AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 29, 2001
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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CLEAR CHANNEL COMMUNICATIONS, INC.
(Exact name of registrant as specified in its charter)
TEXAS 74-1787539
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
L. LOWRY MAYS
200 EAST BASSE ROAD CLEAR CHANNEL COMMUNICATIONS, INC.
SAN ANTONIO, TEXAS 78209 200 EAST BASSE ROAD
(210) 822-2828 SAN ANTONIO, TEXAS 78209
(Address, including zip code, and telephone number, (210) 822-2828
including area code, of registrant's principal executive (Name, address, including zip code, and telephone number
offices) including area code, of agent for service)
---------------------
COPIES TO:
STEPHEN C. MOUNT, ESQ. MORTON A. PIERCE, ESQ.
AKIN, GUMP, STRAUSS, HAUER & FELD, L.L.P. DEWEY BALLANTINE LLP
300 CONVENT STREET, SUITE 1500 1301 AVENUE OF THE AMERICAS
SAN ANTONIO, TEXAS 78205 NEW YORK, NY 10019
(210) 281-7000 (212) 259-8000
(210) 224-2035 (FAX) (212) 259-6333(FAX)
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF SECURITIES TO THE
PUBLIC: As promptly as practicable after the effective date of this
registration statement which relates to the merger of CCMM Sub, Inc., a wholly
owned subsidiary of Clear Channel Communications, Inc., with and into The
Ackerley Group, Inc. pursuant to the merger agreement described herein.
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If the securities being registered on this Form are offered in connection
with the formation of a holding company and there is compliance with General
Instruction G, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
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If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
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CALCULATION OF REGISTRATION FEE
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PROPOSED PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE MAXIMUM OFFERING AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PRICE PER SHARE OFFERING PRICE REGISTRATION FEE
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Common Stock, $0.10 par value............... 12,506,560(1) N.A. $567,797,847(2) $35,601(3)
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(1) Based on the maximum number of shares of Clear Channel Communications, Inc.
common stock to be issued in the merger, assuming the exercise of all
currently outstanding options to purchase The Ackerley Group, Inc. ordinary
common stock and The Ackerley Group, Inc. Class B common stock immediately
prior to the effective time of the merger.
(2) Estimated solely for the purpose of calculating the registration fee
required by Section 6(b) of the Securities Act of 1933, as amended (the
"Securities Act"), and computed pursuant to Rule 457(f) under the Securities
Act by adding (a) the product of $15.89, the average of the high and low
sale prices of Ackerley ordinary common stock on November 23, 2001, as
quoted on the New York Stock Exchange, multiplied by 24,712,408, the number
of shares of Ackerley ordinary common stock outstanding at the close of
business on November 26, 2001, assuming the exercise of all then outstanding
options to purchase Ackerley ordinary common stock immediately prior to the
effective time of the merger and the issuance of all shares of Ackerley
ordinary common stock pursuant to existing contractual obligations and
Ackerley Group's employee stock purchase plan and (b) the product of $15.89,
an amount equal to the average of the high and low sale prices of Ackerley
ordinary common stock on November 23, 2001, as quoted on the New York Stock
Exchange, with such amount being the assumed per unit price of the Ackerley
Class B common stock, of which there is no market, multiplied by 11,020,622,
the number of shares of Ackerley Class B common stock outstanding at the
close of business on November 26, 2001.
(3)Pursuant to Section 14(g)(1)(B) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), the fee of $100,103 paid by Ackerley Group in
connection with the filing on October 29, 2001, of its preliminary proxy
statement relating to the merger has been credited against the registration
fee payable by Clear Channel in connection with the offering hereunder.
---------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE
ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
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MERGER PROPOSED -- YOUR VOTE IS VERY IMPORTANT
[ACKERLEY GROUP LOGO]
November 29, 2001
Dear Shareholders:
Your Board of Directors has approved a merger between The Ackerley Group,
Inc., and a wholly owned subsidiary of Clear Channel Communications, Inc. If we
complete the merger, you will receive 0.35 of a share of Clear Channel common
stock for each share of Ackerley ordinary common stock and each share of
Ackerley Class B common stock that you own. Clear Channel shares are traded on
the New York Stock Exchange under the symbol "CCU." We expect that the merger
generally will be tax-free to holders of Ackerley common stock for federal
income tax purposes except to the extent holders receive cash instead of
fractional shares of Clear Channel common stock.
Consummation of the merger will require shareholder approval of the merger
and the merger agreement.
Your Board of Directors recommends that you approve the merger and the
merger agreement.
A special meeting of our shareholders will be held to consider and vote on
this merger proposal as follows:
January 24, 2002
9:00 a.m. local time
351 Elliott Avenue West
Seattle, Washington
This document provides you with detailed information about the merger. I
encourage you to read this entire document carefully. FOR RISKS IN CONNECTION
WITH THE MERGER, SEE "RISK FACTORS" BEGINNING ON PAGE 17.
It is important that your shares be represented and voted at the special
meeting, whether or not you are able to attend personally. If you do not return
your proxy card or if you do not instruct your bank or broker how to vote any
shares held for you in "street name," the effect will be a vote against the
merger and the merger agreement.
Sincerely,
/s/ BARRY A. ACKERLEY
Barry A. Ackerley
Chairman and Chief Executive Officer
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THE MERGER OR THE CLEAR CHANNEL COMMON
STOCK TO BE ISSUED IN THE MERGER OR DETERMINED IF THIS DOCUMENT IS ACCURATE OR
ADEQUATE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THIS DOCUMENT IS DATED NOVEMBER 29, 2001, AND WAS FIRST MAILED TO
SHAREHOLDERS ON OR ABOUT DECEMBER 3, 2001.
[ACKERLEY GROUP LOGO]
---------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
OF THE ACKERLEY GROUP, INC.
TO BE HELD ON JANUARY 24, 2002
---------------------
Notice is hereby given that a special meeting of shareholders of The
Ackerley Group, Inc. will be held on January 24, 2002, at 9:00 a.m., local time,
at 351 Elliott Avenue West, Seattle, Washington for the following purposes:
1. To consider and vote upon the merger of Ackerley Group with a
wholly owned subsidiary of Clear Channel Communications, Inc., pursuant to
the Agreement and Plan of Merger dated as of October 5, 2001, by and among
Clear Channel, CCMM Sub, Inc., and Ackerley Group, pursuant to which, among
other things, each share of Ackerley ordinary common stock and each share
of Ackerley Class B common stock outstanding immediately prior to the
effective time of the merger will be converted into 0.35 of a share of
Clear Channel common stock, and to consider and vote upon the merger
agreement; and
2. To consider and transact such other business as may properly come
before the meeting or any adjournment or postponement thereof.
A copy of the merger agreement is attached as APPENDIX A to the
accompanying document.
The board of directors of Ackerley Group has fixed the close of business on
November 26, 2001 as the record date for determination of shareholders entitled
to notice of, and to vote at, the special meeting of shareholders and at any and
all adjournments or postponements thereof. A list of shareholders entitled to
vote at the special meeting will be available for examination by any shareholder
at the offices of Ackerley Group in Seattle, Washington during normal business
hours for a period of ten days before the special meeting.
