,
HOWEVER, that such approval shall not be a condition to the consummation of the
Merger.
(c) Each option granted under the 1997 Incentive Plan to an employee or
director of the Company to acquire shares of Company Common Stock ("Company
Option") that is outstanding immediately prior to the Merger, whether or not
then vested or exercisable, shall, simultaneously with the Merger, be cancelled
in exchange for a single lump cash payment equal to the product of (1) the
number of shares of Company Common Stock subject to such Company Option and (2)
the excess, if any, of $41.50 over the exercise price per share of such Company
Option.
SECTION 5.8. 1994 WARRANTS. Simultaneously with the Merger, each
outstanding right to acquire shares of the Company Common Stock pursuant to the
1994 Warrant Agreement ("1994 WARRANTS") shall automatically be cancelled and
Parent shall deliver to the holder of such 1994 Warrants, in exchange for
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the cancellation thereof, (A) the number of validly issued, fully paid and
non-assessable shares of Parent Common Stock determined by multiplying (X) the
difference between (i) the total number of shares of Company Common Stock
subject to such 1994 Warrant and (ii) the number obtained by dividing (A) the
aggregate exercise price of such 1994 Warrant by (B) $41.50 by (Y) 0.67.
SECTION 5.9. FILINGS; OTHER ACTION. (a) Subject to the terms and
conditions herein provided, the Company and Parent shall (i) promptly make their
respective filings and thereafter make any other required submissions under the
HSR Act, (ii) use reasonable efforts to cooperate with one another in (A)
determining whether any filings are required to be made with, or consents,
permits, authorizations or approvals are required to be obtained from, any third
party, the United States government or any agencies, departments or
instrumentalities thereof or other governmental or regulatory bodies or
authorities of federal, state, local and foreign jurisdictions in connection
with the execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby and thereby and (B) timely making all such
filings and timely seeking all such consents, permits, authorizations or
approvals, and (iii) use reasonable efforts to take, or cause to be taken, all
other actions and do, or cause to be done, all other things necessary, proper or
advisable to consummate and make effective the transactions contemplated hereby,
including, without limitation, taking all such further action as reasonably may
be necessary to resolve such objections, if any, as the Federal Trade
Commission, the Antitrust Division of the Department of Justice, state antitrust
enforcement authorities or competition authorities of any other nation or other
jurisdiction or any other person may assert under relevant antitrust or
competition laws with respect to the transactions contemplated hereby.
(b) Without limiting the generality of the undertakings pursuant to this
Section 5.9, Parent and the Company agree to take or cause to be taken the
following actions: (i) provide promptly to Governmental Entities with regulatory
jurisdiction over enforcement of any applicable antitrust laws ("GOVERNMENT
ANTITRUST ENTITY") information and documents requested by any Government
Antitrust Entity or necessary, proper or advisable to permit consummation of the
transactions contemplated by this Agreement; (ii) without in any way limiting
the provisions of Section 5.9(b)(i) above, file any Notification and Report Form
and related material required under the HSR Act as soon as practicable after the
date hereof, and thereafter use its reasonable efforts to certify as soon as
practicable its substantial compliance with any requests for additional
information or documentary material that may be made under the HSR Act; (iii)
the proffer by Parent of its willingness to (A) sell or otherwise dispose of, or
hold separate and agree to sell or otherwise dispose of, such assets, categories
of assets or businesses of the Company or Parent or either's respective
Subsidiaries, (B) terminate such existing relationships and contractual rights
and obligations and (C) amend or terminate such existing licenses or other
intellectual property agreements and to enter into such new licenses or other
intellectual property agreements (and, in each case, to enter into agreements
with the relevant Government Antitrust Entity giving effect thereto) in each
case with respect to the foregoing clauses (A), (B) or (C), if such action is
necessary or reasonably advisable for the purpose of avoiding or preventing any
action by any Government Antitrust Entity which would restrain, enjoin or
otherwise prevent or materially delay consummation of the transactions
contemplated by this Agreement prior to the deadline specified in Section 7.1(b)
hereof; and (iv) Parent shall take promptly, in the event that any permanent or
preliminary injunction or other order is entered or becomes reasonably
foreseeable to be entered in any proceeding that would make consummation of the
transactions contemplated hereby in accordance with the terms of this Agreement
unlawful or that would prevent or delay consummation of the transactions
contemplated hereby, any and all steps (including the appeal thereof, the
posting of a bond or the taking of the steps contemplated by clause (iii) of
this subsection (b)) necessary to vacate, modify or suspend such injunction or
order so as to permit such consummation prior to the deadline specified in
Section 7.1(b). Each of the Company and Parent will provide to the other copies
of all correspondence between it (or its advisors) and any Government Antitrust
Entity relating to this Agreement or any of the matters described in this
Section 5.9(b). The Company and Parent agree to use its reasonable best efforts
to ensure that all telephonic calls and meetings with a Government Antitrust
Entity regarding the transactions contemplated hereby or any of the matters
described in this Section
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5.9(b) shall include representatives of each of the Company and Parent.
Notwithstanding any of the foregoing, no failure to obtain termination of the
waiting period under the HSR Act shall be deemed to be a breach hereunder by the
Company.
SECTION 5.10. FURTHER ASSURANCES. In case at any time after the Effective
Time any further action is necessary or desirable to carry out the purposes of
this Agreement, the proper officers of the Company and Parent shall take all
such necessary action.
SECTION 5.11. NO SOLICITATION. From the date hereof until the termination
of this Agreement, the Company and its Subsidiaries shall not (whether directly
or indirectly through advisors, agents or other intermediaries), and the Company
shall use its reasonable efforts to ensure that the respective officers,
directors, employees, advisors, representatives or other agents of the Company
or its Subsidiaries will not, directly or indirectly, (a) solicit, initiate,
encourage or take any other action to knowingly facilitate, any Acquisition
Proposal or (b) engage or participate in negotiations or substantive discussions
with, or disclose any non-public information relating to the Company or its
Subsidiaries or afford access to the properties, books or records of the Company
or its Subsidiaries to, any Person that has made, or has indicated its interest
in making or considering or intending to make, an Acquisition Proposal;
PROVIDED, THAT, to the extent the Board of Directors of the Company determines
in good faith, after consultation with outside legal counsel, that the failure
to engage or participate in such negotiations or discussions or provide such
information or afford such access would be reasonably likely to be inconsistent
with the fiduciary duties of the Board of Directors of the Company under
applicable law, the Company may furnish information and afford access to any
such Person with respect to the Company and its Subsidiaries and participate in
negotiations and enter into agreements with any such Person regarding such
Acquisition Proposal; PROVIDED, if the Board of Directors of the Company
receives an Acquisition Proposal, then, subject to the fiduciary duties of the
Board of Directors of the Company, the Company shall promptly inform Parent of
the terms and conditions of such proposal and the identity of the Person making
it. The Company will immediately cease and cause to be terminated any existing
activities, discussions or negotiations with any other Person that have been
conducted heretofore with respect to a potential Acquisition Proposal.
Furthermore, nothing contained in this Section 5.11 shall prohibit the Company
or the Board of Directors of the Company from taking and disclosing to the
Company's stockholders a position with respect to a tender or exchange offer by
a third party pursuant to Rules 14d-9 and 14e-2(a) promulgated under the
Exchange Act or from making such disclosure to the Company's stockholders as may
be required by applicable law.
SECTION 5.12. DIRECTOR AND OFFICER LIABILITY. (a) Parent, Merger Sub and
the Company agree that all rights to indemnification and all limitations on
liability existing in favor of any Indemnitee (as defined below) as provided in
the Company Certificate of Incorporation, Company By-laws or any Indemnity
Agreement (as defined below) shall survive the Merger and continue in full force
and effect. To the extent permitted by (i) the DGCL, (ii) the Company's
Certificate of Incorporation and the Company's By-laws or (iii) any agreement
providing for indemnification by the Company or any Subsidiary of the Company of
any Indemnitee previously disclosed in writing to Parent in effect on the date
of this Agreement (including any indemnity provisions contained in any agreement
providing for the registration of securities) (each, an "INDEMNITY AGREEMENT"),
advancement of Expenses (as defined below) pursuant to this Section 5.12 shall
be mandatory rather than permissive and the Surviving Corporation and the Parent
shall advance Costs (as defined below) in connection with such indemnification.
Parent shall, and shall cause the Surviving Corporation to, expressly assume and
honor in accordance with their terms all Indemnity Agreements.
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(b) In addition to the other rights provided for in this Section 5.12 and
not in limitation thereof, for six years from and after the Effective Time,
Parent shall, and shall cause the Surviving Corporation to, to the fullest
extent permitted by applicable law, (i) indemnify and hold harmless the
individuals who on or prior to the Effective Time were officers, directors or
employees of the Company or any of its Subsidiaries, and the heirs, executors,
trustees, fiduciaries and administrators of such officers, directors or
employees (collectively, the "INDEMNITEES") against all losses, Expenses (as
hereinafter defined), claims, damages, liabilities, judgments, or amounts paid
in settlement (collectively, "COSTS") in respect to any threatened, pending or
completed claim, action, suit or proceeding, whether criminal, civil,
administrative or investigative based on, or arising out of or relating to the
fact that such person is or was a director, officer or employee of the Company
or any of its Subsidiaries and arising out of acts or omissions occurring on or
prior to the Effective Time (including, without limitation, in respect of acts
or omissions in connection with this Agreement and the transactions contemplated
hereby) (an "INDEMNIFIABLE CLAIM") and (ii) advance to such Indemnitees all
Expenses incurred in connection with any Indemnifiable Claim promptly after
receipt of reasonably detailed statements therefor; PROVIDED, THAT, except as
otherwise provided pursuant to any Indemnity Agreement, the person to whom
Expenses are to be advanced provides an undertaking to repay such advances if it
is ultimately determined that such person is not entitled to indemnification
from Parent or the Surviving Corporation. In the event any Indemnifiable Claim
is asserted or made within such six year period, all rights to indemnification
and advancement of Expenses in respect of any such Indemnifiable Claim shall
continue until such Indemnifiable Claim is disposed of or all judgments, orders,
decrees or other rulings in connection with such Indemnifiable Claim are fully
satisfied; PROVIDED, HOWEVER, that Parent shall not be liable for any settlement
effected without its written consent (which consent shall not be unreasonably
withheld or delayed). Except as otherwise may be provided pursuant to any
Indemnity Agreement, the Indemnitees as a group may retain only one law firm
with respect to each related matter except to the extent there is, in the
opinion of counsel to an Indemnitee, under applicable standards of professional
conduct, a conflict on any significant issue between positions of any two or
more Indemnitees. For the purposes of this Section 5.12, "Expenses" shall
include reasonable attorneys' fees and all other costs, charges and expenses
paid or incurred in connection with investigating, defending, being a witness in
or participating in (including on appeal), or preparing to defend, be a witness
in or participate in any Indemnifiable Claim.
(c) Notwithstanding any other provisions hereof, the obligations of the
Company, the Surviving Corporation and Parent contained in this Section 5.12
shall be binding upon the successors and assigns of Parent and the Surviving
Corporation. In the event the Company or the Surviving Corporation or any of
their respective successors or assigns (i) consolidates with or merges into any
other Person or (ii) transfers all or substantially all of its properties or
assets to any Person, then, and in each case, proper provision shall be made so
that successors and assigns of the Company or the Surviving Corporation, as the
case may be, honor the indemnification obligations set forth in this Section
5.12.
(d) The obligations of the Company, the Surviving Corporation, and Parent
under this Section 5.12 shall not be terminated or modified in such a manner as
to adversely affect any Indemnitee to whom this Section 5.12 applies without the
consent of such affected Indemnitee (it being expressly agreed that the
Indemnitees to whom this Section 5.12 applies shall be third party beneficiaries
of this Section 5.12).
(e) Parent shall, and shall cause the Surviving Corporation to, advance all
Expenses to any Indemnitee incurred by enforcing the indemnity or other
obligations provided for in this Section 5.12.
SECTION 5.13. ACCOUNTANTS' "COMFORT" LETTERS. The Company and Parent will
each use reasonable best efforts to cause to be delivered to each other letters
from their respective independent accountants, dated a date within two business
days before the effective date of the Registration Statement, in form reasonably
satisfactory to the recipient and customary in scope for comfort letters
delivered by independent accountants in connection with registration statements
on Form S-4 under the Securities Act.
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SECTION 5.14. ADDITIONAL REPORTS. The Company and Parent shall each
furnish to the other copies of any reports of the type referred to in Sections
3.4 and 4.4 which it files with the SEC on or after the date hereof, and the
Company and Parent, as the case may be, represents and warrants that as of the
respective dates thereof, such reports will not contain any untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary to make the statement therein, in light of the circumstances under
which they were made, not misleading; PROVIDED, that the foregoing shall not
apply to the financial statements contained therein (which are covered by the
following sentence). Any consolidated financial statements included in such
reports (including any related notes and schedules) will fairly present the
financial position of the Company and its consolidated Subsidiaries or Parent
and its consolidated Subsidiaries, as the case may be, as of the dates thereof
and the results of operations and changes in financial position or other
information included therein for the periods or as of the date then ended
(subject, where appropriate, to normal year-end adjustments), in each case in
accordance with past practice and GAAP consistently applied during the periods
involved (except as otherwise disclosed in the notes thereto and except that
such financial statements will not include all of the notes required by GAAP).
SECTION 5.15. PLAN OF REORGANIZATION. This Agreement is intended to
constitute a "plan of reorganization" within the meaning of Section 1.368-2(g)
of the income tax regulations promulgated under the Code. From and after the
date of this Agreement and until the Effective Time, each party hereto shall use
its reasonable efforts to cause the Merger to qualify, and will not knowingly
take any actions or cause any actions to be taken which could prevent the Merger
from qualifying, as a reorganization under the provisions of Section 368(a) of
the Code. Following the Effective Time, neither the Surviving Corporation,
Parent nor any of their affiliates shall knowingly take any action or knowingly
cause any action to be taken which would cause the Merger to fail to qualify as
a reorganization under Section 368(a) of the Code.
SECTION 5.16. EMPLOYMENT AGREEMENTS. At or prior to the Effective Time,
the Parent shall enter into an employment agreement individually with Daniel
Simon substantially in the form attached hereto as Exhibit C, the terms of which
are incorporated herein by reference and made a part hereof.
SECTION 5.17. PARENT BOARD OF DIRECTORS. Parent shall take all necessary
action to cause Daniel Simon to be appointed to the Board of Directors of Parent
as of the Effective Time and to serve until the next annual election of
directors of Parent. In connection with such election, Parent shall take all
necessary action to include Daniel Simon as a nominee for the Board of Directors
of Parent recommended by such Board of Directors of Parent for election by
Parent's stockholders to such Board of Directors.
SECTION 5.18. CONVEYANCE TAXES; FEES. Each of the Parent and the Company,
respectively, shall timely pay any real property transfer or gains, sales, use,
transfer, value added, stock transfer and stamp taxes, any transfer, recording,
registration and other fees, and any similar taxes or fees not including any
income tax, gross receipt tax or any similar tax measured with respect to gross
or net income (collectively, the "CONVEYANCE TAXES") imposed on it at or prior
to the Effective Time in connection with the transactions contemplated hereunder
that are required to be paid in connection therewith. Parent and the Company
shall cooperate in the preparation, execution and filing of all Tax Returns,
questionnaires, applications, or other documents regarding any such Conveyance
Taxes.
SECTION 5.19. PUBLIC ANNOUNCEMENTS. Unless otherwise required by
applicable law or the requirements of any listing agreement with any applicable
stock exchange, Parent and the Company shall each use their reasonable efforts
to consult with each other before issuing any press release or otherwise making
any public statements with respect to this Agreement or any transaction
contemplated by this Agreement and shall not issue any such press release or
make any such public statement prior to such consultation.
SECTION 5.20. EMPLOYEE MATTERS. (a) For a period of no more than one year
immediately following the Effective Time, Parent agrees to cause the Surviving
Corporation and its Subsidiaries to provide to all active employees of the
Company as of the Effective Time who continue to be employed by
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the Company coverage under group medical, dental, 401(k) savings, disability
insurance, life insurance, accidental death and disability, and vacation plans
or arrangements which are, in the aggregate, substantially similar to the plans
providing such benefits to the employees of Company immediately prior to the
Effective Time; PROVIDED, HOWEVER, that Parent may at its option at any time
during such year provide to such employees the aforementioned benefits in a form
which are substantially similar to the benefits provided to employees of the
Parent at such time.
(b) Parent shall, and shall cause its Subsidiaries to, honor in accordance
with their terms all agreements, contracts, arrangements, commitments and
understanding described in the Company SEC Reports.
ARTICLE VI
CONDITIONS TO THE MERGER
SECTION 6.1. CONDITIONS TO THE OBLIGATIONS OF EACH PARTY. The obligations
of the Company, Parent and Merger Sub to consummate the Merger are subject to
the satisfaction or waiver on or prior to the Closing Date of the following
conditions:
(a) REGISTRATION STATEMENT. The Registration Statement shall have
become effective under the Securities Act and no stop order suspending the
effectiveness of the Registration Statement shall have been issued by the
SEC and no proceeding for that purpose shall have been initiated by the SEC.
(b) COMPANY STOCKHOLDER APPROVAL. This Agreement shall have been
approved by the requisite affirmative vote of the stockholders of the
Company in accordance with the Company's Articles of Incorporation, as
amended, and the DGCL.
(c) NO INJUNCTION OR RESTRAINT. No statute, rule, regulation,
executive order, decree, preliminary or permanent injunction or restraining
order shall have been enacted, entered, promulgated or enforced by any
Governmental Entity which prohibits the consummation of the transactions
contemplated hereby. No action or proceeding (other than any action or
proceeding pursuant to or in connection with the Antitrust Laws) by any
Governmental Entity shall have been commenced (and be pending), or, to the
knowledge of the parties hereto, threatened, against the Company or Parent
or any of their respective affiliates, partners, associates, officers or
directors, or any officers or directors of such partners, seeking to prevent
or delay the transactions contemplated hereby or challenging any of the
terms of provisions of this Agreement or seeking material damages in
connection therewith.
(d) CONSENTS. All consents and approvals (other than any consent or
approval required pursuant to or in connection with the Antitrust Laws) of
Governmental Entities or any Person necessary for consummation of the
transactions contemplated hereby shall have been obtained, other than those
which, if not obtained, would not in the aggregate have a Material Adverse
Effect.
(e) HSR ACT. Any waiting period (and any extension thereof) applicable
to the consummation of the Merger under the HSR Act shall have expired or
been terminated.
(f) STOCK EXCHANGE LISTING. The shares of Parent Common Stock to be
issued in the Merger shall have been authorized for listing on the NYSE,
subject to official notice of listing.
(g) TAX OPINION. Each of the Company and Parent shall have received an
opinion of its tax counsel, Skadden, Arps, Slate, Meagher & Flom LLP and
Akin, Gump, Strauss, Hauer & Feld, L.L.P., respectively, in form and
substance reasonably satisfactory to it, and dated on or about the Closing
Date, to the effect that the Merger will qualify for federal income tax
purposes as a reorganization within the meaning of Section 368(a) of the
Code and that none of the Company, Parent and Merger Sub shall recognize
gain or loss for federal income tax purposes as a result of the Merger and
stockholders of the Company will not recognize gain or loss for federal
income tax purposes except to the extent they receive cash in lieu of
fractional shares of Parent Common Stock. In rendering such
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<PAGE>
opinions, Skadden, Arps, Slate, Meagher & Flom LLP and Akin, Gump, Strauss,
Hauer & Feld, L.L.P. may rely upon representations of officers of the
Company and Parent substantially in the form of Exhibits A and B.
