<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
[x] Annual report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the fiscal year ended December 31, 1999, or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ________ to _________.
COMMISSION FILE NUMBER
1-9645
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
Telephone (210) 822-2828
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
Securities registered pursuant to Section 12(b) of the Act: Common
Stock, $.10 par value per share.
Securities registered pursuant to Section 12(g) of the Act: None.
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 such 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 by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
On March 10, 2000, the aggregate market value of the Common Stock beneficially
held by non-affiliates of the Company was approximately $19.5 billion. (For
purposes hereof, directors, executive officers and 10% or greater shareholders
have been deemed affiliates).
On March 10, 2000, there were 338,870,380 outstanding shares of Common Stock,
excluding 12,829 shares held in treasury.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of our Definitive Proxy Statement for the 2000 Annual Meeting, expected
to be filed within 120 days of our fiscal year end, are incorporated by
reference into Part III.
<PAGE> 2
CLEAR CHANNEL COMMUNICATIONS, INC.
INDEX TO FORM 10-K
<TABLE>
<CAPTION>
Page
Number
------
PART I.
<S> <C> <C>
Item 1. Business....................................................................................... 3
Item 2. Properties.................................................................................... 47
Item 3. Legal Proceedings............................................................................. 48
Item 4. Submission of Matters to a Vote of Security Holders........................................... 48
PART II.
Item 5. Market for Registrant's Common Stock and Related Stockholder Matters.......................... 49
Item 6. Selected Financial Data....................................................................... 50
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations........................................................... 51
Item 7A. Quantitative and Qualitative Disclosures about Market Risk .................................. 61
Item 8. Financial Statements and Supplementary Data .................................................. 63
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure........................................................... 93
PART III.
Item 10. Directors and Executive Officers of the Registrant........................................... 94
Item 11. Executive Compensation....................................................................... 96
Item 12. Security Ownership of Certain Beneficial Owners and Management............................... 96
Item 13. Certain Relationships and Related Transactions............................................... 96
PART IV.
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K............................. 97
</TABLE>
2
<PAGE> 3
PART I
ITEM 1. BUSINESS
THE COMPANY
Clear Channel Communications, Inc., is a diversified media company with
two business segments: broadcasting and outdoor advertising. We were
incorporated in Texas in 1974. As of December 31, 1999, we owned, programmed, or
sold airtime for 507 domestic radio stations, 2 international radio stations and
24 domestic television stations and we were one of the world's largest outdoor
advertising companies based on total advertising display inventory of 133,097
domestic display faces and 422,060 international display faces.
During 1999, we derived approximately 53% of our net revenue from
broadcasting operations and approximately 47% from outdoor advertising
operations.
Our principal executive offices are located at 200 Concord Plaza, Suite
600, San Antonio, Texas 78216 (telephone: 210-822-2828).
BROADCASTING
As of December 31, 1999, we owned, programmed or sold airtime for 173
AM and 334 FM radio stations, and 24 television stations in 123 domestic markets
and two international radio stations. Our radio stations employ a wide variety
of programming formats, such as News/Talk/Sports, Country, Adult Contemporary,
Urban and Album Rock. We own two international radio stations located in Denmark
and broadcast Adult Contemporary and Oldies formats to the Copenhagen market and
one cable audio channel that reaches most of Denmark. We also provide
programming to and sell airtime under exclusive sales agency agreements for
three radio stations in Mexico. In addition, we operate several radio networks
serving Oklahoma, Texas, Iowa, Kentucky, Virginia, Alabama, Tennessee, Florida
and Pennsylvania. In addition, we currently own the following interests in radio
broadcasting companies:
o a 50% equity interest in the Australian Radio Network Pty., Ltd.,
which operates radio stations in Australia;
o a 33% equity interest in New Zealand Radio Network, which operates
radio stations in New Zealand;
o a 26% non-voting equity interest in Hispanic Broadcasting Corporation,
formerly Heftel Broadcasting Corporation, (Nasdaq: HBCCA) a leading
domestic Spanish-language radio broadcaster;
o a 40% equity interest in Grupo Acir Communicaciones, S.A. de C.V., one
of the largest radio broadcasters in Mexico;
o a 50% equity interest in Radio 1, which owns seven radio stations in
Norway;
o a 32% equity interest in Golden Rose, which owns two radio stations in
England; and
3
<PAGE> 4
o a 50% equity interest in Radio Bonton, a.s., which owns an FM radio
station in the Czech Republic.
Our television stations are affiliated with various television
networks, including FOX, UPN, ABC, NBC and CBS. The primary sources of
programming for our ABC, NBC and CBS affiliated television stations are their
respective networks, which produce and distribute programming in exchange for
each station's commitment to air the programming at specified times and for
commercial announcement time during the programming. We supply the majority of
programming to our FOX and UPN affiliates by selecting and purchasing syndicated
television programs.
OUTDOOR ADVERTISING
As of December 31, 1999, we owned a total of 549,257 advertising
display faces, and operated 5,900 display faces under license management
agreements. We currently provide outdoor advertising services in over 43
domestic markets and over 23 international markets. Domestic display faces
include billboards of various sizes and various small display faces on the
interior and exterior of various public transportation vehicles. International
display faces include street furniture, transit displays and billboards of
various sizes. We also operate numerous smaller displays such as cube displays
in retail malls and convenience store window displays. Additionally, we
currently own the following interests in outdoor advertising companies:
o a 50% equity interest in Hainan White Horse Advertising Media
Investment Co. Ltd., which operates street furniture displays in
China;
o a 50% equity interest in Sirocco International SA, which is developing
a new 8 square meter format network and obtaining concessions for 2
square meter format panels in France;
o a 50% equity interest in Adshel Street Furniture Pty., Limited, which
operates street furniture displays in Australia and New Zealand;
o a 30% equity interest in Capital City Posters Pty., Ltd, which
operates street furniture and billboard displays in Singapore;
o a 50% equity interest in Buspak, which operates bus and tram displays
in Hong Kong; and
o a 31.9% equity interest in Master & More Co., Ltd, which operates
billboard displays in Thailand.
COMPANY STRATEGY
Since our inception, we have focused on helping our clients distribute
their marketing messages in the most efficient ways possible. We believe our
ultimate success is measured by how well we assist our clients in selling their
products and services. To this end, we have assembled a variety of media assets
designed to provide the most efficient and cost-effective ways for our clients
to reach consumers. These assets are comprised of broadcasting assets and
outdoor advertising displays. In the past we have combined these assets with the
talent and motivation of our entrepreneurial personnel to create strong internal
growth. We plan to continue this effort in order to serve our advertisers, our
listeners and viewers, and our equity and debt stakeholders.
4
<PAGE> 5
In the past, a portion of our growth has been achieved through the
acquisition of additional assets within our two business segments. We have found
that the addition of assets to our portfolio gives our clients more flexibility
in the distribution of their messages, and therefore allows us to provide these
clients with a higher level of service. In addition, given our experience in the
industries in which we operate, we are often able to improve the operations of
assets we acquire, thus further enhancing the value they have as an advertising
venue, as well as the value those assets hold for our stakeholders. We evaluate
potential acquisitions based on the returns they can potentially provide on
invested capital by themselves, as well as the positive effects they might have
on our existing business.
Additionally, we seek to create situations in which we own more than
one type of medium in the same market. Aside from the provision of added
flexibility to our clients, this "cross-ownership" allows us ancillary benefits,
such as the use of otherwise vacant outdoor advertising space to promote our
broadcasting assets, or the sharing of on-air talent across radio and television
assets. These are only two examples of the benefits of cross-ownership, but
there are others as well.
Our management believes that growth within the "out-of-home"
advertising business (predominantly radio and outdoor advertising) will be
strong in coming years. We believe the increasing commute times to which
Americans are subjected is one factor supporting such growth. In addition, we
believe that "in-home" media, including broadcast television, cable and the
Internet, increasingly compete against one another for advertising revenues in
the home. Therefore, we have dramatically expanded the "out-of-home" aspects of
our business by continuing our growth, both internal and external, in the radio
and outdoor advertising businesses.
The core to our investment approach has been the pursuit of attractive
business models, which we believe best serve our stakeholders. We think that the
combination of historically stable revenue growth within the industries in which
we operate, coupled with a fixed expense structure and minimal requirements for
ongoing capital expenditures, gives us an excellent forum in which to generate
free cash flow and provide value to our investors. We intend to continue this
creation of value.
BROADCASTING STRATEGY
Our broadcasting strategy entails the ongoing operation of existing
stations as well as the acquisition of under-performing stations, on favorable
terms, for the purpose of improving their performance. Our management seeks to
improve performance of these stations through effective programming, reduction
of costs and aggressive promotion, marketing and sales. We emphasize direct
sales to local customers rather than through advertising agencies and other
intermediaries. We believe that this focus enables our stations to achieve
market revenue shares exceeding their audience shares.
We believe that clustering broadcasting assets together in markets
leads to substantial operating advantages. We attempt to cluster radio stations
in each of our principal markets because we believe that we can offer
advertisers more attractive packages of advertising options if we control a
larger share of the total advertising inventory in a particular market. We also
believe that by clustering we can operate our stations with more highly skilled
local management teams and eliminate duplicative operating and overhead
expenses. We believe that owning multiple broadcasting stations in a market
allows us to provide a more diverse programming selection for our listeners and
a more efficient means for our advertisers to reach those listeners.
5
<PAGE> 6
OUTDOOR ADVERTISING STRATEGY
Our outdoor advertising strategy involves expanding our market presence
in the outdoor advertising business and improving our operating results through
application of the following principles:
o managing the advertising rates and occupancy levels of our displays to
maximize revenues;
o attracting new categories of advertisers to the outdoor medium through
significant investments in sales, marketing, creative and research
services;
o constructing new displays and upgrading our existing displays;
o taking advantage of technological advances which increase sales force
productivity, production department efficiency, and quality of
product;
o acquiring additional displays in our existing markets; and
o expanding into additional markets where we already have a broadcasting
presence as well as into the country's largest media markets and their
surrounding regional areas.
To support our broadcasting and outdoor operating strategies, we have
decentralized our operating structure in order to place authority, autonomy and
accountability at the market level and to provide local management with the
tools necessary to oversee sales, product development, administration and
production and to identify possible acquisition candidates. We also maintain
fully-staffed sales and marketing offices in New York which service national
advertising accounts and support our local sales force in each market. We
believe that one of our strongest competitive advantages is our unique blend of
highly experienced corporate and local market management.
RECENT DEVELOPMENTS
AMFM Inc. Merger
AMFM is a large national radio broadcasting and related media company
with operations in radio broadcasting, media representation and the Internet,
which as of December 31, 1999 consisted of: a radio station portfolio that,
assuming completion of announced transactions, consists of 444 radio stations
(320 FM and 124 AM) in 63 markets throughout the continental United States,
including 6 stations operated under time brokerage or joint sales agreements,
which allow AMFM to program another person's station and/or sell the
advertising; Katz Media, a full-service media representation firm that sells
national spot advertising time for its clients in the radio and television
industries primarily throughout the United States and for AMFM's portfolio of
radio stations; and AMFM's Internet initiative which focuses on developing
AMFM's Internet web sites, streaming online broadcasts of AMFM's on-air
programming and other media, and promoting emerging Internet and new media
concerns. In addition, AMFM owns an approximate 30% equity interest in Lamar
Advertising Company, one of the largest owners and operators of outdoor
advertising structures in the United States.
6
<PAGE> 7
The AMFM Merger Agreement
On October 2, 1999, we entered into a merger agreement with AMFM.
Pursuant to the merger agreement, we will merge our wholly-owned subsidiary with
and into AMFM which will survive as our wholly-owned subsidiary. Each share of
AMFM common stock will convert into 0.94 shares of our common stock. Based on
the number of shares outstanding as of December 31, 1999 and assuming that no
additional shares of AMFM common stock are issued before the completion of the
merger other than shares currently contemplated to be issued in connection with
the conversion of AMFM's convertible preferred stock, we will issue
approximately 202.8 million shares of our common stock in the merger to the
shareholders of AMFM. Pursuant to the merger agreement, at the completion of the
merger, our board of directors will be expanded to include five members who
currently serve on the AMFM board of directors.
Registration Rights Agreement
In connection with the merger agreement, we entered into a registration
rights agreement with certain shareholders of AMFM. As a result of the
registration rights agreement, we may be required to file registration
statements with the SEC to register for resale our common stock received by such
AMFM stockholders in the merger.
Shareholders Agreement
In connection with the merger, several significant stockholders of us
and AMFM entered into a shareholders agreement with us which imposes standstill
and transfer restrictions on the stockholders and obligates those AMFM
stockholders to take various actions regarding regulatory approvals. Mr. Thomas
O. Hicks and seven entities affiliated with Hicks, Muse, Tate & Furst
Incorporated comprise the AMFM stockholders who have entered into the
shareholders agreement and will sometimes be referred to as the Hicks Muse
stockholders in this discussion of the shareholders agreement. Mr. Hicks and
these affiliates of Hicks Muse will be entitled to receive our common stock in
exchange for their AMFM common stock at the effective time of the merger. Our
stockholders who have entered into the shareholders agreement include L. Lowry
Mays and 4-M Partners, Ltd., a limited partnership of which Mr. L. Mays is the
general partner. Mr. L. Mays and the affiliated partnership will sometimes be
referred to as the L. Mays stockholders in this discussion of the shareholders
agreement.
The shareholder agreement imposes standstill and voting restrictions on
the Hicks Muse stockholders and the L. Mays stockholders regarding their
acquisition of our voting securities and their rights to initiate and
participate in business combination transactions, tender and exchange offers,
and proxy or consent solicitations following the merger.
The Hicks Muse stockholders also agreed to facilitate the receipt of
all regulatory approvals required to complete the merger by providing assistance
to us, refraining from action that would hinder or delay the receipt of
regulatory approvals and using their best efforts to prevent the equity interest
in RCN Corporation, an affiliate of Hicks Muse, held by any of them or their
affiliates from hindering or delaying the receipt of regulatory approvals. They
also agreed that they and their affiliates will divest assets, terminate
existing relationships and contractual arrangements and take other actions, as
necessary to prevent interests in other media-related ventures held by the Hicks
Muse stockholders and their affiliates from hindering our future acquisitions of
additional media holdings and pursuit of media-related relationships and
activities. However, we have agreed that these obligations do not require
divestiture of various designated assets currently held by the Hicks Muse
stockholders and their affiliates, nor do the obligations require divestiture of
assets other than radio and television assets located in the U.S. and outdoor
advertising located anywhere in the world but South America. These obligations
continue until interests in other media-related ventures held by the Hicks Muse
stockholders and their affiliates are not attributable to us under the rules and
regulations of the FCC, any antitrust agency or any other governmental
authority.
7
<PAGE> 8
Conditions to the AMFM Merger
The completion of the AMFM merger cannot occur until the satisfaction
of numerous conditions, including the following:
o the receipt of approvals from our shareholders and the shareholders of AMFM;
o the absence of any law or court order prohibiting the merger;
o receipt of regulatory approvals under the federal communications laws and
the completion of the review of the merger by the federal and state
antitrust authorities; and
o receipt of a legal opinion for us and AMFM and its common shareholders that
the merger will be tax-free.
Some conditions may be waived by the company entitled to assert the
condition.
Required Regulatory Approvals
Before the merger can be completed, Clear Channel and AMFM must satisfy
all regulatory requirements and obtain the approval of all regulatory agencies
having jurisdiction over the merger. To facilitate the regulatory review and
approval process, Clear Channel and AMFM have each agreed to promptly make all
necessary filings, seek all required approvals of relevant regulatory agencies
and use reasonable efforts to take all actions necessary to complete the merger.
Accordingly, Clear Channel and AMFM have made their initial filings under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), and the Communications Act of 1934, as amended (the "Communications
Act"). Clear Channel and AMFM will also make any other filings or submissions
and seek the approval of all applicable regulatory agencies, including the FCC,
the U.S. Federal Trade Commission (the "FTC"), the U.S. Department of Justice
(the "DOJ"), state antitrust enforcement authorities and other governmental
authorities under antitrust or competition laws as necessary.
Furthermore, Clear Channel and AMFM will each make reasonable efforts
to resolve objections to the merger raised by regulatory agencies. However, the
merger agreement does not require either party to take any action for the
purpose of obtaining the approval of the FCC or any governmental entity with
regulatory jurisdiction over enforcement of any applicable antitrust laws if
such action would have a material adverse effect on the consolidated businesses,
assets or operations of Clear Channel and AMFM as a result of a material change
to the Communications Act or FCC policy in enforcing the Communication Act or in
the policies of any governmental entity with regulatory jurisdiction over
enforcement of any applicable antitrust laws. A "material change" means a change
in the Communications Act, in FCC policies in implementing or enforcing the
Communications Act or in the policies of any governmental entity with regulatory
jurisdiction over enforcement of any applicable antitrust laws, adopted after
October 2, 1999, which impose an implicit or explicit national limit on the
number of radio stations that may be owned by a person or the effect of any such
changed policies or laws is to impose a national limit on the number of radio
stations that may be owned by a person.
8
<PAGE> 9
During the regulatory review process, each party will consult with the
other, permit the other to review all material communications with regulatory
agencies and give the other the opportunity to participate in all conferences
and meetings with regulatory agencies.
Clear Channel and AMFM must comply with all applicable antitrust and
FCC laws and regulations before the merger can be completed. The DOJ will review
the potential effects of the merger on competition in the markets where the
combined company will operate. If the DOJ determines that the merger will
substantially reduce competition, it can challenge all or certain aspects of the
merger and seek to block the merger or impose restrictive conditions on the
merger. In addition, the FCC must approve the transfer of control of AMFM's FCC
licenses from AMFM's existing stockholders to Clear Channel. As part of the
FCC's determination whether to approve the merger, the FCC will examine whether
the combined company will comply with the FCC's limits on the number of radio
and television stations that a company is permitted to own in a single market.
The FCC also may conduct additional ownership concentration analysis and assess
its effect on competition, diversity or other FCC public interest
considerations. In recent years, the practice in radio acquisitions and mergers
has been for the DOJ to first resolve its issues before the FCC will grant its
approval of the transaction.
It can be a lengthy process to obtain the requisite clearances and
approvals needed from the DOJ and the FCC, sometimes taking more than one year
in large transactions such as the AMFM merger. Therefore, Clear Channel and AMFM
quickly initiated the formal process of obtaining the required regulatory
approvals. In October 1999, Clear Channel and AMFM commenced discussion with the
DOJ to try to identify their specific concerns about the merger and to discuss
possible solutions as early as possible and Clear Channel and AMFM filed
notification and report forms required for antitrust purposes with the DOJ and
the FTC on November 29, 1999. Clear Channel and AMFM filed their applications
for the consent to transfer control of AMFM's FCC licenses with the FCC on
November 16, 1999 (the earliest day on which Clear Channel and AMFM were
permitted to file the applications).
From the outset, Clear Channel recognized that the merger would result
in the combined company exceeding FCC limitations in approximately 26 markets or
geographical areas on the number of radio stations that one company may own in
those particular markets or areas and also recognized that the combined company
would have to divest approximately 110 to 115 stations in the aggregate in those
markets or areas to comply with the FCC's numerical limits and to satisfy
antitrust concerns.
In addition, the FCC has announced its intention to conduct additional
ownership concentration analysis of the merger as it relates to numerous local
markets, including various markets in which AMFM, but not Clear Channel,
currently operates. Five petitions to deny Clear Channel's and AMFM's
applications for the merger also were filed at the FCC by various parties. The
FCC is required to consider those petitions. Clear Channel and AMFM responded to
those petitions and advised the FCC why those petitions should be denied.
Although Clear Channel does not expect that these or any other third party
petitions will be a significant obstacle to completion of the merger, Clear
Channel can give no assurances in this regard. Moreover, Clear Channel's and
AMFM's applications for FCC approval of necessary radio station divestitures
(either to third-party buyers or to trusts), once filed, could also be subject
to FCC additional ownership concentration analysis and/or petitions to deny.
Such ownership concentration analysis and petitions to deny, whether currently
known or encountered in the future, could delay receipt of FCC approval.
The merger also implicates the FCC's television/radio cross-ownership
rule. This rule, which was revised effective November 16, 1999, limits the
number of radio stations a company may own or control in markets where the
company also owns one or more television stations. The merger implicates the
9
<PAGE> 10
television/radio cross-ownership rule in approximately 23 markets or
geographical areas in which Clear Channel, AMFM and/or Hicks Muse television
companies operate, and the rule may require additional divestitures of Clear
Channel or AMFM assets before the merger can be completed. Additionally, the
merger may implicate the FCC's television duopoly rule in two markets, which
limits the number of television stations a company may own or program in a
single market. This rule may require further divestitures of Clear Channel or
AMFM assets or termination of existing time brokerage agreements and local
marketing agreements before the merger can be completed. Proposals are currently
pending to restructure certain Hicks Muse television companies so that Thomas O.
Hicks and others with attributable interest in AMFM would no longer be
attributable to those television companies. These restructurings, if approved by
the FCC and accomplished prior to the merger closing, would reduce the number of
divestitures (and terminations of existing time brokerage and local marketing
agreements) necessary for the merger to comply with the television/radio
cross-ownership and the television duopoly rule.
For FCC purposes, Clear Channel and AMFM must divest the necessary
number of radio stations to comply with FCC limits prior to completion of the
merger. If Clear Channel and AMFM cannot complete such transactions in a timely
manner, Clear Channel and AMFM will have to transfer those assets or the assets
of other Clear Channel or AMFM stations into an FCC approved trust prior to
closing the merger.
Clear Channel also recognized that if the DOJ had concerns about the
concentration of the radio advertising market held by the combined company in
those markets where the combined company would exceed the FCC's numerical
limits, then Clear Channel and AMFM would have to discuss with the DOJ which
stations needed to be divested to come within their antitrust guidelines. Clear
Channel and AMFM also needed to determine if there were any other markets that
concerned the DOJ notwithstanding that they would be within FCC guidelines in
those markets. Clear Channel and AMFM currently contemplate that they may need
to divest between 110 and 115 radio stations in the aggregate to satisfy
antitrust concerns and comply with FCC rules. At March 13, 2000, we have signed
definitive agreements to sell 110 of these radio stations for an aggregated
sales price of $4.3 billion. These definitive agreements are subject to the
closing of the AMFM merger, regulatory approvals and other closing conditions.
The DOJ has issued a second request for information about the effect of
the merger in affected markets. Until Clear Channel and AMFM either arrange and
complete satisfactory divestitures to qualified parties, comply with the second
request, or enter into a consent decree with the DOJ where Clear Channel would
agree to complete the divestiture of agreed upon stations within a specified
period of time following the merger, Clear Channel and AMFM will not be able to
proceed with the merger for antitrust purposes. While Clear Channel agreed in
the merger agreement to take any such action as may be necessary to timely
complete the merger, Clear Channel and AMFM currently hope to resolve the
antitrust issues without entering into any consent decrees.
The DOJ is evaluating the competitive effects of the Clear Channel
merger in several different areas, with respect to its radio broadcasting
business. While Clear Channel is hopeful that the proposed divestiture of radio
stations will meet all FCC multiple ownership rules and antitrust concerns
regarding radio station overlaps, it is still possible that the DOJ, the FCC
and/or a state antitrust agency could require Clear Channel and AMFM to divest
additional assets or to agree to various operating restrictions. This could
happen before or after the merger is completed. Another area being examined by
the DOJ relates to the potential overlap between Clear Channel's current
ownership of outdoor advertising assets and AMFM's approximate 30% ownership
interest in Lamar, which also has significant outdoor advertising assets. If
AMFM and Clear Channel fail to alleviate the DOJ's concerns, it is possible that
the DOJ will require Clear Channel or AMFM to dispose of AMFM's interest in
Lamar, sell outdoor assets in
10
<PAGE> 11
overlapping markets, or agree to various operating or other restrictions. This
could happen after the merger is completed. The DOJ is also examining
competition issues relating to certain television markets and AMFM's ownership
interest in Z-Spanish Media Corporation. There is no guarantee that the DOJ will
not raise concerns in other areas. In addition, private persons may assert
antitrust claims against Clear Channel and AMFM in certain circumstances. If any
of those events occur, Clear Channel may incur substantial expense in litigating
any such claims and/or the combined company may be adversely affected by any
operating restrictions that might be imposed upon it.
Termination of the Merger Agreement and Termination Fees
AMFM and Clear Channel can jointly agree to terminate the merger
agreement at any time without completing the merger, even after obtaining
stockholder approval. In addition, either company can terminate the merger
agreement if:
o the merger is not completed by March 31, 2001;
o the stockholders of either company fail to approve such company's merger
proposal;
o the board of directors of the other company withdraws or changes its
recommendation; or
o it receives and intends to accept a superior acquisition proposal.
AMFM must pay us a termination fee of $700 million plus reasonably
documented expenses up to $25 million if the merger agreement terminates under
specified conditions. Similarly, we must pay AMFM a termination fee of $1
billion plus reasonably documented expenses up to $25 million if the merger
agreement terminates under specified conditions.
AMFM Options and Warrants After the Merger
We will assume all options and warrants to purchase AMFM common stock
outstanding at the effective time of the merger, whether or not exercisable at
the effective time of the merger, and each of these AMFM options and warrants
will become an option or warrant to acquire our common stock on the same terms
and conditions as were applicable prior to the effective time of the merger. We
will register with the SEC and reserve for issuance a sufficient number of
shares of our common stock for delivery upon the exercise of the AMFM options
assumed by us in the merger.
Ownership of Clear Channel After the AMFM Merger
Based on the number of shares outstanding as of December 31, 1999 and
assuming that no additional shares of AMFM or our common stock are issued before
the completion of the merger other than shares currently contemplated to be
issued in connection with the conversion of AMFM's convertible preferred stock,
we will issue approximately 202.8 million shares of our common stock to the
shareholders of AMFM in the merger. Assuming the issuance of such number of
shares of our common stock in the merger, the shares of our common stock held by
our existing shareholders at the time of the merger will represent approximately
62.6% of our outstanding common stock after the merger. Based upon the same
assumptions, the shares of our common stock to be received by the AMFM
shareholders in the merger will represent approximately 37.4% of our common
stock outstanding after the merger.
11
<PAGE> 12
Accounting Treatment
We expect to account for the merger as a purchase. Under this
accounting method, we will record AMFM's assets and liabilities at their fair
market values, and, if the purchase price exceeds the total of these fair market
values, we will record this excess as goodwill. We will include the revenues and
expenses of AMFM in our financial statements following the merger.
Business of AMFM
GENERAL
AMFM is a large national pure-play radio broadcasting and related media
company with operations in radio broadcasting and media representation and
growing Internet operations, which focus on developing AMFM's Internet web
sites, streaming online broadcasts of AMFM's on-air programming and other media,
and promoting emerging Internet and new media concerns. In addition, AMFM owns
an approximate 30% equity interest in Lamar Advertising Company, one of the
largest owners and operators of outdoor advertising structures in the United
States.
AMFM RADIO GROUP
As of December 31, 1999, AMFM owned and operated, programmed or sold
air time for 444 radio stations (320 FM and 124 AM) in 63 markets in the
continental United States including 6 radio stations programmed under time
brokerage or joint sales agreements. AMFM also operates a national radio
network, The AMFM Radio Networks, which broadcasts advertising and syndicated
programming shows to a national audience of approximately 68 million listeners
in the United States (including approximately 59 million listeners from AMFM's
portfolio of stations). The AMFM Radio Networks' syndicated programming shows
include, among others, American Top 40 with Casey Kasem, Rockline, The Dave Koz
Show, The Bob and Tom Morning Show and special events such as the Kentucky
Derby. Additionally, AMFM operates the Chancellor Marketing Group, a full
service sales promotion firm developing integrated marketing programs for
Fortune 1000 companies.
The following table sets forth selected information with regard to each of
AMFM's 126 AM and 330 FM radio stations that it owned and operated or
programmed, or for which it sold airtime, as of December 31, 1999.
<TABLE>
<CAPTION>
MARKET AM STATIONS* FM STATIONS* TOTAL*
------ ------------ ------------ ------
<S> <C> <C> <C>
ALABAMA
Birmingham 1 4 5
Gadsden 1 1 2
Huntsville 2 4 6
Montgomery 0 3 3
Tuscaloosa 1 3 4
ALASKA
Anchorage 2 4 6
Fairbanks 1 3 4
ARIZONA
Phoenix 3 5 8
Tucson 2 2 4
Yuma 1 2 3
</TABLE>
12
<PAGE> 13
<TABLE>
<CAPTION>
MARKET AM STATIONS* FM STATIONS* TOTAL*
------ ------------ ------------ ------
<S> <C> <C> <C>
ARKANSAS
Fayetteville 0 4 4
Ft. Smith 1 3 4
CALIFORNIA
Fresno 3 6 9
Los Angeles 2 5 7(a)
Modesto/Stockton 2 4 6(b)
Riverside/San Bernardino 1 1 2
Sacramento 2 2 4
San Diego 0 2 2
San Francisco 2 5 7
COLORADO
Colorado Springs 0 2 2
Denver 1 5 6
CONNECTICUT
Hartford 1 4 5
New Haven 0 1 1(b)
DELAWARE
Wilmington 2 2 4
FLORIDA
Ft. Pierce/Stuart/Vero Beach 1 4 5
Melbourne/Titusville/Cocoa Beach 2 3 5
Miami/Ft. Lauderdale 1 0 1
Orlando 0 4 4
Pensacola 0 3 3
GEORGIA
Savannah 2 4 6
HAWAII
Honolulu 3 4 7
ILLINOIS
Chicago 1 5 6
Springfield 1 2 3
INDIANA
Indianapolis 1 2 3
IOWA
Cedar Rapids 0 3 3
Des Moines 1 2 3
KANSAS
Wichita 0 4 4
LOUISIANA
Alexandria 1 3 4
Baton Rouge 3 3 6
Shreveport 1 2 3
MARYLAND
Frederick 1 1 2
MASSACHUSETTS
Boston 1 2 3
</TABLE>
13
<PAGE> 14
<TABLE>
<CAPTION>
MARKET AM STATIONS* FM STATIONS* TOTAL*
------ ------------ ------------ ------
<S> <C> <C> <C>
MASSACHUSETTS (CONT.)
Springfield 1 2 3
Worcester 1 1 2
MICHIGAN
Battle Creek/Kalamazoo 2 2 4
Detroit 2 5 7
Grand Rapids 1 3 4
MINNESOTA
Minneapolis/St. Paul 2 5 7
MISSISSIPPI
Biloxi 0 2 2
Jackson 1 4 5
NEBRASKA
Lincoln 0 4 4
Ogallala 1 2 3
Omaha/Council Bluffs 1 3 4
NEW HAMPSHIRE
Manchester 1 1 2
Portsmouth/Dover/Rochester 3 4 7
NEW MEXICO
Farmington 1 4 5(b)
NEW YORK
Albany/Schenectady/Troy 2 4 6
Nassau/Suffolk (Long Island) 1 1 2
New York City 0 5 5
NORTH CAROLINA
Asheville 1 1 2
Charlotte 0 3 3
Greensboro 1 2 3
Raleigh 0 4 4
Statesville 1 1 2
OHIO
Cincinnati 2 2 4
Cleveland 3 4 7
OKLAHOMA
Lawton 0 2 2
PENNSYLVANIA
Allentown 2 2 4
Harrisburg/Lebanon/Carlisle 1 3 4
Philadelphia 1 5 6
Pittsburgh 1 5 6
PUERTO RICO 0 8 8(d)
RHODE ISLAND
Providence 1 2 3
SOUTH CAROLINA
Columbia 2 4 6
Greenville 1 3 4
</TABLE>
14
<PAGE> 15
<TABLE>
<CAPTION>
MARKET AM STATIONS* FM STATIONS* TOTAL*
------ ------------ ------------ ------
<S> <C> <C> <C>
TENNESSEE
Jackson 1 2 3
Nashville 1 4 5
TEXAS
Amarillo 1 3 4
Austin 1 3 4
Beaumont 1 3 4
Corpus Christi 2 4 6
Dallas 1 5 6
Houston 3 5 8
Killeen 0 3 3(c)
Lubbock 2 4 6
Lufkin 1 3 4
Odessa/Midland 0 3 3
Texarkana 1 3 4
Tyler 1 4 5
Victoria 0 2 2
Waco 1 4 5
VERMONT
Burlington 1 3 4(e)
VIRGINIA
Richmond 0 4 4
Roanoke/Lynchburg 2 7 9
Winchester 1 2 3
WASHINGTON
Richland/Kennewick/Pasco 2 4 6(f)
Spokane 2 4 6(b)
WASHINGTON DC 3 5 8
WEST VIRGINIA/KENTUCKY
Huntington/Ashland 5 5 10(e)
Wheeling 2 5 7(b)
WISCONSIN
Madison 2 4 6
Milwaukee 1 1 2
---------- ---------- ----------
126 330 456
========== ========== ==========
</TABLE>
- ----------
* AMFM currently contemplates that AMFM and Clear Channel will be required to
divest as many as approximately 110 to 115 stations in the aggregate to obtain
antitrust and FCC approval of the merger.
(a) Includes one FM and one AM station programmed pursuant to a local marketing
agreement. AMFM does not own the FCC licenses.
(b) Includes one FM station programmed pursuant to a local marketing agreement.
AMFM does not own the FCC license.
(c) Includes one FM station on which AMFM sells the commercial time pursuant to
a joint sales agreement. AMFM does not own the FCC license.
15
<PAGE> 16
(d) Includes eight FM stations that were sold subsequent to December 31, 1999.
(e) Includes one AM station programmed pursuant to a local marketing agreement.
AMFM does not own the FCC license.
(f) Includes two FM stations and two AM station that were sold subsequent to
December 31, 1999 and two FM stations programmed pursuant to a local
marketing agreement, which was assigned to a third party subsequent to
December 31, 1999.
AMFM NEW MEDIA GROUP
Media Representation. AMFM entered into the media representation
business with the acquisition of Katz Media Group, Inc. Katz Media is a
full-service media representation firm that sells national spot advertising time
for its clients in the radio and television industries primarily throughout the
United States and for AMFM's portfolio of stations.
Internet Initiative. AMFM has initiated a broad-based Internet strategy
intended to leverage the value of its national radio station portfolio,
proprietary content, advertiser relationships and listener base. AMFM intends to
develop and position Internet web sites representing AMFM's portfolio of radio
stations as highly trafficked Internet destinations designed to further AMFM's
relationship with its listening audience. These web sites are expected to
encompass a variety of functions including online streaming of AMFM's on-air
programming and other media. In addition, AMFM intends to promote emerging
Internet and new media businesses.
LAMAR ADVERTISING COMPANY INVESTMENT
AMFM completed the sale of its outdoor advertising business to Lamar
Advertising Company on September 15, 1999. Lamar is one of the largest and most
experienced owners and operators of outdoor advertising structures in the United
States. AMFM now owns an approximate 30% equity interest in Lamar. AMFM is
required to retain the shares of Lamar class A common stock representing its 30%
equity interest in Lamar until September 15, 2000.
Dame Media Acquisition
On July 1, 1999, we closed our merger with Dame Media, Inc. Pursuant to
the terms of the agreement, we exchanged approximately 954,100 shares of our
common stock for 100% of the outstanding stock of Dame Media, valuing this
merger at approximately $65.0 million. In addition, we assumed $32.7 million of
long term debt, which was immediately refinanced utilizing our domestic credit
facility. Dame Media's operations include 21 radio stations in 5 markets located
in New York and Pennsylvania. We began consolidating the results of operations
on July 1, 1999.
Dauphin Acquisition
On June 11, 1999, we acquired a 50.5% equity interest in Dauphin a
French company engaged in outdoor advertising. In August 1999 we completed our
tender offer for over 99% of the remaining shares outstanding. At December 31,
1999, all of the shares had been surrendered for an aggregate cost of
approximately $487.2 million. Dauphin's operations include approximately 103,000
outdoor advertising display faces in France, Spain, Italy, and Belgium. This
acquisition is being accounted for as a purchase with resulting goodwill of
approximately $449.7 million, which is being amortized over 25 years on a
16
<PAGE> 17
straight-line basis. The purchase price allocation is preliminary pending
completion of appraisals and other fair value analysis of assets and
liabilities, which we anticipate will be completed during the second quarter of
2000. We began consolidating the results of operations on the date of
acquisition.
Jacor Merger
On May 4, 1999, we closed our merger with Jacor. Pursuant to the terms
of the agreement, each share of Jacor common stock was exchanged for 1.1573151
shares of our common stock or approximately 60.9 million shares valued at $4.2
billion. In addition, we assumed approximately $1.4 billion of Jacor's long-term
debt, as well as Jacor's Liquid Yield Option Notes with a fair value of
approximately $490.1 million, which are convertible into approximately 7.1
million shares of our common stock. We also assumed options, stock appreciation
rights and common stock warrants with a fair value of $414.9 million, which are
convertible into approximately 9.2 million shares of our common stock. We
refinanced $850.0 million of Jacor's long-term debt at the closing of the merger
using our credit facility. Subsequent to the merger, we tendered an additional
$22.1 million of Jacor's long-term debt. Included in the purchase price of Jacor
is $83 million of restricted cash related to the disposition of Jacor assets in
connection with the merger. This merger has been accounted for as a purchase
with resulting goodwill of approximately $3.1 billion, which is being amortized
over 25 years on a straight-line basis. This purchase price allocation is
preliminary pending completion of appraisals and other fair value analysis of
assets and liabilities, which we anticipate will be completed during the second
quarter of 2000. The results of operations of Jacor have been included in our
financial statements beginning May 4, 1999.
In order to comply with governmental directives regarding the Jacor
merger, we divested certain assets valued at $205.8 million and swapped other
assets valued at $35 million in transactions with various third parties,
resulting in a gain on sale of stations of $138.7 million and an increase in
income tax expense (at our statutory rate of 38%) of $52.0 million during 1999.
We anticipate deferring the majority of this tax expense based on our ability to
replace the stations sold with qualified assets. The proceeds from divestitures
are being held in restricted trusts until suitable replacement properties are
identified.
The following table details the reconciliation of divestiture and
acquisition activity in the restricted trust accounts:
In thousands of dollars
<TABLE>
<S> <C>
Restricted cash resulting from Clear Channel divestitures $ 201,500
Restricted cash purchased in Jacor Merger 83,000
Restricted cash from disposition of assets held in trust 4,300
Restricted cash used in acquisitions (246,228)
Restricted cash refunded (41,451)
Other changes to restricted cash 3,228
---------
Restricted cash balance at December 31, 1999 $ 4,349
=========
</TABLE>
SFX Entertainment, Inc. Merger
On February 28, 2000, we entered into a definitive agreement to merge
with SFX Entertainment, Inc. ("SFX"). SFX is one of the world's largest
diversified promoter, producer and venue operator for live entertainment events.
This merger will be a tax-free, stock-for-stock transaction. Each SFX Class A
shareholder will receive 0.6 shares of our common stock for each SFX share and
each SFX Class B shareholder will receive one share of our common stock for each
SFX share, on a fixed exchange basis,
17
<PAGE> 18
valuing the merger at approximately $3.3 billion plus the assumption of SFX's
debt. This merger is subject to regulatory and other closing conditions,
including the approval from the SFX shareholders. We anticipate that this merger
will close during the second half of 2000.
Future Acquisitions
We frequently evaluate strategic opportunities both within and outside
our existing lines of business and from time to time enter into letters of
intent. Although we have no definitive agreements with respect to significant
acquisitions not set forth in this report, we expect from time to time to pursue
additional acquisitions and may decide to dispose of certain businesses. Such
acquisitions or dispositions could be material.
Public Offerings
On January 21, 1999 we completed an equity offering of 1,725,000 shares
of common stock. Net proceeds of $80.2 million were used to reduce the
outstanding balance on our credit facility. On May 20, 1999 and June 23, 1999 we
completed equity offerings of 4,997,457 shares and 1,325,300 shares of common
stock, respectively. Net proceeds of $342.6 million and $90.1 million,
respectively, were used to reduce the outstanding balance on our credit
facility. On November 20, 1999 and December 13, 1999 we sold $900.0 million and
$100.0 million principal amount, respectively, of 1.50% Senior Convertible Notes
due December 1, 2002. Net proceeds of $886.3 million and $98.5 million,
respectively, were used to reduce the outstanding balance on our credit
facility.
To facilitate possible future acquisitions as well as public offerings,
we filed a registration statement on Form S-3 on April 12, 1999 covering a
combined $2 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 our three Delaware statutory business trusts and guarantees of such preferred
securities. After completing the debt offerings during November and December
1999, the amount of securities available under the shelf registration statement
at December 31, 1999 was $1.0 billion.
On December 14, 1999 we completed a tender offer for our 10.125% Senior
Subordinated Notes due June 15, 2006; 9.75% Senior Subordinated Notes due
December 15, 2006; 8.75% Senior Subordinated Notes due June 15, 2007; and 8.0%
Senior Subordinated Notes due February 15, 2010. An agent acting on our behalf
redeemed notes with a face value of approximately $516.6 million. Cash
settlement of the amount due to the agent was completed on January 14, 2000.
Including premiums, discounts, and agency fees, we are recognizing approximately
$13.2 million as an extraordinary charge against net income, after tax of
approximately $8.1 million. Amounts due under the redeemed Senior Subordinated
Notes will be disclosed in long-term debt. After redemption, approximately $1.2
million of the notes remain outstanding.
EMPLOYEES
At February 29, 2000 we had approximately 13,800 domestic employees and
3,850 international employees: 11,600 in broadcasting operations, 5,825 in
outdoor operations and 225 in corporate activities.
18
<PAGE> 19
OPERATING SEGMENTS
Clear Channel consists of two principal operating segments --
broadcasting and outdoor advertising. The broadcasting segment includes both
radio and television stations for which we are the licensee and radio and
television stations for which we program and/or sell air time under local
marketing agreements or joint sales agreements. The broadcasting segment also
operates radio networks. The outdoor advertising segment includes advertising
display faces for which we own and/or operate under lease management agreements.
Information relating to the operating segments of our broadcasting and
outdoor advertising operations for 1999, 1998 and 1997 are included in "Note K:
Segment Data" in the Notes to Consolidated Financial Statements in Item 8 filed
herewith.
BROADCASTING
The following table sets forth certain selected information with regard
to each of our 173 AM and 336 FM radio stations; 20 television stations and four
satellite television stations that we owned, programmed, or for which we sold
airtime, as of December 31, 1999. Excluded from the following table are the one
AM and two FM Mexican radio stations for which we provide programming to and
sell airtime under exclusive sales agency arrangements.
<TABLE>
<CAPTION>
RADIO TELEVISION
----- ----------
AM FM NETWORK
MARKET STATIONS STATIONS TOTAL STATION AFFILIATION
------ -------- -------- ----- ------- -----------
<S> <C> <C> <C> <C> <C>
DOMESTIC:
ALABAMA
Mobile.................................... 2 4 (b) 6 -- --
Mobile, AL/Pensacola, FL.................. -- -- WPMI-TV NBC
WJTC-TV (a) UPN
ARIZONA
Phoenix................................... -- 4 4
Tucson.................................... -- -- -- KTTU-TV (b) UPN
ARKANSAS KLRT-TV FOX
Little Rock............................... -- 5 5 KASN-TV (a) UPN
CALIFORNIA
Lancaster................................. 1 2 3 -- --
Los Angeles............................... 2 4 6 -- --
Monterey.................................. 2 4 6 -- --
Riverside................................. 2 -- 2 -- --
San Diego................................. 3 5 8 -- --
San Francisco............................. -- 1 1 -- --
San Jose.................................. -- 3 3 -- --
Santa Barbara............................. 3(f) 4(f) 7 -- --
Santa Clarita............................. 1 -- 1 -- --
Thousand Oaks............................. 1 -- 1 -- --
Walnut Creek.............................. -- 1 1 -- --
</TABLE>
19
<PAGE> 20
<TABLE>
<CAPTION>
RADIO TELEVISION
----- ----------
AM FM NETWORK
MARKET STATIONS STATIONS TOTAL STATION AFFILIATION
------ -------- -------- ----- ------- -----------
<S> <C> <C> <C> <C> <C>
COLORADO
Denver.................................... 3 5 8 -- --
Ft. Collins-Greeley....................... 2 2 4 -- --
CONNECTICUT
New Haven................................. 2 1 3 -- --
FLORIDA
Daytona Beach............................. -- 1 1 -- --
Florida Keys.............................. 1 (a) 7 8 -- --
Ft. Myers................................. 2 6 8 -- --
Ft. Pierce/Vero Beach 1 1 2 -- --
Jacksonville.............................. 2 (d) 7 (d) 9 WAWS-TV FOX
WTEV-TV (a) UPN
Miami..................................... 2 5 7 -- --
Orlando................................... 2 4 6 -- --
Panama City............................... 1 5 6 -- --
Pensacola................................. -- 2 (d) 2 -- --
Sarasota.................................. 2 4 6 -- --
Tallahassee............................... 1 4 5 -- --
Tampa/St. Petersburg...................... 3 5 8 -- --
West Palm Beach........................... 3 3 6 -- --
GEORGIA
Atlanta................................... 2 4 (f) 6 -- --
Helen..................................... -- 1 1 -- --
Hogansville............................... 1 1 2 -- --
IDAHO
Boise..................................... 2 4 6 -- --
Idaho Falls............................... 1 1 2 -- --
Pocatello................................. 1 2 3 -- --
Twin Falls................................ 1 2 3 -- --
IOWA
Ames...................................... 1 1 2 -- --
Burlington................................ 1 1 2 -- --
Cedar Rapids.............................. 2 2 4 -- --
Des Moines................................ 1 3 4 -- --
Ft. Dodge................................. 1 1 2 -- --
Ft. Madison............................... 1 1 2 -- --
KANSAS
Hoisington................................ -- -- -- KBDK-TV (e) (k) n/a
Salina.................................... -- -- -- KAAS-TV (e) FOX
Wichita................................... -- -- -- KSAS-TV
KSCC-TV (a) (k) FOX
KENTUCKY
Lexington................................. 2 5 (f) 7 -- --
Louisville................................ 3 5 8 -- --
</TABLE>
20
<PAGE> 21
<TABLE>
<CAPTION>
RADIO TELEVISION
----- ----------
AM FM NETWORK
MARKET STATIONS STATIONS TOTAL STATION AFFILIATION
------ -------- -------- ----- ------- -----------
<S> <C> <C> <C> <C> <C>
LOUISIANA
New Orleans............................... 2 5 7 -- --
Shreveport................................ 2 4 (f) 6 -- --
MARYLAND
Baltimore................................. 1 2 3 -- --
MASSACHUSETTS
Springfield............................... 2 1 3 -- --
MICHIGAN
Grand Rapids.............................. 2 5 7 -- --
MINNESOTA
Bemidji................................... -- -- -- KFTC-TV (l) FOX
Minneapolis............................... -- -- -- WFTC-TV FOX
MISSISSIPPI
Jackson................................... 2 3 5 -- --
MISSOURI
St. Louis................................. 1 5 6 -- --
NEVADA
Las Vegas................................. -- 4 4 -- --
NEW MEXICO
Albuquerque............................... -- 5 5 -- --
NEW YORK
Albany.................................... 2 5 7 -- --
Albany/Schenectady/Troy................... -- -- -- WXXA-TV FOX
Rochester................................. 2 5 7 -- --
Syracuse.................................. 2 4 (f) 6 -- --
Utica..................................... 3 3 6 -- --
NORTH CAROLINA
Greensboro................................ 2 2 4 -- --
Morehead City............................. 1 -- 1 -- --
Raleigh-Durham............................ 1 4 5 -- --
NORTH DAKOTA
Bismarck.................................. 1 1 2 -- --
Grand Forks............................... 1 4 5 -- --
OHIO
Chillicothe............................... 2 2 (f) 4 -- --
Cincinnati................................ 4 4 8 WKRC-TV CBS
Cleveland................................. 1 5 6 -- --
Columbus.................................. 2 3 5 -- --
Dayton.................................... 1 5 6 -- --
Defiance.................................. -- 1 1 -- --
Findlay................................... -- 2 2 -- --
Greenville................................ -- 1 1 -- --
Hillsboro................................. 1 1 2 -- --
Lima...................................... 1 3 4 -- --
</TABLE>
21
<PAGE> 22
<TABLE>
<CAPTION>
RADIO TELEVISION
----- ----------
AM FM NETWORK
MARKET STATIONS STATIONS TOTAL STATION AFFILIATION
------ -------- -------- ----- ------- -----------
<S> <C> <C> <C> <C> <C>
OHIO (CONT.)
Marion.................................... 1 2 3 -- --
Sandusky.................................. 1 2 3 -- --
Springfield............................... 1 -- 1 -- --
Tiffin.................................... 1 1 2 -- --
Toledo.................................... 2 3 5 -- --
Washington Court House.................... 1 1 2 -- --
Youngstown................................ 3 (f) 5 (g) (d) 8 -- --
OKLAHOMA
Guymon.................................... 1 (a) -- 1 -- --
Oklahoma City............................. 3 (f) 4 7 -- --
Tulsa..................................... 2 4 6 KOKI-TV FOX
KTFO-TV (a) UPN
OREGON
Corvallis................................. 3 3 6 -- --
Medford................................... 1 4 5 -- --
Portland.................................. 2 3 (c) 5 -- --
PENNSYLVANIA
Allentown................................. 1 1 2 -- --
Lancaster................................. 1 1 2 -- --
Johnstown................................. 1 1 2 -- --
Newcastle................................. 2 1 3 -- --
Reading................................... 1 1 2 -- --
Harrisburg/Lebanon/Lancaster/York......... 3 3 6 WHP-TV CBS
WLHY-TV (a) UPN
Williamsport.............................. 2 2 4 -- --
RHODE ISLAND WPRI-TV CBS
Providence................................ -- 2 2 WNAC-TV (a) FOX
SOUTH CAROLINA
Barnwell.................................. 1 -- 1 -- --
Charleston................................ 1 4 5 -- --
Columbia.................................. 1 3 4 -- --
Greenville................................ 1 (b) 3 4 -- --
TENNESSEE
Cookeville................................ 2 2 4 -- --
Crossville/Sparta......................... 4 (f) 2 6 -- --
Jackson................................... -- -- -- WMTU-TV (a) (m) UPN
McMinnville............................... 2 2 4 -- --
Memphis................................... 3 4 7 WPTY-TV ABC
WLMT-TV (a) UPN
TEXAS
Austin.................................... 1 3 4 -- --
Dallas.................................... -- 2 2 -- --
</TABLE>
22
<PAGE> 23
<TABLE>
<CAPTION>
RADIO TELEVISION
----- ----------
AM FM NETWORK
MARKET STATIONS STATIONS TOTAL STATION AFFILIATION
------ -------- -------- ----- ------- -----------
<S> <C> <C> <C> <C> <C>
TEXAS (CONT.)