The board of directors of Ackerley Group unanimously recommends that
shareholders vote FOR the approval and adoption of the merger agreement and the
merger. The affirmative vote of at least a majority of the outstanding voting
power of Ackerley Group is required for approval and adoption of the merger
agreement and the merger. Barry A. Ackerley, the majority shareholder of
Ackerley Group, has agreed with Clear Channel to vote his shares of Ackerley
ordinary common stock, representing approximately 6.7% of the outstanding voting
power of Ackerley Group, in favor of the approval and adoption of the merger
agreement and the merger.
YOU ARE CORDIALLY INVITED TO ATTEND THE MEETING. IT IS IMPORTANT THAT YOUR
SHARES BE REPRESENTED, WHETHER OR NOT YOU PLAN TO ATTEND IN PERSON. ACCORDINGLY,
PLEASE COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD IN THE ENCLOSED
POSTAGE PREPAID ENVELOPE. YOU MAY REVOKE YOUR PROXY IN WRITING OR IN PERSON AT
ANY TIME BEFORE THE MEETING OF SHAREHOLDERS IN ACCORDANCE WITH THE INSTRUCTIONS
CONTAINED IN THIS DOCUMENT. IF YOUR PROXY CARD IS SIGNED, DATED AND RETURNED
WITHOUT SPECIFYING YOUR CHOICE, THE SHARES WILL BE VOTED AS RECOMMENDED BY THE
ACKERLEY GROUP BOARD OF DIRECTORS.
By Order of the Board of Directors
/s/ BARRY A. ACKERLEY
Barry A. Ackerley
Chairman of the Board
and Chief Executive Officer
November 29, 2001
SOURCES OF ADDITIONAL INFORMATION
This document incorporates important business and financial information
about Clear Channel and Ackerley Group from documents that are not included in
or delivered with this document. This information is available to you without
charge upon your written or oral request. You can obtain other documents
incorporated by reference in this document (other than certain exhibits to those
documents) by requesting them in writing or by telephone from the appropriate
company at the following addresses:
Clear Channel Communications, Inc. The Ackerley Group, Inc.
200 East Basse Road 1301 Fifth Avenue, Suite 4000
San Antonio, Texas 78209 Seattle, Washington 98101
Tel: (210) 822-2828 Tel: (206) 624-2888
Attn.: Investor Relations Attn.: Investor Relations
If you would like to request documents, please do so by January 17, 2002 in
order to receive them before the meeting of Ackerley Group shareholders.
See also "Where You Can Find More Information" (page 78).
TABLE OF CONTENTS
QUESTIONS AND ANSWERS....................................... 1
SUMMARY..................................................... 3
The Companies............................................. 3
The Meeting............................................... 3
Record Date............................................... 3
Vote Required............................................. 3
Reasons for the Merger.................................... 4
Recommendation of the Ackerley Group Board................ 4
Opinion of Ackerley Group's Financial Advisor............. 4
The Merger................................................ 4
Effects of the Merger on the Rights of Ackerley Group
Shareholders........................................... 8
Forward-Looking Statements................................ 8
Clear Channel Summary Historical Consolidated Financial
Data................................................... 9
Ackerley Group Summary Historical Consolidated Financial
Data................................................... 11
Summary Unaudited Pro Forma Combined Condensed
Consolidated Financial Data............................ 13
Comparative Per Share Data................................ 14
Comparative Per Share Market Price and Dividend
Information............................................ 15
RISK FACTORS................................................ 17
Risk Factors Relating to the Merger....................... 17
Risk Factors Arising After the Shareholders' Meeting or
the Merger............................................. 19
THE MEETING................................................. 26
When and Where the Meeting Will be Held................... 26
What Will be Voted Upon................................... 26
Only Ackerley Group Common Shareholders of Record as of
November 26, 2001 Are Entitled to Vote................. 26
A Majority of the Voting Power of All Outstanding Shares
Must be Represented for a Vote to be Taken............. 26
Vote Required for Approval................................ 27
Proxies................................................... 27
Solicitation of Proxies................................... 28
Surrender of Certificates................................. 28
Recommendation of the Ackerley Group Board................ 28
THE MERGER.................................................. 29
Structure of the Merger................................... 29
Background of the Merger.................................. 29
Recommendation of the Ackerley Group Board and Reasons for
the Merger............................................. 34
Opinion of Ackerley Group's Financial Advisor............. 36
Accounting Treatment...................................... 42
Interests of Certain Persons in the Merger................ 42
Material Federal Income Tax Consequences.................. 45
Regulatory Matters........................................ 46
Appraisal Rights.......................................... 47
Federal Securities Laws Consequences...................... 48
Management After the Merger............................... 48
i
THE MERGER AGREEMENT........................................ 49
The Merger................................................ 49
Conversion or Cancellation of Ackerley Common Stock in the
Merger................................................. 49
Listing of Clear Channel Common Stock..................... 50
Representations and Warranties............................ 51
Covenants and Agreements.................................. 52
No Solicitation Covenant.................................. 54
Additional Covenants and Agreements....................... 56
Conditions................................................ 57
Termination............................................... 58
Amendment; Extension; Waiver.............................. 61
Stockholder Voting and Support Agreement.................. 62
BUSINESS OF CLEAR CHANNEL................................... 63
BUSINESS OF ACKERLEY GROUP.................................. 64
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT OF CLEAR CHANNEL............................... 65
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT OF ACKERLEY GROUP.............................. 68
DESCRIPTION OF CLEAR CHANNEL CAPITAL STOCK.................. 70
COMPARISON OF CERTAIN RIGHTS OF SHAREHOLDERS OF CLEAR
CHANNEL AND ACKERLEY GROUP................................ 71
EXPERTS..................................................... 76
LEGAL MATTERS............................................... 76
DELISTING AND DEREGISTRATION OF ACKERLEY ORDINARY COMMON
STOCK..................................................... 77
SHAREHOLDER PROPOSALS....................................... 77
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS........... 77
WHERE YOU CAN FIND MORE INFORMATION......................... 78
UNAUDITED PRO FORMA COMBINED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS...................................... P-1
APPENDIX A Agreement and Plan of Merger.................... A-1
APPENDIX B Stockholder Voting and Support Agreement........ B-1
APPENDIX C Opinion of Credit Suisse First Boston
Corporation............................................... C-1
ii
QUESTIONS AND ANSWERS
Q: WHAT IS THE PROPOSED TRANSACTION?
A: A wholly owned subsidiary of Clear Channel Communications, Inc. will merge
with and into The Ackerley Group, Inc. As a result, Ackerley Group will
become a wholly owned subsidiary of Clear Channel, and the shares of
Ackerley common stock will be converted into the right to receive shares of
Clear Channel common stock. Because Ackerley Group has two classes of
common stock, in order to avoid confusion, we will refer throughout this
document to "Ackerley ordinary common stock" for the class of common stock
that is publicly traded, "Ackerley Class B common stock" for the class of
common stock that is not publicly traded, and "Ackerley common stock" for
both classes of Ackerley Group common stock.
