SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended Commission file number 1-9645
September 30, 1998
CLEAR CHANNEL COMMUNICATIONS, INC.
(Exact name of registrant as specified in its charter)
TEXAS 74-1787539
(State of Incorporation) (I.R.S. Employer Identification No.)
200 CONCORD PLAZA, SUITE 600
SAN ANTONIO, TEXAS 78216-6940
(210) 822-2828
(Address and telephone number
of principal executive offices)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes __x__ No _____
Indicate the number of shares outstanding of each class of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at November 3, 1998
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Common Stock, $.10 par value 248,486,192
<PAGE>
CLEAR CHANNEL COMMUNICATIONS, INC. AND SUBSIDIARIES
INDEX
Page No.
- - - - -
Part I -- Financial Information
Item 1. Unaudited Financial Statements
Consolidated Balance Sheets at
September 30, 1998 and December 31, 1997 3
Consolidated Statements of Earnings
for the nine and three months ended
September 30, 1998 and 1997 5
Consolidated Statements of Cash Flows
for the nine months ended September 30, 1998
and 1997 6
Notes to Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations 11
Item 3. Quantitative and Qualitative Disclosures About Market Risk 16
Part II -- Other Information
Item 4. Submission of Matters to a Vote of Security Holders 18
Item 6. Exhibits and reports on Form 8-K 18
(a) Exhibits
(b) Reports on Form 8-K
Signatures 20
Index to Exhibits 21
<PAGE>
PART I
FINANCIAL INFORMATION
ITEM 1. UNAUDITED FINANCIAL STATEMENTS
CLEAR CHANNEL COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
(IN THOUSANDS OF DOLLARS)
September 30, December 31,
1998 1997
(Unaudited) (*)
-------------- ---------------
CURRENT ASSETS
Cash and cash equivalents $ 48,192 $ 24,657
Income tax receivable -- 3,202
Accounts receivable, less
allowance of $19,872 at
September 30,1998 and
$9,850 at December 31, 1997 287,067 155,962
Other current assets 65,603 14,826
-------------- --------------
Total Current Assets 400,862 198,647
PROPERTY, PLANT AND EQUIPMENT
Land, buildings and improvements 134,398 84,118
Structures and site leases 1,254,802 487,857
Transmitter and studio equipment 232,629 215,755
Furniture and other equipment 83,910 46,584
Construction in progress 225,131 39,992
-------------- --------------
1,930,870 874,306
Less accumulated depreciation (217,421) (128,022)
-------------- --------------
1,713,449 746,284
INTANGIBLE ASSETS
Contract valuations 275,211 33,727
Licenses and goodwill 4,362,111 2,175,944
Other intangible assets 74,552 44,485
--------------- ---------------
4,711,874 2,254,156
Less accumulated amortization (254,869) (141,066)
--------------- ---------------
4,457,005 2,113,090
OTHER ASSETS
Notes receivable 53,675 35,373
Investments in, and advances to,
nonconsolidated affiliates 346,215 266,691
Other assets 41,189 44,293
Other investments 248,890 51,259
--------------- ---------------
TOTAL ASSETS $7,261,285 $3,455,637
========= =========
* From audited financial statements
See Notes to Consolidated Financial Statements
<PAGE>
CLEAR CHANNEL COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
(IN THOUSANDS OF DOLLARS)
September 30, December 31,
1998 1997
(Unaudited) (*)
-------------- --------------
CURRENT LIABILITIES
Accounts payable $ 61,444 $ 11,904
Accrued interest 29,694 9,950
Accrued expenses 113,465 34,489
Accrued income taxes 10,938 --
Current portion of long-term debt 4,049 13,294
Other current liabilities 22,625 17,215
------------- -------------
Total Current Liabilities 242,215 86,852
Long-term debt 2,405,849 1,540,421
Deferred income taxes 163,104 10,114
Other long-term liabilities 92,913 50,679
Convertible debt 575,000 ----
Minority interest 18,502 20,787
SHAREHOLDERS' EQUITY
Common stock 24,856 9,823
Additional paid-in capital 3,322,268 1,541,865
Retained earnings 214,621 169,631
Other 49,288 2,398
Unrealized gain on investments 154,642 23,754
Cost of shares held in treasury (1,973) (687)
-------------- --------------
Total shareholders' equity 3,763,702 1,746,784
-------------- --------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $7,261,285 $ 3,455,637
========== ==========
* From audited financial statements
See Notes to Consolidated Financial Statements
<PAGE>
CLEAR CHANNEL COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
September 30, September 30, September 30, September 30,
1998 1997 1998 1997
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Gross revenue $ 1,025,407 $ 532,081 $ 434,597 $ 209,050
Less agency commissions 115,852 62,905 48,712 24,942
-------------- -------------- -------------- --------------
Net revenue 909,555 469,176 385,885 184,108
Operating expenses 517,562 266,542 228,220 99,809
Depreciation and amortization 201,422 80,216 87,982 31,546
-------------- -------------- -------------- --------------
Operating income before corporate expenses 190,571 122,418 69,683 52,753
Corporate expenses 25,739 13,699 11,960 5,828
-------------- -------------- -------------- --------------
Operating income 164,832 108,719 57,723 46,925
Interest expense 94,555 51,804 40,822 19,490
Other income - net 13,416 7,641 3,218 2,442
-------------- -------------- -------------- --------------
Income before income taxes 83,693 64,556 20,119 29,877
Income taxes 48,766 31,642 12,147 14,335
-------------- -------------- -------------- --------------
Income before equity in earnings
of nonconsolidated affiliates 34,927 32,914 7,972 15,542
Equity in earnings of nonconsolidated affiliates 10,063 8,387 3,530 3,067
-------------- -------------- -------------- --------------
Net income $ 44,990 $ 41,301 $ 11,502 $ 18,609
============= ============= ============ ============
Net income per common share:
Basic $ .19 $ .24 $ .05 $ .11
=============== ================= ============== ===============
Diluted $ .19 $ .23 $ .05 $ .10
=============== ================ ============== ===============
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE>
CLEAR CHANNEL COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS OF DOLLARS)
Nine Months Ended
September 30, September 30,
1998 1997
---------------- ---------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 44,990 $ 41,301
RECONCILING ITEMS:
Depreciation 86,988 38,663
Amortization of intangibles 114,434 41,553
Deferred taxes 22,983 4,556
Amortization of film rights 12,811 12,396
Payments on film liabilities (13,262) (12,846)
Recognition of deferred income (914) (1,095)
Loss on disposal of assets 4,777 883
Gain on sale of other investments (21,047) (3,419)
Equity in earnings (loss) of
nonconsolidated affiliates (5,611) 2,236
Dividend and other payments from
nonconsolidated affiliates 1,807 --
Increase (decrease) minority interest 127 (291)
Exchange (gain) loss (1,241) --
CHANGES IN OPERATING ASSETS AND
LIABILITIES:
(Increase) decrease accounts
receivable (27,989) (6,478)
(Decrease) increase accounts payable (8,020) (764)
Increase (decrease) accrued interest 4,218 (4,314)
Increase (decrease) accrued expenses
and other liabilities (5,469) 981
Increase (decrease) accrued income
taxes 5,371 6,834
-------------- -------------
Net cash provided by operating
activities $ 214,953 $ 120,196
<PAGE>
CLEAR CHANNEL COMMUNICATIONS, INC. AND SUBSIDIARIES
SCHEDULE RECONCILING NET INCOME TO NET CASH
FLOWS PROVIDED BY OPERATING ACTIVITIES
(UNAUDITED)
(IN THOUSANDS OF DOLLARS)
Nine Months Ended
September 30, September 30,
1998 1997
--------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
(Increase) in notes receivable $ (53,675) $ --
Repayment of notes receivable 35,373 52,750
Increase in investments in and
advances to nonconsolidated
affiliates - net (93,020) (41,483)
Purchases of investments (42,931) (22,305)
Proceeds from sale of investments 29,184 --
Purchases of property, plant and
equipment (78,876) (22,569)
Proceeds from disposal of assets 5,692 300
Acquisition of broadcasting assets (204,453) (120,732)
Acquisition of outdoor assets (1,047,851) (467,516)
Increase in other intangible assets (12,555) (4,290)
(Increase) decrease in other-net 26,215 (20,484)
------------- -------------
Net cash used in investing activities (1,436,897) (646,329)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds of long-term debt 2,130,143 1,031,257
Payments on long-term debt (2,035,236) (1,278,632)
Payments of current maturities (586) (2,471)
Proceeds from exercise of stock
options 7,899 2,737
Proceeds from issuance of common
stock 577,250 791,719
Proceeds from issuance of
convertible debt 566,009 --
------------- ---------------
Net cash provided by financing
activities 1,245,479 544,610
Net increase in cash and cash
equivalents 23,535 18,477
Cash and cash equivalents at
beginning of period 24,657 16,701
-------------- ---------------
Cash and cash equivalents at end
of period $ 48,192 $ 35,178
========= =========
See Notes to Consolidated Financial Statements
<PAGE>
CLEAR CHANNEL COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 1: PREPARATION OF INTERIM FINANCIAL STATEMENTS
The consolidated financial statements have been prepared by Clear Channel
Communications, Inc. (the "Company") pursuant to the rules and regulations of
the Securities and Exchange Commission ("SEC") and, in the opinion of
management, include all adjustments (consisting only of normal recurring
accruals and adjustments necessary for adoption of new accounting standards)
necessary to present fairly the results of the interim periods shown. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such SEC rules and regulations. Management
believes that the disclosures made are adequate to make the information
presented not misleading. The results for the interim periods are not
necessarily indicative of results for the full year. The financial statements
contained herein should be read in conjunction with the consolidated financial
statements and notes thereto included in the Company's 1997 Annual Report.
The consolidated financial statements include the accounts of the Company and
its subsidiaries, the majority of which are wholly-owned. Investments in
companies in which the Company owns 20 percent to 50 percent of the voting
common stock or otherwise exercises significant influence over operating and
financial policies of the company are accounted for under the equity method. All
significant intercompany transactions are eliminated in the consolidation
process. Certain reclassifications have been made to the 1997 consolidated
financial statements to conform to the 1998 presentation.
In July 1998, the Company effected a two-for-one stock split payable in the form
of a stock dividend of one share of common stock for each issued and outstanding
share of common stock. The dividend was paid on July 28, 1998, to all holders of
common stock at the close of business on July 21, 1998. The net income per
common share and other per share information for all periods presented has been
restated to reflect this two-for-one stock split.
Note 2: RECENT ACCOUNTING PRONOUNCEMENTS
As of January 1, 1998, the Company adopted Statement of Financial Accounting
Standards No. 130 Reporting Comprehensive Income. Statement 130 establishes new
rules for the reporting and display of comprehensive income and its components;
however, the adoption of this Statement had no impact on the Company's net
income or shareholders' equity. Statement 130 requires unrealized gains or
losses on the Company's available-for-sale securities and foreign currency
translation adjustments, which prior to adoption were reported separately in
shareholders' equity, to be included in comprehensive income.
During the third quarter of 1998 and 1997, total comprehensive income amounted
to $135.8 million and $41.3 million, respectively. During the nine months ended
September 30, 1998 and 1997, total comprehensive income amounted to $175.9
million and $18.6 million, respectively. The primary component of other
comprehensive income was unrealized gains on the Company's available-for-sale
securities.
Note 3: RECENT DEVELOPMENTS
On January 21, 1998 the Company's affiliate, Heftel Broadcasting Corporation
("Heftel"), of which the Company owned 32.3% of the outstanding common stock,
issued 5,075,000 additional shares of its common stock decreasing the Company's
total ownership to approximately 29.1% of Heftel's aggregate outstanding Class A
and Class B common stock.
On April 1, 1998, the Company closed its merger with Universal Outdoor Holdings,
Inc. ("Universal"). Pursuant to the terms of the agreement, each share of
Universal common stock was exchanged for .67 shares of the Company's common
stock or approximately 19.3 million shares. Universal's operations included
approximately 34,000 outdoor advertising display faces in 23 major metropolitan
markets. This acquisition was accounted for as a purchase and resulted in
goodwill of approximately $1.3 billion based on a preliminary purchase price
allocation, which is being amortized over 25 years on a straight-line basis.