El Paso................................... 2 3 5 -- --
Houston................................... 3 (h) 7 (d) 10 -- --
San Antonio............................... 3 (f) 4 7 -- --
UTAH
Salt Lake City............................ 3 4 7 -- --
VIRGINIA
Charlottesville........................... -- 3 3 -- --
Norfolk................................... -- 4 4 -- --
Richmond.................................. 3 3 6 -- --
WASHINGTON
Centralia................................. 1 1 2 -- --
Yakima.................................... 2 3 5 -- --
WISCONSIN
Milwaukee................................. 1 3 4 -- --
WYOMING
Casper.................................... 2 (c) 4 (j) 6 -- --
Cheyenne 1 4 5 -- --
INTERNATIONAL:
DENMARK
Copenhagen................................ -- 2 2 -- --
----- ----- ----- ---
Total........................... 173 336 509 24
===== ===== ===== ===
</TABLE>
- ----------
* Clear Channel currently contemplates that AMFM and Clear Channel will be
required to divest as many as approximately 110 to 115 stations in the aggregate
to obtain antitrust and FCC approval of the merger.
(a) Station programmed pursuant to a local marketing agreement (FCC licenses not
owned by Clear Channel).
(b) Station programmed by another party pursuant to a local marketing agreement.
(c) Includes one station for which Clear Channel holds a construction permit but
which is not yet operating.
(d) Includes one station for which Clear Channel sells airtime pursuant to a
joint sales agreement (FCC license not owned by Clear Channel).
(e) Satellite station of KSAS-TV in Wichita, Kansas.
(f) Includes one station programmed pursuant to a local marketing agreement (FCC
license not owned by Clear Channel).
(g) Includes two stations programmed pursuant to local marketing agreements (FCC
licenses not owned by Clear Channel).
(h) Includes two stations that are owned by CCC-Houston AM, Ltd., in which Clear
Channel owns an 80% interest.
23
<PAGE> 24
(i) Includes four AM and two FM stations programmed pursuant to a local
marketing agreement (FCC license not owned by Clear Channel).
(j) Includes three stations programmed pursuant to a local marketing agreement
(FCC license not owned by Clear Channel).
(k) Station for which there is a construction permit but which is not yet
operating.
(l) Satellite station of WFTC-TV in Minneapolis, Minnesota.
(m) Satellite station of WLMT-TV in Memphis, Tennessee.
Clear Channel also owns the Kentucky News Network based in Louisville,
Kentucky, the Virginia News Network based in Richmond, Virginia, the Oklahoma
News Network based in Oklahoma City, Oklahoma, the Voice of Southwest
Agriculture Network based in San Angelo, Texas, the Clear Channel Sports Network
based both in College Station, Texas, and Des Moines, Iowa, the Alabama Radio
Network based in Birmingham, Alabama, the Tennessee Radio Network based in
Nashville, Tennessee, the Florida Radio Network based in Orlando, Florida, the
University of Florida Sports Network based in Gainesville, Florida and Orlando,
Florida, and the Penn State Sports Network based in State College, Pennsylvania.
Clear Channel produces more than 100 syndicated programs and services
for more than 6,500 radio stations including Rush Limbaugh, The Dr. Laura
Schlessinger Show and The Rick Dees Weekly Top 40, which are three of the top
rated radio programs in the United States.
In addition, we own a 50% equity interest in the Australian Radio
Network Pty., Ltd., which operates ten radio stations in Australia, a 33% equity
interest in the New Zealand Radio Network, which operates 52 radio stations
throughout New Zealand, a 50% equity interest in Radio Bonton, a.s., which
operates a radio station in the Czech Republic, a 40% equity interest in Group
Acir Communicaciones, S.A. de C. V., which operates or is affiliated with 157
radio stations in Mexico, a 32% interest in Golden Rose, which operates two
radio stations in England, a 50% interest in Radio 1, which operates seven in
Norway and a 26% non-voting equity interest in Hispanic Broadcasting
Corporation, a leading domestic Spanish-language broadcaster which operates 39
radio stations in 12 domestic markets.
Our radio stations employ various formats for their programming. A
station's format is important in determining the size and characteristics of its
listening audience. Advertising rates charged by a radio station are based
primarily on the station's ability to attract audiences having certain
demographic characteristics in the market area which advertisers want to reach,
as well as the number of stations competing in the market. Advertisers often
tailor their advertisements to appeal to selected population or demographic
segments. We pay the cost of producing the programming for each station.
Generally, we design formats for our own stations, but have also used outside
consultants and program syndicators for program material. Most of our radio
revenue is generated from the sale of local advertising. Additional revenue is
generated from the sale of national advertising, network compensation payments
and barter and other miscellaneous transactions.
We have focused our radio sales effort on selling directly to local
advertisers. Direct contact with our customers has aided our sales personnel in
developing long-standing customer relationships that we believe are a
competitive advantage. Our sales personnel are paid on a commission basis, which
emphasizes this direct local focus. We believe that this focus has enabled some
of our stations to achieve
24
<PAGE> 25
market revenue shares exceeding their audience shares in a given year. Each of
our radio stations also engages independent sales representatives to assist us
in obtaining national advertising. The representatives obtain advertising
through national advertising agencies and receive a commission from us based on
our net revenue from the advertising obtained. In February 1996, we formed an
alliance with one of the nation's largest national advertising representation
firms, whereby the firm will dedicate certain personnel to work exclusively for
our radio stations. We believe this arrangement has helped our stations achieve
higher shares of national advertising revenue.
We purchase the broadcast rights for the majority of our television
programming for our FOX and UPN affiliates from various syndicators. We compete
with other television stations within each market for these broadcast rights.
These programming costs are expected to increase slightly in the foreseeable
future.
The primary sources of programming for our ABC, CBS and NBC affiliated
television stations are their respective networks, which produce and distribute
programming in exchange for each station's commitment to air the programming at
specified times and for commercial announcement time during the programming. For
1999, the FOX, NBC and ABC networks' primary programming was intended to appeal
primarily to a target audience of 18-49 year old adults, while the CBS network's
primary programming was intended to appeal primarily to a target audience of
25-54 year old adults.
The second source of programming is the production of local news
programming on the FOX, CBS, ABC and NBC affiliate stations in Jacksonville,
Florida; Harrisburg, Pennsylvania; Memphis, Tennessee; Mobile, Alabama;
Providence, Rhode Island; Cincinnati, Ohio; and Albany, New York. Local news
programming traditionally has appealed to a target audience of adults 25 to 54
years of age. Because these viewers generally have increased buying power
relative to viewers in other demographic groups, they are one of the most
sought-after target audiences for advertisers. With such programming, these
stations are able to attract advertisers to which they otherwise would not have
access.
Each FOX station other than WXXA-TV Albany, New York, which expired in
December 1999, is currently operating under the current contract, which expired
December 31, 1998. However, we are currently negotiating a new ten year contract
that we anticipate signing in 2000. Based on the performance of our
FOX-affiliated stations to date, we expect we will continue to be able to renew
our FOX contracts, although no assurances in this regard can be given. The
network affiliation agreements with ABC (for WPTY-TV in Memphis, Tennessee,
effective December 1, 1995), CBS (for WHP-TV in Harrisburg, Pennsylvania,
renewed and effective December 18, 1995), NBC (for WPMI-TV in Mobile, Alabama,
effective January 1, 1996) and UPN (for KTTU-TV in Tucson, Arizona, entered into
in 1995) run for ten-year terms. Also, WTEV, WLMT, WJTC, KTFO, WLYH, and KASN
hold network affiliation agreements with UPN which expire on December 31, 2002.
Television revenue is generated primarily from the sale of local and
national advertising, as well as from fees received from the affiliate
television networks. Advertising rates depend primarily on the quantitative and
qualitative characteristics of the audience we can deliver to the advertiser.
Local advertising is sold by our sales personnel, while national advertising is
sold by independent national sales representatives. Our broadcasting revenue is
seasonal, with the fourth quarter typically generating the highest level of
revenue and the first quarter typically generating the lowest. The fourth
quarter generally reflects higher advertising in preparation for the holiday
season and the effect of political advertising in election years.
Our broadcasting results are dependent on a number of factors,
including the general strength of the economy, population growth, ability to
provide popular programming, relative efficiency of radio and
25
<PAGE> 26
television broadcasting compared to other advertising media, signal strength,
technological capabilities and developments and governmental regulations and
policies.
The major costs associated with radio and television broadcasting are
related to personnel and programming. In an effort to monitor these costs,
corporate management routinely reviews staffing levels and programming costs.
Combined with the centralized accounting functions, this monitoring enables us
to effectively control expenses. Corporate management also advises local station
managers on programming and other broad policy matters and is responsible for
long-range planning, allocating resources and financial reporting and controls.
OUTDOOR ADVERTISING
The following table sets forth certain selected information with regard to our
outdoor advertising display faces as of December 31, 1999.
<TABLE>
<CAPTION>
TOTAL
DISPLAY
MARKET FACES (a)
------ ---------
<S> <C>
DOMESTIC:
ARIZONA
Phoenix.................................................................... 375
Tucson..................................................................... 1,421
CALIFORNIA
Los Angeles (b)............................................................ 12,213
North California (c)....................................................... 4,941
DELAWARE
Wilmington................................................................. 1,043
FLORIDA
Tampa - St. Petersburg..................................................... 2,520
Atlantic Coast............................................................. 827
Orlando.................................................................... 1,930
Jacksonville............................................................... 1,045
Miami...................................................................... 2,004
Ocala - Gainesville........................................................ 1,051
GEORGIA
Atlanta.................................................................... 2,089
ILLINOIS
Chicago.................................................................... 11,521
INDIANA
Indianapolis............................................................... 1,636
IOWA
Des Moines................................................................. 635
MARYLAND
Baltimore.................................................................. 4,480
</TABLE>
26
<PAGE> 27
<TABLE>
<CAPTION>
TOTAL
DISPLAY
MARKET FACES (a)
------ ---------
<S> <C>
MARYLAND (CONT.)
Salisbury - Ocean City..................................................... 1,112
Washington, DC............................................................. 1,398
MICHIGAN
Detroit.................................................................... 166
MINNESOTA
Minneapolis................................................................ 1,746
NEW YORK
New York................................................................... 2,910
Hudson Valley.............................................................. 410
OHIO
Cleveland (d).............................................................. 2,273
PENNSYLVANIA
Philadelphia............................................................... 14,453
SOUTH CAROLINA
Myrtle Beach............................................................... 1,272
TENNESSEE
Chattanooga................................................................ 1,593
Memphis.................................................................... 2,450
TEXAS
Dallas..................................................................... 4,748
San Antonio................................................................ 3,353
Houston.................................................................... 4,961
El Paso.................................................................... 1,290
WISCONSIN
Milwaukee.................................................................. 1,678
OTHER OUT-OF-HOME
Various.................................................................... 31,653
UNION PACIFIC SOUTHERN PACIFIC(E)
Various.................................................................... 5,900
INTERNATIONAL:
Australia - New Zealand.................................................... 7,692
Belgium.................................................................... 15,684
Canada..................................................................... 252
China...................................................................... 13,806
Denmark.................................................................... 5,932
Finland.................................................................... 1,618
France..................................................................... 109,955
Great Britain.............................................................. 43,572
Hong Kong.................................................................. 2,400
India...................................................................... 5
Ireland.................................................................... 5,559
Italy...................................................................... 5,742
Norway..................................................................... 26,510
Peru....................................................................... 498
</TABLE>
27
<PAGE> 28
<TABLE>
<CAPTION>
TOTAL
DISPLAY
MARKET FACES (a)
------ ---------
<S> <C>
INTERNATIONAL (CONT.)
Poland..................................................................... 6,635
Singapore.................................................................. 566
Spain...................................................................... 5,824
Sweden..................................................................... 15,860
Switzerland................................................................ 12,775
Taiwan..................................................................... 1,606
Thailand................................................................... 388
Turkey..................................................................... 1,733
Small Transit displays (f) ................................................ 137,448
---------
Total............................................................ 555,157
=========
</TABLE>
- ----------
(a) Domestic display faces primarily include 20'x60' bulletins, 14'x48'
bulletins, 12'x25' Premier Panels(TM), 25'x25' Premier Plus Panels(TM),
12'x25' 30-sheet posters, 6'x12' 8-sheet posters, and various transit
displays. International display faces include street furniture, various
transit displays and billboards of various sizes.
(b) Includes Los Angeles, San Diego, Orange, Riverside, San Bernardino and
Ventura counties.
(c) Includes San Francisco, Oakland, San Jose, Santa Cruz, Sacramento and Solano
counties.
(d) Includes Akron and Canton.
(e) Represents licenses managed under Union Pacific Southern Pacific License
Management Agreement.
(f) Represents small display faces on the interior and exterior of various
public transportation vehicles.
DOMESTIC:
The outdoor advertising industry is comprised of several large outdoor
advertising and media companies with operations in multiple markets, as well as
many smaller and local companies operating a limited number of structures in a
single or few local markets. While the industry has experienced some
consolidation within the past few years, the Outdoor Advertising Association of
America estimates that there are still approximately 800 companies in the
outdoor advertising industry operating approximately 396,000 billboard displays.
We expect the trend of consolidation in the outdoor advertising industry to
continue.
We focus our efforts on local sales. Local advertisers tend to have
smaller advertising budgets and require greater assistance from our production
and creative personnel to design and produce advertising copy. In local sales,
we often expend more sales efforts on educating customers regarding the benefits
of outdoor media and helping potential customers develop an advertising strategy
using outdoor advertising. While price and availability are important
competitive factors, service and customer relationships are also critical
components of local sales.
We operate the following types of outdoor advertising billboards and
displays:
o Bulletins generally are 14 feet high by 48 feet wide or 20 feet high by 60
feet wide and consist of panels on which advertising copy is displayed.
Bulletin advertising copy is either printed with computer-generated graphics
on a single sheet of vinyl that is "wrapped" around an outdoor advertising
structure, or is hand painted and attached to the structure. Bulletins also
include "wallscapes" that are
28
<PAGE> 29
painted on vinyl surfaces or directly on the sides of buildings, typically
four stories or less. Because of their greater impact and higher cost,
bulletins are usually located on major highways and freeways. In addition,
wallscapes are located on major freeways, commuter and tourist routes and in
downtown business districts.
o Premier Panels(TM) generally are 12 feet high by 25 feet wide and have vinyl
wrapped around the display face. Premier Panels (TM) are built on superior
30-sheet poster locations that deliver a "bulletin-like" display. We also
offer unique Premier Plus (TM) panels, 25 feet high by 25 feet wide (625
square feet), which consist of two stacked 30-sheet posters that are
converted into one larger individual display face.
o Thirty-sheet posters are generally 12 feet high by 25 feet wide and are the
most common type of billboard. Advertising copy for 30-sheet posters
consists of lithographed or silk-screened paper sheets supplied by the
advertiser that are pasted and applied like wallpaper to the face of the
display. Thirty-sheet posters are typically concentrated on major highway
arteries.
o Eight-sheet posters are usually 6 feet high by 12 feet wide. Displays are
prepared and mounted in the same manner as 30-sheet posters. Most 8-sheet
posters, because of their smaller size, are concentrated on city streets
targeting pedestrian traffic.
Billboards are generally mounted on structures we own and are located
on sites that are either owned or leased by us or on which we have acquired a
permanent easement. Bus shelters are usually constructed, owned and maintained
by the outdoor service provider under revenue-sharing arrangements with a
municipality or transit authority. Over 90% of our bulletin inventory has been
retrofitted for vinyl. Advertising rates are based on a particular display's
exposure, or number of "impressions" delivered, in relation to the demographics
of the particular market and its location within that market. The number of
"impressions" delivered by a display is measured by the number of vehicles
passing the site during a defined period and is weighted to give effect to such
factors as its proximity to other displays, the speed and viewing angle of
approaching traffic, the national average of adults riding in vehicles and
whether the display is illuminated. The number of impressions delivered by a
display is verified by independent auditing companies.
We have a diversified customer base in our outdoor advertising segment
of over 8,000 advertisers and advertising agency clients. The size and
geographic diversity of our markets allow us to attract national advertisers,
often by packaging displays in several of our markets in a single contract to
allow a national advertiser to simplify its purchasing process and present its
message in several markets. National advertisers generally seek wide exposure in
major markets and therefore tend to make larger purchases. We compete for
national advertisers primarily on the basis of price, location of displays,
availability and service.
29
<PAGE> 30
INTERNATIONAL:
We have operations in Europe, South America and Asia with a presence in
over 23 countries operating more than 300,000 outdoor advertising faces and over
100,000 transport-advertising panels. Our goal is to develop strong, autonomous
business units in each country, which are managed by local people, reflecting
local advertising requirements. During the past year, our main focus has been on
building our outdoor advertising businesses in Europe. In each of our separate
country markets we compete with a broad range of local and international outdoor
advertising companies. Our aim is to consolidate each market and develop a
combination of billboard, street furniture and transit media for our
advertisers.
We operate the following types of outdoor advertising billboards and
displays:
o Billboards vary by market and location. Billboards are located in towns and
city centers, and on the arterial roads which surround them. They vary in
size from 40 feet wide by 10 feet high to 12 feet wide by 10 feet high. Some
of our billboards are illuminated, and located at busy traffic interchanges
to offer maximum visual impact to vehicular audiences. Billboards are
mounted on the sides of buildings, or are constructed as free-standing
structures.
o Transit advertising incorporates all advertising on or in transit systems,
including the interiors and exteriors of buses, advertising at rail stations
and on / in trains, trams and taxis and airport advertising. Transit
advertising posters range from vinyl sheets, which are applied directly to
transit vehicles, to billboards and panels mounted in station or airport
locations.
o Street furniture panels are developed and marketed under our global Adshel
brand. Street furniture panels include bus shelters, free standing units,
pillars and columns. The most numerous are bus shelters which measure 5.5
feet high by 3.5 feet wide, are back illuminated and reach vehicular and
pedestrian audiences. Street furniture is growing in popularity with local
authorities.
Billboards are generally mounted on structures we own and are located
ion sites that are either owned or leased by us. Lease contracts are negotiated
with both public and private landlords. Street furniture contracts are usually
won in a competitive tender and last between 10 and 15 years. Tenders are won on
the basis of revenues and community-related products offered to municipalities,
including bus shelters, public toilets and information kiosks. Transit
advertising contracts are negotiated with public transit authorities and private
transit operators, either on a fixed revenue guarantee or a revenue-share basis.
We target a broad range of advertisers with specific arguments about
the efficacy of outdoor media in meeting their communications needs. Strong
outdoor categories include food and drink, fashion, automotive,
telecommunications and other media providers. In most of our international
markets, our sales are predominantly to national advertisers. However, we are
increasing our efforts to develop local outdoor advertising sales, targeting
local and regional press advertisers.
COMPETITION
Our two business segments are in highly competitive industries, and we
may not be able to maintain or increase our current audience ratings and
advertising revenues. Our radio and television stations and outdoor advertising
properties compete for audiences and advertising revenues with other radio and
television stations and outdoor advertising companies, as well as with other
media, such as newspapers, magazines, cable television, and direct mail, within
their respective markets. Audience ratings
30
<PAGE> 31
and market shares are subject to change, which could have an adverse effect on
our revenues in that market. Other variables that could affect our financial
performance include:
o economic conditions, both general and relative to the broadcasting industry;
o shifts in population and other demographics;
o the level of competition for advertising dollars;
o fluctuations in operating costs;
o technological changes and innovations;
o changes in labor conditions; and
o changes in governmental regulations and policies and actions of federal
regulatory bodies.
REGULATION OF OUR BUSINESS
Existing Regulation and 1996 Legislation
Television and radio broadcasting are subject to the jurisdiction of
the FCC under the Communications Act of 1934. The Communications Act prohibits
the operation of a television or radio broadcasting station except under a
license issued by the FCC and empowers the FCC, among other things, to:
o issue, renew, revoke and modify broadcasting licenses;
o assign frequency bands;
o determine stations' frequencies, locations, and power;
o regulate the equipment used by stations;
o adopt other regulations to carry out the provisions of the Communications
Act;
o impose penalties for violation of such regulations; and
o impose fees for processing applications and other administrative functions.
The Communications Act prohibits the assignment of a license or the transfer of
control of a licensee without prior approval of the FCC. Under the
Communications Act, the FCC also regulates certain aspects of the operation of
cable television systems and other electronic media that compete with
broadcasting stations.
The Telecommunications Act of 1996 represented the most comprehensive
overhaul of the country's telecommunications laws in more than 60 years. The
Communications Act originated at a time when telephone and broadcasting
technologies were quite distinct and addressed different consumer needs. As a
consequence, both the statute and its implementing regulatory scheme were
designed to compartmentalize the various sectors of the telecommunications
industry. The 1996 Act removed or relaxed the statutory barriers to telephone
company entry into the video programming delivery business, to cable company
provision of telephone service, and to common ownership of broadcast television
and cable properties.
31
<PAGE> 32
The 1996 Act also significantly changed both the process for renewal of
broadcast station licenses and the broadcast ownership rules. The 1996 Act
established a "two-step" renewal process that limits the FCC's discretion to
consider applications filed in competition with an incumbent's renewal
application. The 1996 Act also substantially liberalized the national broadcast
ownership rules, eliminating the national radio limits and easing the national
restrictions on TV ownership. The 1996 Act also relaxed local radio ownership
restrictions, but left local TV ownership restrictions in place pending further
FCC review.
This new regulatory flexibility has engendered aggressive local,
regional, and/or national acquisition campaigns. Removal of previous station
ownership limitations on leading media companies, such as existing networks and
major station groups, has increased sharply the competition for and the prices
of attractive stations.
License Grant and Renewal
Prior to the passage of the 1996 Act, television and radio broadcasting
licenses generally were granted or renewed for periods of five and seven years,
respectively, upon a finding by the FCC that the "public interest, convenience,
and necessity" would be served thereby. At the time an application is made for
renewal of a television or radio license, parties in interest may file petitions
to deny the application, and others may object informally to grant of the
application. Such parties, including members of the public, may comment upon
matters related to whether renewal is warranted, including the service the
station has provided during the preceding license term. Prior to passage of the
1996 Act, any person or entity also was permitted to file a competing
application for authority to operate on the station's channel and replace the
incumbent licensee. Renewal applications were granted without a hearing if there
were no competing applications and if issues raised by petitioners to deny or
informal objectors to such applications were not serious enough to cause the FCC
to order a hearing. If competing applications were filed, or if sufficiently
serious issues were raised by a petitioner or objector, a full comparative
hearing was required.
Under the 1996 Act, the statutory restriction on the length of
broadcast licenses has been amended to allow the FCC to grant broadcast licenses
to both television and radio stations for terms of up to eight years. The 1996
Act also requires renewal of a broadcast license if the FCC finds that
o the station has served the public interest, convenience, and necessity;
o there have been no serious violations of either the Communications Act or
the FCC's rules and regulations by the licensee; and
o there have been no other serious violations which taken together constitute
a pattern of abuse.
In making its determination, the FCC may still consider petitions to deny and
informal objections, and may order a hearing if such petitions or objections
raise sufficiently serious issues, but cannot consider whether the public
interest would be better served by a person or entity other than the renewal
applicant. Instead, under the 1996 Act, competing applications for the same
frequency may be accepted only after the FCC has denied an incumbent's
application for renewal of license.
32
<PAGE> 33
Although in the vast majority of cases broadcast licenses are renewed
by the FCC even when petitions to deny or informal objections are filed, there
can be no assurance that any of our stations' licenses will be renewed at the
expiration of their terms.
Multiple Ownership Restrictions
The FCC has promulgated rules that, among other things, limit the
ability of individuals and entities to own or have an "attributable interest" in
broadcast stations, as well as other specified mass media entities. Prior to the
passage of the 1996 Act, these rules included limits on the number of radio and
television stations that could be owned on both a national and local basis. On a
national basis, the rules generally precluded any individual or entity from
having an attributable interest in more than 20 AM radio stations, 20 FM radio
stations and 12 television stations. Moreover, the aggregate audience reach of
the co-owned television stations could not exceed 25% of all U.S. television
households.
The 1996 Act completely revised the television and radio ownership
rules via changes the FCC implemented in two orders issued on March 8, 1996.
With respect to television, the 1996 Act and the FCC's subsequently issued
orders eliminated the 12-station national limit for station ownership and
increased the national audience reach limitation from 25% to 35%. On a local
basis, however, the 1996 Act did not alter current FCC rules prohibiting an
individual or entity from holding an attributable interest in more than one
television station in a market. The 1996 Act did require the FCC to conduct a
rulemaking proceeding, however, to determine whether to retain or modify this
so-called "TV duopoly rule," including narrowing the rule's geographic scope and
permitting some two-station combinations at least in certain (large) markets. In
August 1999, the FCC completed this rulemaking and adopted a revised TV duopoly
rule. Under the new rule, permissible common ownership of television stations is
dictated by Nielsen Designated Market Areas, or "DMAs." A company may own two
television stations in a DMA if the stations' Grade B contours do not overlap.
Conversely, a company may own television stations in separate DMAs even if the
stations' service contours do overlap. Conversely, a company may own television
stations in separate DMAs even if the stations' service contours do overlap.
Furthermore, a company may own two television stations in a DMA with overlapping
Grade B contours if (i) at least eight independently owned and operating
full-power television stations will remain in the DMA after the combination; and
(ii) at least one of the commonly owned stations is not among the top four
stations in the market in terms of audience share. The FCC will presumptively
waive these criteria and allow the acquisition of a second same-market
television station where the station being acquired is shown to be "failed" or
"failing" (under specific FCC definitions of those terms), or authorized but
unbuilt. A buyer seeking such a waiver must also demonstrate that it is the only
buyer ready, willing, and able to operate the station, and that sale to an
out-of-market buyer would result in an artificially depressed price.
With respect to radio licensees, the 1996 Act and the FCC's
subsequently issued rule changes eliminated the national ownership restriction,
allowing one entity to own nationally any number of AM or FM broadcast stations.
The 1996 Act and the FCC's implementing rules also greatly eased local radio
ownership restrictions. The maximum allowable number of stations that may be
commonly owned in a market varies depending on the number of radio stations
within that market, as determined using a method prescribed by the FCC. In
markets with more than 45 stations, one company may own, operate, or control
eight stations, with no more than five in any one service (AM or FM). In markets
of 30-44 stations, one company may own seven stations, with no more than four in
any one service; in markets with 15-29 stations, one entity may own six
stations, with no more than four in any one service. In markets with 14
commercial stations or less, one company may own up to five stations or 50% of
all of the stations, whichever is less, with no more than three in any one
service. These new rules permit common ownership of substantially more stations
in the same market than did the FCC's prior rules, which at most allowed
ownership of no more than two AM stations and two FM stations even in the
largest markets.
33
<PAGE> 34
Irrespective of FCC rules governing radio ownership, however, the
Antitrust Division of the United States Department of Justice and the Federal
Trade Commission have the authority to determine that a particular transaction
presents antitrust concerns. Following the passage of the 1996 Act, the
Antitrust Division has become more aggressive in reviewing proposed acquisitions
of radio stations, particularly in instances where the proposed acquirer already
owns one or more radio stations in a particular market and seeks to acquire
another radio station in the same market. The Antitrust Division has, in some
cases, obtained consent decrees requiring radio station divestitures in a
particular market based on allegations that acquisitions would lead to
unacceptable concentration levels. The FCC has also been more aggressive in
independently examining issues of market concentration when considering radio
station acquisitions. The FCC has delayed its approval of numerous proposed
radio station purchases by various parties because of market concentration
concerns, and generally will not approve radio acquisitions where the Antitrust
Division has expressed concentration concerns, even if the acquisition complies
with the FCC's numerical station limits. Moreover, in recent months the FCC has
followed a policy of giving specific public notice of its intention to conduct
additional ownership concentration analysis, and soliciting public comment on
"the issue of concentration and its effect on competition and diversity," with
respect to certain applications for consent to radio station acquisitions
(including our application for approval of our merger with AMFM as it relates to
various local markets) based on advertising revenue shares or other criteria.
In 1992, the FCC adopted rules with respect to so-called local
marketing agreements, or "LMAs", by which the licensee of one radio station
provides substantially all the programming for another licensee's station in the
same market and sells all of the advertising within that programming. Under
these rules, in determining the number of radio stations that a single entity
may control, an entity that owns one or more radio stations in a market and
programs a station in the same market pursuant to an LMA is required, under
certain circumstances, to count the LMA station toward its local radio ownership
limits even though it does not own the station. As a result, in a market where
we own one or more radio stations, we generally cannot provide programming under
an LMA to another radio station if we cannot acquire that station under the
local radio ownership rules.
In August 1999, the FCC adopted rules for television LMAs similar to
those that govern radio LMAs. As is the case for radio LMAs, an entity that owns
a television station and programs more than 15% of the broadcast time on another
television station in the same market is now required to count the LMA station
toward its television ownership limits even though it does not own the station.
Thus, in the future with respect to markets in which we own television stations,
we generally will not be able to enter into an LMA with another television
station in the same market if we cannot acquire that station under the revised
television duopoly rule.
In adopting these new rules concerning television LMAs, however, the
FCC provided "grandfathering" relief for LMAs that were in effect at the time of
the rule change. Television LMAs that were in place at the time of the new rules
and were entered into before November 5, 1996, were allowed to continue at least
through 2004, when the FCC is scheduled to undertake a comprehensive review and
re-evaluation of its broadcast ownership rules. Such LMAs entered into after
November 5, 1996, were allowed to continue until August 5, 2001, at which point
they must be terminated unless they comply with the revised television duopoly
rule.
34
<PAGE> 35
We provide programming under LMAs to television stations in eight
markets where we also own a television station. In one additional market, a
third party which owns a television station in that market also programs our
station under an LMA. Each of our television LMAs was entered into before
November 5, 1996. Therefore, under the FCC's August 1999 decision, each of our
television LMAs is permitted to continue through at least the year 2004.
Moreover, beginning in September 2000, we will have the opportunity to obtain
permanent grandfathering of our television LMAs by demonstrating to the FCC,
among other things, the public interest benefits the LMAs have produced and the
extent to which the LMAs have enabled the stations involved to convert to
digital operation. Finally, in five markets in which we own a television station
and program a second station under an LMA, the FCC's revised television duopoly
rule permits us to own two television stations. Accordingly, we have applied for
FCC approval to acquire our LMA stations in these five markets.
A number of cross-ownership rules pertain to licensees of television
and radio stations. FCC rules, the Communications Act or both generally prohibit
an individual or entity from having an attributable interest in both a
television station and a daily newspaper or cable television system that is
located in the same market served by the television station.
Prior to August 1999, FCC rules also generally prohibited common
ownership of a television station and one or more radio stations in the same
market, although the FCC in many cases allowed such combinations under waivers
of the rule. In August 1999, however, the FCC comprehensively revised its
radio/television cross-ownership rule. The revised rule permits the common
ownership of one television and up to seven same-market radio stations, or up to
two television and six same-market radio stations, if the market will have at
least twenty separately owned broadcast, newspaper and cable "voices" after the
combination. Common ownership of up to two television and four radio stations is
permissible when ten "voices" will remain, and common ownership of up to two
television and one radio station is permissible in all markets regardless of
voice count. The radio/television limits, moreover, are subject to the
compliance of the television and radio components of the combination with the
television duopoly rule and the local radio ownership limits, respectively.
Waivers of the radio/television cross-ownership rule are available only where
the station being acquired is "failed" (i.e., off the air for at least four
months or involved in court-supervised involuntary bankruptcy or insolvency
proceedings). A buyer seeking such a waiver must also demonstrate that it is the
only buyer ready, willing, and able to operate the station, and that sale to an
out-of-market buyer would result in an artificially depressed price.
There are nine markets where we own both radio and television stations
under temporary and conditional waivers of the prior radio/television
cross-ownership rule. In some of these markets, the number of radio stations we
own complies with the limit imposed by the revised rule, and we have asked the
FCC to permanently authorize our common ownership of our radio and television
stations in such markets. In those markets where our number of radio stations
exceeds the limit under the revised rule, we are nonetheless authorized to
retain our present television/radio combinations at least until 2004, when the
FCC is scheduled to undertake a comprehensive review and re-evaluation of its
broadcast ownership rules. As with grandfathered television LMAs, beginning in
September 2000 we will have the opportunity to obtain permanent authorization
for our non-compliant radio/television combinations by demonstrating to the FCC,
among other things, the public interest benefits the combinations have produced
and the extent to which the combinations have enabled the television stations
involved to convert to digital operation.
The 1996 Act eliminated a statutory prohibition against common
ownership of television broadcast stations and cable systems serving the same
area, but left the current FCC rule in place. The 1996 Act stipulates that the
FCC should not consider the repeal of the statutory ban in any review of its
applicable rules. The legislation also eliminated the FCC's former network/cable
cross-ownership limitations, but
35
<PAGE> 36
allowed the FCC to adopt regulations if necessary to ensure carriage,
appropriate channel positioning, and nondiscriminatory treatment of
non-affiliated broadcast stations on network-owned cable systems. The FCC
eliminated the restriction and determined that additional safeguards were not
necessary at this time.
The 1996 Act did not alter the FCC's newspaper/broadcast
cross-ownership restrictions. However, the FCC is considering whether to change
the policy pursuant to which it considers waivers of the radio/newspaper
cross-ownership rule. Finally, the 1996 Act and the FCC's subsequently issued
rule changes revised the long-standing "dual network" rule to permit television
broadcast stations to affiliate with an entity that maintains two or more
networks, unless the combination is composed of (a) two of the four existing
networks (ABC, CBS, NBC or FOX) or (b) any of the four existing networks and one
of the two emerging networks (WB or UPN).
Expansion of our broadcast operations in particular areas and
nationwide will continue to be subject to the FCC's ownership rules and any
further changes the FCC or Congress may adopt. Significantly, the 1996 Act
requires the FCC to review its remaining ownership rules biennially as part of
its regulatory reform obligations to determine whether its various rules are
still necessary. The first such biennial review commenced March 13, 1998, with
the FCC's adoption of a notice of inquiry soliciting comment on its ownership
rules. In this notice of inquiry, the FCC has requested specific comment on
o the manner in which the FCC counts stations for purposes of the local radio
multiple ownership rule;
o the "UHF discount," under which UHF television stations are attributed with
only 50% of their reach for purposes of the national television audience
reach limit;
o the prohibition on common ownership of a daily newspaper and a radio or TV
broadcast station in the same market; and
o the prohibition on common ownership of a television station and a cable
system in the same market.
We cannot predict the impact of the biennial review process or any other agency
or legislative initiatives upon the FCC's broadcast rules. Further, the 1996
Act's relaxation of the FCC's ownership rules has increased the level of
competition in many markets in which our stations are located.
Under the FCC's ownership rules, a direct or indirect purchaser of
certain types of our securities could violate FCC regulations or policies if
that purchaser owned or acquired an "attributable" interest in other media
properties in the same areas as stations owned by us or in a manner otherwise
prohibited by the FCC. All officers and directors of a licensee and any direct
or indirect parent, as well as general partners, limited partners and limited
liability company members who are not properly "insulated" from management
activities, and stockholders who own five percent or more of the outstanding
voting stock of a licensee, either directly or indirectly, generally will be
deemed to have an attributable interest in the license. Certain institutional
investors who exert no control or influence over a licensee may own up to twenty
percent of such outstanding voting stock before attribution occurs. Under
current FCC regulations, debt instruments, non-voting stock, properly insulated
limited partnership and limited liability company interests as to which the
licensee certifies that the interest holders are not "materially involved" in
the management and operation of the subject media property, and voting stock
held by minority stockholders in cases in which there is a single majority
stockholder generally are not subject to attribution unless such interests
implicate the FCC's recently-adopted "equity/debt plus," or "EDP," rule. Under
the EDP rule, an aggregate interest in excess of 33% of a licensee's total asset
value (equity plus debt) is attributable if the interest holder is either a
major program supplier (providing over 15% of the licensee's station's total
weekly broadcast programming hours) or a same-market media owner (including
broadcasters, cable operators, and newspapers). To the best of our knowledge at
present, none of our officers, directors or five percent
36
<PAGE> 37
stockholders holds an interest in another television station, radio station,
cable television system or daily newspaper that is inconsistent with the FCC's
ownership rules and policies.
Alien Ownership Restrictions
The Communications Act restricts the ability of foreign entities or
individuals to own or hold certain interests in broadcast licenses. Foreign
governments, representatives of foreign governments, non-U.S. citizens,
representatives of non-U.S. citizens, and corporations or partnerships organized
under the laws of a foreign nation are barred from holding broadcast licenses.
Non-U.S. citizens, collectively, may directly or indirectly own or vote up to
twenty percent of the capital stock of a corporate licensee. In addition, a
broadcast license may not be granted to or held by any corporation that is
controlled, directly or indirectly, by any other corporation more than
one-fourth of whose capital stock is owned or voted by non-U.S. citizens or
their representatives, by foreign governments or their representatives, or by
non-U.S. corporations, if the FCC finds that the public interest will be served
by the refusal or revocation of such license. The FCC has interpreted this
provision of the Communications Act to require an affirmative public interest
finding before a broadcast license may be granted to or held by any such
corporation, and the FCC has made such an affirmative finding only in limited
circumstances. Since we serve as a holding company for subsidiaries that serve
as licensees for our stations, we may be restricted from having more than
one-fourth of our stock owned or voted directly or indirectly by non-U.S.
citizens, foreign governments, representatives of non-foreign governments, or
foreign corporations.
Other Regulations Affecting Broadcast Stations
General. The FCC has significantly reduced its past regulation of
broadcast stations, including elimination of formal ascertainment requirements
and guidelines concerning amounts of certain types of programming and commercial
matter that may be broadcast. There are, however, FCC rules and policies, and
rules and policies of other federal agencies, that regulate matters such as
network-affiliate relations, the ability of stations to obtain exclusive rights
to air syndicated programming, cable systems' carriage of local television
stations and of syndicated and network programming on distant stations,
political advertising practices, application procedures and other areas
affecting the business or operations of broadcast stations.
Children's Television Programming. The FCC has adopted rules to
implement the Children's Television Act of 1990, which, among other provisions,
limits the permissible amount of commercial matter in children's programs and
requires each television station to present "educational and informational"
children's programming. The FCC also has adopted renewal processing guidelines
effectively requiring television stations to broadcast an average of three hours
per week of children's educational programming.
Closed Captioning. The FCC has adopted rules requiring closed
captioning of broadcast television programming. The rules require generally that
(i) 100% of all new programming first published or exhibited on or after January
1, 1998 must be closed captioned within eight years, and (ii) 75% of "old"
programming which first aired prior to January 1, 1998 must be closed captioned
within 10 years, subject to certain exemptions.
37
<PAGE> 38
Television Violence. The 1996 Act contains a number of provisions
relating to television violence. First, pursuant to the 1996 Act, the television
industry has developed a ratings system which the FCC has approved. Furthermore,
also pursuant to the 1996 Act, the FCC has adopted rules requiring certain
television sets to include the so-called "V-chip," a computer chip that allows
blocking of rated programming. Under these rules, half of all television
receiver models with picture screens 13 inches or greater were required to have
the "V-chip" by July 1, 1999, and all such models were required to have the
"V-chip" by January 1, 2000. In addition, the 1996 Act requires that all
television license renewal applications filed after May 1, 1995 contain
summaries of written comments and suggestions received by the station from the
public regarding violent programming.
Recent Developments, Proposed Legislation and Regulation
Equal Employment Opportunity. In April 1998, the U.S. Court of Appeals
for the D.C. Circuit concluded that the affirmative action requirements of the
FCC's Equal Employment Opportunity ("EEO") regulations were unconstitutional.
The FCC responded to the court's ruling in September 1998 by suspending its
requirements for the filing by broadcasters of annual employment reports and
program reports. In January 2000, the FCC adopted new EEO rules, which (1)
require broadcast licensees to widely disseminate information about job openings
to all segments of the community; and (2) give broadcasters the choice of
implementing two FCC-suggested supplemental recruitment measures or,
alternatively, designing their own broad recruitment/outreach program. The
Commission also reinstated its requirement that broadcasters file annual
employment reports and other EEO-related forms with the FCC.
Distribution of Video Services by Telephone Companies. Recent actions
by Congress, the FCC and the courts all presage significant future involvement
in the provision of video services by telephone companies. We cannot predict
either the timing or the extent of such involvement. These developments all
relate to a former provision of the Communications Act that prohibited a local
telephone company from providing video programming directly to subscribers
within the company's telephone service areas. As applied by government
regulators historically, the former provision prevented telephone companies from
providing cable service over either the telephone network or a separate cable
system located within the telephone service area. That provision has now been
superseded by the 1996 Act, which provides for telephone company entry into the
distribution of video services either under the laws and rules applicable to
cable systems as operators of so-called "wireless cable systems", as common
carriers or under new rules devised by the FCC for "open video systems" subject
to certain common carrier requirements.
The 1996 Act also eliminated the FCC's "video dialtone" rules, which
allowed telephone companies to provide a transport "platform" to multiple video
programmers, including, potentially, competing program packages, on a
non-discriminatory, common carrier basis. The legislation does not affect any
video dialtone systems approved prior to enactment of the 1996 Act. Congress
instead has determined that telephone companies may offer video programming
either as a traditional cable operator, as a so-called "wireless cable"
operator, as a common carrier, or through operation of an "open video system."
Although Congress specifically preempted the FCC's video dialtone rules, the
legislation's directives for open video systems resemble the rules adopted or
proposed for video dialtone systems in certain respects. These include the
requirements that the operator of an open video system offer carriage capacity
to various video programming providers under nondiscriminatory rates, terms, and
conditions; and if demand for carriage exceeds the channel capacity of the open
video system, the operator generally is barred from devoting more than one-third
of the system's capacity to programming provided by itself or an affiliate.
38
<PAGE> 39
The 1992 Cable Act. On October 5, 1992, Congress enacted the Cable
Television Consumer Protection and Competition Act of 1992, which, among other
matters, includes provisions respecting the carriage of television stations'
signals by cable television systems. The signal carriage, or "must carry,"
provisions of the 1992 Cable Act require cable operators to carry the signals of
local commercial and non-commercial television stations and certain low power
television stations. Systems with 12 or fewer usable activated channels and more
than 300 subscribers must carry the signals of at least three local commercial
television stations. A cable system with more than 12 usable activated channels,
regardless of the number of subscribers, must carry the signals of all local
commercial television stations, up to one-third of the aggregate number of
usable activated channels of such a system. The 1992 Cable Act also includes a
retransmission consent provision that prohibits cable operators and other
multi-channel video programming distributors from carrying broadcast signals
without obtaining the station's consent in certain circumstances. The "must
carry" and retransmission consent provisions are related in that a local
television broadcaster, on a cable system-by-cable system basis, must make a
choice once every three years whether to proceed under the "must carry" rules or
to waive the right to mandatory but uncompensated carriage and negotiate a grant
of retransmission consent to permit the cable system to carry the station's
signal, in most cases in exchange for some form of consideration from the cable
operator. Cable systems and other multi-channel video programming distributors
must obtain retransmission consent to carry all distant commercial stations
other than "super stations" delivered via satellite.
In March 1997, the U.S. Supreme Court upheld the constitutionality of
the must-carry provisions of the 1992 Cable Act. As a result, the regulatory
scheme promulgated by the FCC to implement the must-carry provisions of the 1992
Cable Act remains in effect. Whether and to what extent such must-carry rights
will extend to the new digital television signals (see below) to be broadcast by
licensed television stations, including those owned by us, over the next several
years is still a matter to be determined in an ongoing rulemaking proceeding
initiated by the FCC in July 1998. Our television stations are highly dependent
on their carriage by cable systems in the areas they serve. Thus, FCC rules that
impose no or limited obligations on cable systems and other multi-channel video
programming distributors to carry the digital signals of television broadcast
stations in their local markets could adversely affect our operations.
The 1992 Cable Act was amended in several important respects by the
1996 Act. Most notably, as discussed above, the 1996 Act repealed the
cross-ownership ban between cable and telephone entities and the FCC's former
video dialtone rules. These actions, among other regulatory developments, permit
involvement by telephone companies in providing video services. We cannot
predict the impact that telephone company entry into video programming will have
upon the broadcasting industry.
The 1996 Act also repealed or curtailed several cable-related ownership
and cross-ownership restrictions. For example, as noted above, the 1996 Act
eliminated the broadcast network/cable cross-ownership limitations and the
statutory prohibition on TV/cable cross-ownership.
Advanced Television Service. The FCC has taken a number of steps to
implement digital television broadcasting service in the United States. In
December 1996, the FCC adopted a digital television broadcast standard and, in
April 1997, adopted decisions in several pending rulemaking proceedings that
establish service rules and a plan for implementing digital television. The FCC
adopted a digital television table of allotments that provides all authorized
television stations with a second channel on which to broadcast a digital
television signal. The FCC has attempted to provide digital television coverage
areas that are comparable to stations' existing service areas. The FCC has ruled
that television broadcast licensees may use their digital channels for a wide
variety of services such as high-definition television, multiple standard
definition television programming, audio, data, and other types of
communications, subject to the requirement that each broadcaster provide at
least one free video channel equal in quality to the current technical standard.
39
<PAGE> 40
Digital television channels will generally be located in the range of
channels from channel 2 through channel 51. Stations must construct their DTV
facilities and be on the air with a digital signal according to a schedule by
the FCC based on the type of station and the size of the market in which it is
located. For example, all ABC, CBS, NBC and FOX network affiliates in the 10
largest markets were required to be on the air with a digital signal by May 1,
1999. Affiliates of the four major networks in the top 30 markets were required
to be transmitting digital signals by November 1, 1999. (Our WFTC-TV in
Minneapolis, Minnesota is awaiting a construction permit for its DTV facilities
from the FCC and, therefore, did not meet this deadline.) All other commercial
broadcasters must follow suit by May 1, 2002.
The FCC's plan calls for the digital television transition period to
end in the year 2006, at which time the FCC expects that television broadcasters
will cease non-digital broadcasting and return one of their two channels to the
government, allowing that spectrum to be recovered for other uses. Under the
Balanced Budget Act, however, the FCC is authorized to extend the December 31,
2006 deadline for reclamation of a television station's non-digital channel if,
in any given case:
o one or more television stations affiliated with ABC, CBS, NBC or FOX in a
market is not broadcasting digitally, and the FCC determines that such
stations have "exercised due diligence" in attempting to convert to digital
broadcasting; or
o less than 85% of the television households in the station's market subscribe
to a multichannel video service that carries at least one digital channel
from each of the local stations in that market, and less than 85% of the
television households in the market can receive digital signals off the air
using either a set-top converter box for an analog television set or a new
digital television set.
The FCC is currently considering whether cable television system
operators should be required to carry local stations' digital television signals
in addition to the currently required carriage of such stations' analog signals.
In July 1998, the FCC issued a Notice of Proposed Rulemaking posing seven
different options for the carriage of digital signals and solicited comments
from all interested parties. The FCC has yet to issue a decision on this matter.
The FCC also is considering the impact of low power television ("LPTV")
stations on digital broadcasting. Currently, stations in the LPTV service are
authorized with "secondary" frequency use status, and, as such, may not cause
interference to, and must accept interference from, full service television
stations. With the conversion to DTV now underway, LPTV stations, which already
were required to protect existing analog television stations, are now required
to protect the new DTV stations and allotments as well. Thus, if an LPTV station
causes interference to a new DTV station, the LPTV station must either find a
suitable replacement channel or, if unable to do so, cease operating. In
recognition of the consequences the DTV transition could have on many LPTV
stations, legislation enacted in November 1999 created a new "Class A" LPTV
service that will afford some measure of primary status (i.e., interference
protection) to certain qualifying LPTV stations. Thus, in the future, full
service television stations will have to provide interference protection to all
LPTV stations certified as Class A. In accordance with the recently enacted law,
in January 2000, the FCC sought comment on proposed rules for the new Class A
television service. Congress has directed the FCC to finalize its rules by March
28, 2000. We cannot predict the form of the new rules or the impact of such
rules on our operation.
In December 1999, the FCC commenced a proceeding seeking comment on the
public interest obligations of digital television broadcasters. Specifically,
the Commission is requesting information in
40
<PAGE> 41
four general areas: (1) the new flexibility and capabilities of digital
television, such as multiple channel transmission; (2) service to local
communities in terms of providing information on public interest activities and
disaster relief; (3) enhancing access to the media by persons with disabilities
and using DTV to encourage diversity in the digital era; and (4) enhancing the
quality of political discourse. The FCC stated that it was not proposing new
rules or policies, but merely seeking to create a forum for public debate on how
broadcasters can best serve the public interest during and after the transition
to DTV.
Implementation of digital television will improve the technical quality
of television signals received by viewers and will give television broadcasters
the flexibility to provide new services, including high definition television or
multiple programs of standard definition television and data transmission.