Q: WHAT WILL ACKERLEY GROUP SHAREHOLDERS RECEIVE IN THE MERGER?
A: Each share of Ackerley common stock will be
exchanged for 0.35 of a share of Clear Channel common stock. Holders of
Ackerley common stock will receive cash for any fractional share of Clear
Channel common stock they would have otherwise received. After giving
effect to the merger, former Ackerley Group shareholders will hold
approximately 1.9% of the outstanding shares of Clear Channel common stock.
Q: WHAT VOTE IS REQUIRED TO APPROVE THE MERGER AND THE MERGER AGREEMENT?
A: For the merger to occur, the holders of a majority of the voting power of
all of the outstanding shares of Ackerley ordinary common stock and
Ackerley Class B common stock, voting together as a single class, must
approve and adopt the merger and the merger agreement at the meeting.
Q: HOW DO I VOTE?
A: You may vote by mailing a signed proxy card in the enclosed postage prepaid
return envelope as soon as possible so that those shares may be represented
at the meeting. You may also attend the meeting and vote in person.
Q: CAN I CHANGE MY VOTE AFTER SENDING IN MY
PROXY?
A: Yes. You may change your vote by sending written notice to Ackerley Group's
corporate secretary or assistant secretary stating you would like to revoke
your proxy, by submitting a later-dated, signed proxy card or by attending
the meeting and voting in person. However, simply attending the meeting
without voting will not revoke your previously submitted proxy.
Q: IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER VOTE MY
SHARES FOR ME?
A: Your broker will vote your shares only if you provide instructions on how
to vote. You should follow the directions provided by your broker regarding
how to instruct your broker to vote your shares. Without your instructions,
your shares will not be voted on the merger and the merger agreement or any
other proposals that may properly arise at the meeting.
Q: IS THE MERGER TAXABLE?
A: Clear Channel and Ackerley Group each expect the merger to qualify for
federal income tax purposes as a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code and it is a condition to the
completion of the merger that our tax advisors will be able to deliver
opinions to that effect. Assuming the merger so qualifies, the merger
generally will be tax-free to the holders of Ackerley common stock except
to the extent the holders receive cash instead of fractional Clear Channel
shares. We describe the material federal income tax consequences of the
merger in more detail on page 45. The tax consequences to you will depend
on the facts of your own situation. Please consult your tax advisors for a
full understanding of the tax consequences to you of the merger.
Q: AM I ENTITLED TO APPRAISAL RIGHTS?
A: No. You will not be entitled to appraisal rights in connection with the
merger. See "The Merger -- Appraisal Rights" on page 47.
1
Q: WILL THE SHARES OF CLEAR CHANNEL COMMON
STOCK ISSUED IN THE MERGER BE LISTED FOR TRADING?
A: Clear Channel common stock is currently
listed on the New York Stock Exchange under the symbol "CCU." After the
merger, the Clear Channel common stock (including the shares issued in the
merger) will continue to be listed on the New York Stock Exchange.
Q: WHEN DO YOU EXPECT TO COMPLETE THE MERGER?
A: We expect to complete the merger in the first
quarter of 2002.
Q: SHOULD I SEND IN MY ACKERLEY GROUP STOCK
CERTIFICATES NOW?
A: No. After we complete the merger, Clear
Channel will send instructions to former Ackerley Group shareholders
explaining how to exchange Ackerley Group share certificates for Clear
Channel share certificates and, if applicable, cash in lieu of any
fractional share.
Q: WHEN AND WHERE IS THE MEETING?
A: The meeting will be held on January 24, 2002
at 9:00 a.m., local time, at 351 Elliott Avenue West, Seattle, Washington.
Q: WHOM CAN I CALL WITH QUESTIONS?
A: If you would like additional copies of this
document or if you have any questions about the merger, you may contact
Ackerley Group's proxy solicitor, Georgeson Shareholder-New Jersey at (866)
283-6860. You may also call Clear Channel at (210) 822-2828 or Ackerley
Group at (206) 624-2888.
If you would like copies of any of the documents we refer to in this document,
you should call Clear Channel at (210) 822-2828 if the documents relate to Clear
Channel, or call Ackerley Group at (206) 624-2888 if the documents relate to
Ackerley Group.
2
SUMMARY
This summary highlights selected information from this document and may not
contain all of the information that is important to you. To better understand
the merger, and for a more complete description of the legal terms of these
transactions, you should read this entire document carefully, as well as those
additional documents to which we refer you. See "Where You Can Find More
Information" on page 78.
THE COMPANIES
CLEAR CHANNEL COMMUNICATIONS, INC.
200 East Basse Road
San Antonio, Texas 78209
Tel: (210) 822-2828
Clear Channel is a diversified media company with three reportable business
segments: radio broadcasting, outdoor advertising and live entertainment. As of
December 31, 2000, Clear Channel owned, programmed, or sold airtime for 1,105
domestic radio stations and two international radio stations and owned a leading
national radio network. In addition, at December 31, 2000, Clear Channel had
equity interests in various domestic and international radio broadcasting
companies. Clear Channel is also one of the world's largest outdoor advertising
companies based on total advertising display inventory of approximately 149,000
domestic display faces and approximately 549,000 international display faces. In
addition, Clear Channel is one of the world's largest diversified promoters,
producers and venue operators for live entertainment events. As of December 31,
2000, Clear Channel owned or operated 120 live entertainment venues. As of
December 31, 2000, Clear Channel also owned or programmed 22 television
stations, including three satellite stations, owned a media representation firm
and represented professional athletes. Clear Channel is a corporation and was
organized under the laws of the State of Texas in 1974.
THE ACKERLEY GROUP, INC.
1301 Fifth Avenue, Suite 4000
Seattle, Washington 98101
Tel: (206) 624-2888
Ackerley Group holds a diversified group of market-leading outdoor,
broadcasting and interactive media assets. Ackerley Group operates the nation's
fourth-largest outdoor media company with more than 6,000 advertising displays
in Boston, Massachusetts, Seattle, Washington and Portland, Oregon. Ackerley
Group owns or operates under management agreements 18 television stations making
it one of the nation's 30 largest television owners. Ackerley Group's radio
broadcasting segment includes the No. 1 hit-music and No. 1 sports talk stations
in Seattle, Washington, the nation's 13th-largest media market. Through its
Interactive Media segment, Ackerley Group operates three local portals
connecting its television viewers with the Internet to bring them the latest in
local and national news. Ackerley Group is a Delaware corporation and was
founded in 1975.
THE MEETING (SEE PAGE 26)
The meeting will be held on January 24, 2002 at 9:00 a.m., local time, at
351 Elliott Avenue West, Seattle, Washington. At the meeting, Ackerley Group
shareholders will be asked to approve and adopt the merger agreement and the
merger and to conduct other business if properly raised.