On August 6, 1998, the Company completed the final closing of its tender offer
for all of the issued and to be issued shares of More Group Plc., ("More"), an
outdoor advertising company based in the United Kingdom. More's operations
included approximately 90,000 outdoor advertising display faces in 22 countries.
Through a series of transactions beginning in May 1998, the Company purchased
all issued share capital of More for (pound)11.10 per share, totaling
approximately $757.9 million. In addition the Company assumed approximately
$137.7 million in long-term debt from More. The Company has accounted for this
acquisition as a purchase, which resulted in approximately $675.0 million
additional goodwill. Majority control of More was reached on June 25, 1998. The
Company consolidated the assets and liabilities of More as of June 30, 1998 and
began consolidating the results of operations on July 1, 1998.
On October 8, 1998 the Company entered into a definitive agreement to merge with
Jacor Communications, Inc. ("Jacor"), the nation's second largest radio company
measured by total stations. Including announced pending acquisitions, Jacor
owns, operates or represents 230 radio stations in 55 markets, one television
station, and Premiere Radio Networks. The merger is structured as a tax-free,
stock-for-stock transaction. Upon consummation of the merger, each outstanding
share of Jacor common stock will be exchanged for shares of the Company's stock.
The exchange ratio is based on the average closing price of the Company's common
stock during the 25 consecutive trading days ending on the second trading day
prior to the closing date as follows:
Average Closing Price of the Company's Common Stock Conversion Ratio
Less than or equal to $42.86 1.40
Above $42.86 but less than or equal to $44.44 1.40 to 1.35
Above $44.44 but less than $50.00 1.35
If the average closing price is $50.00 or more, the conversion ratio will be
calculated as the quotient obtained by dividing (a) $67.50 plus the product of
$.675 and the amount by which the average closing price exceeds $50.00, by (b)
the average closing price. If the average closing price of the Company's common
stock for any 25 consecutive trading day period commencing after October 8,
1998, is less than or equal to $37.50, the merger agreement may be terminated by
Jacor upon notice to the Company. At September 30, 1998 Jacor had 51,051,484
shares outstanding. Consummation of the merger is subject to certain closing
conditions and regulatory approvals, including, but not limited to, stockholder
approvals and receipt of approvals from the Federal Communications Commission
and the federal antitrust authorities. Consummation of this merger is expected
before September 1999. The Company intends to account for this merger as a
purchase.
The results of operations for the nine month periods ending September 30, 1998
and 1997 include the operations of Eller Media ("Eller"), Paxson Radio
("Paxson"), Universal and More from the respective dates of acquisition or
merger as appropriate. Assuming the acquisitions of Eller, Paxson and More, and
the merger with Universal had occurred at January 1, 1997, unaudited pro forma
consolidated results of operations for the nine months ended September 30, 1998
and 1997 would have been as follows:
Pro Forma (Unaudited)
Nine Months Ended September 30,
In thousands, except per share data
1998 1997
---- ----
Net revenue $1,109,521 $ 923,699
Net income (loss) $ (92) $ (42,168)
Net income (loss) per share:
Basic $ (.00) $ (.19)
Diluted $ (.00) $ (.19)
The pro forma information above is presented in response to applicable
accounting rules relating to business acquisitions and is not necessarily
indicative of the actual results that would have been achieved had the
acquisitions of Eller, Paxson and More, and the merger with Universal occurred
at the beginning of 1997, nor is it indicative of future results of operations.
The Company had other acquisitions during the nine months ended September 30,
1998 and 1997, the effects of which, individually and in aggregate, were not
material to the Company's consolidated financial position or results of
operations.
To facilitate possible future acquisitions, on March 16, 1998 the Company filed
a registration statement on Form S-3 covering a combined $1.5 billion of debt
securities, junior subordinated debt securities, preferred stock, common stock,
warrants, stock purchase contracts and stock purchase units (the "shelf
registration statement"). The shelf registration statement also covers preferred
securities that may be issued from time to time by the Company's three Delaware
statutory business trusts and guarantees of such preferred securities by the
Company.
On March 30, 1998, the Company completed its offering of six million shares of
common stock under the shelf registration statement. Also, on March 30, 1998 the
Company completed its offering of $500 million aggregate principal amount of
2.625% senior convertible notes due April 1, 2003, under the shelf registration
statement. On April 28, 1998, the Company issued an additional $75 million
aggregate principal amount of 2.625% senior convertible notes due April 1, 2003.
The net proceeds to the Company of $577.2 million, $492.5 million and $73.5
million, respectively were used to reduce the outstanding balance on the
Company's credit facility.
On May 6, 1998, the Company amended the shelf registration statement to increase
the amount of securities registered pursuant to the registration statement filed
on March 16, 1998 back to $1.5 billion. On June 16, 1998, the Company completed
its offering of $175 million 6.875% senior debentures due June 15, 2018 and $125
million 6.625% senior notes due June 15, 2008 under the shelf registration
statement. The net proceeds of approximately $296 million, in aggregate, were
used to purchase the issued share capital of More.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
Comparison of Three Months Ended September 30, 1998 to Three Months Ended
September 30, 1997.
(In thousands of dollars, except per share data)
<TABLE>
<CAPTION>
Three Months As-Reported Pro Forma
Ended September 30, % Increase % Increase
Consolidated 1998 1997 (Decrease) (Decrease)
------------ ---- ---- ---------- ----------
<S> <C> <C> <C> <C>
Net revenue $385,885 $184,108 110 % 19%
Operating expenses 228,220 99,809 129 % 21%
Depreciation and amortization 87,982 31,546 179 % 18%
Operating income 57,723 46,925 23 % 7%
Interest expense 40,822 19,490 109 %
Net income 11,502 18,609 (62)%
Net income per share:
Basic $ .05 $ .11 (55)%
Diluted $ .05 $ .10 (50)%
</TABLE>
The majority of the growth in the "as reported" net revenue and operating
expenses for the three months ended September 30, 1998 was due to the April 1998
merger with Universal, and the acquisitions of Paxson and More, which have been
included in the operations of the Company since October 1997 and July 1998,
respectively. In addition 9 radio stations and 21,343 outdoor display faces were
purchased during the third quarter of 1998, the effects of which, individually
and in the aggregate, were not material to the Company's consolidated financial
position or results of operations. The tangible and intangible assets associated
with the purchase of the above-mentioned radio and outdoor operations account
for the majority of the increase in "as reported" depreciation and amortization.
Interest expense increased as a result of greater average borrowing levels,
which resulted from the above-mentioned merger and acquisitions. This increase
in interest expense is partially offset by the issuance of the 2.625% senior
convertible notes due April 1, 2003, issued in 1998. The majority of the
increase in "as reported" net income also was primarily due to the inclusion of
operations resulting from the above-mentioned merger and acquisitions.
The pro forma presentation referred to above assumes that the acquisition of
Eller, Paxson, and More, and the merger of Universal occurred on January 1,
1997. Pro forma net revenue increased due to improved advertising rates in the
broadcasting segment and improved occupancy and increased advertising rates
within the outdoor segment. Pro forma operating expenses increased primarily
from the incremental selling costs related to the additional revenues.
Comparison of Nine Months Ended September 30, 1998 to Nine Months Ended
September 30, 1997.
(In thousands of dollars, except per share data)
<TABLE>
<CAPTION>
Nine Months As-Reported Pro Forma
Ended September 30, % Increase % Increase
Consolidated 1998 1997 (Decrease) (Decrease)
------------ ---- ---- ---------- ----------
<S> <C> <C> <C> <C>
Net revenue $909,555 $469,176 94 % 20%
Operating expenses 517,562 266,542 94 % 19%
Depreciation and amortization 201,422 80,216 151 % 16%
Operating income 164,832 108,719 56 % 29%
Interest expense 94,555 51,804 83 %
Net income 44,990 41,301 9 %
Net income per share:
Basic $ .19 $ .24 (21)%
Diluted $ .19 $ .23 (17)%
</TABLE>
The majority of the growth in the "as reported" net revenue and operating
expenses for the nine months ended September 30, 1998 was due to the April 1998
merger with Universal and the acquisitions of the Eller, Paxson and More, which
have been included in the operations of the Company since April 1997, October
1997 and July 1998, respectively. In addition 37 radio stations and 26,091
outdoor display faces were purchased during the first nine months of 1998, the
effects of which, individually and in the aggregate, were not material to the
Company's consolidated financial position or results of operations. The tangible
and intangible assets associated with the purchase the above-mentioned radio and
outdoor operations account for the majority of the increase in "as reported"
depreciation and amortization. Interest expense increased as a result of greater
average borrowing levels, which resulted from the above-mentioned business
acquisitions. This increase in interest expense is partially offset by the
issuance of the 2.625% senior convertible notes due April 1, 2003, issued in
1998. The majority of the increase in "as reported" net income also was
primarily due to the inclusion of operations resulting from the above-mentioned
business acquisitions.
The pro forma presentation referred to above assumes that the acquisition of
Eller, Paxson, and More, and the merger of Universal occurred on January 1,
1997. Pro forma net revenue increased due to improved advertising rates in the
broadcasting segment and improved occupancy and increased advertising rates
within the outdoor segment. Pro forma operating expenses increased primarily
from the incremental selling costs related to the additional revenues.
LIQUIDITY AND CAPITAL RESOURCES
The major sources of capital for the Company have been cash flow from
operations, advances on its revolving long-term line of credit (the "credit
facility"), and funds provided by various stock, convertible and other bond
offerings, and other borrowings. As of September 30, 1998 and December 31, 1997,
the Company had the following debt outstanding:
(In millions of dollars)
September 30, 1998 December 31, 1997
Credit facility - domestic $1,626.6 $1,215.2
Credit facility - international 124.0 --
Senior convertible notes 575.0 --
Long-term bonds 600.0 300.0
Other borrowings 59.3 38.5
----------- -----------
Total $2,984.9 $1,553.7
======= =======
In addition, the Company had $48.2 million in unrestricted cash and cash
equivalents on hand at September 30, 1998.
On March 16, 1998 the Company filed a registration statement on Form S-3
covering a combined $1.5 billion of debt securities, junior subordinated debt
securities, preferred stock, common stock, warrants, stock purchase contracts
and stock purchase units (the "shelf registration statement"). The shelf
registration statement also covers preferred securities that may be issued from
time to time by the Company's three Delaware statutory business trusts and
guarantees of such preferred securities by the Company. Due to various debt and
equity offerings during March and April 1998, on May 6, 1998, the Company
amended the shelf registration statement to increase the amount of securities
registered pursuant to the registration statement filed on March 16, 1998 back
to $1.5 billion.
On June 29, 1998 the Company filed a registration statement on Form S-4 covering
1,500,000 shares of common stock, which may be offered and issued by the Company
from time to time in connection with the acquisition directly or indirectly by
the Company of various businesses or properties, or interests therein.
<PAGE>
CREDIT FACILITY:
DOMESTIC: On July 1, 1998, the Company expanded its revolving credit facility
from $1.75 billion to $2 billion, of which $1,626.6 million is outstanding and,
taking into account other letters of credit, $352.7 million is available for
future borrowings. The credit facility converts into a reducing revolving line
of credit on the last business day of September 2000, with quarterly repayment
of the outstanding principal balance to begin the last business day of September
2000 and continue during the subsequent five year period, with the entire
balance to be repaid by the last business day of June 2005. During the first
nine months of the year, the Company made principal payments on the credit
facility totaling $1,287.9 million including $566.0 million and $577.2 million
from the net proceeds from the convertible debt offering and the equity
offering, respectively and drew down $1,699.3 million. Funding for the majority
of the Company's acquisitions and the refinancing of long-term debt in the
merger with Universal was provided by the Company's credit facility.
INTERNATIONAL: A (pound)80 million revolving credit facility with a group of
international banks was assumed in the acquisition of More. This international
credit facility allows for borrowings in various foreign currencies, which are
used to hedge net assets in those currencies. At September 30, 1998, (pound)6.9
million, or $11.7 million, was available for future borrowings and (pound)73.1
million, or $124.0 million, was outstanding. This credit facility converts into
a reducing revolving facility on January 10, 2000 with annual payments of
(pound)12 million due in 2000 and 2001. The credit facility expires on January
10, 2002. At September 30, 1998, interest rates varied from 4.0% to 8.7875%.
EQUITY OFFERINGS:
On March 30, 1998, the Company completed an offering of six million shares of
common stock. The net proceeds to the Company were $577.2 million, which was
used to pay down the outstanding balance under the credit facility.