However, the implementation of digital television will also impose substantial
additional costs on television stations because of the need to replace equipment
and because some stations will need to operate at higher utility costs. There
can be no assurance that our television stations will be able to increase
revenue to offset such costs. In addition, the 1996 Act allows the FCC to charge
a spectrum fee to broadcasters who use the digital spectrum to offer
subscription-based services. The FCC has adopted rules that require broadcasters
to pay a fee of 5% of gross revenues received from ancillary or supplementary
uses of the digital spectrum for which they charge subscription fees. We cannot
predict what future actions the FCC might take with respect to digital
television, nor can we predict the effect of the FCC's present digital
television implementation plan or such future actions on our business. We will
incur considerable expense in the conversion to digital television and are
unable to predict the extent or timing of consumer demand for digital television
services.
Digital Audio Radio Service. In January 1995, the FCC adopted rules to
allocate spectrum for satellite digital audio radio service. Satellite digital
audio radio service systems potentially could provide for regional or nationwide
distribution of radio programming with fidelity comparable to compact discs. The
FCC has issued two authorizations to launch and operate satellite digital audio
radio service. The FCC also has undertaken an inquiry regarding rules for the
terrestrial broadcast of digital audio radio service signals, addressing, among
other things, the need for spectrum outside the existing FM band and the role of
existing broadcasters. We cannot predict the impact of either satellite digital
audio radio service or terrestrial digital audio radio service on our business.
Low Power FM Radio Service. In January 2000, the FCC created two new
classes of noncommercial low power FM radio stations ("LPFM"). One class (LP100)
will operate with a maximum power of 100 watts and a service radius of about 3.5
miles. The other class (LP10) will operate with a maximum power of 10 watts and
a service radius of about 1 to 2 miles. In establishing the new LPFM service,
the FCC said that its goal is to create a class of radio stations designed "to
serve very localized communities or underrepresented groups within communities."
We cannot predict the impact of low power FM radio stations on our business.
Direct Broadcast Satellite Systems. There are currently in operation
several direct broadcast satellite systems that serve the United States, and it
is anticipated that additional systems will become operational over the next
several years. Direct broadcast satellite systems provide programming on a
subscription basis to those who have purchased and installed a satellite signal
receiving dish and associated decoder equipment. Direct broadcast satellite
systems claim to provide visual picture quality comparable to that found in
movie theaters and aural quality comparable to digital audio compact discs. We
cannot predict the impact of direct broadcast satellite systems on our business.
Congress and the FCC currently have under consideration, and may in the
future adopt, new laws, regulations and policies regarding a wide variety of
matters that could affect, directly or indirectly, the
41
<PAGE> 42
operation and ownership of our broadcast properties. In addition to the changes
and proposed changes noted above, such matters include, for example, the license
renewal process, spectrum use fees, political advertising rates, and potential
restrictions on the advertising of certain products such as beer and wine. Other
matters that could affect our broadcast properties include technological
innovations and developments generally affecting competition in the mass
communications industry, such as direct broadcast satellite service, the
continued establishment of wireless cable systems and low power television
stations, digital television and radio technologies, the establishment of a low
power FM radio service, and the advent of telephone company participation in the
provision of video programming service.
The foregoing is a brief summary of certain provisions of the
Communications Act, the 1996 Act, the 1992 Cable Act, and specific regulations
and policies of the FCC thereunder. This description does not purport to be
comprehensive and reference should be made to the Communications Act, the 1996
Act, the 1992 Cable Act, the FCC's rules and the public notices and rulings of
the FCC for further information concerning the nature and extent of federal
regulation of broadcast stations. Proposals for additional or revised
regulations and requirements are pending before and are being considered by
Congress and federal regulatory agencies from time to time. Also, various of the
foregoing matters are now, or may become, the subject of court litigation, and
we cannot predict the outcome of any such litigation or its impact on our
broadcast business.
Outdoor Advertising
The outdoor advertising industry is subject to extensive governmental
regulation at the federal, state and local level. Compliance with existing and
future regulations could have a significant financial impact on us. Federal law,
principally the Highway Beautification Act of 1965, encourages states to
implement legislation to restrict billboards located within 660 feet of, or
visible from, highways except in commercial or industrial areas. Every state has
implemented regulations at least as restrictive as the Highway Beautification
Act, including a ban on the construction of new billboards along federally-aided
highways and the removal of any illegal signs on these highways at the owner's
expense and without any compensation.
States and local jurisdictions have, in some cases, passed additional
regulations on the construction, size, location and, in some instances,
advertising content of outdoor advertising structures adjacent to
federally-aided highways and other thoroughfares. From time to time governmental
authorities order the removal of billboards by the exercise of eminent domain
and certain jurisdictions have also adopted amortization of billboards in
varying forms. Amortization permits the billboard owner to operate its billboard
only as a non-conforming use for a specified period of time, after which it must
remove or otherwise conform its billboards to the applicable regulations at its
own cost without any compensation. We or our acquired companies have agreed to
remove certain billboards in Jacksonville, Florida. Furthermore, Tampa, Houston
and San Francisco, which are municipalities within our existing markets, have
adopted amortization ordinances. We can give no assurance that we will be
successful in negotiating acceptable arrangements in circumstances in which our
displays are subject to removal or amortization, and what effect, if any, such
regulations may have on our operations.
In addition, we are unable to predict what additional regulations may
be imposed on outdoor advertising in the future. Legislation regulating the
content of billboard advertisements and additional billboard restrictions have
been introduced in Congress from time to time in the past. Changes in laws and
regulations affecting outdoor advertising at any level of government, including
laws of the foreign jurisdictions in which we operate, could have a material
adverse effect on us.
42
<PAGE> 43
Tobacco and Alcohol Advertising
Regulations, potential legislation and recent settlement agreements
related to outdoor tobacco advertising could have a material adverse effect on
our operations. The major U.S. tobacco companies that are defendants in numerous
class action suits throughout the country recently reached an out-of-court
settlement with 46 states that includes a ban on outdoor advertising of tobacco
products. The settlement agreement was finalized on November 23, 1998, but must
be ratified by the courts in each of the 46 states participating in the
settlement. In addition to the mass settlement, the tobacco industry previously
had come to terms with the remaining four states individually. The terms of such
individual settlements also included bans on outdoor advertising of tobacco
products. The elimination of billboard advertising by the tobacco industry will
cause a reduction in our direct revenues from such advertisers and may
simultaneously increase the available space on the existing inventory of
billboards in the outdoor advertising industry. This industry-wide increase in
space may in turn result in a lowering of outdoor advertising rates or limit the
ability of industry participants to increase rates for some period of time. For
the year ended December 31, 1999, approximately 1.5% of our revenues came from
the outdoor advertising of tobacco products.
In addition to the above settlement agreements, state and local
governments are also regulating the outdoor advertising of alcohol and tobacco
products. For example, several states and cities have laws restricting tobacco
billboard advertising near schools and other locations frequented by children.
Some cities have proposed even broader restrictions, including complete bans on
outdoor tobacco advertising on billboards, kiosks, and private business window
displays. It is possible that state and local governments may propose or pass
similar ordinances to limit outdoor advertising of alcohol and other products or
services in the future. Legislation regulating tobacco and alcohol advertising
has also been introduced in a number of European countries in which we conduct
business, and could have a similar impact.
Antitrust Matters
An important element of our growth strategy involves the acquisition of
additional radio and television stations and outdoor advertising display faces,
many of which are likely to require preacquisition antitrust review by the
Federal Trade Commission and the Antitrust Division. Following passage of the
1996 Act, the Antitrust Division has become more aggressive in reviewing
proposed acquisitions of radio stations and radio station networks, particularly
in instances where the proposed acquiror already owns one or more radio stations
in a particular market and the acquisition involves another radio station in the
same market. Recently, the Antitrust Division, in some cases, has obtained
consent decrees requiring radio station divestitures in a particular market
based on allegations that acquisitions would lead to unacceptable concentration
levels. There can be no assurance that the Antitrust Division or the FTC will
not seek to bar us from acquiring additional radio and television stations or
outdoor advertising display faces in any market where our existing stations or
display faces already have a significant market share. In addition, the
anitirust laws of foreign jurisdictions will apply if we acquire international
broadcasting properties.
Environmental Matters
As the owner, lessee or operator of various real properties and
facilities, we are subject to various federal, state and local environmental
laws and regulations. Historically, compliance with such laws and regulations
has not had a material adverse effect on our business. There can be no
assurance, however, that compliance with existing or new environmental laws and
regulations will not require us to make significant expenditures in the future.
43
<PAGE> 44
FINANCIAL LEVERAGE
We currently use a significant portion of our operating income for debt
service. Our leverage could make us vulnerable to an increase in interest rates
or a downturn in the operating performance of our broadcast properties or
outdoor advertising properties or a decline in general economic conditions. At
December 31, 1999, we had borrowings under our credit facility and other
long-term debt outstanding of approximately $4.1 billion and shareholders'
equity of $10.1 billion. We expect to continue to borrow funds to finance
acquisitions of broadcasting and outdoor advertising properties, as well as for
other purposes. We may borrow up to $2 billion under our domestic credit
facility at floating rates currently equal to the London InterBank Offered Rate
plus .40% and an additional $1 billion under our multi-currency credit facility
at floating rates currently equal to the London InterBank Offered Rate plus
.625%.
DEPENDENCE ON KEY PERSONNEL
Our business is dependent upon the performance of certain key
employees, including our chief executive officer and other executive officers.
We also employ or independently contract with several on-air personalities with
significant loyal audiences in their respective markets. Although we have
entered into long-term agreements with certain of our executive officers and key
on-air talent to protect their interests in those relationships, we can give no
assurance that all such key personnel will remain with us or will retain their
audiences.
INTERNATIONAL BUSINESS RISKS
Doing business in foreign countries carries with it certain risks that
are not found in doing business in the United States. We currently derive a
portion of our revenues from international radio and outdoor operations in
Europe, Asia, Mexico, Australia and New Zealand. The risks of doing business in
foreign countries which could result in losses against which we are not insured
include:
o potential adverse changes in the diplomatic relations of foreign
countries with the United States;
o hostility from local populations;
o the adverse effect of currency exchange controls;
o restrictions on the withdrawal of foreign investment and earnings;
o government policies against businesses owned by foreigners;
o expropriations of property;
o the potential instability of foreign governments;
o the risk of insurrections;
o risks of renegotiation or modification of existing agreements with
governmental authorities;
o foreign exchange restrictions; and
o changes in taxation structure.
44
<PAGE> 45
EXCHANGE RATE RISK
Because we own assets overseas and derive revenues from our
international operations, we may incur currency translation losses due to
changes in the values of foreign currencies and in the value of the U.S. dollar.
We cannot predict the effect of exchange rate fluctuations upon future operating
results. To reduce a portion of our exposure to the risk of international
currency fluctuations, we maintain a hedge by incurring debt in some other
currencies. We review this hedge position monthly. We currently maintain no
other derivative instruments to reduce the exposure to translation and/or
transaction risk, but may adopt other hedging strategies in the future.
OUR ACQUISITION STRATEGY COULD POSE RISKS
Operational Risks. We intend to grow through the acquisition of
broadcasting companies and assets, outdoor advertising companies, individual
outdoor advertising display faces, and other assets that we believe will assist
our customers in marketing their products and services. Our acquisition strategy
involves numerous risks, including:
o Certain of such acquisitions may prove unprofitable and fail to
generate anticipated cash flows;
o To successfully manage a rapidly expanding and significantly larger
portfolio of broadcasting and outdoor advertising properties, we may
need to recruit additional senior management and expand corporate
infrastructure;
o We may encounter difficulties in the integration of operations and
systems;
o Our management's attention may be diverted from other business
concerns; and
o We may lose key employees of acquired companies or stations.
Capital Requirements Necessary for Additional Acquisitions. We will
face stiff competition from other broadcasting and outdoor advertising companies
for acquisition opportunities. If the prices sought by sellers of these
companies continue to rise, we may find fewer acceptable acquisition
opportunities. In addition, the purchase price of possible acquisitions could
require additional debt or equity financing on our part. We can give no
assurance that we will obtain the needed financing or that we will obtain such
financing on attractive terms. Additional indebtedness could increase our
leverage and make us more vulnerable to economic downturns and may limit our
ability to withstand competitive pressures. Additional equity financing could
result in dilution to our stockholders.
NEW TECHNOLOGIES MAY AFFECT OUR BROADCASTING OPERATIONS
The FCC is considering ways to introduce new technologies to the radio
broadcasting industry, including satellite and terrestrial delivery of digital
audio broadcasting and the standardization of available technologies which
significantly enhance the sound quality of AM broadcasts. We are unable to
predict the effect such technologies will have on our broadcasting operations,
but the capital expenditures necessary to implement such technologies could be
substantial. We also face risks in implementing the conversion of our television
stations to digital television, which the FCC has ordered and for which it has
established a timetable. We will incur considerable expense in the conversion to
digital television and are unable to
45
<PAGE> 46
predict the extent or timing of consumer demand for any such digital television
services. Moreover, the FCC may impose additional public service obligations on
television broadcasters in return for their use of the digital television
spectrum. This could add to our operational costs. One issue yet to be resolved
is the extent to which cable systems will be required to carry broadcasters' new
digital channels. Our television stations are highly dependent on their carriage
by cable systems in the areas they serve. Thus, FCC rules that impose no or
limited obligations on cable systems to carry the digital television signals of
television broadcast stations in their local markets could adversely affect our
television operations.
OUR SYSTEMS MUST BE YEAR 2000 COMPLIANT
We are exposed to the risk that the year 2000 issue could cause system
failures or miscalculations in our broadcasting, 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. As a result, we
determined that we were required to modify or replace portions of our software
and certain hardware so that those systems would properly utilize dates beyond
December 31, 1999. We did not experience any significant system failures at the
turning of the new millennium. We presently believe that with our modifications
or replacements of existing software and certain hardware, the year 2000 issue
has been mitigated. The amounts incurred and expensed for developing and
carrying out the plans to complete the year 2000 modifications did not have a
material effect on our operations. See "Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations - Year 2000."
FORWARD-LOOKING STATEMENTS MAY PROVE INACCURATE
This report contains certain forward-looking statements within the
meaning of Section 21E of the Securities Exchange Act of 1934 about us. Although
we believe that, in making any such statements, our expectations are based on
reasonable assumptions, any such statement may be influenced by factors that
could cause actual outcomes and results to be materially different from those
projected. When used in this document, the words "anticipates," "believes,"
"expects," "intends," and similar expressions, as they relate to us or our
management, are intended to identify such forward-looking statements. These
forward-looking statements are subject to numerous risks and uncertainties.
Important factors that could cause actual results to differ materially from
those in forward-looking statements, certain of which are beyond our control,
include:
o the impact of general economic conditions in the U.S. and in other
countries in which we currently do business;
o industry conditions, including competition;
o fluctuations in exchange rates and currency values;
o capital expenditure requirements;
o legislative or regulatory requirements;
o interest rates;
46
<PAGE> 47
o taxes; and
o access to capital markets.
Our actual results, performance or achievements could differ materially
from those expressed in, or implied by, these forward-looking statements.
Accordingly, we cannot be certain that any of the events anticipated by the
forward-looking statements will occur or, if any of them do, what impact they
will have on us.
ITEM 2. PROPERTIES
Our corporate headquarters is in San Antonio, Texas. The lease
agreement for the approximately 20,000 square feet of office space in San
Antonio expires on April 30, 2000. On May 1, 2000 we intend to move into our
Company owned, newly constructed 50,000 square foot, corporate office building.
The types of properties required to support each of our radio and
television stations and outdoor advertising branches listed in Item 1 above
include offices, studios, transmitter sites, antenna sites and production
facilities. A radio or television station's studios are generally housed with
its offices in downtown or business districts. A radio or television station's
transmitter sites and antenna sites are generally located in a manner that
provides maximum market coverage. An outdoor branch and production facility is
generally located in an industrial/warehouse district.
The studios and offices of our radio and television stations and
outdoor advertising branches are located in leased or owned facilities. These
leases generally have expiration dates that range from one to twenty years. We
either own or lease our transmitter and antenna sites. These leases generally
have expiration dates that range from five to fifteen years. We do not
anticipate any difficulties in renewing those leases that expire within the next
several years or in leasing other space, if required. We own substantially all
of the equipment used in our broadcasting and outdoor businesses.
We own or have permanent easements on relatively few parcels of real
property that serve as the sites for our outdoor displays. Our remaining outdoor
display sites are leased. Our leases are for varying terms ranging from
month-to-month to year-to-year and can be for terms of ten years or longer, and
many provide for renewal options. There is no significant concentration of
displays under any one lease or subject to negotiation with any one landlord. We
believe that an important part of our management activity is to negotiate
suitable lease renewals and extensions.
As noted in Item 1 above, as of December 31, 1999, we own or program
509 radio stations and 24 television stations, and own or lease approximately
555,000 outdoor advertising display faces in various markets throughout the
world. See "Business -- Industry Segments." Therefore, no one property is
material to our overall operations. We believe that our properties are in good
condition and suitable for our operations.
ITEM 3. LEGAL PROCEEDINGS
From time to time we become involved in various claims and lawsuits
incidental to our business, including defamation actions. In the opinion of our
management, after consultation with counsel, any
47
<PAGE> 48
ultimate liability arising out of currently pending claims and lawsuits will not
have a material effect on our financial condition or operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
On December 28, 1999, Jacor Communications Company, a subsidiary of
Clear Channel, completed a consent solicitation and cash tender offer to acquire
all of its outstanding 10 1/8% Senior Subordinated Notes due 2006, 9 3/4% Senior
Subordinated Notes due 2006, 8 3/4% Senior Subordinated Notes due 2007, and 8%
Senior Subordinated Notes due 2010 (collectively, the "Senior Subordinated
Notes"). In connection with the tender offer, holders of not less than 51% in
aggregate principal amount of each series of the Senior Subordinated Notes
consented to certain amendments to the indentures governing the Senior
Subordinated Notes, and the material restrictive covenants in the indentures
were deleted.
48
<PAGE> 49
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Our common stock trades on the New York Stock Exchange under the symbol
"CCU." There were approximately 2,588 shareholders of record as of March 10,
2000. This figure does not include an estimate of the indeterminate number of
beneficial holders whose shares may be held of record by brokerage firms and
clearing agencies. The following table sets forth, for the calendar quarters
indicated, the reported high and low sales prices of the common stock as
reported on the NYSE. The prices have been adjusted to reflect a two-for-one
stock split in July 1998.
<TABLE>
<CAPTION>
CLEAR CHANNEL
COMMON STOCK
------------
MARKET PRICE
------------
HIGH LOW
---- ---
<S> <C> <C>
1998
First Quarter..................... $ 50.0315 $ 36.7190
Second Quarter.................... 54.5625 44.0625
Third Quarter..................... 61.7500 40.3750
Fourth Quarter.................... 54.5000 36.1250
1999
First Quarter..................... 67.4375 53.1250
Second Quarter.................... 74.0000 65.0625
Third Quarter..................... 79.8750 64.3750
Fourth Quarter.................... 90.2500 71.2500
</TABLE>
DIVIDEND POLICY
Presently, we expect to retain our earnings for the development and
expansion of our business and do not anticipate paying cash dividends in 2000.
However, any future decision by our Board of Directors to pay cash dividends
will depend on, among other factors, our earnings, financial position, capital
requirements and loan covenant restrictions. Our current bank credit agreement
allows for the payment of dividends subject to certain loan covenant
restrictions. There are no restrictions on dividends payable wholly in our
capital stock.
49
<PAGE> 50
ITEM 6. SELECTED FINANCIAL DATA
In thousands of dollars, except per share data
<TABLE>
<CAPTION>
As of and for the Years ended December 31, (2)
----------------------------------------------
1999 1998 1997 1996 1995
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS INFORMATION:
Gross revenue $ 2,992,018 $ 1,522,551 $ 790,178 $ 398,094 $ 283,357
=========== =========== =========== =========== ===========
Net revenue $2,678,160 $1,350,940 $697,068 $351,739 $250,059
Operating expenses 1,632,115 767,265 394,404 198,332 137,504
Depreciation and amortization 722,233 304,972 114,207 45,790 33,769
Corporate expenses 70,146 37,825 20,883 8,527 7,414
----------- ----------- ----------- ----------- -----------
Operating income 253,666 240,878 167,574 99,090 71,372
Interest expense 192,321 135,766 75,076 30,080 20,752
Gain on sale of stations 138,659 -- -- -- --
Other income (expense) - net 20,209 12,810 11,579 2,230 (803)
----------- ----------- ----------- ----------- -----------
Income before income taxes, equity in
earnings (loss) of nonconsolidated
affiliates and extraordinary item 220,213 117,922 104,077 71,240 49,817
Income taxes 150,635 72,353 47,116 28,386 20,292
----------- ----------- ----------- ----------- -----------
Income before equity in earnings (loss)
of nonconsolidated affiliates and
extraordinary item 69,578 45,569 56,961 42,854 29,525
Equity in earnings (loss) of non-
consolidated affiliates 16,077 8,462 6,615 (5,158) 2,489
----------- ----------- ----------- ----------- -----------
Income before extraordinary item 85,655 54,031 63,576 37,696 32,014
Extraordinary item (13,185) -- -- -- --
----------- ----------- ----------- ----------- -----------
Net income $ 72,470 $ 54,031 $ 63,576 $ 37,696 $ 32,014
=========== =========== =========== =========== ===========
Net income per common share (1) Basic:
Income before extraordinary item $ .27 $ .23 $ .36 $ .26 $ .23
Extraordinary item (.04) -- -- -- --
----------- ----------- ----------- ----------- -----------
Net income $ .23 $ .23 $ .36 $ .26 $ .23
=========== =========== =========== =========== ===========
Diluted:
Income before extraordinary item $ .26 $ .22 $ .33 $ .25 $ .23
Extraordinary item (.04) -- -- -- --
----------- ----------- ----------- ----------- -----------
Net income $ .22 $ .22 $ .33 $ .25 $ .23
=========== =========== =========== =========== ===========
Cash dividends per share $ -- $ -- $ -- $ -- $ --
=========== =========== =========== =========== ===========
BALANCE SHEET DATA:
Current assets $ 925,109 $ 409,960 $ 210,742 $ 113,164 $ 70,485
Property, plant and equipment - net 2,478,124 1,915,787 746,284 147,838 99,885
Total assets 16,821,512 7,539,918 3,455,637 1,324,711 563,011
Current liabilities 685,515 258,144 86,852 43,462 36,005
Long-term debt, net of current maturities 4,093,543 2,323,643 1,540,421 725,132 334,164
Shareholders' equity 10,084,037 4,483,429 1,746,784 513,431 163,713
</TABLE>
(1) All per share amounts have been adjusted to reflect two-for-one stock splits
effected in July 1998, December 1996 and November 1995.
(2) Acquisitions and dispositions significantly impact the comparability of the
historical consolidated financial data reflected in this schedule of Selected
Financial Data.
The Selected Financial Data should be read in conjunction with Management's
Discussion and Analysis.
50
<PAGE> 51
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Following is a discussion of the key factors that have affected our
business over the last three years. This commentary should be read in
conjunction with our financial statements and our five-year summary of
operations that appear in this report.
RESULTS OF OPERATIONS
Management's discussion and analysis of results of operations for 1999
vs. 1998 and 1998 vs. 1997, have been presented on an as-reported basis except
for net revenue, operating expenses, operating income before depreciation and
amortization, depreciation and amortization, and operating income explanations,
which have been presented on an as-reported and a pro forma basis. The pro forma
results for the 1999 vs. 1998 assumes our acquisitions of Jacor Communications,
Dame Media, Dauphin OTA, More Group Plc, and Universal Outdoor Holdings, Inc.
had occurred on January 1, 1998. The pro forma results for the 1998 vs. 1997
assumes our acquisitions of More Group Plc., Universal Outdoor Holdings, Inc.,
Paxson Radio and Eller Media Corporation had occurred on January 1, 1997. A
complete list of material acquisitions during the three-year period ended
December 31, 1999 is as follows:
<TABLE>
<CAPTION>
Date Included in
Business Acquired Segment As-Reported
----------------- ------- -----------
<S> <C> <C> <C>
Dauphin Outdoor July, 1999
Dame Media Broadcasting July, 1999
Jacor Broadcasting May, 1999
More Group Outdoor July 1998
Universal Outdoor April 1998
Paxson Broadcasting October 1997
Eller Outdoor April 1997
</TABLE>
CONSOLIDATED
(In thousands of dollars, except per share data)
<TABLE>
<CAPTION>
1999 vs. 1998 1998 vs. 1997
------------------------ ------------------------
Years Ended December 31, As-Reported Pro Forma As-Reported Pro Forma
------------------------ % Increase % Increase % Increase % Increase
1999 1998 1997 (Decrease) (Decrease) (Decrease) (Decrease)
---- ---- ---- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net revenue $2,678,160 $1,350,940 $697,068 98.2% 17.2% 93.8% 21.7%
Operating expenses 1,632,115 767,265 394,404 112.7% 15.9% 94.5% 21.2%
Operating income before
depreciation and amortization
and corporate expenses 1,046,045 583,675 302,664 79.2% 19.6% 92.8% 22.5%
Depreciation and amortization 722,233 304,972 114,207 136.8% 22.6% 167.0% 22.7%
Operating income 253,666 240,878 167,574 5.3% 11.2% 43.7% 20.9%
Interest expense 192,321 135,766 75,076 41.7% 80.8%
Gain on sale of stations 138,659 -- -- N/A N/A
Other income (expense) - net 20,209 12,810 11,579 57.8% 10.6%
Income taxes 150,635 72,353 47,116 108.2% 53.6%
Equity in earnings (loss) of
nonconsolidated affiliates 16,077 8,462 6,615 90.0% 27.9%
Net income 72,470 54,031 63,576 34.1% (15.0)%
Net income per share: (1)
Basic $ .23 $ .23 $ .36 0.0% (36.1)%
Diluted $ .22 $ .22 $ .33 0.0% (33.3)%
Effective tax rate 66% 58% 45%
</TABLE>
(1) Adjusted for a two-for-one stock split effective July 28, 1998
51
<PAGE> 52
CHANGE IN OPERATING REVENUE AND EXPENSE
The growth from 1998 to 1999 in "as reported" net revenue and operating
expenses was primarily due to the acquisitions of Universal in April of 1998,
More Group in July 1998, Jacor in May 1999 and Dame Media and Dauphin in July
1999. The acquisitions of Jacor and Dame Media added approximately 230 radio
stations and Premier Radio Network and contributed 27% of 1999 net revenue. The
acquisition of Dauphin added approximately 103,000 display faces, including
joint ventures, and contributed 5% of 1999 net revenue. On a pro forma basis,
net revenue increased due to improved advertising rates in our broadcasting
segment and improved occupancy, increased advertising rates and other less
significant acquisitions within our outdoor segment. Pro forma operating
expenses increased primarily from the incremental selling costs related to the
additional revenues.
The majority of the growth from 1997 to 1998 in "as-reported" net
revenue and operating expenses was due to the additional revenue and expenses
associated with the operations of Universal and More Group during 1998 and the
inclusion of the full year's operations of Eller and Paxson. The acquisition of
Universal and More Group added approximately 34,000 and 119,000 display faces,
respectively, including joint ventures, and contributed 27.6% of 1998 net
revenue. On a pro forma basis, net revenue increased due to improved advertising
rates in our broadcasting segment and improved occupancy and increased
advertising rates within our outdoor segment. Pro forma operating expenses
increased primarily from the incremental selling costs related to the additional
revenues.
In addition to the above mentioned acquisitions, "as-reported" and "pro
forma" information includes the operations of certain broadcast and outdoor
assets, which we acquired, net of dispositions, since January 1, 1997, for the
period we owned and operated the assets. These acquisitions include 13 radio
stations and approximately 75,000 outdoor displays in 1999; 34 radio stations
and approximately 25,000 outdoor displays in 1998; and 25 radio stations and
approximately 2,000 outdoor displays in 1997. Resulting from these net
acquisitions was an increase in net revenue and operating expense during 1999,
1998 and 1997; however, the effects of which, individually and in the aggregate,
were not material to our consolidated financial position or results of
operations.
CHANGE IN DEPRECIATION AND AMORTIZATION
The majority of the increase in "as reported" depreciation and
amortization from 1998 to 1999 was primarily due to the acquisition of the
tangible and intangible assets associated with the above-mentioned business
combinations. The majority of the increase in operating income from 1998 to 1999
was due to improved operations during 1999 for both the broadcasting and outdoor
segments, which was partially offset by an increase in depreciation and
amortization.
The tangible and intangible assets associated with the above mentioned
business acquisitions account for the majority of the increase in the
"as-reported" depreciation and amortization for 1998 over 1997.
CHANGE IN INTEREST EXPENSE, TAXES AND NET INCOME
Interest expense increased primarily due to an increase in the average
amount of debt outstanding, which resulted from the above-mentioned business
combinations. Income tax expense increased primarily from the increase in the
average effective tax rate from 58% in 1998 to 66% in 1999. The effective tax
rate increased as a result of the increase in nondeductible amortization
expenses principally associated with the acquisition of Jacor. The majority of
the increase in net income from 1998 to 1999 was due to a $138.7 million gain
realized during 1999 relating to the divestiture of certain stations we were
required to make by governmental directives regarding the Jacor merger. This was
partially offset by the increase in interest expense for the year.
52
<PAGE> 53
Interest expense increased during 1998 as a result of greater average
borrowing levels as a result of the aforementioned acquisitions, but was
partially offset by lower average borrowing rates, 5.9% in 1998 versus 6.6% in
1997. Our average borrowing rate was lowered in 1998 as a result of the issuance
of 2.625% senior convertible notes dated April 1, 1998. Other income rose due to
realized gains on the sale of available-for-sale marketable securities and was
offset by charges related to the purchase of certain subsidiary options and
losses on sale of assets. Income tax expense increased primarily from the
increase in the average effective tax rate from 45% in 1997 to 58% in 1998. The
effective tax rate increased as a result of the increase in nondeductible
amortization expense principally associated with the acquisition of Universal.
The majority of the increase in net income was primarily due to the inclusion of
operations resulting from the aforementioned business acquisitions, partially
offset by an increase in corporate related expenses.
CHANGE IN EQUITY IN EARNINGS OF NONCONSOLIDATED AFFILIATES
Equity earnings of nonconsolidated affiliates increased in 1999 over
1998 primarily due to the improvement in the operating results of Hispanic
Broadcasting Communications (formerly known as Heftel Broadcasting, "HBC") and
Grupo Acir Comunicaciones, ("Acir"). We own a 26% equity interest in HBC and a
40% equity interest in Acir.
Equity in earnings of nonconsolidated affiliates increased in 1998 over
1997 due to the inclusion of several investments held by More Group, which are
accounted for under the equity method and the inclusion of a partial month of
More Group's operations, which was accounted for under the equity method prior
to consolidation. This was partially offset by the transfer of our investment in
American Tower Corporation, which merged with American Tower Systems, Inc. in
June 1998, the result of which diluted our investment from 30% to 8%.
Prospectively, we have accounted for this investment using the cost method. The
remainder of the increase in equity in earnings (loss) of nonconsolidated
affiliates was due to the continued solid financial performance by HBC, of which
we owned a 29.1% equity interest.
BROADCASTING SEGMENT
(In thousands of dollars)
<TABLE>
<CAPTION>
1999 vs. 1998 1998 vs. 1997
------------------------ ------------------------
Years Ended December 31, As-Reported Pro Forma As-Reported Pro Forma
------------------------ % Increase % Increase % Increase % Increase
1999 1998 1997 (Decrease) (Decrease) (Decrease) (Decrease)
---- ---- ---- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net revenue $1,426,683 $648,877 $489,633 119.9% 15.1% 32.5% 14.3%
Operating expenses 848,734 373,452 286,314 127.3% 12.8% 30.4% 7.2%
Operating income before
depreciation and amortization
and corporate expenses 577,949 275,425 203,319 109.8% 19.0% 35.5% 25.6%
Depreciation and amortization 349,935 107,343 66,383 226.0% 12.1% 61.7% 22.2%
Operating income 188,807 148,571 122,971 27.1% 45.5% 20.8% 31.0%
</TABLE>
1999 vs. 1998
The majority of the increase in as-reported net revenue, operating
expenses and depreciation and amortization was due to the aforementioned
broadcasting acquisitions. Net revenue also increased due to increased
advertising rates associated with improved station ratings within the radio
stations. At December 31, 1999, our broadcasting segment included 486 radio
stations and 15 television stations for which we are the licensee and 26 radio
stations and nine television stations programmed under local marketing or time
brokerage agreements. Of these stations, 534 operate in 123 domestic markets and
two stations operate in one international markets. We also operate 14 radio
networks.
53
<PAGE> 54
Pro forma net revenue increased due to improved advertising rates at
the core Clear Channel radio stations as well as within the radio stations
obtained through the Jacor acquisition. Excluding the effect of acquisitions
completed during the last twelve months, other than Jacor, the broadcasting
segment experienced a 14% increase in net revenues during 1999 as compared to
1998. Pro forma operating expenses increased primarily from the incremental
selling costs related to the additional revenues. The majority of the increase
in pro forma operating income was due to improved operations within the
broadcasting segment. Excluding the effect of acquisitions made during the last
twelve months, except for Jacor, the broadcasting segment experienced a 23%
increase in operating income during 1999 as compared to 1998.
1998 vs. 1997
The majority of the increase in as-reported net revenue, operating
expenses and depreciation and amortization was due to the aforementioned
broadcasting acquisitions. Net revenue also increased due to increased
advertising rates associated with improved ratings at most of our television and
radio stations. At December 31, 1998, our broadcasting segment included 193
radio stations and 11 television stations for which we own the Federal
Communications Commission license and 11 radio stations and 7 television
stations programmed under local marketing or time brokerage agreements, in 47
domestic markets. We also own two radio stations in one international market.
The majority of the increase in pro forma net revenue is due to
improved advertising rates associated with improved ratings at most of the
television and radio stations. The majority of the increase in pro forma
operating expenses is due to the increase in selling and promotional expenses
associated with the increase in revenue.
OUTDOOR SEGMENT
(In thousands of dollars)
<TABLE>
<CAPTION>
1999 vs. 1998 1998 vs. 1997
------------------------ ------------------------
Years Ended December 31, As-Reported Pro Forma As-Reported Pro Forma
------------------------ % Increase % Increase % Increase % Increase
1999 1998 1997 (Decrease) (Decrease) (Decrease) (Decrease)
---- ---- ---- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net revenue $1,251,477 $702,063 $207,435 78.3% 20.0% 238.4% 27.7%
Operating expenses 783,381 393,813 108,090 98.9% 19.9% 264.3% 33.4%
Operating income before
depreciation and amortization
and corporate expenses 468,096 308,250 99,345 51.9% 20.2% 210.3% 20.2%
Depreciation and amortization 372,298 197,629 47,824 88.4% 37.3% 313.2% 22.9%
Operating income 64,859 92,307 44,603 (29.7)% (31.3)% 106.9% 7.7%
</TABLE>
1999 vs. 1998
The majority of the increase in as-reported net revenue, operating
expenses and depreciation and amortization was due to the inclusion of a full
year of Universal and More Group's operations and the inclusion of the partial
year's operations of Dauphin, which was acquired in July 1999. In addition,
increased occupancy and rates were achieved in 1999. At December 31, 1999, the
outdoor segment owned approximately 127,000 display faces and operated 5,900
displays under lease management agreements in over 43 domestic markets, and
approximately 422,000 display faces in over 23 international markets.
The majority of the increase in pro forma net revenue and operating
expenses is due to increased advertising and occupancy rates in 1999 and other
less significant acquisitions. Pro forma depreciation and amortization increased
in part due to the depreciation expenses associated with increased capital
expenditures within the outdoor segment. The outdoor segment's capital
expenditures were $154.1 million during 1999, vs. $95.1 million during 1998.
54
<PAGE> 55
1998 vs. 1997
The majority of the increase in as-reported net revenue, operating
expenses and depreciation and amortization was due to the inclusion of a full
year of Eller's operations and the inclusion of the partial year's operations of
Universal and More Group, which were acquired during 1998. These two
acquisitions added approximately 124,000 display faces in 1998. In addition,
increased occupancy and rates were achieved in 1998. At December 31, 1998, the
outdoor segment owned 83,225 display faces and operated 5,783 displays under
lease management agreements in 32 domestic markets, and 213,566 display faces in
14 international markets.
The majority of the increase in pro forma net revenue and operating
expenses is due to increased advertising and occupancy rates in 1998. Pro forma
depreciation and amortization increased in part due to the depreciation expenses
associated with increased capital expenditures within the outdoor segment. The
outdoor segment's capital expenditures were $95.1 million during 1998, vs. $15.0
million in 1997.
LIQUIDITY AND CAPITAL RESOURCES
Our major sources of capital have been cash flow from operations,
advances on our revolving long-term line of credit (the "credit facility"), and
funds provided by various equity, convertible and other debt offerings, and
other borrowings. As of December 31, 1999 and 1998, we had the following debt
outstanding:
In millions of dollars
<TABLE>
<CAPTION>
December 31,
------------
1999 1998
---- ----
<S> <C> <C>
Credit facility - domestic $ 743.8 $ 1,007.5
Credit facility - multi-currency 483.9 --
Credit facility - international 120.4 103.7
Senior convertible notes 1,575.0 575.0
Liquid Yield Option Notes 490.8 --
Long-term bonds 1,171.4 600.0
Other borrowings 29.4 45.4
---------- ----------
Total $ 4,614.7 $ 2,331.6
========== ==========
</TABLE>
In addition, we had $76.7 million in unrestricted cash and cash
equivalents on hand at December 31, 1999.
On April 26, 1999 we filed a registration statement on Form S-3
covering a combined $2 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 our three Delaware statutory business trusts and guarantees of
such preferred securities by us. After completing the debt offerings during
November and December 1999, the amount of securities available under the shelf
registration statement at December 31, 1999 was $1.0 billion.
55
<PAGE> 56
SOURCES OF FUNDS
CREDIT FACILITY: DOMESTIC: We have a revolving credit facility for $2
billion, of which $743.8 million is outstanding and, taking into account
other letters of credit, $1.2 billion is available for future borrowings at
December 31, 1999 . The credit facility converts into a reducing revolving line
of credit on the last business day of September 2000, and will be automatically
and permanently reduced at the end of each quarter during the subsequent five
year period, with the remaining balance to be repaid by the last business day of
June 2005. During 1999, we made principal payments on the credit facility
totaling $2.1 billion including $80.2 million, $342.6 million, $90.1 million,
$886.3 million and $98.5 million from the net proceeds of our equity offerings
in January 1999, May 1999 and June 1999, and our convertible debt offerings in
November 1999 and December 1999, respectively, and drew down $1.8 billion
primarily to fund acquisitions or pay off assumed acquisition debt. Funding for
the majority of our acquisitions and the refinancing of long-term debt in the
acquisition of Jacor was provided by our credit facility. In January 2000,
$572.0 million was drawn to settle the tender of the Jacor senior subordinated
notes.
MULTI-CURRENCY: On August 11, 1999 we entered into a 364-day
multi-currency revolving credit facility for $1 billion. This credit facility
matures on August 10, 2000 at which time we have the option to convert this
facility to a four-year term loan. This credit facility allows for borrowings in
various foreign currencies, which we intend to use to hedge net assets in those
currencies. At December 31, 1999, we had Euro 478.9, or approximately $483.9
million outstanding and approximately $516.1 million available for future
borrowings under this facility.
INTERNATIONAL: We have a (pound)100 million, or approximately $161.2
million, revolving credit facility with a group of international banks. This
international credit facility allows for borrowings in various foreign
currencies, which are used to hedge net assets in those currencies. At December
31, 1999, approximately $62.9 million, was available for future borrowings and
$98.3 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
December 31, 1999, interest rates varied from 3.97% to 7.35%.
SENIOR CONVERTIBLE NOTES:
On November 19, 1999 and December 9, 1999, we completed an offering of
$900.0 million and $100.0 million, respectively, principal amounts of 1 1/2%
Senior convertible Notes due December 1, 2002 under the shelf registration
statement. Our aggregated net proceeds of approximately $984.8 million were used
to pay down the outstanding balance under our credit facility. The notes are
convertible into our common stock at a conversion rate of 9.45 shares per each
$1,000 principal amount of convertible notes, subject to adjustment in certain
circumstances. This is equivalent to a conversion price of $105.78 per share.
Interest on the notes is payable semiannually on each June 1 and December 1,
beginning June 1, 2000.
LIQUID YIELD OPTION NOTES:
We assumed Liquid Yield Option Notes ("LYONs") as a part of the merger
with Jacor. We assumed 4 3/4% LYONs due 2018 and 5 1/2% LYONs due 2011 with an
aggregated fair value of $490.1 million. Each LYON has a principal amount at
maturity of $1,000 and is convertible, at the option of the holder, at any time
on or prior to maturity, into our common stock at a conversion rate of 7.227
shares per LYON and 15.522 shares per LYON for the 2018 and 2011 issues,
respectively. The LYONs aggregated balance at December 31, 1999 was $490.8
million.
56
<PAGE> 57
LONG TERM BONDS:
We have various bond issues outstanding. In addition, we assumed
several issues of senior subordinated notes as part of our merger with Jacor,
which are summarized as follows:
In millions of dollars
<TABLE>
<CAPTION>
Interest
Bond Issue Interest Rate Face Value Fair Value Maturity Date Payment Terms
---------- ------------- ---------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Assumed in Jacor Merger:
Senior subordinated notes 10.125% $ 100.0 $ 107.0 6/15/06 Semi-annual
Senior subordinated notes 9.750% 170.0 182.4 12/15/06 Semi-annual
Senior subordinated notes 8.750% 150.0 156.2 6/15/07 Semi-annual
Senior subordinated notes 8.000% 120.0 124.5 2/15/10 Semi-annual
</TABLE>
Subsequent to the merger with Jacor and prior to our tender offer, we redeemed
$22.1 million of the senior subordinated notes.
On December 14, 1999 we completed a tender offer for our 10.125% Senior
Subordinated Notes due June 15, 2006; 9.75% Senior Subordinated Notes due
December 15, 2006; 8.75% Senior Subordinated Notes due June 15, 2007; and 8.0%
Senior Subordinated Notes due February 15, 2010. An agent acting on our behalf
redeemed notes with a face value of approximately $516.6 million. Cash
settlement of the amount due to the agent was completed on January 14, 2000.
Including premiums, discounts, and agency fees, we are recognizing approximately
$13.2 million as an extraordinary charge against net income, net of tax of
approximately $8.1 million. Amounts due under the redeemed Senior Subordinated
Notes will be will be disclosed in long-term debt. After redemption,
approximately $1.2 million of the notes remain outstanding.
EQUITY OFFERINGS:
On January 21, 1999 we completed an equity offering of 1,725,000 shares
of common stock. The net proceeds of $80.2 million were used to reduce the
outstanding balance on our credit facility.
On May 20, 1999 and June 23, 1999 we completed equity offerings of
4,997,457 shares and 1,325,300 shares of common stock, respectively. The net
proceeds of $342.7 million and $90.1 million were used to reduce the outstanding
balance on our credit facility.
SHELF REGISTRATION:
On April 26, 1999 we filed a registration statement on Form S-3
covering a combined $2 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 our three Delaware statutory business trusts and guarantees of
such preferred securities by us. After completing the debt offerings during
November and December 1999, the amount of securities available under the shelf
registration statement at December 31, 1999 was $1.0 billion.
USES OF FUNDS AND CAPITAL RESOURCES
DAME MEDIA PURCHASE:
On July 1, 1999, we closed our merger with Dame Media, Inc. Pursuant to
the terms of the agreement, we exchanged approximately 954,100 shares of our
common stock for 100% of the outstanding
57
<PAGE> 58
stock of Dame Media, valuing this merger at approximately $65.0 million. In
addition, we assumed $32.7 million of long term debt, which was immediately
refinanced utilizing our domestic credit facility. Dame Media's operations
include 21 radio stations in 5 markets located in New York and Pennsylvania. We
began consolidating the results of operations on July 1, 1999.
DAUPHIN PURCHASE:
On June 11, 1999, we acquired a 50.5% equity interest in Dauphin a
French company engaged in outdoor advertising. In August 1999 we completed our
tender offer for over 99% of the remaining shares outstanding. At December 31,
1999, all of the shares had been surrendered for an aggregate cost of
approximately $487.2 million. Dauphin's operations include approximately 103,000
outdoor advertising display faces in France, Spain, Italy, and Belgium. This
acquisition is being accounted for as a purchase with resulting goodwill of
approximately $449.7 million, which is being amortized over 25 years on a
straight-line basis. The purchase price allocation is preliminary pending
completion of appraisals and other fair value analysis of assets and
liabilities, which we anticipate will be completed during the second quarter of
2000. We began consolidating the results of operations on the date of
acquisition.
JACOR PURCHASE:
On May 4, 1999, we closed our merger with Jacor. Pursuant to the terms
of the agreement, each share of Jacor common stock was exchanged for 1.1573151
shares of our common stock or approximately 60.9 million shares valued at $4.2
billion. In addition, we assumed approximately $1.4 billion of Jacor's long-term
debt, as well as Jacor's Liquid Yield Option Notes with a fair value of
approximately $490.1 million, which are convertible into approximately 7.1
million shares of our common stock. We also assumed options, stock appreciation
rights and common stock warrants with a fair value of $414.9 million, which are
convertible into approximately 9.2 million shares of our common stock. We
refinanced $850.0 million of Jacor's long-term debt at the closing of the merger
using our credit facility. Subsequent to the merger, we tendered an additional
$22.1 million of Jacor's long-term debt. Included in the purchase price of Jacor
is $83 million of restricted cash related to the disposition of Jacor assets in
connection with the merger.
We divested the broadcasting assets of 12 radio stations in 3 markets
receiving proceeds of $205.8 million in connection with the Jacor merger and
governmental directives. The proceeds from these divestitures are being held in
restricted trusts until suitable replacement properties can be identified and
purchased.
The following table details the reconciliation of the divestiture and
acquisition activity in the restricted trust accounts:
IN THOUSANDS OF DOLLARS
<TABLE>
<S> <C>
Restricted cash resulting from Clear Channel divestitures $ 201,500
Restricted cash purchased in Jacor Merger 83,000
Restricted cash from disposition of assets held in trust 4,300
Restricted cash used in acquisitions (246,228)
Restricted cash refunded (41,451)
Other changes in restricted cash 3,228
----------
Restricted cash balance at December 31, 1999 $ 4,349
===========
</TABLE>
The Clear Channel and Jacor divestiture proceeds have been used to
purchase the broadcasting assets of 69 radio stations in 22 domestic markets. In
addition to the above mentioned broadcast
58
<PAGE> 59
acquisitions, we have purchased the broadcasting assets of nine radio stations
in six domestic markets for a total of $372.4 million.
OTHER:
In addition to the acquisition of Dauphin, we have acquired
approximately 2,789 additional outdoor faces in 29 domestic markets and in malls
throughout the U.S. and 72,326 additional display faces in 8 international
markets for a total of $366.9 million.
During 1999, we purchased capital equipment totaling $238.7 million.
Capital expenditures within the Broadcasting Segment totaled $84.6 million.
Capital expenditures within the Outdoor Segment totaled $154.1 million,
including $88.8 million which was for new construction of display structures.
Future acquisitions of broadcasting stations, outdoor advertising
facilities and other media-related properties affected in connection with the
implementation of our acquisition strategy are expected to be financed from
increased borrowings under our credit facility, additional public equity and
debt offerings and cash flow from operations. We believe that cash flow from
operations as well as the proceeds from securities offerings made from time to
time will be sufficient to make all required future interest and principal
payments on our credit facility, senior convertible notes and bonds, and will be
sufficient to fund all anticipated capital expenditures.
From December 31, 1999 through February of 2000, we purchased the
broadcasting assets of six radio stations for approximately $12.0 million and
17,723 outdoor display faces and the right to build an additional 7,400 display
faces for $340.3 million. Our credit facility and cash flow from operations
provided funding.
Pending Transactions
On October 2, 1999, we entered into a definitive agreement to merge
with AMFM Inc. This merger will create the world's largest out-of-home media
entity. After anticipated divestitures required to obtain regulatory approval,
the combined company will own or program approximately 870 domestic radio
stations. This merger is structured as a tax-free, stock-for-stock transaction.
Each share of AMFM common stock will be exchanged for 0.94 shares of our common
stock, valuing the merger at approximately $17.1 billion plus the assumption of
AMFM's debt.
At the exchange ratio of .94 and assuming that no additional shares of
AMFM common stock are issued before the completion of the merger, we will issue
approximately 202.8 million shares of our common stock in the merger to AMFM
stockholders and, following the merger, the AMFM stockholders would own
approximately 37.4% of our outstanding common stock. In addition, in connection
with the AMFM merger, we will assume approximately $5.9 billion of AMFM's
long-term debt.
Numerous conditions must be satisfied before the completion of the
merger, including the receipt of regulatory approvals and shareholder approvals
from the stockholders of both companies and the completion of a review of the
merger by the federal and state antitrust authorities. We intend to account for
this merger as a purchase. See "Item 1. Business - Recent Developments - AMFM
Inc. Merger."
On February 28, 2000, we entered into a definitive agreement to merge
with SFX Entertainment, Inc. SFX is one of the world's largest diversified
promoter, producer and venue operator for live entertainment events. This merger
will be a tax-free, stock-for-stock transaction. Each SFX Class A shareholder
will receive 0.6 shares of our common stock for each SFX share and each SFX
Class B shareholder will receive one share of our common stock for each SFX
share, on a fixed exchange basis, valuing the merger at approximately $3.3
billion plus the assumption of SFX's debt. This merger is
59
<PAGE> 60
subject to regulatory and other closing conditions, including the approval from
the SFX shareholders. We anticipate that this merger will close during the
second half of 2000 and we intend to account for this merger as a purchase.
Future acquisitions of broadcasting stations, outdoor advertising
facilities and other media-related properties affected in connection with the
implementation of our 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. We believe that cash flow from
operations as well as the proceeds from our securities offerings made from time
to time will be sufficient to make all required future interest and principal
payments on our credit facility, senior convertible notes and bonds, and will be
sufficient to fund all anticipated capital expenditures.