RECORD DATE (SEE PAGE 26)
You can vote at the meeting if you owned shares of Ackerley common stock at
the close of business on November 26, 2001. On that date, there were 24,108,416
shares of Ackerley ordinary common stock and 11,020,622 shares of Ackerley Class
B common stock outstanding and entitled to vote. Clear Channel has advised
Ackerley Group that, as of the record date, it held 1,170,000 shares of Ackerley
ordinary common stock.
VOTE REQUIRED (SEE PAGE 27)
Approval and adoption of the merger and the merger agreement require the
vote of the holders of a majority of the voting power of the outstanding shares
of Ackerley ordinary common stock and Ackerley Class B common stock voting
together as a single class. Holders of Ackerley ordinary common stock are
entitled to cast one vote for each share owned on that date. Holders of Ackerley
Class B common stock are entitled to cast ten votes for each share owned on that
date. As of the record date, Ackerley Group's directors
3
and executive officers beneficially owned 9,086,970 shares of Ackerley ordinary
common stock and 11,003,856 shares of Ackerley Class B common stock, which
represented approximately 57% of the outstanding shares of Ackerley common stock
and 89% of the voting power of all the outstanding shares of the Ackerley common
stock.
REASONS FOR THE MERGER (SEE PAGE 34)
In connection with the Ackerley Group Board's unanimous approval of the
merger agreement and its determination to recommend that the Ackerley Group
shareholders approve the merger agreement and the merger, the Ackerley Group
Board consulted with Ackerley Group's management and with Ackerley Group's
financial and legal advisors and considered a variety of factors, including the
strategic alternatives available to Ackerley Group, including remaining an
independent company, the terms and conditions of the merger agreement, including
the premium to Ackerley Group shareholders for their Ackerley common stock, the
opportunity for Ackerley Group shareholders to participate in the combined
company and the tax consequences of the merger to Ackerley Group shareholders.
RECOMMENDATION OF THE ACKERLEY GROUP BOARD (SEE PAGE 34)
The Ackerley Group Board has determined that the merger is advisable and
fair to, and in the best interests of, Ackerley Group and Ackerley Group
shareholders, and therefore has unanimously approved the merger and the merger
agreement. The Ackerley Group Board recommends that the Ackerley Group
shareholders vote "FOR" the approval and adoption of the merger and the merger
agreement.
OPINION OF ACKERLEY GROUP'S FINANCIAL ADVISOR (SEE PAGE 36)
In connection with the proposed merger, Ackerley Group's financial advisor,
Credit Suisse First Boston Corporation, delivered an opinion to the Ackerley
Group Board as to the fairness to the holders of Ackerley ordinary common stock
of the exchange ratio provided for in the merger, from a financial point of
view. The full text of Credit Suisse First Boston's written opinion, dated
October 5, 2001, is attached to this document as APPENDIX C. We encourage you to
read this opinion carefully in its entirety for a description of the procedures
followed, assumptions made, matters considered and limitations on the review
undertaken. CREDIT SUISSE FIRST BOSTON'S OPINION IS ADDRESSED TO THE ACKERLEY
GROUP BOARD AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY SHAREHOLDER AS TO
ANY MATTER RELATING TO THE MERGER.
THE MERGER (SEE PAGE 29)
Under the terms of the merger agreement, a wholly owned subsidiary of Clear
Channel formed for the purpose of the merger will merge with and into Ackerley
Group. As a result, Ackerley Group will become a wholly owned subsidiary of
Clear Channel.
We have attached the merger agreement, which is the legal document that
governs the merger, as APPENDIX A. We encourage you to carefully read this
document. Please see the section titled "Where You Can Find More Information" on
page 78 for instructions on how to obtain copies of these appendices.
WHAT YOU WILL RECEIVE IN THE MERGER
Each share of Ackerley common stock will be converted into the right to
receive 0.35 of a share of Clear Channel common stock. Because the number of
shares of Clear Channel common stock that you will receive in the merger is
fixed, the value of the shares of Clear Channel common stock you will receive in
the merger will fluctuate as the price of Clear Channel common stock changes.
You will have to surrender your Ackerley common stock certificates to
receive Clear Channel common stock certificates. HOWEVER, PLEASE DO NOT SEND ANY
ACKERLEY COMMON STOCK CERTIFICATES UNTIL YOU RECEIVE WRITTEN INSTRUCTIONS AFTER
WE COMPLETE THE MERGER.
EFFECTIVE TIME OF THE MERGER (SEE PAGE 29)
The merger will become effective after all conditions to the merger are met
or waived and upon the filing of a Certificate of Merger with the Secretary of
State of the State of Delaware or at such later time as is specified in the
Certificate of Merger.
4
CONDITIONS (SEE PAGE 57)
We will not complete the merger until we have satisfied numerous
conditions. Some of the conditions are listed below:
- the Ackerley Group shareholders approve and adopt the merger and the
merger agreement;
- the continued effectiveness of the registration statement that includes
this document;
- no law or court order prohibits the merger;
- regulatory agencies issue all required approvals under the federal
communications laws;
- the federal antitrust authorities complete their review of the merger;
- the representations and warranties made by each company are true and
correct in all material respects;
- the obligations of each party under the merger agreement have been
performed;
- a material adverse change has not occurred with respect to either Clear
Channel or Ackerley Group;
- the shares of Clear Channel common stock issuable to Ackerley Group
shareholders in the merger are approved for listing on the New York Stock
Exchange, subject only to official notice of issuance; and
- Clear Channel's and Ackerley Group's legal counsel each deliver an
opinion that the merger will qualify for federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the Internal
Revenue Code.
Some of the conditions may be waived by the company entitled to assert the
condition.
TERMINATION OF THE MERGER AGREEMENT (SEE PAGE 58)
We can jointly agree to terminate the merger agreement at any time without
completing the merger, even after obtaining approval from the Ackerley Group
shareholders. In addition, either party may terminate the merger agreement if:
- we do not complete the merger by October 5, 2002, provided that the party
seeking termination is not in material breach;
- an applicable law, rule or regulation makes the merger illegal;
- a final and nonappealable order is entered enjoining or prohibiting the
completion of the merger;
- the merger and the merger agreement fail to receive Ackerley Group
shareholder approval after a vote; or
- the other party materially breaches its representations, warranties or
covenants under the merger agreement and the breaching party fails to
cure the breach within 20 business days of receiving notice of such
breach.
Clear Channel may terminate the merger agreement if Ackerley Group fails to
hold a shareholders' meeting within 75 days after the registration statement
registering the Clear Channel common stock to be issued in the merger is
declared effective, unless such failure is due to circumstances beyond the
reasonable control of Ackerley Group.