SENIOR CONVERTIBLE NOTES OFFERING:
On March 30, and April 28, 1998 the Company completed an offering of $500
million and $75 million aggregate principal amounts, respectively, of 2.625%
senior convertible notes due April 1, 2003 under the shelf registration
statement. The net proceeds to the Company of approximately $566.0 million, in
aggregate, were used to pay down the outstanding balance under the credit
facility. The notes are convertible into the Company's common stock at any time
following the date of original issuance, unless previously redeemed, at a
conversion price of $61.95 per share, subject to adjustment in certain events.
Interest on the notes is payable semiannually on each April 1 and October 1,
beginning October 1, 1998. The notes are redeemable, in whole or in part, at the
option of the Company at any time on or after April 1, 2001 and until March 31,
2002 at 101.050%; on or after April 1, 2002 and until March 31, 2003 at
100.525%; and on or after April 1, 2003 at 100%, plus accrued interest.
BOND OFFERINGS AND REFINANCINGS:
On June 16, 1998, the Company completed an offering of $175 million 6.875%
senior debentures due June 15, 2018 and $125 million 6.625% senior notes due
June 15, 2008 under the shelf registration statement. The net proceeds of
approximately $296.0 million, in aggregate, were used to fund the acquisition of
issued share capital of More. Interest on the senior debentures and senior notes
is payable semiannually on each June l5 and December 15, beginning December 15,
1998. In addition, the Company assumed approximately $567 million of Universal's
long-term debt, $242 million of which was refinanced at the closing date using
the Company's credit facility. In May 1998, the Company completed a public
tender offer for the remaining $325 million of 9.75% debentures, the majority of
which were purchased for approximately $374 million leaving approximately $2
million outstanding at September 30, 1998.
OTHER:
During the first nine months of 1998, the Company merged with Universal in a
transaction valued at approximately $1.3 billion and acquired More for $768.1
million. Also during the first nine months of 1998, the Company purchased the
broadcasting assets of 37 radio stations in 13 markets, and acquired
approximately 26,094 additional outdoor display faces in 33 markets for $190.0
million and $278.1 million, respectively. In addition, the Company purchased
capital equipment totaling $78.9 million.
Future acquisitions of broadcasting stations, outdoor advertising facilities and
other media-related properties affected in connection with the implementation of
the Company's acquisition strategy are expected to be financed from increased
borrowings under the credit facility, additional public equity and debt
offerings and cash flow from operations. The Company believes that cash flow
from operations as well as the proceeds from securities offerings made by the
Company from time to time will be sufficient to make all required future
interest and principal payments on the credit facility, senior convertible notes
and bonds, and will be sufficient to fund all anticipated capital expenditures.
The Company's earnings are affected by fluctuations in the value of the U.S.
dollar as compared to foreign currencies as a result of its investments in
various foreign countries. The Company believes that the foreign currency risks
to which it is exposed are not reasonably likely to have a material adverse
effect on the Company's cash flows, results of operations or financial position
given the concentration of revenue in the United States.
The ratio of earnings to combined fixed charges and preferred stock dividends is
as follows:
Nine Months ended
September 30, Year Ended
1998 1997 1997 1996 1995 1994 1993
- ------ ------ ------ ------ ------ ------ ------
1.91 2.16 2.32 3.63 3.32 5.54 3.81
The ratio of earnings of combined fixed charges and preferred stock dividends
was computed on a total enterprise basis. Earnings represent income from
continuing operations before income taxes less equity in undistributed net
income (loss) of unconsolidated affiliates plus fixed charges. Fixed charges
represent interest, amortization of debt discount and expense, and the estimated
interest portion of rental charges. The Company had no preferred stock
outstanding and paid no dividends thereon for any period presented.
YEAR 2000
The Year 2000 Issue ("Y2K") is the result of computer programs being written
using two digits rather than four to define the applicable year. Any of the
Company's computer programs or hardware that have date-sensitive software or
embedded chips may recognize a date using"00" as the year 1900 rather than the
year 2000. This could cause a system failure or miscalculations in the Company's
broadcast, outdoor and corporate locations which could cause disruptions of
operations, including, among other things, a temporary inability to produce
broadcast signals, process financial transactions, or engage in similar normal
business activities.
Based on recent system evaluations, surveys, and on-site inventories, the
Company determined that it will be required to modify or replace portions of its
software and certain hardware so that those systems will properly utilize dates
beyond December 31, 1999. The Company presently believes that with modifications
or replacements of existing software and certain hardware, the Y2K issue can be
mitigated. If such modifications and replacements are not made, or are not
completed in time, the Y2K issue could have a material impact on the operations
of the Company.
The Company's plan to resolve the Y2K issue involves the identification and
assessment of the existing problem, plan of remediation, as well as a testing
and implementation plan. To date, the Company has substantially completed the
identification and assessment process, with the following significant financial
and operational components identified as being affected by the Y2K issue:
|X| Computer hardware running critical financial and operational software
that is not capable of recognizing a four-digit code for the applicable
year.
|X| The Company's advertising inventory management software responsible for
managing, scheduling and billing customer's broadcast and outdoor
advertising purchases.
|X| Broadcast studio equipment and software necessary to deliver radio and
television programming.
|X| Corporate financial accounting and information system software.
Significant non-technical systems and equipment that may contain
microcontrollers which are not Y2K compliant are being identified and addressed
if deemed critical.
The Company has instituted the following remediation plan to address the Y2K
issues:
|X| A computer hardware replacement plan for computers running essential
broadcast, operational and financial software applications with Y2K
compatible computers has been instituted. As of September 30, 1998
approximately 80% of all essential computers related to broadcast or
studio equipment is Y2K compatible. Approximately 75% of all essential
financial based computers are Y2K compliant. The Company anticipates
this replacement plan to be 100% complete by the end of the second
quarter in 1999.
|X| Software upgrades or replacement of advertising inventory management
software which is Y2K compliant have been planned, are in process, or
have been completed as of September 30, 1998. The company has received
assurances from its software vendors that supply the Company's
advertising inventory management software that this software is Y2K
compliant with a few minor exceptions. For these non-compliant vendors,
the Company will install inventory management software from a compliant
vendor by the end of the second quarter of 1999. Approximately 75% of
the broadcast properties have Y2K compliant advertising inventory
management software as of September 30, 1998. All of the outdoor
advertising inventory management software is currently being upgraded
and is targeted for Y2K compliance at the end of the second quarter of
1999.
|X| The Company received assurances from its software vendors that supply
broadcasting digital automation systems that the software used by the
company is currently compliant or has upgrades currently available that
are compliant. Broadcast software and studio equipment is considered to
be 75% compliant as of September 30, 1998 and is anticipated to be 100%
compliant by the second quarter of 1999.
|X| Financial accounting software for the broadcast segment is currently
being replaced by Y2K compliant software. This conversion will be
completed in the fourth quarter of 1998. Financial accounting software
for the outdoor segment has been updated to be Y2K compliant.
While the Company believes its efforts will provide reasonable assurance that
material disruptions will not occur due to internal failure, the possibility of
interruption still exists.
The Company is currently querying other significant vendors that do not share
information systems with the Company (external agents). To date, the Company is
not aware of any external agent with a Y2K issue that would materially impact
the Company's results of operations, liquidity, or capital resources. However,
the Company has no means of ensuring that external agents will be Y2K ready. The
inability of external agents to complete their Y2K resolution process in a
timely fashion could materially impact the Company. The effect of non-compliance
by external agents is not determinable.
In the ordinary course of business, the Company has acquired or plans to acquire
a significant amount of Y2K compliant hardware and software. These purchases are
part of specific operational and financial system enhancements with completion
dates during 1998 and early 1999 that were planned without specific regard to
the Y2K issue. These system enhancements resolve many Y2K problems and have not
been delayed as a result of any additional efforts addressing the Y2K issue.
However, there are several hardware and software expenditures that have been, or
will be incurred, to specifically remediate Y2K non-compliance. Incremental
hardware and software costs that the Company has attributed to the Y2K issue are
estimated at $1,200,000 plus or minus 25%. The majority of these costs will be
incurred over the next 12 months. Of this cost, approximately 30% will be
expensed as modification or upgrade costs with the remaining costs being
capitalized as new hardware or software. As of September 30, 1998, approximately
$80,000 has been charged to expense and $275,000 capitalized as a result of
expenditures. Sources of funds for these expenditures will be supplied through
cash flow generated from operations and/or available borrowings from the
Company's credit facility. The Company's accounting policy is to expense costs
incurred due to maintenance, modification or upgrade costs and to capitalize the
cost of new hardware and software.
Management believes it has an effective program in place to resolve the Y2K
issue in a timely manner. As noted above, the Company has not yet completed all
necessary phases of the Y2K program. In the event that the Company does not
complete any additional phases, it could experience disruptions in its
operations, including among other things, a temporary inability to produce
broadcast signals, process financial transactions, or engage in similar normal
business activities. In addition, disruptions in the economy generally resulting
from the Y2K issues could also materially adversely affect the Company. The
Company could be subject to litigation for computer systems failures, equipment
shutdowns or failure to properly date business records. The amount of potential
liability and lost revenue cannot be reasonably estimated at this time.
The Company currently has no contingency plans in place in the event it does not
complete all phases of the Y2K program. The Company plans to evaluate the status
of completion in March 1999 and determine whether such contingency plans are
necessary.
RISKS REGARDING FORWARD LOOKING STATEMENTS
Except for the historical information, this report contains various
"forward-looking statements" which represent the Company's expectations or
beliefs concerning future events, including the future levels of cash flow from
operations. The Company cautions that these forward-looking statements involve a
number of risks and uncertainties and are subject to many variables which could
have an adverse effect upon the Company's financial performance. These variables
include economic conditions, the ability of the Company to integrate the
operations of Eller, Paxson, Universal and More, shifts in population and other
demographics, level of competition for advertising dollars, fluctuations in
operating costs, technological changes and innovations, changes in labor
conditions, changes in governmental regulations and policies, and certain other
factors set forth in the Company's SEC filings. Actual results in the future
could differ materially from those described in the forward-looking statements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Interest Rate Risk:
At September 30, 1998, approximately 73.8% of the Company's long-term debt bears
interest at variable rates. Accordingly, the Company's earnings and after tax
cash flow are affected by changes in interest rates. Assuming the current level
of borrowings at variable rates and assuming a two percentage point change in
the first nine months of 1998 average interest rate under these borrowings, it
is estimated that the Company's first nine months of 1998 interest expense would
have changed by $35.6 million and that the Company's first nine months of 1998
net income and after tax cash flow would have changed by $23.1 million. In the
event of an adverse change in interest rates, management would likely take
actions to further mitigate its exposure. However, due to the uncertainty of the
actions that would be taken and their possible effects, the analysis assumes no
such actions. Further the analysis does not consider the effects of the change
in the level of overall economic activity that could exist in such an
environment.
At September 30, 1998, the Company has several interest rate protection
agreements that it obtained through an acquisition. These agreements, the fair
value of which are not material at September 30, 1998 and are not expected to
become material in the near term, have not been considered in the above analysis
as the Company intends to terminate these agreements.
Equity Price Risk:
The carrying value of the Company's available-for-sale equity securities is
affected by changes in their quoted market prices. It is estimated that a 20%
change in the market prices of these securities would change their carrying
value at September 30, 1998 by $49.2 million.
Foreign Currency:
As a result of the August 6, 1998 acquisition of More, the Company now has
operations in 25 countries throughout Europe and Asia. All foreign operations
are measured in their local currencies. As a result, the Company's financial
results could be affected by factors such as changes in foreign currency
exchange rates or weak economic conditions in the foreign markets in which we
have operations. To mitigate the exposure to risk of currency fluctuations
throughout Europe and Asia to the British pound, the Company has a natural hedge
through borrowings in each currency for amounts similar to the net assets in
that currency. This hedge position is reviewed monthly. The Company maintains no
other derivative instruments to mitigate the exposure to translation and/or
transaction risk. However, this does not preclude the adoption of specific
hedging strategies in the future. Our foreign operations reported a loss of
$13.7 million for the three months ended September 30, 1998. It is estimated
that a 5% change in the value of the U.S. dollar to the British pound would
change net income for the nine months ended September 30, 1998 by $0.7 million.