SECTION 6.2. CONDITIONS TO THE OBLIGATIONS OF PARENT AND MERGER SUB. The
obligations of Parent and Merger Sub to consummate the Merger are subject to the
satisfaction or waiver by Parent on or prior to the Closing Date of the
following further conditions:
(a) COMPANY REPRESENTATIONS AND WARRANTIES. The obligation of Parent
to effect the Merger is further subject to the conditions that (a) the
representations and warranties of the Company contained herein shall be true
and correct in all respects as of the Effective Time with the same effect as
though made as of the Effective Time except for such exceptions and
qualifications which, in the aggregate, for all such representations and
warranties would not have a Material Adverse Effect on the Company and
except (i) for changes specifically permitted by the terms of this Agreement
and (ii) that the accuracy of representations and warranties that by their
terms speak as of the date of this Agreement or some other date will be
determined as of such date, and (b) the Company shall have performed in all
material respects (except with respect to the covenants contained in
Sections 5.1(a)(ix) and 5.1(a)(xiii) which shall be performed in all
respects) all obligations and complied with all covenants required by this
Agreement to be performed or complied with by it prior to the Effective Time
and (c) the Company shall have delivered to Parent a certificate, dated the
Effective Time and signed by its Chief Executive Officer, Chief Financial
Officer or a Senior Vice President, certifying to both such effects.
Material Adverse Effect with respect solely to the satisfaction of the
closing condition set forth in this Section 6.2(a) relating to the accuracy
of the representation of the Company with respect to the aggregate number
(the "Disclosed Number") of fully-diluted shares of capital stock of the
Company set forth in Section 3.2 hereof shall be an additional number of
shares in excess of 10,000.
SECTION 6.3. CONDITIONS TO THE OBLIGATIONS OF THE COMPANY. The obligations
of the Company to consummate the Merger are subject to the satisfaction or
waiver by the Company on or prior to the Closing Date of the following further
conditions:
(a) PARENT AND MERGER SUB REPRESENTATIONS AND WARRANTIES. The
obligation of the Company to effect the Merger is further subject to the
conditions that (a) the representations and warranties of Parent contained
herein shall be true and correct in all respects as of the Effective Time
with the same effect as though made as of the Effective Time except (i) for
changes specifically permitted by the terms of this Agreement and (ii) that
the accuracy of representations and warranties that by their terms speak as
of the date of this Agreement or some other date will be determined as of
such date, (b) Parent shall have performed in all material respects all
obligations and complied with all covenants required by this Agreement to be
performed or complied with by it prior to the Effective Time and (c) Parent
shall have delivered to the Company a certificate, dated the Effective Time
and signed by its Chief Executive Officer, Chief Financial Officer or a
Senior Vice President, certifying to both such effects.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
SECTION 7.1. TERMINATION OR ABANDONMENT. Notwithstanding anything
contained in this Agreement to the contrary, this Agreement may be terminated
and abandoned at any time prior to the Effective Time, whether before or after
any approval of the matters presented in connection with the Merger by the
stockholders of the Company:
(a) by the mutual written consent of the Company and Parent;
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(b) by either the Company or Parent if the Effective Time shall not have
occurred on or before August 30, 1998; PROVIDED, that the party seeking to
terminate this Agreement pursuant to this clause 7.1(b) shall not have
breached in any material respect its obligations under this Agreement in any
manner that shall have proximately contributed to the failure to consummate
the Merger on or before such date;
(c) by either the Company or Parent if (i) a statute, rule, regulation
or executive order shall have been enacted, entered or promulgated
prohibiting the consummation of the Merger substantially on the terms
contemplated hereby or (ii) an order, decree, ruling or injunction shall
have been entered permanently restraining, enjoining or otherwise
prohibiting the consummation of the Merger substantially on the terms
contemplated hereby and such order, decree, ruling or injunction shall have
become final and non-appealable; PROVIDED, that the party seeking to
terminate this Agreement pursuant to this clause 7.1(c)(ii) shall have used
its reasonable best efforts to remove such order, decree, ruling or
injunction;
(d) by either the Company or Parent if the approval of the stockholders
of the Company contemplated by this Agreement shall not have been obtained
by reason of the failure to obtain the required vote at the Company Meeting
or any postponement or adjournment thereof;
(e) by Parent if the Board of Directors of the Company shall have (i)
withdrawn, modified or amended in any respect adverse to Parent its approval
or recommendation of this Agreement or any of the transactions contemplated
herein, (ii) failed to include in the Proxy Statement when mailed the
recommendation of the Board of Directors of the Company or (iii) recommended
to its stockholders any Acquisition Proposal of a Person other than Parent;
(f) by the Company (i) if the Board of Directors of the Company
determines to accept an Acquisition Proposal that such Board has determined
in good faith, after consultation with its outside legal counsel and
financial advisor, to be more favorable to its stockholders than the
transactions contemplated hereby, (ii) if the Board of Directors of the
Company takes any action set forth in subsection (e) of this Section 7.1; or
(iii) upon notice to Parent, authorized by the Board of Directors of the
Company, if at any time during the period between the date hereof and the
two days prior to the Effective Time, the average of the Parent Common Stock
closing prices, regular way, on the NYSE for any fifteen (15) consecutive
trading day period is less than or equal to $49.85 (the "FLOOR PRICE") and,
in the event the Custom Index at the time of any such calculation declines
from the date hereof, the amount by which the percentage decrease in the
average of the Parent Common Stock from $62.3125 exceeds the percentage
decrease, if any, in the Custom Index from $36.0375 is greater than or equal
to 20 percentage points; PROVIDED, HOWEVER, that no right of termination
shall arise under this Section 7.1(f)(iii) if (x) Parent elects within 5
business days of receipt of such notice to increase the number of shares of
Parent Common Stock included in the Merger Consideration such that the per
share value of the Parent Common Stock consideration (valued at the Floor
Price) is at least equal to the per share consideration that would have been
received if the Conversion Number had been equal to a number such that the
per share value of the Company Common Stock is equal to $41.50, (y) the
issuance of the additional shares of stock does not necessitate a vote of
the shareholders of the Parent to approve such issuance and (z) in the
opinion of Skadden, Arps, Slate, Meagher & Flom LLP and Akin, Gump, Strauss,
Hauer & Feld, L.L.P., the transaction as adjusted qualifies as a tax-free
"reorganization" within the meaning of Section 368 of the Code; PROVIDED,
FURTHER, however, that no right of termination shall arise under Section
7.1(f)(iii) if, prior to the delivery of notice by Company to Parent
provided for in this Section 7.1(f)(iii), the average of closing prices for
a subsequent fifteen (15) consecutive trading day period is not less than or
equal to the Floor Price or for the same period the amount by which the
percentage decrease in the average prices of the Parent Common Stock exceeds
the percentage decrease in the Custom Index is not greater than or equal to
20 percentage points.
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The party desiring to terminate this Agreement pursuant to this Section 7.1
shall give written notice of such termination to the other party.
SECTION 7.2. AMENDMENT OR SUPPLEMENT. At any time before or after approval
of the matters presented in connection with the Merger by the stockholders of
the Company and prior to the Effective Time, this Agreement may be amended or
supplemented in writing by the Company and Parent with respect to any of the
terms contained in this Agreement; PROVIDED, HOWEVER, that following approval by
the stockholders of the Company, there shall be no amendment or change to the
provisions hereof with respect to any matter not permitted under applicable law
without further approval by the stockholders of the Company unless such approval
is first obtained.
SECTION 7.3. EFFECT OF TERMINATION. In the event of termination of this
Agreement by either the Company or Parent as provided in Section 7.1, this
Agreement shall forthwith become void and have no effect, without any liability
or obligation on the part of Parent, Merger Sub or the Company, other than the
provisions of the last sentence of Section 5.5, this Section 7.3, Section 7.4
and Article VIII, and except to the extent that such termination results from
the wilful and material breach by a party of any of its representations,
warranties, covenants or agreements set forth in this Agreement.
SECTION 7.4. FEES AND EXPENSES. (a) In addition to any other amounts that
may be payable or become payable pursuant to any other paragraph of this Section
7.4, if this Agreement is terminated pursuant to Section 7.1(e) hereof and
Parent or Merger Sub is not then in material breach of its obligations under
this Agreement, then the Company shall promptly, but in no event later than one
business day after the termination of this Agreement (or from time to time after
the Closing Date), reimburse Parent and Merger Sub for all documented
out-of-pocket expenses and fees (including, without limitation, reasonable fees
payable to all banks, investment banking firms and other financial institutions,
and their respective agents and counsel, and all reasonable fees of counsel,
accountants, financial printers, experts and consultants to Parent and Merger
Sub and their affiliates), whether incurred prior to, on or after the date
hereof, in connection with the Merger and the consummation of all transactions
contemplated by this Agreement; PROVIDED, THAT, in no event shall the Company be
required to pay in excess of an aggregate of $1.5 million pursuant to this
subsection (a); PROVIDED, FURTHER, that in no event shall any payment be due
pursuant to this subsection (a) in the event that a fee is payable pursuant to
Section 7.4(b), and if a fee becomes payable pursuant to such subsection (b)
following such time as a payment has been made pursuant to this subsection (a),
then the amount of such prior expense reimbursement payment shall be credited
against, and shall reduce, the fee otherwise payable pursuant to subsection (b).
(b) If this Agreement is terminated either pursuant to (i) Section 7.1(f)(i)
or (f)(ii), or (ii) Section 7.1(b) and in the case of this clause (ii), (x)
prior to such date (A) the Board of Directors of the Company shall have taken
any of the actions as contemplated by clauses (i), (ii) or (iii) of Section
7.1(e) hereof such that Parent could have terminated this Agreement but elected
not to and (B) either (i) the Company Meeting shall have been held and the
approval of the stockholders at the Company Meeting shall not have been obtained
or (ii) the Company Meeting shall not have been held as of the date of such
termination as a result of the Company delaying such meeting in accordance with
the provisions of Section 5.2(a), and (y) on or prior to twelve months after the
termination of this Agreement, the Company enters into an agreement with a
Person regarding a transaction the proposal of which would otherwise qualify as
an Acquisition Proposal under Section 5.11 hereof and such transaction is
subsequently consummated; then in any such event, the Company shall, promptly
following, but in no event later than one business day after (I) in the case of
clause (i) above, the date of such termination and (II) in the case of clause
(ii) above, the consummation of the third party Acquisition Proposal, pay Parent
a fee of $40 million in cash, which amount shall be payable in same day funds.
Only one fee in the aggregate of $40 million shall be payable pursuant to this
Section 7.4(b).
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<PAGE>
(c) Except as provided otherwise in this Section 7.4, all costs and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby shall be paid by the party incurring such expenses.
SECTION 7.5. EXTENSION; WAIVER. At any time prior to the Effective Time,
the parties may (a) extend the time for the performance of any of the
obligations or other acts of the other parties, (b) waive any inaccuracies in
the representations and warranties contained in this Agreement or in any
document delivered pursuant to this Agreement or (c) subject to the proviso of
Section 7.2, waive compliance with any of the agreements or conditions of the
other party contained in this Agreement. Any agreement on the part of a party to
any such extension or waiver shall be valid only if set forth in an instrument
in writing signed on behalf of such party. The failure of any party to this
Agreement to assert any of its rights under this Agreement or otherwise shall
not constitute a waiver of those rights. Notwithstanding the foregoing, no
failure or delay by the Company or Parent in exercising any right hereunder
shall operate as a waiver thereof nor shall any single or partial exercise
thereof preclude any other or further exercise of any other right hereunder.
ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.1. NONSURVIVAL OF REPRESENTATIONS. None of the representations
and warranties in this Agreement or in any instrument delivered pursuant to this
Agreement shall survive the Effective Time. This Section 8.1 shall not limit any
covenant or agreement of the parties which by its terms contemplates performance
after the Effective Time. Nothing contained in this Section 8.1 shall relieve
any party from liability for any willful breach of this Agreement.
SECTION 8.2. NOTICES. All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be deemed
given if delivered personally or sent by overnight courier (providing proof of
delivery) to the parties at the following addresses (or at such address for a
party as shall be specified by like notice):
(a) if to the Company, to:
Universal Outdoor Holdings, Inc.
311 South Wacker Drive
Suite 6400
Chicago, Illinois 60606
Attention: Paul G. Simon
Facsimile No.: (312) 344-4171
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
Attention: Lou R. Kling, Esq.
Howard L. Ellin, Esq.
Facsimile No.: (212) 735-2000
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<PAGE>
(b) if to Parent or Merger Sub, to:
Clear Channel Communications, Inc.
200 Concord Plaza
Suite 600
San Antonio, Texas 78216
Attention: Randall Mays
Facsimile No.: (210) 822-2299
with a copy to:
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
1700 Pacific Avenue
Suite 4100
Dallas, Texas 75201
Attention: Ford Lacy P.C.
Facsimile No.: (214) 969-4343
SECTION 8.3. DEFINITIONS. For purposes of this Agreement:
(a) "ACQUISITION PROPOSAL" means any offer or proposal for a merger,
consolidation, recapitalization, liquidation, business combination or
similar transaction involving the Company or any of its Subsidiaries or the
acquisition or purchase of 50% or more of the voting power of any class of
equity securities of the Company or any of its Subsidiaries, or any tender
offer (including self-tenders) or exchange offer that if consummated would
result in any Person beneficially owning 50% or more of the voting power of
any class of equity securities of the Company or any of its Subsidiaries, or
a substantial portion of the assets of the Company or any of its
Subsidiaries outside of the ordinary course of business, other than the
transactions contemplated by this Agreement.
(b) "ADVERTISER EFFECT" means any and all legal, financial, or other
effects, on or to this Agreement, the Merger, the Company, or its business,
the Merger Sub, the Parent or any of their stockholders or Affiliates, that
may arise from or are in any way related to: any public or non-public
discussion initiated by or involving public officials, announcement,
development, action or potential action, settlement, negotiation,
legislation, proposed or enacted, judicial decision, order, judgment or
change in status of any nature or type, which contemplates, proposes,
threatens or results in any voluntary or non-voluntary cessation of or a
legal ban or restrictions on the use of the outdoor advertising services of
any person or entity, including the Company, any of its Subsidiaries, Merger
Sub or Parent, by any person or entity or group of persons or entities
seeking to advertise tobacco products or products containing alcohol.
(c) "AFFILIATE" of any person means another person that directly or
indirectly, through one or more intermediaries, controls, is controlled by,
or is under common control with, such first person.
(d) "ANTITRUST LAWS" mean and include the Sherman Act, as amended, the
Clayton Act, as amended, the HSR Act, the Federal Trade Commission Act, as
amended, and all other federal, state or foreign statutes, rules,
regulations, orders, decrees, administrative and judicial doctrines and
other laws that are designed or intended to prohibit, restrict or regulate
actions having the purpose or effect of monopolization or restraint of
trade.
(e) "CONTROL" (including the terms "CONTROLLED BY" and "UNDER COMMON
CONTROL WITH") means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of a person,
whether through the ownership of voting securities, by contract or
otherwise.
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<PAGE>
(f) "CUSTOM INDEX" means the average of the closing prices, regular way,
on the NYSE for the fifteen day period used to calculate the average of the
closing prices referred to in Section 7.1(f)(iii) for the following
companies:
<TABLE>
<CAPTION>
CLOSING PRICE ON
COMPANY(1) OCTOBER 23, 1997 SYMBOL
- -------------------------------------------------------------------------- ---------------- ---------
<S> <C> <C>
Westinghouse-CBS(2)....................................................... $ 28.75 WX
Chancellor Broadcasting................................................... 58 AMFM
Cox Radio Inc............................................................. 34.43750 CXR
Lamar Advertising Company................................................. 31 LAMR
Outdoor Systems........................................................... 28 OSI
Average Price............................................................. $ 36.03750
</TABLE>
- ------------------------
(1) When any company on this list is sold, it shall be deleted from the Custom
Index and replaced with the common stock of a company operating in the radio
broadcasting industry mutually agreeable to both the Company and Parent
which shall be substituted in the Custom Index on the date of the
termination of trading of the company being sold and the price on such day
of the common stock of the Company being added to the Custom Index shall be
substituted for the price of the company being sold for the prior 14 days of
any calculation period.
(2) When CBS is spun off from Westinghouse, CBS shall be substituted in the
Custom Index for Westinghouse effective as of the date CBS commences trading
regular way and the price of CBS on such day shall be substituted for the
price of Westinghouse for the prior 14 days of any calculation period.
(g) "GOVERNMENTAL ENTITY" means any government or any agency, bureau,
board, commission, court, department, official, political subdivision,
tribunal or other instrumentality of any government, whether federal, state
or local, domestic or foreign.
(h) "KNOWLEDGE" or "KNOWN" means, with respect to the matter in
question, if any of the executive officers of the Company or Parent, as the
case may be, has actual knowledge of such matter.
(i) "LIEN" means any encumbrance, hypothecation, infringement, lien,
mortgage, pledge, restriction, security interest, title retention or other
security arrangement, or any adverse right or interest, charge or claim of
any nature whatsoever of, on, or with respect to any asset, property or
property interest; PROVIDED, HOWEVER, that the term "lien" shall not include
(i) liens for water and sewer charges and current taxes not yet due and
payable or being contested in good faith, (ii) mechanics', carriers',
workers', repairers', materialmen's, warehousemen's and other similar liens
arising or incurred in the ordinary course of business (iii) all liens
approved in writing by the other party hereto or (iv) restrictions on
transfer imposed by federal or state securities laws.
(j) "MATERIAL ADVERSE CHANGE" or "MATERIAL ADVERSE EFFECT" means, when
used in connection with the Company, Parent or Merger Sub, any change or
effect that (i) is materially adverse to the business, financial condition
or results of operations of such party and its subsidiaries taken as a whole
or (ii) substantially impairs or delays the consummation of the transactions
contemplated hereby, but, in either such event, shall not include any change
or effect that results from an Advertiser Effect.
(k) "PERSON" means any natural person, firm, individual, business trust,
trust, association, corporation, partnership, joint venture, company,
unincorporated entity or Governmental Entity.
(l) "SUBSIDIARY" or "SUBSIDIARIES" of any Person means another Person,
an amount of the voting securities, other voting ownership or voting
partnership interests of which is sufficient to elect at least a majority of
its board of directors or other governing body (or, if there are no such
voting interests, 50% or more of the equity interests of which) is owned
directly or indirectly by such first Person.
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<PAGE>
(m) "TAXES" means any and all federal, state, local, foreign or other
taxes of any kind (together with any and all interest, penalties, additions
to tax and additional amounts imposed with respect thereto) imposed by any
taxing authority, including, without limitation, taxes or other charges on
or with respect to income, franchises, windfall or other profits, gross
receipts, property, sales, use, transfer, capital stock, payroll,
employment, social security, workers' compensation, unemployment
compensation, or net worth, and taxes or other charges in the nature of
excise, withholding, ad valorem or value added.
(n) "TAX RETURN" means any return, report or similar statement
(including the attached schedules) required to be filed with respect to any
Tax, including, without limitation, any information return, claim for
refund, amended return or declaration of estimated Tax.