Clear Channel may also terminate the merger agreement if certain Ackerley
Group triggering events shall have occurred, including:
- the Ackerley Group Board fails to recommend to its shareholders to vote
to adopt the merger agreement (or withdraws or modifies its
recommendation in a manner adverse to Clear Channel);
- Ackerley Group fails to include in its proxy statement the recommendation
of its Board to vote to approve the merger and the merger agreement or a
statement to the effect that the Ackerley Group Board believes that the
merger is in the best interests of the Ackerley Group shareholders;
- the Ackerley Group Board fails to publicly reaffirm its recommendation to
approve the merger and the merger agreement or fails to reaffirm its
statement that the merger is in the best interests of its shareholders
5
within ten business days of receiving a written request by Clear Channel for a
reaffirmation;
- the Ackerley Group Board approves, endorses or recommends another
acquisition proposal;
- Ackerley Group enters into a letter of intent or other similar document
relating to any acquisition proposal;
- a tender or exchange offer for Ackerley common stock is commenced and
Ackerley Group does not send a statement to its shareholders recommending
rejection of such tender or exchange offer within ten business days
thereafter;
- Ackerley Group fails to issue a press release reaffirming the Ackerley
Group Board recommendation to approve the merger and the merger agreement
within ten business days after any acquisition proposal is publicly
announced; or
- Ackerley Group, any of its subsidiaries or an Ackerley Group
representative violates the no solicitation covenant of the merger
agreement in a material respect.
TERMINATION FEE (SEE PAGE 60)
Ackerley Group must pay Clear Channel a fee of $17.25 million, plus up to
$7.5 million of the reasonable, actual and documented out-of-pocket expenses of
Clear Channel if one of the following circumstances occurs:
- Clear Channel or Ackerley Group terminates the merger agreement because
Ackerley Group shareholders fail to adopt the merger agreement at a duly
held shareholders' meeting;
- Clear Channel terminates the merger agreement due to Ackerley Group's
failure to hold a shareholders' meeting within 75 days after the
registration statement registering the Clear Channel common stock to be
issued in the merger is declared effective, if such failure is not due to
circumstances beyond the reasonable control of Ackerley Group; or
- Clear Channel terminates the merger agreement due to the occurrence of an
Ackerley Group triggering event; and within 15 months after the
termination of the merger agreement one of the following occurs:
- Ackerley Group consummates a transaction that would have constituted an
acquisition proposal for 50% or more of the assets or equity securities
of Ackerley Group; or
- Ackerley Group enters into a definitive agreement for a transaction
that would have constituted an acquisition proposal for 50% or more of
the assets or equity securities of Ackerley Group, whether or not such
transaction is consummated within such 15 month period.
If Clear Channel rightfully terminates the merger agreement because
Ackerley Group materially breaches its representations, warranties or covenants
under the merger agreement and fails to cure the breach within 20 business days
of receiving written notice of such breach, then Ackerley Group must reimburse
Clear Channel for up to $7.5 million of its reasonable, actual and documented
out-of-pocket expenses. No termination fee would be payable in this
circumstance.
REGULATORY MATTERS (SEE PAGE 46)
Clear Channel and Ackerley Group have received notice of early termination
of the waiting period during which the U.S. regulatory authorities reviewed the
merger under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended.
In addition, we filed applications with the Federal Communications
Commission on October 17, 2001 seeking its approval of the transfer of Ackerley
Group's FCC licenses. One petition to deny and two informal objections have been
filed against the FCC applications by various parties. Clear Channel intends to
respond to these petitions and objections and advise the FCC why the petitions
and objections should be denied. Although Clear Channel does not expect that
these or any other third-party petitions or objections will be a significant
obstacle to completion of the merger, Clear Channel can give no assurances in
this regard. Clear Channel expects to be required to divest television or radio
stations in five markets or geographical areas to comply with FCC rules,
6
and it has requested the FCC to waive its rules for twelve months following
closing of the merger to allow completion of the necessary divestitures.
We expect to obtain all required governmental approvals and, if all other
conditions to the merger are satisfied, complete the merger in the first quarter
of 2002. We cannot be certain, however, that Clear Channel and Ackerley Group
will obtain all required governmental approvals, or that we will obtain these
approvals without conditions that would be detrimental to Clear Channel or
Ackerley Group.
ACCOUNTING TREATMENT (SEE PAGE 42)
Clear Channel will account for the merger as a purchase. Under this
accounting method, Clear Channel will record, at fair value, the acquired assets
and assumed liabilities of Ackerley Group, and to the extent that the total
purchase price consideration exceeds the fair value of assets acquired and
liabilities assumed, Clear Channel will record goodwill. Accordingly, Clear
Channel will include the revenues and expenses of Ackerley Group in Clear
Channel's financial statements from the date of consummation of the merger.
NYSE LISTING
Clear Channel will list the shares of Clear Channel common stock to be
issued in the merger on the New York Stock Exchange.
OWNERSHIP OF SHARES AFTER THE MERGER
After giving effect to the merger, the former holders of Ackerley common
stock will hold approximately 1.9% of the outstanding Clear Channel common stock
based upon the number of outstanding shares of Clear Channel common stock as of
November 26, 2001.
STOCKHOLDER VOTING AND SUPPORT AGREEMENT (SEE PAGE 62)
Barry A. Ackerley, the Chairman of the Board and Chief Executive Officer of
Ackerley Group, has agreed not to sell any shares of Ackerley ordinary common
stock owned by him and to vote the shares of Ackerley ordinary common stock he
owns or has the right to vote in favor of the merger and the merger agreement.
Mr. Ackerley has entered into a Stockholder Voting and Support Agreement with
Clear Channel which is attached to this document as APPENDIX B. As of November
26, 2001, these shares represented approximately 6.7% of the voting power of all
the outstanding shares of common stock entitled to vote on the merger and the
merger agreement. However, Mr. Ackerley's agreement to vote in favor of the
merger and the merger agreement and the proxy described below are not applicable
to the shares of Ackerley Class B common stock owned by him, which represent
approximately 82% of the voting power of all the outstanding shares of common
stock entitled to vote on the merger and the merger agreement.
Mr. Ackerley also agreed to deliver to Clear Channel an irrevocable proxy
with respect to his shares of Ackerley ordinary common stock, thereby allowing
Clear Channel to vote such shares at any time prior to the effective date of the
merger or the termination date of the merger agreement in accordance with the
terms of the Stockholder Voting and Support Agreement.
If the shares of Ackerley ordinary common stock or the shares of Ackerley
Class B common stock owned by Mr. Ackerley are disposed of in any manner in
connection with any acquisition proposal made prior to or within 18 months of
the termination of the merger agreement, Mr. Ackerley will pay to Clear Channel
an amount equal to 50% of the additional profit realized from such alternative
transaction as compared to the merger.
If the amount of consideration to be received by the holders of Ackerley
common stock in connection with the merger should be increased, then, as may be
requested by Clear Channel, Mr. Ackerley will either (i) execute and deliver to
Clear Channel such documents as may be necessary to waive the right to receive
50% of such increase or (ii) pay to Clear Channel an amount equal to 50% of such
increase.
INTERESTS OF CERTAIN PERSONS IN THE MERGER (SEE PAGE 42)
In considering the recommendation of the Ackerley Group Board with respect
to the merger, shareholders should be aware that certain officers of Ackerley
Group and the members of the Ackerley Group Board have interests in the merger
that may be different from, or in addition
7
to, the interests of shareholders generally. For certain officers, these
interests relate to accelerated vesting of stock options, potential retention
and severance payments, consulting fees or indemnification rights. For certain
directors, these interests relate to an earlier payment of their quarterly
non-employee director fees in the form of Ackerley ordinary common stock.