Other
<TABLE>
<CAPTION>
The ratio of earnings to fixed charges is as follows:
Year Ended
--------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995 1994
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
2.04 1.83 2.32 3.63 3.32 5.54
</TABLE>
The ratio of earnings to fixed charges 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.
We had no preferred stock outstanding for any period presented.
CAPITAL EXPENDITURES
Capital expenditures of $238.7 million and $141.9 million during 1999
and 1998, respectively, included the following:
<TABLE>
<CAPTION>
In millions Broadcasting Outdoor
------------------- -------------------
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Land and buildings $ 29.6 $ 11.1 $ 3.0 $ 6.9
Broadcasting and other equipment 55.0 35.7 -- --
Display structures and other equipment -- -- 62.3 13.4
New construction of display structures -- -- 88.8 74.8
-------- -------- -------- --------
$ 84.6 $ 46.8 $ 154.1 $ 95.1
======== ======== ======== ========
</TABLE>
Broadcasting
The increase in our capital outlays for land and buildings were
primarily related to one-time expenditures for our new corporate headquarters
and the consolidation of operations in certain markets in conjunction with the
Jacor merger which are expected to result in improved operating results in such
markets. Expenditures for broadcasting and other equipment in 1999 include
approximately $10 million in non-recurring expenditures for the implementation
of Year 2000 compliant systems and equipment for the integration of the Jacor
stations. The remaining increase in 1999 versus 1998 in expenditures for
broadcasting and other equipment is due to maintenance of a larger number of
stations owned in 1999 versus 1998.
60
<PAGE> 61
Outdoor
Capital expenditures for display structures and other equipment
increased due to the number of displays owned in 1999 versus 1998 as a result of
the acquisitions of Universal and More Group in 1998 and Dauphin in 1999. Also
included in the 1999 capital outlays for display structures and other equipment
are one-time expenditures of approximately $5 million for the implementation of
Year 2000 compliant systems and approximately $11 million for non-recurring
expenditures for safety equipment and cranes.
We anticipate funding capital outlays with cash generated from
operations. We anticipate funding any subsequent broadcasting or outdoor
acquisitions with the credit facility and cash flow generated from operations.
OTHER
Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133 Accounting for Derivative Instruments
and Hedging Activities. Statement 133 establishes new rules for the recognition
and measurement of derivatives and hedging activities. Statement 133 is amended
by Statement 137 Accounting for Derivative Instruments and Hedging Activities -
Deferral of the Effective Date of FASB Statement No. 133, and is effective for
years beginning after June 15, 2000. We plan to adopt this statement in fiscal
year 2001. Management does not believe adoption of this statement will
materially impact our financial position or results of operations.
Inflation
Inflation has affected our performance in terms of higher costs for
wages, salaries and equipment. Although the exact impact of inflation is
indeterminable, we believe we have offset these higher costs by increasing the
effective advertising rates of most of our broadcasting stations and outdoor
display faces.
Year 2000
In prior years, we discussed the nature and progress of our plans to
become Year 2000 ready. In late 1999, we completed our remediation and testing
of systems. As a result of those planning and implementation efforts, we
experienced no significant disruptions in mission critical information
technology and non-information technology systems and we believe those systems
successfully responded to the Year 2000 date changes. We expensed approximately
$490,000 during 1999 in connection with remediating our systems. We are not
aware of any material problems resulting from year 2000 issues, either with our
products, our internal systems, or the products and services of third parties.
We will continue to monitor our mission critical computer applications and those
of our suppliers and vendors throughout the year 2000 to ensure that any latent
Year 2000 matters that may arise are addressed promptly.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
INTEREST RATE RISK
At December 31, 1999, approximately 46.9% of our long-term debt bears
interest at variable rates. Accordingly, our interest expense and earnings 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 1999 average
interest rate under these borrowings, it is estimated that our 1999 interest
expense would have changed by $38.4 million and that our 1999 net income would
have changed by $23.0 million. In the event
61
<PAGE> 62
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. Furthermore the analysis does not consider the effects of the change in
the level of overall economic activity that could exist in such an environment.
We currently hedge a portion of our outstanding debt with interest rate
swap agreements that effectively fix the interest at rates from 4.5% to 8.0% on
$60.6 million of our current borrowings. These agreements expire from April 2000
to December 2000. The fair value of these agreements at December 31, 1999 and
settlements of interest during 1999 were not material.
EQUITY PRICE RISK
The carrying value of our 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 December 31, 1999 by $151.9 million and would change comprehensive
income by $98.8 million.
FOREIGN CURRENCY RISK
We have operations in 36 countries throughout Europe, Asia and South
America. All foreign operations are measured in their local currencies. As a
result, our 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 a portion of the exposure to
risk of currency fluctuations throughout Europe and Asia to the British pound,
we have a natural hedge through borrowings in some other currencies.
Additionally, we have a natural hedge through borrowings in Euros to mitigate a
portion of the exposure to risk of currency fluctuations in Western Europe. This
hedge position is reviewed monthly. We maintain no 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 $51.1 million for the year ended December
31, 1999. 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 year by $2.6 million.
Our earnings are also affected by fluctuations in the value of the U.S.
dollar as compared to foreign currencies as a result of our investments in
Australia, New Zealand and Mexico, all of which are accounted for under the
equity method. It is estimated that the result of a 10% fluctuation in the value
of the dollar relative to these foreign currencies at December 31, 1999 would
change our 1999 net income by $1.7 million. This analysis does not consider the
implications that such fluctuations could have on the overall economic activity
that could exist in such an environment in the U.S. or the foreign countries or
on the results of operations of these foreign entities.
62
<PAGE> 63
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
MANAGEMENT'S REPORT ON FINANCIAL STATEMENTS
The consolidated financial statements and notes related thereto were prepared by
and are the responsibility of management. The financial statements and related
notes were prepared in conformity with accounting principles generally accepted
in the United States and include amounts based upon management's best estimates
and judgments.
It is management's objective to ensure the integrity and objectivity of its
financial data through systems of internal controls designed to provide
reasonable assurance that all transactions are properly recorded in our books
and records, that assets are safeguarded from unauthorized use, and that
financial records are reliable to serve as a basis for preparation of financial
statements.
The financial statements have been audited by our independent auditors, Ernst &
Young LLP, to the extent required by auditing standards generally accepted in
the United States and, accordingly, they have expressed their professional
opinion on the financial statements in their report included herein.
The Board of Directors meets with the independent auditors and management
periodically to satisfy itself that they are properly discharging their
responsibilities. The independent auditors have unrestricted access to the
Board, without management present, to discuss the results of their audit and the
quality of financial reporting and internal accounting controls.
Lowry Mays
Chairman/Chief Executive Officer
Herbert W. Hill, Jr.
Senior Vice President/Chief Accounting Officer
63
<PAGE> 64
REPORT OF ERNST & YOUNG LLP
SHAREHOLDERS AND BOARD OF DIRECTORS
CLEAR CHANNEL COMMUNICATIONS, INC.
We have audited the accompanying consolidated balance sheets of Clear Channel
Communications, Inc. and subsidiaries (the Company) as of December 31, 1999 and
1998, and the related consolidated statements of earnings, changes in
shareholders' equity and cash flows for each of the three years in the period
ended December 31, 1999. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits. The financial statements of Hispanic
Broadcasting Corporation (formerly Heftel Broadcasting Corporation), in which
the Company has a 26% equity interest, have been audited by other auditors whose
reports have been furnished to us; insofar as our opinion on the consolidated
financial statements relates to data included for Hispanic Broadcasting
Corporation for 1999, 1998 and 1997, it is based solely on their reports.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits and the reports of other auditors
provide a reasonable basis for our opinion.
In our opinion, based on our audits and the reports of other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the consolidated financial position of Clear Channel
Communications, Inc. and subsidiaries at December 31, 1999 and 1998, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1999, in conformity with accounting
principles generally accepted in the United States.
ERNST & YOUNG LLP
San Antonio, Texas
March 13, 2000
64
<PAGE> 65
CONSOLIDATED BALANCE SHEETS
ASSETS
In thousands of dollars, except share data
<TABLE>
<CAPTION>
December 31,
---------------------------------
1999 1998
-------------- -------------
CURRENT ASSETS
<S> <C> <C>
Cash and cash equivalents $ 76,724 $ 36,498
Accounts receivable, less allowance of
$26,095 in 1999 and $13,508 in 1998 724,900 307,372
Other current assets 123,485 66,090
-------------- -------------
TOTAL CURRENT ASSETS 925,109 409,960
PROPERTY, PLANT
AND EQUIPMENT
Land, buildings and improvements 338,764 158,089
Structures and site leases 1,870,731 1,627,704
Transmitter and studio equipment 427,063 235,099
Furniture and other equipment 222,581 101,681
Construction in progress 89,901 52,038
-------------- -------------
2,949,040 2,174,611
Less accumulated depreciation 470,916 258,824
-------------- -------------
2,478,124 1,915,787
INTANGIBLE ASSETS
Contracts 817,227 393,748
Licenses and goodwill 11,809,882 4,223,432
Other intangible assets 80,102 66,528
-------------- -------------
12,707,211 4,683,708
Less accumulated amortization 758,889 310,012
-------------- -------------
11,948,322 4,373,696
OTHER
Restricted cash 4,349 --
Notes receivable 53,675 53,675
Investments in, and advances to,
nonconsolidated affiliates 380,918 324,835
Other assets 251,604 127,055
Other investments 779,411 334,910
-------------- -------------
TOTAL ASSETS $ 16,821,512 $ 7,539,918
============== =============
</TABLE>
See Notes to Consolidated Financial Statements
65
<PAGE> 66
LIABILITIES AND SHAREHOLDERS' EQUITY
In thousands of dollars, except share data
<TABLE>
<CAPTION>
December 31,
---------------------------------
1999 1998
-------------- -------------
CURRENT LIABILITIES
<S> <C> <C>
Accounts payable $ 196,222 $ 60,855
Accrued interest 16,449 13,168
Accrued expenses 337,939 148,318
Accrued income taxes 29,769 4,554
Current portion of long-term debt 30,361 7,964
Other current liabilities 74,775 23,285
-------------- -------------
TOTAL CURRENT LIABILITIES 685,515 258,144
Long-term debt 4,093,543 2,323,643
Liquid Yield Option Notes 490,809 --
Deferred income taxes 1,289,783 383,564
Other long-term liabilities 149,032 75,533
Minority interest 28,793 15,605
SHAREHOLDERS' EQUITY
Preferred Stock - Class A, par value $1.00
per share, authorized 2,000,000 shares,
no shares issued and outstanding -- --
Preferred Stock, - Class B, par value $1.00
per share, authorized 8,000,000 shares,
no shares issued and outstanding -- --
Common Stock, par value $.10 per share,
authorized 900,000,000 and 600,000,000
shares, issued and outstanding 338,609,503
and 263,698,206 shares in 1999 and 1998,
respectively 33,861 26,370
Additional paid-in capital 9,216,957 4,067,297
Common stock warrants 252,862 --
Retained earnings 296,132 223,662
Other comprehensive income 282,745 163,148
Other 2,304 4,925
Cost of shares (11,612 in 1999 and 104,278
in 1998) held in treasury (824) (1,973)
-------------- -------------
TOTAL SHAREHOLDERS' EQUITY 10,084,037 4,483,429
-------------- -------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 16,821,512 $ 7,539,918
============== =============
</TABLE>
See Notes to Consolidated Financial Statements
66
<PAGE> 67
CONSOLIDATED STATEMENTS OF EARNINGS
In thousands of dollars, except per share data
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------------
1999 1998 1997
------------- ------------- -------------
REVENUE
<S> <C> <C> <C>
Gross revenue $ 2,992,018 $ 1,522,551 $ 790,178
Less: agency commissions 313,858 171,611 93,110
------------- ------------- -------------
Net revenue 2,678,160 1,350,940 697,068
EXPENSE
Operating expenses 1,632,115 767,265 394,404
Depreciation and amortization 722,233 304,972 114,207
Corporate expenses 70,146 37,825 20,883
------------- ------------- -------------
Operating income 253,666 240,878 167,574
Interest expense 192,321 135,766 75,076
Gain on sale of stations 138,659 -- --
Other income (expense) - net 20,209 12,810 11,579
------------- ------------- -------------
Income before income taxes, equity
in earnings of nonconsolidated
affiliates and extraordinary item 220,213 117,922 104,077
Income taxes 150,635 72,353 47,116
------------- ------------- -------------
Income before equity in earnings
of nonconsolidated affiliates
and extraordinary item 69,578 45,569 56,961
Equity in earnings of
nonconsolidated affiliates 16,077 8,462 6,615
------------- ------------- -------------
Income before extraordinary item 85,655 54,031 63,576
Extraordinary item (13,185) -- --
------------- ------------- -------------
Net income 72,470 54,031 63,576
Other comprehensive income, net of tax:
Foreign currency translation adjustments (47,814) 5,801 (5,064)
Unrealized gains on securities:
Unrealized holding gains arising during period 182,315 162,925 23,754
Less: reclassification adjustment for gains
included in net income (14,904) (25,494) --
------------- -------------- -------------
Comprehensive income $ 192,067 $ 197,263 $ 82,266
============= ============= =============
PER SHARE DATA
Net income per common share:
Basic:
Income before extraordinary item $ .27 $ .23 $ .36
Extraordinary item (.04) -- --
------------- ------------- -------------
Net income $ .23 $ .23 $ .36
============= ============= =============
Diluted:
Income before extraordinary item $ .26 $ .22 $ .33
Extraordinary item (.04) -- --
------------- ------------- -------------
Net income $ .22 $ .22 $ .33
============= ============= =============
</TABLE>
See Notes to Consolidated Financial Statements
67
<PAGE> 68
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
In thousands of dollars
<TABLE>
<CAPTION>
Additional Common Other
Common Paid-in Stock Retained Comprehensive Treasury
Stock Capital Warrants Earnings Income Other Stock Total
--------- ---------- ---------- --------- --------- --------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balances at December 31, 1996 $ 7,699 $ 398,622 $ -- $ 106,055 $ 1,226 $ -- $ (171) $ 513,431
Net income for year 63,576 63,576
Proceeds from sale of Common
Stock 1,409 790,310 791,719
Common Stock and stock options
issued for business acquisitions 665 348,023 6,633 355,321
Exercise of stock options 50 4,910 (397) (516) 4,047
Currency translation adjustment (5,064) (5,064)
Unrealized gains on investments,
net of tax 23,754 23,754
--------- ---------- ---------- --------- --------- --------- ------- ---------
Balances at December 31, 1997 9,823 1,541,865 -- 169,631 19,916 6,236 (687) 1,746,784
Net income for year 54,031 54,031
Proceeds from sale of Common
Stock 2,100 1,279,318 1,281,418
Common Stock issued related to
Eller put/call agreement 13 5,820 5,833
Common Stock and stock options
issued for business acquisitions 1,929 1,199,928 1,201,857
Exercise of stock options 89 52,782 (1,311) (1,286) 50,274
Currency translation adjustment 5,801 5,801
Unrealized gains on investments,
net of tax 137,431 137,431
Stock split 12,416 (12,416) --
--------- ---------- ---------- --------- --------- --------- ------- ---------
Balances at December 31, 1998 26,370 4,067,297 -- 223,662 163,148 4,925 (1,973) 4,483,429
Net income for year 72,470 72,470
Proceeds from sale of Common
Stock 805 512,112 512,917
Common Stock issued related to
Eller put/call agreement 190 130,440 130,630
Common Stock, stock options and
common stock warrants issued
for business acquisitions 6,180 4,413,530 253,428 4,673,138
Conversion of Liquid
Yield Option Notes 10 3,271 3,281
Exercise of stock options and
common stock warrants 306 90,307 (566) (2,621) (2,953) 84,473
Charitable donation of
treasury shares 4,102 4,102
Currency translation adjustment (47,814) (47,814)
Unrealized gains on investments,
net of tax 167,411 167,411
--------- ---------- ---------- --------- --------- --------- ------- -----------
Balances at December 31, 1999 $ 33,861 $9,216,957 $ 252,862 $ 296,132 $ 282,745 $ 2,304 $ (824) $10,084,037
========= ========== ========== ========= ========= ========= ======= ===========
</TABLE>
See Notes to Consolidated Financial Statements
68
<PAGE> 69
CONSOLIDATED STATEMENTS OF CASH FLOWS
In thousands of dollars
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------
1999 1998 1997
----------- ---------- -----------
CASH FLOWS FROM
OPERATING ACTIVITIES:
<S> <C> <C> <C>
Net income $ 72,470 $ 54,031 $ 63,576
Reconciling Items:
Depreciation 263,242 134,042 51,700
Amortization of intangibles 458,991 170,930 62,507
Deferred taxes 32,495 35,329 18,300
Amortization of film rights 19,609 17,250 16,735
Amortization of deferred financing charges 4,075 2,444 35
Amortization of bond premiums (8,826) -- --
Accretion of note discounts 10,418 -- --
Payments on film liabilities (18,410) (17,524) (17,289)
Recognition of deferred income 18,647 (11,371) (1,460)
Loss (gain) on disposal of assets (141,556) 13,845 (1,129)
Gain on sale of other investments (22,930) (39,221) (3,819)
Equity in (earnings) loss of non-
consolidated affiliates (10,775) (4,471) (2,778)
Charitable donation of treasury shares 4,102 -- --
Increase (decrease) minority interest 1,686 (1,512) (617)
Exchange loss (gain) 7,660 (4,688) --
Extraordinary item 13,185 -- --
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable (87,529) (47,699) (20,752)
Increase (decrease) in accounts payable,
accrued expenses and other 1,757 9,663 (3,643)
Increase (decrease) in accrued interest (10,778) (12,309) 3,598
Increase (decrease) in accrued income taxes 31,873 (19,750) 1,533
----------- ---------- -----------
Net cash provided by operating activities 639,406 278,989 166,497
</TABLE>
69
<PAGE> 70
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------------
1999 1998 1997
------------ ---------- -----------
CASH FLOWS FROM
INVESTING ACTIVITIES:
<S> <C> <C> <C>
Increase in restricted cash (4,349) -- --
(Increase) decrease in notes receivable, net -- (18,302) 17,377
Investments in and advances to
nonconsolidated affiliates, net (36,647) (91,527) (38,317)
Purchases of investments (174,698) (44,931) (25,101)
Proceeds from sale of investments 29,659 56,408 6,333
Purchases of property, plant and equipment (238,738) (141,938) (30,956)
Proceeds from disposal of assets 218,003 7,977 2,410
Acquisitions of broadcasting assets (372,413) (209,327) (784,204)
Acquisitions of outdoor assets (854,135) (1,102,668) (490,345)
Other, net (40,852) (58,010) (3,025)
------------ ---------- -----------
Net cash used in investing activities (1,474,170) (1,602,318) (1,345,828)
CASH FLOWS FROM
FINANCING ACTIVITIES:
Proceeds from long-term debt 3,420,310 2,835,668 2,013,160
Payments on long-term debt (3,088,520) (2,825,744) (1,614,821)
Payments of current maturities (5,989) (1,137) (5,176)
Proceeds from exercise of stock options and
common stock warrants 36,273 44,965 2,405
Proceeds from issuance of common stock 512,916 1,281,418 791,719
----------- ---------- -----------
Net cash provided by financing activities 874,990 1,335,170
------------ ---------- -----------
1,187,287
Net increase in cash and
cash equivalents 40,226 11,841 7,956
Cash and cash equivalents at
beginning of year 36,498 24,657 16,701
------------ ---------- -----------
Cash and cash equivalents
at end of year $ 76,724 $ 36,498 $ 24,657
============ ========== ===========
SUPPLEMENTAL DISCLOSURE
OF CASH FLOW INFORMATION
Cash paid during the year for:
Interest $ 201,127 $ 130,049 $ 71,399
Income taxes 58,005 10,856 49,741
</TABLE>
See Notes to Consolidated Financial Statements
70
<PAGE> 71
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS:
Clear Channel Communications, Inc., is a diversified media company with two
business segments: broadcasting and outdoor advertising. The Company was
incorporated in Texas in 1974. The Company owns, programs, or sells airtime for
radio and television stations and is one of the world's largest outdoor
advertising companies based on total advertising display inventory in the United
States and internationally.
PRINCIPLES OF CONSOLIDATION:
The consolidated financial statements include the accounts of the Company and
its subsidiaries, substantially all of which are wholly-owned. Significant
intercompany accounts have been eliminated in consolidation. Investments in
nonconsolidated affiliates are accounted for using the equity method of
accounting. Certain amounts in prior years have been reclassified to conform to
the 1999 presentation.
CASH AND CASH EQUIVALENTS:
Cash and cash equivalents include all highly liquid investments with an original
maturity of three months or less.
LAND LEASES AND OTHER STRUCTURE LICENSES:
Most of the Company's outdoor advertising structures are located on leased land.
Domestic land rents are typically paid in advance for periods ranging from one
to twelve months. International land rents are paid both in advance and in
arrears, for periods ranging from one to twelve months. Most international
street furniture advertising display faces are licensed through municipalities
for up to 20 years. The street furniture licenses often include a percent of
revenue to be paid along with a base rent payment. Domestic prepaid land leases
are recorded as an asset and expensed ratably over the related rental term.
International license and rent payments in arrears are recorded as an accrued
liability.
PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment are stated at cost. Depreciation is computed
principally by the straight-line method at rates that, in the opinion of
management, are adequate to allocate the cost of such assets over their
estimated useful lives, which are as follows:
Buildings - 10 to 30 years
Structures and site leases - 2 to 20 years
Transmitter and studio equipment - 7 to 15 years
Furniture and other equipment - 2 to 10 years
Leasehold improvements - generally life of lease
Expenditures for maintenance and repairs are charged to operations as incurred,
whereas expenditures for renewal and betterments are capitalized.
INTANGIBLE ASSETS:
Intangible assets are stated at cost and are being amortized using the
straight-line method. Excess cost over the fair value of net assets acquired
(goodwill) and certain licenses are amortized generally over 20 to 25 years.
Transit and street furniture contracts are amortized over the respective lives
of the agreements,
71
<PAGE> 72
typically four to eleven years. Covenants not-to-compete are amortized over the
respective lives of the agreements. Network affiliation agreements are amortized
over 10 years. Leases are amortized over the remaining lease terms.
The periods of amortization are evaluated annually to determine whether
circumstances warrant revision.
LONG-LIVED ASSETS:
Long-lived assets (including related goodwill and other intangible assets) are
reviewed on a regular basis for the existence of facts or circumstances, both
internally and externally, that may suggest impairment. If such impairment is
identified, the impairment loss will be measured by comparing the estimated
future undiscounted cash flows to the asset's carrying value. To date, no such
impairment has been indicated.
OTHER INVESTMENTS:
Other investments are composed primarily of equity securities. These securities
are classified as available-for-sale and carried at fair value based on quoted
market prices. Securities are carried at historical value when quoted market
prices are unavailable. The net unrealized gains or losses on these investments,
net of tax, are reported as a separate component of shareholders' equity. The
average cost method is used to compute the realized gains and losses on sales of
equity securities.
EQUITY METHOD INVESTMENTS:
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. The Company does not recognize gains or losses upon the issuance
of securities by any of its equity method investees.
FINANCIAL INSTRUMENTS:
Due to their short maturity and/or their insignificance, the carrying amounts of
accounts and notes receivable, accounts payable, accrued liabilities, and
short-term borrowings approximated their fair values at December 31, 1999 and
1998. The carrying amounts of long-term debt approximated their fair value at
the end of 1999 and 1998, except as disclosed in Note D.
INCOME TAXES:
The Company accounts for income taxes using the liability method. Under this
method, deferred tax assets and liabilities are determined based on differences
between financial reporting bases and tax bases of assets and liabilities and
are measured using the enacted tax rates expected to apply to taxable income in
the periods in which the deferred tax asset or liability is expected to be
realized or settled.
REVENUE RECOGNITION:
Broadcasting revenue is recognized as advertisements or programs are broadcast
and is generally billed monthly. Outdoor advertising provides services under the
terms of contracts covering periods up to three years, which are generally
billed monthly. Revenue for outdoor advertising space rental is recognized
ratably over the term of the contract. Revenues from design, production and
certain other services are recognized as the services are provided. Payments
received in advance of billings are recorded as deferred income.
72
<PAGE> 73
Revenue from barter transactions is recognized when advertisements are broadcast
or outdoor advertising space is utilized. Merchandise or services received are
charged to expense when received or used.
INTEREST RATE PROTECTION AGREEMENTS:
Periodically, the Company enters into interest rate swap agreements to modify
the interest characteristics of its outstanding debt. Each interest rate swap
agreement is designated with all or a portion of the principal balance and term
of a specific debt obligation. These agreements involve the exchange of amounts
based on a fixed interest rate for amounts based on variable interest rates over
the life of the agreement without an exchange of the notional amount upon which
the payments are based. The differential to be paid or received as interest rate
change is accrued and recognized as an adjustment to interest expense related to
the debt. The fair value of the swap agreements and changes in the fair value as
a result of changes in market interest rates are not recognized in these
consolidated financial statements
FOREIGN CURRENCY:
Results of operations for foreign subsidiaries and foreign equity investees are
translated into U.S. dollars using the average exchange rates during the year.
The assets and liabilities of those subsidiaries and investees, other than those
of operations in highly inflationary countries, are translated into U.S. dollars
using the exchange rates at the balance sheet date. The related translation
adjustments are recorded in a separate component of shareholders' equity,
"Currency translation adjustment". Foreign currency transaction gains and
losses, as well as translation of financial statements of subsidiaries and
investees in highly inflationary countries, are included in operations.
STOCK BASED COMPENSATION:
The Company uses the intrinsic value method in accounting for its stock based
employee compensation plans.
USE OF ESTIMATES:
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
NEW ACCOUNTING PRONOUNCEMENTS:
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 Accounting for Derivative Instruments and
Hedging Activities. Statement 133 establishes new rules for the recognition and
measurement of derivatives and hedging activities. Statement 133 is amended by
Statement 137 Accounting for Derivative Instruments and Hedging Activities -
Deferral of the Effective Date of FASB Statement No. 133, and is effective for
years beginning after June 15, 2000. The Company plans to adopt this statement
in fiscal year 2001. Management does not believe adoption of this statement will
materially impact the Company's financial position or results of operations.
73
<PAGE> 74
NOTE B - BUSINESS ACQUISITIONS
1999 ACQUISITIONS:
AMFM
On October 2, 1999, the Company entered into a definitive agreement to merge
with AMFM Inc. ("AMFM"). This merger will create one of the world's largest
out-of-home media entities. After anticipated divestitures required to gain
regulatory approval, the combined company will own or program approximately 870
domestic radio stations. This merger is structured as a tax-free,
stock-for-stock transaction. Each share of AMFM common stock will be exchanged
for 0.94 shares of the Company's common stock. The Company will issue
approximately 202.8 million shares of its common stock, valuing the merger at
October 2, 1999 at approximately $17.1 billion plus the assumption of AMFM's
debt. Consummation of this merger, which is subject to regulatory approval and
various closing conditions, is expected during the second half of 2000.
DAME MEDIA
On July 1, 1999, the Company closed its merger with Dame Media, Inc. ("Dame
Media"). Pursuant to the terms of the agreement, the Company exchanged
approximately 954,100 shares of its common stock for 100% of the outstanding
stock of Dame Media, valuing this merger at approximately $65.0 million. In
addition the Company assumed $32.7 million of long term debt, which was
immediately refinanced utilizing the domestic credit facility. Dame Media's
operations include 21 radio stations in five markets located in New York and
Pennsylvania. The Company began consolidating the results of operations on July
1, 1999.
DAUPHIN
On June 11, 1999, the Company acquired a 50.5% equity interest in Dauphin OTA,
("Dauphin") a French company engaged in outdoor advertising. In August 1999 the
Company completed its tender offer for over 99% of the remaining shares
outstanding. At December 31, 1999, all of the shares had been surrendered for an
aggregate cost of approximately $487.2 million. Dauphin's operations include
approximately 103,000 outdoor advertising display faces in France, Spain, Italy,
and Belgium. This acquisition is being accounted for as a purchase with
resulting goodwill of approximately $449.7 million, which is being amortized
over 25 years on a straight-line basis. The purchase price allocation is
preliminary pending completion of appraisals and other fair value analysis of
assets and liabilities, which the Company anticipates will be completed during
the second quarter of 2000. The Company began consolidating the results of
operations on the date of acquisition.
JACOR
On May 4, 1999, the Company closed its merger with Jacor Communications, Inc.
("Jacor"). Pursuant to the terms of the agreement, each share of Jacor common
stock was exchanged for 1.1573151 shares of the Company's common stock or
approximately 60.9 million shares valued at $4.2 billion. In addition, the
Company assumed approximately $1.4 billion of Jacor's long-term debt, as well as
Jacor's Liquid Yield Option Notes with a fair value of approximately $490.1
million, which are convertible into approximately 7.1 million shares of the
Company's common stock. The Company also assumed options, stock appreciation
rights and common stock warrants with a fair value of $414.9 million, which are
convertible into approximately 9.2 million shares of the Company's common stock.
The Company refinanced $850.0
74
<PAGE> 75
million of Jacor's long-term debt at the closing of the merger using the
Company's credit facility. Subsequent to the merger, the Company tendered an
additional $22.1 million of Jacor's long-term debt. Included in the Jacor assets
acquired is $83 million of restricted cash related to the disposition of Jacor
assets in connection with the merger. This merger has been accounted for as a
purchase with resulting goodwill of approximately $3.1 billion, which is being
amortized over 25 years on a straight-line basis. This purchase price allocation
is preliminary pending completion of appraisals and other fair value analysis of
assets and liabilities, which the Company anticipates will be completed during
the second quarter of 2000. The results of operations of Jacor have been
included in the Company's financial statements beginning May 4, 1999.
In order to comply with governmental directives regarding the Jacor merger, the
Company divested certain assets valued at $205.8 million and swapped other
assets valued at $35 million in transactions with various third parties,
resulting in a gain on sale of stations of $138.7 million and an increase in
income tax expense (at the Company's statutory rate of 38%) of $52.0 million
during 1999. The Company anticipates deferring the majority of this tax expense
based on its ability to replace the stations sold with qualified assets. The
proceeds from divestitures are being held in restricted trusts until suitable
replacement properties are identified.
The following table details the reconciliation of divestiture and acquisition
activity in the restricted trust accounts:
In thousands of dollars
<TABLE>
<S> <C>
Restricted cash resulting from Clear Channel divestitures $ 201,500
Restricted cash purchased in Jacor Merger 83,000
Restricted cash from disposition of assets held in trust 4,300
Restricted cash used in acquisitions (246,228)
Restricted cash refunded (41,451)
Other changes to restricted cash 3,228
---------
Restricted cash balance at December 31, 1999 $ 4,349
=========
</TABLE>
OTHER
Also during 1999, the Company acquired substantially all of the assets of nine
radio stations in six domestic markets, 2,789 outdoor display faces in 29
domestic markets and in malls throughout the U.S. and 72,326 outdoor display
faces in eight international markets. The aggregate cash paid for these
acquisitions was approximately $739.3 million.
1998 ACQUISITIONS:
UNIVERSAL
On April 1, 1998, the Company merged 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 include approximately
34,000 outdoor advertising display faces in 23 major metropolitan markets. In
addition, the Company assumed approximately $615.3 million of Universal's
long-term debt, $236.0 million of which was refinanced at the closing date using
the Company's credit facility. In May 1998, the Company
75
<PAGE> 76
completed a public tender offer for $374.9 million of Universal's 9.75%
debentures using the Company's credit facility to fund the offer. This
acquisition is being accounted for as a purchase with resulting goodwill of
approximately $1.2 billion being amortized over 25 years on a straight-line
basis. The results of operations of Universal have been included in the
Company's financial statements beginning April 1, 1998.
MORE GROUP
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
Group"), an outdoor advertising company based in the United Kingdom. More
Group'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 Group for (pound)11.10
per share, totaling approximately $765.5 million. In addition, the Company
assumed approximately $137.7 million in long-term debt from More Group. The
Company has accounted for this acquisition as a purchase, which resulted in
approximately $693.7 million additional goodwill being amortized over 25 years
on a straight-line basis. Majority control of More Group was reached on June 25,
1998. The Company began consolidating the results of operations on July 1, 1998.
1997 ACQUISITIONS:
ELLER MEDIA
In April of 1997, the Company acquired approximately 93% of the outstanding
stock of Eller Media, Inc. ("Eller"). Eller's operations included approximately
50,000 outdoor advertising display faces in 15 major metropolitan markets. As
consideration for the stock acquired, the Company paid cash of approximately
$329 million and issued common stock of the Company in the aggregate value of
approximately $298 million. In addition, the Company issued options on the
Company's common stock with an aggregate value of approximately $51 million in
connection with the assumption of Eller's outstanding stock options. In
addition, the Company assumed approximately $417 million of Eller's long-term
debt, which was refinanced at the closing date using the Company's credit
facility. This acquisition was accounted for as a purchase with resulting
goodwill of approximately $655 million.
PAXSON RADIO
In December 1997 the Company acquired 43 radio stations, six news, sports and
agricultural networks and approximately 350 display faces from Paxson
Communications, Inc. ("Paxson") for approximately $629 million.
76
<PAGE> 77
The following is a summary of the assets acquired and the consideration given
for acquisitions:
In thousands of dollars
<TABLE>
<CAPTION>
1999 1998 1997
------------- ------------- -------------
<S> <C> <C> <C>
Property, plant and
equipment $ 654,430 $ 1,185,813 $ 629,207
Accounts receivable 329,999 103,711 56,028
Equity investments -- 15,262 --
Licenses, goodwill and
other assets 8,158,034 2,505,259 1,460,505
------------- ------------- -------------
Total assets acquired 9,142,463 3,810,045 2,145,740
Less:
Long term debt assumed (1,942,185) (753,065) --
Other liabilities assumed (490,138) (267,258) (526,938)
Deferred tax (liability) asset (789,186) (273,708) 19,482
Minority interest (21,267) (2,162) (15,047)
Common Stock issued (4,673,139) (1,201,857) (348,688)
------------- ------------- -------------
Cash paid for acquisitions $ 1,226,548 $ 1,311,995 $ 1,274,549
============= ============= =============
</TABLE>
The results of operations for 1999, 1998, and 1997 include the operations of
each station, for which the Company purchased the license, as well as all other
businesses acquired, from the respective date of acquisition. Unaudited pro
forma consolidated results of operations, assuming each of the acquisitions had
occurred at January 1, 1997, would have been as follows:
<TABLE>
<CAPTION>
Pro Forma (Unaudited)
Year Ended December 31,
In thousands of dollars, except per share data
1999 1998 1997
------------- ------------- -------------
<S> <C> <C> <C>
Net revenue $ 3,082,640 $ 2,629,290 $ 2,187,030
Net loss $ (65,728) $ (125,633) $ (144,727)
Net loss per common share:
Basic $ (.20) $ (.41) $ (.52)
Diluted $ (.20) $ (.41) $ (.52)
</TABLE>
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 or mergers with Eller, Paxson, Universal, More Group, Dauphin,
Dame and Jacor occurred at the beginning of 1997, nor is it indicative of
future results of operations. The Company made other acquisitions during 1999,
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.
77
<PAGE> 78
NOTE C - INVESTMENTS
INVESTMENTS IN NON-CONSOLIDATED AFFILIATES:
AUSTRALIAN RADIO NETWORK
In May 1995, the Company purchased a fifty percent (50%) interest in Australian
Radio Network ("ARN"), an Australian company that owns and operates radio
stations, a narrowcast radio broadcast service and a radio representation
company in Australia.
HISPANIC BROADCASTING CORPORATION
In May 1995, the Company purchased 21.4% of the outstanding common stock of
Hispanic Broadcasting Corporation (formerly known as Heftel Broadcasting
Corporation, "HBC"), a Spanish-language radio broadcaster in the United States.
In August 1996, the Company purchased an additional 41.8% of the outstanding
common stock of HBC. In early January 1997, the Company purchased certain
interest from the Tichenor family, which was subsequently exchanged for HBC
common stock at the time of HBC's merger with Tichenor Media System, Inc.
("Tichenor"), another Spanish-language radio broadcaster with stations in major
Hispanic markets in the United States. In February of 1997, the Company sold
350,000 shares of its HBC common stock as a selling shareholder in a secondary
stock offering in which HBC issued an additional 4.8 million shares of common
stock. The Company recognized a gain of approximately $6.2 million as a result
of this transaction. Also, HBC issued 5.6 million shares of its common stock in
connection with its merger with Tichenor and another 5.1 million shares of its
common stock in January of 1998, 2 million shares in June 1999 and 3.1 million
in December 1999. After the above-described transactions, the Company's interest
in HBC was 26% of the total number of shares of HBC's common stock outstanding
at December 31, 1999, which had a fair market value of $1.3 billion at that
date.
GRUPO ACIR COMUNICACIONES
In April 1998 the Company purchased a forty percent (40%) interest in Grupo Acir
Comunicaciones ("Acir"), a Mexican radio broadcasting company. Acir owns and
operates 157 radio stations throughout Mexico.
WHITE HORSE
In April 1998 the Company purchased a fifty percent (50%) interest in Hainan
White Horse Advertising Media Investment Co. Ltd. ("White Horse"), a Chinese
company that operates street furniture displays throughout China.
78
<PAGE> 79
SUMMARIZED FINANCIAL INFORMATION
The following table summarizes the Company's investments in these
nonconsolidated affiliates:
In thousands of dollars
<TABLE>
<CAPTION>
White All
ARN HBC Acir Horse Others Total
--------- ---------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
At December 31, 1998 $ 61,947 $ 137,047 $ 54,352 $ 35,193 $ 36,296 $ 324,835
Acquisition of new investments -- -- -- -- 26,235 26,235
Additional investment, net (4,933) -- -- 5,542 9,803 10,412
Equity in net earnings (loss) 2,988 9,930 1,044 (223) (62) 13,677
Amortization of excess cost -- (202) (1,896) (460) (674) (3,232)
Foreign currency transaction
adjustment 330 -- -- -- -- 330
Foreign currency translation
Adjustment 5,032 -- 765 (81) 2,945 8,661
--------- ---------- --------- --------- --------- -----------
At December 31, 1999 $ 65,364 $ 146,775 $ 54,265 $ 39,971 $ 74,543 $ 380,918
========= ========== ========= ========= ========= ===========
</TABLE>
These investments are not consolidated, but are accounted for under the equity
method of accounting, whereby the Company records its investments in these
entities in the balance sheet as "Investments in, and advances to,
nonconsolidated affiliates." The Company's interests in their operations are
recorded in the statement of earnings as "Equity in earnings (loss) of
nonconsolidated affiliates." Other income derived from transactions with
nonconsolidated affiliates consists of interest, management fees and other
transaction gains, which aggregated $7.4 million in 1999, $5.8 million in 1998
and $6.4 million in 1997, less applicable income taxes of $2.1 million in 1999,
$1.8 million in 1998 and $2.5 million in 1997 and are recorded in the
Consolidated Statement of Earnings as "Equity in earnings (loss) of
nonconsolidated affiliates." Undistributed earnings (loss) included in Retained
Earnings for these investments was $10.8 million, $4.5 million and $2.1 million
for December 31, 1999, 1998 and 1997, respectively.
OTHER INVESTMENTS:
Other investments at December 31, 1999 and 1998 include marketable equity
securities recorded at market value of $759.7 million and $332.2 million (cost
basis of $254.2 million and $84.2 million), respectively. During 1999 and 1998,
realized gains of $22.9 million and $39.2 million were recorded in "Other income
(expense) - net." At December 31, 1999 and 1998, unrealized gains, net of tax,
of $328.6 million and $161.2 million, respectively, were recorded as a separate
component of shareholders' equity.
79
<PAGE> 80
NOTE D - LONG-TERM DEBT
Long-term debt at December 31, 1999 and 1998 consisted of the following:
In thousands of dollars
<TABLE>
<CAPTION>
December 31,
-------------------------------
1999 1998
------------- --------------
<S> <C> <C>
Debentures (1) $ 300,000 $ 300,000
2.625% Convertible Notes (2) 575,000 575,000
6.6250% Senior Notes (3) 125,000 125,000
6.875% Senior Debentures (4) 175,000 175,000
1.5% Convertible Notes (5) 1,000,000 --
Domestic revolving long-term line of credit facility (6) 743,750 1,007,500
Multi-currency revolving long-term line of credit facility (7) (9) 483,868 --
Various Senior Subordinated Notes (8) 571,405 --
Other long-term debt (9) 149,881 149,107
------------- --------------
4,123,904 2,331,607
Less: current portion 30,361 7,964
------------- --------------
Total long-term debt $ 4,093,543 $ 2,323,643
============= ==============
</TABLE>
(1) Debentures, 7.25%, interest payable semiannually on April 15 and October
15, beginning April 15, 1998, principal to be paid in full on October 15,
2027. Proceeds from issuance of debentures totaled $294.3 million, net of
fees and initial offering discount of $5.7 million. The fees and initial
offering discount are being amortized as interest expense over 30 years.
The market value of the debentures was approximately $258.2 million at
December 31, 1999.
(2) Convertible notes, 2.625%, interest payable semiannually on April 1 and
October 1, beginning October 1, 1998, principal to be paid in full on April
1, 2003. Proceeds from issuance of convertible notes totaled $566.5
million, net of fees and initial offering discount of $8.5 million. The
fees and initial offering discount are being amortized as interest expense
over three and five years, respectively. 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. The Company has reserved 9,281,679
of its common stock for the conversion of these notes. 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. The market value of the 2.625%
convertibles notes was approximately $853.2 million at December 31, 1999.
(3) Senior notes, 6.6250%, interest payable semiannually on June 15 and
December 15, beginning December 15, 1998, principal to be paid in full on
June 15, 2008. Proceeds from issuance of notes totaled $124.1 million, net
of fees and initial offering discount of $0.9 million. The fees and initial
offering discount are being amortized as interest expense over 10 years.
The market value of the 6.625% senior notes was approximately $114.4
million at December 31, 1999.
(4) Senior debentures, 6.875%, interest payable semiannually on June 15 and
December 15, beginning December 15, 1998, principal to be paid in full on
June 15, 2018. Proceeds from issuance of debentures totaled $171.9 million,
net of fees and initial offering discount of $3.1 million. The fees and
initial offering discount are being amortized as interest expense over 20
years. The market value of the 6.875% senior debentures was approximately
$149.2 million at December 31, 1999.
80
<PAGE> 81
(5) Convertible notes, 1.5%, interest payable semiannually on June 1 and
December 1, beginning June 1, 2000, principal to be paid in full on
December 1, 2002. Proceeds from issuance of convertible notes totaled
$984.8 million, net of fees and initial offering discount of $15.2 million.
The fees and initial offering discount are being amortized as interest
expense over three and five years, respectively. The notes are convertible
into the Company's common stock at any time prior to maturity, at a
conversion price of 9.45 shares per each $1,000 principal amount of
convertible notes, subject to adjustment in certain circumstances. The
Company has reserved 9,453,582 of its common stock for the conversion of
these notes. The carrying value of the 1.5% convertible notes approximated
fair value at December 31, 1999.
(6) Domestic revolving long-term line of credit facility payable to banks,
interest only through September 2000, payable quarterly, rate based upon
prime, LIBOR or Fed funds rate, at the Company's discretion, principal to
be paid in full by June 2005, secured by 100% of the Common Stock of the
Company's wholly owned subsidiaries. This $2 billion facility converts into
a reducing revolving line of credit on the last business day of September
2000, with quarterly repayment of the principal to begin on that date and
continue quarterly through the last business day of June 2005, when the
commitment must be paid in full. Of the $1.3 billion undrawn, $12.1 million
is unavailable due to letters of credit. This leaves $1.2 billion available
at December 31, 1999 for future borrowings under the credit facility.
(7) Multi-currency revolving long-term line of credit facility with interest
payable quarterly, rate based upon prime or LIBOR for U. S. dollar
borrowings and for offshore currencies, based on offered quotations in the
applicable currency and Interbank Market. $516.1 million remains undrawn,
secured by 100% of the Common Stock of the Company's wholly owned
subsidiaries. The $1 billion facility matures on August 10, 2000 at which
time the Company has the option to convert this facility to a four-year tem
loan. This credit facility allows for borrowings in various foreign
currencies, which the Company intends to use to hedge net assets in those
currencies.
(8) On December 14, 1999 the Company completed a tender offer for the 10.125%
senior subordinated notes due June 15, 2006; 9.75% senior subordinated
notes due December 15, 2006; 8.75% senior subordinated notes due June 15,
2007; and 8.0% senior subordinated notes due February 15, 2010. An agent
acting on behalf of the Company redeemed notes with a face value of
approximately $516.6 million. Cash settlement of the amount due to the
agent was completed on January 14, 2000 and was funded through the domestic
credit facility. Including premiums, discounts, and agency fees, the
Company is recognizing approximately $13.2 million as an extraordinary
charge against net income, net of tax of approximately $8.1 million. After
redemption, approximately $1.2 million of the notes remain outstanding.
(9) Approximately $604.3 million and $103.7 million of the Company's debt is
denominated in foreign currencies at December 31, 1999 and 1998,
respectively. This debt acts as a natural hedge of a portion of the
Company's investment in net assets of foreign subsidiaries. Currency
translation gains and (losses) related to such debt was $24.4 million,
$(3.0) million and $-0- in 1999, 1998 and 1997, respectively.
The Company's current line of credit agreement with banks contains certain
covenants that substantially restrict, among other matters, the payment of cash
dividends and the pledging of assets.
81
<PAGE> 82
Future maturities of long-term debt at December 31, 1999 are as follows:
<TABLE>
<S> <C>
In thousands of dollars
2000 $ 30,361
2001 1,726
2002 1,209
2003 1,037,026
2004 1,106,775
Thereafter 1,946,807
-------------
$ 4,123,904
=============
</TABLE>
The Company currently hedges a portion of its outstanding debt with interest
rate swap agreements that effectively fix the interest at rates from 4.5% to
8.0% on $60.6 million of its current borrowings. These agreements expire from
April 2000 to December 2000. The fair value of these agreements at December 31,
1999, and settlements of interest during 1999 were not material.
NOTE E - LIQUID YIELD OPTION NOTES
The Company assumed two issues of Liquid Yield Option Notes ("LYONs") as a part
of the merger with Jacor on May 4, 1999.
LYONs due 2018:
The Company assumed 4 3/4% LYONs due 2018 with a fair value of $225.4 million.
Each LYON has a principal amount at maturity of $1,000 and is convertible, at
the option of the holder, at any time on or prior to maturity, into the
Company's common stock at a conversion rate of 7.227 shares per LYON. The LYONs
due 2018, had a balance, net of redemptions, conversions to common stock,
amortization of premium, and accretion of interest, at December 31, 1999, of
$229.9 million and approximate fair value of $286.0 million. At December 31,
1999, approximately 3.1 million shares of common stock were reserved for the
conversion of the LYONs due 2018.
The LYONs due 2018 are not redeemable by the Company prior to February 9, 2003.
Thereafter, the LYONs are redeemable for cash at any time at the option of the
Company in whole or in part, at redemption prices equal to the issue price
plus accrued original issue discount to the date of redemption.
The LYONs due 2018 can be purchased by the Company, at the option of the holder,
on February 9, 2003, February 9, 2008, and February 9, 2013, for a purchase
price of $494.52, $625.35 and $790.79, respectively, representing a 4 3/4% yield
per annum to the holder on such date. The Company, at its option, may elect to
pay the purchase price on any such purchase date in cash or common stock, or any
combination thereof.
LYONs due 2011:
The Company assumed 5 1/2% LYONs due 2011 with a fair value of $264.8 million.
Each LYON has a principal amount at maturity of $1,000 and is convertible, at
the option of the holder, at any time on or prior to maturity, into the
Company's common stock at a conversion rate of 15.522 shares per LYON. The LYONs
due 2011 had a balance, net of redemptions, conversions to common stock,
amortization of premium, and accretion of interest, at December 31, 1999, of
$260.9 million and approximate fair value of
82
<PAGE> 83
$344.8 million. At December 31, 1999, approximately 3.9 million shares of common
stock were reserved for the conversion of the LYONs due 2011.
The LYONs due 2011 are not redeemable by the Company prior to June 12, 2001.
Thereafter, the LYONs are redeemable for cash at any time at the option of the
Company in whole or in part, at redemption prices equal to the issue price
accrued plus original issue discount to the date of redemption.
The LYONs due 2011 can be purchased by the Company, at the option of the holder,
on June 12, 2001 and June 12, 2006 for a purchase price of $581.25 and $762.39,
respectively, representing a 5 1/2 yield per annum to the holder on such date.
The Company, at its option, may elect to pay the purchase price on any such
purchase date in cash or common stock, or any combination thereof.
NOTE F - COMMITMENTS
The Company leases office space, certain broadcasting facilities, equipment and
the majority of the land occupied by its outdoor advertising structures under
long-term operating leases. Some of the lease agreements contain renewal options
and annual rental escalation clauses (generally tied to the consumer price index
or a maximum of 5%), as well as provisions for the payment of utilities and
maintenance by the Company. As of December 31, 1999, the Company's future
minimum rental commitments, under noncancelable lease agreements with terms in
excess of one year, consist of the following:
<TABLE>
In thousands of dollars
<S> <C>
2000 $ 160,910
2001 140,884
2002 116,985
2003 88,319
2004 73,420
Thereafter 464,070
------------
$ 1,044,588
============
</TABLE>
Rent expense charged to operations for 1999, 1998 and 1997 was $306.4 million,
$200.6 million and $76.5 million, respectively.
NOTE G - CONTINGENCIES
From time to time, claims are made and lawsuits are filed against the Company,
arising out of the ordinary business of the Company. In the opinion of the
Company's management, liabilities, if any, arising from these actions are either
covered by insurance or accrued reserves, or would not have a material adverse
effect on the financial condition of the Company.