SECTION 8.4. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
SECTION 8.5. 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 of this Agreement (PROVIDED, HOWEVER, that the provisions of the
Confidentiality Agreement shall remain valid and in effect) and, except for the
provisions of Article II and Sections 5.7, 5.8, 5.12 and 5.16, is not intended
to confer upon any person other than the parties any rights or remedies
hereunder.
SECTION 8.6. ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations under this Agreement shall be assigned, in whole or in
part, by operation of law or otherwise by any of the parties hereto without the
prior written consent of the other parties, except that Merger Sub may assign,
in its sole discretion, any or all of its rights, interests and obligations
under this Agreement to Parent or to any direct or indirect wholly owned
subsidiary of Parent, but no such assignment shall relieve Merger Sub of any of
its obligations under this Agreement. 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 successors and assigns.
SECTION 8.7. GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware, without regard
to any applicable conflicts of law.
SECTION 8.8. ENFORCEMENT. The parties agree that irreparable damage would
occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any court of the United States
located in the State of Delaware or in Delaware state court, this being in
addition to any other remedy to which they are entitled at law or in equity. In
addition, each of the parties hereto (a) consents to submit itself to the
personal jurisdiction of any federal court located in the State of Delaware or
any Delaware state court in the event any dispute arises out of this Agreement
or any of the transactions contemplated by this Agreement, (b) agrees that it
will not attempt to deny or defeat such personal jurisdiction by motion or other
request for leave from any such court and (c) agrees that it will not bring any
action relating to this Agreement or any of the transactions contemplated by
this Agreement in any court other than a federal or state court sitting in the
State of Delaware.
SECTION 8.9. SEVERABILITY. Any term or provision of this Agreement which
is invalid or unenforceable in any jurisdiction shall, as to that jurisdiction,
be ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
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Agreement in any other jurisdiction. If any provision of this Agreement is so
broad as to be unenforceable, such provision shall be interpreted to be only so
broad as is enforceable.
SECTION 8.10. HEADINGS. Headings of the Articles and Sections of this
Agreement are for convenience of the parties only, and shall be given no
substantive or interpretive effect whatsoever.
SECTION 8.11. FINDERS OR BROKERS. Except for BT Alex Brown & Sons, Inc.,
and Bear, Stearns & Co., Inc., with respect to the Company, a copy of whose
engagement agreement has been or will be provided to Parent, neither the Company
nor Parent nor any of their respective Subsidiaries has employed any investment
banker, broker, finder or intermediary in connection with the transactions
contemplated hereby who might be entitled to any fee or any commission in
connection with or upon consummation of the Merger.
IN WITNESS WHEREOF, Parent, Merger Sub and the Company have caused this
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the date first written above.
<TABLE>
<S> <C> <C>
CLEAR CHANNEL COMMUNICATIONS, INC.
By: /s/ RANDALL MAYS
-----------------------------------------
Name: Randall Mays
TITLE: CHIEF FINANCIAL OFFICER
UH MERGER SUB, INC.
By: /s/ RANDALL MAYS
-----------------------------------------
Name: Randall Mays
TITLE: CHIEF FINANCIAL OFFICER
UNIVERSAL OUTDOOR HOLDINGS, INC.
By: /s/ BRIAN T. CLINGEN
-----------------------------------------
Name: Brian T. Clingen
TITLE: VICE PRESIDENT AND CHIEF FINANCIAL
OFFICER
</TABLE>
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<PAGE>
EXHIBIT A
FORM OF COMPANY TAX OPINION REPRESENTATION LETTER
, 1997
[Parents Counsel]
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, NY 10022
Dear Sirs:
On behalf of the Company, the undersigned, in connection with the opinions
to be delivered by your firms pursuant to Sections [ ] of the Agreement and
Plan of Merger, dated [ ], 1997, among Parent, Merger Sub and the
Company,(1) hereby certifies that the descriptions of the facts contained in the
Registration Statement and the Proxy Statement completely and accurately
describe the Merger and the transactions leading up thereto and further that:
1. Neither the Company nor any of its subsidiaries has acquired any shares
of Company Common Stock in contemplation of the Merger, or otherwise as part of
a plan of which the Merger is a part. For purposes of this representation,
Company Common Stock acquired in the ordinary course of business in connection
with employee incentive and benefit plans, programs or arrangements in existence
on the date hereof shall not be treated as an acquisition in contemplation of
the Merger or otherwise as part of which the Merger is a part.
2. There is no present plan or intention on the part of the stockholders of
the Company that own 5% or more of the common stock of the Company Common Stock,
and the Company knows of no present plan or intention on the part of the
remaining holders of Company Common Stock, to sell, exchange or otherwise
dispose of (each of the foregoing, a "disposition"), shares of Parent Common
Stock received in the Merger in exchange for such Company Common Stock that
would reduce the ownership of Parent Common Stock by former holders of Company
Common Stock (other than public shareholders) to a number of shares having a
value, as of immediately prior to the Merger, of less than 50% of the value of
all of the outstanding shares of Company Common Stock as of such date. For
purposes of this representation, any disposition (as defined above) of Parent
Common Stock will be treated as a reduction in ownership thereof. In addition,
for purposes of this representation, shares of Company Common Stock exchanged by
holders of Company Common Stock for cash in lieu of fractional shares of Parent
Common Stock will be treated as outstanding Company Common Stock immediately
prior to the Merger. Moreover, for purposes of this representation, shares of
Company Common Stock and shares of Parent Common Stock received in the Merger
and sold, redeemed or disposed of prior to or subsequent to the Merger, in
contemplation thereof or as part of a plan therewith, will be considered in
making this representation.
3. The Company and the stockholders of the Company will each pay their
respective expenses, if any, incurred in connection with the Merger, except in
the case of Conveyance Taxes for which such stockholders are liable, which shall
be paid by the Company.
4. Following the Merger, the Company will hold at least 90 percent of the
fair market value of the net assets and at least 70 percent of the fair market
value of the gross assets that the Company held immediately prior to the Merger,
and the Company will hold at least 90 percent of the fair market value of the
net assets and at least 70 percent of the fair market value of the gross assets
that the Merger Sub held immediately prior to the Merger. For purposes of this
representation, Company assets used to pay its reorganization expenses and all
redemptions and distributions (except for regular, normal dividends) made by the
Company immediately preceding or in contemplation of, the Merger will be
included as assets of the Company prior to the Merger.
- ------------------------
(1) For purposes of this certificate, capitalized terms used and not otherwise
defined herein shall have the meaning ascribed thereto in the Agreement and
Plan of Merger.
I-38
<PAGE>
5. Except as provided in Annex I attached herewith, immediately prior to
the time of the Merger, the Company will not have outstanding any warrants,
options, convertible securities or any other type of right pursuant to which any
person could acquire stock of the Company ("Company Stock").
6. In the Merger, shares of Company Stock representing at least 80% of the
total combined voting power of all classes of Company Stock outstanding on the
date of the Merger, and at least 80% of the total number of each other class of
Company Stock outstanding on the date of the Merger will be exchanged solely for
Parent Common Stock. For purposes of this representation, shares of Company
Stock exchanged for cash or other property originating with Parent will be
treated as outstanding stock of the Company on the date of the Merger.
7. The Company is not an investment company as defined in Section
368(a)(2)(F)(iii) and (iv) of the Internal Revenue Code of 1986, as amended (the
"Code").
8. The Company will not take, and the Company is not aware of any plan or
intention of Company stockholders to take, any position on any Federal, state or
local income or franchise tax return, or take any other tax reporting position,
that is inconsistent with the treatment of the Merger as a reorganization within
the meaning of Section 368(a) of the Code, unless otherwise required by a
"determination" (as defined in Section 1313(a)(1) of the Code) or by applicable
state or local income or franchise tax law.
9. None of the compensation received by any stockholder-employee of the
Company in respect of periods at or prior to the Effective Time represents
separate consideration for, or is allocable to, any of their Company Common
Stock. None of the Parent Common Stock that will be received by Company
stockholder-employees in the Merger represents separately bargained-for
consideration which is allocable to any employment agreement or arrangement. The
compensation paid to any shareholder-employees will be for services actually
rendered and will be determined by bargaining at arm's-length.
10. There is no intercorporate indebtedness existing between Parent and the
Company or between Sub and the Company that was issued or acquired, or will be
settled, at a discount.
11. The Company is not under jurisdiction of a court in a Title 11 or
similar case within the meaning of Section 368(a)(3)(A) of the Code.
12. The Merger Agreement and the documents described in Sections 5.5 and
5.16 of the Merger Agreement represent the entire understanding of the Company,
Parent and Merger Sub with respect to the Merger.
13. The Company Common Stock will be surrendered pursuant to the Merger in
an arms-length exchange, and the Parent Common Stock received in exchange
therefor represents the sole bargained-for consideration therefor. The fair
market value of the Parent Common Stock received by each holder of Company
Common Stock will be approximately equal to the fair market value of the Company
Common Stock surrendered in the Merger.
14. There will be no dissenters to the Merger.
15. On the date of the Merger, the fair market value of the assets of the
Company will exceed the sum of its liabilities plus the liabilities, if any, to
which the assets are subject.
I understand that Skadden, Arps, Slate, Meagher & Flom LLP, as counsel for
the Company, and [ ], as counsel for Parent, will rely on this certificate
in rendering their respective opinions concerning certain of the federal income
tax consequences of the Merger and hereby commit to inform them if, for any
reason, any of the foregoing representations ceases to be true prior to the
Effective Time.
UNIVERSAL OUTDOOR HOLDINGS, INC.
By:
-----------------------------------------
Name:
Title:
I-39
<PAGE>
ANNEX I
<TABLE>
<CAPTION>
BENEFICIALLY PERCENT OF
BENEFICIAL OWNER* OWNED SHARES CLASS
- ----------------------------------------------------------------------------------------- --------------- -----------
<S> <C> <C>
</TABLE>
- ------------------------
* [Attach SEC filings]
I-40
<PAGE>
EXHIBIT B
FORM OF PARENT TAX OPINION REPRESENTATION LETTER
, 1997
[PARENT COUNSEL]
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, NY 10022
Dear Sirs:
On behalf of Parent and Merger Sub, the undersigned, in connection with the
opinions to be delivered by your firms pursuant to Section [ ] of the
Agreement and Plan of Merger, dated [ ], 1997, among Parent, Merger
Sub and the Company,(1) hereby certifies that the descriptions of the facts
contained in the Registration Statement and the Proxy Statement completely and
accurately describe the Merger and the transactions leading up thereto and
further that:
1. Except in the Merger, neither Parent nor Merger Sub (nor any other
subsidiary of Parent) has acquired or prior to the Merger will acquire, or has
owned in the past five years, any shares of common stock of the Company.
2. Cash payments to be made to stockholders of the Company in lieu of
fractional shares of Parent Common Stock that would otherwise be issued to such
stockholders in the Merger will be made for the purpose of saving Parent the
expense and inconvenience of issuing and transferring fractional shares of
Parent Common Stock, and do not represent separately bargained for
consideration.
3. Prior to the Merger, Parent will own all the capital stock of Merger
Sub. Parent has no plan or intention to cause the Company to issue additional
shares of its stock that would result in Parent owning less than all the capital
stock of the Company after the Merger.
4. Parent has no plan or intention, following the Merger, to reacquire any
of the Parent Common Stock issued in the Merger.
5. Parent has no plan or intention, following the Merger, to liquidate the
Company, to merge the Company with and into another corporation, to sell or
otherwise dispose of any of the stock of the Company, or to cause the Company to
sell or otherwise dispose of any of the assets held by the Company at the time
of the Merger, except for dispositions of such assets in the ordinary course of
business; PROVIDED, HOWEVER, that Parent may transfer assets or stock of the
Company in a manner that is consistent with Section 368(a)(2)(C) of the Internal
Revenue Code of 1986, as amended (the "Code").
6. Parent and Merger Sub will each pay their respective expenses, if any,
incurred in connection with the Merger.
7. Following the Merger, Parent intends to cause the Company to continue
its historic business or use a significant portion of its historic business
assets in a business.
8. Neither Parent nor Merger Sub is an investment company as defined in
Section 368(a)(2)(F)(iii) and (iv) of the Code.
9. Neither Parent nor Merger Sub will take any position on any Federal,
state or local income or franchise tax return, or take any other tax reporting
position, that is inconsistent with the treatment of the Merger as a
reorganization within the meaning of Section 368(a) of the Code, unless
otherwise required by
- ------------------------
(1) For purposes of this certificate, capitalized terms used and not otherwise
defined herein shall have the meaning ascribed thereto in the Agreement and
Plan of Merger.
I-41
<PAGE>
a "determination" (as defined in Section 1313(a)(1) of the Code) or by
applicable state or local income or franchise tax law.
10. None of the compensation received by any stockholder-employee of the
Company in respect of periods after the Effective Time represents separate
consideration for, or is allocable to, any of their Company Common Stock. None
of the Parent Common Stock that will be received by Company
stockholder-employees in the Merger represents separately bargained-for
consideration which is allocable to any employment agreement or arrangement. The
compensation paid to any shareholder-employees will be for services actually
rendered and will be determined by bargaining at arm's-length.
11. No stock of Merger Sub will be issued in the Merger.
12. There is no intercorporate indebtedness existing between Parent and the
Company or between Merger Sub and the Company that was issued or acquired, or
will be settled, at a discount.
13. The Merger Agreement and the documents described in Sections 5.5 and
5.16 of the Merger Agreement represent the entire understanding of the Company,
Parent and Merger Sub with respect to the Merger.
14. Merger Sub is a corporation newly formed for the purpose of
participating in the Merger and at no time prior to the Merger has had assets
(other than nominal assets contributed upon the formation of Merger Sub, which
assets will be held by the Company following the Merger) or business operation.
Merger Sub will have no liabilities assumed by the Company, and will not
transfer to the Company any assets subject to liabilities in the Merger.
15. Following the Merger, the Company will hold at least 90 percent of the
fair market value of the net assets and at least 70 percent of the fair market
value of the gross assets that the Company held immediately prior to the Merger,
and the Company will hold at least 90 percent of the fair market value of the
net assets and at least 70 percent of the fair market value of the gross assets
that the Merger Sub held immediately prior to the Merger. For purposes of this
representation, Company assets used to pay its reorganization expenses and all
redemptions and distributions (except for regular, normal dividends) made by the
Company immediately preceding or in contemplation of, the Merger will be
included as assets of the Company prior to the Merger.
16. Parent will not assume any liabilities of the Company or any of the
Company's Subsidiaries.
17. The Company Common Stock will be surrendered pursuant to the Merger in
an arms-length exchange, and the Parent Common Stock received in exchange
therefor represents the sole bargained-for consideration therefor. The fair
market value of the Parent Common Stock received by each holder of Company
Common Stock will be approximately equal to the fair market value of the Company
Common Stock surrendered in the Merger.
18. There will be no dissenters to the Merger.
I understand that Skadden, Arps, Slate, Meagher & Flom LLP, as counsel for
the Company, and [ ], as counsel for Parent, will rely on this certificate in
rendering their opinion concerning certain of the federal income tax
consequences of the Merger and hereby commit to inform them if, for any reason,
any of the foregoing representations ceases to be true prior to the Effective
Time.
<TABLE>
<S> <C> <C>
, INC.
By:
-----------------------------------------
Name:
Title:
</TABLE>
I-42
<PAGE>
EXHIBIT D
, 1997
[PARENT COUNSEL]
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, NY 10022
Dear Sirs:
In connection with the opinion to be delivered by you pursuant to the
Agreement and Plan of Merger, dated [ ], 1997, among Parent, Merger
Sub and the Company(1), the undersigned hereby certifies (to the best of its
knowledge and belief, where indicated), after due inquiry and investigation, as
follow:
1. The Undersigned has no present plan or intention to sell, exchange
or otherwise dispose of (each of the foregoing, a "disposition"), more than %
shares of Parent Common Stock received in the merger contemplated by the Merger
Agreement (the "Merger"). For purposes of this representation, shares of Company
Common Stock and shares of Parent Common Stock received in the Merger and sold,
redeemed or disposed of prior to or subsequent to the Merger, in contemplation
thereof or as part of a plan therewith, will be considered in making this
representation.
2. The undersigned will not take any position on any Federal, state or
local income or franchise tax return, or take any other tax reporting position,
that is inconsistent with the treatment of the Merger as a reorganization within
the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended
(the "Code"), unless otherwise required by a "determination" (as defined in
Section 1313(a)(1) of the Code) or by applicable state or local income or
franchise tax law.
[THE COMPANY STOCKHOLDER]
- ------------------------
(1) For purposes of this certificate, capitalized terms used and not otherwise
defined herein shall have the meaning ascribed thereto in the Agreement and
Plan of Merger.
I-43
<PAGE>
ANNEX II
October , 1997
Universal Outdoor Holdings, Inc.
311 South Wacker Drive
Suite 6400
Chicago, IL 60606
Dear Members of the Board of Directors:
Universal Outdoor Holdings, Inc. ("Universal" or the "Company") and Clear
Channel Communications, Inc. ("Clear Channel"), a Texas corporation, have
entered into an Agreement and Plan of Merger dated as of October 23, 1997 ("the
Agreement"). Pursuant to the Agreement, the implementation of which is
contingent on approval by Universal's stockholders, Universal and Clear Channel
will combine their companies through a merger of a newly formed subsidiary of
Clear Channel into Universal ("the Merger"). As a result of the Merger, each
share of Universal common stock issued and outstanding immediately prior to the
effective time of the Merger will be converted into 0.67 shares (the "Exchange
Ratio") of common stock of Clear Channel. We have assumed, with your consent,
that the Merger will qualify as a tax free reorganization for federal income tax
purposes. You have requested our opinion as to whether the Exchange Ratio is
fair, from a financial point of view, to Universal.
BT Alex. Brown Incorporated ("BT Alex. Brown"), as a customary part of its
investment banking business, is engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions, negotiated
underwritings, private placements and valuations for estate, corporate and other
purposes. We have acted as financial advisor to the Board of Directors of
Universal in connection with the transaction described above and will receive a
fee for our services, a portion of which is contingent upon the consummation of
the Merger and a portion of which becomes payable upon the delivery of this
opinion. We have acted as financial advisor to Universal in the past in
connection with various capital raising transactions and other matters,
including serving as the lead managing underwriter in the July 1996 initial
public offering of the common stock of Universal, as the lead managing
underwriter in the October 1996 follow-on offering of the common stock of
Universal, as a co-managing underwriter in the November 1996 offering of Senior
Subordinated Notes of Universal Outdoor, Inc., a wholly-owned subsidiary of
Universal, and as financial advisor to Universal in its October 1996 acquisition
of Outdoor Advertising Holdings, Inc. In addition, we have acted as financial
advisor to Clear Channel in the past in connection with various capital raising
transactions and other matters, including serving as the lead-managing
underwriter in two follow-on offerings of common stock of Clear Channel, one
follow-on offering of common stock of Heftel Broadcasting Corporation, a Clear
Channel affiliate, as a co-managing underwriter in an offering of debentures of
Clear Channel, and we are currently serving as financial advisor in connection
with a potential acquisition under consideration by Clear Channel. BT Alex.
Brown maintains a market in the common stock of each of Universal and Clear
Channel and regularly publishes research reports regarding the outdoor
advertising, radio broadcasting and television broadcasting industries and the
businesses and securities of each of Universal and Clear Channel and other
publicly owned companies in the outdoor advertising, radio broadcasting and
television broadcasting industries. In the ordinary course of business, BT Alex.