In addition, prior to the closing of the merger, Ackerley Group will repay
to an entity owned by certain officers and directors the $500,000 loan from such
entity to Ackerley Group and Ackerley Group will, subject to documentation and
arrangements reasonably acceptable to Clear Channel, transfer a lease obligation
of Ackerley Group to Mr. Barry A. Ackerley or his designee.
Members of the Ackerley Group Board were aware of these interests and
considered them, among other matters, in making their recommendation to approve
the merger.
EFFECTS OF THE MERGER ON THE RIGHTS OF ACKERLEY GROUP SHAREHOLDERS (SEE PAGE 71)
The rights of Ackerley Group shareholders who receive shares of Clear
Channel common stock in the merger will be governed by Texas law and by Clear
Channel's restated articles of incorporation, as amended, and Clear Channel's
third amended and restated by-laws. The rights of Ackerley Group shareholders
under Clear Channel's restated articles of incorporation, as amended, and third
amended and restated by-laws will differ in certain respects from the rights
under Ackerley Group's fourth restated certificate of incorporation and amended
and restated by-laws.
FORWARD-LOOKING STATEMENTS (SEE PAGE 77)
Clear Channel and Ackerley Group have made forward-looking statements in
this document and in the documents to which we have referred you. These
statements are subject to risks and uncertainties, and therefore may not prove
to be correct. Forward-looking statements include assumptions as to how Clear
Channel may perform after the merger, and, accordingly, it is uncertain whether
any of the events anticipated by the forward-looking statements will occur, or,
if any of them do so, what impact they will have on the results of operations
and financial condition of Clear Channel or the price of its common stock. See
page 77 for further details.
When we use words like "believes," "expects," "anticipates" or similar
expressions, we are making forward-looking statements. For those statements,
Clear Channel and Ackerley Group claim the protection of the safe harbor for
forward-looking statements contained in the Private Securities Litigation Reform
Act of 1995.
8
CLEAR CHANNEL SUMMARY HISTORICAL CONSOLIDATED FINANCIAL DATA
The following sets forth summary historical financial data for Clear
Channel as of and for the five years ended December 31, 2000, and as of and for
the nine month periods ended September 30, 2000 and 2001. The financial data for
the nine month periods ended September 30, 2000 and 2001 are derived from
unaudited consolidated financial statements. The unaudited consolidated
financial statements include all adjustments, consisting of normal recurring
accruals, which Clear Channel considers necessary for a fair presentation of its
consolidated financial position and its consolidated results of operations for
these periods. Due to seasonality and other factors, operating results for the
nine month period ended September 30, 2001 are not necessarily indicative of the
results that may be expected for the entire year ending December 31, 2001. After
tax cash flow is diluted net income before unusual and non-recurring items plus
certain non-cash items (including nonconsolidated affiliates). EBITDA is net
revenue less operating expenses and corporate expenses. You should not consider
after tax cash flow and EBITDA in isolation from, or as a substitute for, or
more meaningful than, operating income, net income or cash flow and other
consolidated income or cash flow statement data computed in accordance with
generally accepted accounting principles, or as a measure of operating
performance, or as an alternative to operating cash flows as a measure of
liquidity. Although after tax cash flow and EBITDA are not calculated in
accordance with generally accepted accounting principles, they are widely used
in the media industry as a measure of a company's operating performance because
they assist in comparing performance across companies without regard to
depreciation and amortization, which can vary significantly depending on
accounting methods, particularly where acquisitions are involved. In addition,
Clear Channel's calculation of after tax cash flows and EBITDA is not
necessarily comparable to similarly titled measures reported by other companies,
including Ackerley Group.
Acquisitions and dispositions significantly impact the comparability of the
historical consolidated financial data reflected in this financial data. This
information is only a summary and you should read the information presented
below in conjunction with the Consolidated Financial Statements and the Notes
thereto, and Management's Discussion and Analysis for Clear Channel,
incorporated into this document by reference, which qualify the information
presented below in its entirety.
NINE MONTH PERIOD
YEAR ENDED DECEMBER 31, ENDED SEPTEMBER 30,
----------------------------------------------------------------- ------------------------
1996 1997 1998 1999 2000 2000 2001
--------- ----------- ----------- ----------- ----------- ----------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
STATEMENT OF OPERATIONS DATA:
Net revenue...................... $ 351,739 $ 697,068 $ 1,350,940 $ 2,678,160 $ 5,345,306 $ 3,325,133 $6,107,857
Operating expenses............... 198,332 394,404 767,265 1,632,115 3,480,706 2,144,974 4,395,864
Non-cash compensation expense.... -- -- -- -- 16,032 3,151 14,931
Depreciation and amortization.... 45,790 114,207 304,972 722,233 1,401,063 820,800 1,911,372
Corporate expenses............... 8,527 20,883 37,825 70,146 142,627 91,862 140,832
--------- ----------- ----------- ----------- ----------- ----------- ----------
Operating income (loss).......... 99,090 167,574 240,878 253,666 304,878 264,346 (355,142)
Interest expense................. 30,080 75,076 135,766 179,404 383,104 230,795 428,683
Gain (loss) on sale of assets
related to mergers............. -- -- -- 138,659 783,743 805,183 (57,390)
Gain on marketable securities.... -- 3,819 39,221 22,930 -- -- 29,512
Equity in earnings (loss) of
nonconsolidated affiliates..... (3,441) 9,132 10,305 18,183 25,155 18,036 11,619
Other income (expense) -- net.... 2,230 7,760 (26,411) (15,638) (17,133) (7,340) (19,049)
--------- ----------- ----------- ----------- ----------- ----------- ----------
Income (loss) before income taxes
and extraordinary item......... 67,799 113,209 128,227 238,396 713,539 849,430 (819,133)
Income tax (expense) benefit..... (30,103) (49,633) (74,196) (152,741) (464,731) (408,670) 40,706
--------- ----------- ----------- ----------- ----------- ----------- ----------