In various areas in which the Company operates, outdoor advertising is the
object of restrictive and, in some cases, prohibitive zoning and other
regulatory provisions, either enacted or proposed. The impact to the Company of
loss of displays due to governmental action has been somewhat mitigated by
federal and state laws mandating compensation for such loss and constitutional
restraints.
83
<PAGE> 84
NOTE H - INCOME TAXES
Significant components of the provision for income taxes are as follows:
In thousands of dollars
<TABLE>
<CAPTION>
1999 1998 1997
----------- ---------- -----------
<S> <C> <C> <C>
Current - federal $ 82,452 $ 36,084 $ 28,321
Deferred - domestic 43,386 35,329 18,299
Deferred - foreign (10,049) -- --
State 14,547 3,156 3,012
Foreign 14,324 (373) --
----------- ---------- -----------
Total $ 144,660 $ 74,196 $ 49,632
=========== ========== ===========
</TABLE>
Included in current-federal is $2.1 million, $1.8 million and $2.5 million for
1999, 1998 and 1997, respectively, related to taxes on other income from
nonconsolidated affiliates, which has been included as a reduction in equity in
earnings (loss) of nonconsolidated affiliates. Also, $8.1 million of benefit
related to the extraordinary loss resulting from early extinguishment of
long-term debt is included in current - federal for 1999. The remaining $150.7
million, $72.4 million and $47.1 million for 1999, 1998 and 1997, respectively,
have been reflected as income tax expense.
Significant components of the Company's deferred tax liabilities and assets as
of December 31, 1999 and 1998 are as follows:
In thousands of dollars
<TABLE>
<CAPTION>
1999 1998
------------- -------------
<S> <C> <C>
Deferred tax liabilities:
Fixed assets $ 297,772 $ 227,432
Intangibles 860,916 41,493
Unrealized gain in marketable securities 181,114 86,792
Foreign 98,720 94,366
Other 1,235 1,473
Deferred income 377 --
------------- -------------
Total deferred tax liabilities 1,440,134 451,556
Deferred tax assets:
Deferred income -- 3,355
Operating loss carryforwards 84,934 67,155
Accrued expenses 10,651 13,165
Bad debt reserves 6,271 3,160
Accrued interest 8,006 --
Bond premiums 76,864 --
Other 1,242 994
------------- -------------
Total gross deferred tax assets 187,968 87,829
Valuation allowance 37,617 19,837
------------- -------------
Total deferred tax assets 150,351 67,992
------------- -------------
Net deferred tax liabilities $ 1,289,783 $ 383,564
============= =============
</TABLE>
84
<PAGE> 85
The reconciliation of income tax computed at the U.S. federal statutory tax
rates to income tax expense is:
In thousands of dollars
<TABLE>
<CAPTION>
1999 1998 1997
---------------------- ---------------------- ----------------------
Amount Percent Amount Percent Amount Percent
-------- ------- ------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Income tax expense
at statutory rates $ 75,996 35% $ 44,880 35% $ 38,772 35%
State income taxes, net
of federal tax benefit 18,084 8% 5,108 4% 1,958 2%
Amortization of goodwill 54,279 25% 21,365 17% 7,093 6%
Other, net (3,699) (2)% 2,843 2% 1,809 2%
--------- ---- --------- ------ --------- ------
$ 144,660 66% $ 74,196 58% $ 49,632 45%
========= ==== ========= ====== ========= ======
</TABLE>
The Company has certain net operating loss carryforwards amounting to $228.4
million, which expire in the year 2018. Approximately $162.4 million in
operating loss carryforwards was generated by certain acquired companies prior
to their acquisition by the Company. During the current year, the Company did
not utilize any net operating loss carryforwards.
The Company established a valuation allowance against its operating loss
carryforwards generated by certain companies acquired during 1998 and 1999
following an assessment of the likelihood of realizing such amounts. The amount
of the valuation allowance was based on past operating history as well as
statutory restrictions on the use of operating losses from acquisitions, tax
planning strategies and its expectation of the level and timing of future
taxable income.
NOTE I - CAPITAL STOCK
STOCK SPLITS AND DIVIDENDS:
In May 1998 the Board of Directors authorized a two-for-one stock split
distributed on July 28, 1998 to stockholders of record on July 21, 1998. A total
of 124.2 million shares were issued in connection with the stock split. All
share, per share, stock price and stock option amounts shown in the financial
statements (except the Consolidated Statement of Changes in Shareholders'
Equity) and related footnotes have been restated to reflect the stock split.
ELLER PUT/CALL AGREEMENT:
The Company granted to the former Eller stockholders certain demand and
piggyback registration rights relating to the shares of common stock received by
them. The holders of the approximately 7% of the outstanding capital stock of
Eller, not purchased by the Company in April 1997, had the right to put such
stock to the Company for approximately 2.2 million shares of the Company's
common stock until April 10, 2002. During 1998, the former Eller stockholders
exercised their put right for 260,000 shares of the Company's common stock. In
June 1999, the former Eller stockholders and the Company terminated the put
rights agreement and at which time the Eller stockholders received the remaining
1.9 million shares of the Company's common stock.
85
<PAGE> 86
RECONCILIATION OF EARNINGS PER SHARE:
In thousands of dollars, except per share data
<TABLE>
<CAPTION>
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
NUMERATOR:
Net income before extraordinary item $ 85,655 $ 54,031 $ 63,576
Extraordinary item (13,185) -- --
----------- ----------- -----------
Net income 72,470 54,031 63,576
Effect of dilutive securities:
Eller put/call option agreement (2,300) (4,299) (2,577)
Convertible debt - 2.625% issued in 1998 9,811* 7,358 --
Convertible debt - 1.5% issued in 1999 964* -- --
LYONs - 1996 issue (311) -- --
LYONs - 1998 issue 2,944* -- --
Less: Anti-dilutive items (13,719) -- --
----------- ----------- -----------
(2,611) 3,059 (2,577)
Numerator for net income per
common share - diluted $ 69,859 $ 57,090 $ 60,999
=========== =========== ===========
DENOMINATOR:
Weighted-average common shares 312,610 236,060 176,960
Effect of dilutive securities:
Stock options and common stock warrants 8,395 4,098 4,440
Eller put/call option agreement 847 1,972 1,630
Convertible debt - 2.625% issued in 1998 9,282* 6,993 --
Convertible debt - 1.5% issued in 1999 927* -- --
LYONs - 1996 issue 2,556 -- --
LYONs - 1998 issue 2,034* -- --
Less: Anti-dilutive items (12,243) -- --
----------- ----------- -----------
11,798 13,063 6,070
Denominator for net income
per common share - diluted 324,408 249,123 183,030
=========== =========== ===========
Net income per common share:
Basic:
Net income before extraordinary item $ .27 $ .23 $ .36
Extraordinary item (.04) -- --
----------- ----------- -----------
Net income $ .23 $ .23 $ .36
=========== =========== ===========
Diluted:
Net income before extraordinary item $ .26 $ .22 $ .33
Extraordinary item (.04) -- --
----------- ----------- -----------
Net income $ .22 $ .22 $ .33
=========== =========== ===========
</TABLE>
* Denotes items that are anti-dilutive to the calculation of earnings per share.
86
<PAGE> 87
STOCK OPTIONS
The Company has granted options to purchase its common stock to employees and
directors of the Company and its affiliates under various stock option plans at
no less than the fair market value of the underlying stock on the date of grant.
These options are granted for a term not exceeding ten years and are forfeited
in the event the employee or director terminates his or her employment or
relationship with the Company or one of its affiliates. All option plans contain
antidilutive provisions that require the adjustment of the number of shares of
the Company common stock represented by each option for any stock splits or
dividends.
The following table presents a summary of the Company's stock options
outstanding at and stock option activity during the years ended December 31,
1999, 1998 and 1997.
In thousands, except per share data
<TABLE>
<CAPTION>
Weighted
Average
Exercise Price
Options (1) Per Share
----------- ---------
<S> <C> <C>
Options outstanding at January 1, 1997 3,276 5.00
Options granted in acquisitions 2,936 7.00
Options granted 692 22.00
Options exercised (990) 3.00
Options forfeited (56) 17.00
------
Options outstanding at December 31, 1997 5,858 8.00
======
Weighted-average fair value of options granted during 1997 18.00
Options outstanding at January 1, 1998 5,858 8.00
Options granted in acquisitions 215 25.00
Options granted 1,401 44.00
Options exercised (1,339) 5.00
Options forfeited (128) 43.00
------
Options outstanding at December 31, 1998 6,007 17.00
======
Weighted-average fair value of options granted during 1998 21.00
Options outstanding at January 1, 1999 6,007 17.00
Options granted in acquisitions 3,666 28.00
Options granted 1,580 63.00
Options exercised (2,989) 13.00
Options forfeited (214) 38.00
------
Options outstanding at December 31, 1999 (2) 8,050 32.00
======
Weighted-average fair value of options granted during 1999 26.00
</TABLE>
(1) Adjusted to reflect two-for-one stock split paid on July 1998.
(2) Vesting dates range from February 2000 to December 2004, and expiration
dates range from February 2000 to February 2009 at exercise prices ranging
from $2.08 to $86.00, with an average contractual
87
<PAGE> 88
remaining life of five years. Of the 8.1 million options outstanding at
December 31, 1999, 5.0 million were exercisable at a weighted-average
exercise price of $25.10. There were 8.7 million shares available for
future grants under the various option plans at December 31, 1999.
The fair value for these options was estimated at the date of grant using a
Black-Scholes option pricing model with the following weighted-average
assumptions for 1999, 1998 and 1997: risk-free interest rates of 6.0%, 5.0% and
6.0% for 1999, 1998 and 1997, respectively; a dividend yield of 0%; the
volatility factors of the expected market price of the Company's common stock
used was 30%, 36% and 31% for 1999, 1998 and 1997, respectively; and the
weighted-average expected life of the option was six, six and five years for
1999, 1998 and 1997, respectively.
Pro forma net income and earnings per share, assuming that the Company had
accounted for its employee stock options using the fair value method and
amortized such to expense over the options' vesting period is as follows:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Net income before extraordinary item (in thousands)
As reported $ 85,655 $ 54,031 $ 63,576
Pro forma $ 70,781 $ 47,982 $ 61,739
Net income before extraordinary item per common share
Basic:
As reported $ .27 $ .23 $ .36
Pro forma $ .23 $ .20 $ .35
Diluted:
As reported $ .26 $ .22 $ .33
Pro forma $ .21 $ .20 $ .33
</TABLE>
In February 1991, CCTV, a wholly owned subsidiary of the Company, adopted the
1991 Non-Qualified Stock Option Plan which authorized the granting of options to
purchase 50,000 shares of CCTV Common Stock. In February 1993, CCTV elected to
discontinue the granting of options under this plan. In 1998, the Company
offered to repurchase the outstanding options. Options were valued at $7.1
million by an outside consulting firm and recorded in "Other income (expense) -
net" as compensation expense in 1998. Option holders were paid in January 1999.
At December 31, 1999, common shares reserved for future issuance under the
Company's various stock option plans aggregated 16.9 million shares including
8.1 million options currently granted.
COMMON STOCK RESERVED FOR FUTURE ISSUANCE
Common stock is reserved for future issuances of, approximately 16.9 million
shares for issuance upon the various stock option plans to purchase the
Company's common stock, 9.3 million shares for issuance upon conversion of the
Company's 2?% Senior Convertible Notes, 9.5 million for issuance upon conversion
of the Company's 1 1/2% Senior Convertible Notes, 7.0 million for issuance upon
conversion of the Company's LYONs, 5.5 million for issuance upon conversion of
the Company's Common Stock Warrants and approximately 243.6 million shares are
reserved for issuance upon consummation of pending mergers.
88
<PAGE> 89
NOTE J - EMPLOYEE BENEFIT PLANS
The Company has various 401(K) savings and other plans for the purpose of
providing retirement benefits for substantially all employees. Both the
employees and the Company make contributions to the plan. The Company matches a
portion of an employee's contribution. Company matched contributions vest to the
employees based upon their years of service to the Company. Contributions to
these plans of $7.9 million, $3.8 million and $1.2 million were charged to
expense for 1999, 1998 and 1997, respectively.
NOTE K - OTHER INFORMATION
In thousands of dollars
<TABLE>
<CAPTION>
For the year ended December 31,
----------------------------------------------
1999 1998 1997
----------- ---------- ---------
<S> <C> <C> <C>
The following details the components of "Other income (expense) - net":
Realized gains on sale of marketable securities $ 22,930 $ 39,221 $ 10,019
Gain (loss) on disposal of fixed assets 2,897 (13,845) 1,129
Minority interest (2,769) (327) (848)
Interest income from notes receivable 5,403 2,635 --
Compensation expense relating to subsidiary options -- (8,791) --
IRS and legal settlements -- (7,400) --
Charitable contribution of treasury shares (4,102) -- --
Other (4,150) 1,317 1,279
----------- ---------- ---------
Total Other Income (Expense) - net $ 20,209 $ 12,810 $ 11,579
=========== ========== =========
The following details the income tax expense (benefit) on items of other comprehensive income:
Foreign currency translation adjustments $ 3,036 $ 3,124 $ (2,727)
Unrealized gains on securities:
Unrealized holding gains arising during period $ 98,170 $ 87,729 $ 12,791
Less: reclassification adjustments for gains
included in net income $ (8,026) $ (13,727) --
<CAPTION>
As of December 31,
-----------------------------
1999 1998
----------- ---------
The following details the components of "Other current assets":
Current film rights $ 19,584 $ 14,468
Inventory 42,672 9,937
Prepaid expenses 35,791 34,035
Other 25,438 7,650
----------- ---------
Total Other Current Assets $ 123,485 $ 66,090
=========== =========
</TABLE>
89
<PAGE> 90
<TABLE>
<S> <C> <C>
The following details the components of "Other current liabilities":
Deferred income - current $ 54,113 $ 7,628
Current portion of film rights liability 20,662 15,657
---------- ----------
Total Other Current Liabilities $ 74,775 $ 23,285
========== ==========
The following details the components of "Other comprehensive income":
Cumulative currency translation adjustment $ (45,851) $ 1,963
Cumulative unrealized gain on investments 328,596 161,185
---------- ----------
Total Other Comprehensive Income $ 282,745 $ 163,148
========== ==========
</TABLE>
NOTE L - SUBSEQUENT EVENTS
AMFM Merger:
In order to obtain FCC approval to close the AMFM merger, the Company
may need to divest between 110 and 115 radio stations in the aggregate in
approximately 37 markets or geographical areas. The Company may need to make
additional divestitures of radio stations or other assets or interests in order
to gain the approval of the federal and state antitrust authorities for the
merger. At March 13, 2000, the Company has signed definitive agreements to sell
110 of these radio stations for an aggregated sales price of $4.3 billion. These
definitive agreements are subject to the closing of the AMFM merger, regulatory
approvals and other closing conditions.
SFX Merger:
On February 28, 2000, the Company entered into a definitive agreement
to merge with SFX Entertainment, Inc. ("SFX"). SFX is one of the world's largest
diversified promoter producer and venue operator of live entertainment events.
This merger will be a tax-free, stock-for-stock transaction. Each SFX Class A
shareholder will receive 0.6 shares of the Company's common stock for each SFX
share and each SFX Class B shareholder will receive one share of the Company's
common stock for each SFX share, on a fixed exchange basis, valuing the merger
at approximately $3.3 billion plus the assumption of SFX's debt. This merger is
subject to regulatory and other closing conditions, including the approval from
the SFX shareholders. The Company anticipates that this merger will close during
the second half of 2000.
NOTE M - SEGMENT DATA
The Company is managed based on two principal business segments -- broadcasting
and outdoor advertising. At December 31, 1999, the broadcasting segment included
486 radio stations and 15 television stations for which the Company is the
licensee and 26 radio stations and nine television stations operated under lease
management or time brokerage agreements. Of these stations, 534 operate in 123
domestic markets and two stations operate in one international market. The
broadcasting segment also operates 14 radio networks.
At December 31, 1999, the outdoor segment owned 549,257 advertising display
faces and operated 5,900 displays under lease management agreements. Of these
555,157 display faces, 133,097 are in over 43 domestic markets and the remaining
422,060 displays are in over 23 international markets.
Substantially all revenues represent income from unaffiliated companies.
90
<PAGE> 91
In thousands of dollars
<TABLE>
<CAPTION>
1999 1998 1997
----------- ----------- ----------
<S> <C> <C> <C>
Net revenue
Broadcasting $ 1,426,683 $ 648,877 $ 489,633
Outdoor 1,251,477 702,063 207,435
----------- ----------- ----------
Consolidated $2,678,160 $ 1,350,940 $ 697,068
Operating expenses
Broadcasting $ 848,734 $ 373,452 $ 286,314
Outdoor 783,381 393,813 108,090
----------- ----------- ----------
Consolidated $1,632,115 $ 767,265 $ 394,404
Depreciation
Broadcasting $ 62,159 $ 36,581 $ 24,815
Outdoor 201,083 97,461 26,885
----------- ----------- ----------
Consolidated $ 263,242 $ 134,042 $ 51,700
Amortization of intangibles
Broadcasting $ 287,776 $ 70,762 $ 41,568
Outdoor 171,215 100,168 20,939
----------- ----------- ----------
Consolidated $ 458,991 $ 170,930 $ 62,507
Operating income
Broadcasting $ 188,807 $ 148,571 $ 122,971
Outdoor 64,859 92,307 44,603
----------- ----------- ----------
Consolidated $ 253,666 $ 240,878 $ 167,574
Total identifiable assets
Broadcasting $11,764,963 $ 2,652,428 $2,151,601
Outdoor 5,056,549 4,887,490 1,304,036
----------- ----------- ----------
Consolidated $16,821,512 $ 7,539,918 $3,455,637
Capital expenditures
Broadcasting $ 84,605 $ 46,814 $ 15,924
Outdoor 154,133 95,124 15,032
----------- ----------- ----------
Consolidated $ 238,738 $ 141,938 $ 30,956
</TABLE>
Net revenue of $567,189, $175,132 and -0- and identifiable assets of $1,324,970,
$1,245,132 and -0- derived from the Company's foreign operations are included in
the data above for the years ended December 31, 1999, 1998 and 1997,
respectively.
91
<PAGE> 92
NOTE N - QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
In thousands of dollars, except per share data
<TABLE>
<CAPTION>
March 31, June 30, September 30, December31,
-------------------- -------------------- -------------------- -----------------
1999 1998 1999 1998 1999 1998 1999 1998
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Gross revenue $ 421,607 $ 229,849 $ 696,130 $ 360,961 $ 887,854 $ 434,597 $ 986,427 $ 497,144
Net revenue $ 376,787 $ 203,642 $ 617,691 $ 320,028 $ 796,157 $ 385,885 $ 887,525 $ 441,385
Operating expenses 244,822 123,774 356,549 165,568 495,800 228,220 534,944 249,703
Depreciation and amortization 110,648 43,011 154,379 70,428 208,627 87,982 248,579 103,551
Corporate expenses 12,447 5,909 15,884 7,870 16,254 11,960 25,561 12,086
--------- --------- --------- --------- --------- --------- --------- ---------
Operating income 8,870 30,948 90,879 76,162 75,476 57,723 78,441 76,045
Interest expense 31,832 25,701 47,010 28,032 54,090 40,822 59,389 41,211
Gain on sale of stations -- -- 136,925 -- -- -- 1,734 --
Other income (expenses) 10,919 2,795 4,048 7,403 907 3,218 4,335 (606)
--------- --------- --------- --------- --------- --------- --------- ---------
Income (loss) before income,
taxes, equity in earnings (loss)
of non-consolidated affiliates
and extraordinary items (12,043) 8,042 184,842 55,533 22,293 20,119 25,121 34,228
Income taxes 2,889 4,259 79,962 32,360 23,695 12,147 44,089 23,587
--------- --------- --------- --------- --------- --------- --------- ---------
Income (loss) before equity in
earnings (loss) of non-
consolidated affiliates and
extraordinary items (14,932) 3,783 104,880 23,173 (1,402) 7,972 (18,968) 10,641
Equity in earnings (loss) of
nonconsolidated affiliates 2,196 1,796 1,620 4,736 2,925 3,530 9,336 (1,600)
--------- --------- --------- --------- --------- --------- --------- ---------
Income (loss) before
extraordinary item (12,736) 5,579 106,500 27,909 1,523 11,502 (9,632) 9,041
Extraordinary item -- -- -- -- -- -- (13,185) --
--------- --------- --------- --------- --------- --------- --------- ---------
Net income (loss) $ (12,736) $ 5,579 $ 106,500 $ 27,909 $ 1,523 $ 11,502 $(22,817) $ 9,041
========= ========= ========= ========= ========= ========= ======== =========
Net income (loss) per
common share: (1)
Basic:
Income (loss) before
extraordinary item $ (.05) $ .03 $ .35 $ .11 $ .00 $ .05 $ (.03) .04
Extraordinary item -- -- -- -- -- -- (.04) --
--------- --------- --------- --------- --------- --------- --------- ---------
Net income (loss) $ (.05) $ .03 $ .35 $ .11 $ .00 $ .05 $ (.07) $ .04
========= ========= ========= ========= ========= ========= ======== =========
Diluted:
Income (loss) before
extraordinary item $ (.05) $ .02 $ .33 $ .11 $ .00 $ .05 $ (.03) $ .04
Extraordinary item -- -- -- -- -- -- (.04) --
--------- --------- --------- --------- --------- --------- --------- ---------
Net income (loss) $ (.05) $ .02 $ .33 $ .11 $ .00 $ .05 $ (.07) $ .04
========= ========= ========= ========= ========= ========= ======== =========
Stock price: (1)
High $ 67.4375 $ 50.0315 $ 74.0000 $ 54.5625 $ 79.8750 $ 61.7500 $ 90.2500 $ 54.5000
Low 53.1250 36.7190 65.0625 44.0625 64.3750 40.3750 71.2500 36.1250
</TABLE>
(1) Adjusted for two-for-one stock split declared by Board of Directors in May
1998.
The Company's Common Stock is traded on the New York Stock Exchange under the
symbol CCU.
92
<PAGE> 93
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not Applicable
93
<PAGE> 94
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
We believe that one of our most important assets is our experienced
management team. With respect to our operations, general managers are
responsible for the day-to-day operation of their respective broadcasting
stations or outdoor branch locations. We believe that the autonomy of our
general managers enables us to attract top quality managers capable of
implementing our aggressive marketing strategy and reacting to competition in
the local markets. Most general managers have options to purchase our common
stock. As an additional incentive, a portion of each manager's compensation is
related to the performance of the profit centers for which he or she is
responsible. In an effort to monitor expenses, corporate management routinely
reviews staffing levels and operating costs. Combined with the centralized
accounting functions, this monitoring enables us to control expenses
effectively. Corporate management also advises local general managers on broad
policy matters and is responsible for long-range planning, allocating resources,
and financial reporting and controls.
The information required by this item with respect to the directors and
nominees for election to our Board of Directors is incorporated by reference to
the information set forth under the caption "Election of Directors" and
"Compliance With Section 16(A) of the Exchange Act," in our Definitive Proxy
Statement, which will be filed with the Securities and Exchange Commission
within 120 days of our fiscal year end.
The following information is submitted with respect to our executive
officers as of December 31, 1999.
<TABLE>
<CAPTION>
Age on
December 31, Officer
Name 1999 Position Since
<S> <C> <C> <C>
L. Lowry Mays 64 Chairman/Chief Executive Officer 1972
Mark P. Mays 36 President/ Chief Operating Officer 1989
Randall T. Mays 34 Executive Vice President/Chief Financial Officer 1993
Herbert W. Hill, Jr. 40 Senior Vice President/Chief Accounting Officer 1989
Kenneth E. Wyker 38 Senior Vice President/Legal Affairs 1993
W. A. Ripperton Riordan 42 Executive Vice President/Chief Operating Officer - 1995
Television
Karl Eller 71 Chief Executive Officer - Eller Media 1997
Mark Hubbard 50 Senior Vice President/Corporate Development 1998
Roger Parry 46 Chief Executive Officer - Clear Channel International 1998
Paul Meyer 57 President/Chief Operating Officer - Eller Media 1999
Juliana F. Hill 30 Vice President/Finance and Strategic Development 1999
Randy Michaels 47 President of Radio 1999
</TABLE>
The officers named above serve until the next Board of Directors
meeting immediately following the Annual Meeting of Shareholders.
Mr. L. Mays is our founder and was our President and Chief Executive
Officer from 1972 to February 1997. Since that time, Mr. L. Mays has served as
our Chairman and Chief Executive Officer. He has been one of our directors since
our inception. Mr. L. Mays is the father of Mark P. Mays and
94
<PAGE> 95
Randall T. Mays, who serve as our President/Chief Operating Officer and our
Executive Vice President/Chief Financial Officer, respectively.
Mr. M. Mays was our Senior Vice President of Operations from February
1993 until his appointment as our President/Chief Operating Officer in February
1997. He has been one of our directors since May 1998. Mr. M. Mays is the son of
L. Lowry Mays, our Chairman/Chief Executive Officer and the brother of Randall
T. Mays, our Executive Vice President/Chief Financial Officer.
Mr. R. Mays was appointed Executive Vice President/Chief Financial
Officer in February 1997. Prior thereto, he was our Vice President/Treasurer
since he joined us in January 1993. Mr. R. Mays is the son of L. Lowry Mays, our
Chairman/Chief Executive Officer and the brother of Mark P. Mays, our
President/Chief Operating Officer.
Mr. Hill was appointed Senior Vice President/Chief Accounting Officer
in February 1997. Prior thereto, he was our Vice President/Controller since
January 1989.
Mr. Wyker was appointed Senior Vice President for Legal Affairs in
February 1997. Prior thereto he was Vice President for Legal Affairs since he
joined us in July 1993.
Mr. Riordan was appointed Executive Vice President/Chief Operating
Officer - Television in November 1995. Prior thereto he was the Vice
President/General Manager of Clear Channel Television for the remainder of the
relevant five-year period.
Mr. Eller was appointed Chief Executive Officer - Eller Media in April
1997. Prior thereto, he was the Chief Executive Officer of Eller Media Company
from August 1995 to April 1997 and he was the Chief Executive Officer of Eller
Outdoor Advertising for the remainder of the relevant five-year period. Mr.
Eller is the father of Scott Eller, who served as the President - Eller Media
until March 1999 and who currently serves as the Vice-Chairman of Eller Media.
Mr. Hubbard was appointed Senior Vice President/Corporate Development
in April 1998. Prior thereto he had worked as an independent consultant in the
broadcasting industry from July 1994. Prior thereto, he was President of
Fairmont Communications for the remainder of the relevant five-year period.
Mr. Parry was appointed Chief Executive Officer - Clear Channel
International in June 1998. Prior thereto, he was the Chief Executive of More
Group plc from October 1995 to June 1998 and he was the Group Vice President of
Carat North America for the remainder of the relevant five-year period.
Mr. Meyer was appointed President - Eller Media in March 1999. Prior
thereto he was the Executive Vice President and General Counsel of Eller Media
Company from March 1996 to March 1999 and he was the Managing Partner of Meyer,
Hendricks Bivens & Moyes for the remainder of the relevant five-year period.
Ms. Hill was appointed Vice President/Finance and Strategic Development
in March 1999. Prior thereto she was an Associate at US WEST Communications from
August 1998 to March 1999 and she was a student at J.L. Kellogg Graduate School
of Management, Northwestern University from September 1996 to June 1998. She was
an Audit Manager of Ernst & Young LLP for the remainder of the relevant
five-year period.
95
<PAGE> 96
Mr. Michaels was appointed President of Radio in May 1999. Prior
thereto he was the Chief Executive Officer of Jacor Communications, Inc. from
November 1996 to May 1999 and he was President and Company Chief Operating
Officer of Jacor Communications, Inc. for the remainder of the relevant
five-year period.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is incorporated by reference to
the information set forth under the caption "Executive Compensation" in our
Definitive Proxy Statement, expected to be filed within 120 days of our fiscal
year end.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is incorporated by reference to
our Definitive Proxy Statement under the headings "Security Ownership of Certain
Beneficial Owners and Management", expected to be filed within 120 days of our
fiscal year end.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is incorporated by reference to
our Definitive Proxy Statement under the heading "Certain Transactions",
expected to be filed within 120 days of our fiscal year end.
96
<PAGE> 97
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K
(a)1. Financial Statements.
The following consolidated financial statements are included in Item 8.
Consolidated Balance Sheets as of December 31, 1999 and 1998
Consolidated Statements of Earnings for the Years Ended December 31, 1999, 1998
and 1997. Consolidated Statements of Changes in Shareholders' Equity for the
Years Ended December 31, 1999, 1998 and 1997.
Consolidated Statements of Cash Flows for the Years Ended December 31, 1999,
1998 and 1997.
Notes to Consolidated Financial Statements
(a)2. Financial Statement Schedule.
The following financial statement schedule for the years ended December 31,
1999, 1998 and 1997 and related report of independent auditors are filed as part
of this report and should be read in conjunction with the consolidated financial
statements.
All other schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable, and therefore have been omitted.
97
<PAGE> 98
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
Allowance for Doubtful Accounts
In thousands of dollars
<TABLE>
<CAPTION>
Charges
Balance at to Costs, Write-off Balance
Beginning Expenses of Accounts at end of
Description of period and other Receivable Other (1) Period
--------------- ------------- ------------- --------------- ------------- ---------
<S> <C> <C> <C> <C> <C>
Year ended
December 31,
1997 $ 6,067 $ 4,006 $ 4,474 $ 4,251 $ 9,850
========= ========= ========= ======== =========
Year ended
December 31,
1998 $ 9,850 $ 6,031 $ 7,840 $ 5,467 $ 13,508
========= ========= ========= ======== =========
Year ended
December 31,
1999 $ 13,508 $ 12,975 $ 15,640 $ 15,252 $ 26,095
========= ========= ========= ======== =========
</TABLE>
(1) Allowance for accounts receivable acquired in acquisitions net of deletions
related to dispositions.
98
<PAGE> 99
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
Deferred Tax Asset Valuation Allowance
In thousands of dollars
<TABLE>
<CAPTION>
Charges
Balance at to Costs, Balance
Beginning Expenses at end of
Description of period and other Deletions Other (1) Period
--------------- ------------- ------------- --------------- ------------- ---------
<S> <C> <C> <C> <C> <C>
Year ended
December 31,
1997 $ -- $ -- $ -- $ -- $ --
========= ========= ========= ======== =========
Year ended
December 31,
1998 $ -- $ -- $ -- $ 19,837 $ 19,837
========= ========= ========= ======== =========
Year ended
December 31,
1999 $ 19,837 $ -- $ -- $ 17,780 $ 37,617
========= ========= ========= ======== =========
</TABLE>
(1) Related to allowance for net operating loss carryforwards assumed in
acquisitions.
99
<PAGE> 100
(a)3. Exhibits.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
DESCRIPTION
<S> <C>
2.1 Agreement and Plan of Merger dated as of October 8, 1998, as amended
on November 11, 1998, among Clear Channel Communications, Inc., CCU
Merger Sub, Inc. and Jacor Communications, Inc. (incorporated by
reference to Annex A to the Company's Registration Statement on Form
S-4 (Reg. No. 333-72839) dated February 23, 1999).
2.2 Agreement and Plan of Merger dated as of October 2, 1999, among Clear
Channel, CCU Merger Sub, Inc. and AMFM Inc. (incorporated by reference
to the exhibits of Clear Channel's Current Report on Form 8-K filed
October 5, 1999.)
2.3 Agreement and Plan of Merger dated as of February 28, 2000, among
Clear Channel, CCU II Merger Sub, Inc. and SFX Entertainment, Inc.
(incorporated by reference to the exhibits of Clear Channel's Current
Report on Form 8-K filed February 29, 2000.)
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 (incorporated by
reference to the exhibits to the Company's Quarterly Report on Form
10-Q for the quarter ended September 30, 1998).
3.4 Second Amendment to Clear Channel's Articles of Incorporation
(incorporated by reference to the exhibits to Clear Channel's
Quarterly Report on Form 10-Q for the quarter ended March 31, 1999)
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 First Supplemental Indenture dated March 30, 1998 to Senior Indenture
dated October 1, 1997, by and between the Company and The Bank of New
York, as Trustee (incorporated by reference to the exhibits to the
Company's Quarterly Report on Form 10-Q for the quarter ended March
31, 1998).
</TABLE>
100
<PAGE> 101
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
<S> <C>
4.4 Second Supplemental Indenture dated June 16, 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 exhibits to the Company's Current Report on Form 8-K dated
August 27, 1998).
4.5 Third Supplemental Indenture dated June 16, 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 exhibits to the Company's Current Report on Form 8-K dated
August 27, 1998).
4.6 Fourth Supplement Indenture dated November 24, 1999 to Senior
Indenture dated October 1, 1997, by and between Clear Channel and The
Bank of New York as Trustee.
10.1 Incentive Stock Option Plan of Clear Channel Communications, Inc. as
of January 1, 1984 (incorporated by reference to the exhibits of the
Company's Registration Statement on Form S-1 (Reg. No. 33-289161)
dated April 19, 1984).
10.2 Clear Channel Communications, Inc. 1994 Incentive Stock Option Plan
(incorporated by reference to the exhibits of the Company's
Registration Statement on Form S-8 dated November 20, 1995).
10.3 Clear Channel Communications, Inc. 1994 Nonqualified Stock Option Plan
(incorporated by reference to the exhibits of the Company's
Registration Statement on Form S-8 dated November 20, 1995).
10.4 Clear Channel Communications, Inc. Directors' Nonqualified Stock
Option Plan (incorporated by reference to the exhibits of the
Company's Registration Statement on Form S-8 dated November 20, 1995).
10.5 Option Agreement for Officer (incorporated by reference to the
exhibits of the Company's Registration Statement on Form S-8 dated
November 20, 1995).
10.6 First Amendment to the Credit Facility dated September 17, 1997
(incorporated by reference to exhibit 4.1 to the Company's Current
Report on Form 8-K filed October 14, 1997).
10.7 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 (incorporated by reference to
the exhibits to the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1998).
10.8 Second Amendment to the Credit Facility dated November 7, 1997.
(incorporated by reference to the exhibits to the Company's Annual
Report on Form 10-K filed March 31, 1998.)
10.9 Third Amendment to the Credit Facility dated December 29, 1997.
(incorporated by reference to the exhibits to the Company's Annual
Report on Form 10-K filed March 31, 1998.)
</TABLE>
101
<PAGE> 102
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
<S> <C>
10.10 The Clear Channel Communications, Inc. 1998 Stock Incentive Plan
(incorporated by reference to Appendix A to the Company's Definitive
14A Proxy Statement dated March 24, 1998).
10.11 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 (incorporated by reference to
the exhibits to the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1998).
10.12 Credit Agreement by and among Clear Channel, Bank of America, N.A. as
administrative agent, BankBoston, N.A. as documentation agent, the
Bank of Montreal and Chase Manhattan Bank, as co-syndication agents,
and certain other lenders dated August 11, 1999 (incorporated by
reference to the exhibits to Clear Channel's Quarterly Report on Form
10-Q for the quarter ended June 30, 1999).
10.13 Shareholders Agreement dated October 2, 1999, by and among Clear
Channel, L. Lowry Mays, 4-M Partners, Ltd., Hicks, Muse, Tate & Furst
Equity Fund II, L.P., HM2/HMW, L.P., HM2/Chancellor, L.P.,
HM4/Chancellor, L.P., Capstar Broadcasting Partners, L.P., Capstar BT
Partners, L.P., Capstar Boston Partners, L.L.C., and Thomas O. Hicks.
10.14 Registration Rights Agreement dated as of October 2, 1999, among Clear
Channel and Hicks, Muse, Tate & Furst Equity Fund II, L.P., HM2/HMW,
L.P., HM2/Chancellor, L.P., HM4/Chancellor, L.P., Capstar Broadcasting
Partners, L.P., Capstar BT Partners, L.P., Capstar Boston Partners,
L.L.C., Thomas O. Hicks, John R. Muse, Charles W. Tate, Jack D. Furst,
Michael J. Levitt, Lawrence D. Stuart, Jr., David B Deniger and Dan H.
Blanks.
10.15 Voting Agreement dated as of October 2, 1999, by and among Clear
Channel and Thomas O. Hicks (incorporated by reference to exhibits to
Amendment No. 6 to Schedule 13D of Thomas O. Hicks, et. Al., filed on
October 14, 1999).
10.16 Voting Agreement dated as of October 2, 1999, by and among AMFM and L.
Lowry Mays and 4-M Partners, Ltd. (incorporated by reference to
exhibits to Schedule 13D of L. Lowry Mays, et. Al., filed on October
14, 1999).
10.17 Voting Agreement dated as of October 2, 1999, by and among Clear
Channel and HM2/HMW, L.P., HM2/Chancellor, L.P., HM4/Chancellor, L.P.
and Capstar Broadcasting Partners, L.P. (incorporated by reference to
exhibits to Amendment No. 6 to Schedule 13D of Thomas O. Hicks, et
Al., filed on October 14, 1999)
10.18 Employment Agreement by and between Clear Channel Communications, Inc.
and L. Lowry Mays dated October 1, 1999. (incorporated by reference to
the exhibits to Clear Channel's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1999.)
10.19 Employment Agreement by and between Clear Channel Communications, Inc.
and Mark P. Mays dated October 1, 1999. (incorporated by reference to
the exhibits to Clear Channel's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1999.)
</TABLE>
102
<PAGE> 103
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
DESCRIPTION
<S> <C>
10.20 Employment Agreement by and between Clear Channel Communications, Inc.
and Randall T. Mays dated October 1, 1999. (incorporated by reference
to the exhibits to Clear Channel's Quarterly Report on Form 10-Q for
the quarter ended September 30, 1999.
11 Statement re: Computation of Per Share Earnings.
12 Statement re: Computation of Ratios.
21 Subsidiaries of the Company.
23.1 Consent of Ernst & Young LLP.
23.2 Consent of KPMG LLP
24 Power of Attorney (included on signature page)
27 Financial Data Schedule
99.1 Report of Independent Auditors on Financial Statement Schedule - Ernst
& Young LLP.
99.2 Report of Independent Auditors - KPMG LLP.
</TABLE>
(b) Reports on Form 8-K.
We filed a report on Form 8-K dated October 5, 1999 that reported that
we had entered into an Agreement and Plan of Merger with AMFM Inc. pursuant to
which our wholly-owned subsidiary would be merged with and into AMFM Inc. with
our wholly-owned subsidiary surviving the merger and continuing its operations
as a wholly-owned subsidiary of the Company. The AMFM Merger is described under
the caption "Recent Developments" in Item 1 of Part I of this Form 10-K.
We filed a report on Form 8-K dated November 19, 1999 which reported
the Consolidated Balance Sheet of AMFM Inc., at December 31, 1998 and 1997, and
the related Consolidated Statement of Operations and Shareholders' Equity and
Consolidated Statement of Cash Flows for the years ended December 31, 1998 and
1997, with a Report of Independent Accountants dated February 10, 1999, except
as to Note 16, which is as of March 15, 1999. Also included were unaudited
quarterly financial information including the Condensed Consolidated Balance
Sheets AMFM Inc. at September 30, 1999 and 1998, and the related Condensed
Consolidated Statements of Operations and Shareholders' Equity and Condensed
Consolidated Statements of Cash Flows for the nine months ended September 30,
1999 and 1998. Also included were an unaudited Pro Forma Combined Condensed
Balance Sheet of us and our subsidiaries at September 30, 1999, and unaudited
Pro Forma Combined Condensed Statements for Operations for us and our
subsidiaries for the year ended December 31, 1998 and the nine months ended
September 30, 1999.
103
<PAGE> 104
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, on March 14, 2000.
CLEAR CHANNEL COMMUNICATIONS, INC.
By: /S/ L. Lowry Mays
----------------------------------------
L. Lowry Mays
Chairman and Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below authorizes L. Lowry Mays,
Mark P. Mays, Randall T. Mays and Herbert W. Hill, Jr., or any one of them, each
of whom may act without joinder of the others, to execute in the name of each
such person who is then an officer or director of the Registrant and to file any
amendments to this annual report on Form 10-K necessary or advisable to enable
the Registrant to comply with the Securities Exchange Act of 1934, as amended,
and any rules, regulations and requirements of the Securities and Exchange
Commission in respect thereof, which amendments may make such changes in such
report as such attorney-in-fact may deem appropriate.
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons on behalf of the Registrant
and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
NAME TITLE DATE
<S> <C> <C>
/S/ L. Lowry Mays Chairman, Chief Executive Officer and March 14, 2000
- ------------------------------------- Director
L. Lowry Mays
/S/ Mark P. Mays President and Chief Operating Officer and March 14, 2000
- ------------------------------------- Director
Mark P. Mays
/S/ Randall T. Mays Executive Vice President and Chief Financial March 14, 2000
- ------------------------------------- Officer (Principal Financial Officer) and
Randall T. Mays Director
/S/ Herbert W. Hill, Jr. Senior Vice President and Chief Accounting March 14, 2000
- ------------------------------------- Officer (Principal Accounting Officer)
Herbert W. Hill, Jr.
/S/ B. J. McCombs Director March 14, 2000
- -------------------------------------
B. J. McCombs
</TABLE>
<PAGE> 105
<TABLE>
<CAPTION>
NAME TITLE DATE
<S> <C> <C>
/S/ Alan D. Feld Director March 14, 2000
- -------------------------------------
Alan D. Feld
/S/ Theodore H. Strauss Director March 14, 2000
- -------------------------------------
Theodore H. Strauss
/S/ John H. Williams Director March 14, 2000
- -------------------------------------
John H. Williams
/S/ Karl Eller Director March 14, 2000
- -------------------------------------
Karl Eller
</TABLE>
<PAGE> 106
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
<S> <C>
2.1 Agreement and Plan of Merger dated as of October 8, 1998, as amended
on November 11, 1998, among Clear Channel Communications, Inc., CCU
Merger Sub, Inc. and Jacor Communications, Inc. (incorporated by
reference to Annex A to the Company's Registration Statement on Form
S-4 (Reg. No. 333-72839) dated February 23, 1999).
2.2 Agreement and Plan of Merger dated as of October 2, 1999, among Clear
Channel, CCU Merger Sub, Inc. and AMFM Inc. (incorporated by reference
to the exhibits of Clear Channel's Current Report on Form 8-K filed
October 5, 1999.)
2.3 Agreement and Plan of Merger dated as of February 28, 2000, among
Clear Channel, CCU II Merger Sub, Inc. and SFX Entertainment, Inc.
(incorporated by reference to the exhibits of Clear Channel's Current
Report on Form 8-K filed February 29, 2000.)
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 (incorporated by
reference to the exhibits to the Company's Quarterly Report on Form
10-Q for the quarter ended September 30, 1998).
3.4 Second Amendment to Clear Channel's Articles of Incorporation
(incorporated by reference to the exhibits to Clear Channel's
Quarterly Report on Form 10-Q for the quarter ended March 31, 1999)
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 First Supplemental Indenture dated March 30, 1998 to Senior Indenture
dated October 1, 1997, by and between the Company and The Bank of New
York, as Trustee (incorporated by reference to the exhibits to the
Company's Quarterly Report on Form 10-Q for the quarter ended March
31, 1998).
</TABLE>
<PAGE> 107
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
<S> <C>
4.4 Second Supplemental Indenture dated June 16, 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 exhibits to the Company's Current Report on Form 8-K dated
August 27, 1998).
4.5 Third Supplemental Indenture dated June 16, 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 exhibits to the Company's Current Report on Form 8-K dated
August 27, 1998).
4.6 Fourth Supplement Indenture dated November 24, 1999 to Senior
Indenture dated October 1, 1997, by and between Clear Channel and The
Bank of New York as Trustee.
10.1 Incentive Stock Option Plan of Clear Channel Communications, Inc. as
of January 1, 1984 (incorporated by reference to the exhibits of the
Company's Registration Statement on Form S-1 (Reg. No. 33-289161)
dated April 19, 1984).
10.2 Clear Channel Communications, Inc. 1994 Incentive Stock Option Plan
(incorporated by reference to the exhibits of the Company's
Registration Statement on Form S-8 dated November 20, 1995).
10.3 Clear Channel Communications, Inc. 1994 Nonqualified Stock Option Plan
(incorporated by reference to the exhibits of the Company's
Registration Statement on Form S-8 dated November 20, 1995).
10.4 Clear Channel Communications, Inc. Directors' Nonqualified Stock
Option Plan (incorporated by reference to the exhibits of the
Company's Registration Statement on Form S-8 dated November 20, 1995).
10.5 Option Agreement for Officer (incorporated by reference to the
exhibits of the Company's Registration Statement on Form S-8 dated
November 20, 1995).
10.6 First Amendment to the Credit Facility dated September 17, 1997
(incorporated by reference to exhibit 4.1 to the Company's Current
Report on Form 8-K filed October 14, 1997).
10.7 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 (incorporated by reference to
the exhibits to the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1998).
10.8 Second Amendment to the Credit Facility dated November 7, 1997.
(incorporated by reference to the exhibits to the Company's Annual
Report on Form 10-K filed March 31, 1998.)
10.9 Third Amendment to the Credit Facility dated December 29, 1997.
(incorporated by reference to the exhibits to the Company's Annual
Report on Form 10-K filed March 31, 1998.)
</TABLE>
<PAGE> 108
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
<S> <C>
10.10 The Clear Channel Communications, Inc. 1998 Stock Incentive Plan
(incorporated by reference to Appendix A to the Company's Definitive
14A Proxy Statement dated March 24, 1998).
10.11 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 (incorporated by reference to
the exhibits to the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1998).
10.12 Credit Agreement by and among Clear Channel, Bank of America, N.A. as
administrative agent, BankBoston, N.A. as documentation agent, the
Bank of Montreal and Chase Manhattan Bank, as co-syndication agents,
and certain other lenders dated August 11, 1999 (incorporated by
reference to the exhibits to Clear Channel's Quarterly Report on Form
10-Q for the quarter ended June 30, 1999).
10.13 Shareholders Agreement dated October 2, 1999, by and among Clear
Channel, L. Lowry Mays, 4-M Partners, Ltd., Hicks, Muse, Tate & Furst
Equity Fund II, L.P., HM2/HMW, L.P., HM2/Chancellor, L.P.,
HM4/Chancellor, L.P., Capstar Broadcasting Partners, L.P., Capstar BT
Partners, L.P., Capstar Boston Partners, L.L.C., and Thomas O. Hicks.
10.14 Registration Rights Agreement dated as of October 2, 1999, among Clear
Channel and Hicks, Muse, Tate & Furst Equity Fund II, L.P., HM2/HMW,
L.P., HM2/Chancellor, L.P., HM4/Chancellor, L.P., Capstar Broadcasting
Partners, L.P., Capstar BT Partners, L.P., Capstar Boston Partners,
L.L.C., Thomas O. Hicks, John R. Muse, Charles W. Tate, Jack D. Furst,
Michael J. Levitt, Lawrence D. Stuart, Jr., David B Deniger and Dan H.
Blanks.
10.15 Voting Agreement dated as of October 2, 1999, by and among Clear
Channel and Thomas O. Hicks (incorporated by reference to exhibits to
Amendment No. 6 to Schedule 13D of Thomas O. Hicks, et. Al., filed on
October 14, 1999).
10.16 Voting Agreement dated as of October 2, 1999, by and among AMFM and L.
Lowry Mays and 4-M Partners, Ltd. (incorporated by reference to
exhibits to Schedule 13D of L. Lowry Mays, et. Al., filed on October
14, 1999).
10.17 Voting Agreement dated as of October 2, 1999, by and among Clear
Channel and HM2/HMW, L.P., HM2/Chancellor, L.P., HM4/Chancellor, L.P.
and Capstar Broadcasting Partners, L.P. (incorporated by reference to
exhibits to Amendment No. 6 to Schedule 13D of Thomas O. Hicks, et
al., file on October 14, 1999.)
10.18 Employment Agreement by and between Clear Channel Communications, Inc.
and L. Lowry Mays dated October 1, 1999. (incorporated by reference to
the exhibits to Clear Channel's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1999.)
10.19 Employment Agreement by and between Clear Channel Communications, Inc.
and Mark P. Mays dated October 1, 1999. (incorporated by reference to
the exhibits to Clear Channel's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1999.)
</TABLE>
<PAGE> 109
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
DESCRIPTION
<S> <C>
10.20 Employment Agreement by and between Clear Channel Communications, Inc.
and Randall T. Mays dated October 1, 1999. (incorporated by reference
to the exhibits to Clear Channel's Quarterly Report on Form 10-Q for
the quarter ended September 30, 1999.)
11 Statement re: Computation of Per Share Earnings.
12 Statement re: Computation of Ratios.
21 Subsidiaries of the Company.
23.1 Consent of Ernst & Young LLP.
23.2 Consent of KPMG LLP
24 Power of Attorney (included on signature page)
27 Financial Data Schedule
99.1 Report of Independent Auditors on Financial Statement Schedule - Ernst
& Young LLP.
99.2 Report of Independent Auditors - KPMG LLP
</TABLE>
<PAGE> 1
EXHIBIT 4.6
================================================================================
CLEAR CHANNEL COMMUNICATIONS, INC.
AND
THE BANK OF NEW YORK,
as Trustee
----------------------
FOURTH SUPPLEMENTAL INDENTURE
Dated as of November 24, 1999
TO
SENIOR INDENTURE
Dated as of October 1, 1997
----------------------
1 1/2% Senior Convertible Notes Due December 1, 2002
================================================================================
<PAGE> 2
Fourth Supplemental Indenture, dated as of
the 24th day of November 1999 (this "Fourth
Supplemental Indenture"), between Clear Channel
Communications, Inc., a corporation duly organized
and existing under the laws of the State of Texas
(hereinafter sometimes referred to as the "Company")
and The Bank of New York, a New York banking
corporation, as trustee (hereinafter sometimes
referred to as the "Trustee") under the Indenture
dated as of October 1, 1997, between the Company and
the Trustee (the "Indenture"); as set forth in
Section 7.01 hereto and except as otherwise set forth
herein, all terms used and not defined herein are
used as defined in the Indenture.