<PAGE>
PART II -- OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
A special meeting of shareholders of the Company was held on July 13, 1998. The
shareholders approved an amendment to the Company's Articles of Incorporation to
increase the number of authorized shares of Common Stock of the Company from 150
million to 600 million shares. The shareholders also approved an amendment to
the Company's Articles of Incorporations to authorize the issuance of eight
million shares of a new class of preferred stock.
The results of voting at the special meeting of the shareholders were as
follows:
PROPOSAL NO. 1
(AMENDMENT OF THE ARTICLES OF INCORPORATION TO INCREASE
COMMON STOCK TO 600 MILLION)
For Withhold/Against Exceptions/Abstain
98,863,379 16,029,730 35,168
PROPOSAL NO. 2
(AMENDMENT OF THE ARTICLES OF INCORPORATION TO AUTHORIZE A
NEW CLASS OF PREFERRED STOCK)
For Withhold/Against Exceptions/Abstain
83,324,710 27,322,142 4,281,425
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits. See Exhibit Index on Page 18
(b) Reports on Form 8-K
Filing Date Items Reported Financial Statements
Reported
8-K 7/10/98 Item 2. Business None, the required
acquisition of More items under item
Group Plc. on June 7(a) and 7(b)will be
25, 1998. filed within 60 days
of this filing.
8-K 8/28/98 Item 5. Company None
executed supplemental
indentures on 8/26/98
regarding Sr. Notes
and Sr. Debentures
issued 6/16/98.
8-K/A 9/4/98 Item 2. Pro forma Clear Channel
financial statements Communications, Inc.
assuming the 12/31/97
acquisition More Group Plc.
of More Group Plc. 12/31/97
had occurred on Pro forma statements
1/1/97. 12/31/97
<PAGE>
8-K 9/11/98 Item 5. Company's None
Board of Directors
authorized the re-
purchase of up to
$500 million of the
Company's common
stock.
8-K 10/9/98 Item 5. Company None
entered into an
agreement and plan
of merger with Jacor
Communications, Inc.
on 10/8/98.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CLEAR CHANNEL COMMUNICATIONS, INC.
Date November 4, 1998 by: /s/ Herbert W. Hill, Jr.
Herbert W. Hill, Jr.
Senior Vice President and
Chief Accounting Officer
<PAGE>
INDEX TO EXHIBITS
EXHIBIT NUMBER
DESCRIPTION
2.1 Agreementand Plan of Merger dated as of October 23, 1997, among
Universal Outdoor Holdings, Inc., the Company, and UH Merger
Sub, Inc. (incorporated by reference to the exhibits of the
Company's Current Report on Form 8-K dated November 3, 1997).
2.2 Agreement and Plan of Merger dated October 8, 1998, among Clear
Channel Communications, Inc., Jacor Communications, Inc., and
CCU Merger Sub, Inc. (incorporated by reference to the
exhibits of the Company's Current Report on Form 8-K dated
October 9, 1998).
3.1 Current Articles of Incorporation of the Company (incorporated
by reference to the exhibits of the Company's Registration
Statement on Form S-3 (Reg. No. 333-33371) dated September 9,
1997).
3.2 Second Amended and Restated Bylaws of the Company (incorporated
by reference to the exhibits of the Company's Registration
Statement on Form S-3 (Reg. No. 333-33371) dated September 9,
1997).
3.3 Amendment to the Company`s Articles of incorporation.
4.1 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 the Company's Registration Statement on Form S-1
(Reg. No. 33-289161) dated April 19, 1984).
4.2 Senior Indenture dated October 1, 1997, by and between Clear
Channel Communications, Inc. and The Bank of New York as
Trustee (incorporated by reference to exhibit 4.2 of the
Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1997).
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 (the "Credit Facility")
(incorporated by reference to the exhibits of the Company's
Amendment No. 1 to the Registration Statement on Form S-3 (Reg.
No. 333-25497) dated May 9, 1997).
4.4 First Supplemental Indenture dated March 30, 1998 to Senior
Indenture dated October 1, 1997, by and between Clear Channel
Communications, Inc. and the Bank of New York as Trustee.
(incorporated by reference to the Company's Quarterly Report on
Form 10-Q for the quarter ended March 31, 1998).
10.1 Voting Agreement dated as of October 8, 1998, by and among
Jacor Communications, Inc. and L. Lowry Mays, mark P. Mays and
Randall T. Mays and certain related family trusts
10.2 Registration Rights Agreements dated as October 8, 1998, by and
among the Company and the Zell/Chilmark Fund, L.P., Samstock,
L.L.C., the SZ2 (IGP) Partnership and Samuel Zell.
11 Computation of Earnings Per Share
12 Computation of Ratio of Earnings to Fixed Charges
27 Financial Data Schedule at September 30, 1998
27.1 Financial Data Schedule at September30, 1997 (incorporated by
reference to exhibit 27 of the Company's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1997).
VOTING AGREEMENT
This VOTING AGREEMENT (the "Agreement"), dated as of October
8, 1998, is entered into by and among Jacor Communications, Inc., a Delaware
corporation (the "Company"), and the other parties listed on the signature page
hereof (collectively, the "Stockholders" and, individually, a "Stockholder").
WHEREAS, the Company, Clear Channel Communications, Inc.
("Parent"), and CCU Merger Sub, Inc. ("Merger Sub") 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, each of the Stockholders is
the owner of the number of shares (the "Shares") of common stock, par value
$0.10 per share, of Parent ("Parent 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, the Company has required that the Stockholders agree, and each
of the Stockholders hereby agrees, to the matters set forth herein. Except as
specified herein, terms defined in the Merger Agreement are used herein as
defined therein.
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. Each of the Stockholders
hereby agrees to vote (or cause to be voted) all of such Stockholder's 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 Parent, 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 of the
issuance of Parent Common Stock in the Merger (the "Parent Proposal") and any
actions required in furtherance thereof;
(ii) against any action or agreement that is
reasonably likely to result in a breach in any material respect of any covenant,
representation or warranty or any other obligation of Parent under this
Agreement or the Merger Agreement;
and
(iii) except for all such actions which may be
permitted to Parent under Section 5.1(b) of the Merger Agreement, against (A)
any extraordinary corporate transaction, such as a merger, rights offering,
reorganization, recapitalization or liquidation involving Parent or any of its
subsidiaries other than the Merger, (B) a sale or transfer of a material amount
of assets of Parent or any of its material subsidiaries or the issuance of any
securities of Parent or any subsidiary, (C) any change in the Board of Directors
of Parent other than in connection with an annual meeting of the shareholders
of Parent with respect to the slate of directors proposed by the incumbent Board
of Directors of Parent (in which case they agree to vote for the slate proposed
by the incumbent Board) or (D) any action that is reasonably likely to
materially impede, interfere with, delay, postpone or adversely affect in any
material respect the Merger and the transaction contemplated by the Merger
Agreement.
2. Representations and Warranties of Stockholders. Each of the
Stockholders severally represents and warrants to the Company as follows in each
case as of the date hereof:
2.1. Binding Agreement. The Stockholder has the
capacity and full power and authority 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, nor the compliance with any of the provisions
hereof in each case by the Stockholder (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 material 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 which has not been
obtained, or (d) violate or conflict with any order, writ, injunction, decree or
law applicable to such Stockholder or the Shares.
2.3. Ownership of Shares. Except as set forth
in Schedule II and except as may be provided in the organizational documents,
if any, of the Stockholder, the Stockholder is the record and beneficial owner
of the Shares free and clear of any security interests, liens, charges,
encumbrances, options or restriction on the right to vote the Shares. 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 Parent beneficially owned by Stockholder.
3. Representations and Warranties of the Company. The Company
represents and warrants to each of the Stockholders as follows in each case as
of the date hereof:
3.1. Binding Agreement. The Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Delaware 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 the Company and the consummation of the transactions contemplated
hereby and thereby have been duly and validly authorized by the Board of
Directors of the Company, and no other corporate proceedings on the part of
the Company except for the approval and adoption of the Merger Agreement and
approval of the Merger by a majority of the holders of shares of Company
common stock are necessary to authorize the execution, delivery and performance
of this Agreement and the Merger Agreement by the Company and the consummation
of the transactions contemplated thereby. The Company has duly and validly
executed this Agreement and this Agreement constitutes a legal, valid and
binding obligation of the Company, enforceable against the Company 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 the Company of the transactions
contemplated hereby, nor the compliance by the Company 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
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 Company.
4. Transfer and Other Restrictions. For so long as the
Merger Agreement is in effect: 4.1. Certain
Prohibited Transfers. Each of the Stockholders
generally agrees not to:
(a) sell, transfer, assign or otherwise dispose
of, or enter into any contract, option or other arrangement or understanding
with respect to the sale, transfer, assignment or other disposition of, the
Shares or any interest contained therein if (i) such sale, transfer, assignment
or other disposition, taken together with all other sales, transfers,
assignments or other dispositions by the Stockholders, as a group, during the
period from the date hereof through the date of the meeting held to consider
the Parent Proposal, would be of shares in an amount in excess of 1% of the
Parent Common Stock then outstanding or (ii) such sale, transfer, assignment
or other disposition is reasonably likely to impact the Average Closing Price
(as defined in the Merger 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;
(c) deposit the Shares into a voting trust; nor
(d) buy, sell or trade any equity security of Parent
including, without limitation, entering into any put, call, option, swap or
collar derivative transaction which has a similar economic effect if such
purchase, sale or trade is reasonably likely to impact the Average Closing
Price.
4.2. Additional Shares. Without limiting the
provisions of the Merger Agreement, in the event of (i) any stock dividend,
stock split, recapitalization, reclassification, combination or exchange of
shares of capital stock of Parent on, or affecting the Shares or (ii) the
Stockholder shall become the beneficial owner of any additional shares of
Parent 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 Parent 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. Each of the Stockholders hereby agrees, while this Agreement
is in effect, to promptly notify the Company of the number of any new shares of
Company Common Stock acquired by the Stockholder, if any, after the date hereof.
5. 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 seek specific
performance of the terms hereof, in addition to any other remedy which may be
available at law or in equity.
6. Termination. Except for Sections 6 and 7 hereof, which
shall survive for the period specified therein, this Agreement shall terminate,
with respect to a Stockholder to whom any of the following applies, as
applicable, but shall not terminate with respect to the other Stockholders on
the earlier of (i) the termination of the Merger Agreement, (ii) the agreement
of the parties hereto to terminate this Agreement, (iii) consummation of the
Merger and (iv) the date such Stockholder ceases to own any Shares other than as
a result of the breach by such Stockholder of this Agreement.
7. Indemnification. The Company shall, to the fullest extent
permitted under applicable law, indemnify and hold harmless, each of the
Stockholders 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 Parent or any stockholder of Parent asserting any
breach by the Stockholder of any fiduciary duty on his part to Parent or the
other stockholders of Parent by reason of the Stockholder entering into this
Agreement, for a period of six years after the date hereof. In the event the
Stockholder seeks indemnification from the Company for any such claim, action,
suit, proceeding or investigation (whether arising before or after the
termination of this Agreement), (a) the Company shall pay the fees and expenses
of one counsel selected by the Stockholder and reasonably acceptable to the
Company to represent the Stockholder in connection therewith promptly after
statements therefor are received, and (b) the Company will cooperate in the
defense of any such matter; provided, however, that the Company 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.
8. 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 the Company, to:
Jacor Communications, Inc.
50 E. RiverCenter Blvd.
Suite 1200
Covington, KY 41011
Attention: Randy Michaels
Facsimile No.: (606) 655-9354
with a copy to:
Graydon Head & Ritchey
511 Walnut Street
1900 Fifth Third Center
Cincinnati, OH 45202
Attention: Richard S. Schwalzl
Facsimile No.: (513) 651-3836
and to:
Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, New York 10006
Attention: William A. Groll
Facsimile No.: (212) 225-3999
If to Stockholder, to:
The Stockholder
200 Concord Plaza
Suite 600
San Antonio, Texas 78216
Attention: the Stockholder
Facsimile No.: (210) 829-8080
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
9. 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.
10. Consideration. This Agreement is granted in consideration
of the execution and delivery of the Merger Agreement by the Company.
11. 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.
12. 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.
13. 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.
14. 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).
15. 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.
16. 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.