Brown may actively trade the securities of both the Company and Clear Channel
for our own account and the account of our customers and, accordingly, may at
any time hold a long or short position in such securities.
In connection with this opinion, we have reviewed certain publicly available
financial information and other information concerning Universal and Clear
Channel and certain internal analyses and other information furnished to us by
Universal. We have also held discussions with the members of the senior
management of each of Universal and Clear Channel regarding the businesses and
prospects of their respective companies and the joint prospects of a combined
company. In addition, we have (i) reviewed the reported prices and trading
activity for the common stock of both Universal and Clear Channel,
II-1
<PAGE>
(ii) compared certain financial and stock market information for Universal and
Clear Channel with similar information for certain other companies in the
outdoor advertising, radio broadcasting and television broadcasting industries
whose securities are publicly traded, (iii) reviewed the financial terms of
certain recent business combinations in the outdoor advertising, radio
broadcasting and television broadcasting industries, (iv) reviewed the terms of
the Agreement, and (v) performed such other studies and analyses and considered
such other factors as we deemed appropriate.
We have not independently verified the information described above and for
purposes of this opinion have assumed the accuracy, completeness and fairness
thereof. With respect to the information relating to the prospects of Universal
and Clear Channel, we have assumed that such information reflects the best
currently available judgments and estimates of the senior management of each of
Universal and Clear Channel as to the likely future financial performances of
their respective companies and of the combined entity. In addition, we have not
made nor been provided with an independent evaluation or appraisal of the assets
or liabilities of either Universal or Clear Channel, nor have we been furnished
with any such evaluations or appraisals. Our opinion is based on market,
economic and other conditions as they exist and can be evaluated as of the date
of this letter.
Our advisory services and the opinion expressed herein were conducted solely
for the use of the Board of Directors of Universal and do not constitute a
recommendation to any stockholder as to how such stockholder should vote in
connection with the Merger. We hereby consent, however, to the inclusion of this
opinion in its entirety as an exhibit to any proxy or registration statement
distributed in connection with the Merger.
Based upon and subject to the foregoing, it is our opinion that, as of the
date of this letter, the Exchange Ratio is fair, from a financial point of view,
to Universal.
Very truly yours,
/s/ JEFFREY S. AMLING
--------------------------------------
BT ALEX. BROWN INCORPORATED
II-2
<PAGE>
ANNEX III
October 23, 1997
Board of Directors
Universal Outdoor Holdings, Inc.
311 South Wacker Drive, Suite 6400
Chicago, IL 60606
Gentlemen:
We understand that Universal Outdoor Holdings, Inc. ("Universal Outdoor"),
Clear Channel Communications, Inc. ("Clear Channel") and UH Merger Sub, Inc. a
wholly owned subsidiary of Clear Channel ("Sub"), have entered into an Agreement
and Plan of Merger ("the Merger Agreement") dated October 23, 1997, pursuant to
which Sub will be merged (the "Merger") with and into Universal Outdoor, with
Universal Outdoor surviving the merger and becoming a wholly owned subsidiary of
Clear Channel. Upon the terms and subject to the conditions set forth in the
Merger Agreement, at the Effective Time (as defined in the Merger Agreement) of
the Merger, each issued and outstanding share of common stock of Universal
Outdoor, other than shares owned directly or indirectly by Clear Channel or by
the Company, will be converted into the right to receive 0.67 (the "Exchange
Ratio") shares of common stock of Clear Channel.
You have asked us to render our opinion as to whether the Exchange Ratio in
the Merger is fair, from a financial point of view, to the public shareholders
of Universal Outdoor.
In the course of performing our reviews and analyses for rendering this
opinion, we have:
1. reviewed the Merger Agreement;
2. reviewed Universal Outdoor's Annual Report to Shareholders and Annual Report
on Form 10-K for the year ended December 31, 1996, its Quarterly Reports on
Form 10-Q for the periods ended March 31, 1997 and June 30, 1997, its
unaudited balance sheet as of August 31, 1997 and its Prospectus for the
Sale of 5,500,000 Common Shares, dated August 15, 1997;
3. reviewed Clear Channel's Annual Report to Shareholders and Annual Report on
Form 10-K for the year ended December 31, 1996, its Quarterly Reports on
Form 10-Q for the periods ended March 31, 1997 and June 30, 1997, its
Prospectus for the Issuance of 8,000,000 Common Shares, dated September 12,
1997, and its Prospectus to offer $300 million aggregate principal amount of
7.25% Debentures due October 15, 2027, dated October 9, 1997;
4. reviewed certain operating and financial information, including projections,
provided to us by the senior managements of Universal Outdoor and Clear
Channel relating to Universal Outdoor's and Clear Channel's businesses and
future prospects;
5. met with certain members of Universal Outdoor's and Clear Channel's senior
managements to discuss each company's operations, historical financial
statements and future prospects;
6. reviewed the historical prices, trading volumes and valuation parameters of
Universal Outdoor Common Stock and Clear Channel Common Stock;
7. reviewed publicly available financial data, stock market performance data
and valuation parameters of companies which we deemed generally comparable
to Universal Outdoor and Clear Channel;
8. reviewed the terms of recent mergers and acquisitions involving companies
which we deemed generally comparable to Universal Outdoor and the Merger;
9. conducted such other studies, analyses, inquiries and investigations as we
deemed appropriate.
III-1
<PAGE>
In the course of our review, we have relied upon and assumed, without
independent verification, the accuracy and completeness of the financial and
other projections provided to us by Universal Outdoor and Clear Channel. With
respect to Universal Outdoor's and Clear Channel's projected financial results
and potential synergies that could be achieved upon consummation of the Merger,
we have assumed that they have been reasonably prepared on bases reflecting the
best currently available estimates and judgments of the senior managements of
Universal Outdoor and Clear Channel as to the expected future performance of
Universal Outdoor and Clear Channel, respectively. We have not assumed any
responsibility for the independent verification of any such information or of
the projections provided to us and we have further relied upon the assurances of
the senior managements of Universal Outdoor and Clear Channel that they are
unaware of any facts that would make the information or projections provided to
us incomplete or misleading. In arriving at our opinion, we have not performed
or obtained any independent appraisal of the assets or liabilities of Universal
Outdoor and Clear Channel, nor have we been furnished with any such appraisals.
Our opinion is necessarily based on economic, market and other conditions, and
the information made available to us, as of the date hereof. We have assumed
that the Merger will qualify as a tax-free "reorganization" within the meaning
of Section 368(a) of the Code.
We do not express any opinion as to the price or range of prices at which
shares of common stock of Clear Channel may trade subsequent to the consummation
of the Merger.
We have acted as a financial advisor to Universal Outdoor in connection with
the Merger and will receive a fee for such services.
Bear Stearns has been previously engaged by Universal Outdoor to provide
certain investment banking and financial advisory services in connection with
its IPO on July 23, 1996 and subsequent offerings of equity and debt. During the
last two years, Bear Stearns earned compensation with respect to all such
services, other than the fees described in the preceding paragraph, of
approximately $12.1 million. In the ordinary course of business, Bear Stearns
may actively trade the equity securities of Universal Outdoor for its own
account and for the account of its customers and, accordingly, may at any time
hold a long or short position in such securities.
Bear Stearns has been previously engaged by Clear Channel to provide certain
investment banking and financial advisory services in connection with an equity
offering in 1991. Additionally, an officer of Bear Stearns is a member of the
Clear Channel Board of Directors. In the ordinary course of business, Bear
Stearns may actively trade the equity securities of Clear Channel for its own
account and for the account of its customers and, accordingly, may at any time
hold a long or short position in such securities.
It is understood that this letter is intended for the benefit and use of the
Board of Directors of Universal Outdoor and does not constitute a recommendation
to the Board of Directors of Universal Outdoor or any holders of Universal
Outdoor Common Stock as to how to vote in connection with the Merger. This
opinion does not address Universal Outdoor's underlying business decision to
pursue the Merger. This letter is not to be used for any other purpose, or
reproduced, disseminated, quoted to or referred to at any time, in whole or in
part, without our prior written consent; provided, however, that this letter may
be included in its entirety in any joint proxy statement / prospectus to be
distributed to the holders of Universal Outdoor Common Stock in connection with
the Merger.
Based on and subject to the foregoing, it is our opinion that the Exchange
Ratio is fair, from a financial point of view, to the public shareholders of
Universal Outdoor.
Very truly yours,
BEAR, STEARNS & CO. INC.
By: /s/ MICHAEL L. OFFEN
------------------------------------------
SENIOR MANAGING DIRECTOR
III-2
<PAGE>
ANNEX IV.A
CONFORMED COPY
VOTING AGREEMENT
This VOTING AGREEMENT (the "Agreement"), dated as of October 23, 1997, is
entered into by and among Clear Channel Communications, Inc., a Texas
corporation ("Parent"), and Daniel L. Simon (the "Stockholder").
WHEREAS, Parent, UH Merger Sub, Inc. ("Merger Sub") and Universal Outdoor
Holdings, Inc. (the "Company"), have entered into an Agreement and Plan of
Merger of even date herewith (the "Merger Agreement"), pursuant to which the
parties thereto have agreed, upon the terms and subject to the conditions set
forth therein, to merge Merger Sub with and into the Company (the "Merger");
WHEREAS, as of the date hereof, the Stockholder is the record and beneficial
owner of, and has the sole right to vote and dispose of the number of shares
(the "Shares") of common stock, par value $0.01 per share, of the Company (the
"Company Common Stock") set forth opposite such Stockholder's name on Schedule I
attached hereto; and
WHEREAS, as a condition to its willingness to enter into the Merger
Agreement, Parent has required that the Stockholder agree, and the Stockholder
is willing to agree, to the matters set forth herein.
NOW, THEREFORE, in consideration of the foregoing and the agreements set
forth below, the parties hereto agree as follows:
1. VOTING OF SHARES.
1.1 VOTING AGREEMENT. For so long as the Merger Agreement is in
effect, the Stockholder hereby agrees to vote (or cause to be voted) all of
the Shares (and any and all securities issued or issuable in respect
thereof) which such Stockholder is entitled to vote (or to provide his
written consent thereto), at any annual, special or other meeting of the
stockholders of the Company, and at any adjournment or adjournments thereof,
or pursuant to any consent in lieu of a meeting or other-wise:
(i) in favor of the Merger and the approval and adoption of the
terms contemplated by the Merger Agreement and any actions required in
furtherance thereof;
(ii) against any action or agreement that could result in a breach
in any material respect of any covenant, representation or warranty or
any other obligation of the Company under this Agreement or the Merger
Agreement; and
(iii) against (A) any extraordinary corporate transaction, such as a
merger, rights offering, reorganization, recapitalization or liquidation
involving the Company or any of its subsidiaries other than the Merger,
(B) a sale or transfer of a material amount of assets of the Company or
any of its subsidiaries or the issuance of any securities of the Company
or any subsidiary, (C) any change in the executive officers or Board of
Directors of the Company, (D) any change in the present corporate
structure or business of the Company or (E) any action that is intended,
or could reasonably be ex-pected, to materially impede, interfere with,
delay, postpone or adversely affect the Merger and the transaction
contemplated by the Merger Agreement.
1.2 PROXY. At Parent's request Stockholder will deliver to Parent an
irrevocable proxy only with respect to the matters covered by clauses (i),
(ii) and (iii) of this paragraph 1 granting to Parent or its designee a
proxy to vote the Shares in accordance with the terms of this Agreement;
PROVIDED, THAT such proxy shall survive only for so long as the Merger
Agreement is in effect.
IV.A-1
<PAGE>
2. REPRESENTATIONS AND WARRANTIES OF STOCKHOLDER. The Stockholder
represents and warrants to Parent as follows:
2.1 BINDING AGREEMENT. The Stockholder has the capacity to execute and
deliver this Agreement and to consummate the transactions contemplated
hereby. The Stockholder has duly and validly executed and delivered this
Agreement and this Agreement constitutes a legal, valid and binding
obligation of the Stockholder, enforceable against the Stockholder in
accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization or other similar laws
affecting creditors' rights generally and by general equitable principles
(regardless of whether enforceability is considered in a proceeding in
equity or at law).
2.2 NO CONFLICT. Neither the execution and delivery of this Agreement,
the consummation of the transactions contemplated hereby, nor the compliance
with any of the provisions hereof, (a) require any consent, approval,
authorization or permit of, registration, declaration or filing (except for
filings under the Securities Exchange Act of 1934, as amended (the "Exchange
Act")) with, or notification to, any governmental entity, (b) result in a
default (or an event which, with notice or lapse of time or both, would
become a default) or give rise to any right of termination by any third
party, cancellation, amendment or acceleration under any contract,
agreement, instrument, commitment, arrangement or understanding, or result
in the creation of a security interest, lien, charge, encumbrance, equity or
claim with respect to any of the Shares, (c) require any material consent,
authorization or approval of any person other than a governmental entity, or
(d) violate or conflict with any order, writ, injunction, decree or law
applicable to the Stockholder or the Shares.
2.3 OWNERSHIP OF SHARES. The Stockholder is the record and beneficial
owner of the Shares free and clear of any security interests, liens,
charges, encumbrances, equities, claims, options or limitations of whatever
nature and free of any other limitation or restriction (including any
restriction on the right to vote, sell or otherwise dispose of the Shares).
Except as set forth on Schedule II attached hereto, there are no outstanding
options or other rights to acquire from the Stockholder, or obligations of
the Stockholder to sell or to acquire, any shares of Company Common Stock.
The Stockholder holds exclusive power to vote the Shares, subject to the
limitations set forth in Section 1 of this Agreement. The Shares represent
all of the shares of capital stock of the Company beneficially owned by
Stockholder.
3. REPRESENTATIONS AND WARRANTIES OF PARENT. Parent represents and
warrants to the Stockholder as follows:
3.1 BINDING AGREEMENT. Parent is a corporation duly incorporated,
validly existing and in good standing under the laws of the State of Texas
and has full corporate power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the Merger Agreement by Parent
and the consummation of the transactions contemplated hereby and thereby
have been duly and validly authorized by the Board of Directors of Parent,
and no other corporate proceedings on the part of Parent are necessary to
autho-rize the execution, delivery and performance of this Agreement and the
Merger Agreement by Parent and the consummation of the transactions
contemplated hereby and thereby. Parent has duly and validly executed this
Agreement and this Agreement constitutes a legal, valid and binding
obligation of Parent, enforceable against Parent in accordance with its
terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization or other similar laws affecting
creditors' rights generally and by general equitable principles (regardless
of whether enforceability is considered in a proceeding in equity or at
law).
3.2 NO CONFLICT. Neither the execution and delivery of this Agreement,
the consummation by Parent of the transactions contemplated hereby, nor the
compliance by Parent with any of the provisions hereof will (a) conflict
with or result in a breach of any provision of its Certificate of
Incorporation or By-laws, (b) require any consent, approval, authorization
or permit of, registration, declaration or filing (except for filings under
the Exchange Act) with, or notification to, any
IV.A-2
<PAGE>
governmental entity, (c) result in a default (or an event which, with notice
or lapse of time or both, would become a default) or give rise to any right
of termination by any third party, cancellation, amendment or acceleration
under any contract, agreement, instrument, commitment, arrangement or
understanding, (d) require any material consent, authorization or approval
of any person other than a governmental entity, or (e) violate or conflict
with any order, writ, injunction, decree or law applicable to the
Stockholder or the Shares.
4. TRANSFER AND OTHER RESTRICTIONS. For so long as the Merger Agreement is
in effect:
4.1 CERTAIN PROHIBITED TRANSFERS. The Stockholder agrees not to:
(a) sell, transfer, pledge, encumber, assign or otherwise dispose of,
or enter into any contract, option or other arrangement or understanding
with respect to the sale, transfer, pledge, encumbrance, assignment or
other disposition of, the Shares or any interest contained therein, other
than pursuant to this Agreement;
(b) except as contemplated by this Agreement, grant any proxies or
power of attorney or enter into a voting agreement or other arrangement
with respect to the Shares, other than this Agreement; nor
(c) deposit the Shares into a voting trust.
4.2 EFFORTS. The Stockholder agrees not to take any action which would
make any representation or warranty of the Stockholder herein untrue or
incorrect in any material respect or take any action that would have the
effect of preventing or disabling such Stockholder from performing its
obligations under this Agreement, other than any action permitted to be
taken pursuant to the Merger Agreement.
4.3 ADDITIONAL SHARES. Without limiting the provisions of the Merger
Agreement, in the event (i) of any stock dividend, stock split,
recapitalization, reclassification, combination or exchange of shares of
capital stock of the Company on, of or affecting the Shares or (ii) the
Stockholder shall become the beneficial owner of any additional shares of
Company Common Stock or other securities entitling the holder thereof to
vote or give consent with respect to the matters set forth in Section 1
hereof, then the terms of this Agreement shall apply to the shares of
capital stock or other securities of the Company held by the Stockholder
immediately following the effectiveness of the events described in clause
(i) or the Stockholder becoming the beneficial owner thereof, as described
in clause (ii), as though they were Shares hereunder. The Stockholder hereby
agrees, while this Agreement is in effect, to promptly notify Parent of the
number of any new shares of Company Common Stock acquired by the
Stockholder, if any, after the date hereof.
5. LEGEND. The Stockholder shall surrender to the Company all certificates
representing the Shares, and instruct the Company to place the following legend
on such certificates:
"The shares of capital stock represented by this certificate
are subject to a Voting Agreement, dated as of October 23, 1997,
by and among Clear Channel Communications, Inc. and Daniel L.
Simon."
6. SPECIFIC ENFORCEMENT. The parties hereto agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with the terms hereof or were otherwise breached and
that each party shall be entitled to specific performance of the terms hereof,
in addition to any other remedy which may be available at law or in equity.
7. CONFIDENTIALITY. Except as may be required by applicable law, the
Stockholder and Parent severally agree to keep proprietary information regarding
the Company and Parent and their respective subsidiaries confidential.
8. TERMINATION. Except for Section 7 hereof, which shall survive without
limitation, and Sections 8 and 9 hereof, which shall survive for the period
specified therein, this Agreement shall terminate on the
IV.A-3
<PAGE>
earlier of (i) the termination of the Merger Agreement in accordance with its
terms, (ii) the agreement of the parties hereto to terminate this Agreement and
(iii) consummation of the Merger.
9. INDEMNIFICATION. Parent shall, to the fullest extent permitted under
applicable law, indemnify and hold harmless, the Stockholder against any costs
or expenses (including attorneys' fees as provided below), judgments, fines,
losses, claims, damages, liabilities and amounts paid in settlement in
connection with any claim, action, suit, proceeding or investigation by the
Company or any stockholder of the Company asserting any breach by the
Stockholder of any fiduciary duty on his part to the Company or the other
stockholders of the Company by reason of the Stockholders's entering into this
Agreement, for a period of six years after the date hereof. In the event of any
such claim, action, suit, proceeding or investigation (whether arising before or
after the termination of this Agreement), (a) Parent shall pay the fees and
expenses of one counsel selected by the Stockholder and reasonably acceptable to
Parent to represent him in connection therewith promptly after statements
therefor are received, and (b) Parent and Merger Sub will cooperate in the
defense of any such matter; PROVIDED, HOWEVER, that Parent shall not be liable
for any settlement effected without its written consent (which consent shall not
be unreasonably withheld); PROVIDED, FURTHER, that in the event that any claim
or claims for indemnification are asserted or made within such six-year period,
all rights to indemnification in respect of any such claim or claims shall
contin-ue until the disposition of any and all such claims.
10. NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed given upon (a) transmitter's confirmation of a
receipt of a facsimile transmission, (b) confirmed delivery by a standard
overnight carrier or when delivered by hand or (c) the expiration of five
business days after the day when mailed by certified or registered mail, postage
prepaid, addressed at the following addresses (or at such other address for a
party as shall be specified by like notice):
If to Parent, to:
Clear Channel Communications, Inc.
200 Concord Plaza
Suite 600
San Antonio, Texas 78216
Attention: Randall Mays
Facsimile No.: (210) 822-2299
with a copy to:
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
1700 Pacific Avenue
Suite 4100
Dallas, Texas 75201
Attention: Ford Lacy P.C.
Facsimile No.: (214) 969-4343
If to Stockholder, to:
c/o Universal Outdoor Holdings, Inc.
311 South Wacker Drive
Suite 6400
Chicago, Illinois 60606
Attention: Paul G. Simon
Facsimile No.: (312) 344-4171
IV.A-4
<PAGE>
with a copy to:
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, New York 10022
Facsimile No.: (212) 735-2000
Attention: Lou R. Kling, Esq.
Howard L. Ellin, Esq.
11. CERTAIN EVENTS. The Stockholder agrees that this Agreement and the
obligations hereunder shall attach to the Shares and shall be binding upon any
person or entity to which legal or beneficial ownership of such Shares shall
pass, whether by operation of law or otherwise.
12. ENTIRE AGREEMENT. This Agreement (including the documents and
instruments referred to herein) constitutes the entire agreement and supersedes
all other prior agreements and understandings, both written and oral, among the
parties, or any of them, with respect to the subject matter hereof.
13. CONSIDERATION. This Agreement is granted in consideration of the
execution and delivery of the Merger Agreement by Parent.
14. AMENDMENT. This Agreement may not be modified, amended, altered or
supplemented except upon the execution and delivery of a written agreement
executed by the parties hereto.
15. SUCCESSORS AND ASSIGNS. This Agreement shall not be assigned by
operation of law or otherwise without the prior written consent of the other
parties hereto. This Agreement will be binding upon, inure to the benefit of and
be enforceable by each party and such party's respective heirs, beneficiaries,
executors, representatives and permitted assigns.
16. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
17. GOVERNING LAW. This Agreement shall be governed in all respects,
including validity, interpreta-tion and effect, by the laws of the State of
Delaware (without giving effect to the provisions thereof relating to conflicts
of law).
18. SEVERABILITY. Any term or provision of this Agreement which is invalid
or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.
19. HEADINGS. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by
the Stockholder and a duly authorized officer of Parent on the day and year
first written above.
<TABLE>
<S> <C> <C>
CLEAR CHANNEL COMMUNICATIONS, INC.
By: /s/ RANDALL MAYS
-----------------------------------------
Name: Randall Mays
TITLE: CHIEF FINANCIAL OFFICER
/s/ DANIEL L. SIMON
-----------------------------------------
Daniel L. Simon
</TABLE>
IV.A-5
<PAGE>
SCHEDULE I TO
VOTING AGREEMENT
<TABLE>
<CAPTION>
NAME OF STOCKHOLDER NUMBER OF SHARES
- ------------------------------------ ------------------------------------
<S> <C> <C>
1. Daniel L. Simon 5,377,292
</TABLE>
IV.A-6
<PAGE>
SCHEDULE II TO
VOTING AGREEMENT
<TABLE>
<S> <C> <C>
1. Management Warrants 1,847,526
</TABLE>
IV.A-7
<PAGE>
ANNEX IV.B
CONFORMED COPY
VOTING AGREEMENT
This VOTING AGREEMENT (the "Agreement"), dated as of October 23, 1997, is
entered into by and among Clear Channel Communications, Inc., a Texas
corporation ("Parent"), and Brian T. Clingen (the "Stockholder").
WHEREAS, Parent, UH Merger Sub, Inc. ("Merger Sub") and Universal Outdoor
Holdings, Inc. (the "Company"), have entered into an Agreement and Plan of
Merger of even date herewith (the "Merger Agreement"), pursuant to which the
parties thereto have agreed, upon the terms and subject to the conditions set
forth therein, to merge Merger Sub with and into the Company (the "Merger");
WHEREAS, as of the date hereof, the Stockholder is the record and beneficial
owner of, and has the sole right to vote and dispose of the number of shares
(the "Shares") of common stock, par value $0.01 per share, of the Company (the
"Company Common Stock") set forth opposite such Stockholder's name on Schedule I
attached hereto; and
WHEREAS, as a condition to its willingness to enter into the Merger
Agreement, Parent has required that the Stockholder agree, and the Stockholder
is willing to agree, to the matters set forth herein.
NOW, THEREFORE, in consideration of the foregoing and the agreements set
forth below, the parties hereto agree as follows:
1. VOTING OF SHARES.
1.1 VOTING AGREEMENT. For so long as the Merger Agreement is in
effect, the Stockholder hereby agrees to vote (or cause to be voted) all of
the Shares (and any and all securities issued or issuable in respect
thereof) which such Stockholder is entitled to vote (or to provide his
written consent thereto), at any annual, special or other meeting of the
stockholders of the Company, and at any adjournment or adjournments thereof,
or pursuant to any consent in lieu of a meeting or otherwise:
(i) in favor of the Merger and the approval and adoption of the terms
contemplated by the Merger Agreement and any actions required in
furtherance thereof;
(ii) against any action or agreement that could result in a breach in
any material respect of any covenant, representation or warranty or any
other obligation of the Company under this Agreement or the Merger
Agreement; and
(iii) against (A) any extraordinary corporate transaction, such as a
merger, rights offering, reorganization, recapitalization or liquidation
involving the Company or any of its subsidiaries other than the Merger,
(B) a sale or transfer of a material amount of assets of the Company or
any of its subsidiaries or the issuance of any securities of the Company
or any subsidiary, (C) any change in the executive officers or Board of
Directors of the Company, (D) any change in the present corporate
structure or business of the Company or (E) any action that is intended,
or could reasonably be expected, to materially impede, interfere with,
delay, postpone or adversely affect the Merger and the transaction
contemplated by the Merger Agreement.
1.2 PROXY. At Parent's request Stockholder will deliver to Parent an
irrevocable proxy only with respect to the matters covered by clauses (i),
(ii) and (iii) of this paragraph 1 granting to Parent or its designee a
proxy to vote the Shares in accordance with the terms of this Agreement;
PROVIDED, THAT such proxy shall survive only for so long as the Merger
Agreement is in effect.
IV.B-1
<PAGE>
2. REPRESENTATIONS AND WARRANTIES OF STOCKHOLDER. The Stockholder
represents and warrants to Parent as follows:
2.1 BINDING AGREEMENT. The Stockholder has the capacity to execute and
deliver this Agreement and to consummate the transactions contemplated
hereby. The Stockholder has duly and validly executed and delivered this
Agreement and this Agreement constitutes a legal, valid and binding
obligation of the Stockholder, enforceable against the Stockholder in
accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization or other similar laws
affecting creditors' rights generally and by general equitable principles
(regardless of whether enforceability is considered in a proceeding in
equity or at law).
2.2 NO CONFLICT. Neither the execution and delivery of this Agreement,
the consummation of the transactions contemplated hereby, nor the compliance
with any of the provisions hereof, (a) require any consent, approval,
authorization or permit of, registration, declaration or filing (except for
filings under the Securities Exchange Act of 1934, as amended (the "Exchange
Act")) with, or notification to, any governmental entity, (b) result in a
default (or an event which, with notice or lapse of time or both, would
become a default) or give rise to any right of termination by any third
party, cancellation, amendment or acceleration under any contract,
agreement, instrument, commitment, arrangement or understanding, or result
in the creation of a security interest, lien, charge, encumbrance, equity or
claim with respect to any of the Shares, (c) require any material consent,
authorization or approval of any person other than a governmental entity, or
(d) violate or conflict with any order, writ, injunction, decree or law
applicable to the Stockholder or the Shares.
2.3 OWNERSHIP OF SHARES. The Stockholder is the record and beneficial
owner of the Shares free and clear of any security interests, liens,
charges, encum-brances, equities, claims, options or limitations of whatever
nature and free of any other limitation or restriction (including any
restriction on the right to vote, sell or otherwise dispose of the Shares).
Except as set forth on Schedule II attached hereto, there are no outstanding
options or other rights to acquire from the Stockholder, or obligations of
the Stockholder to sell or to acquire, any shares of Company Common Stock.
The Stockholder holds exclusive power to vote the Shares, subject to the
limitations set forth in Section 1 of this Agreement. The Shares represent
all of the shares of capital stock of the Company beneficially owned by
Stockholder except for such shares owned by Stockholder and issued in the
name of Daniel L. Simon, as trustee, under a Voting Trust Agreement, dated
December 20, 1995, between Daniel L. Simon and Stockholder.
3. REPRESENTATIONS AND WARRANTIES OF PARENT. Parent represents and
warrants to the Stockholder as follows:
3.1 BINDING AGREEMENT. Parent is a corporation duly incorporated,
validly existing and in good standing under the laws of the State of Texas
and has full corporate power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the Merger Agreement by Parent
and the consummation of the transactions contemplated hereby and thereby
have been duly and validly authorized by the Board of Directors of Parent,
and no other corporate proceedings on the part of Parent are necessary to
authorize the execution, delivery and performance of this Agreement and the
Merger Agreement by Parent and the consummation of the transactions
contemplated hereby and thereby. Parent has duly and validly executed this
Agreement and this Agreement constitutes a legal, valid and binding
obligation of Parent, enforceable against Parent in accordance with its
terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization or other similar laws affecting
creditors' rights generally and by general equitable principles (regardless
of whether enforceability is considered in a proceeding in equity or at
law).
3.2 NO CONFLICT. Neither the execution and delivery of this Agreement,
the consummation by Parent of the transactions contemplated hereby, nor the
compliance by Parent with any of the
IV.B-2
<PAGE>
provisions hereof will (a) conflict with or result in a breach of any
provision of its Certificate of Incorporation or By-laws, (b) require any
consent, approval, authorization or permit of, registration, declaration or
filing (except for filings under the Exchange Act) with, or notification to,
any governmental entity, (c) result in a default (or an event which, with
notice or lapse of time or both, would become a default) or give rise to any
right of termination by any third party, cancellation, amendment or
acceleration under any contract, agreement, instrument, commitment,
arrangement or understanding, (d) require any material consent,
authorization or approval of any person other than a governmental entity, or
(e) violate or conflict with any order, writ, injunction, decree or law
applicable to the Stockholder or the Shares.
4. TRANSFER AND OTHER RESTRICTIONS. For so long as the Merger Agreement is
in effect:
4.1 CERTAIN PROHIBITED TRANSFERS. The Stockholder agrees not to:
(a) sell, transfer, pledge, encumber, assign or otherwise dispose of,
or enter into any contract, option or other arrangement or understanding
with respect to the sale, transfer, pledge, encumbrance, assignment or
other disposition of, the Shares or any interest contained therein, other
than pursuant to this Agreement;
(b) except as contemplated by this Agreement, grant any proxies or
power of attorney or enter into a voting agreement or other arrangement
with respect to the Shares, other than this Agreement; nor
(c) deposit the Shares into a voting trust.
4.2 EFFORTS. The Stockholder agrees not to take any action which would
make any representation or warranty of the Stockholder herein untrue or
incorrect in any material respect or take any action that would have the
effect of preventing or disabling such Stockholder from performing its
obligations under this Agreement, other than any action permitted to be
taken pursuant to the Merger Agreement.
4.3 ADDITIONAL SHARES. Without limiting the provisions of the Merger
Agreement, in the event (i) of any stock dividend, stock split,
recapitalization, reclassification, combination or exchange of shares of
capital stock of the Company on, of or affecting the Shares or (ii) the
Stockholder shall become the beneficial owner of any additional shares of
Company Common Stock or other securities entitling the holder thereof to
vote or give consent with respect to the matters set forth in Section 1
hereof, then the terms of this Agreement shall apply to the shares of
capital stock or other securities of the Company held by the Stockholder
immediately following the effectiveness of the events described in clause
(i) or the Stockholder becoming the beneficial owner thereof, as described
in clause (ii), as though they were Shares hereunder. The Stockholder hereby
agrees, while this Agreement is in effect, to promptly notify Parent of the
number of any new shares of Company Common Stock acquired by the
Stockholder, if any, after the date hereof.
5. LEGEND. The Stockholder shall surrender to the Company all certificates
representing the Shares, and instruct the Company to place the following legend
on such certificates:
"The shares of capital stock represented by this certificate are subject
to a Voting Agreement, dated as of October 23, 1997, by and among Clear
Channel Coommunications, Inc. and Brian T. Clingen."
6. SPECIFIC ENFORCEMENT. The parties hereto agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with the terms hereof or were otherwise breached and
that each party shall be entitled to specific performance of the terms hereof,
in addition to any other remedy which may be available at law or in equity.
IV.B-3
<PAGE>
7. CONFIDENTIALITY. Except as may be required by applicable law, the
Stockholder and Parent severally agree to keep proprietary information regarding
the Company and Parent and their respective subsidiaries confidential.
8. TERMINATION. Except for Section 7 hereof, which shall survive without
limitation, and Sections 8 and 9 hereof, which shall survive for the period
specified therein, this Agreement shall terminate on the earlier of (i) the
termination of the Merger Agreement in accordance with its terms, (ii) the
agreement of the parties hereto to terminate this Agreement and (iii)
consummation of the Merger.
9. INDEMNIFICATION. Parent shall, to the fullest extent permitted under
applicable law, indemnify and hold harmless, the Stockholder against any costs
or expenses (including attorneys' fees as provided below), judgments, fines,
losses, claims, damages, liabilities and amounts paid in settlement in
connection with any claim, action, suit, proceeding or investigation by the
Company or any stockholder of the Company asserting any breach by the
Stockholder of any fiduciary duty on his part to the Company or the other
stockholders of the Company by reason of the Stockholders's entering into this
Agreement, for a period of six years after the date hereof. In the event of any
such claim, action, suit, proceeding or investigation (whether arising before or
after the termination of this Agreement), (a) Parent shall pay the fees and
expenses of one counsel selected by the Stockholder and reasonably acceptable to
Parent to represent him in connection therewith promptly after statements
therefor are received, and (b) Parent and Merger Sub will cooperate in the
defense of any such matter; PROVIDED, HOWEVER, that Parent shall not be liable
for any settlement effected without its written consent (which consent shall not
be unreasonably withheld); PROVIDED, FURTHER, that in the event that any claim
or claims for indemnification are asserted or made within such six-year period,
all rights to indemnification in respect of any such claim or claims shall
continue until the disposition of any and all such claims.
10. NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed given upon (a) transmitter's confirmation of a
receipt of a facsimile transmission, (b) confirmed delivery by a standard
overnight carrier or when delivered by hand or (c) the expiration of five
business days after the day when mailed by certified or registered mail, postage
prepaid, addressed at the following addresses (or at such other address for a
party as shall be specified by like notice):
If to Parent, to:
Clear Channel Communications, Inc.
200 Concord Plaza
Suite 600
San Antonio, Texas 78216
Attention: Randall Mays
Facsimile No.: (210) 822-2299
with a copy to:Akin, Gump, Strauss, Hauer & Feld, L.L.P.
1700 Pacific Avenue
Suite 4100
Dallas, Texas 75201
Attention: Ford Lacy P.C.
Facsimile No.: (214) 969-4343
IV.B-4
<PAGE>
If to Stockholder, to:
[NAME]
c/o Universal Outdoor Holdings, Inc.
311 South Wacker Drive
Suite 6400
Chicago, Illinois 60606
Attention: Paul G. Simon
Facsimile No.: (312) 344-4171
with a copy to:
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, New York 10022
Facsimile No.: (212) 735-2000
Attention: Lou R. Kling, Esq.
Howard L. Ellin, Esq.
11. CERTAIN EVENTS. The Stockholder agrees that this Agreement and the
obligations hereunder shall attach to the Shares and shall be binding upon any
person or entity to which legal or beneficial ownership of such Shares shall
pass, whether by operation of law or otherwise.
12. ENTIRE AGREEMENT. This Agreement (including the documents and
instruments referred to herein) constitutes the entire agreement and supersedes
all other prior agreements and understandings, both written and oral, among the
parties, or any of them, with respect to the subject matter hereof.
13. CONSIDERATION. This Agreement is granted in consideration of the
execution and delivery of the Merger Agreement by Parent.
14. AMENDMENT. This Agreement may not be modified, amended, altered or
supplemented except upon the execution and delivery of a written agreement
executed by the parties hereto.
15. SUCCESSORS AND ASSIGNS. This Agreement shall not be assigned by
operation of law or otherwise without the prior written consent of the other
parties hereto. This Agreement will be binding upon, inure to the benefit of and
be enforceable by each party and such party's respective heirs, beneficiaries,
executors, representatives and permitted assigns.
16. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
17. GOVERNING LAW. This Agreement shall be governed in all respects,
including validity, interpretation and effect, by the laws of the State of
Delaware (without giving effect to the provisions thereof relating to conflicts
of law).
18. SEVERABILITY. Any term or provision of this Agreement which is invalid
or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.
19. HEADINGS. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
IV.B-5
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by
the Stockholder and a duly authorized officer of Parent on the day and year
first written above.
<TABLE>
<S> <C> <C>
CLEAR CHANNEL COMMUNICATIONS, INC.
By: /s/ RANDALL MAYS
-----------------------------------------
Name: Randall Mays
TITLE: CHIEF FINANCIAL OFFICER
/s/ BRIAN T. CLINGEN
-----------------------------------------
Brian T. Clingen
</TABLE>
IV.B-6
<PAGE>
SCHEDULE I TO
VOTING AGREEMENT
<TABLE>
<CAPTION>
NAME AND ADDRESS OF STOCKHOLDER NUMBER OF SHARES
- -------------------------------------------------------------------------- ------------------------------------
<S> <C> <C>
1. Brian T. Clingen 125,008
</TABLE>
IV.B-7
<PAGE>
SCHEDULE II TO
VOTING AGREEMENT
<TABLE>
<S> <C> <C>
1. Management Warrants 326,053
</TABLE>
IV.B-8
<PAGE>
ANNEX V
CONFORMED COPY
RESALE AGREEMENT
This RESALE AGREEMENT (the "Agreement"), dated as of October 23, 1997, is
entered into by and among CLEAR CHANNEL COMMUNICATIONS, INC., a Texas
corporation ("Parent"), and DANIEL SIMON (the "Stockholder").
WHEREAS, Parent, UH MERGER SUB, INC. ("Merger Sub") and UNIVERSAL OUTDOOR
HOLDINGS, INC. (the "Company"), have entered into an Agreement and Plan of
Merger of even date herewith (the "Merger Agreement"), pursuant to which the
parties thereto have agreed, upon the terms and subject to the conditions set
forth therein, to merge Merger Sub with and into the Company (the "Merger");
WHEREAS, as of the date hereof, the Stockholder is the record and beneficial
owner of, and has the sole right to vote and dispose of the number of shares
(the "Shares") of common stock, par value $0.01 per share, of the Company (the
"Company Common Stock") set forth opposite such Stockholder's name on Schedule I
attached hereto and, upon the consummation of the Merger will receive shares of
common stock, par value $.10 per share, of Parent ("Common Stock");
WHEREAS, Parent has requested Stockholder to agree to restrictions on buying
or selling Common Stock or derivatives thereof prior to the consummation of the
Merger in order to reduce volatility in the price of such Common Stock; and
WHEREAS, as a condition to its willingness to enter into the Merger
Agreement, Parent has required that the Stockholder agree, and the Stockholder
is willing to agree, to the matters set forth herein.