Income (loss) before
extraordinary item............. 37,696 63,576 54,031 85,655 248,808 440,760 (778,427)
Extraordinary item............... -- -- -- (13,185) -- -- --
--------- ----------- ----------- ----------- ----------- ----------- ----------
Net income (loss)................ $ 37,696 $ 63,576 $ 54,031 $ 72,470 $ 248,808 $ 440,760 $ (778,427)
========= =========== =========== =========== =========== =========== ==========
9
NINE MONTH PERIOD
YEAR ENDED DECEMBER 31, ENDED SEPTEMBER 30,
----------------------------------------------------------------- ------------------------
1996 1997 1998 1999 2000 2000 2001
--------- ----------- ----------- ----------- ----------- ----------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Net income (loss) per common
share:
Basic:
Income (loss) before
extraordinary item......... $ 0.26 $ 0.36 $ 0.23 $ 0.27 $ 0.59 $ 1.19 $ (1.32)
Extraordinary item........... -- -- -- (0.04) -- -- --
--------- ----------- ----------- ----------- ----------- ----------- ----------
Net income (loss)............ $ 0.26 $ 0.36 $ 0.23 $ 0.23 $ 0.59 $ 1.19 $ (1.32)
========= =========== =========== =========== =========== =========== ==========
Diluted:
Income (loss) before
extraordinary item......... $ 0.25 $ 0.33 $ 0.22 $ 0.26 $ 0.57 $ 1.13 $ (1.32)
Extraordinary item........... -- -- -- (0.04) -- -- --
--------- ----------- ----------- ----------- ----------- ----------- ----------
Net income (loss)............ $ 0.25 $ 0.33 $ 0.22 $ 0.22 $ 0.57 $ 1.13 $ (1.32)
========= =========== =========== =========== =========== =========== ==========
Weighted-average common shares
outstanding
Basic.......................... 146,844 176,960 236,060 312,610 423,969 370,099 590,015
========= =========== =========== =========== =========== =========== ==========
Diluted........................ 149,260 183,030 249,123 324,408 438,711 405,854 590,015
========= =========== =========== =========== =========== =========== ==========
STATEMENT OF CASH FLOWS DATA:
Cash flows from operating
activities..................... $ 107,604 $ 166,497 $ 278,989 $ 639,406 $ 755,085 $ 631,015 $ 354,133
========= =========== =========== =========== =========== =========== ==========
Cash flows from investing
activities..................... $(796,764) $(1,345,828) $(1,602,318) $(1,474,170) $(1,755,654) $(1,451,712) $ (39,549)
========= =========== =========== =========== =========== =========== ==========
Cash flows from financing
activities..................... $ 700,470 $ 1,187,287 $ 1,335,170 $ 874,990 $ 1,120,683 $ 1,128,819 $ (245,023)
========= =========== =========== =========== =========== =========== ==========
AS OF DECEMBER 31,
------------------------- AS OF SEPTEMBER 30,
1999 2000 2001
----------- ----------- -------------------
(IN THOUSANDS)
BALANCE SHEET DATA:
Cash and cash equivalents................................... $ 76,724 $ 196,838 $ 266,399
Total assets................................................ 16,821,512 50,056,461 48,390,411
Long-term debt, net of current.............................. 4,584,352 10,597,082 9,685,701
Shareholders' equity........................................ 10,084,037 30,347,173 29,920,884
NINE MONTH PERIOD
YEAR ENDED DECEMBER 31, ENDED SEPTEMBER 30,
------------------------------------------------------ -----------------------
1996 1997 1998 1999 2000 2000 2001
-------- -------- -------- -------- ---------- ---------- ----------
(IN THOUSANDS)
OTHER DATA:
After tax cash flow.................. $101,587 $192,723 $381,555 $752,777 $1,282,014 $ 802,913 $1,237,647
======== ======== ======== ======== ========== ========== ==========
EBITDA............................... $144,880 $281,781 $545,850 $975,899 $1,721,973 $1,088,297 $1,571,161
======== ======== ======== ======== ========== ========== ==========
10
ACKERLEY GROUP SUMMARY HISTORICAL CONSOLIDATED FINANCIAL DATA
The following sets forth summary historical financial data for Ackerley
Group as of and for the five years ended December 31, 2000, and as of and for
the nine month periods ended September 30, 2000 and 2001. The financial data for
the nine month periods ended September 30, 2000 and 2001 are derived from
unaudited consolidated financial statements. The unaudited consolidated
financial statements include all adjustments, consisting of normal recurring
accruals, which Ackerley Group considers necessary for a fair presentation of
its consolidated financial position and its consolidated results of operations
for these periods. Due to seasonality and other factors, operating results for
the nine month period ended September 30, 2001 are not necessarily indicative of
the results that may be expected for the entire year ending December 31, 2001.
After tax cash flow is calculated as the sum of income (loss) from continuing
operations, depreciation and amortization expense, extraordinary or
non-recurring items, including the net after tax (gain) or loss on dispositions
of assets and equity in losses of affiliates. EBITDA is net revenue less
operating expenses and corporate expenses. You should not consider after tax
cash flow and EBITDA in isolation from, or as a substitute for, or more
meaningful than, operating income, net income or cash flow and other
consolidated income or cash flow statement data computed in accordance with
generally accepted accounting principles, or as a measure of operating
performance, or as an alternative to operating cash flows as a measure of
liquidity. Although after tax cash flow and EBITDA are not calculated in
accordance with generally accepted accounting principles, they are widely used
in the media industry as a measure of a company's operating performance because
they assist in comparing performance across companies without regard to
depreciation and amortization, which can vary significantly depending on
accounting methods, particularly where acquisitions are involved. In addition,
Ackerley Group's calculation of after tax cash flows and EBITDA is not
necessarily comparable to similarly titled measures reported by other companies,
including Clear Channel.
Acquisitions and dispositions significantly impact the comparability of the
historical consolidated financial data reflected in this financial data. This
information is only a summary and you should read the information presented
below in conjunction with the Consolidated Financial Statements and the Notes
thereto, and Management's Discussion and Analysis for Ackerley Group,
incorporated into this document by reference, which qualify the information
presented below in its entirety.