17. Shareholder Capacity. No Stockholder or designee of any
Stockholder who is or becomes during the term hereof a director or officer of
Parent makes any agreement or understanding herein in its capacity as such
director or officer. Each Stockholder signs solely in its capacity as the record
holder and beneficial owner of such Stockholder's Shares and nothing herein
shall limit or affect any actions taken by a Stockholder any designee of any
Stockholder in his or her capacity as an officer or director of Parent.
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by the Stockholder and a duly authorized officer of the Company on the
day and year first written above.
JACOR COMMUNICATIONS, INC.
By: /s/ R. Christopher Weber
Name: R. Christopher Weber
Title: Chief Financial Officer
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by the Stockholder and a duly authorized officer of the Company on the
day and year first written above.
/s/ L. Lowry Mays /s/ Randall T. Mays
L. LOWRY MAYS RANDALL T. MAYS
Address: 200 Concord Plaza, Address: 200 Concord Plaza
Suite 600 Suite 600
San Antonio, Texas 78216 San Antonio, Texas 78216
Facsimile No.: (210) 829-8080 Facsimile No.: (210) 829-8080
/s/ Mark P. Mays /s/ Mark P. Mays
MARK P. MAYS MARK P. MAYS
As Trustee for Ryan Mays
Address: 200 Concord Plaza Address: 200 Concord Plaza
Suite 600 Suite 600
San Antonio, Texas 78216 San Antonio, Texas 78216
Facsimile No.:(210) 829-8080 Facsimile No.: (210) 829-8080
/s/ Mark P. Mays /s/ Mark P. Mays
MARK P. MAYS MARK P. MAYS
As Trustee for Patrick Mays As Trustee for Daniel Mays
Address: 200 Concord Plaza Address: 200 Concord Plaza
Suite 600 Suite 600
San Antonio, Texas 78216 San Antonio, Texas 78216
Facsimile No.: (210) 829-8080 Facsimile No.: (210) 829-8080
/s/ Mark P. Mays /s/ Randall T. Mays
MARK P. MAYS RANDALL T. MAYS
As Trustee for Andrew John Mays As Trustee for Grace Mays
Address: 200 Concord Plaza Address: 200 Concord Plaza
Suite 600 Suite 600
San Antonio, Texas 78216 San Antonio, Texas 78216
Facsimile No.: (210) 829-8080 Facsimile No.: (210) 829-8080
<PAGE>
/s/ Randall T. Mays /s/ Mark P. Mays
RANDALL T. MAYS MARK P. MAYS
As Trustee for Lowry Thomas Mays As Trustee for the Charlotte
Trust Moreau Family
Address: 200 Concord Plaza Address: 200 Concord Plaza
Suite 600 Suite 600
San Antonio, Texas 78216 San Antonio, Texas 78216
Facsimile No.: (210) 829-8080 Facsimile No.: (210) 829-8080
/s/ L. Lowry Mays /s/ L. Lowry Mays
L. LOWRY MAYS L. LOWRY MAYS
As Trustee for the Maddox Family Trust As Trustee for the Ralph
Trust Maddox Family
Address: 200 Concord Plaza Address: 200 Concord Plaza
Suite 600 Suite 600
San Antonio, Texas 78216 San Antonio, Texas 78216
Facsimile No.: (210) 829-8080 Facsimile No.: (210) 829-8080
<PAGE>
SCHEDULE I TO
VOTING AGREEMENT
Name of Stockholder Number of Shares
L. Lowry Mays 29,084,078
Randall T. Mays 559,176
Mark Mays 795,296
Mark P. Mays 35,188
As Trustee for Ryan Mays
Mark P. Mays 35,196
As Trustee for Patrick Mays
Mark P. Mays 11,636
As Trustee for Daniel Mays
Mark P. Mays 1,260
As Trustee for Andrew John Mays
Randall T. Mays 6,444
As Trustee for Grace Mays
Randall T. Mays 3,108
As Trustee for Lowry Thomas Mays
Mark P. Mays 2,696
As Trustee for the Charlotte Moreau Family Trust
L. Lowry Mays 55,056
As Trustee for the Maddox Family Trust
L. Lowry Mays 45,000
As Trustee for the Ralph Maddox Family Trust
<PAGE>
SCHEDULE II TO
VOTING AGREEMENT
Mark P. Mays holds 35,188 Shares of Parent Common Stock as trustee for Ryan
Mays.
Mark P. Mays holds 35,196 Shares of Parent Common Stock as trustee for Patrick
Mays.
Mark P. Mays holds 11,636 Shares of Parent Common Stock as trustee for Daniel
Mays.
Mark P. Mays holds 1,260 Shares of Parent Common Stock as trustee for Andrew
John Mays.
Randall T. Mays holds 6,444 Shares of Parent Common Stock as trustee for Grace
Mays.
Randall T. Mays holds 3,108 Shares of Parent Common Stock as trustee for Lowry
Thomas Mays.
Mark P. Mays holds 2,696 Shares of Parent Common Stock as trustee for the
Charlotte Moreau Family Trust.
L. Lowry Mays holds 55,056 Shares of Parent Common Stock as trustee for the
Maddox Family Trust.
L. Lowry Mays holds 45,000 Shares of Parent Common Stock as trustee for the
Ralph Maddox Family Trust.
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT dated as of October 8, 1998 (this
"Agreement"), among Clear Channel Communications, Inc., a Texas corporation (the
"Issuer"), and the Holders (as defined herein).
WHEREAS, this Agreement is being entered into in connection with the
closing under the Merger Agreement referred to below.
NOW, THEREFORE, in consideration of the foregoing and the mutual
promises, representations, warranties, covenants and agreements contained
herein, the parties hereto, intending to be legally bound hereby, agree as
follows:
ARTICLE 1
DEFINITIONS
Section 1.1 Definitions. Terms defined in the Agreement and Plan of
Merger, dated as of October 8, 1998 (the "Merger Agreement"), among the Issuer,
CCU Merger Sub, Inc., a Delaware corporation wholly owned by the Issuer, and
Jacor Communications, Inc., a Delaware corporation (the "Company"), are used
herein as defined therein. In addition, the following terms, as used herein,
shall have the following respective meanings:
"Commission" means the Securities and Exchange Commission or any
successor governmental body or agency.
"Common Stock" means the common stock, par value $.10 per share, of the
Issuer.
"Demand Registration" has the meaning ascribed thereto in
Section 2.2(a).
"Demand Request" has the meaning ascribed thereto in Section 2.2(a).
"Disadvantageous Condition" has the meaning ascribed thereto in
Section 2.4.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Holder" means a Person who owns Registrable Securities and is either
(i) an Investor or (ii) a Person that (A) has agreed to be bound by the terms of
this Agreement as if such Person were an Investor and (B) is (x) a general or
limited partner or limited liability company member, as appropriate, of an
Investor that has received Registrable Securities pursuant to the distribution
to such Person of Registrable Securities in accordance with the agreement of
limited or general partnership or limited liability company agreement, as
appropriate, governing the rights of such Persons, (y) an individual that has a
direct or indirect equity interest in a general partner, a limited partner or a
limited liability company member of an Investor and has received Registrable
Securities directly or indirectly from such Investor or (z) any financial
institution that has received Registrable Securities pursuant to a bona fide
pledge thereof by any Holder referred to in the preceding clauses (x) or (y).
"Investor" means any of the following: (i) Zell/Chilmark Fund, L.P., a
Delaware limited partnership, (ii) Samstock, L.L.C., a Delaware limited
liability company, (iii) SZ2 (IGP) Partnership, Illinois general partnership,
and (iv) Samuel Zell.
"Permitted Holder" means each of the Zell Holders' Agent (or one
representative of the Zell Holders that (x) is designated by Zell Holders that
hold a majority of the Registrable Securities proposed to be sold by Zell
Holders in the applicable offering and (y) is reasonably acceptable to the
Issuer).
"Registrable Securities" means Common Stock acquired by the Holders
pursuant to the Merger (and any shares of stock or other securities into which
or for which such Common Stock may hereafter be changed, converted or exchanged
and any other shares or securities issued to Holders of such Common Stock (or
such shares of stock or other securities into which or for which such shares are
so changed, converted or exchanged) upon any reclassification, share
combination, share subdivision, share dividend, share exchange, merger,
consolidation or similar transaction or event) or otherwise. As to any
particular Registrable Securities, such Registrable Securities shall cease to be
Registrable Securities as soon as (i) such Registrable Securities have been sold
or otherwise disposed of pursuant to a registration statement that was filed
with the Commission in accordance with this Agreement and declared effective
under the Securities Act, (ii) such Registrable Securities shall have been
otherwise sold, transferred or disposed of by a Holder to any Person that is not
a Holder, or (iii) such Registrable Securities shall have ceased to be
outstanding.
"Registration Expenses" means any and all expenses incident to
performance of or compliance with any registration of securities pursuant to
Article 2, including, without limitation, (i) the fees, disbursements and
expenses of the Issuer's counsel and accountants (including in connection with
the delivery of opinions and/or comfort letters) in connection with this
Agreement and the performance of the Issuer's obligations hereunder; (ii) all
expenses, including filing fees, in connection with the preparation, printing
and filing of one or more registration statements hereunder; (iii) the cost of
printing or producing any agreements among underwriters, underwriting
agreements, and blue sky or legal investment memoranda; (iv) the filing fees
incident to securing any required review by the National Association of
Securities Dealers, Inc. of the terms of the sale of the securities to be
disposed of; (v) transfer agents' and registrars' fees and expenses in
connection with such offering; (vi) all security engraving and security printing
expenses; (vii) all fees and expenses payable in connection with the listing of
the Registrable Securities on any securities exchange or automated interdealer
quotation system on which the Common Stock is then listed; and (viii) all
reasonable fees and expenses of one legal counsel for the Holders in connection
with each of the Required Shelf Registration and the Demand Registration, which
legal counsel shall be selected by Holders owning a majority of the Registrable
Securities then being registered; provided that Registration Expenses shall
exclude (x) all underwriting discounts and commissions, selling or placement
agent or broker fees and commissions, and transfer taxes, if any, in connection
with the sale of any securities, (y) the fees and expenses of counsel for any
Holder (other than pursuant to clause (viii)) and (z) all costs and expenses of
the Issuer incurred as contemplated in Section 2.6(g).
"Required Shelf Registration" has the meaning ascribed thereto in
Section 2.1.
"Rule 144" means Rule 144 (or any successor rule to similar effect)
promulgated under the Securities Act.
"Rule 145" means Rule 145 (or any successor rule to similar effect)
promulgated under the Securities Act.
"Rule 415 Offering" means an offering on a delayed or continuous basis
pursuant to Rule 415 (or any successor rule to similar effect) promulgated under
the Securities Act.
"Securities Act" means the Securities Act of 1933, as amended.
"Selling Holder" means any Holder who sells Registrable Securities
pursuant to a public offering registered hereunder.
"Shelf Registration" means the registration under the Securities Act of
a Rule 415 Offering.
"Shelf Registration Statement" means a registration statement intended
to effect a Shelf Registration.
"Zell Holders' Agent" has the meaning ascribed thereto in Section 3.11.
"Zell Holder" means an Investor, any Affiliate of an Investor that is a
Holder, and each Person referred to in clause (x) of the definition of "Holder".
Section 1.2. Internal References. Unless the context indicates
otherwise, references to Articles, Sections and paragraphs shall refer to the
corresponding articles, sections and paragraphs in this Agreement, and
references to the parties shall mean the parties to this Agreement.