NOW, THEREFORE, in consideration of the foregoing and the agreements set
forth below, the parties hereto agree as follows:
1. RESTRICTIONS ON TRANSFER.
1.1 RESTRICTIONS ON TRANSFER: POST-MERGER. The Stockholder hereby
agrees that during the period beginning on the effective date of the Merger
and ending on the earlier of (i) the date Stockholder is no longer an
officer or director of Parent or any of its subsidiaries and (ii) two years
following the effective date of the Merger Agreement, Stockholder will not,
directly or indirectly, offer, sell, sell short or otherwise dispose of any
shares of Common Stock or other capital stock of Parent, or any other
securities convertible into, exchangeable or exercisable for Common Stock or
other capital stock of Parent or derivative of Common Stock or other capital
stock of Parent owned by the Stockholder, or request the registration for
the offer or sale of any of the foregoing, provided that during such period
the Stockholder (a) may sell up to $75,000,000 of Common Stock in accordance
with applicable law and (b) may make Permitted Transfers. Any Permitted
Transfer will require the execution and delivery of an instrument in form
and substance satisfactory to Parent pursuant to which the transferee agrees
to be bound by this Agreement. This restriction shall terminate if the
Merger Agreement is terminated prior to its consummation.
1.2 RESTRICTIONS ON ACTIVITIES: PRE-MERGER. The Stockholder agrees
that during the period beginning on the date hereof and ending on the date
the Merger Agreement is terminated in accordance with its terms or
consummated, Stockholder will not, directly or indirectly, purchase, offer
to purchase, sell, offer to sell, sell short or otherwise acquire or dispose
of any shares of Common Stock or other capital stock of Parent, or any
securities convertible into, exchangeable or exercisable for Common Stock or
other capital stock of Parent or derivative of Common Stock or other capital
stock of Parent.
V-1
<PAGE>
1.3 CERTAIN EXCEPTIONS. The restrictions set forth in Section 1.1 and
Section 1.2 shall not apply to (i) Stockholder surrendering options
exercisable for up to 180,000 shares of Company Common Stock to the Company,
(ii) the grant by the Company of up to 180,000 options to purchase Company
Common Stock or restricted stock to certain of its officers and (iii) the
exchange of such options described in clause (ii) above for Common Stock or
options to acquire Common Stock in the Merger.
2. OTHER RESTRICTIONS. For so long as this Agreement is in effect;
2.1 EFFORTS. The Stockholder agrees not to take any action that would
have the effect of preventing or disabling such Stockholder from performing
its obligations under this Agreement, other than any action permitted to be
taken pursuant to the Merger Agreement.
2.2 ADDITIONAL SHARES. In the event (i) of any stock dividend, stock
split, recapitalization, reclassification, combination or exchange of shares
of capital stock of the Company on, of or affecting the Shares or (ii) the
Stockholder shall become the beneficial owner of any additional shares of
Company Common Stock or other securities convertible or exchangeable into
shares of Common Stock, then the terms of this Agreement shall apply to the
shares of capital stock or other securities of the Company held by the
Stockholder immediately following the effectiveness of the events described
in clause (i) or the Stockholder becoming the beneficial owner thereof, as
described in clause (ii), as though they were Shares hereunder. The
Stockholder hereby agrees, while this Agreement is in effect, to promptly
notify Parent of the number of any new shares of Company Common Stock or
other securities acquired by the Stockholder, if any, after the date hereof.
3. LEGEND. The Stockholder shall surrender to the Company all certificates
representing the Shares, and instruct the Company to place the following legend
on such certificates:
"The shares of capital stock represented by this certificate are
subject to a Resale Agreement, dated as of October 23, 1997, by and
among Clear Channel Communications, Inc. and Daniel Simon that among
other things restricts the transfer of the shares represented by this
certificate."
4. SPECIFIC ENFORCEMENT. The parties hereto agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with the terms hereof or were otherwise breached and
that each party shall be entitled to specific performance of the terms hereof,
in addition to any other remedy which may be available at law or in equity.
5. CERTAIN EVENTS. The Stockholder agrees that this Agreement and the
obligations hereunder shall attach to the Shares and shall be binding upon any
person or entity to which legal or beneficial ownership of such Shares shall
pass, whether by operation of law or otherwise.
6. ENTIRE AGREEMENT. This Agreement (including the documents and
instruments referred to herein) constitutes the entire agreement and supersedes
all other prior agreements and understandings, both written and oral, among the
parties, or any of them, with respect to the subject matter hereof.
7. CONSIDERATION. This Agreement is granted in consideration of the
execution and delivery of the Merger Agreement by Parent.
8. AMENDMENT. This Agreement may not be modified, amended, altered or
supplemented except upon the execution and delivery of a written agreement
executed by the parties hereto.
9. SUCCESSORS AND ASSIGNS. This Agreement shall not be assigned by
operation of law or otherwise without the prior written consent of the other
parties hereto. This Agreement will be binding upon, inure to the benefit of and
be enforceable by each party and such party's respective heirs, beneficiaries,
executors, representatives and permitted assigns.
10. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
V-2
<PAGE>
11. GOVERNING LAW. This Agreement shall be governed in all respects,
including validity, interpretation and effect, by the laws of the State of
Delaware (without giving effect to the provisions thereof relating to conflicts
of law).
12. SEVERABILITY. Any term or provision of this Agreement which is invalid
or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.
13. HEADINGS. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
14. CERTAIN DEFINITIONS. The following terms shall have the meanings set
forth below:
"Immediate Family" means the spouse of an individual and the parents,
siblings and children (and children and spouses of any of the foregoing) of
the individual or his or her spouse. An adopted child will be treated as the
child of his or her adoptive parent or parents if (but only if) he or she
was adopted before he or she reached 21 years of age.
"Permitted Transfer" means any Transfer (a) with respect to a
Stockholder who is an individual, to a member of the Immediate Family of the
Stockholder or a trust whose sole beneficiaries are the Stockholder and/or
members of the Immediate Family of the Stockholder, (b) with respect to a
Stockholder that is a trust, to any beneficiary of the trust or any member
of the Immediate Family of a beneficiary of the trust.
"Transfer" means with respect to shares of Common Stock, any direct or
indirect sale, transfer, or other disposition of shares of Common Stock.
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by
the Stockholder and a duly authorized officer of Parent on the day and year
first written above.
<TABLE>
<S> <C> <C>
CLEAR CHANNEL COMMUNICATIONS, INC.
By: /s/ RANDALL MAYS
-----------------------------------------
Name: Randall Mays
TITLE: CHIEF FINANCIAL OFFICER
/s/ DANIEL L. SIMON
-----------------------------------------
Daniel L. Simon
</TABLE>
V-3
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
SHARES
----------
<S> <C>
Daniel Simon 6,626,986
</TABLE>
V-4
<PAGE>
ANNEX VI
CONFORMED COPY
EMPLOYMENT AGREEMENT
THIS AGREEMENT (the "Agreement"), dated as of October 23, 1997, by and
between Clear Channel Communications, Inc. ("CCU"), a corporation organized
under the laws of the State of Texas, Eller Media, Inc. ("Eller"), a wholly
owned subsidiary of CCU and a corporation organized under the laws of the State
of Delaware, Universal Outdoor Holdings, Inc. ("Universal"), a corporation
organized under the laws of the State of Delaware, and Daniel L. Simon (the
"Executive").
WHEREAS, the Executive is presently the President of Universal;
WHEREAS, CCU is acquiring Universal in a stock for stock merger pursuant to
the Merger Agreement by and among CCU, Universal and UH Merger Sub, Inc. dated
October 23, 1997 (the "Merger");
WHEREAS, simultaneously with the Execution of the Merger Agreement,
Executive and CCU are entering into a Voting Agreement dated as of the date
hereof (the "Voting Agreement") and a Resale Agreement dated as of the date
hereof (the "Resale Agreement");
WHEREAS, as an inducement for Executive to enter into such Voting Agreement
and the Resale Agreement and as further consideration thereunder;
WHEREAS, CCU recognizes that the Executive is essential to a successful
transition and the growth and success of Universal and Eller after the Merger
and desires to secure the benefits of the Executive's knowledge, experience and
services;
WHEREAS, CCU, Universal and Eller desire to employ the Executive on the
terms and conditions set forth below; and
WHEREAS, the Executive desires to be so employed by CCU, Universal and
Eller.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and promises of the parties hereto contained herein, the parties agree as
follows:
1. TERM. CCU, Universal and Eller agree to employ the Executive for a
period commencing on the effective date of the Merger and continuing through and
until August 18, 1999, unless terminated earlier pursuant to Paragraph 4 hereof
(the "Term"). If the Merger does not become effective on or before August 31,
1998 or the Merger Agreement is terminated, this Agreement shall be null and
void and of no further force and effect.
2. DUTIES AND RESPONSIBILITIES.
2.1 POSITION. The Executive shall be the Vice Chairman and Chief
Operating Officer of Universal and Eller, their respective subsidiary and
affiliate companies and any successor companies or affiliates of CCU which
are in the business of outdoor advertising ("CCU Outdoor"). His
responsibilities as Chief Operating Officer shall include, without
limitation, such duties and functions as are customarily performed by the
Chief Operating Officer of a company of the size and nature of Universal and
Eller. The Executive shall be based in Chicago, Illinois (the "Chicago
Office"). As a material inducement to Executive agreeing to enter into this
Agreement, CCU, Universal and Eller hereby agree that his duties will
continue to be performed out of the Chicago Office for the duration of the
Term. The Executive shall report to the Chief Executive Officer of CCU
Outdoor.
2.2 TRANSITION. The Executive shall be responsible for managing the
transition relating to the Merger including, but not limited to, integrating
the outdoor advertising business of Universal, Eller and CCU (the
"Transition"). The Executive's responsibilities relating to the Transition
shall include,
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without limitation, (a) proposing how to consolidate functions such as
accounting, human resources, legal, administration and marketing and sales
including proposing what functions will continue to be performed in the
Chicago Office, (b) recommending a plan for assigning, hiring and
terminating personnel and determining employee compensation, and (c) other
general management functions relating to the operations of CCU Outdoor all
subject to the review and approval by the CEO of CCU Outdoor and the CEO of
CCU. Nothing herein will allow the executive to take any action contrary to
the internal policies and regulations of CCU. Neither Universal, Eller nor
CCU will make any significant decisions regarding the Transition without
consulting with the Executive.
3. COMPENSATION AND BENEFITS.
3.1 BASE SALARY. As compensation for services rendered hereunder, CCU
shall pay the Executive an annual salary of $350,000, less applicable
withholding and deductions (the "Base Salary"), to be paid in accordance
with CCU's customary payroll practices.
3.2 BONUS. The Executive shall receive an annual bonus to be
determined by the Board of Directors of CCU (the "Bonus").
3.3 OTHER BENEFITS. The Executive will be entitled to participate in
CCU's employee benefit plans made available to senior executive officers of
CCU, Universal and/or Eller including, without limitation, medical, dental,
pension, life and disability insurance, incentive compensation, and stock
options. CCU may, from time to time, make changes in such employee benefit
plans as CCU, in its sole discretion, deems appropriate.
3.4 VACATION. The Executive shall be entitled to four weeks paid
vacation time each year of employment to be taken consistent with CCU's
policies.
3.5 AUTOMOBILE. CCU will continue to provide Executive's present
automobile for the Executive's use. Following any termination of this
Agreement, ownership of such automobile shall be transferred to Executive.
3.6 EXPENSES. All reasonable business expenses incurred by the
Executive shall be reimbursed in accordance with CCU's policies as in place
from time to time.
3.7 INDEMNITY. The Executive shall be indemnified by CCU against
claims arising in connection with the Executive's status as an employee,
officer, director or agent of CCU and its affiliated entities in accordance
with CCU's indemnity policies for its senior executives.
4. TERMINATION.
4.1 DISABILITY. If, as a result of the incapacity of the Executive due
to physical or mental illness, the Executive shall have been continually
absent from the full-time performance of his duties with the Company for
four (4) consecutive months or for six (6) months within a twelve (12) month
period, his employment may be terminated hereunder for "Disability";
PROVIDED, HOWEVER, that this provision shall be modified or interpreted to
ensure Executive receives CCU's disability benefits.
4.2 DEATH. The Executive's employment hereunder will terminate
automatically if he should die.
4.3 CAUSE. The Executive's employment hereunder may be terminated for
"Cause" which shall mean termination based upon (a) the Executive's
conviction of a felony; (b) the material breach by the Executive of this
Agreement; or (c) the willful gross neglect or willful gross misconduct in
the performance of Executive's duties hereunder. Prior to terminating the
Executive for Cause pursuant to subparagraphs (b) and (c) above, CCU must
give the Executive written notice of the facts and circumstances giving rise
to Cause and provide the Executive with thirty (30) days to cure, remedy or
rectify the situation.
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<PAGE>
4.4 WITHOUT GOOD REASON. Executive may terminate his employment with
CCU, Universal and Eller at any time without Good Reason, after providing
four (4) weeks notice, in which case this Agreement will terminate. In the
event that Executive terminates his employment without Good Reason,
Executive agrees that for a period equal to the greater of one year after
such termination or the remainder of the Term, Executive shall not directly
or indirectly own, manage, operate, control or participate in the ownership,
management or control of, any business within 25 miles of any outdoor
advertising display owned or operated by CCU Outdoor which is in the outdoor
advertising business; PROVIDED, THAT, the foregoing shall not limit
Executive's ability to own up to 5% of the outstanding Common Stock at any
publicly traded company operating in the outdoor advertising business.
4.5 GOOD REASON. The Executive may voluntarily terminate his
employment hereunder for "Good Reason" which shall mean, without the
Executive's express written consent, the occurrence of any of the following
circumstances: (i) the removal of the Executive from the position of COO or
Vice Chairman; (ii) the assignment to the Executive of any duties or
responsibilities materially inconsistent with his status as COO and Vice
Chairman or a material reduction in the authority, responsibilities,
importance or scope of his position; or (iii) a material breach of any
provision of this Agreement. The Executive's continued employment shall not
constitute consent to, or a waiver of rights with respect to, any
circumstances constituting Good Reason hereunder. Prior to terminating his
employment for Good Reason pursuant to subparagraphs (ii) and (iii) above,
the Executive must give CCU written notice of the facts and circumstances
giving rise to Good Reason and provide CCU with thirty (30) days to cure,
remedy or rectify the situation.
4.6 NOTICE OF TERMINATION. Any purported termination of the
Executive's employment by CCU, Universal, Eller or the Executive shall be
communicated by written Notice of Termination in accordance with Paragraph
9.4 hereof.
5. COMPENSATION UPON TERMINATION OR DURING DISABILITY. Upon termination of
the Executive's employment or during a period of Disability, the Executive shall
be entitled to the following benefits:
5.1 DISABILITY. During any period that the Executive fails to perform
his full-time duties hereunder as a result of incapacity due to physical or
mental illness, the Executive shall continue to receive his Base Salary and
a pro rata portion of the Bonus less any compensation payable to the
Executive under the applicable disability insurance plan of CCU during such
period, until his employment is terminated pursuant to Paragraph 4.1 hereof.
After the Executive's employment is terminated for Disability, he shall not
receive any additional payments or benefits hereunder (except for disability
benefits he may be entitled to receive) and CCU, Universal and Eller shall
have no further obligations to the Executive under this Agreement.
5.2 DEATH. In the event the Executive's employment shall be terminated
by reason of his death, the Executive's legal representative or his estate
shall receive his Base Salary and a pro rata portion of the Bonus through
the date of death and CCU, Universal and Eller shall have no further
obligations to the Executive under this Agreement.
5.3 CAUSE. If the Executive's employment shall be terminated hereunder
for Cause, the Executive shall receive his Base Salary through the date his
employment is terminated and CCU, Universal and Eller shall have no further
obligations to the Executive under this Agreement.
5.4 WITHOUT GOOD REASON. If the Executive's employment is terminated
pursuant to Paragraph 4.4, the Executive shall receive the Base Salary and a
pro rata portion of the Bonus through the date of termination and CCU,
Universal and Eller shall have no further obligations to the Executive under
this Agreement.
5.5 GOOD REASON. If the Executive's employment is terminated by the
Executive for Good Reason pursuant to Paragraph 4.5, the Executive shall
receive the compensation and benefits set forth herein for the duration of
the Term.
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<PAGE>
6. CONFIDENTIAL INFORMATION. The Executive shall not, without the prior
written consent of CCU, Universal or Eller, use or disclose to any other person,
other than an officer or director of said companies or a person to whom
disclosure is reasonably necessary in connection with the performance by the
Executive of his duties hereunder or as required in connection with any judicial
or administrative proceeding, any confidential information belonging to CCU,
Universal or Eller or their affiliates or their respective assets, business,
products, or operations, which is obtained by the Executive while employed
hereunder. Such confidential information shall include, without limitation,
information relating to products, improvements, customers, suppliers, contracts,
databases, financial information, accounts, books, records, business or
marketing plans, and personnel information; provided, however, that confidential
information shall not include any information which is generally available to
the public or to companies in the business of providing outdoor advertising
(other than as a result of unauthorized disclosure), or was obtained by the
Executive from a third party not under any obligation of confidentiality. Upon
the termination of his employment for any reason, the Executive agrees to return
all documents and other property provided to him or prepared by him during his
employment with CCU, Universal or Eller.
7. DISPUTES. Any controversy or claim arising out of or relating to this
Agreement or any breach thereof, shall be settled by submitting the matter to a
panel of three arbitrators pursuant to the National Rules for the Resolution of
Employment Disputes and the Supplementary Procedures For Large, Complex Disputes
of the American Arbitration Association in Chicago, Illinois. The award may be
entered in any court of competent jurisdiction. Each party shall be responsible
for its own attorneys' fees and costs, provided, however, that if the Executive
prevails in arbitration, CCU shall reimburse him for his attorneys' fees and
costs. The fees of the American Arbitration Association and the arbitrator(s)
shall be paid by CCU. The parties shall use their reasonable best efforts to
agree upon a panel of arbitrators within 30 days of the assertion of a claim
under this Section 7, in order to ensure that any arbitration will be completed
as expeditiously as possible.
8. MISCELLANEOUS.
8.1 SUCCESSORS AND ASSIGNS; BINDING AGREEMENT. This Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective heirs, personal representatives, successors and assigns;
provided, however, that the duties of the Executive hereunder are personal
to the Executive and may not be delegated or assigned by him.
8.2 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Illinois without regard to
conflict of law rules thereof.
8.3 WAIVERS. The waiver by either party hereto of any right hereunder
or of any failure to perform or breach by the other party hereto shall not
be deemed a waiver of any other right hereunder or of any other failure or
breach by the other party hereto, whether of the same or a similar nature or
otherwise. No waiver shall be deemed to have occurred unless set forth in a
writing executed by or on behalf of the waiving party. No such written
waiver shall be deemed a continuing waiver unless specifically stated
therein, and each such waiver shall operate only as to the specific term or
condition waived and shall not constitute a waiver of such term or condition
for the future or as to any act other than that specifically waived.
8.4 NOTICES. All notices and communications that are required or
permitted to be given hereunder shall be in writing and shall be deemed to
have been duly given when delivered personally or upon mailing by registered
or certified mail, postage prepaid, return receipt requested, as follows:
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If to CCU, to:
Clear Channel Communications, Inc.