WHEREAS, the Company executed and delivered the Indenture to
the Trustee to provide for the future issuance of its Securities, to be issued
from time to time in series as might be determined by the Company under the
Indenture, in an unlimited aggregate principal amount which may be authenticated
and delivered thereunder as in the Indenture provided;
WHEREAS, pursuant to the terms of the Indenture, the Company
desires to provide for the establishment of a new series of its Securities to be
known as its 1 1/2% Senior Convertible Notes Due December 1, 2002 (said series
being hereinafter referred to as the "Series 1 1/2% Notes"), the form of such
Series 1 1/2% Notes and the terms, provisions and conditions thereof to be as
provided in the Indenture and this Fourth Supplemental Indenture;
WHEREAS, the Company desires and has requested the Trustee to
join with it in the execution and delivery of this Fourth Supplemental
Indenture, and all requirements necessary to make this Fourth Supplemental
Indenture a valid instrument, enforceable in accordance with its terms, and to
make the Series 1 1/2% Notes, when executed by the Company and authenticated and
delivered by the Trustee, the valid obligations of the Company, have been
performed and fulfilled, and the execution and delivery of this Supplemental
Indenture and the Series 1 1/2% Notes have been in all respects duly authorized.
<PAGE> 3
2
NOW, THEREFORE, in consideration of the purchase and
acceptance of the Series 1 1/2% Notes by the holders thereof, and for the
purpose of setting forth, as provided in the Indenture, the form of the Series
1 1/2% Notes and the terms, provisions and conditions thereof, the Company
covenants and agrees with the Trustee as follows:
ARTICLE I
General Terms and Conditions of
the Series 1 1/2% Notes
SECTION 1.01. (a) There shall be and is hereby authorized a
series of Securities designated the "1 1/2% Senior Convertible Notes Due
December 1, 2002", limited in aggregate principal amount to $900,000,000
($1,000,000,000 if the option described in Section 2(b) of the Underwriting
Agreement relating to the Series 1 1/2% Notes dated November 18, 1999 between
the Company and the Underwriters listed therein is exercised). The Series 1 1/2%
Notes shall mature and the principal thereof shall be due and payable, together
with all accrued and unpaid interest thereon on December 1, 2002. The Series
1 1/2% Notes shall be convertible into shares of Common Stock, $0.10 par value,
of the Company, as such shares shall be constituted at the time of conversion
("Common Stock"), in accordance with Article IV.
SECTION 1.02. (a) The Series 1 1/2% Notes shall be issued as
Global Securities. Principal and interest on the Series 1 1/2% Notes issued in
certificated form will be payable, the transfer of such Series 1 1/2% Notes will
be registrable and such Series 1 1/2% Notes will be exchangeable for Series
1 1/2% Notes bearing identical terms and provisions at the office or agency of
the Company in the Borough of Manhattan, The City and State of New York provided
for that purpose; provided, however, that payment of interest may be made at the
option of the Company by check mailed to the registered holder at such address
as shall appear in the Security Register and that the payment of principal with
respect to the Series 1 1/2% Notes will only be made upon surrender of the
Series 1 1/2% Notes to the Trustee.
SECTION 1.03. Each Series 1 1/2% Note will bear interest at
the rate of 1 1/2% per annum from November 24, 1999 until the principal thereof
becomes due and payable, payable (subject to the provisions of Article III)
semi-annually in arrears on June 1 and December 1 of each year (each, an
"Interest Payment Date", commencing on June 1, 2000), to the person in whose
name such Series 1 1/2% Note (or one or more Predecessor Securities) is
registered at the close of business on the Regular Record Date for such interest
installment, which, except as set forth below, shall be, May 15 or November 15
next preceding the Interest Payment Date with respect to such interest
installment. Any installment of interest not punctually paid or duly provided
for shall forthwith cease to be payable to the registered holder of a Series
1 1/2% Note on such regular record date and may be paid to the person in whose
name such Series 1 1/2% Note (or one or more Predecessor Securities) is
registered at the close of business on a special record date to be fixed by the
Trustee for the payment of such defaulted interest, notice whereof to be given
to the registered holders of the Series 1 1/2% Notes not less than 10 days prior
to such Special Record Date, or may be paid at any time in any other lawful
manner not inconsistent with the requirements of any securities exchange on
<PAGE> 4
3
which the Series 1 1/2% Notes may be listed, and upon such notice as may be
required by such exchange, all as more fully provided in the Indenture.
The amount of interest payable for any period will be computed
on the basis of a 360-day year of twelve 30-day months. In the event that any
date on which interest is payable on the Series 1 1/2% Notes is not a Business
Day, then payment of interest payable on such date will be made on the next
succeeding day which is a Business Day (and without any interest or other
payment in respect of any such delay).
SECTION 1.04. The Series 1 1/2% Notes are not entitled to any
sinking fund.
ARTICLE II
No Optional Redemption of the Series
1 1/2% Notes
SECTION 2.01. The Company will have no right of optional
redemption at any time prior to December 1, 2002.
ARTICLE III
Repurchase at Option of Holders upon Change In Control
SECTION 3.01. In the event that a Change in Control (as
hereinafter defined) shall occur, each Holder shall have the right, at the
Holder's option, to require the Company to repurchase, and upon the exercise of
such right the Company shall repurchase, all of such Holder's Series 1 1/2%
Notes, or any portion of the principal amount thereof that is an integral
multiple of $1,000 (provided that no single Series 1 1/2% Note may be
repurchased in part unless the portion of the principal amount of such Series
1 1/2% Note to be outstanding after such repurchase is equal to $1,000 or an
integral multiple of $1,000), on the date (the "Repurchase Date") that is 30
days after the date of the Company Notice (as defined in Section 3.02) for cash
at a purchase price equal to 100% of the principal amount (the "Repurchase
Price") plus interest accrued and unpaid to, but excluding, the Repurchase Date.
If the Repurchase Date is between a record date for an Interest Payment Date and
such Interest Payment Date, then the interest payable on such Interest Payment
Date shall be paid to the Holder of record of the Series 1 1/2% Note on such
Interest Payment Date. Whenever in this Fourth Supplemental Indenture there is a
reference, in any context, to the principal of any Series 1 1/2% Note as of any
time, such reference shall be deemed to include reference to the Repurchase
Price payable in respect of such Series 1 1/2% Note to the extent that such
Repurchase Price is, was or would be so payable at such time, and express
mention of the Repurchase Price in any provision of this Fourth Supplemental
Indenture shall not be construed as excluding the Repurchase Price in those
provisions of this Fourth Supplemental Indenture when such express mention is
not made.
SECTION 3.02. (a) On or before the 15th day after the
occurrence of a Change in Control, the Company or, at the written request of the
Company on or before the tenth (10th) day after receipt of such request, the
Trustee, shall give to all Holders of
<PAGE> 5
4
Series 1 1/2% Notes notice (the "Company Notice") of the occurrence of the
Change in Control and of the repurchase right set forth herein arising as a
result thereof. The Company shall also deliver a copy of such notice of a
repurchase right to the Trustee.
Each notice of a repurchase right shall state:
(1) the Repurchase Date;
(2) the date by which the repurchase right must be exercised;
(3) the Repurchase Price;
(4) a description of the procedure which a Holder must follow to exercise
a repurchase right;
(5) that on the Repurchase Date the Repurchase Price will become due and
payable upon each such Series 1 1/2% Note designated by the Holder to be
repurchased, and that interest thereon shall cease to accrue on and after said
date;
(6) the Conversion Price, the date on which the right to convert the
Series 1 1/2% Notes to be repurchased will terminate and the places where such
Series 1 1/2% Notes may be surrendered for conversion; and
(7) the place or places where such Series 1 1/2% Notes are to be
surrendered for payment of the Repurchase Price and accrued interest, if any.
No failure of the Company to give the foregoing notices or
defect therein shall limit any Holder's right to exercise a repurchase right or
affect the validity of the proceedings for the repurchase of Series 1 1/2%
Notes.
(b) To exercise a repurchase right, a Holder shall deliver to the
Trustee or any Paying Agent on or before the 30th day after the date of the
Company Notice (i) written notice of the Holder's exercise of such right, which
notice shall set forth the name of the Holder, the principal amount of the
Series 1 1/2% Notes to be repurchased (and, if any Series 1 1/2% Note is to be
repurchased in part, the serial number thereof, the portion of the principal
amount thereof to be repurchased and the name of the Person in which the portion
thereof to remain outstanding after such repurchase is to be registered) and a
statement that an election to exercise the repurchase right is being made
thereby, and (ii) the Series 1 1/2% Notes with respect to which the repurchase
right is being exercised.
(c) In the event a repurchase right shall be exercised in accordance
with the terms hereof, the Company shall pay or cause to be paid to the Trustee
or the Paying Agent the Repurchase Price in cash, for payment to the Holder on
the Repurchase Date, together with accrued and unpaid interest to, but
excluding, the Repurchase Date payable with respect to the Series 1 1/2% Notes
(or portion thereof) as to which the repurchase right has been exercised.
(d) If any Series 1 1/2% Note (or portion thereof) surrendered for
repurchase shall not be so paid on the Repurchase Date, the principal amount of
such Series 1 1/2% Note (or portion thereof, as the case may be) shall, until
paid, bear interest from the
<PAGE> 6
5
Repurchase Date at the rate of 1 1/2% per annum, and each Series 1 1/2% Note
shall remain convertible into Common Stock until the principal of such Series
1 1/2% Note (or portion thereof, as the case may be) shall have been paid or
duly provided for.
(e) Any Series 1 1/2% Note which is to be repurchased only in part
shall be surrendered to the Trustee (with, if the Company or the Trustee so
requires, due endorsement by, or a written instrument of transfer in form
satisfactory to the Company and the Trustee duly executed by, the Holder thereof
or his attorney duly authorized in writing), and the Company shall execute, and
the Trustee shall authenticate and deliver to the Holder of such Series 1 1/2%
Note without service charge, a new Series 1 1/2% Note or Series 1 1/2% Notes,
containing identical terms and conditions, each in an authorized denomination in
aggregate principal amount equal to and in exchange for the portion of the
principal of the Series 1 1/2% Note so surrendered that was not repurchased.
(f) Any Holder that has delivered to the Trustee its written notice
exercising its right to require the Company to repurchase its Series 1 1/2%
Notes upon a Change in Control shall have the right to withdraw such notice at
any time prior to the close of business on the Repurchase Date by delivery of a
written notice of withdrawal to the Trustee prior to the close of business on
such date. A Series 1 1/2% Note in respect of which a Holder is exercising its
option to require repurchase upon a Change in Control may be converted into
Common Stock only if such Holder withdraws its notice in accordance with the
preceding sentence.
SECTION 3.03. For purposes of this Article III:
(a) the term "beneficial owner" shall be determined in accordance with
Rule l3d-3 promulgated by the Commission pursuant to the Securities Exchange Act
of 1934, as amended (the "Exchange Act"); and
(b) the term "Person" shall include any syndicate or group which would
be deemed to be a "Person" under Section 13(d)(3) of the Exchange Act.
SECTION 3.04. A "Change in Control" shall be deemed to have
occurred at such time after the original issuance of the Series 1 1/2% Notes as:
(a) any Person, other than the Company, any subsidiary of the Company
or any entity Controlled (as defined below) by the foregoing, or any employee
benefit plan of the Company or any such subsidiary, L. Lowry Mays, B. J. McCombs
or their Affiliates, is or becomes the beneficial owner, directly or indirectly,
through a purchase or other acquisition transaction or series of transactions
(other than a merger or consolidation involving the Company), of shares of
capital stock of the Company entitling such Person to exercise in excess of 50%
of the total voting power of all shares of capital stock of the Company entitled
to vote generally in the election of directors;
(b) there occurs any consolidation of the Company with, or merger of
the Company into, any other Person, any merger of another Person into the
Company, or any sale or transfer of the assets of the Company as, or
substantially as, an entirety to another Person (other than (i) any such
transaction pursuant to which the Holders of the Common Stock immediately prior
to such transaction have, directly or indirectly, shares of capital stock of the
continuing or surviving corporation immediately after such transaction which
<PAGE> 7
6
entitle such Holders to exercise in excess of 50% of the total voting power of
all shares of capital stock of the continuing or surviving corporation entitled
to vote generally in the election of directors and (ii) any merger (1) which
does not result in any reclassification, conversion, exchange or cancelation of
outstanding shares of Common Stock or (2) which is effected solely to change the
jurisdiction of incorporation of the Company and results in a reclassification,
conversion or exchange of outstanding shares of Common Stock solely into shares
of Common Stock and separate series of Common Stock carrying substantially the
same relative rights as the Common Stock); or
(c) a change in the Board of Directors of the Company in which the
individuals who constituted the Board of Directors of the Company at the
beginning of the one-year period immediately preceding such change (together
with any other director whose election by the Board of Directors of the Company
or whose nomination for election by the shareholders of the Company was approved
by a vote of at least a majority of the directors then in office either who were
directors at the beginning of such period or whose election or nomination for
election was previously so approved) cease for any reason to constitute a
majority of the directors then in office; provided, however, that a Change in
Control shall not be deemed to have occurred if either (a) the Closing Price (as
defined in Section 4.05) per share of the Common Stock for any ten (10) Trading
Days (as defined in Section 4.04) within the period of 20 consecutive Trading
Days ending immediately before the Change in Control shall equal or exceed 105%
of the Conversion Price (as defined in Section 4.05) in effect on each such
Trading Day, or (b) (i) at least 90% of the consideration (excluding cash
payments for fractional shares) in the transaction or transactions constituting
the Change in Control consists of shares of Common Stock with full voting rights
traded on a national securities exchange or quoted on the Nasdaq National Market
(or which will be so traded or quoted when issued or exchanged in connection
with such Change in Control) (such securities being referred to as "Publicly
Traded Securities") and as a result of such transaction or transactions such
Series 1 1/2% Notes become convertible solely into such Publicly Traded
Securities and (ii) the consideration in the transaction or transactions
constituting the Change of Control consists of cash, Publicly Traded Securities
or a combination of cash and Publicly Traded Securities with an aggregate fair
market value (which, in the case of Publicly Traded Securities, shall be equal
to the average Closing Price of such Publicly Traded Securities during the ten
(10) consecutive Trading Days, commencing with the third Trading Day, following
consummation of the transaction or transactions constituting the Change in
Control) is at least 105% of the Conversion Price in effect on the date
immediately preceding the date of consummation of such Change in Control. The
term "Controlled" shall mean ownership or control of more than 50% of the voting
power of such entity.
SECTION 3.05. In the case of any reclassification, change,
consolidation, merger, combination, sale or conveyance to which Section 4.06
applies, in which the Common Stock of the Company is changed or exchanged as a
result into the right to receive shares of stock and other securities or
property or assets (including cash) which includes shares of Common Stock of the
Company or Common Stock of another Person that are, or upon issuance will be,
traded on a United States national securities exchange or approved for trading
on an established automated over-the-counter trading market in the United States
and such shares constitute at the time such change or exchange becomes effective
in excess of 50% of the aggregate fair market value of such shares of stock and
other securities, property and assets (including cash) (as determined by the
Company, which determination shall be conclusive and binding), then the Person
formed by such
<PAGE> 8
7
consolidation or resulting from such merger or combination or which acquires the
properties or assets (including cash) of the Company, as the case may be, shall
execute and deliver to the Trustee a supplemental indenture (which shall comply
with the Trust Indenture Act as in force at the date of execution of such
supplemental indenture) modifying the provisions of this Fourth Supplemental
Indenture relating to the right of Holders to cause the Company to repurchase
the Series 1 1/2% Notes following a Change in Control and the definitions of the
Common Stock and Change in Control, as appropriate, and such other related
definitions set forth herein as determined in good faith by the Company (which
determination shall be conclusive and binding), to make such provisions apply to
the Common Stock and the issuer thereof if different from the Company and Common
Stock of the Company (in lieu of the Company and the Common Stock of the
Company).
ARTICLE IV
Conversion
SECTION 4.01. Subject to and upon compliance with the
provisions of this Fourth Supplemental Indenture, the Holder of any Series
1 1/2% Note shall have the right, at his option, at any time prior to the close
of business on December 1, 2002 to convert the principal amount of any such
Series 1 1/2% Note, or any portion of such principal amount which is $1,000 or
an integral multiple thereof, into that number of fully paid and nonassessable
shares of Common Stock obtained by dividing the principal amount of the Series
1 1/2% Note or portion thereof surrendered for conversion by the Conversion
Price in effect at such time, by surrender of the Series 1 1/2% Note so to be
converted in whole or in part in the manner provided, together with any required
funds, in Section 4.02. A Holder of Series 1 1/2% Notes is not entitled to any
rights of a Holder of Common Stock until such Holder has converted his Series
1 1/2% Notes to Common Stock, and only to the extent such Series 1 1/2% Notes
are deemed to have been converted to Common Stock under this Article IV.
SECTION 4.02. In order to exercise the conversion privilege,
the beneficial Holder must complete the appropriate instruction form for
conversion pursuant to the Depositary's book-entry conversion program, deliver
by book-entry delivery an interest in such Series 1 1/2% Note in global form,
furnish appropriate endorsements and transfer documents if required by the
Company or the Trustee or Conversion Agent appointed by the Company (the
"Conversion Agent"), and pay the funds, if any, required by this Section 4.02
and any transfer taxes if required pursuant to Section 4.07.
As promptly as practicable after satisfaction of the
requirements for conversion set forth above, subject to compliance with any
restrictions on transfer if shares issuable on conversion are to be issued in a
name other than that of the Holder of the Series 1 1/2% Note (as if such
transfer were a transfer of the Series 1 1/2% Note or Series 1 1/2% Notes (or
portion thereof) so converted), the Company shall issue and shall deliver to
such Holder at the office or agency maintained by the Company for such purpose,
a certificate or certificates for the number of full shares of Common Stock
issuable upon the conversion of such Series 1 1/2% Note or portion thereof in
accordance with the provisions of this Article and a check or cash in respect of
any fractional interest in respect of a share of Common Stock arising upon such
conversion, as provided in Section 4.03. In case any Series 1 1/2% Note of a
denomination greater than $1,000 shall
<PAGE> 9
8
be surrendered for partial conversion, and subject to Section 4.03, the Company
shall execute and the Trustee shall authenticate and deliver to the Holder of
the Series 1 1/2% Note so surrendered, without charge to him, a new Series
1 1/2% Note or Series 1 1/2% Notes in authorized denominations in an aggregate
principal amount equal to the unconverted portion of the surrendered Series
1 1/2% Note.
Each conversion shall be deemed to have been effected as to
any such Series 1 1/2% Note (or portion thereof) on the date on which the
requirements set forth above in this Section 4.02 have been satisfied as to such
Series 1 1/2% Note (or portion thereof), and the Person in whose name any
certificate or certificates for shares of Common Stock shall be issuable upon
such conversion shall be deemed to have become on said date the Holder of record
of the shares represented thereby; provided, however, that if any such surrender
occurs on any date when the stock transfer books of the Company shall be closed,
the Person in whose name the certificates are to be issued as the record Holder
thereof shall be deemed for all purposes to have become the Holder of record on
the next succeeding day on which such stock transfer books are open, but such
conversion shall be at the Conversion Price in effect on the date upon which
such Series 1 1/2% Note shall be surrendered.
Any Series 1 1/2% Note or portion thereof surrendered for
conversion during the period from the close of business on the Record Date for
any Interest Payment Date to the close of business on the Business Day next
preceding the following Interest Payment Date shall be accompanied by payment,
in New York Clearing House funds or other funds acceptable to the Company, of an
amount equal to the interest payable on such Interest Payment Date on the
principal amount being converted; provided, however, that no such payment need
be made if there shall exist at the time of conversion a default in the payment
of interest on the Series 1 1/2% Notes, and provided that no such payment need
be made if any Series 1 1/2% Note is surrendered for conversion during the
period from the close of business on November 15, 2002 to the close of business
on November 29, 2002, the Business Day next preceding December 1, 2002. No other
adjustment shall be made for interest accrued on any Series 1 1/2% Note
converted or for dividends on any shares issued upon the conversion of such
Series 1 1/2% Note.
SECTION 4.03. No fractional shares of Common Stock or scrip
representing fractional shares shall be issued upon conversion of Series 1 1/2%
Notes. If more than one Series 1 1/2% Note shall be surrendered for conversion
at one time by the same Holder, the number of full shares which shall be
issuable upon conversion shall be computed on the basis of the aggregate
principal amount of the Series 1 1/2% Notes (or specified portions thereof to
the extent permitted hereby) so surrendered. If any fractional share of stock
would be issuable upon the conversion of any Series 1 1/2% Note or Series 1 1/2%
Notes, the Company shall make an adjustment and payment therefor in cash at the
current market value thereof to the Holder of Series 1 1/2% Notes. The current
market value of a share of Common Stock shall be the Closing Price on the first
Trading Day immediately preceding the day on which the Series 1 1/2% Notes (or
specified portions thereof) are deemed to have been converted.
SECTION 4.04. The conversion price shall be $105.78 (herein
called the "Conversion Price") subject to adjustment as provided in this Article
IV.
<PAGE> 10
9
SECTION 4.05. The Conversion Price shall be adjusted from time
to time by the Company as follows:
(a) In case the Company shall hereafter pay a dividend or make a
distribution to all Holders of the outstanding Common Stock in shares of Common
Stock, the Conversion Price in effect at the opening of business on the date
following the date fixed for the determination of shareholders entitled to
receive such dividend or other distribution shall be reduced by multiplying such
Conversion Price by a fraction of which the numerator shall be the number of
shares of Common Stock outstanding at the close of business on the date fixed
for such determination and the denominator shall be the sum of such number of
shares and the total number of shares constituting such dividend or other
distribution, such reduction to become effective immediately after the opening
of business on the day following the date fixed for such determination. The
Company will not pay any dividend or make any distribution on shares of Common
Stock held in the treasury of the Company. If any dividend or distribution of
the type described in this Section 4.05(a) is declared but not so paid or made,
the Conversion Price shall again be adjusted to the Conversion Price which would
then be in effect if such dividend or distribution had not been declared.
(b) In case the Company shall issue rights or warrants to all Holders
of its outstanding shares of Common Stock entitling them (for a period expiring
within 45 days after the date fixed for determination of shareholders entitled
to receive such rights or warrants) to subscribe for or purchase shares of
Common Stock at a price per share less than the Current Market Price (as defined
below) on the date fixed for determination of shareholders entitled to receive
such rights or warrants, the Conversion Price shall be adjusted so that the same
shall equal the price determined by multiplying the Conversion Price in effect
immediately prior to the date fixed for determination of shareholders entitled
to receive such rights or warrants by a fraction of which the numerator shall be
the number of shares of Common Stock outstanding at the close of business on the
date fixed for determination of shareholders entitled to receive such rights and
warrants plus the number of shares which the aggregate offering price of the
total number of shares so offered would purchase at such Current Market Price,
and of which the denominator shall be the number of shares of Common Stock
outstanding on the date fixed for determination of shareholders entitled to
receive such rights and warrants plus the total number of additional shares of
Common Stock offered for subscription or purchase. Such adjustment shall be
successively made whenever any such rights and warrants are issued, and shall
become effective immediately after the opening of business on the day following
the date fixed for determination of shareholders entitled to receive such rights
or warrants. To the extent that shares of Common Stock are not delivered after
the expiration of such rights or warrants, the Conversion Price shall be
readjusted to the Conversion Price which would then be in effect had the
adjustments made upon the issuance of such rights or warrants been made on the
basis of delivery of only the number of shares of Common Stock actually
delivered. In the event that such rights or warrants are not so issued, the
Conversion Price shall again be adjusted to be the Conversion Price which would
then be in effect if such date fixed for the determination of shareholders
entitled to receive such rights or warrants had not been fixed. In determining
whether any rights or warrants entitle the Holders to subscribe for or purchase
shares of Common Stock at less than such Current Market Price, and in
determining the aggregate offering price of such shares of Common Stock, there
shall be taken into account any
<PAGE> 11
10
consideration received by the Company for such rights or warrants, the value of
such consideration, if other than cash, to be determined by the Board of
Directors.
(c) In case outstanding shares of Common Stock shall be subdivided
into a greater number of shares of Common Stock, the Conversion Price in effect
at the opening of business on the day following the day upon which such
subdivision becomes effective shall be proportionately reduced, and conversely,
in case outstanding shares of Common Stock shall be combined into a smaller
number of shares of Common Stock, the Conversion Price in effect at the opening
of business on the day following the day upon which such combination becomes
effective shall be proportionately increased, such reduction or increase, as the
case may be, to become effective immediately after the opening of business on
the day following the day upon which such subdivision or combination becomes
effective.
(d) In case the Company shall, by dividend or otherwise, distribute to
all Holders of its Common Stock shares of any class of capital stock of the
Company (other than any dividends or distributions to which Section 4.05(a)
applies) or evidences of its indebtedness or assets (including securities, but
excluding any rights or warrants referred to in Section 4.05(b), and excluding
any dividend or distribution paid exclusively in cash (any of the foregoing
hereinafter called the "Distributed Securities")), then, in each such case
(unless the Company elects to reserve such Distributed Securities for
distribution to the Holders upon the conversion of the Series 1 1/2% Notes so
that any such Holder converting Series 1 1/2% Notes will receive upon such
conversion, in addition to the shares of Common Stock to which such Holder is
entitled, the amount and kind of such Distributed Securities which such Holder
would have received if such Holder had converted its Series 1 1/2% Notes into
Common Stock immediately prior to the Record Date (as defined in Section 4.05(h)
for such distribution of the Distributed Securities)), the Conversion Price
shall be reduced so that the same shall be equal to the price determined by
multiplying the Conversion Price in effect on the Record Date (as defined below)
with respect to such distribution by a fraction of which the numerator shall be
the Current Market Price per share of the Common Stock on such Record Date less
the fair market value (as determined by the Board of Directors, whose
determination shall be conclusive, and described in a resolution of the Board of
Directors) on the Record Date of the portion of the Distributed Securities so
distributed applicable to one share of Common Stock and the denominator shall be
the Current Market Price per share of the Common Stock, such reduction to become
effective immediately prior to the opening of business on the day following such
Record Date; provided, however, that in the event the then fair market value (as
so determined) of the portion of the Distributed Securities so distributed
applicable to one share of Common Stock is equal to or greater than the Current
Market Price of the Common Stock on the Record Date, in lieu of the foregoing
adjustment, adequate provision shall be made so that each Holder of a 1 1/2%
Note shall have the right to receive upon conversion the amount of Distributed
Securities such Holder would have received had such Holder converted each Series
1 1/2% Note on the Record Date. In the event that such dividend or distribution
is not so paid or made, the Conversion Price shall again be adjusted to be the
Conversion Price which would then be in effect if such dividend or distribution
had not been declared. If the Board of Directors determines the fair market
value of any distribution for purposes of this Section 4.05(d) by reference to
the actual or when issued trading market for any securities, it must in doing so
consider the prices in such market over the same period used in computing the
Current Market Price of the Common Stock.
<PAGE> 12
11
In the event the Company implements a shareholder rights plan,
such rights plan shall provide that upon conversion of the Series 1 1/2% Notes
the Holders will receive, in addition to the Common Stock issuable upon such
conversion, the rights issued under such rights plan (notwithstanding the
occurrence of an event causing such rights to separate from the Common Stock at
or prior to the time of conversion).
Rights or warrants distributed by the Company to all Holders
of Common Stock entitling the Holders thereof to subscribe for or purchase
shares of the Company's capital stock (either initially or under certain
circumstances), which rights or warrants, until the occurrence of a specified
event or events ("Trigger Event"): (i) are deemed to be transferred with such
shares of Common Stock, (ii) are not exercisable and (iii) are also issued in
respect of future issuances of Common Stock, shall be deemed not to have been
distributed for purposes of this Section 4.05 (and no adjustment to the
Conversion Price under this Section 4.05 will be required) until the occurrence
of the earliest Trigger Event, whereupon such rights and warrants shall be
deemed to have been distributed and an appropriate adjustment (if any is
required) to the Conversion Price shall be made under this Section 4.05(d). If
any such right or warrant, including any such existing rights or warrants
distributed prior to the date of this Fourth Supplemental Indenture, are subject
to events, upon the occurrence of which such rights or warrants become
exercisable to purchase different securities, evidences of indebtedness or other
assets, then the date of the occurrence of any and each such event shall be
deemed to be the date of distribution and record date with respect to new rights
or warrants with such rights (and a termination or expiration of the existing
rights or warrants without exercise by any of the Holders thereof). In addition,
in the event of any distribution (or deemed distribution) of rights or warrants,
or any Trigger Event or other event (of the type described in the preceding
sentence) with respect thereto that was counted for purposes of calculating a
distribution amount for which an adjustment to the Conversion Price under
Section 4.05 was made, (1) in the case of any such rights or warrants which
shall all have been redeemed or repurchased without exercise by any Holders
thereof, the Conversion Price shall be readjusted upon such final redemption or
repurchase to give effect to such distribution or Trigger Event, as the case may
be, as though it were a cash distribution, equal to the per share redemption or
repurchase price received by a Holder or Holders of Common Stock with respect to
such rights or warrants (assuming such Holder had retained such rights or
warrants), made to all Holders of Common Stock as of the date of such redemption
or repurchase, and (2) in the case of such rights or warrants which shall have
expired or been terminated without exercise by any Holders thereof, the
Conversion Price shall be readjusted as if such rights and warrants had not been
issued.
For purposes of this Section 4.05(d) and Sections 4.05(a) and
(b), any dividend or distribution to which this Section 4.05(d) is applicable
that also includes shares of Common Stock, or rights or warrants to subscribe
for or purchase shares of Common Stock (or both), shall be deemed instead to be
(1) a dividend or distribution of the evidences of indebtedness, assets or
shares of capital stock other than such shares of Common Stock or rights or
warrants (and any further Conversion Price reduction required by this Section
4.05(d) with respect to such dividend or distribution shall then be made)
immediately followed by (2) a dividend or distribution of such shares of Common
Stock or such rights or warrants (and any further Conversion Price reduction
required by Sections 4.05(a) and (b) with respect to such dividend or
distribution shall then be made), except (A) the Record Date of such dividend or
distribution shall be substituted as "the date fixed for the determination of
shareholders entitled to receive such dividend or other
<PAGE> 13
12
distribution" and "the date fixed for such determination" within the meaning of
Sections 4.05(a) and (b), and (B) any shares of Common Stock included in such
dividend or distribution shall not be deemed "outstanding at the close of
business on the date fixed for such determination" within the meaning of Section
4.05(a).
(e) In case the Company shall, by dividend or otherwise, distribute to
all Holders of its Common Stock cash (excluding any cash that is distributed
upon a merger or consolidation to which Section 4.06 applies or as part of a
distribution referred to in Section 4.05(d)) in an aggregate amount that,
combined together with (1) the aggregate amount of any other such distributions
to all holders of its Common Stock made exclusively in cash within the 12 months
preceding the date of payment of such distribution, and in respect of which no
adjustment pursuant to this Section 4.05(e) has been made, and (2) the aggregate
of any cash plus the fair market value (as determined by the Board of Directors,
whose determination shall be conclusive and described in a resolution of the
Board of Directors) of consideration payable in respect of any tender offer by
the Company for all or any portion of the Common Stock concluded within the 12
months preceding the date of payment of such distribution, and in respect of
which no adjustment pursuant to Section 4.05(f) has been made, exceeds 10% of
the product of the Current Market Price (determined as provided in Section
4.05(h)) on the Record Date with respect to such distribution times the number
of shares of Common Stock outstanding on such date, then, and in each such case,
immediately after the close of business on such date, the Conversion Price shall
be reduced so that the same shall equal the price determined by multiplying the
Conversion Price in effect immediately prior to the close of business on such
Record Date by a fraction (i) the numerator of which shall be equal to the
Current Market Price on the Record Date less an amount equal to the quotient of
(x) the excess of such combined amount over such 10% and (y) the number of
shares of Common Stock outstanding on the Record Date and (ii) the denominator
of which shall be equal to the Current Market Price on such Record Date;
provided, however, that, if the portion of the cash so distributed applicable to
one share of Common Stock is equal to or greater than the Current Market Price
of the Common Stock on the Record Date, in lieu of the foregoing adjustment,
adequate provision shall be made so that each Holder of a 1 1/2% Note shall have
the right to receive upon conversion the amount of cash such Holder would have
received had such Holder converted such Series 1 1/2% Note immediately prior to
such Record Date. If such dividend or distribution is not so paid or made, the
Conversion Price shall again be adjusted to be the Conversion Price which would
then be in effect if such dividend or distribution had not been declared.
(f) In case a tender offer made by the Company or any of its
subsidiaries for all or any portion of the Common Stock expires and such tender
offer (as amended upon the expiration thereof) requires the payment to
shareholders (based on the acceptance (up to any maximum specified in the terms
of the tender offer) of Purchased Shares (as defined below)) of an aggregate
consideration having a fair market value (as determined by the Board of
Directors, whose determination shall be conclusive and described in a resolution
of the Board of Directors) that, combined together with (1) the aggregate of the
cash plus the fair market value (as determined by the Board of Directors, whose
determination shall be conclusive and described in a resolution of the Board of
Directors), as of the expiration of such tender offer, of consideration payable
in respect of any other tender offers, by the Company or any of its subsidiaries
for all or any portion of the Common Stock expiring within the 12 months
preceding the expiration of such tender offer and in respect of which no
adjustment pursuant to this Section 4.05(f) has been made and (2) the aggregate
amount of any distributions to all Holders of the Common Stock made exclusively
in cash within 12 months preceding the expiration of such tender offer and in
respect of
<PAGE> 14
13
which no adjustment pursuant to Section 4.05(e) has been made, exceeds 10% of
the product of the Current Market Price (determined as provided in Section
4.05(h)) as of the last time (the "Expiration Time") tenders could have been
made pursuant to such tender offer (as it may be amended) times the number of
shares of Common Stock outstanding (including any tendered shares) at the
Expiration Time, then, and in each such case, immediately prior to the opening
of business on the day after the date of the Expiration Time, the Conversion
Price shall be adjusted so that the same shall equal the price determined by
multiplying the Conversion Price in effect immediately prior to the close of
business on the date of the Expiration Time by a fraction of which the numerator
shall be the number of shares of Common Stock outstanding (including any
tendered shares) at the Expiration Time multiplied by the Current Market Price
of the Common Stock on the Trading Day next succeeding the Expiration Time and
the denominator shall be the sum of (x) the fair market value (determined as
aforesaid) of the aggregate consideration payable to shareholders based on the
acceptance (up to any maximum specified in the terms of the tender offer) of all
shares validly tendered and not withdrawn as of the Expiration Time (the shares
deemed so accepted, up to any such maximum, being referred to as the "Purchased
Shares") and (y) the product of the number of shares of Common Stock outstanding
(less any Purchased Shares) at the Expiration Time and the Current Market Price
of the Common Stock on the Trading Day next succeeding the Expiration Time, such
reduction (if any) to become effective immediately prior to the opening of
business on the day following the Expiration Time. If the Company is obligated
to purchase shares pursuant to any such tender offer, but the Company is
permanently prevented by applicable law from effecting any such purchases or all
such purchases are rescinded, the Conversion Price shall again be adjusted to be
the Conversion Price which would then be in effect if such tender offer had not
been made. If the application of this Section 4.05(f) to any tender offer would
result in an increase in the Conversion Price, no adjustment shall be made for
such tender offer under this Section 4.05(f).
(g) In case of a tender or exchange offer made by a Person other than
the Company or any subsidiary of the Company for an amount which increases the
offeror's ownership of Common Stock to more than 25% of the Common Stock
outstanding and shall involve the payment by such Person of consideration per
share of Common Stock having a fair market value (as determined by the Board of
Directors, whose determination shall be conclusive, and described in a
resolution of the Board of Directors) at the Expiration Time that exceeds the
Current Market Price of the Common Stock on the Trading Day next succeeding the
Expiration Time, and in which, as of the Expiration Time the Board of Directors
is not recommending rejection of the offer, the Conversion Price shall be
reduced so that the same shall equal the price determined by multiplying the
Conversion Price in effect immediately prior to the Expiration Time by a
fraction of which the numerator shall be the number of shares of Common Stock
outstanding (including any tendered or exchanged shares) at the Expiration Time
multiplied by the current Market Price of the Common Stock on the Trading Day
next succeeding the Expiration Time and the denominator shall be the sum of (x)
the fair market value (determined as aforesaid) of the aggregate consideration
payable to shareholders based on the acceptance (up to any maximum specified in
the terms of the tender or exchange offer) of all shares validly tendered or
exchanged and not withdrawn as of the Expiration
<PAGE> 15
14
Time (the shares deemed so accepted, up to any such maximum, being referred to
as the "Purchased Shares") and (y) the product of the number of shares of Common
Stock outstanding (less any Purchased Shares) at the Expiration Time and the
Current Market Price of the Common Stock on the Trading Day next succeeding the
Expiration Time, such reduction to become effective as of immediately prior to
the opening of business on the day following the Expiration Time. In the event
that such Person is obligated to purchase shares pursuant to any such tender or
exchange offer, but such Person is permanently prevented by applicable law from
effecting any such purchases or all such purchases are rescinded, the Conversion
Price shall again be adjusted to be the Conversion Price which would then be in
effect if such tender or exchange offer had not been made. Notwithstanding the
foregoing, the adjustment described in this Section 4.05(g) shall not be made
if, as of the Expiration Time, the offering documents with respect to such offer
disclose a plan or intention to cause the Company to engage in any transaction
described in Article Eight of the Indenture.
(h) For purposes of this Fourth Supplemental Indenture, the following
terms shall have the meaning indicated:
(1) "Closing Price" with respect to any securities on any day shall
mean the closing sale price regular way on such day or, in case no such sale
takes place on such day, the average of the reported closing bid and asked
prices, regular way, in each case on the New York Stock Exchange, or, if such
security is not listed or admitted to trading on such Exchange, on the principal
national security exchange or quotation system on which such security is quoted
or listed or admitted to trading, or, if not quoted or listed or admitted to
trading on any national securities exchange or quotation system, the average of
the closing bid and asked prices of such security on the over-the-counter market
on the day in question as reported by the National Quotation Bureau
Incorporated, or a similar generally accepted reporting service, or if not so
available, in such manner as furnished by any New York Stock Exchange member
firm selected from time to time by the Board of Directors for that purpose, or a
price determined in good faith by the Board of Directors or, to the extent
permitted by applicable law, a duly authorized committee thereof, whose
determination shall be conclusive.
(2) "Current Market Price" shall mean the average of the daily Closing
Prices per share of Common Stock for the ten consecutive Trading Days
immediately prior to the date in question; provided, however, that (1) if the
"ex" date (as hereinafter defined) for any event (other than the issuance or
distribution requiring such computation) that requires an adjustment to the
Conversion Price pursuant to Section 4.05(a), (b), (c). (d), (e), (f) or (g)
occurs during such ten consecutive Trading Days, the Closing Price for each
Trading Day prior to the "ex" date for such other event shall be adjusted by
multiplying such Closing Price by the same fraction by which the Conversion
Price is so required to be adjusted as a result of such other event, (2) if the
"ex" date for any event (other than the issuance or distribution requiring such
computation) that requires an adjustment to the Conversion Price pursuant to
Section 4.05(a), (b), (c), (d), (e), (f) or (g) occurs on or after the "ex" date
for the issuance or distribution requiring such computation and prior to the day
in question, the Closing Price for each Trading Day on and after the "ex" date
for such other event shall be adjusted by multiplying such Closing Price by the
reciprocal of the fraction by which the Conversion Price is so required to be
adjusted as a result of such other event, and (3) if the "ex" date for the
issuance or distribution requiring such computation is prior to the day in
question, after taking into account any adjustment
<PAGE> 16
15
required pursuant to clause (1) or (2) of this proviso, the Closing Price for
each Trading Day on or after such "ex" date shall be adjusted by adding thereto
the amount of any cash and the fair market value (as determined by the Board of
Directors or, to the extent permitted by applicable law, a duly authorized
committee thereof in a manner consistent with any determination of such value
for purposes of Section 4.05(d), (f) or (g), whose determination shall be
conclusive and described in a resolution of the Board of Directors or such duly
authorized committee thereof, as the case may be) of the evidences of
indebtedness, shares of capital stock or assets being distributed applicable to
one share of Common Stock as of the close of business on the day before such
"ex" date. For purposes of any computation under Section 4.05(f) or (g), the
Current Market Price of the Common Stock on any date shall be deemed to be the
average of the daily Closing Prices per share of Common Stock for such day and
the next two succeeding Trading Days; provided, however, that if the "ex" date
for any event (other than the tender or exchange offer requiring such
computation) that requires an adjustment to the Conversion Price pursuant to
Section 4.05(a), (b), (c), (d), (e), (f) or (g) occurs on or after the
Expiration Time for the tender or exchange offer requiring such computation and
prior to the day in question, the Closing Price for each Trading Day on and
after the "ex" date for such other event shall be adjusted by multiplying such
Closing Price by the reciprocal of the fraction by which the Conversion Price is
so required to be adjusted as a result of such other event. For purposes of this
paragraph, the term "ex" date, (1) when used with respect to any issuance or
distribution, means the first date on which the Common Stock trades regular way
on the relevant exchange or in the relevant market from which the Closing Price
was obtained without the right to receive such issuance or distribution, (2)
when used with respect to any subdivision or combination of shares of Common
Stock, means the first date on which the Common Stock trades regular way on such
exchange or in such market after the time at which such subdivision or
combination becomes effective, and (3) when used with respect to any tender or
exchange offer means the first date on which the Common Stock trades regular way
on such exchange or in such market after the Expiration Time of such offer.
(3) "fair market value" shall mean the amount which a willing buyer
would pay a willing seller in an arm's length transaction.
(4) "Record Date" shall mean, with respect to any dividend,
distribution or other transaction or event in which the Holders of Common Stock
have the right to receive any cash, securities or other property or in which the
Common Stock (or other applicable security) is exchanged for or converted into
any combination of cash, securities or other property, the date fixed for
determination of shareholders entitled to receive such cash, securities or other
property (whether such date is fixed by the Board of Directors or by statute,
contract or otherwise).
(5) "Trading Day" shall mean (x) if the applicable security is listed
or admitted for trading on the New York Stock Exchange or another national
security exchange, a day on which the New York Stock Exchange or such other
national security exchange is open for business or (y) if the applicable
security is quoted on the Nasdaq National Market, a day on which trades may be
made thereon or (z) if the applicable security is not so listed, admitted for
trading or quoted, any day other than a Saturday or Sunday or a day on which
banking institutions in the State of New York are authorized or obligated by law
or executive order to close.
<PAGE> 17
16
(i) The Company may make such reductions in the Conversion Price, in
addition to those required by Sections 4.05(a), (b), (c), (d), (e), (f) and (g),
as the Board of Directors considers to be advisable to avoid or diminish any
income tax to Holders of Common Stock or rights to purchase Common Stock
resulting from any dividend or distribution of stock (or rights to acquire
stock) or from any event treated as such for income tax purposes.
To the extent permitted by applicable law, the Company from
time to time may reduce the Conversion Price by any amount for any period of
time if the period is at least 20 days, the reduction is irrevocable during the
period and the Board of Directors shall have made a determination that such
reduction would be in the best interests of the Company, which determination
shall be conclusive. Whenever the Conversion Price is reduced pursuant to the
preceding sentence, the Company shall mail to Holders of record of the Series
1 1/2% Notes a notice of the reduction at least 15 days prior to the date the
reduced Conversion Price takes effect, and such notice shall state the reduced
Conversion Price and the period during which it will be in effect.
(j) No adjustment in the Conversion Price shall be required unless
such adjustment would require an increase or decrease of at least 1.00% in such
price; provided, however, that any adjustments which by reason of this Section
4.05(j) are not required to be made shall be carried forward and taken into
account in any subsequent adjustment. All calculations under these Provisions
shall be made by the Company and shall be made to the nearest cent or to the
nearest one hundredth of a share, as the case may be.
(k) Whenever the Conversion Price is adjusted as herein provided, the
Company shall promptly file with the Trustee and any Conversion Agent other than
the Trustee an Officers' Certificate setting forth the Conversion Price after
such adjustment and setting forth a brief statement of the facts requiring such
adjustment. Promptly after delivery of such certificate, the Company shall
prepare a notice of such adjustment of the Conversion Price setting forth the
adjusted Conversion Price and the date on which each adjustment becomes
effective and shall mail notice of such adjustment of the Conversion Price to
the Holder of each Series 1 1/2% Note at his last address appearing on the
Series 1 1/2% Note register, within 20 days after execution thereof. Failure to
deliver such notice shall not affect the legality or validity of any such
adjustment.
(l) In any case in which this Section 4.05 provides that an adjustment
shall become effective immediately after a record date for an event, the Company
may defer until the occurrence of such event (i) issuing to the Holder of any
Series 1 1/2% Note converted after such record date and before the occurrence of
such event the additional shares of Common Stock issuable upon such conversion
by reason of the adjustment required by such event over and above such
conversion by reason of the adjustment required by such event and above the
Common Stock issuable upon such conversion before giving effect to such
adjustment and (ii) paying to such Holder any amount in cash in lieu of any
fraction pursuant to Section 4.03.
(m) For purposes of this Section 4.05, the number of shares of Common
Stock at any time outstanding shall not include shares held in the treasury of
the Company but shall include shares issuable in respect of scrip certificates
issued in lieu of fractions of
<PAGE> 18
17
shares of Common Stock. The Company will not pay any dividend or make any
distribution on shares of Common Stock held in the treasury of the Company.
SECTION 4.06. If any of the following events occur, namely (i)
any reclassification or change of the outstanding shares of Common Stock (other
than a subdivision or combination to which Section 4.05(c) applies), (ii) any
consolidation, merger or combination of the Company with another corporation as
a result of which Holders of Common Stock shall be entitled to receive stock,
securities or other property or assets (including cash) with respect to or in
exchange for such Common Stock, or (iii) any sale or conveyance of the
properties and assets of the Company as, or substantially as, an entirety to any
other corporation as a result of which Holders of Common Stock shall be entitled
to receive stock, securities or other property or assets (including cash) with
respect to or in exchange for such Common Stock, then the Company or the
successor or purchasing corporation, as the case may be, shall execute with the
Trustee a supplemental indenture (which shall comply with the Trust Indenture
Act as in force at the date of execution of such supplemental indenture)
providing that such Series 1 1/2% Notes shall be convertible into the kind and
amount of shares of stock and other securities or property or assets (including
cash) receivable upon such reclassification, change, consolidation, merger,
combination, sale or conveyance by a Holder of a number of shares of Common
Stock issuable upon conversion of such Series 1 1/2% Notes (assuming, for such
purposes, a sufficient number of authorized shares of Common Stock available to
convert all such Series 1 1/2% Notes) immediately prior to such
reclassification, change, consolidation, merger, combination, sale or conveyance
assuming such Holder of Common Stock did not exercise his rights of election, if
any, as to the kind or amount of shares of stock and other securities or
property or assets (including cash) receivable upon such reclassification,
change, consolidation, merger, combination, sale or conveyance (provided that,
if the kind or amount of shares of stock and other securities or property or
assets (including cash) receivable upon such reclassification, change,
consolidation, merger, combination, sale or conveyance is not the same for each
share of Common Stock in respect of which such rights of election shall not have
been exercised ("nonelecting share"), then for the purposes of this Section 4.06
the kind and amount of shares of stock and other securities or property or
assets (including cash) receivable upon such reclassification, change,
consolidation, merger, combination, sale or conveyance for each non-electing
share shall be deemed to be the kind and amount so receivable per share by a
plurality of the nonelecting shares. Such supplemental indenture shall provide
for adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Fourth Supplemental Indenture.
The Company shall cause notice of the execution of such
supplemental indenture to be mailed to each Holder of Series 1 1/2% Notes, at
his address appearing on the Series 1 1/2% Note register, within 20 days after
execution thereof. Failure to deliver such notice shall not affect the legality
or validity of such supplemental indenture.
The above provisions of this Section shall similarly apply to
successive reclassifications, changes, consolidations, mergers, combinations,
sales and conveyances.
If this Section 4.06 applies to any event or occurrence,
Section 4.05 shall not apply.
<PAGE> 19
18
SECTION 4.07. The issue of stock certificates on conversions
of Series 1 1/2% Notes shall be made without charge to the converting Holder of
any Series 1 1/2% Note for any tax in respect of the issue thereof. The Company
shall not, however, be required to pay any tax which may be payable in respect
of any transfer involved in the issue and delivery of stock in any name other
than that of the Holder of any Series 1 1/2% Note converted, and the Company
shall not be required to issue or deliver any such stock certificate unless and
until the Person or Persons requesting the issue thereof shall have paid to the
Company the amount of such tax or shall have established to the satisfaction of
the Company that such tax has been paid.
SECTION 4.08. The Company shall reserve, free from preemptive
rights, out of its authorized but unissued shares or shares held in treasury,
sufficient shares of Common Stock to provide for the conversion of the Series
1 1/2% Notes from time to time as such Series 1 1/2% Notes are presented for
conversion.
Before taking any action which would cause an adjustment
reducing the Conversion Price below the then par value, if any, of the shares of
Common Stock issuable upon conversion of the Series 1 1/2% Notes, the Company
will take all corporate action which may, in the opinion of its counsel, be
necessary in order that the Company may validly and legally issue shares of such
Common Stock at such adjusted Conversion Price.
The Company covenants that all shares of Common Stock which
may be issued upon conversion of Series 1 1/2% Notes will upon issue be fully
paid and non-assessable by the Company and free from all taxes, liens and
charges with respect to the issue thereof.