ARTICLE 2
REGISTRATION RIGHTS
Section 2.1. Shelf Registration. If requested by a Holder or Holders
holding a majority in interest of the Registrable Securities, as soon as
practicable (but in any event not more than 15 days) after such request, the
Issuer shall prepare and file with the Commission a Shelf Registration Statement
on an appropriate form that shall include all Registrable Securities, and may
include securities of the Issuer for sale for the Issuer's own account (the
"Required Shelf Registration"). The Issuer shall use its reasonable best efforts
to cause such Shelf Registration Statement to be declared effective as soon as
practicable after such request. Notwithstanding anything else contained in this
Agreement, the Issuer shall only be obligated to keep such Shelf Registration
Statement effective until the earliest of:
(a) (y) 12 months after the date such Shelf Registration
Statement has been declared effective or (z) the date, which may not be earlier
than 90 days following the date such Registration Statement has been declared
effective, on which the Issuer delivers to the Holders an opinion of counsel,
reasonably acceptable to the Issuer and the Zell Holders' Agent, to the effect
that in the opinion of such counsel, sales by a Holder (other than a general
partner of an Investor or Samuel Zell) would not be aggregated with sales by
other Holders for purposes of the volume limitations of Rule 144 or 145,
provided that such 12-month period or 90-day period, respectively, shall be
extended by (i) the length of any period during which the Issuer delays in
maintaining the Shelf Registration Statement current pursuant to Section 2.4,
(ii) the length of any period (in which such Shelf Registration Statement is
required to be effective hereunder) during which such Shelf Registration
Statement is not maintained effective, and (iii) such number of days that equals
the number of days elapsing from (x) the date the written notice contemplated by
Section 2.6(e) below is given by the Issuer to (y) the date on which the Issuer
delivers to the Holders of Registrable Securities the supplement or amendment
contemplated by Section 2.6(e) below;
(b) such time as all Registrable Securities have been sold or
disposed of thereunder or sold, transferred or otherwise disposed of to a Person
that is not a Holder; and
(c) such time as all securities that were Registrable
Securities on the date hereof have ceased to be Registrable Securities (the
earliest of (a), (b) and (c) being the "Shelf Termination Date").
The Required Shelf Registration shall not be counted as a Demand
Registration for purposes of Section 2.2 of this Agreement.
Section 2.2. Demand Registration.
(a) Upon written notice to the Issuer from a Holder or Holders
holding a majority in interest of the Registrable Securities (but no later than
the date that is 12 months after the Effective Time) (the "Demand Request")
requesting that the Issuer effect the registration under the Securities Act of
any or all of the Registrable Securities held by such requesting Holders, which
notice shall specify the intended method or methods of disposition of such
Registrable Securities, the Issuer shall prepare as soon as practicable and,
within 15 days after such request, file with the Commission a registration
statement with respect to such Registrable Securities and thereafter use its
reasonable best efforts to cause such registration statement to be declared
effective under the Securities Act for purposes of dispositions in accordance
with the intended method or methods of disposition stated in such request within
30 days after the filing of such registration statement.
Notwithstanding any other provision of this Agreement to the contrary:
(i) the Holders may collectively exercise their rights
to request registration under this Section 2.2(a) on not more than one occasion
(such registration being referred to herein as the "Demand Registration");
(ii) the method of disposition requested by Holders
in connection with any Demand Registration may not, without the Issuer's written
consent, be a Rule 415 Offering; and
(iii) the Issuer shall not be required to effect the
Demand Registration hereunder if
all securities that were Registrable Securities on the date hereof have ceased
to be Registrable Securities.
(b) Notwithstanding any other provision of this Agreement to
the contrary, a Demand Registration requested by Holders pursuant to this
Section 2.2 shall not be deemed to have been effected, and, therefore, not
requested and the rights of each Holder shall be deemed not to have been
exercised for purposes of paragraph (a) above, (i) if such Demand Registration
has not become effective under the Securities Act or (ii) if such Demand
Registration, after it became effective under the Securities Act, was not
maintained effective under the Securities Act (other than as a result of any
stop order, injunction or other order or requirement of the Commission or other
government agency or court solely on the account of a material misrepresentation
or omission of a Holder) for at least 30 days (or such shorter period ending
when all the Registrable Securities covered thereby have been disposed of
pursuant thereto) and, as a result thereof, the Registrable Securities requested
to be registered cannot be distributed in accordance with the plan of
distribution set forth in the related registration statement. So long as a
Demand Request is made by the Holders within the 12-month period referred to in
Section 2.2(a), the Holders shall not lose their right to their Demand
Registration under Section 2.2 if the Demand Registration related to such Demand
Request is delayed or not effected in the circumstances set forth in this clause
(b).
(c) The Issuer shall have the right to cause the registration
of additional equity securities for sale for the account of the Issuer, but not
for the account of any other person, in the registration of Registrable
Securities requested by the Holders pursuant to Section 2.2(a) above, provided
that if such Holders are advised in writing (with a copy to the Issuer) by the
lead or managing underwriter referred to in Section 2.3(b) that, in such
underwriter's good faith view, all or a part of such Registrable Securities and
additional equity securities cannot be sold and the inclusion of such
Registrable Securities and additional equity securities in such registration
would be likely to have an adverse effect on the price, timing or distribution
of the offering and sale of the Registrable Securities and additional equity
securities then contemplated, then the number of securities that can, in the
good faith view of such underwriter, be sold in such offering without so
adversely affecting such offering shall be allocated pro rata among the
requesting Holders and the Issuer on the basis of the relative number requested
to be included therein by the Issuer and each such Holder; provided that in the
event such a pro rata allocation shall be made in connection with the Demand
Request, the remaining Holders shall be entitled to request one additional
Demand Registration (without needing to make a Demand Request therefor within
the 12-month period referred to in Section 2.2(a)); provided further that in
connection with such additional Demand Registration, if any, the Issuer may not
include additional securities therein for its own account if such inclusion
would result in any reduction in the Registrable Securities proposed to be sold
therein by the Holders. The Holders of the Registrable Securities to be offered
pursuant to paragraph (a) above may require that any such additional equity
securities be included by the Issuer in the offering proposed by such Holders on
the same conditions as the Registrable Securities that are included therein.
(d) Within 7 days after delivery of a Demand Request by a
Holder, the Issuer shall provide a written notice to each Holder (provided that,
if so requested by the Issuer after appropriate notice to the Zell Holders'
Agent by the Issuer, the Zell Holders' Agent shall provide written notice to
each Zell Holder), advising such Holder of its right to include any or all of
the Registrable Securities held by such Holder for sale pursuant to the Demand
Registration and advising such Holder of procedures to enable such Holder to
elect to so include Registrable Securities for sale in the Demand Registration.
Any Holder may, within 7 days of delivery to such Holder of a notice pursuant to
this Section 2.2(d), elect to so include Registrable Securities in the Demand
Registration by written notice to such effect to the Issuer specifying the
number of Registrable Securities desired to be so included by such Holder.
Section 2.3. Other Matters In Connection With Registrations.
(a) Each Zell Holder shall keep the Zell Holders' Agent informed promptly (x)
of the name, address and other contact information of such Zell Holder, (y) of
the number of Registrable Securities held from time-to-time by such Zell Holder,
and (z) of each sale, transfer or other disposition of Registrable Securities
(including the number of shares sold) by each such Zell Holder. The Zell
Holders' Agent shall use its reasonable best efforts to keep the Issuer informed
promptly (x) of the name, address and other contact information of each Zell
Holder, (y) of the number of Registrable Securities held from time-to-time by
each such Zell Holder and (z) of each sale, transfer or other disposition of
Registrable Securities (including the number of shares sold) by each such Zell
Holder.
(b) In the event that any public offering pursuant to this
Agreement shall involve, in whole or in part, an underwritten offering, the
Issuer shall have the right to designate an underwriter or underwriters as the
lead or managing underwriters of such underwritten offering who shall be
reasonably acceptable to Holders owning a majority of the Registrable Securities
proposed to be sold therein.
Section 2.4. Certain Delay Rights. Notwithstanding any other provision
of this Agreement to the contrary, if at any time while the Required Shelf
Registration is effective the Issuer provides written notice to each Holder
(whether by notice directly to such Holder or, in the case of the Zell Holders,
through the Zell Holders' Agent) that in the Issuer's good faith and reasonable
judgment it would be materially disadvantageous to the Issuer (because the sale
of Registrable Securities covered by such registration statement or the
disclosure of information therein or in any related prospectus or prospectus
supplement would materially interfere with any acquisition, financing or other
material event or transaction in connection with which a registration of
securities under the Securities Act for the account of the Issuer is then
intended or the public disclosure of which at the time would be materially
prejudicial to the Issuer (a "Disadvantageous Condition") for sales of
Registrable Securities thereunder to then be permitted, and setting forth the
general reasons for such judgment, the Issuer may refrain from maintaining
current the prospectus contained in the Shelf Registration Statement until such
Disadvantageous Condition no longer exists (notice of which the Issuer shall
promptly deliver to each Holder (directly or, in the case of the Zell Holders,
through the Zell Holders' Agent)). Furthermore, notwithstanding anything else
contained in this Agreement, with respect to any registration statement filed,
or to be filed, pursuant to Section 2.2, if the Issuer provides written notice
to each Holder (whether by notice directly to such Holder or, in the case of the
Zell Holders, through the Zell Holders' Agent) that in the Issuer's good faith
and reasonable judgment it would be materially disadvantageous to the Issuer
(because of a Disadvantageous Condition) for such a registration statement to be
maintained effective, or to be filed and become effective, and setting forth the
general reasons for such judgment, the Issuer shall be entitled to cause such
registration statement to be withdrawn or the effectiveness of such registration
statement terminated, or, in the event no registration statement has yet been
filed, shall be entitled not to file any such registration statement, until such
Disadvantageous Condition no longer exists (notice of which the Issuer shall
promptly deliver to each Holder (directly or, in the case of the Zell Holders,
through the Zell Holders' Agent)). With respect to each Holder, upon the receipt
by such Holder of any such notice of a Disadvantageous Condition (directly from
the Issuer or, in the case of the Zell Holders, through the Zell Holders' Agent)
(i) in connection with the Required Shelf Registration, such Holder shall
forthwith discontinue use of the prospectus and any prospectus supplement under
such registration statement and shall suspend sales of Registrable Securities
until such Disadvantageous Condition no longer exists and (ii) in connection
with the Required Shelf Registration or the Demand Registration, as applicable,
if so directed by the Issuer by notice as aforesaid, such Holder will deliver to
the Issuer all copies, other than permanent filed copies then in such Holder's
possession, of the prospectus and prospectus supplements then covering such
Registrable Securities at the time of receipt of such notice as aforesaid.
Notwithstanding anything else contained in this Agreement, (x) neither the
filing nor the effectiveness of any registration statement under Section 2.2 may
be delayed for more than a total of 60 days pursuant to this Section 2.4 and (y)
the maintaining current of a prospectus (and the suspension of sales of
Registrable Securities) in connection with the Required Shelf Registration may
not be delayed under this Section 2.4 for more than a total of 60 days in any
six-month period.
Section 2.5. Expenses. Except as provided herein, the Issuer shall pay
all Registration Expenses with respect to each registration hereunder.
Notwithstanding the foregoing, (i) each Holder and the Issuer shall be
responsible for its own internal administrative and similar costs, which shall
not constitute Registration Expenses, (ii) each Holder shall be responsible for
the legal fees and expenses of its own counsel (except as provided in clause
(viii) of the definition of Registration Expenses), (iii) each Holder shall be
responsible for all underwriting discounts and commissions, selling or placement
agent or broker fees and commissions, and transfer taxes, if any, in connection
with the sale of securities by such Holder, and (iv) the Holders shall be
jointly and severally responsible for all out-of-pocket costs and expenses of
the Issuer and its officers and employees incurred in connection with providing
the assistance and/or attending analyst or investor presentations or any "road
show" undertaken in connection with the registration and/or marketing of any
Registrable Securities as contemplated in Section 2.6(g).