200 Concord Plaza
Suite 600
San Antonio, Texas 78216
Attention: Randall Mays
Facsimile No.: (210) 822-2299
With a copy to:
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
1700 Pacific Avenue
Suite 4100
Dallas, Texas 75201
Attention: Ford Lacy P.C.
Facsimile No.: (214) 969-4343
If to Universal, to:
Universal Outdoor Holdings, Inc.
311 South Wacker Drive
Suite 6400
Chicago, Illinois 60606
Attention: Paul G. Simon
Facsimile No.: (312) 344-4171
With a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
Attention:Lou R. Kling, Esq.
Howard L. Ellin, Esq.
Facsimile No.: (212) 735-2000
If to Eller, to:
Eller Media, Inc.
c/o Clear Channel Communications, Inc.
200 Concord Plaza
Suite 600
San Antonio, Texas 78216
Attention: Randall Mays
Facsimile No.: (210) 822-2299
If to Executive, to:
c/o Universal Outdoor Holdings, Inc.
311 South Wacker Drive
Suite 6400
Chicago, Illinois 60606
Attention: Paul G. Simon
Facsimile No.: (312) 344-4171
or to such other address as may be specified in a notice given by one
party to the other parties hereunder.
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8.5 SEVERABILITY. If for any reason any term or provision of this
Agreement is held to be invalid or unenforceable, all other valid terms and
provisions hereof shall remain in full force and effect, and all of the
terms and provisions of this Agreement shall be deemed to be severable in
nature.
8.6 SURVIVAL. The provisions set forth in Paragraphs 6, 7 and 8 hereof
shall remain in full force and effect after the termination of Executive's
employment hereunder, notwithstanding the expiration or termination of this
Agreement.
8.7 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of
which together shall constitute but one and the same instrument.
8.8 ENTIRE AGREEMENT. This Agreement sets forth the entire agreement
between the parties with respect to the subject matter and merges and
supersedes all prior discussions, agreements and understandings of every
kind and nature between the Executive and the Company. This Agreement may
not be changed or modified except by a written agreement executed by both
parties.
8.9 HEADINGS DESCRIPTIVE. The headings of the several paragraphs of
this Agreement are inserted for convenience only and shall not in any way
affect the meaning or construction of any provision of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
date first written above.
CLEAR CHANNEL COMMUNICATIONS, INC.
<TABLE>
<S><C> <C> <C>
By:/s/ RANDALL MAYS /s/ DANIEL L. SIMON
------------------------------ -----------------------------------
Name: Randall Mays Daniel L. Simon
Title: CHIEF FINANCIAL OFFICER
UNIVERSAL OUTDOOR HOLDINGS, INC.
/s/ BRIAN T. CLINGEN
By:
------------------------------
Name: Brian T. Clingen
Title: VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
ELLER MEDIA COMPANY
/s/ RANDALL MAYS
------------------------------
Name: Randall Mays
Title: VICE PRESIDENT
By:
</TABLE>
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Article 2.02-1 of the TBCA provides for indemnification of directors and
officers in certain circumstances. In addition, the Texas Miscellaneous
Corporation Law provides that a corporation may amend its Articles of
Incorporation to provide that no director shall be liable to Clear Channel or
its stockholders for monetary damages for an act or omission in the director's
capacity as a director, provided that the liability of a director is not
eliminated or limited (i) for any breach of the director's duty of loyalty to
Clear Channel or its stockholders, (ii) for acts or omissions not in good faith
or which involve intentional misconduct or knowing violation of law, (iii) any
transaction from which such director derived an improper personal benefit, or
(iv) an act or omission for which the liability of a director is expressly
provided by an applicable statute. Clear Channel has amended its Charter and
added Article Eleven adopting such limitations on a director's liability. Clear
Channel's Charter also provide in Article Nine, for indemnification of directors
or officers in connection with the defense or settlement of suits brought
against them in their capacities as directors or officers of Clear Channel,
except in respect of liabilities arising from gross negligence or willful
misconduct in the performance of their duties.
Article IX(8) of Clear Channel's By-laws provides for indemnification of any
person made a party to a proceeding by reason of such person's status as a
director, officer, employee, partner or trustee of Clear Channel, except in
respect of liabilities arising from negligence or misconduct in the performance
of their duties.
An insurance policy obtained by the Registrant provides for indemnification
of officers and directors of Clear Channel and certain other persons against
liabilities and expenses incurred by any of them in certain stated proceedings
and under certain stated conditions.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
<TABLE>
<CAPTION>
EXHIBITS. DESCRIPTION
- ----------- ---------------------------------------------------------------------------------------------------
<S> <C>
2.1.1 Agreement and Plan of Merger dated as of October 23, 1997, among Universal Outdoor Holdings, Inc.,
Clear Channel Communications, Inc., and UH Merger Sub, Inc. (Incorporated by reference to the
exhibits of Clear Channel's Current Report on Form 8-K dated November 3, 1997.)
2.1.2 Voting Agreement dated as of October 23, 1997, by and among Clear Channel Communications, Inc. and
Daniel L. Simon. (Incorporated by reference to the exhibits of Clear Channel's Current Report on
Form 8-K dated November 3, 1997.)
2.1.3 Voting Agreement dated as of October 23, 1997, by and among Clear Channel Communications, Inc. and
Brian T. Clingen. (Incorporated by reference to the exhibits of Clear Channel's Current Report on
Form 8-K dated November 3, 1997.)
2.1.4 Resale Agreement dated as of October 23, 1997, by and among Clear Channel Communications, Inc. and
Daniel L. Simon.
2.2 Asset Purchase Agreement by and among Paxson Communications Corporation, Clear Channel Metroplex,
Inc., Clear Channel Metroplex Licenses, Inc., and Clear Channel Communications, Inc., dated
August 25, 1997. (Incorporated by reference to the exhibits of Clear Channel's Amendment No. 1 to
the Registration Statement on Form S-3 (Reg. No. 333-33371) dated September 2, 1997.)
</TABLE>
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<TABLE>
<CAPTION>
EXHIBITS. DESCRIPTION
- ----------- ---------------------------------------------------------------------------------------------------
<S> <C>
2.2.1 Amendment dated October 1, 1997, to Asset Purchase Agreement by and among Paxson Communications
Corporation, Clear Channel Metroplex, Inc., Clear Channel Metroplex Licenses, Inc. and Clear
Channel Communications, Inc., dated August 25, 1997. (Incorporated by reference to the exhibits
of Clear Channel's Current Report on Form 8-K filed December 22, 1997.)
2.3 Asset Purchase Agreement by and among Paxson Communications Corporation, L. Paxson, Inc., Clear
Channel Metroplex, Inc., Clear Channel Metroplex Licenses, Inc., and Clear Channel
Communications, Inc., dated August 25, 1997. (Incorporated by reference to the exhibits of Clear
Channel's Amendment No. 1 to the Registration Statement on Form S-3 (Reg. No. 333-33371) dated
September 2, 1997).
2.4 Stock Purchase Agreement by and among Clear Channel Communications, Inc., Eller Media Corporation
and the Stockholders of Eller Media Corporation, dated February 25, 1997. (Incorporated by
reference to the exhibits of Clear Channel's Form 10-K dated March 31, 1997.)
2.5 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. (Incorporated
by reference to the exhibits of Clear Channel's Current Report on Form 8-K dated April 17, 1997.)
2.6 Registration Rights Agreement by and between Clear Channel Communications, Inc., and the
Stockholders of Eller Media Corporation, dated April 10, 1997. (Incorporated by reference to the
exhibits of Clear Channel's Current Report on Form 8-K dated April 17, 1997.)
2.7 Stockholders Agreement by and between Clear Channel Communications, Inc., and EM Holdings LLC,
dated April 10, 1997. (Incorporated by reference to the exhibits of Clear Channel's Current
Report on Form 8-K dated April 17, 1997.)
2.8 Escrow Agreement by and among Eller Media Corporation, Clear Channel Communications, Inc., EM
Holdings LLC, and Chase Trust Company of California, dated April 10, 1997. (Incorporated by
reference to the exhibits of Clear Channel's Current Report on Form 8-K dated April 17, 1997.)
3.1 Current Articles of Incorporation of Clear Channel. (Incorporated by reference to the exhibits of
Clear Channel's Registration Statement on Form S-3 (Reg. No. 333-33371) dated August 11, 1997).
3.2 Second Amended and Restated Bylaws of Clear Channel. (Incorporated by reference to the exhibits of
Clear Channel's Registration Statement on Form S-3 (Reg. No. 333-33371) dated August 11, 1997).
4.1 Specimen certificate for the Common Stock. (Incorporated by reference to the exhibits of Clear
Channel's Registration Statement on Form S-1 (Reg. No. 33-289161) dated April 19, 1984).
4.2 Buy-Sell Agreement by and between Clear Channel Communications, Inc., L. Lowry Mays, B. J. McCombs,
John M. Schaefer, and John W. Barger, dated May 31, 1977. (Incorporated by reference to the
exhibits of Clear Channel's Registration Statement on Form S-1 (Reg. No. 33-289161) dated April
19, 1984).
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBITS. DESCRIPTION
- ----------- ---------------------------------------------------------------------------------------------------
<S> <C>
4.3 Third Amended and Restated Credit Agreement by and among Clear Channel Communications, Inc.,
NationsBank of Texas, N.A., as administrative lender, the First National Bank of Boston, as
documentation agent, the Bank of Montreal and Toronto Dominion (Texas), Inc., as co-syndication
agents, and certain other lenders dated April 10, 1997. (Incorporated by reference to the
exhibits of Clear Channel's Amendment No. 1 to the Registration Statement on Form S-3 (Reg. No.
333-25497) dated May 9, 1997).
4.4 Form of Senior Indenture. (Incorporated by reference to the exhibits of Clear Channel's
Registration Statement on Form S-3 (Reg. No. 333-33371) dated August 11, 1997).
4.5 Form of Senior Debt Security. (included in Form of Senior Indenture filed as Exhibit 4.3).
5 Opinion of Akin, Gump, Strauss, Hauer & Feld, L.L.P.
8 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP.
23.1 Consent of Ernst & Young LLP.
23.2 Consent of Ernst & Young LLP.
23.3 Consent of Ernst & Young LLP.
23.4 Consent of KPMG.
23.5 Consent of KPMG Peat Marwick LLP.
23.6 Consent of Arthur Andersen LLP.
23.7 Consent of KPMG Peat Marwick LLP.
23.8 Consent of Price Waterhouse LLP.
23.9 Consent of Price Waterhouse LLP.
23.10 Consent of Ernst & Young LLP.
23.11 Consent of Arthur Andersen LLP.
23.12 Consent of Akin, Gump, Strauss, Hauer & Feld, L.L.P. (included in opinion filed as Exhibit 5).
23.13 Consent of Skadden, Arps, Slate, Meagher & Flom LLP. (included in opinion filed as Exhibit 8).
23.14 Consent of BT Alex. Brown Incorporated.
23.15 Consent of Bear, Stearns & Co. Inc.
24 Power of Attorney for Clear Channel Communications, Inc. (included on Signature Page).
99.1 Form of Proxy.
</TABLE>
- ------------------------
Clear Channel agrees to furnish supplementally a copy of any omitted
schedules or exhibits to the SEC upon request.
ITEM 22. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period which offers or sales are being made, a
post-effective amendment to this Registration Statement;
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
II-3
<PAGE>
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in
the Registration Statement. Notwithstanding the foregoing, any increase
or decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering
range may be relected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table
in the effective Registration Statement:
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or
any material change to such information in the Registration Statement.
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if
the Registration Statement is on Form S-3, Form S-8 or Form F-3, and the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the SEC
by the Registrant pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934 that are incorporated by reference in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to section 15(d) of the Exchange Act) that is
incorporated by reference in the Registration Statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(c) (1) The undersigned Registrant hereby undertakes as follows: that prior
to any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this Registration Statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other Items of the applicable form.
(2) The Registrant undertakes that every prospectus: (i) that is filed
pursuant to paragraph (1) immediately preceding, or (ii) that purports to
meet the requirements of section 10(a)(3) of the Act and is used in
connection with an offering of securities subject to Rule 415, will be filed
as a part of an amendment to the Registration Statement and will not be used
until such amendment is effective, and that, for purposes of determining any
liability under the Securities Act, each such post-effective amendment shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(d) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or
II-4
<PAGE>
otherwise, the Registrant has been advised that in the opinion of the SEC such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
(e) The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the Proxy
Statement/Prospectus pursuant to Items 4, 10(b), 11, or 13 herein, within one
business day of receipt of such request, and to send the incorporated documents
by first class mail or other equally prompt means. This includes information
contained in documents filed subsequent to the effective date of the
Registration Statement through the date of responding to the request.
(f) The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-4 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the city of San Antonio, State of Texas, on the 5th day of
January, 1998.
CLEAR CHANNEL COMMUNICATIONS, INC.
By: /s/ L. LOWRY MAYS
------------------------------------------
L. Lowry Mays
CHIEF EXECUTIVE OFFICER
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned directors and
officers of Clear Channel Communications, Inc., hereby constitute and appoint L.
Lowry Mays, Randall T. Mays and Herbert W. Hill, Jr., and each of them, his true
and lawful attorneys-in-fact and agents with full power of substitution and
resubstitution, for him and his name place and stead, in any and all capacities,
to execute any and all amendments (including post-effective amendments) to this
Registration Statement, and to file the same with all exhibits thereto, and all
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully and to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents or any of them, or their or his
substitute or substitutes may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated below.
<TABLE>
<CAPTION>
NAME TITLE DATE
- ------------------------------ ------------------------------ -------------------
<C> <S> <C>
/s/ L. LOWRY MAYS
- ------------------------------ Chief Executive Officer and January 5, 1998
L. Lowry Mays Director
/s/ RANDALL T. MAYS Senior Vice President / Chief
- ------------------------------ Financial Officer (Principal January 5, 1998
Randall T. Mays Financial Officer)
Senior Vice President / Chief
/s/ HERBERT W. HILL, JR. Accounting Officer
- ------------------------------ (Principal Accounting January 5, 1998
Herbert W. Hill, Jr. Officer)
</TABLE>
II-6
<PAGE>
<TABLE>
<CAPTION>
NAME TITLE DATE
- ------------------------------ ------------------------------ -------------------
<C> <S> <C>
/s/ B.J. MCCOMBS
- ------------------------------ Director January 5, 1998
B.J. McCombs
/s/ ALAN D. FELD
- ------------------------------ Director January 5, 1998
Alan D. Feld
- ------------------------------ Director January 5, 1998
Theodore H. Strauss
/s/ JOHN H. WILLIAMS
- ------------------------------ Director January 5, 1998
John H. Williams
- ------------------------------ Director January 5, 1998
Karl Eller
</TABLE>
II-7
<PAGE>
EXHIBIT 2.1.4
CONFORMED COPY
RESALE AGREEMENT
This RESALE AGREEMENT (the "Agreement"), dated as of October 23, 1997, is
entered into by and among CLEAR CHANNEL COMMUNICATIONS, INC., a Texas
corporation ("Parent"), and DANIEL SIMON (the "Stockholder").
WHEREAS, Parent, UH MERGER SUB, INC. ("Merger Sub") and UNIVERSAL OUTDOOR
HOLDINGS, INC. (the "Company"), have entered into an Agreement and Plan of
Merger of even date herewith (the "Merger Agreement"), pursuant to which the
parties thereto have agreed, upon the terms and subject to the conditions set
forth therein, to merge Merger Sub with and into the Company (the "Merger");
WHEREAS, as of the date hereof, the Stockholder is the record and beneficial
owner of, and has the sole right to vote and dispose of the number of shares
(the "Shares") of common stock, par value $0.01 per share, of the Company (the
"Company Common Stock") set forth opposite such Stockholder's name on Schedule I
attached hereto and, upon the consummation of the Merger will receive shares of
common stock, par value $.10 per share, of Parent ("Common Stock");
WHEREAS, Parent has requested Stockholder to agree to restrictions on buying
or selling Common Stock or derivatives thereof prior to the consummation of the
Merger in order to reduce volatility in the price of such Common Stock; and
WHEREAS, as a condition to its willingness to enter into the Merger
Agreement, Parent has required that the Stockholder agree, and the Stockholder
is willing to agree, to the matters set forth herein.
NOW, THEREFORE, in consideration of the foregoing and the agreements set
forth below, the parties hereto agree as follows:
1. RESTRICTIONS ON TRANSFER.
1.1 RESTRICTIONS ON TRANSFER: POST-MERGER. The Stockholder hereby
agrees that during the period beginning on the effective date of the Merger
and ending on the earlier of (i) the date Stockholder is no longer an
officer or director of Parent or any of its subsidiaries and (ii) two years
following the effective date of the Merger Agreement, Stockholder will not,
directly or indirectly, offer, sell, sell short or otherwise dispose of any
shares of Common Stock or other capital stock of Parent, or any other
securities convertible into, exchangeable or exercisable for Common Stock or
other capital stock of Parent or derivative of Common Stock or other capital
stock of Parent owned by the Stockholder, or request the registration for
the offer or sale of any of the foregoing, provided that during such period
the Stockholder (a) may sell up to $75,000,000 of Common Stock in accordance
with applicable law and (b) may make Permitted Transfers. Any Permitted
Transfer will require the execution and delivery of an instrument in form
and substance satisfactory to Parent pursuant to which the transferee agrees
to be bound by this Agreement. This restriction shall terminate if the
Merger Agreement is terminated prior to its consummation.
1.2 RESTRICTIONS ON ACTIVITIES: PRE-MERGER. The Stockholder agrees
that during the period beginning on the date hereof and ending on the date
the Merger Agreement is terminated in accordance with its terms or
consummated, Stockholder will not, directly or indirectly, purchase, offer
to purchase, sell, offer to sell, sell short or otherwise acquire or dispose
of any shares of Common Stock or other capital stock of Parent, or any
securities convertible into, exchangeable or exercisable for Common Stock or
other capital stock of Parent or derivative of Common Stock or other capital
stock of Parent.
V-1
<PAGE>
1.3 CERTAIN EXCEPTIONS. The restrictions set forth in Section 1.1 and
Section 1.2 shall not apply to (i) Stockholder surrendering options
exercisable for up to 180,000 shares of Company Common Stock to the Company,
(ii) the grant by the Company of up to 180,000 options to purchase Company
Common Stock or restricted stock to certain of its officers and (iii) the
exchange of such options described in clause (ii) above for Common Stock or
options to acquire Common Stock in the Merger.
2. OTHER RESTRICTIONS. For so long as this Agreement is in effect;
2.1 EFFORTS. The Stockholder agrees not to take any action that would
have the effect of preventing or disabling such Stockholder from performing
its obligations under this Agreement, other than any action permitted to be
taken pursuant to the Merger Agreement.
2.2 ADDITIONAL SHARES. In the event (i) of any stock dividend, stock
split, recapitalization, reclassification, combination or exchange of shares
of capital stock of the Company on, of or affecting the Shares or (ii) the
Stockholder shall become the beneficial owner of any additional shares of
Company Common Stock or other securities convertible or exchangeable into
shares of Common Stock, then the terms of this Agreement shall apply to the
shares of capital stock or other securities of the Company held by the
Stockholder immediately following the effectiveness of the events described
in clause (i) or the Stockholder becoming the beneficial owner thereof, as
described in clause (ii), as though they were Shares hereunder. The
Stockholder hereby agrees, while this Agreement is in effect, to promptly
notify Parent of the number of any new shares of Company Common Stock or
other securities acquired by the Stockholder, if any, after the date hereof.