The Company covenants that if any shares of Common Stock to be
provided for the purpose of conversion of Series 1 1/2% Notes hereunder require
registration with or approval of any governmental authority under any federal or
state law before such shares may be validly issued upon conversion, the Company
will in good faith and as expeditiously as possible endeavor to secure such
registration or approval, as the case may be.
The Company further covenants that so long as the Common Stock
shall be listed or quoted on the New York Stock Exchange, the Nasdaq Stock
Market (National Market), or any other national securities exchange the Company
will, if permitted by the rules of such exchange, list and keep listed so long
as the Common Stock shall be so listed on such market or exchange, all Common
Stock issuable upon conversion of the Series 1 1/2% Notes.
SECTION 4.09. The Trustee and any other Conversion Agent shall
not at any time be under any duty or responsibility to any Holder of Series
1 1/2% Notes to either calculate the Conversion Price or determine whether any
facts exist which may require any adjustment of the Conversion Price, or with
respect to the nature or extent or calculation of any such adjustment when made,
or with respect to the method employed, or herein or in a Series 1 1/2% Note or
any other supplemental indenture provided to be employed, in making the same.
The Trustee and any other Conversion Agent shall not be accountable with respect
to the validity or value (or the kind or amount) of any shares of Common Stock,
or of any securities or property, which may at any time be issued or
<PAGE> 20
19
delivered upon the conversion of any Series 1 1/2% Note and the Trustee and any
other Conversion Agent make no representations with respect thereto. Subject to
the provisions of Section 601 of the Indenture, neither the Trustee nor any
Conversion Agent shall be responsible for any failure of the Company to issue,
transfer or deliver any shares of Common Stock or stock certificates or other
securities or property or cash upon the surrender of any Series 1 1/2% Note for
the purpose of conversion or to comply with any of the duties, responsibilities
or covenants of the Company contained in this Fourth Supplemental Indenture.
Without limiting the generality of the foregoing, neither the Trustee nor any
Conversion Agent shall be under any responsibility to determine the correctness
of any provisions contained in any supplemental indenture entered into pursuant
to Section 4.06 relating either to the kind or amount of shares of stock or
securities or property (including cash) receivable by Holders upon the
conversion of their Series 1 1/2% Notes after any event referred to in such
Section 4.06 or to any adjustment to be made with respect thereto, but, subject
to the provisions of Section 601 of the Indenture, may accept as conclusive
evidence of the correctness of any such provisions, and shall be protected in
relying upon, the Officers' Certificate (which the Company shall be obligated to
file with the Trustee prior to the execution of any such supplemental indenture)
with respect thereto.
SECTION 4.10. In case:
(a) the Company shall declare a dividend (or any other distribution)
on its Common Stock that would require an adjustment in the Conversion Price
pursuant to Section 4.05; or
(b) the Company shall authorize the granting to all or substantially
all the Holders of its Common Stock of rights or warrants to subscribe for or
purchase any share of any class or any other rights or warrants; or
(c) of any reclassification or reorganization of the Common Stock of
the Company (other than a subdivision or combination of its outstanding Common
Stock, or a change in par value, or from par value to no par value, or from no
par value to par value), or of any consolidation or merger to which the Company
is a party and for which approval of any shareholders of the Company is
required, or of the sale or transfer of all or substantially all of the assets
of the Company; or
(d) of the voluntary or involuntary dissolution, liquidation or
winding-up of the Company;
the Company shall cause to be filed with the Trustee and to be mailed to each
Holder of Series 1 1/2% Notes at his address appearing on the Series 1 1/2%
Security Register for the Series 1 1/2% Notes, as promptly as possible but in
any event at least 15 days prior to the applicable date hereinafter specified, a
notice stating (x) the date on which a record is to be taken for the purpose of
such dividend, distribution or rights or warrants, or, if a record is not to be
taken, the date as of which the holders of Common Stock of record to be entitled
to such dividend, distribution, or rights or warrants are to be determined, or
(y) the date on which such
<PAGE> 21
20
reclassification, consolidation, merger, sale, transfer, dissolution,
liquidation or winding-up is expected to become effective or occur, and the date
as of which it is expected that Holders of Common Stock of record shall be
entitled to exchange their Common Stock for securities or other property
deliverable upon such reclassification, consolidation, merger, sale, transfer,
dissolution, liquidation or winding-up. Failure to give such notice, or any
defect therein, shall not affect the legality or validity of such dividend,
distribution, reclassification, consolidation, merger, sale, transfer,
dissolution, liquidation or winding-up.
ARTICLE V
Form of Series 1 1/2% Notes
SECTION 5.01. The Series 1 1/2% Notes and the Trustee's
Certificate of Authentication to be endorsed thereon are to be substantially in
the following forms:
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"),
TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT,
AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER
NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS
MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF,
CEDE & CO., HAS AN INTEREST HEREIN.
THIS SECURITY IS A GLOBAL SECURITY AS REFERRED TO IN THE INDENTURE HEREINAFTER
REFERENCED. UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR THE
INDIVIDUAL SECURITIES REPRESENTED HEREBY, THIS GLOBAL SECURITY MAY NOT BE
TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY
OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE
DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR
A NOMINEE OF SUCH SUCCESSOR DEPOSITARY.
CLEAR CHANNEL COMMUNICATIONS, INC.
1 1/2% SENIOR CONVERTIBLE NOTE DUE DECEMBER 1, 2002
REGISTERED $[ ],000,000
NO. R-[ ] CUSIP 184502 AE2
CLEAR CHANNEL COMMUNICATIONS, INC., a corporation duly
organized and existing under the laws of the State of Texas (herein called the
"Company", which term includes any successor under the Indenture hereinafter
referred to), for value received, hereby promises to pay to
Cede & Co.
<PAGE> 22
21
or registered assigns, the principal sum of $[ ],000,000 at the office or agency
of the Company in the Borough of Manhattan, The City of New York, on December 1,
2002 in such coin or currency of the United States of America as at the time of
payment shall be legal tender for the payment of public and private debts, and
to pay interest on said principal sum semiannually on June 1 and December 1 of
each year, commencing June 1, 2000 (each an "Interest Payment Date"), at said
office or agency, in like coin or currency, at the rate per annum specified in
the title hereof, from the June 1 or the December 1, as the case may be, next
preceding the date of this Note to which interest on the Notes has been paid or
duly provided for (unless the date hereof is the date to which interest on the
Notes has been paid or duly provided for, in which case from the date of this
Note), or if no interest has been paid on the Notes or duly provided for, from
November 24, 1999 until payment of said principal sum has been made or duly
provided for. Notwithstanding the foregoing, if the date hereof is after the
15th day of any May or November and before the next succeeding June 1 or
December 1, this Note shall bear interest from such June 1 or December 1, as the
case may be; provided, however, that if the Company shall default in the payment
of interest due on such June 1 or December 1, then this Note shall bear interest
from the next preceding June 1 or December 1 to which interest on the Notes has
been paid or duly provided for, or, if no interest has been paid on the Notes or
duly provided for, from November 24, 1999. The interest so payable, and
punctually paid or duly provided for, on any June 1 or December 1 will, except
as provided in the Indenture dated as of October 1, 1997, as supplemented by the
Fourth Supplemental Indenture dated as of November 24, 1999 (herein called the
"Indenture"), duly executed and delivered by the Company and The Bank of New
York, as Trustee (herein called the "Trustee"), be paid to the Person in whose
name this Note (or one or more Predecessor Securities) is registered at the
close of business on the next preceding May 15 or November 15, as the case may
be (herein called the "Regular Record Date"), whether or not a Business Day, and
may, at the option of the Company, be paid by check mailed to the registered
address of such Person. Any such interest which is payable, but is not so
punctually paid or duly provided for, shall forthwith cease to be payable to the
registered Holder on such Regular Record Date and may be paid either to the
Person in whose name this Note (or one or more Predecessor Securities) is
registered at the close of business on a Special Record Date for the payment of
such Defaulted Interest to be fixed by the Trustee, notice whereof shall be
given to Holders of Notes not less than 10 days prior to such Special Record
Date, or may be paid at any time in any other lawful manner not inconsistent
with the requirements of any securities exchange on which the Notes may be
listed and upon such notice as may be required by such exchange, if such manner
of payment shall be deemed practical by the Trustee, all as more fully provided
in the Indenture. Notwithstanding the foregoing, in the case of interest payable
at Stated Maturity, such interest shall be paid to the same Person to whom the
principal hereof is payable.
The Bank of New York will be the Paying Agent, Conversion
Agent and the Security Registrar with respect to the Notes. The Company reserves
the right at any time to vary or terminate the appointment of any Paying Agent,
Conversion Agent or Security Registrar, to appoint additional or other Paying
Agents and other Security Registrars or Conversion Agents, which may include the
Company, and to approve any change in the office through which any Paying Agent,
Conversion Agent or Security Registrar acts; provided that there will at all
times be a Paying Agent and Conversion Agent in The City of New York and there
will be no more than one Security Registrar for the Notes.
<PAGE> 23
22
This Note is one of the duly authorized issue of debentures,
notes, bonds or other evidences of indebtedness (hereinafter called the
"Securities") of the Company, of the series hereinafter specified, all issued or
to be issued under and pursuant to the Indenture, to which Indenture and any
other indentures supplemental thereto reference is hereby made for a statement
of the respective rights, limitations of rights, obligations, duties and
immunities thereunder of the Trustee and any agent of the Trustee, any Paying
Agent, the Company and the Holders of the Securities and the terms upon which
the Securities are issued and are to be authenticated and delivered.
The Securities may be issued in one or more series, which
different series may be issued in various aggregate principal amounts, may
mature at different times, may bear interest (if any) at different rates, may be
subject to different redemption provisions (if any), may be subject to different
sinking, purchase or analogous funds (if any), may be subject to different
covenants and Events of Default and may otherwise vary as provided or permitted
in the Indenture. This Note is one of the series of Securities of the Company
issued pursuant to the Indenture and designated as the 1 1/2% Senior Convertible
Notes Due December 1, 2002 (herein called the "Notes").
Subject to the provisions of the Indenture, the Holder hereof
has the right, at its option, at any time prior to the close of business on the
maturity date, to convert the principal hereof or any portion of such principal
which is $1,000 or an integral multiple thereof, into that number of shares of
the Company's Common Stock, as said shares shall be constituted at the date of
conversion, obtained by dividing the principal amount of this Note or portion
thereof to be converted by the Conversion Price of $105.78 or such Conversion
Price as adjusted from time to time as provided in the Indenture, upon surrender
of this Note, together with a conversion notice as provided in the Indenture, to
the Company at the office or agency of the Company maintained for that purpose
in New York, New York, and, unless the shares issuable on conversion are to be
issued in the same name as this Note, duly endorsed by, or accompanied by
instruments of transfer in form satisfactory to the Company duly executed by,
the Holder or by his duly authorized attorney. No adjustment in respect of
interest or dividends will be made upon any conversion; provided, however, that
if this Note shall be surrendered for conversion during the period from the
close of business on any record date for the payment of interest to the close of
business on the Business Day preceding the interest payment date, this Note must
be accompanied by an amount, in New York Clearing House funds or other funds
acceptable to the Company, equal to the interest payable on such interest
payment date on the principal amount being converted (provided, however, that no
such payment need be made if there shall exist at the time of conversion a
default in the payment of interest on the Notes, and provided that no such
payment need be made if this Note is surrendered for conversion during the
period from the close of business on November 15, 2002 to the close of business
on November 29, 2002, the Business Day preceding December 1, 2002). No
fractional shares will be issued upon any conversion, but an adjustment in cash
will be made, as provided in the Indenture, in respect of any fraction of a
share which would otherwise be issuable upon the surrender of any Note or Notes
for conversion.
Subject to the terms of the Indenture, in the event that a
Change in Control shall occur, each Holder shall have the right, at the Holder's
option, to require the Company to repurchase, and upon the exercise of such
right the Company shall repurchase, all of such Holders Series 1 1/2% Notes, or
any portion of the principal
<PAGE> 24
23
amount thereof that is an integral multiple of $1,000 (provided that no single
Note may be repurchased in part unless the portion of the principal amount of
such Note to be outstanding after such repurchase is equal to $1,000 or an
integral multiple of $1,000), on the Repurchase Date for cash at a purchase
price equal to 100% of the principal amount plus interest accrued and unpaid to,
but excluding, the Repurchase Date.
If an Event of Default with respect to the Notes shall occur
and be continuing, the principal of all of the Notes may be declared due and
payable in the manner, with the effect and subject to the conditions provided in
the Indenture.
The Indenture permits, with certain exceptions as therein
provided, the Company and the Trustee to enter into supplemental indentures to
the Indenture for the purpose of adding any provisions to or changing in any
manner or eliminating any of the provisions of the Indenture or of modifying in
any manner the rights of the Holders of the Securities of each series under the
Indenture with the consent of the Holders of not less than a majority in
principal amount of the Securities at the time Outstanding of each series to be
affected thereby on behalf of the Holders of all Securities of such series. The
Indenture also permits the Holders of a majority in principal amount of the
Securities at the time Outstanding of each series, on behalf of the Holders of
all Securities of such series, to waive compliance by the Company with certain
provisions of the Indenture and certain past defaults and their consequences
with respect to such series under the Indenture. Any such consent or waiver by
the Holder of this Note shall be conclusive and binding upon such Holder and
upon all future Holders of this Note and of any Note issued upon the
registration of transfer hereof or in exchange here for or in lieu hereof,
whether or not notation of such consent or waiver is made upon this Note or such
other Notes.
No reference herein to the Indenture and no provision of this
Note or of the Indenture shall alter or impair the obligation of the Company,
which is absolute and unconditional, to pay the principal of and interest on
this Note at the place, rate and respective times and in the coin or currency
herein and in the Indenture prescribed.
As provided in the Indenture and subject to the satisfaction
of certain conditions therein set forth, including the deposit of certain trust
funds in trust, the Company shall be deemed to have paid and discharged the
entire indebtedness represented by, and the obligations under, the Securities of
any series and to have satisfied all the obligations (with certain exceptions)
under the Indenture relating to the Securities of such series.
The Notes are issuable in registered form without coupons in
denominations of $1,000 and any integral multiple of $1,000. Notes may be
exchanged for a like aggregate principal amount of Notes of other authorized
denominations at the office or agency of the Company in the Borough of
Manhattan, The City of New York, designated for such purpose and in the manner
and subject to the limitations provided in the Indenture.
Upon due presentment for registration of transfer of this Note
at the office or agency of the Company in the Borough of Manhattan, The City of
New York designated for such purpose, a new Note or Notes of authorized
denominations for a like
<PAGE> 25
24
aggregate principal amount will be issued to the transferee in exchange
therefor, subject to the limitations provided in the Indenture.
No charge shall be made for any such transfer or exchange, but
the Company may require payment of a sum sufficient to cover any tax or other
governmental charge imposed in connection therewith.
The Company, the Trustee and any agent of the Company or the
Trustee may treat the Person in whose name this Note is registered as the owner
hereof for all purposes, whether or not this Note is overdue, and neither the
Company, the Trustee nor any such agent shall be affected by notice to the
contrary.
Unless otherwise defined herein, all terms used in this Note
which are defined in the Indenture shall have the meanings assigned to them in
the Indenture.
This Note shall be construed in accordance with and governed
by the laws of the State of New York.
Unless the certificate of authentication hereon has been
manually executed by or on behalf of the Trustee under the Indenture, this Note
shall not be entitled to any benefits under the Indenture, or be valid or
obligatory for any purpose.
<PAGE> 26
25
IN WITNESS WHEREOF, CLEAR CHANNEL COMMUNICATIONS, INC. has
caused this Note to be duly executed.
CLEAR CHANNEL COMMUNICATIONS, INC.
by
-------------------------------------
Title:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities of the series designated therein
referred to in the within-mentioned Indenture.
THE BANK OF NEW YORK,
as Trustee,
Dated: November 24, 1999 by
-------------------------------------
Authorized Signatory
<PAGE> 27
26
------------------------
ABBREVIATIONS
The following abbreviations, when used in the inscription on
the face of this instrument, shall be construed as though they were written out
in full according to applicable laws or regulations:
TEN COM--as tenants in common
TEN ENT--as tenants by the entireties
JT TEN--as joint tenants with right of survivorship and not as tenants
in common UNIF GIFT MIN ACT--...........Custodian.........
(Cust) (Minor)
Under Uniform Gifts to Minors Act
----------------------------------------
(State)
Additional abbreviations may also be used though
not in the above list.
--------------------------
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s),
and transfer(s) unto
- ----------------------------------
: :
:
- ----------------------- :
PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER OF ASSIGNEE:
PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING POSTAL
ZIP CODE OF ASSIGNEE:
- ------------------------------------------------------------
__________________________________________________ the within Note and
all rights thereunder, hereby irrevocably constituting and appointing
- ----------------------------------------------------
<PAGE> 28
27
attorney to transfer said Note on the books of the Company, with full power of
substitution in the premises.
Dated:
------------------------
- -------------------------------
Signature
(Signature must correspond with the name as written upon the face of the within
instrument in every particular, without alteration or enlargement or any change
whatever.)
- ------------------------------
Signature Guaranty
Signatures must be guaranteed by an "eligible guarantor institution" meeting the
requirements of the Registrar, which requirements include membership or
participation in the Security Transfer Agent Medallion Program ("STAMP") or such
other "signature guarantee program" as may be determined by the Registrar in
addition to, or in substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.
<PAGE> 29
28
CONVERSION NOTICE
To: CLEAR CHANNEL COMMUNICATIONS, INC.
The undersigned registered owner of this Note hereby irrevocably
exercises the option to convert this Note, or the portion hereof (which is
$1,000 or an integral multiple thereof) below designated, into shares of Common
Stock of Clear Channel Communications, Inc. in accordance with the terms of the
Note, and directs that the shares issuable and deliverable upon such conversion,
together with any check in payment for fractional shares and any Notes
representing any unconverted principal amount hereof, be issued and delivered to
the registered Holder hereof unless a different name has been indicated below.
If shares or any portion of this Note not converted are to be issued in the name
of a Person other than the undersigned, the undersigned will check the
appropriate box below and pay all transfer taxes payable with respect thereto.
Any amount required to be paid to the undersigned on account of interest
accompanies this Note.
Dated:
------------------
-------------
-------------
Signature(s)
Signature(s) must be guaranteed by
an eligible Guarantor Institution
(banks, stock brokers, savings and
loan associations and credit unions)
with membership in an approved
signature guarantee medallion
program pursuant to Securities and
Exchange Commission Rule 17Ad-15 if
shares of Common Stock are to be
issued, or Notes to be delivered,
other than to and in the name of the
registered Holder.
-------------
Signature Guarantee
<PAGE> 30
29
Fill in for registration of shares of
Common Stock if to be issued, and Notes
it to be delivered, other than to and in
the name of the registered Holder:
- ------------------------
(Name)
- ------------------------
(Street Address)
- ------------------------
(City, State and Zip Code)
Please print name and address
Principal amount to be converted (if less than all):
$
-------------------------
------------------------------------------------------
Social Security or Other Taxpayer Identification Number
<PAGE> 31
30
OPTION TO ELECT REPURCHASE
UPON A CHANGE IN CONTROL
To: CLEAR CHANNEL COMMUNICATIONS, INC.
The undersigned registered owner of this Note hereby irrevocably
acknowledges receipt of a notice from Clear Channel Communications, Inc. (the
Company") as to the occurrence of a Change in Control with respect to the
Company and requests and instructs the Company to repay the entire principal
amount of this Note, or the portion thereof (which is $1,000 or an integral
multiple thereof) below designated, in accordance with the terms of the Note at
the repurchase price, together with accrued interest to, but excluding, such
date, to the registered Holder hereof.
Dated:
----------------
------------------------
------------------------
Signature(s)
NOTICE: The above signatures of the
Holder(s) hereof must correspond with
the name as written upon the face of the
Note in every particular without
alteration, enlargement or any change
whatever.
Principal amount to be repurchased (if
less than all):
$
-------------------------------
----------------------------------
Social Security or Other Taxpayer
Identification Number
<PAGE> 32
31
ARTICLE VI
Original Issue of Series 1 1/2% Notes
SECTION 6.01. Series 1 1/2% Notes in the aggregate principal
amount equal to $900,000,000 ($1,000,000,000 if the option described in Section
2(b) of the Underwriting Agreement relating to the Series 1 1/2% Notes dated
November 18, 1999 between the Company and the Underwriters listed therein is
exercised) may, upon execution of this Fourth Supplemental Indenture, be
executed by the Company and delivered to the Trustee for authentication, and the
Trustee shall thereupon authenticate and make available for delivery said Series
1 1/2% Notes to or upon a Company Order.
ARTICLE VII
Miscellaneous Provisions
SECTION 7.01. Except as otherwise expressly provided in this
Fourth Supplemental Indenture or in the form of Series 1 1/2% Note or otherwise
clearly required by the context hereof or thereof, all terms used herein or in
said form of Series 1 1/2% Note that are defined in the Indenture shall have the
several meanings respectively assigned to them thereby.
SECTION 7.02. The Indenture, as supplemented by this Fourth
Supplemental Indenture, is in all respects ratified and confirmed. This Fourth
Supplemental Indenture shall be deemed part of the Indenture in the manner and
to the extent herein and therein provided.
SECTION 7.03. The recitals herein contained are made by the
Company and not by the Trustee, and the Trustee assumes no responsibility for
the correctness thereof. The Trustee makes no representation as to the validity
or sufficiency of this Fourth Supplemental Indenture.
SECTION 7.04. This Fourth Supplemental Indenture may be
executed in any number of counterparts each of which shall be an original; but
such counterparts shall together constitute but one and the same instrument.
<PAGE> 33
32
IN WITNESS WHEREOF, the parties hereto have caused this Fourth
Supplemental Indenture 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
Title: Executive Vice President and
Chief Financial Officer
THE BANK OF NEW YORK, as Trustee
by: /s/ Van K. Brown
------------------------------------
Name: Van K. Brown
Title: Assistant Vice President
<PAGE> 1
EXHIBIT 10.13
SHAREHOLDERS AGREEMENT
This SHAREHOLDERS AGREEMENT (this "Agreement") is entered into this 2nd day
of October, 1999 by and among CLEAR CHANNEL COMMUNICATIONS, INC., a Texas
corporation ("Parent"), L. LOWRY MAYS and 4-M PARTNERS, LTD., a Texas limited
partnership (the "Existing Shareholders"), and the other parties listed on the
signature page hereof (the "New Shareholders").
WITNESSETH:
WHEREAS, Parent, CCU Merger Sub, Inc., a Delaware corporation ("Merger
Sub"), and AMFM INC., a Delaware corporation (the "Company"), have entered into
an Agreement and Plan of Merger of even date herewith (the "Merger Agreement"),
pursuant to which the parties thereto have agreed, upon the terms and subject to
the conditions set forth therein, to merge Merger Sub with and into the Company
(the "Merger");
WHEREAS, as of the date hereof, the New Shareholders together are
significant shareholders of the Company, and upon consummation of the Merger in
accordance with the Merger Agreement, the New Shareholders will become
significant shareholders of Parent immediately after the Merger;
WHEREAS, as of the date hereof, the Existing Shareholders together are
significant shareholders of Parent and together will continue to be significant
shareholders of Parent immediately after the Merger; and
WHEREAS, Parent, the Existing Shareholders and the New Shareholders wish to
provide for and acknowledge certain arrangements and understandings respecting
the share ownership of the Existing Shareholders and the New Shareholders and
certain other matters.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements herein contained, and intending to be legally bound hereby,
Parent, the New Shareholders and the Existing Shareholders hereby agree as
follows:
ARTICLE 1
CERTAIN DEFINITIONS
Capitalized terms used but not otherwise defined herein shall have the
meanings ascribed to such terms in the Merger Agreement. In addition, the
following terms, as used in this Agreement, shall have the respective meanings
set forth in this Article 1:
"Affiliate" of any Person, means (i) another Person that, directly or
indirectly, through one or more intermediaries controls, is controlled by, or is
under common control with, such first Person; (ii) another Person whose assets
are attributable to such first Person pursuant to the attribution rules and
regulations of the Communications Act; or (iii) another Person who is a member
of a 13d Group with such first Person. Notwithstanding the foregoing, for
purposes of this Agreement, no Existing Shareholder shall constitute an
"Affiliate" of any New Shareholder, and no New Shareholder shall constitute an
"Affiliate" of any Existing Shareholder.
"Beneficial owner" or "beneficially owned" or "beneficial ownership" shall
have the meaning assigned to such term in Rule 13d-3 under the Exchange Act.
"Board" or "Board of Directors" means the board of directors of Parent, as
constituted from time to time.
"Business Combination Transaction" shall mean (A) a (i) merger, (ii)
consolidation, (iii) "business combination" as defined in Part Thirteen of the
Texas Business Corporation Act as in effect on the date hereof, (iv) compulsory
share exchange, (v) recapitalization, or (vi) a transaction in which Parent or
any
1
<PAGE> 2
successor or Subsidiary of Parent is a constituent corporation or to which
Parent or any successor or Subsidiary of Parent is a party, or (B) a sale of a
substantial portion of the assets of Parent or any successor, division or
Subsidiary of Parent; provided, however, for purposes of this Agreement, none of
the foregoing shall constitute a "Business Combination Transaction" if the
beneficial ownership of the capital stock of Parent or the surviving entity
(following a merger in which Parent ceases to exist) immediately after the
consummation of the transaction is substantially the same as the beneficial
ownership of the capital stock of Parent immediately prior to the transaction.
"Buy-Sell Agreement" means that certain Buy-Sell Agreement, dated May 31,
1977, by and among Parent, L. Lowry Mays, and B.J. McCombs.
"Common Stock" means the common stock of Parent, par value $0.10 per share.
"Communications Act" means the Communications Act of 1934, as amended, and
any regulations promulgated thereunder.
"Effective Time" means the time at which the Merger becomes effective.
"Exchange Act" means the Securities Exchange act of 1934, as amended, or
any successor federal statute, as in effect from time to time.
"FCC" means the Federal Communications Commission.
"FCC Rule" means any FCC rule, regulation or policy regarding ownership of,
control over, or any relationship with any medium of mass communication.
"Governmental Entity" means any government or any agency, bureau, board,
commission, court, department, official, political subdivision, tribunal or
other instrumentality of any government, whether federal, state or local,
domestic or foreign.
"Independent Director" means, with respect to a matter presented to the
Board of Directors for approval, any member of the Board of Directors who (i) is
not a Director Nominee in Section 5.17 of the Merger Agreement and (ii) under
the Texas Business Corporation Act, does not have an interest in the matter
presented for approval.
"Non-Listed Assets" means all radio, television, and outdoor advertising
assets owned by any New Shareholder or any Affiliate of a New Shareholder from
time to time that are not listed on Schedule 4.2 hereto.
"Person" means any natural person, firm, individual, business trust, trust,
association, corporation, partnership, joint venture, company, unincorporated
entity or Governmental Entity.
"Securities Act" means the Securities Act of 1933, as amended, or any
successor federal statute, as in effect from time to time.
"Subsidiary" or "Subsidiaries" of any Person means another Person, an
amount of the voting securities, other voting ownership or voting partnership
interests of which is sufficient to elect at least a majority of its board of
directors or other governing body (or, if there are no such voting interests,
50% or more of the equity interests of which) is owned directly or indirectly by
such first Person.
"13d Group" means a group with in the meaning of Section 13(d)(3) of the
Exchange Act.
"Voting Power" means, with respect to Voting Securities, the maximum number
of votes that the holders of Voting Securities are entitled (at the time of
determination of Voting Power) to vote in the election of directors (except to
the extent such voting rights are contingent upon dividend arrearages or similar
circumstances).
"Voting Securities" means the Common Stock and any other securities of
Parent or its successors that are entitled by their terms to vote generally in
the election of directors of Parent or its successors and all options, rights,
warrants and other securities convertible into, or exercisable or exchangeable
for, any shares of the Common Stock or other securities possessing such voting
rights.
2
<PAGE> 3
ARTICLE 2
SHAREHOLDER ACTIVITIES
Section 2.1. Certain Agreements of the New Shareholders.
(a) General. The New Shareholders jointly and severally covenant and agree
that from and after the Effective Time, except as specifically permitted or
contemplated by this Agreement or unless previously approved in writing by
Parent upon the approval of a majority of the Independent Directors or with the
approval of the Chief Executive Officer of Parent, the New Shareholders and
their Affiliates will not in any manner, directly or indirectly, acting alone or
in concert with others:
(i) beneficially own or seek to beneficially own, directly or
indirectly, Voting Securities of Parent such that the aggregate beneficial
ownership of the New Shareholders and their Affiliates exceeds 20% of the
total Voting Securities of Parent outstanding at any time (such 20%
limitation of the total Voting Securities outstanding from time to time
shall be referred to as the "Percentage Limitation");
(ii) acquire or offer, agree, attempt, seek, propose, or announce an
intention to acquire, directly or indirectly, by purchase or otherwise, any
Voting Securities (or any direct or indirect beneficial ownership, rights,
options or interests therein), if after the consummation of such
acquisition the New Shareholders and their Affiliates would have an
aggregate beneficial ownership of Voting Securities in excess of the
Percentage Limitation;
(iii) acquire or offer, agree, attempt, seek, propose, or announce an
intention to acquire, directly or indirectly, by purchase or otherwise, any
assets of Parent or any of its successors or Subsidiaries;
(iv) (A) solicit proxies or consents or become a "participant" in a
"solicitation" (as such terms are defined or used in Regulation 14A under
the Exchange Act) of proxies or consents with respect to securities of
Parent or any of its successors or Subsidiaries; (B) initiate any
shareholder proposal or "election contest" (as such term is defined or used
in Rule 14a-11 under Exchange Act) with respect to Parent or any of its
successors or Subsidiaries; or (C) directly or indirectly, advise, assist,
encourage, induce, or act as a financing source for others to take any such
action;
(v) take any action for the purpose of (A) convening a meeting of the
shareholders of Parent or any of its successors or Subsidiaries; (B) taking
action by written consent of the shareholders of Parent or any of its
successors or Subsidiaries; or (C) directly or indirectly, advise, assist,
encourage, induce, or act as a financing source for others to take such
action;
(vi) except in connection with actions otherwise permitted by this
Agreement, make any public announcement or disclosure relating to (A) the
acquisition of Voting Securities that would result in the aggregate
beneficial ownership of Voting Securities of the New Shareholders and their
Affiliates exceeding the Percentage Limitation; (B) a proposal for a
Business Combination Transaction; or (C) a tender offer or exchange offer
for Voting Securities;
(vii) except as permitted by Section 3.1, enter into or agree, offer,
commence, propose or seek to enter into, discuss, or otherwise be involved
in or part of, directly or indirectly, any (A) tender offer or exchange
offer for Voting Securities or (B) any Business Combination Transaction;
(viii) request or solicit any Person or negotiate with any Person to
(A) make a tender offer or exchange offer for Voting Securities or (B) make
a Business Combination Transaction;
(ix) make any proposal (A) to Parent or its Board of Directors for a
Business Combination Transaction or (B) for a tender offer or exchange
offer for Voting Securities;
(x) except in connection with bona fide estate planning activities
undertaken by a New Shareholder who is an individual, deposit Voting
Securities into a voting trust or subject Voting Securities to voting
agreements, or grant any proxy with respect to any Voting Securities to any
person not designated by Parent's Board of Directors, other than in
connection with a bona fide pledge of Voting Securities by a New
Shareholder who is an individual;
3
<PAGE> 4
(xi) form, join or in any way participate in a 13d Group for the
purpose of taking any action restricted or prohibited under any clause of
this Subsection (a) of Section 2.1;
(xii) disclose publicly any intention, plan or arrangement
inconsistent with the foregoing or the other provisions of this Agreement
relating to any Voting Securities; or
(xiii) enter into any discussions, negotiations, arrangements or
understandings with any third party with a view to, or advise, aid, abet,
solicit, induce, encourage, or finance in whole or in part, any action
prohibited by any clause of this Subsection (a) of Section 2.1 if such
action were taken by the New Shareholders or their Affiliates or which
action would be prohibited by any clause of this Subsection (a) of Section
2.1 if such third party were a New Shareholder or an Affiliate of a New
Shareholder.
(b) Suspension. The agreements contained in Subsection (a) of this Section
2.1 shall not apply during the pendency of a Business Combination Transaction
approved by a majority of the Independent Directors.
Section 2.2. Certain Agreements of the Existing Shareholders.
(a) General. The Existing Shareholders jointly and severally covenant and
agree that from and after the Effective Time, except as specifically permitted
or contemplated by this Agreement or unless previously approved in writing by
Parent upon the approval of a majority of the Board of Directors (not including
any Existing Shareholder as a member of the Board of Directors for purposes of
determining such approval), the Existing Shareholders will not in any manner,
directly or indirectly acting alone or in concert with others:
(i) beneficially own or seek to beneficially own, directly or
indirectly, Voting Securities of Parent such that the aggregate beneficial
ownership of the Existing Shareholders exceeds the Percentage Limitation;
(ii) acquire or offer, agree, attempt, seek, propose, or announce an
intention to acquire, directly or indirectly, by purchase or otherwise, any
Voting Securities (or any direct or indirect beneficial ownership, rights,
options or interests therein), if after the consummation of such
acquisition the Existing Shareholders would have an aggregate beneficial
ownership of Voting Securities in excess of the Percentage Limitation;
(iii) acquire or offer, agree, attempt, seek, propose, or announce an
intention to acquire, directly or indirectly, by purchase or otherwise, any
assets of Parent or any of its successors or Subsidiaries;
(iv) (A) solicit proxies or consents or become a "participant" in a
"solicitation" (as such terms are defined or used in Regulation 14A under
the Exchange Act) of proxies or consents with respect to securities of
Parent or any of its successors or Subsidiaries; (B) initiate any
shareholder proposal or "election contest" (as such term is defined or used
in Rule 14a-11 under Exchange Act) with respect to Parent or any of its
successors or Subsidiaries; or (C) directly or indirectly, advise, assist,
encourage, induce, or act as a financing source for others to take any such
action;
(v) take any action for the purpose of (A) convening a meeting of the
shareholders of Parent or any of its successors or Subsidiaries; (B) taking
action by written consent of the shareholders of Parent or any of its
successors or Subsidiaries; or (C) directly or indirectly, advise, assist,
encourage, induce, or act as a financing source for others to take such
action;
(vi) except in connection with actions otherwise permitted by this
Agreement, make any public announcement or disclosure relating to (A) the
acquisition of Voting Securities that would result in the aggregate
beneficial ownership of Voting Securities of the Existing Shareholders
exceeding the Percentage Limitation; (B) a proposal for a Business
Combination Transaction; or (C) a tender offer or exchange offer for Voting
Securities;
4
<PAGE> 5
(vii) except as permitted by Section 3.3, enter into or agree, offer,
commence, propose or seek to enter into, discuss, or otherwise be involved
in or part of, directly or indirectly, any (A) tender offer or exchange
offer for Voting Securities or (B) any Business Combination Transaction;
(viii) request or solicit any Person or negotiate with any Person to
(A) make a tender offer or exchange offer for Voting Securities or (B) make
a Business Combination Transaction;
(ix) make any proposal for (A) any Business Combination Transaction to
Parent or its Board of Directors or (B) a tender offer or exchange offer
for Voting Securities;
(x) except in connection with bona fide estate planning activities
undertaken by an Existing Shareholder who is an individual, deposit Voting
Securities into a voting trust or subject Voting Securities to voting
agreements or grant any proxy with respect to any Voting Securities to any
person not designated by Parent's Board of Directors, other than in
connection with a bona fide pledge of Voting Securities by an Existing
Shareholder who is an individual;
(xi) form, join or in any way participate in a 13d Group for the
purpose of taking any action restricted or prohibited under any clause of
this Subsection (a) of Section 2.2;
(xii) disclose publicly any intention, plan or arrangement
inconsistent with the foregoing or the other provisions of this Agreement
relating to any Voting Securities; or
(xiii) enter into any discussions, negotiations, arrangements or
understandings with any third party with a view to, or advise, aid, abet,
solicit, induce, encourage, or finance in whole or in part, any action
prohibited by any clause of this Subsection (a) of Section 2.2 if such
action were taken by an Existing Shareholder or which action would be
prohibited by any clause of this Subsection (a) of Section 2.2 if such
third party were an Existing Shareholder.
(b) Suspension. The agreements contained in Subsection (a) of this Section
2.2 shall not apply to prevent the parties to the Buy-Sell Agreement from
exercising any and all rights thereunder and shall not apply during the pendency
of a Business Combination Transaction approved by a majority of the Board of
Directors.
ARTICLE 3
RESTRICTIONS ON TRANSFER
Section 3.1. Transfer Restrictions Applicable to the New Shareholders. The
parties hereto agree that from and after the Effective Time the New Shareholders
and their Affiliates may, at any time, directly or indirectly, sell, transfer
any beneficial interest in, pledge, hypothecate or otherwise dispose, or offer
or enter into any agreement or understanding to sell, any Voting Securities;
provided, however, the New Shareholders agree that they and their Affiliates may
not sell Voting Securities, to a Person who, after consummation of such sale,
will beneficially own, directly or indirectly, more than 20% of the outstanding
Voting Securities, except (a) upon the prior consent of a majority of the
Independent Directors specifically expressed in a resolution; (b) in connection
with a tender offer or exchange offer, Business Combination Transaction, or a
similar transaction recommended by a majority of the Independent Directors; (c)
in response to a tender offer or exchange offer not approved by the Independent
Directors if (X) no New Shareholder or Affiliate of a New Shareholder, directly
or indirectly, initiated or commenced or advised, assisted, encouraged, induced,
or acted as a financing source for others to commence such tender offer or
exchange offer; (Y) holders of no less than 51% (excluding the Voting Securities
beneficially owned by the New Shareholders and their Affiliates) of the total
outstanding Voting Securities (including the Voting Securities beneficially
owned by the New Shareholders and their Affiliates) subject to the tender offer
or exchange offer have affirmatively accepted such offer and deposited the
Voting Securities in accordance with the terms of the offer; and (Z) no New
Shareholder or Affiliate of a New Shareholder made any public or private
disclosure of its intention to participate in the tender offer or exchange offer
prior to acceptance by no less than 51% of the total outstanding Voting
Securities as described in (Y) above; or (d) in connection with a Business
Combination Transaction, whether or not recommended by a majority
5
<PAGE> 6
of the Independent Directors, that occurred by operation of law provided that
the New Shareholders and their Affiliates were otherwise in compliance with this
Agreement.
Section 3.2. Notice of Distributions. In connection with any dividend or
distribution to the holders of equity interests of any New Shareholder that is a
partnership, corporation or other entity, each New Shareholder that is a
partnership, corporation or other entity severally agrees to provide Parent with
at least ten (10) days prior written notice of such dividend or distribution to
its equity holders.
Section 3.3. Transfer Restrictions Applicable to the Existing
Shareholders. The parties hereto agree that from and after the Effective Time
the Existing Shareholders may, at any time, directly or indirectly, sell,
transfer any beneficial interest in, pledge, hypothecate or otherwise dispose,
or offer or enter into any agreement or understanding to sell, any Voting
Securities; provided, however, the Existing Shareholders agree that they may not
sell Voting Securities to a Person, who after consummation of such sale, will
beneficially own, directly or indirectly, more than 20% of the outstanding
Voting Securities of Parent, except (a) upon the prior consent of a majority of
the Board of Directors specifically expressed in a resolution; (b) in connection
with a tender offer or exchange offer, Business Combination Transaction, or a
similar transaction recommended by the Board of Directors; (c) in response to a
tender offer or exchange offer not approved by the Board of Directors if (X) no
Existing Shareholder, directly or indirectly, initiated or commenced or advised,
assisted, encouraged, induced, or acted as a financing source for others to
commence such tender offer or exchange offer; (Y) holders of no less than 51%
(excluding the Voting Securities beneficially owned by the Existing
Shareholders) of the total outstanding Voting Securities (including the Voting
Securities beneficially owned by the Existing Shareholders) subject to the
tender offer or exchange offer have affirmatively accepted such offer and
deposited the Voting Securities in accordance with the terms of the offer; and
(Z) no Existing Shareholder made any public or private disclosure of its
intention to participate in the tender offer or exchange offer prior to
acceptance by no less than 51% of the total outstanding Voting Securities as
described in (Y) above; or (d) in connection with a Business Combination
Transaction, whether or not recommended by a majority of the Board of Directors,
that occurred by operation of law, provided that the Existing Shareholders were
otherwise in compliance with this Agreement.
Section 3.4. Voting Restrictions.
(a) Non-Class Voting. In connection with any matter in which a New
Shareholder or Existing Shareholder has voting rights related to Voting
Securities not entitled to vote separately as a class but that vote together
with all other Voting Securities not entitled to vote separately as a class on
such matter, the number of votes which such New Shareholder or Existing
Shareholder, as the case may be, shall be entitled to cast at its sole
discretion with respect to such matter shall not exceed one vote fewer than
twenty percent (20%) of the aggregate number of votes entitled to be cast
thereon by all securities of Parent entitled to vote on such matter, less (i) in
the case of any New Shareholder, the votes entitled to be cast by all other New
Shareholders and the votes entitled to be cast by all Affiliates of New
Shareholders relating to Voting Securities not entitled to vote separately as a
class and (ii) in the case of any Existing Shareholder, the votes entitled to be
cast by any other Existing Shareholder not entitled to vote separately as a
class.
(b) Class Voting. In connection with any matter in which a New Shareholder
or Existing Shareholder has voting rights which are entitled to be counted
separately as part of a class of securities entitled to vote as a class on such
matter, the number of votes which such New Shareholder or Existing Shareholder,
as the case may be, shall be entitled to cast at its sole discretion with
respect to such matter shall not exceed one vote fewer than twenty percent (20%)
of the aggregate number of votes entitled to be cast thereon by all securities
of such class, less (i) in the case of a New Shareholder, the votes entitled to
be cast by all other New Shareholders and the votes entitled to be cast by all
Affiliates of New Shareholders relating to Voting Securities of the same class
and (ii) in the case of an Existing Shareholder, the votes entitled to be cast
by all other Existing Shareholders relating to Voting Securities of the same
class.
6
<PAGE> 7
(c) Limitation. If any New Shareholder or Existing Shareholder would
otherwise be entitled to cast votes in excess of the number calculated pursuant
to clauses (a) and (b) above, then the balance of such votes shall be cast for,
against or abstain in respect of such matter in the same proportion as the votes
cast for, against or abstain by all other shareholders of Parent entitled to
vote on the matter.
ARTICLE 4
OTHER COVENANTS OF THE NEW SHAREHOLDERS
Section 4.1. Facilitation of the Merger. The New Shareholders jointly and
severally covenant and agree that from and after the date hereof the New
Shareholders and their Affiliates will (a) use their commercially reasonable
efforts to cooperate with and provide assistance to Parent so as to facilitate
Parent's compliance with the provisions of Section 5.8 of the Merger Agreement;
(b) refrain from taking any action which will cause the FCC or any Governmental
Authority to restrain, enjoin, or otherwise prevent or materially delay the
consummation of the Merger; and (c) use their best efforts (i) to avoid or
prevent any Action (as defined in Section 4.2) resulting in any way from the
attribution to Parent and its Affiliates of the ownership of assets of RCN
Corporation, a Delaware corporation, due to the equity interest therein held by
an Affiliate of a New Shareholder (the "RCN Interest") and (ii) to prevent the
RCN Interest from preventing or materially delaying the consummation of the
Merger beyond the Termination Date. Prior to the Effective Time, Section 4.1
governs the obligations of the New Shareholders and their Affiliates with
respect to the RCN Interest, and from and after the Effective Time, Section 4.2
shall govern such obligations. This Section 4.1 shall not apply to any assets
listed on Schedule 4.2.
Section 4.2. Regulatory Compliance Responsibilities. In consideration for
Parent's agreement to enter into the Merger Agreement and issue Common Stock to
the New Shareholders in the Merger despite the potential for increased
regulatory complications, the New Shareholders jointly and severally covenant
and agree that from and after the date hereof:
(a) the New Shareholders and their Affiliates will (i) sell or
otherwise dispose of, or hold separate and agree to sell or otherwise
dispose of, assets, categories of assets or businesses, (ii) amend or
terminate existing relationships (including, but not limited to positional
interests and debtor-creditor relationships) and contractual rights and
obligations, (iii) amend or terminate existing licenses or other
intellectual property agreements and enter into new licenses or other
intellectual property agreements, and (iv) take any and all other action,
if any of the foregoing is reasonably likely to be necessary for the
purpose of avoiding or preventing any Action; provided that the foregoing
clauses (i)-(iv) shall not apply to any assets listed on Schedule 4.2. As
used herein, "Action" shall mean any action or inaction by the FCC or any
Governmental Entity that (A) would adversely affect the ability of Parent
and its Affiliates to acquire additional media properties, expand its media
properties or enter into joint ventures or other relationships respecting
media properties and media-related activities and (B) was caused by or
resulted in any way from (i) the attribution to Parent and its Affiliates
of the ownership of Non-Listed Assets of the New Shareholder and its
Affiliates pursuant to the Communications Act which causes the Parent or
New Shareholder to violate the FCC Rules or (ii) the ownership of
Non-Listed Assets of the New Shareholder and its Affiliates under
applicable federal, state and local antitrust laws or any other federal,
state or local laws. For example, "Action" as used herein may include the
FCC's failure to grant its consent to an application filed by Parent or an
Affiliate of Parent seeking approval for an acquisition of new media of
mass communication including, but not limited to, radio and television
stations; and
(b) the New Shareholders and their Affiliates shall take promptly, in
the event that any permanent or preliminary injunction or other order is
entered or becomes reasonably foreseeable to be entered in any proceeding
that would make consummation of any agreement to which the Parent or an
Affiliate of Parent is a party in accordance with its terms unlawful or
that would prevent or delay consummation of such transaction, any and all
steps (including the appeal thereof, the posting of a bond or the taking of
the steps contemplated above) necessary to vacate, modify or suspend such
7
<PAGE> 8
injunction or order so as to permit the consummation of such transaction
prior to the deadline agreed upon by the parties to such transaction,
provided that such injunction or order was caused by or resulted in any way
from (x) the attribution to Parent and its Affiliates of the ownership of
Non-Listed Assets of the New Shareholder and its Affiliates pursuant to the
Communications Act which causes the Parent or New Shareholder or any of its
Affiliates to violate the FCC Rules or (y) the ownership of Non-Listed
Assets of the New Shareholder and its Affiliates under applicable federal,
state and local antitrust laws or any other federal, state or local laws.
The foregoing obligations of the New Shareholder and its Affiliates shall
apply regardless of whether the conflict or violation results in whole or
in part from actions of Parent or its Affiliates, actions of the New
Shareholder or its Affiliates, or changes in any applicable laws.
(c) Parent will promptly provide notice to the New Shareholders upon
the execution of a definitive agreement for a new acquisition or other
transaction which Parent reasonably believes will cause the New
Shareholders or their Affiliates to incur obligations under this Section
4.2.
Section 4.3. Scope. The foregoing obligations in Section 4.2 shall apply
only to radio and television assets of the New Shareholders and their Affiliates
which assets are located in the United States and outdoor advertising assets of
the New Shareholders and their Affiliates which assets are located anywhere in
the world excluding South America.
Section 4.4. Survival. This Article 4 shall survive the termination of this
Agreement for so long as the assets or actions of the New Shareholder or its
Affiliates are attributable to or deemed to be owned or taken by Parent pursuant
to attribution, control or ownership laws, rules or policies of any Governmental
Entity; provided, however, if the Merger Agreement terminates prior to the
consummation of the Merger, then this Article 4 shall terminate simultaneously
with the termination of the Merger Agreement.
Section 4.5. Liability Under Article IV. Thomas O. Hicks, a New
Shareholder, shall not be personally liable for monetary damages arising from a
breach or violation of this Article 4 by any New Shareholder; provided, however,
all other New Shareholders shall be jointly and severally liable for any and all
losses or damages, direct or indirect, consequential or otherwise, arising from
a breach or violation of this Article 4. Except as set forth above, Thomas O.
Hicks shall not in any way be released from the obligations of the New
Shareholders hereunder.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES
Section 5.1. Representations and Warranties of the New Shareholders.
(a) Binding Agreement. Each New Shareholder severally represents and
warrants as follows: (i) the New Shareholder, if not an individual, is duly
organized and validly existing under the laws of the State of its organization;
(ii) the New Shareholder has the capacity to execute and deliver this Agreement
and to consummate the transactions contemplated hereby; and (iii) the New
Shareholder has duly and validly executed and delivered this Agreement and this
Agreement constitutes a legal, valid, and binding obligation of the New
Shareholder, enforceable against the New Shareholder 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).
(b) No Conflict. Each New Shareholder severally represents and warrants
that neither the execution and delivery of this Agreement, nor the compliance
with any of the provisions hereof in each case by the New Shareholder (i)
requires any consent, approval, authorization or permit of, registration,
declaration, or filing with, or notification to, any Governmental Entity (except
for filings or notifications under the Exchange Act or Communications Act), (ii)
results in a default (or an event which, with notice or lapse of time or both,
will result in a default) or gives rise to any right of termination by any third
party, cancellation, amendment, or acceleration under any material contract,
agreement, instrument, commitment,
8
<PAGE> 9
arrangement, or understanding, or results in the creation of a security
interest, lien, charge, encumbrance, equity, or claim with respect to any of the
securities of the Company beneficially owned by the New Shareholder, (iii)
requires any material consent, authorization, or approval of any person other
than a Governmental Entity which has not been obtained, (iv) violates or
conflicts with any order, writ, injunction, decree or law applicable to the New
Shareholder or the securities of the Company beneficially owned by the New
Shareholder, or (v) violates or conflicts with the organizational documents, if
any, of the New Shareholder.