Section 2.6. Registration and Qualification. If and whenever the Issuer
is required to effect the registration of any Registrable Securities under the
Securities Act as provided in Sections 2.1 or 2.2, the Issuer shall as promptly
as practicable (but subject to the provisions of Sections 2.1 and 2.2):
(a) prepare, file and cause to become effective a registration
statement under the Securities Act relating to the Registrable Securities to be
offered in accordance with the intended method of disposition thereof;
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective and
to comply with the provisions of the Securities Act with respect to the
disposition of all Registrable Securities (i) in the case of the Required Shelf
Registration, until the Shelf Termination Date and (ii) in the case of the
Demand Registration, until the earlier of (A) such time as all Registrable
Securities proposed to be sold therein have been disposed of in accordance with
the intended methods of disposition set forth in such registration statement and
(B) the expiration of 30 days after such registration statement becomes
effective, provided, that such 30-day period shall be extended for such number
of days that equals the number of days elapsing from (x) the date the written
notice contemplated by paragraph (e) below is given by the Issuer to (y) the
date on which the Issuer delivers to the Holders of Registrable Securities the
supplement or amendment contemplated by paragraph (e) below;
(c) furnish to the Holders of Registrable Securities and to
any underwriter of such Registrable Securities such number of conformed copies
of such registration statement and of each such amendment and supplement thereto
(in each case including all exhibits), such number of copies of the prospectus
included in such registration statement (including each preliminary prospectus),
in conformity with the requirements of the Securities Act, and such documents
incorporated by reference in such registration statement or prospectus, as the
Holders of Registrable Securities or such underwriter may reasonably request;
(d) furnish to any underwriter of such Registrable Securities
an opinion of counsel for the Issuer and a "cold comfort" letter signed by the
independent public accountants who have audited the financial statements of the
Issuer included in the applicable registration statement, in each such case
covering substantially such matters with respect to such registration statement
(and the prospectus included therein) and the related offering as are
customarily covered in opinions of issuer's counsel with respect thereto and in
accountants' letters delivered to underwriters in underwritten public offerings
of securities and such other matters as such underwriters may reasonably
request;
(e) promptly notifying the Selling Holders in writing (i) at
any time when a prospectus relating to a registration pursuant to Section 2.1 or
2.2 is required to be delivered under the Securities Act of the happening of any
event as a result of which the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a material fact or
omits to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, and (ii) of any request by the Commission or any other
regulatory body or other body having jurisdiction for any amendment or
supplement to any registration statement or other document relating to such
offering, and in either such case, at the request of the Selling Holders prepare
and furnish to the Selling Holders a reasonable number of copies of a supplement
to or an amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such Registrable Securities, such prospectus
shall not include an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they are made, not
misleading;
(f) use its reasonable best efforts to list all such
Registrable Securities covered by such registration on each securities exchange
and automated interdealer quotation system on which the Common Stock is then
listed;
(g) use reasonable efforts to assist the Holders in the
marketing of Common Stock in connection with up to two underwritten offerings
hereunder (including, to the extent reasonably consistent with work commitments,
using reasonable efforts to have officers of the Issuer attend "road shows" and
analyst or investor presentations scheduled in connection with such
registration), with all out-of-pocket costs and expenses incurred by the Issuer
or such officers in connection with such attendance or assistance to be paid by
the Holders as provided in Section 2.5; and
(h) furnish for delivery in connection with the closing of any
offering of Registrable Securities pursuant to a registration effected pursuant
to Section 2.1 or 2.2 unlegended certificates representing ownership of the
Registrable Securities being sold in such denominations as shall be requested by
the Selling Holders or the underwriters.
Section 2.7. Underwriting; Due Diligence.
(a) If requested by the underwriters for any underwritten
offering of Registrable Securities pursuant to a registration requested under
this Article 2, the Issuer shall enter into an underwriting agreement with such
underwriters for such offering, which agreement will contain such
representations and warranties by the Issuer and such other terms and provisions
as are customarily contained in underwriting agreements with respect to
secondary distributions, including, without limitation, indemnification and
contribution provisions substantially to the effect and to the extent provided
in Section 2.8, and agreements as to the provision of opinions of counsel and
accountants' letters to the effect and to the extent provided in Section 2.6(d).
Such underwriting agreement shall also contain such representations and
warranties by such Selling Holders and such other terms and provisions as are
customarily contained in underwriting agreements with respect to secondary
distributions, including, without limitation, indemnification and contribution
provisions substantially to the effect and to the extent provided in Section
2.8.
(b) In connection with the preparation and filing of each registration
statement registering Registrable Securities under the Securities Act pursuant
to this Article 2, the Issuer shall give the Permitted Holders of such
Registrable Securities and the underwriters, if any, and their respective
counsel and accountants (the identity and number of whom shall be reasonably
acceptable to the Issuer), such reasonable and customary access to its books,
records and properties and such opportunities to discuss the business and
affairs of the Issuer with its officers and the independent public accounts who
have certified the financial statements of the Issuer as shall be necessary, in
the opinion of such Holders and such underwriters or their respective counsel,
to conduct a reasonable investigation within the meaning of the Securities Act;
provided that the foregoing shall not require the Issuer to provide access to
(or copies of) any competitively sensitive information relating to the Issuer or
its subsidiaries or their respective business; provided further that (i) each
Holder and the underwriters and their respective counsel and accountants shall
have entered into a confidentiality agreement reasonably acceptable to the
Issuer and (ii) the Permitted Holders and the underwriters and their respective
counsel and accountants shall use their reasonable best efforts to minimize the
disruption to the Issuer's business and coordinate any such investigation of the
books, records and properties of the Issuer and any such discussions with the
Issuer's officers and accountants so that all such investigations occur at the
same time and all such discussions occur at the same time.
Section 2.8. Indemnification and Contribution.
(a) The Issuer agrees to indemnify and hold harmless each
Selling Holder and each Person, if any, who controls such Selling Holder within
the meaning of either Section 15 of the Securities Act or Section 20 of the
Exchange Act from and against any and all losses, claims, damages and
liabilities (including, without limitation, any legal or other expenses
reasonably incurred in connection with defending or investigating any such
action or claim) insofar as such losses, claims, damages or liabilities are
caused by any untrue statement or alleged untrue statement of a material fact
contained in any registration statement or any amendment thereof, any
preliminary prospectus or prospectus (as amended or supplemented if the Issuer
shall have furnished any amendments or supplements thereto) relating to the
Registrable Securities, or caused by any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, except insofar as such losses, claims,
damages or liabilities are caused by any such untrue statement or omission or
alleged untrue statement or omission based upon information furnished to the
Issuer in writing by such Selling Holder expressly for use therein. The Issuer
also agrees to indemnify any underwriter of the Registrable Securities so
offered and each Person, if any, who controls such underwriter on substantially
the same basis as that of the indemnification by the Issuer of the Selling
Holders provided in this Section 2.8(a).
(b) Each Selling Holder agrees to indemnify and hold harmless
the Issuer, its directors, the officers who sign the registration statement and
each Person, if any who controls the Issuer within the meaning of either Section
15 of the Securities Act or Section 20 of the Exchange Act, from and against any
and all loses, claims, damages, liabilities (including, without limitation, any
legal or other expenses reasonably incurred in connection with defending or
investigating any such action or claim) insofar as such losses, claims, damages
or liabilities are caused by any untrue statement or alleged untrue statement of
a material fact contained in any registration statement or any amendment
thereof, any preliminary prospectus or prospectus (as amended or supplemented if
the Issuer shall have furnished any amendments or supplements thereto) relating
to the Registrable Securities, or caused by any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, but only with reference to information
furnished in writing by such Selling Holder (or any representative thereof)
expressly for use in a registration statement, any preliminary prospectus,
prospectus or any amendments or supplements thereto. Each Selling Holder also
agrees to indemnify any underwriter of the Registrable Securities so offered and
each Person, if any, who controls such underwriter on substantially the same
basis as that of the indemnification by such Selling Holder of the Issuer
provided in this Section 2.8(b).
(c) Each party indemnified under paragraph (a) or (b) above
shall, promptly after receipt of notice of a claim or action against such
indemnified party in respect of which indemnity may be sought hereunder, notify
the indemnifying party in writing of the claim or action; provided that the
failure to notify the indemnifying party shall not relieve it from any liability
that it may have to an indemnified party on account of the indemnity agreement
contained in paragraph (a) or (b) above except to the extent that the
indemnifying party was actually prejudiced by such failure, and in no event
shall such failure relieve the indemnifying party from any other liability that
it may have to such indemnified party. If any such claim or action shall be
brought against an indemnified party, and it shall have notified the
indemnifying party thereof, unless based on the written advice of counsel to
such indemnified party a conflict of interest between such indemnified party and
indemnifying parties may exist in respect of such claim, the indemnifying party
shall be entitled to participate therein, and, to the extent that it wishes,
jointly with any other similarly notified indemnifying party, to assume the
defense thereof. After notice from the indemnifying party to the indemnified
party of its election to assume the defense of such claim or action, the
indemnifying party shall not be liable to the indemnified party under this
Section 2.8 for any legal or other expenses subsequently incurred by the
indemnified party in connection with the defense thereof. Any indemnifying party
against whom indemnity may be sought under this Section 2.8 shall not be liable
to indemnify an indemnified party if such indemnified party settles such claim
or action without the consent of the indemnifying party. The indemnifying party
may not agree to any settlement of any such claim or action, other than solely
for monetary damages for which the indemnifying party shall be responsible
hereunder, the result of which any remedy or relief shall be applied to or
against the indemnified party, without the prior written consent of the
indemnified party, which consent shall not be unreasonably withheld. In any
action hereunder as to which the indemnifying party has assumed the defense
thereof, the indemnified party shall continue to be entitled to participate in
the defense thereof, with counsel of its own choice, but the indemnifying party
shall not be obligated hereunder to reimburse the indemnified party for the
costs thereof.
(d) If the indemnification provided for in this Section 2.8
shall for any reason be unavailable (other than in accordance with its terms) to
an indemnified party in respect of any loss, liability, cost, claim or damage
referred to therein, then each indemnifying party shall, in lieu of indemnifying
such indemnified party, contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, cost, claim or damage (i)
in such proportion as is appropriate to reflect the relative benefits received
by the Issuer on the one hand and the Selling Holders on the other hand from the
offering of the Registrable Securities or (ii) if the allocation provided by
clause (i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of the indemnifying party or parties on the
one hand and of the indemnified party or parties on the other hand in connection
with the statements or omissions that resulted in such losses, claims, damages
or liabilities, as well as any other relevant equitable considerations. The
relative benefits received by the Issuer on the one hand and the Selling Holders
on the other hand in connection with the offering of the Registrable Securities
shall be deemed to be in the same respective proportions as the net proceeds
from the offering of the Registrable Securities (before deducting expenses)
received by the Issuer and the Selling Holders, respectively, bear to the
aggregate public offering price of the Registrable Securities. The relative
fault of the Issuer on the one hand and the Selling Holders on the other hand
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information supplied by the Issuer or a
Selling Holder and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The amount paid or payable by an indemnified party as a result of the loss,
cost, claim, damage or liability, or action in respect thereof, referred to
above in this paragraph (d) shall be deemed to include, for purposes of this
paragraph (d), any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such action
or claim. The Issuer and the Selling Holders agree that it would not be just and
equitable if contribution pursuant to this Section 2.8 were determined by pro
rata allocation or by any other method of allocation which does not take account
of the equitable considerations referred to in this paragraph. Notwithstanding
any other provision of this Section 2.8, no Selling Holder shall be required to
contribute any amount in excess of the amount by which the total price at which
the Registrable Securities of such Selling Holder were offered to the public
exceeds the amount of any damages which such Selling Holder has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission. No Person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation.
(e) The obligations of the parties under this Section 2.8
shall be in addition to any liability which any party may otherwise have to any
other party.
Section 2.9. Holdback Agreement. If the Demand Registration pursuant to
this Article 2 shall be in connection with an underwritten public offering of
Registrable Securities, each Selling Holder agrees not to effect any sale or
distribution, including any sale under Rule 144, of any equity security of the
Issuer (otherwise than through the registered public offering then being made),
within 7 days prior to or 90 days (or such lesser period as the lead or managing
underwriters may permit) after the effective date of the applicable registration
statement.
ARTICLE 3
MISCELLANEOUS
Section 3.1. Entire Agreement. This Agreement constitutes the entire
agreement between the parties with respect to the subject matter hereof and
supersedes all other prior agreements and understandings, both written and oral,
between the parties with respect to the subject matter hereof.
Section 3.2. Assignment. No party may assign any of its rights or
obligations hereunder by operation of law or otherwise without the prior
written consent of the other parties.
Section 3.3. Amendments, Waivers, Etc. This Agreement may not be
amended, changed, supplemented, waived or otherwise modified or terminated,
except upon the execution and delivery of a written agreement executed by the
Issuer and Holders representing a majority of the Registrable Securities then
held by all Holders.
Section 3.4. Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly received if given) by hand delivery or telecopy, or by
any courier service, such as Federal Express, providing proof of delivery. All
communications hereunder shall be delivered to the respective parties at the
address or telecopy number set forth on the signature pages hereto (unless such
contact information in the case of the Holders is updated pursuant to Section
2.3(a) or by written notice from the affected Holder to the Issuer).
Section 3.5. Severability. Whenever possible, each provision or portion
of any provision of this Agreement will be interpreted in such manner as to be
effective and valid under applicable law but if any provision or portion of any
provision of this Agreement is held to be invalid, illegal or unenforceable in
any respect under any applicable law or rule in any jurisdiction, such
invalidity, illegality or unenforceability will not affect any other provision
or portion of any provision in such jurisdiction, and this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision or portion of any provision had never been
contained herein.