3. LEGEND. The Stockholder shall surrender to the Company all certificates
representing the Shares, and instruct the Company to place the following legend
on such certificates:
"The shares of capital stock represented by this certificate are
subject to a Resale Agreement, dated as of October 23, 1997, by and
among Clear Channel Communications, Inc. and Daniel Simon that among
other things restricts the transfer of the shares represented by this
certificate."
4. SPECIFIC ENFORCEMENT. The parties hereto agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with the terms hereof or were otherwise breached and
that each party shall be entitled to specific performance of the terms hereof,
in addition to any other remedy which may be available at law or in equity.
5. CERTAIN EVENTS. The Stockholder agrees that this Agreement and the
obligations hereunder shall attach to the Shares and shall be binding upon any
person or entity to which legal or beneficial ownership of such Shares shall
pass, whether by operation of law or otherwise.
6. ENTIRE AGREEMENT. This Agreement (including the documents and
instruments referred to herein) constitutes the entire agreement and supersedes
all other prior agreements and understandings, both written and oral, among the
parties, or any of them, with respect to the subject matter hereof.
7. CONSIDERATION. This Agreement is granted in consideration of the
execution and delivery of the Merger Agreement by Parent.
8. AMENDMENT. This Agreement may not be modified, amended, altered or
supplemented except upon the execution and delivery of a written agreement
executed by the parties hereto.
9. SUCCESSORS AND ASSIGNS. This Agreement shall not be assigned by
operation of law or otherwise without the prior written consent of the other
parties hereto. This Agreement will be binding upon, inure to the benefit of and
be enforceable by each party and such party's respective heirs, beneficiaries,
executors, representatives and permitted assigns.
10. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
V-2
<PAGE>
11. GOVERNING LAW. This Agreement shall be governed in all respects,
including validity, interpretation and effect, by the laws of the State of
Delaware (without giving effect to the provisions thereof relating to conflicts
of law).
12. SEVERABILITY. Any term or provision of this Agreement which is invalid
or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.
13. HEADINGS. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
14. CERTAIN DEFINITIONS. The following terms shall have the meanings set
forth below:
"Immediate Family" means the spouse of an individual and the parents,
siblings and children (and children and spouses of any of the foregoing) of
the individual or his or her spouse. An adopted child will be treated as the
child of his or her adoptive parent or parents if (but only if) he or she
was adopted before he or she reached 21 years of age.
"Permitted Transfer" means any Transfer (a) with respect to a
Stockholder who is an individual, to a member of the Immediate Family of the
Stockholder or a trust whose sole beneficiaries are the Stockholder and/or
members of the Immediate Family of the Stockholder, (b) with respect to a
Stockholder that is a trust, to any beneficiary of the trust or any member
of the Immediate Family of a beneficiary of the trust.
"Transfer" means with respect to shares of Common Stock, any direct or
indirect sale, transfer, or other disposition of shares of Common Stock.
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by
the Stockholder and a duly authorized officer of Parent on the day and year
first written above.
<TABLE>
<S> <C> <C>
CLEAR CHANNEL COMMUNICATIONS, INC.
By: /s/ RANDALL MAYS
-----------------------------------------
Name: Randall Mays
TITLE: CHIEF FINANCIAL OFFICER
/s/ DANIEL L. SIMON
-----------------------------------------
Daniel L. Simon
</TABLE>
V-3
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
SHARES
----------
<S> <C>
Daniel Simon 6,626,986
</TABLE>
V-4
<PAGE>
EXHIBIT 5
[AKIN, GUMP, STRAUSS, HAUER & FELD, L.L.P. LETTERHEAD]
January 5, 1998
Clear Channel Communications, Inc.
200 Concord Plaza, Suite 600
San Antonio, Texas 78216
Gentlemen:
We have acted as legal counsel to Clear Channel Communications, Inc., a
Texas corporation ("Clear Channel") in connection with the proposed merger
between UH Merger Sub, Inc., a Delaware corporation and wholly-owned
subsidiary of Clear Channel ("Merger Sub"), and Universal Outdoor Holdings,
Inc., a Delaware corporation ("Universal"), whereby Clear Channel will issue
up to 19,325,579 shares of Common Stock, par value $.10 per share ("Clear
Channel Common Stock") to the security holders of Universal in accordance
with an Agreement and Plan of Merger dated October 23, 1997, by and between
Clear Channel, Merger Sub and Universal (the "Merger Agreement").
We have, as counsel to Clear Channel, examined originals or photostatic,
certified or conformed copies of all such agreements, documents, instruments,
corporate records, certificates of public officials, public records and
certificates of officers of Clear Channel as we have deemed necessary,
relevant or appropriate to enable us to render the opinions stated below. In
rendering such opinions, we have assumed the genuineness of all signatures
and the authenticity of all documents examined by us. As to various questions
of fact material to such opinions, we have relied upon representations of
Clear Channel.
Based upon such examination and representations, we advise you that, in
our opinion:
1. The shares of Clear Channel Common Stock which are to be issued to
the security holders of Universal, as contemplated by the Merger
Agreement will be duly and validly authorized by Clear Channel.
2. The shares of Clear Channel Common Stock which are to be issued and
delivered by Clear Channel to Universal security holders pursuant to
the Merger Agreement
<PAGE>
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
Clear Channel Communications, Inc.
January 5, 1998
Page 2
will, upon consummation of the Merger, be validly issued, fully paid
and non-assessable.
We hereby consent to the filing of this opinion as Exhibit 5 to the
Registration Statement and to the reference to this firm under the caption
"Legal Opinions" in the Joint Proxy Statement/Prospectus contained therein.
This opinion is to be used only in connection with the issuance of the
Common Stock while the Registration Statement is in effect.
Sincerely,
/s/ AKIN, GUMP, STRAUSS, HAUER & FELD, L.L.P.
---------------------------------------------
AKIN, GUMP, STRAUSS, HAUER & FELD, L.L.P.
<PAGE>
EXHIBIT 8
CONFORMED COPY
--------------
[SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP LETTERHEAD]
January 5, 1998
Universal Outdoor Holdings, Inc.
311 South Wacker Drive
Suite 6400
Chicago, Illinois 60606
Dear Ladies and Gentlemen:
You have requested our opinion regarding the discussion of the material
U.S. federal income tax consequences under the headings "SUMMARY - Certain
U.S. Federal Income Tax Consequences" and "THE MERGER - Certain U.S. Federal
Income Tax Consequences" in the Proxy Statement/Prospectus (the "Proxy
Statement/Prospectus") which will be included in the Registration Statement on
Form S-4 (the "Registration Statement") filed by Clear Channel
Communications, Inc. ("Clear Channel") on the date hereof with the Securities
and Exchange Commission (the "Commission") under the Securities Act of 1933,
as amended (the "Securities Act"). The Proxy Statement/Prospectus relates to
the proposed merger of UH Merger Sub, Inc. ("Merger Sub"), a newly-formed,
wholly-owned subsidiary of Clear Channel with and into Universal Outdoor
Holdings, Inc. ("Universal"), pursuant to an Agreement and Plan of Merger
dated as of October 23, 1997 (the "Merger Agreement") among Clear Channel,
Merger Sub and Universal. This opinion is delivered in accordance with the
requirements of Item 601(b)(8) of Regulation S-K under the Securities Act.
We have reviewed the Proxy Statement/Prospectus and such other materials
as we have deemed necessary or appropriate as a basis for our opinion
described therein, and have considered the applicable provisions of the
Internal Revenue Code of 1986, as amended (the "Code"), Treasury regulations
promulgated thereunder, pertinent judicial authorities, interpretive rulings
of the Internal Revenue Service and such other authorities as we have
considered relevant all as in effect on the date hereof. It should be noted
that statutes, regulations, judicial decisions and administrative
interpretations are subject to change at any time and, in some circumstances,
with retroactive effect. A change in the authorities upon which our opinion is
based could affect our conclusions.
Based upon the foregoing, it is our opinion that the statements made
under the headings "SUMMARY - Certain U.S. Federal Income Tax Consequences"
and "THE MERGER - Certain U.S. Federal Income Tax Consequences" in the Proxy
Statement/Prospectus, to the extent that they constitute matters of law or
legal conclusions, are correct in all material respects.
In accordance with the requirements of Item 601(b)(23) of Regulation
S-K under the Securities Act, we hereby consent to the use of our name under
the heading "LEGAL OPINIONS" in the Proxy Statement/Prospectus and to the
filing of this opinion as an Exhibit to the Registration Statement. In giving
this consent, we do not thereby admit that we are within the category of
persons whose consent is required under Section 7 of the Securities Act of
1933 or the rules and regulations of the Commission promulgated thereunder.
Very truly yours,
/s/ SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
--------------------------------------------
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
<PAGE>
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP
We consent to the reference to our firm under the captions "Clear
Channel Communications, Inc. Selected Historical Financial Data" and
"Experts" in the Registration Statement (Form S-4) and related Proxy
Statement/Prospectus of Clear Channel Communications, Inc. and to the
incorporation by reference therein of our reports dated February 17, 1997
(except for Note K, as to which the date is February 25, 1997), with respect
to the consolidated financial statements of Clear Channel Communications,
Inc. incorporated by reference in its Annual Report (Form 10-K) for the year
ended December 31, 1996 and the related financial statement schedules
included therein, filed with the Securities and Exchange Commission.
ERNST & YOUNG LLP
San Antonio, Texas
January 2, 1998
<PAGE>
EXHIBIT 23.2
CONSENT OF ERNST & YOUNG LLP
We consent to the reference to our firm under the caption "Experts" and
to the use of our report dated March 10, 1995 with respect to the
consolidated financial statements of Ragan Henry Communications Group, L.P.,
US Radio, L.P., and US Radio Stations, L.P. incorporated by reference in the
Registration Statement (Form S-4) and related Proxy Statement/Prospectus of
Clear Channel Communications, Inc.
ERNST & YOUNG LLP
Philadelphia, Pennsylvania
January 2, 1998
<PAGE>
EXHIBIT 23.3
CONSENT OF ERNST & YOUNG LLP
We consent to the reference to our firm under the caption "Experts" and
to the use of our report dated March 4, 1996 with respect to the consolidated
financial statements of US Radio, Inc. incorporated by reference in the
Registration Statement (Form S-4) and related Prospectus of Clear Channel
Communications, Inc.
ERNST & YOUNG LLP
Philadelphia, Pennsylvania
January 2, 1998
<PAGE>
EXHIBIT 23.4
CONSENT OF KPMG
Board of Directors
Clear Channel Communications, Inc.
We consent to the incorporation by reference in the Registration
Statement on Form S-4 of our report dated March 4, 1997, relating to the
consolidated financial statements of Australian Radio Network Pty Limited and
its controlled entities (such consolidated financial statements not
separately presented in the Form 10-K referred to below), which report
appears in the December 31, 1996 annual report on Form 10-K of Clear Channel
Communications, Inc.
KPMG
Sydney, Australia
January 5, 1998
<PAGE>
EXHIBIT 23.5
CONSENT OF KPMG PEAT MARWICK, LLP
Radio Equity Partners, L.P. and subsidiary:
We consent to the incorporation by reference in the registration statement
on Form S-4 of Clear Channel Communications, Inc. of our report dated March
29, 1996, relating to the consolidated balance sheets of Radio Equity
Partners, L.P. and subsidiary as of December 31, 1995 and 1994, and the
related consolidated statements of operations, partners' capital and cash
flows for the years then ended, which report appears in the Current Report on
Form 8-K of Clear Channel Communications, Inc. dated June 5, 1996.
KPMG PEAT MARWICK, LLP
New York, New York
January 5, 1998
<PAGE>
EXHIBIT 23.6
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation by reference in this registration statement on Form S-4 of our
reports dated March 14, 1997 and March 9, 1995 covering Eller Media
Corporation and Eller Investment Company, Inc., respectively, included in
Clear Channel Communications, Inc. Current Report on Form 8-K, filed
April 17, 1997 and to all references to our firm included in this registration
statement.
ARTHUR ANDERSEN LLP
Phoenix, Arizona
January 2, 1998
<PAGE>
EXHIBIT 23.7
CONSENT OF KPMG PEAT MARWICK LLP
We consent to the incorporation by reference in the Registration
Statement on Form S-4 of Clear Channel Communications, Inc. 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 Current Report
on Form 8-K of Clear Channel Communications, Inc. dated April 17, 1997.
We also consent to the reference to our firm under the heading "Experts"
in the Registration Statement.
KPMG PEAT MARWICK LLP
Stamford, Connecticut
January 5, 1998
<PAGE>
EXHIBIT 23.8
CONFORMED COPY
--------------
Consent of Independent Accountants
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-4 of Clear Channel
Communications, Inc. of our report dated February 28, 1997, appearing on page
22 of Universal Outdoor Holdings, Inc. Annual Report on Form 10-K for the
year ended December 31, 1996. We also consent to the incorporation by
reference of our reports dated (i) February 28, 1997, which appears as
Exhibit 99.2 (ii) February 28, 1997, which appears as Exhibit 99.5 and (iii)
June 14, 1996, which appears as Exhibit 99.4 of the Current Report on Form
8-K dated July 31, 1997. We also consent to the references to us under the
heading "Experts" in such Prospectus.
/s/ PRICE WATERHOUSE LLP
- ------------------------
PRICE WATERHOUSE LLP
Chicago, Illinois
January 5, 1998
<PAGE>
EXHIBIT 23.9
Consent of Independent Certified Public Accountants
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-4 of Clear Channel
Communications, Inc. of our report dated November 3, 1997 relating to the
financial statements of Paxson Radio (a division of Paxson Communications
Corporation), included in Clear Channel Communications, Inc.'s Current Report
on Form 8-K dated December 22, 1997. We also consent to the references to us
under the heading "Experts" in such Prospectus.
/s/ PRICE WATERHOUSE LLP
- -------------------------------
Price Waterhouse LLP
Fort Lauderdale, Florida
January 5, 1998
<PAGE>
Exhibit 23.10
CONFORMED COPY
--------------
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts" and to
the incorporation by reference of our report dated July 21, 1995, with
respect to the consolidated financial statements of NOA Holding Company
included in the Current Report on Form 8-K of Universal Outdoor Holdings,
Inc. dated July 31, 1997, filed with the Securities and Exchange Commission,
in the Proxy Statement and related Prospectus of Universal Outdoor Holdings,
Inc.
/s/ ERNST & YOUNG LLP
Minneapolis, Minnesota
January 5, 1998
<PAGE>
[ARTHUR ANDERSEN LLP LETTERHEAD]
EXHIBIT 23.11
CONFORMED COPY
--------------
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this Proxy Statement/Prospectus of our report dated March 8,
1996, included in Form 8-K File No. 000-20823. It should be noted that we
have not audited any financial statements of the Company subsequent to
December 31, 1995, or performed any audit procedures subsequent to the date
of our report.
/s/ ARTHUR ANDERSEN LLP
-------------------------
ARTHUR ANDERSEN LLP
Baltimore, Maryland
January 5, 1998
<PAGE>
EXHIBIT 23.14
CONFORMED COPY
--------------
CONSENT OF BT ALEX. BROWN INCORPORATED
We hereby consent to the (i) use of our opinion letter dated October 23,
1997 to the Board of Directors of Universal Outdoor Holdings, Inc. (the
"Company") included in annex II to the Proxy Statement/Prospectus relating to
the proposed merger of the Company and Clear Channel Communications, Inc.,
and (ii) the references to such opinion in such Proxy Statement/Prospectus.
In giving such consent, we do not admit that we come within the category of
persons whose consent is required under Section 7 of the Securities Act of
1933, as amended, or the rules and regulations of the Securities and Exchange
Commission thereunder, nor do we hereby admit that we are experts with
respect to any part of such Proxy Statement/Prospectus within the meaning of
the term "experts" as used in the Securities Act of 1933, as amended, or the
rules and regulations of the Securities and Exchange Commission thereunder.
BT ALEX. BROWN INCORPORATED
By /s/ Charles J. Carey
----------------------------
Name: Charles J. Carey
Principal
----------------------------
Title
January 5, 1998
<PAGE>
[BEAR, STEARNS & CO. LETTERHEAD]
EXHIBIT 23.15
CONFORMED COPY
--------------
CONSENT OF BEAR, STEARNS & CO. INC.
We hereby consent to (i) the use of our opinion letter dated October 23,
1997 to the Board of Directors of Universal Outdoor Holdings, Inc. (the
"Company") included in Annex III to the Proxy Statement/Prospectus relating
to the proposed merger of the Company and Clear Channel Communications, Inc.,
and (ii) the reference to such opinion in such Proxy Statement/Prospectus. In
giving such consent, we do not admit that we come within Section 7 of the
Securities Act of 1933, as amended, or the rules and regulations of the
Securities and Exchange Commission thereunder, nor do we hereby admit that we
are experts to any part of such Proxy Statement/Prospectus within the
meaning of the term "experts" as used in the Securities Act of 1933, as
amended, or the rules and regulations of the Securities and Exchange
Commission thereunder.
BEAR, STEARNS & CO. INC.
By: /s/ Michael L. Offen
----------------------------
Name: Michael L. Offen
Title: Senior Managing Director
January 5, 1998
<PAGE>
UNIVERSAL OUTDOOR HOLDINGS, INC.
311 SOUTH WACKER DRIVE, SUITE 6400
CHICAGO ILLINOIS 60606
PROXY/VOTING INSTRUCTION CARD
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF UNIVERSAL
OUTDOOR HOLDINGS, INC. FOR THE SPECIAL MEETING OF STOCKHOLDERS ON FEBRUARY 6,
1998 OR ANY ADJOURNMENT OR POSTPONEMENT THEREOF (THE "SPECIAL MEETING").
The undersigned appoints Daniel L. Simon and Brian T. Clingen and each of
them, with full power of substitution in each of them, the proxies of the
undersigned, to vote for and on behalf of the undersigned all shares of
Universal Outdoor Holdings, Inc. Common Stock which the undersigned may be
entitled to vote on all matters properly coming before the Special Meeting, as
set forth in related Notice of Special Meeting and Proxy Statement/Prospectus,
both of which have been received by the undersigned.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS GIVEN, THIS PROXY WILL
BE VOTED FOR PROPOSAL 1.
/X/ Please mark your votes as in this example
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR PROPOSAL 1.
The Board of Directors recommends a vote FOR proposal 1.
<PAGE>
1. Proposal to approve and adopt the Agreement and Plan of Merger dated as of
October 23, by and among Universal Outdoor Holdings, Inc. ("Universal"),
Clear Channel Communications, Inc. ("Clear Channel") and UH Merger Sub, Inc.
("Sub"), pursuant to which Sub will be merged with and into Universal as
more fully described in the accompanying Proxy Statement/ Prospectus
/ / FOR / / AGAINST / / ABSTAIN
Address change/comments noted / /
Mark this box to obtain an admittance ticket / /
_______________________________________
SIGNATURE(S) DATE
NOTE: Please sign exactly as name
appears hereon. Joint owners
should each sign. When signing as
attorney, executor,
administrator, trustee or
guardian, please give full title
as such.
The signer hereby revokes all proxies
heretofore given the signer to vote at
said meeting or any adjournment or
postponement thereof.
FOLD AND DETACH HERE