(c) Share Ownership. Each New Shareholder severally represents and warrants
that (i) except as set forth in Schedule 5.1, the New Shareholder is the record
owner of the number of shares of common stock, par value $0.01 per share, of the
Company set forth opposite his or its name on Schedule 5.1 (the "New Shareholder
Shares"), free and clear of any security interests, liens, charges,
encumbrances, options or restriction on the right to vote the New Shareholder
Shares; (ii) the New Shareholder holds exclusive power to vote the New
Shareholder Shares, subject to the limitations set forth in that certain Voting
Agreement of even date herewith by and between the New Shareholder and Parent;
and (iii) the New Shareholder Shares represent all of the shares of capital
stock of the Company owned of record by the New Shareholder.
Section 5.2. Representations and Warranties of the Existing Shareholders.
(a) Binding Agreement. The Existing Shareholders represent and warrant as
follows: (i) the Existing Shareholder, if not an individual, is duly organized
and validly existing under the laws of its state of organization; (ii) the
Existing Shareholder has the capacity to execute and deliver this Agreement and
to consummate the transactions contemplated hereby, and (iii) the Existing
Shareholder has duly and validly executed and delivered this Agreement, and this
Agreement constitutes a legal, valid, and binding obligation of the Existing
Shareholder, enforceable against the Existing Shareholder 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).
(b) No Conflict. Each Existing Shareholder represents and warrants that
neither the execution and delivery of this Agreement, nor the compliance with
any of the provisions hereof in each case by the Existing Shareholder (i)
requires any consent, approval, authorization or permit of, registration,
declaration or filing with, or notification to, any Governmental Entity (except
for filings under the Exchange Act or Communications Act), (ii) results in a
default (or an event which, with notice or lapse of time or both, will result in
a default) or gives 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 results in the
creation of a security interest, lien, charge, encumbrance, equity, or claim
with respect to any of the securities of Parent beneficially owned by the
Existing Shareholder, (iii) requires any material consent, authorization, or
approval of any person other than a Governmental Entity which has not been
obtained, (iv) violates or conflicts with any order, writ, injunction, decree or
law applicable to the Existing Shareholder or the securities of Parent
beneficially owned by the Existing Shareholder, or (v) violates or conflicts
with the organizational documents, if any, of the Existing Shareholder.
(c) Share Ownership. Each Existing Shareholder represents and warrants that
(i) except as set forth in Schedule 5.2, the Existing Shareholder is the record
owner of the number of shares of Common Stock of Parent set forth on Schedule
5.2 (the "Existing Shareholder Shares"), free and clear of any security
interests, liens, charges, encumbrances, options or restriction on the right to
vote the Existing Shareholder Shares; (ii) the Existing Shareholder holds
exclusive power to vote the Existing Shareholder Shares, subject to the
limitations set forth in that certain Voting Agreement of even date herewith by
and between the Existing Shareholder and the Company; and (iii) the Existing
Shareholder Shares represent all of the shares of capital stock of Parent owned
of record by the Existing Shareholder.
9
<PAGE> 10
ARTICLE 6
MISCELLANEOUS
Section 6.1. Termination. Except for Article 4, which shall survive for the
period specified therein (but in no event after the termination of the Merger
Agreement), this Agreement shall terminate upon the earlier to occur of the
following: (i) the fifth anniversary of the Effective Time of the Merger, (ii)
the termination of the Merger Agreement prior to consummation of the Merger,
(iii) the agreement of the parties hereto to terminate this Agreement, or (iv)
the date on which a person or group (not including the New Shareholder, the
Existing Shareholder or their respective Affiliates) beneficially owns more than
50% of the Voting Power, whether by way of tender or exchange offer or
otherwise.
Section 6.2. Survival. The representations and warranties herein contained
shall survive indefinitely following the termination of this Agreement, subject
to applicable statutes of limitation, if any; provided, however, that no
representations and warranties shall survive the termination of this Agreement
pursuant to Section 6.1(ii).
Section 6.3. Specific Enforcement. The parties hereto agree that if any of
the provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached, irreparable damage would occur and it
would be extremely impracticable and difficult to measure damages. Accordingly,
in addition to any other rights and remedies to which the parties may be
entitled by law or equity, each party shall be entitled to seek specific
performance of the terms hereof. Further, the parties hereto expressly waive (a)
the defense that a remedy in damages will be adequate and (b) any requirement,
in an action for specific performance, for the posting of a bond. The New
Shareholders further agree to use their best efforts to cause their respective
partners, trustees, directors, officers, employees and agents to waive, any
requirement for the posting of a bond in connection with such remedy.
Section 6.4. No Waiver. The parties hereby agree that no failure or delay
by a party to this Agreement, in exercising any right, power or privilege
hereunder will operate as a waiver thereof, nor will a single or partial
exercise thereof preclude any other or further exercise thereof or the exercise
of any right, power or privilege hereunder.
Section 6.5. Governing Law. This Agreement shall be governed and construed
in all respects in accordance with the laws of the State of Texas (without
giving effect to the provisions thereof relating to conflicts of law). Parent,
the Existing Shareholders, and the New Shareholders hereby consent to personal
jurisdiction in any action brought with respect to this Agreement and the
transactions contemplated hereby in the United States District Court for the
Western District of Texas sitting in Bexar County, Texas.
Section 6.6. Successors and Assigns. Except as otherwise provided herein,
the provisions hereof shall inure to the benefit of and be binding upon, the
successors, permitted assigns, heirs, executors and administrators of the
parties hereto.
Section 6.7. Entire Agreement; Amendment. 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, and no
party shall be liable or bound to any other party in any manner by any
warranties, representations, or covenants except as specifically set forth
herein or therein. Except as expressly provided herein, neither this Agreement
nor any term hereof may be amended, waived, discharged or terminated other than
by a written instrument signed by the party against whom enforcement of any such
amendment, waiver, discharge, or termination is sought.
Section 6.8 Interpretation. Headings of the Articles and Sections of this
Agreement are for convenience of the parties only, and shall be given no
substantive or interpretive effect whatsoever.
10
<PAGE> 11
Section 6.9. Notices. Unless otherwise provided, any notice, request,
demand or other communication required or permitted under this Agreement shall
be given in writing and shall be deemed effectively given upon personal delivery
to the party to be notified, or when sent by telex or telecopier (with receipt
confirmed), or one business day following deposit with overnight courier or
three business days following deposit with the United States Post Office, by
registered or certified mail, postage prepaid and addressed as follows (or at
such other address as a party may designate by notice to the other):
If to Parent:
Clear Channel Communications, Inc.
200 Concord Plaza
Suite 600
San Antonio, Texas 78216-6940
Attention: Randall T. Mays
Telephone: (210) 822-2828
Facsimile: (210) 822-2299
With a copy to:
Akin, Gump, Strauss, Hauer & Feld L.L.P.
1700 Pacific Avenue
Suite 4100
Dallas, Texas 75201-4675
Attention: Michael E. Dillard, P.C.
Telephone: (214) 969-2800
Facsimile: (214) 969-4343
If to the New Shareholders:
c/o Hicks, Muse, Tate & Furst Incorporated
200 Crescent Court
Suite 1600
Dallas, Texas 75201
Attention: Thomas O. Hicks
Telephone: (214) 740-7300
Facsimile: (214) 740-7313
With a copy to:
Hicks, Muse, Tate & Furst Incorporated
200 Crescent Court
Suite 1600
Dallas, Texas 75201
Attention: Lawrence D. Stuart, Jr.
Telephone: (214) 740-7300
Facsimile: (214) 740-7313
Section 6.10. Assignment. Without the prior written consent of the other
parties hereto, no party hereto may assign this Agreement or any of its rights
or obligations hereunder, in whole or in part, by operation of law or otherwise
except that Parent may, without the prior written consent of the other parties,
assign this Agreement upon a merger, consolidation, "business combination" as
defined in Part Thirteen of the Texas Business Corporation Act as in effect on
the date hereof, compulsory share exchange, recapitalization or other similar
transaction, provided that holders of the capital stock of Parent or the
surviving entity immediately prior to such transaction hold at least a majority
of the capital stock of Parent or the surviving entity immediately after such
transaction.
Section 6.11. 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
11
<PAGE> 12
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 6.12. Facsimile Signatures. Any signature page delivered by a fax
machine or telecopy machine shall be binding to the same extent as an original
signature page, with regard to any agreement subject to the terms hereof or any
amendment thereto. Any party who delivers such a signature page agrees to later
deliver an original counterpart to any party which requests it.
Section 6.13. 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.
Section 6.14. Shareholder Capacity. No covenant or agreement of the
Existing Shareholders contained herein is made by an Existing Shareholder in his
capacity as a director or officer. No covenant or agreement of Thomas O. Hicks
contained herein shall be deemed to be made by him in his capacity as a director
or officer provided that he complies with the provisions of Section 2.1 and
votes in his capacity as a director or officer. All New Shareholders other than
Thomas O. Hicks shall be jointly and severally liable for any breach of this
Agreement by any New Shareholder, including Thomas O. Hicks.
Section 6.15. No Recourse Against Others. No past, present or future
partner, director, officer, employee, member or stockholder of a New Shareholder
or an Existing Shareholder or any of their respective partners, directors,
officers, employees, members or stockholders (unless such person has executed
this Agreement) shall have any liability for any obligations of the New
Shareholders or the Existing Shareholders under this Agreement for any claim
based on, in respect of or by reason of such obligations or their creation.
12
<PAGE> 13
SHAREHOLDERS AGREEMENT SIGNATURE PAGE
IN WITNESS WHEREOF, the parties have caused this Shareholders Agreement to
be duly executed as of the day and year first above written.
CLEAR CHANNEL COMMUNICATIONS, INC.,
A TEXAS CORPORATION
/s/ RANDALL T. MAYS
----------------------------------------
By: Randall T. Mays
Title: Executive Vice President and
Chief Executive Officer
EXISTING SHAREHOLDERS:
/s/ L. LOWRY MAYS
----------------------------------------
L. Lowry Mays
4-M PARTNERS, LTD., a Texas limited
partnership
By: /s/ L. LOWRY MAYS
-------------------------------------
Name: L. Lowry Mays
Title: General Partner
NEW SHAREHOLDERS:
HICKS, MUSE, TATE & FURST EQUITY FUND
II, L.P.
By: HM2/GP PARTNERS, L.P., its general
partner
By: HICKS, MUSE GP PARTNERS, L.P., its
general partner
By: HICKS, MUSE FUND II INCORPORATED,
its general partner
By: /s/ THOMAS O. HICKS
-------------------------------------
Name: Thomas O. Hicks
Title: President
13
<PAGE> 14
SHAREHOLDERS AGREEMENT SIGNATURE PAGE -- (CONTINUED)
HM2/HMW, L.P.
By: HICKS, MUSE, TATE & FURST EQUITY
FUND II, L.P., its general partner
By: HM2/GP PARTNERS, L.P., its general
partner
By: HICKS, MUSE GP PARTNERS, L.P., its
general partner
By: HICKS, MUSE FUND II INCORPORATED,
its general partner
By: /s/ THOMAS O. HICKS
-------------------------------------
Name: Thomas O. Hicks
Title: President
HM2/CHANCELLOR, L.P.
By: HM2/CHANCELLOR GP, L.P., its general
partner
By: HM2/CHANCELLOR HOLDINGS, INC., its
general partner
By: /s/ THOMAS O. HICKS
-------------------------------------
Name: Thomas O. Hicks
Title: President
HM4/CHANCELLOR, L.P.
By: HICKS, MUSE FUND IV LLC, its general
partner
By: /s/ THOMAS O. HICKS
-------------------------------------
Name: Thomas O. Hicks
Title: President
14
<PAGE> 15
SHAREHOLDERS AGREEMENT SIGNATURE PAGE -- (CONTINUED)
CAPSTAR BROADCASTING PARTNERS, L.P.
By: HM3/CAPSTAR PARTNERS, L.P., its
general partner
By: HM3/CAPSTAR, INC., its general
partner
By: /s/ THOMAS O. HICKS
-------------------------------------
Name: Thomas O. Hicks
Title: President
CAPSTAR BT PARTNERS, L.P.
By: HM3/GP PARTNERS, L.P., its general
partner
By: HICKS, MUSE GP PARTNERS III, L.P.,
its general partner
By: HICKS, MUSE FUND III INCORPORATED,
its general partner
By: /s/ THOMAS O. HICKS
-------------------------------------
Name: Thomas O. Hicks
Title: President
CAPSTAR BOSTON PARTNERS, L.L.C.
By: HM3/GP PARTNERS, L.P., its managing
member
By: HICKS, MUSE GP PARTNERS III, L.P.,
its general partner
By: HICKS, MUSE FUND III INCORPORATED,
its general partner
By: /s/ THOMAS O. HICKS
-------------------------------------
Name: Thomas O. Hicks
Title: President
/s/ THOMAS O. HICKS
----------------------------------------
Thomas O. Hicks
15
<PAGE> 1
EXHIBIT 10.14
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT dated as of October 2, 1999 (this
"Agreement"), among CLEAR CHANNEL COMMUNICATIONS, INC., a Texas corporation (the
"Issuer"), and the other persons set forth on the signature pages hereto
(including such persons' permitted transferees, the "Holders").
WITNESSETH:
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 2, 1999 (the "Merger Agreement"), among the Issuer,
CCU Merger Sub, Inc., a Delaware corporation wholly owned by the Issuer, and
AMFM 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" shall mean the Securities and Exchange Commission or any
successor governmental body or agency.
"Common Stock" shall mean the common stock, par value $.10 per share, of
the Issuer.
"Demand Registration" shall have the meaning ascribed thereto in Section
2.1(a).
"Demand Request" shall have the meaning ascribed thereto in Section 2.1(a).
"Disadvantageous Condition" shall have the meaning ascribed thereto in
Section 2.4.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"Excluded Registration" shall mean the sale of any securities pursuant to a
registration statement that is not a firmly underwritten offering of Common
Stock.
"HMTF" shall mean Hicks, Muse, Tate & Furst Incorporated, a Delaware
corporation.
"Holders' Agent" shall have the meaning ascribed thereto in Section 4.11.
"Holder" shall mean each of the Persons who are listed as signatories
hereto other than the Issuer and their Included Transferees.
"Included Transferee" shall mean any transferee in a Significant
Disposition, as well as any subsequent transferees to the extent such subsequent
transferees received shares in the manner set forth in the definition of
"Significant Disposition," but in each case only with respect to shares of
Registrable Securities received in a Significant Disposition.
"Person" shall mean any natural person, firm, individual, business trust,
association, corporation, partnership, joint venture, company, unincorporated
entity or other entity.
1
<PAGE> 2
"Registrable Securities" shall mean Common Stock acquired by the initial
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). The Person that issues the
Registrable Securities shall be the "Issuer" hereunder. 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. Any shares of Common Stock received by an Included Transferee
pursuant to a Significant Disposition shall be deemed "Registrable Securities"
for purposes of this Agreement.
"Registration Expenses" shall mean 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; and (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; 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 and (z) all costs and expenses of
the Issuer incurred as contemplated in Section 2.6(g).
"Rule 144" shall mean Rule 144 (or any successor rule to similar effect)
promulgated under the Securities Act.
"Rule 415 Offering" shall mean 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" shall mean the Securities Act of 1933, as amended.
"Selling Holder" shall mean any Holder who sells Registrable Securities
pursuant to a public offering registered hereunder.
"Shareholders Agreement" shall mean that certain Shareholders Agreement
dated the date hereof among the Issuer, L. Lowry Mays and the Holders and the
other Persons named therein.
"Significant Disposition" means any sale, exchange, disposition or other
transfer to one Person to the extent that (a) such sale, exchange, disposition
or transfer involves at least a majority of all the Registrable Securities then
held by the initial Holders and (b) the value of the Registrable Securities
received by such transferees was at least $2,000,000,000 based on the closing
price of the Common Stock on the trading day immediately preceding the day of
such sale, exchange, distribution, disposition or other transfer. If a
transferee of Common Stock in a Significant Disposition makes a subsequent
disposition or transfer of the entire amount of securities received as set forth
above in a single transaction to one Person, such transferee (but not more than
one Person) shall be deemed an Included Transferee and shall have
2
<PAGE> 3
the rights of a Holder under this Agreement, and any subsequent transferee (but
not more than one Person) of such entire block of shares of Common Stock shall
be deemed an Included Transferee and shall have rights of a Holder under this
Agreement.
"Termination Date" shall have the meaning set forth in Article 3.
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 Demand Registration.
(a) Upon written notice to the Issuer prior to the Termination Date from a
Holder or Holders holding a majority in interest of the Registrable Securities
(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 (the "Requesting Holders" which term shall include parties
deemed "Requesting Holders" pursuant to Section 2.1(d)) in a firmly underwritten
public offering, the Issuer shall prepare as soon as practicable and, within 30
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 within 45 days after the filing of such registration statement. A
registration effected pursuant to a Demand Request pursuant to this Section
2.1(a) shall be referred to herein as a "Demand Registration." Notwithstanding
any other provision of this Agreement to the contrary:
(i) the Holders may collectively exercise their rights to request
Demand Registrations on not more the one occasion in any 12-month period;
(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 a Demand Registration
hereunder unless the aggregate offering size for such offering is at least
$500 million.
(b) Notwithstanding any other provision of this Agreement to the contrary,
a Demand Registration requested by Holders pursuant to this Section 2.1 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, if (i) such Demand Registration has not become effective
under the Securities Act or (ii) 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 90 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 prior
to the Termination Date, the Holders shall not lose their right to their Demand
Registration under Section 2.1(a) if the Demand Registration related to such
Demand Request is delayed or not effected in the circumstances set forth in this
Section 2.1(b) or Section 2.4.
(c) The Issuer shall have the right to cause the registration of additional
equity securities for sale for the account of the Issuer or any other Person to
whom the Issuer has granted registration rights from time to time, in the
registration of Registrable Securities requested by the Holders pursuant to
Section 2.1(a)
3
<PAGE> 4
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 (referred to herein as a
"Material Adverse Effect"), 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 as follows: (i) first, all securities
the Holders propose to register and (ii) thereafter, the securities to be
registered for the account of the Issuer and/or securities requested to be
registered for the account of other Persons entitled to participate, in such
proportions determined by the Issuer in its discretion or in accordance with
agreements between the Issuer and other Persons.
(d) Within 7 days after delivery of a Demand Request by a Holder, the
Issuer shall provide a written notice to the Holders' Agent (which shall be
deemed notice to all the Holders), 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 15 days of delivery to such Holder of a
notice pursuant to this Section 2.1(d), elect to so include all or any portion
of such Holder's 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. All Holders requesting to
have their Registrable Securities included in a Demand Registration pursuant to
this Section 2.1(d) shall be deemed "Requesting Holders" for purposes of this
Article 2.
Section 2.2 Piggyback Registrations.
(a) Right to Piggyback. Each time the Issuer proposes to register any of
its equity securities (other than pursuant to an Excluded Registration) under
the Securities Act for sale to the public (whether for the account of the Issuer
or the account of any securityholder) or proposes to make such an offering of
equity securities (other than pursuant to an Excluded Registration) to the
public pursuant to a previously filed registration statement pursuant to Rule
415 under the Securities Act, the Issuer shall give prompt written notice to
each Holder of Registrable Securities (which notice shall be given not less than
10 days prior to the proposed initial filing date of the Issuer's registration
statement in the case of a non-Rule 415 Offering or the commencement of the
offering, in the case of a Rule 415 Offering), which notice shall offer each
such Holder the opportunity to offer any or all of its or his Registrable
Securities in such public offering. Each Holder who desires to sell its or his
Registrable Securities in such underwritten public offering shall so advise the
Issuer in writing (stating the number of Registrable Securities desired to be
registered or sold) within 5 days after the date of such notice from the Issuer.
Any Holder shall have the right to withdraw such Holder's request for inclusion
of such Holder's Registrable Securities in any offering pursuant to this Section
2.2(a) by giving written notice to the Issuer of such withdrawal. The Issuer may
at any time withdraw or cease proceeding with any such registration if it shall
at the same time withdraw or cease proceeding with the registration of all other
equity securities originally proposed to be registered. Except as provided
above, the Holders shall have no registration rights with respect to an Excluded
Registration.
(b) Priority on Piggyback Registrations. The priority of shares to be
included on an offering pursuant to which the Holders have piggyback
registrations and as to which the underwriters have advised the Holders that a
Material Adverse Effect would be likely shall be as follows:
(i) with respect to an offering initiated by the Issuer on its own
behalf, first, to the Issuer, and second to the Holders and any other
securityholders of the Issuer who have the right to include securities in
such offering pro rata based on the number of shares proposed by such
Persons to be included in the offering; and
4
<PAGE> 5
(ii) with respect to an offering pursuant to demand registration
rights of securityholders of the Issuer other than the Holders, first to
the securityholders pursuant to their demand registration rights, second to
the Issuer, and third, to the Holders and any other securityholders of the
Issuer who have the right to include securities in such offering pro rata
based on the number of shares proposed by the Holders and such other
securityholders to be included in such offering.
If as a result of the provisions of this Section 2.2(b) any Holder shall not be
entitled to include all Registrable Securities in an offering that such Holder
has requested to be so included, such Holder may withdraw such Holder's request
to include Registrable Securities in such offering prior to completion of the
offering.
(c) Limited Purpose Shelf Registration Statement. The Issuer shall prepare,
and file with the Commission one or more Registration Statements on Form S-3
under Rule 415 of the Securities Act covering the resale of the Registrable
Securities in an amount of shares to be mutually agreed by Issuer and Holders'
Agent from time to time, but such Registration Statement on Form S-3 shall be
restricted for use by the Holders only for participation pursuant to Section
2.2(a) in a firmly underwritten public offering of Common Stock proposed by the
Issuer for the account of the Issuer or the account of any other securityholder.
Section 2.3 Other Matters In Connection With Registrations.
(a) Each Holder shall keep the Holders' Agent informed promptly of (x) the
name, address and other contact information of such Holder, (y) the number of
Registrable Securities held from time-to-time by such Holder, and (z) each sale,
transfer or other disposition of Registrable Securities (including the number of
shares sold) by each such Holder. The Holders' Agent shall use its reasonable
best efforts to keep the Issuer informed promptly of (x) the name, address and
other contact information of each Holder, (y) the number of Registrable
Securities held from time-to-time by each such Holder and (z) each sale,
transfer or other disposition of Registrable Securities (including the number of
shares sold) by each such Holder.
(b) The Issuer shall have the right to designate an underwriter or
underwriters as the lead or managing underwriters of any Demand Registration or
other registration who shall be reasonably acceptable to Holders owning a
majority of the Registrable Securities proposed to be sold therein.
(c) No Holder may participate in any registration statement hereunder
unless such Person (x) agrees to sell such Person's Registrable Securities on
the basis provided in any underwriting arrangements approved by the Issuer and
(y) completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements, and other documents reasonably required under the terms
of such underwriting arrangements.
Section 2.4 Certain Delay Rights. The Issuer may defer the filing or
effectiveness (but not the preparation) of a registration statement required by
Section 2.1 for a period not to exceed 120 days (or, if longer, 120 days after
the effective date of the registration statement contemplated by clause (ii) or
(iii) below) if (i) at the time the Issuer receives the Demand Request, the
Issuer or any of its Subsidiaries are engaged in confidential negotiations or
other confidential business activities, disclosure of which would be required in
such registration statement (but would not be required if such registration
statement were not filed), and the Board of Directors of the Issuer determines
in good faith that such disclosure would be materially detrimental to the Issuer
and its stockholders or would have a material adverse effect on any such
confidential negotiations or other confidential business activities, (ii) within
three (3) business days following its receipt of a Demand Request, the Issuer
decides to effect a public offering of the Issuer's securities for the Issuer's
account, or (iii) prior to the receipt of any Demand Request, another Person has
exercised demand registration rights and the Issuer has begun preparations or
planning for the offering (each of clauses (i), (ii) and (iii) referred to
herein as a "Disadvantageous Condition"). A deferral of the filing or
effectiveness of a registration statement pursuant to this Section 2.4
5
<PAGE> 6
shall be lifted, and the requested registration statement shall be filed
forthwith, if, in the case of a deferral pursuant to clause (i) of the preceding
sentence, the negotiations or other activities are disclosed or terminated, or,
in the case of a deferral pursuant to clause (ii) or (iii) of the preceding
sentence, the proposed offering for the Issuer's or another securityholder's
account is abandoned. In order to defer the filing or effectiveness of a
registration statement pursuant to this Section 2.4, the Issuer shall promptly
(but in any event within three (3) business days), upon determining to seek such
deferral, deliver to each Holder (whether by notice directly to such Holder or
through the Holders' Agent) a certificate signed by an executive officer of the
Issuer stating that the Issuer is deferring such filing pursuant to this Section
2.4 and a general statement of the reason for such deferral, and an
approximation of the anticipated delay. Within 20 days after receiving such
certificate, the holders of a majority of the Registrable Securities held by the
Requesting Holders and for which registration was previously requested may
withdraw such Demand Request by giving notice to the Issuer. If withdrawn, the
Demand Request shall be deemed not to have been made for all purposes of this
Agreement. The Issuer may defer the filing of a particular registration
statement pursuant to this Section 2.4 only once during any 12-month period.
Section 2.5 Expenses. Except as provided herein, the Issuer shall be
responsible for all Registration Expenses with respect to each registration
hereunder, whether or not any registration statement becomes effective.
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
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, (iii) each Holder shall be responsible for the legal
fees and expenses of its own counsel; and (iv) the Issuer shall be 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 Section 2.1, the Issuer shall as promptly as
practicable (but subject to the provisions of Section 2.1):
(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 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 90 days after such registration statement becomes effective, provided,
that such 90-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 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;
(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
6
<PAGE> 7
underwriter may reasonably request (it being understood that, subject to
Section 2.10 and the requirements of the Securities Act and applicable
State securities law, the Issuer consents to the use of the prospectus and
any amendment or supplement thereto by each Selling Holder and the
underwriters in connection with the offering and sale of the Registrable
Securities covered by the registration statement of which such prospectus,
amendment to supplement is a part);
(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 or incorporated by reference into 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 notify the Selling Holders and each underwriter in
writing (i) when a prospectus or any prospectus supplement or
post-effective amendment has been filed and, with respect to a registration
statement or any post-effective amendment, when the same has become
effective, (ii) of the issuance by any state securities or other regulatory
authority of any order suspending the qualification or exemption from
qualification of any of the Registrable Securities under state securities
or "blue sky" laws or the initiation of any proceedings for that purpose,
(iii) at any time when a prospectus relating to a registration pursuant to
Section 2.1 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 (iv) 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, promptly 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 or
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 five 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 Issuer as provided in Section 2.5;
(h) use its commercially reasonable efforts to register or qualify
such Registrable Securities under such other securities or blue sky laws of
such jurisdictions as the managing underwriter reasonably requests; use its
commercially reasonable efforts to keep each such registration or
qualification (or exemption therefrom) effective during the period in which
such registration statement is required to be kept effective; and do any
and all other acts and things which may be reasonably necessary or
advisable to enable such Selling Holder to consummate the disposition of
the Registrable Securities owned by such Selling Holder in such
jurisdictions (provided, however, that the
7
<PAGE> 8
Issuer will not be required to (A) qualify generally to do business in any
jurisdiction where it would not otherwise be required to qualify but for
this subparagraph or (B) consent to general service of process in any such
jurisdiction);
(i) make generally available to the Holders an earning statement
satisfying the provisions of Section 11(a) of the Securities Act no later
than 30 days after the end of the 12-month period beginning with the first
day of the Issuer's first fiscal quarter commencing after the effective
date of a registration statement, which earnings statement shall cover said
12-month period, and which requirement will be deemed to be satisfied if
the Issuer timely files complete and accurate information on Forms 10-Q,
10-K and 8-K under the Exchange Act, and otherwise complies with Rule 158
under the Securities Act;
(j) if requested by the managing underwriter or any Selling Holder,
promptly incorporate in a prospectus supplement or post-effective amendment
such information as the managing underwriter or any Selling Holder
reasonably requests to be included therein, including, without limitation,
with respect to the Registrable Securities being sold by such Selling
Holder, the purchase price being paid therefor by the underwriters and with
respect to any other terms of the underwritten offering of the Registrable
Securities to be sold in such offering, and promptly make all required
filings of such prospectus supplement or post-effective amendment;
(k) as promptly as practicable after filing with the Commission of any
document which is incorporated by reference into a registration statement
(in the form in which it was incorporated), deliver a copy of each such
document to each Selling Holder;
(l) provide a CUSIP number for the Registrable Securities included in
any registration statement not later than the effective date of such
registration statement;
(m) cooperate with each Selling Holder and each underwriter
participating in the disposition of such Registrable Securities and their
respective counsel in connection with any filings required to be made with
the National Association of Securities Dealers, Inc.;
(n) prepare and file with the Commission promptly any amendments or
supplements to such registration statement or prospectus which, in the
opinion of counsel for the Issuer or the managing underwriter, is required
in connection with the distribution of the Registrable Securities; and
(o) advise each Selling Holder of such Registrable Securities,
promptly after it shall receive notice or obtain knowledge thereof, of the
issuance of any stop order by the Commission suspending the effectiveness
of such registration statement or the initiation or threatening of any
proceeding for such purpose and promptly use its best efforts to prevent
the issuance of any stop order or to obtain its withdrawal at the earliest
possible moment if such stop order should be issued.
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.
8
<PAGE> 9
(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 Holders' Agent 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 businesses; 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 Holders' Agent 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, to the fullest extent
permitted by law, each Selling Holder and each of its employees, advisors,
agents, representatives, partners, officers and directors, 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, liabilities or expenses (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, liabilities or expenses 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, liabilities or expenses are
caused by any such untrue statement or omission or alleged untrue statement or
omission made in reliance 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). The reimbursement required by this Section 2.8(a) will be
made by periodic payments during the course of the investigation or defense, as
and when bills are received or expenses incurred.
(b) Each Selling Holder agrees to indemnify and hold harmless the Issuer,
its employees, advisors, agents, representatives, 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 losses, claims, damages,
liabilities and expenses (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, liabilities or
expenses 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
9
<PAGE> 10
supplements thereto; provided that the obligation to indemnify will be several,
not joint and several, among such Selling Holders, and the liability of each
Selling Holder will be in proportion to, and provided further that such
liability will be limited to, the net amount received by such seller from the
sale of Registrable Securities pursuant to such registration statement;
provided, however, that such Selling Holder shall not be liable in any such case
to the extent that prior to the filing of any such registration statement or
prospectus or amendment thereof or supplement thereto, such Selling Holder has
furnished in writing to the Issuer information expressly for use in such
registration statement or prospectus or any amendment thereof or supplement
thereto, such Selling Holder has furnished in writing to the Issuer information
expressly for use in such registration statement or prospectus or any amendment
or supplement thereto which corrected or made not misleading information
previously furnished to the Issuer. 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 and unless such settlement contains a full and
unconditional release of the indemnified party. 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, cost, claim, damage, liability or
expense referred to herein, 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, damage,
liability or expense in such proportion as is appropriate to reflect 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, liabilities or
expenses, as well as any other relevant equitable considerations. 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
10
<PAGE> 11
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,
liability, expense, 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. The Holders' obligations in this Section 2.8(d) to contribute
shall be several in proportion to the amount of Registrable Securities
registered by them and not joint.
(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. 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 10 days prior to or 30 days (or such lesser period as
the lead or managing underwriters may permit) after the date of the consummation
of such offering for any Demand Registration hereunder, for any underwritten
public offering by the Issuer by or any other Person of Common Stock or any
securities convertible into or exchangeable or exercisable for Common Stock.
Section 2.10 Suspension of Dispositions. Each Holder agrees by acquisition
of any Registrable Securities that, upon receipt of any notice (a "Suspension
Notice") from the Issuer of the happening of any event of the kind described in
Section 2.6(e)(iii), such Holder will forthwith discontinue disposition of
Registrable Securities until such Holder's receipt of the copies of the
supplemented or amended prospectus, or until it is advised in writing (the
"Advice") by the Issuer that the use of the prospectus may be resumed, and has
received copies of any additional or supplemental filings which are incorporated
by reference in the prospectus, and, if so directed by the Issuer, such Holder
will deliver to the Issuer all copies, other than permanent file copies then in
such Holder's possession, of the prospectus covering such Registrable Securities
current at the time of receipt of such notice. In the event the Issuer shall
give any such notice, the time period regarding the effectiveness of
registration statements set forth in Section 2.6(b) hereof shall be extended by
the number of days during the period from and including the date of the giving
of the Suspension Notice to and including the date when each Selling Holder of
Registrable Securities covered by such registration statement shall have
received the copies of the supplemented or amended prospectus or the Advice. The
Issuer shall use its commercially reasonable efforts and take such actions as
are reasonably necessary to render the Advice as promptly as practicable.
ARTICLE 3
TERM AND TERMINATION
This Agreement shall become effective at the Effective Time of the Merger
and shall continue in effect for five (5) years from the Effective Time, and
shall continue in effect thereafter until the Issuer terminates this Agreement
by delivery of written notice to each Holder (whether by notice directly to such
Holder or through the Holders' Agent) on the earlier of the following to occur
(or at any time thereafter): (i) the market value of the aggregate amount of
Registrable Securities beneficially owned by the Holders
11
<PAGE> 12
is less than $1,000,000,000 based on the average closing price of the Issuer's
Common Stock for the twelve (12) consecutive calendar months preceding the date
of notice of termination; or (ii) the aggregate number of shares of Registrable
Securities beneficially owned by the Holders is less than the average weekly
trading volume of the Common Stock during the preceding consecutive six-month
period and the market value of the aggregate amount of Registrable Securities
beneficially owned by the Holders is less than $2,000,000,000 based on the
average closing price of the Issuer's Common Stock for the twelve (12)
consecutive calendar months preceding the date of notice of termination. Such
date upon which the Issuer terminates this Agreement shall be referred to herein
as the "Termination Date." Notwithstanding the above, no termination shall be
effective for any Demand Registration for which the Issuer has received a Demand
Request.
ARTICLE 4
MISCELLANEOUS
Section 4.1 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 4.2 Not Exclusive; No Other Rights. The Holders agree that nothing
herein contained shall prohibit the Issuer from granting registration rights to
any other party, provided that such registration rights shall not conflict with
the terms of this Agreement. The Issuer represents and warrants that no other
Person has registration rights that conflict with the rights granted to the
Holders hereunder.
Section 4.3 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 4.4 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 4.5 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 by written notice from
the affected Holder to the Issuer).
Section 4.6 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 4.7 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.
12
<PAGE> 13
Section 4.8 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 4.9 Governing Law. This Agreement shall be governed and construed
in accordance with the laws of the State of Texas, without giving effect to the
principles of conflicts of law thereof.
Section 4.10 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 4.11 Holders' Agent. Each Holder hereby appoints HMTF as its agent
and attorney-in-fact (the "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 Holder hereunder by giving such notice directly to such
Holder. Alternatively, the Issuer may give notice to the Holders' Agent, in
which event the Holders' Agent will promptly so give such notice to each Holder.
Delivery of any notice or other communication pursuant to this Agreement by the
Issuer to the Holders' Agent in accordance with Section 4.5 will be deemed to
constitute notice by the Issuer directly to the Holders. Delivery of any notice
or other communication pursuant to this Agreement by the Holders' Agent to the
Issuer in accordance with Section 4.5 will be deemed to constitute notice by the
Holders directly to the Issuer. Notwithstanding anything else contained herein,
under no circumstances shall the Issuer be required to deliver any notice or
other communication pursuant to this Agreement directly to any Holder. Further
notwithstanding anything else contained herein, the Holders' Agent will not be
liable or responsible to any Person should any Holder fail to act in accordance
with any notice so give to such Holder hereunder.
Section 4.12 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.
Section 4.13 Termination of Existing Registration Rights. Each Holder that
is a party to any registration rights agreement of the Issuer in effect on the
date hereof hereby consents to the termination of such agreement effective on
the Effective Time.
13
<PAGE> 14
REGISTRATION RIGHTS AGREEMENT SIGNATURE 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.,
a Texas corporation
By: /s/ RANDALL T. MAYS
-------------------------------------
Name: Randall T. Mays
Address: 200 Concord Plaza
Suite 600
San Antonio, Texas 78216-6940
Facsimile No.: (210) 822-2299
14
<PAGE> 15
HOLDERS:
HICKS, MUSE, TATE & FURST EQUITY
FUND II, L.P.
By: HM2/GP PARTNERS, L.P.,
its general partner
By: HICKS, MUSE GP PARTNERS, L.P.,
its general partner
By: HICKS, MUSE FUND II INCORPORATED,
its general partner
By: /s/ THOMAS O. HICKS
-------------------------------------
Name: Thomas O. Hicks
Title: President
HM2/HMW, L.P.
By: HICKS, MUSE, TATE & FURST EQUITY
FUND II, L.P.,
its general partner
By: HM2/GP PARTNERS, L.P.,
its general partner
By: HICKS, MUSE GP PARTNERS, L.P.,
its general partner
By: HICKS, MUSE FUND II INCORPORATED,
its general partner
By: /s/ THOMAS O. HICKS
-------------------------------------
Name: Thomas O. Hicks
Title: President
15
<PAGE> 16
HM2/CHANCELLOR, L.P.
By: HM2/CHANCELLOR GP, L.P.,
its general partner
By: HM2/CHANCELLOR HOLDINGS, INC.,
its general partner
By: /s/ THOMAS O. HICKS
-------------------------------------
Name: Thomas O. Hicks
Title: President
HM4/CHANCELLOR, L.P.
By: HICKS, MUSE FUND IV LLC,
its general partner
By: /s/ THOMAS O. HICKS
-------------------------------------
Name: Thomas O. Hicks
Title: President
CAPSTAR BROADCASTING PARTNERS, L.P.
By: HM3/CAPSTAR PARTNERS, L.P.,
its general partner
By: HM3/CAPSTAR, INC.,
its general partner
By: /s/ THOMAS O. HICKS
-------------------------------------
Name: Thomas O. Hicks
Title: President
16
<PAGE> 17
CAPSTAR BT PARTNERS, L.P.
By: HM3/GP PARTNERS, L.P.,
its general partner
By: HICKS, MUSE GP PARTNERS III, L.P.,
its general partner
By: HICKS, MUSE FUND III INCORPORATED,
its general partner
By: /s/ THOMAS O. HICKS
-------------------------------------
Name: Thomas O. Hicks
Title: President
CAPSTAR BOSTON PARTNERS, L.L.C.
By: HM3/GP PARTNERS, L.P.,
its managing member
By: HICKS, MUSE GP PARTNERS III, L.P.,
its general partner
By: HICKS, MUSE FUND III INCORPORATED,
its general partner
By: /s/ THOMAS O. HICKS
-------------------------------------
Name: Thomas O. Hicks
Title: President
/s/ THOMAS O. HICKS
----------------------------------------
Thomas O. Hicks
/s/ JOHN D. MUSE
----------------------------------------
John D. Muse
/s/ CHARLES W. TATE
----------------------------------------
Charles W. Tate
/s/ JACK D. FURST
----------------------------------------
Jack D. Furst
/s/ MICHAEL J. LEVITT
----------------------------------------
Michael J. Levitt
17
<PAGE> 18
/s/ LAWRENCE D. STEWART, JR.
----------------------------------------
Lawrence D. Stewart, Jr.
/s/ DAVID B. DENIGER
----------------------------------------
David B. Deniger
/s/ DAN H. BLANKS
----------------------------------------
Dan H. Blanks
18
<PAGE> 1
EXHIBIT 11 - Computation of Per Share Earnings
In thousands of dollars, except per share data
<TABLE>
<CAPTION>
1999 1998 1997
----------- ----------- -----------
NUMERATOR:
<S> <C> <C> <C>
Net income before extraordinary item $ 85,655 $ 54,031 $ 63,576
Extraordinary item (13,185) -- --
----------- ----------- -----------
Net income 72,470 54,031 63,576
Effect of dilutive securities:
Eller put/call option agreement (2,300) (4,299) (2,577)
Convertible debt - 2.625% issued in 1998 9,811* 7,358 --
Convertible debt - 1.5% issued in 1999 964* -- --
LYONs - 1996 issue (311) -- --
LYONs - 1998 issue 2,944* -- --
Less: Anti-dilutive items (13,719) -- --
----------- ----------- -----------
(2,611) 3,059 (2,577)
Numerator for net income per
common share - diluted $ 69,859 $ 57,090 $ 60,999
=========== =========== ===========
DENOMINATOR:
Weighted-average common shares 312,610 236,060 176,960
Effect of dilutive securities:
Stock options and common stock warrants 8,395 4,098 4,440
Eller put/call option agreement 847 1,972 1,630
Convertible debt - 2.625% issued in 1998 9,282* 6,993 --
Convertible debt - 1.5% issued in 1999 927* -- --
LYONs - 1996 issue 2,556 -- --
LYONs - 1998 issue 2,034* -- --
Less: Anti-dilutive items (12,243) -- --
----------- ----------- -----------
11,798 13,063 6,070
Denominator for net income
per common share - diluted 324,408 249,123 183,030
=========== =========== ===========
Net income per common share:
Basic:
Net income before extraordinary item $ .27 $ .23 $ .36
Extraordinary item (.04) -- --
----------- ----------- -----------
Net income $ .23 $ .23 $ .36
=========== =========== ===========
Diluted:
Net income before extraordinary item $ .26 $ .22 $ .33
Extraordinary item (.04) -- --
----------- ----------- -----------
Net income $ .22 $ .22 $ .33
=========== =========== ===========
</TABLE>
* Denotes items that are anti-dilutive to the calculation of earnings per share.
<PAGE> 1
EXHIBIT 12 - COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
Year Ended
--------------------------------------------------------------------------
1999 1998 1997 1996 1995 1994
-------- --------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Income before income
taxes, equity in earnings of
non-consolidated affiliates and
extraordinary item 220,213 117,922 104,077 71,240 49,817 36,396
Dividends and other received from
nonconsolidated affiliates 7,079 9,168 4,624 10,430 1,432 --
-------- --------- --------- -------- -------- ---------
Total 227,292 127,090 108,701 81,670 51,249 36,396
Fixed Charges
Interest expense 192,321 135,766 75,076 30,080 20,752 7,669
Amortization of loan fees 1,970 2,220 1,451 506 1,004 82
Interest portion of rentals 24,511 16,044 6,120 424 361 262
-------- --------- --------- -------- -------- ---------
Total fixed charges 218,802 154,030 82,647 31,010 22,117 8,013
Preferred stock dividends
Tax effect of preferred dividends -- -- -- -- -- --
After tax preferred dividends -- -- -- -- -- --
--------- --------- --------- -------- -------- ---------
Total fixed charges and
preferred dividends 218,802 154,030 82,647 31,010 22,117 8,013
Total earnings available for
payment of fixed charges 446,094 281,120 191,348 112,680 73,366 44,409
========= ========= ========= ======== ======== =========
Ratio of earnings to fixed
Charges 2.04 1.83 2.32 3.63 3.32 5.54
========= ========= ========= ======== ======== =========
Rental fees and charges 306,393 200,550 76,500 5,299 4,510 3,273
Interest rate 8% 8% 8% 8% 8% 8%
</TABLE>
<PAGE> 1
EXHIBIT 21 - Subsidiaries of Registrant, Clear Channel Communications, Inc.
Name State of Incorporation
Clear Channel Communications, Inc. Texas
Clear Channel Broadcasting, Inc. Nevada
Clear Channel Broadcasting Licenses, Inc. Nevada
Clear Channel Holdings, Inc. Nevada
Eller Media Corporation Delaware
Universal Outdoor Holdings, Inc. Delaware
Clear Channel International, Ltd. United Kingdom
Jacor Communications, Inc. Delaware
<PAGE> 1
EXHIBIT 23.1 - CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration
Statement (Form S-3 No. 333-76105) and the Registration Statement (Form S-4 No.
333-57987) Clear Channel Communications, Inc. of our reports dated March 13,
2000 with respect to the consolidated financial statements and schedule of Clear
Channel Communications, Inc. for the year ended December 31, 1999 included in
this Annual Report (Form 10-K) for the year ended December 31, 1999.
We also consent to the incorporation by reference in the Registration
Statements (Forms S-8) pertaining to the 1984 Incentive Stock Option Plan of
Clear Channel Communications, Inc. (No. 33-14193); the Clear Channel
Communications, Inc. Nonqualified Stock Option Plan (No. 33-59772); the Clear
Channel Communications, Inc. 1994 Incentive Stock Option Plan, the Clear Channel
Communications, Inc. 1994 Nonqualified Stock Option Plan, the Clear Channel
Communications, Inc. Directors' Nonqualified Stock Option Plan; the Option
Agreement for Officer (No. 33-64463); the Non-Qualified Option Grant to Karl
Eller dated April 10, 1997, the Non-Qualified Option Grant to Paul J. Meyer
dated April 10, 1997, the Non-Qualified Option Grant to Timothy J. Donmoyer
dated April 10, 1997, the Eller Media Company Senior Management Incentive Plan
of Clear Channel Communications, Inc. (No. 333-29717), the Clear Channel
Communications, Inc. 1998 Stock Incentive Plan (No. 333-61883) and the Clear
Channel Communications, Inc. Employee Stock Purchase Plan (No., 333-30784) of
our reports dated March 13, 2000 with respect to the consolidated financial
statements of Clear Channel Communications, Inc. included in this Annual Report
(Form 10-K) for the year ended December 31, 1999 and with respect to the related
financial statement schedule included in this Annual Report (Form 10-K) for the
year ended December 31, 1999.
ERNST & YOUNG LLP
San Antonio, Texas
March 13, 2000
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS-KPMG LLP
The Board of Directors
Clear Channel Communications, Inc.:
We consent to the incorporation by reference in the Registration Statements of
Clear Channel Communications, Inc. on Form S-3 (No. 333-47367) and Form S-4 (No.
333-72839) of our report dated February 10, 2000 on the consolidated balance
sheets of Hispanic Broadcasting Corporation (formerly Heftel Broadcasting
Corporation) and subsidiaries as of December 31, 1999 and 1998, and the related
consolidated statements of operations, stockholders' equity and cash flows for
each of the years in the three-year period ended December 31, 1999, which report
is included in the 1999 Annual Report on Form 10-K of Clear Channel
Communications, Inc.
We also consent to the incorporation by reference of the aforementioned report
in the Registration Statements on Form S-8 of the 1984 Incentive Stock Option
Plan of Clear Channel Communications, Inc. (No. 33-14193); the Clear Channel
Communications, Inc. Nonqualified Stock Option Plan (No. 33-59772); the Clear
Channel Communications, Inc. 1994 Incentive Stock Option Plan; the Clear Channel
Communications, Inc. 1994 Nonqualified Stock Option Plan, the Clear Channel
Communications, Inc. Directors' Nonqualified Stock Option Plan, the Option
Agreement for Officer (No 33-64463); the Non-Qualified Option Grant to Karl
Eller dated April 10, 1997, the Non-Qualified Option Grant to Paul J. Meyer
dated April 10, 1997, the Non-Qualified Option Grant to Timothy J. Donmoyer
dated April 10, 1997, and the Eller Media Company Senior Management Incentive
Plan of Clear Channel Communications, Inc. (No. 333-29717), the Clear Channel
Communications, Inc. 1998 Stock Incentive Plan (No. 333-61883) and the Clear
Channel Communications, Inc. Employee Stock Purchase Plan (No. 333-30784).
Dallas, Texas
March 14, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 76,724,459
<SECURITIES> 0
<RECEIVABLES> 750,994,436
<ALLOWANCES> 26,094,706
<INVENTORY> 0
<CURRENT-ASSETS> 925,109,270
<PP&E> 2,949,040,319
<DEPRECIATION> 470,916,546
<TOTAL-ASSETS> 16,821,512,099
<CURRENT-LIABILITIES> 685,515,392
<BONDS> 2,175,000,000
0
0
<COMMON> 33,860,600
<OTHER-SE> 10,050,176,066
<TOTAL-LIABILITY-AND-EQUITY> 16,821,512,099
<SALES> 0
<TOTAL-REVENUES> 2,992,018,150
<CGS> 0
<TOTAL-COSTS> 1,632,115,330
<OTHER-EXPENSES> 792,378,501
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 192,321,133
<INCOME-PRETAX> 220,213,351
<INCOME-TAX> 150,635,071
<INCOME-CONTINUING> 85,655,448
<DISCONTINUED> 0
<EXTRAORDINARY> 13,185,000
<CHANGES> 0
<NET-INCOME> 72,470,448
<EPS-BASIC> .23
<EPS-DILUTED> .22
</TABLE>
<PAGE> 1
EXHIBIT 99.1 - REPORT OF INDEPENDENT AUDITORS ON FINANCIAL STATEMENT SCHEDULE
We have audited the consolidated financial statements of Clear Channel
Communications, Inc., and subsidiaries, as of December 31, 1999 and 1998, and
for each of the three years in the period ended December 31, 1999, and have
issued our report thereon dated March 13, 2000. Our audits also included the
financial statement schedule listed in the Index at Item 14(a). This schedule is
the responsibility of the Company's management. Our responsibility is to express
an opinion based on our audits.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
Ernst & Young LLP
March 13, 2000
San Antonio, Texas
<PAGE> 1
EXHIBIT 99.2 - REPORT OF INDEPENDENT AUDITORS -- KPMG LLP
The Board of Directors
Hispanic Broadcasting Corporation
We have audited the consolidated balance sheets of Hispanic Broadcasting
Corporations (formerly Heftel Broadcasting Corporation) and subsidiaries as of
December 31, 1999 and 1998, and the related consolidated statements of
operations, stockholders' equity and cash flows for each of the three-year
periods ended December 31, 1999 (not presented separately herein). These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Hispanic
Broadcasting Corporation and subsidiaries as of December 31, 1999 and 1998, and
the results of their operations and their cash flows for each of the years in
the three-year period ended December 31, 1999 in conformity with generally
accepted accounting principles.
KPMG LLP
Dallas, Texas
February 10, 2000