Section 3.6. No Waiver. The failure of any party hereto to exercise any
right, power or remedy provided under this Agreement or otherwise available in
respect hereof at law or in equity, or to insist upon compliance by any other
party hereto with its obligations hereunder, and any custom or practice of the
parties at variance with the terms hereof, shall not constitute a waiver by such
party of its right to exercise any such or other right, power or remedy or to
demand such compliance.
Section 3.7. No Third Party Beneficiaries. This Agreement is not
intended to be for the benefit of, and shall not be enforceable by, any Person
who or which is not a party hereto; provided, that, this Agreement is also
intended to be for the benefit of and is enforceable by each Holder.
Section 3.8. Governing Law. This Agreement shall be governed and
construed in accordance with the laws of the State of Delaware, without giving
effect to the principles of conflicts of law thereof.
Section 3.9. Jurisdiction. Each party hereby irrevocably submits to the
exclusive jurisdiction of the United States District Court for the Southern
District of New York or any state court sitting in the City of New York, Borough
of Manhattan in any action, suit or proceeding arising in connection with this
Agreement, and agrees that any such action, suit or proceeding shall be brought
only in such courts (and waives any objection based on forum non convenience or
any other objection to venue therein); provided, however, that such consent to
jurisdiction is solely for the purpose referred to in this Section 3.9 and shall
not be deemed to be a general submission to the jurisdiction of said courts or
in the State of New York other than for such purposes. Each party hereto hereby
waives any right to a trial by jury in connection with any such action, suit or
proceeding.
Section 3.10. Descriptive Headings. The descriptive headings used
herein are inserted for convenience of reference only and are not intended
to be part of or to affect the meaning or interpretation of this Agreement.
Section 3.11. Holders' Agent. Each Zell Holder hereby appoints
Zell/Chilmark Fund, L.P. as its agent and attorney-in-fact (the "Zell Holders'
Agent") for purposes of the delivery and receipt of all notices and requests
pursuant to this Agreement. The Issuer may give notice to any Zell Holder
hereunder by giving such notice directly to such Holder. Alternatively, the
Issuer may request that the Zell Holders' Agent deliver to each Zell Holder any
notice given by the Issuer hereunder, in which event the Zell Holders' Agent
will promptly so give such notice to each Zell Holder. Prompt delivery by the
Zell Holders' Agent to the Zell Holders will be deemed satisfied if delivery is
made to the Zell Holders, in accordance with Section 3.4, not later than the
third business day after actual receipt of the applicable notice or document by
the Zell Holders' Agent from the Issuer. Notwithstanding anything else contained
herein, the Zell Holders' Agent will not be liable or responsible to any Person
should any Zell Holder fail to act in accordance with any notice so given to
such Zell Holder hereunder.
Section 3.12. Counterparts. This Agreement may be executed in
counterpart, each of which shall be deemed to be an original, but all of which,
taken together, shall constitute one and the same Agreement.
<PAGE>
IN WITNESS WHEREOF, the Issuer and the Holders have caused this
Agreement to be duly executed as of the day and year first above written.
CLEAR CHANNEL COMMUNICATIONS, INC.
By: /s/ Randall T. Mays
Name: Randall T. Mays
Address: 200 Concord Plaza, Suite 600
San Antonio, TX 78216
Facsimile No.: (210) 822-2299
HOLDERS:
ZELL/CHILMARK FUND, L.P. SAMSTOCK, L.L.C.
By: ZC Limited Partnership, By: SZ Investments, L.L.C.,
general partner its sole member its sole member
By: ZC Partnership, By: Zell General Partnership, Inc.,
general partner a member
By: ZC Inc., a partner
By: /s/ Sheli Z. Rosenberg By: /s/ Sheli Z. Rosenberg
Name: Sheli Z. Rosenberg Name: Sheli Z. Rosenberg
Address: 2 North Riverside Plaza Address: 2 North Riverside Plaza
Chicago, Illinois 60606 Chicago, Illinois 60606
Facsimile No.: (312) 454-0531 Facsimile No.: (312) 207-5243
SZ2 (IGP) PARTNERSHIP
By: /s/ Sheli Z. Rosenberg /s/ Samuel Zell
Name: Sheli Z. Rosenberg SAMUEL ZELL
Address: 2 North Riverside Plaza Address: 2 North Riverside Plaza
Chicago, Illinois 60606 Chicago, Illinois 60606
Facsimile No.: (312) 454-0531 Facsimile No.: (312) 207-5243
EXHIBIT 3.3
ARTICLES OF AMENDMENT
TO THE ARTICLES OF INCORPORATION
OF CLEAR CHANNEL COMMUNICATIONS, INC.
Pursuant to the provisions of article 4.04 of the Texas Business
Corporation Act, the undersigned corporation adopts the following articles of
amendment to its articles of incorporation:
ARTICLE ONE
The name of the corporation is CLEAR CHANNEL COMMUNICATIONS, INC.
ARTICLE TWO
The following amendment to the articles of incorporation, increasing
the number of shares that the corporation is authorized to issue from
152,000,000 shares to 610,000,000 shares, was adopted by the shareholders of the
corporation on July 13, 1998. The amendment alters or changes Article Four,
Section 1 and Section 2 of the original or amended articles of incorporation and
the full text of such section is as follows:
"ARTICLE FOUR
"Section 1. Authorized Shares. The aggregate number of shares which the
Corporation shall have the authority to issue is 610,000,000 shares, consisting
of three classes of capital stock:
(a) 600,000,000 shares of Common Stock ("Common Stock"), par value of $.10
each;
(b) 2,000,000 shares of Class A Preferred Stock ("Class A Preferred
Stock"), par value of $1.00 each; and
(c) 8,000,000 shares of Class B Preferred Stock ("Class B Preferred
Stock"), par value of $1.00 each.
Section 2. Preferred Stock; Designations, Preferences, etc.
(a) Class A Preferred Stock. Shares of Class A Preferred Stock may be
issued from time to time in one or more series. The Corporation's
Board of Directors is authorized, subject to limitations prescribed by
law, to provide for the issuance of the shares of Class A Preferred
Stock in series, and by filing a statement pursuant to the applicable
law of the State of Texas to establish from time to time the number of
shares to be included in each such series, to determine the powers,
designations, preferences and relative, participating, optional or
other special rights, including voting rights, and the qualifications,
limitations or restrictions thereof, of each series of Class A
Preferred Stock and may increase or decrease the number of shares
within such series; provided, however, that the Board of Directors may
not decrease the number of shares within a series to less than the
number of shares within such series that are then outstanding and may
not increase the number of shares within a series above the total
number of authorized shares of Class A Preferred Stock for which the
powers, designations, preferences and rights have not otherwise been
set forth herein. Each share of any series of Class A Preferred Stock
shall be identical with all other shares of such series.
(b) Class B Preferred Stock. Shares of Class B Preferred Stock may be
issued from time to time in one or more series. The Corporation's
Board of Directors is authorized, subject to limitations prescribed by
law, to provide for the issuance of the shares of Class B Preferred
Stock in series, and by filing a statement pursuant to the applicable
law of the State of Texas to establish from time to time the number of
shares to be included in each such series, to determine the powers,
designations, preferences and relative, participating, optional or
other special rights, including voting rights, and the qualifications,
limitations or restrictions thereof, of each series of Class B
Preferred Stock; provided, however, that the holders of shares of any
series of Class B Preferred Stock shall not be entitled to more than
one vote per share when voting as a class with the holders of shares
of Common Stock. The Board of Directors is further authorized, subject
to limitations prescribed by law, to increase or decrease the number
of shares within any series of Class B Preferred Stock; provided,
however, that the Board of Directors may not decrease the number of
shares within a series to less than the number of shares within such
series that are then outstanding and may not increase the number of
shares within a series above the total number of authorized shares of
Class B Preferred Stock for which the powers, designations,
preferences and rights have not otherwise been set forth herein. Each
share of any series of Class B Preferred Stock shall be identical with
all other shares of such series."
ARTICLE THREE
The number of shares of the corporation outstanding at the time of such
adoption was 124,058,408; and the number of shares entitled to vote thereon was
124,009,980.
<PAGE>
ARTICLE FOUR
The number of shares voted for the portion of the amendment to increase
the number of authorized shares of Common Stock was 98,863,379; and the number
of shares voted against such portion of the amendment was 16,029,730. The number
of shares voted for the portion of the amendment to authorize the issuance of
Class B Preferred Stock was 83,324,710; and the number of shares voted against
such portion was 27,322,142.
Dated July 20, 1998.
CLEAR CHANNEL COMMUNICATIONS, INC.
By: /s/ Kenneth E. Wyker
Kenneth E. Wyker
Secretary
EXHIBIT 11 - COMPUTATION OF EARNINGS PER SHARE
In thousands of dollars, except per share data
Nine months ended
September 30,
1998 1997
---- ----
Numerator:
Net income $ 44,990 $41,301
Effect of dilutive securities:
Eller put/call option agreement (2,843) (941)
Convertible debt 4,905 --
-------- --------
Numerator for net income per
common share - diluted $47,052 $40,360
======== ========
Denominator:
Weighted average common shares 231,362 170,448
Effect of dilutive securities:
Employee stock options 4,238 4,545
Eller put/call option agreement 1,995 1,450
Convertible debt 6,222 --
-------- --------
Denominator for net income
per common share - diluted 243,817 176,443
======== ========
Net income per common share:
Basic $ .19 $ .24
======== ========
Diluted $ .19 $ .23
======== ========
EXHIBIT 12 - COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
Nine months ended
September 30, Year Ended
---------------------- ---------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
------ ------ ----- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Income before income
taxes 93,756 64,556 104,077 71,240 49,817 36,396 15,696
Dividends and other received from
nonconsolidated affiliates 1,807 2,236 4,624 10,430 1,432
--------- -------- ------- ------- -------- -------- --------
Total 95,563 66,792 108,701 81,670 51,249 36,396 15,696
Fixed Charges
Interest expense 94,555 51,804 75,076 30,080 20,752 7,669 5,390
Amortization of loan fees 1,571 1,013 1,451 506 1,004 82 5
Interest portion of rentals 8,853 4,590 6,120 424 361 262 188
--------- --------- ---------- --------- --------- --------- ---------
Total fixed charges 104,979 57,407 82,647 31,010 22,117 8,013 5,583
Preferred stock dividends
Tax effect of preferred dividends 0 0 0 0 0 0 0
After tax preferred dividends 0 0 0 0 0 0 0
--------- --------- ---------- --------- --------- --------- ---------
Total fixed charges and
preferred dividends 104,979 57,407 82,647 31,010 22,117 8,013 5,583
--------- --------- ---------- --------- --------- --------- ---------
Total earnings available for
payment of fixed charges 200,542 124,199 191,348 112,680 73,366 44,409 21,279
====== ===== ===== ===== ===== ===== =====
Ratio of earnings to fixed
Charges 1.91 2.16 2.32 3.63 3.32 5.54 3.81
====== ===== ===== ===== ===== ===== =====
Rental fees and charges 110,659 57,375 76,500 5,299 4,510 3,273 2,344
Interest rate 8% 8% 8% 8% 8% 8% 8%
</TABLE>
EXHIBIT 27 - FINANCIAL DATA SCHEDULE
FISCAL-YEAR-END DEC-31-1998
PERIOD-END SEPT-30-1998
CASH 48192484
SECURITIES 0
RECEIVABLES 173900552
ALLOWANCES 17938262
INVENTORY 0
CURRENT-ASSETS 400861528
PP&E 193869839
DEPRECEATION 217420870
TOTAL-ASSETS 7261285067
CURRENT-LIABILITIES 242215189
BONDS 600000000
PREFERRED-MANDATORY 0
PREFERRED 0
COMMON 24855615
OTHER-SE 3763701580
TOTAL-LIABILITY-AND-EQUITY 7261285067
SALES 0
TOTAL-REVENUES 909555036
CGS 0
TOTAL-COSTS 517561842
OTHER-EXPENSES 13415963
LOSS-PROVISION 0
INTEREST-EXPENSE 94555300
INCOME-PRETAX 93756126
INCOME-TAX 48765987
INCOME-CONTINUING 44990139
DISCONTINUED 0
EXTRAORDINARY 0
CHANGES 0
NET-INCOME 44990139
EPS-BASIC .19
EPS-DILUTED .19