NINE MONTH PERIOD
YEAR ENDED DECEMBER 31, ENDED SEPTEMBER 30,
----------------------------------------------------- --------------------
1996 1997 1998 1999 2000 2000 2001
-------- -------- -------- --------- -------- -------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
STATEMENT OF OPERATIONS
DATA:
Net revenue................ $175,651 $197,743 $201,501 $ 207,583 $224,564 $164,290 $ 148,928
Operating expenses......... 116,904 132,076 136,420 142,048 157,674 114,874 122,344
Non-cash compensation
expense.................. -- 9,344 452 559 100 70 305
Depreciation and
amortization............. 14,255 13,184 14,078 26,042 39,161 25,711 31,916
Corporate expenses......... 8,233 10,013 14,491 16,142 23,792 17,619 16,401
-------- -------- -------- --------- -------- -------- ---------
Operating income (loss).... 36,259 33,126 36,060 22,792 3,837 6,016 (22,038)
Interest expense........... 22,514 24,209 22,792 32,959 25,795 16,424 20,646
Gain (loss) on dispositions
of assets................ -- -- 33,524 28,999 277,650 280,166 (2,198)
Equity in losses of
nonconsolidated
affiliates............... -- -- -- (174) (801) (801) --
Other income
(expense) -- net......... -- 5,000 -- -- -- -- --
-------- -------- -------- --------- -------- -------- ---------
Income (loss) from
continuing operations
before income taxes and
extraordinary items...... 13,745 13,917 46,792 18,658 254,891 268,957 (44,882)
Income tax (expense)
benefit.................. (2,007) 19,168 (18,576) (7,917) (96,284) (107,897) 14,613
-------- -------- -------- --------- -------- -------- ---------
Income (loss) from
continuing operations
before extraordinary
items.................... 11,738 33,085 28,216 10,741 158,607 161,060 (30,269)
Discontinued operations.... 4,391 (156) (4,693) (2,778) (9,707) (4,285) 92,689
Extraordinary items........ (355) -- (4,346) (1,373) -- -- (2,650)
-------- -------- -------- --------- -------- -------- ---------
Net income................. $ 15,774 $ 32,929 $ 19,177 $ 6,590 $148,900 $156,775 $ 59,770
======== ======== ======== ========= ======== ======== =========
11
NINE MONTH PERIOD
YEAR ENDED DECEMBER 31, ENDED SEPTEMBER 30,
----------------------------------------------------- --------------------
1996 1997 1998 1999 2000 2000 2001
-------- -------- -------- --------- -------- -------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Net income (loss) per
common share:
Basic:
Income (loss) from
continuing operations
before extraordinary
items................ $ 0.38 $ 1.05 $ 0.89 $ 0.33 $ 4.54 $ 4.60 $ (0.86)
Discontinued
operations........... 0.14 -- (0.14) (0.09) (0.28) (0.12) 2.64
Extraordinary items.... (0.01) -- (0.14) (0.04) -- -- (0.08)
-------- -------- -------- --------- -------- -------- ---------
Net income............. $ 0.51 $ 1.05 $ 0.61 $ 0.20 $ 4.26 $ 4.48 $ 1.70
======== ======== ======== ========= ======== ======== =========
Diluted:
Income (loss) from
continuing operations
before extraordinary
items................ $ 0.37 $ 1.04 $ 0.88 $ 0.32 $ 4.52 $ 4.58 $ (0.86)
Discontinued
operations........... 0.14 -- (0.14) (0.08) (0.28) (0.12) 2.64
Extraordinary items.... (0.01) -- (0.14) (0.04) -- -- (0.08)
-------- -------- -------- --------- -------- -------- ---------
Net income............. $ 0.50 $ 1.04 $ 0.60 $ 0.20 $ 4.24 $ 4.46 $ 1.70
======== ======== ======== ========= ======== ======== =========
Weighted-average common
shares outstanding
Basic.................... 31,166 31,345 31,627 32,932 34,994 34,985 35,073
======== ======== ======== ========= ======== ======== =========
Diluted.................. 31,760 31,652 31,883 33,110 35,122 35,124 35,073
======== ======== ======== ========= ======== ======== =========
STATEMENT OF CASH FLOWS
DATA:
Cash flows from operating
activities............... $ 16,337 $ 28,010 $ 14,844 $ (167) $(78,249) $(66,656) $ (27,796)
======== ======== ======== ========= ======== ======== =========
Cash flows from investing
activities............... $(32,095) $(19,801) $(46,947) $(186,806) $ 98,528 $114,775 $ 186,939
======== ======== ======== ========= ======== ======== =========
Cash flows from financing
activities............... $ 12,247 $ (7,463) $ 33,077 $ 185,151 $(18,400) $(47,002) $(103,043)
======== ======== ======== ========= ======== ======== =========
AS OF
AS OF DECEMBER 31, SEPTEMBER 30,
------------------- -------------
1999 2000 2001
-------- -------- -------------
(IN THOUSANDS)
BALANCE SHEET DATA:
Cash and cash equivalents................................... $ 2,808 $ 4,687 $ 6,787
Total assets................................................ 528,436 667,307 627,949
Long-term debt, net of current.............................. 403,761 385,439 289,336
Shareholders' equity........................................ 27,289 175,980 236,645
NINE MONTH PERIOD
YEAR ENDED DECEMBER 31, ENDED SEPTEMBER 30,
----------------------------------------------- -------------------
1996 1997 1998 1999 2000 2000 2001
------- ------- ------- ------- ------- ------- -------
(IN THOUSANDS)
OTHER DATA:
After tax cash flow from
continuing operations........... $25,993 $40,700 $22,351 $20,511 $25,560 $19,520 $ 3,335
======= ======= ======= ======= ======= ======= =======
EBITDA............................ $50,514 $55,654 $50,590 $49,393 $43,098 $31,797 $10,183
======= ======= ======= ======= ======= ======= =======
12
SUMMARY UNAUDITED PRO FORMA COMBINED CONDENSED CONSOLIDATED FINANCIAL DATA
The following summary unaudited pro forma combined condensed consolidated
financial data give effect to the merger, which Clear Channel will account for
as a purchase in accordance with generally accepted accounting principles. The
statements of operations data assume that the merger was completed on January 1,
2000, and the balance sheet data assumes that the merger was completed on
September 30, 2001. Clear Channel and Ackerley Group's pro forma statements of
operations data also give effect to recently completed significant acquisitions
and dispositions as more completely described in the unaudited pro forma
combined condensed consolidated financial statements, including the notes
thereto, beginning on page P-1. Additionally, as the merger was initiated after
June 30, 2001, it will be accounted for under the newly issued Statement of
Financial Accounting Standards No. 141, Business Combinations, and Statement of
Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets.
Under the new rules, goodwill and intangible assets deemed to have indefinite
lives, such as FCC licenses, will no longer be amortized but will be subject to
annual impairment tests. Accordingly, the pro forma financial statements reflect
no amortization expense relating to Ackerley Group goodwill or FCC licenses. The
pro forma financial statements do not reflect adjustments to Clear Channel's
historical amortization expense of goodwill or FCC licenses, as adoption of the
new rules will not take effect with Clear Channel's financial statements until
January 1, 2002. In addition, the unaudited pro forma combined condensed
consolidated financial data does not reflect any cost savings and other
synergies which management of Clear Channel and Ackerley Group anticipate will
result from the merger and is not necessarily indicative of the results of
operations or the financial positions which would have occurred had the merger
been completed on the dates indicated, nor is it necessarily indicative of
future results of operations or financial position. This information is only a
summary and you should read the information presented below in conjunction with
the historical consolidated financial statements of Clear Channel and Ackerley
Group and the unaudited pro forma combined condensed consolidated financial
statements, including the notes thereto, beginning on page P-1.
YEAR ENDED DECEMBER 31, 2000
----------------------------------------------
CLEAR CHANNEL
AND ACKERLEY
GROUP
CLEAR CHANNEL ACKERLEY GROUP PRO FORMA
PRO FORMA PRO FORMA MERGER
------------- -------------- -------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
STATEMENT OF OPERATIONS DATA:
Net revenue.................................. $7,655,965 $224,564 $7,880,529
Operating income (loss)...................... (24,989) 3,837 (5,688)
Income (loss) from continuing operations..... (557,349) 168,248 (539,097)
Income (loss) from continuing operations per
common share:
Basic...................................... $ (.95) $ 4.81 $ (.90)
Diluted.................................... $ (.95) $ 4.79 $ (.90)
Weighted-average common shares outstanding:
Basic...................................... 584,443 34,994 596,318
Diluted.................................... 584,443 35,122 596,318
13
AS OF AND FOR THE NINE MONTH PERIOD ENDED
SEPTEMBER 30, 2001
------------------------------------------------
CLEAR CHANNEL
AND ACKERLEY
CLEAR CHANNEL ACKERLEY GROUP PRO FORMA
HISTORICAL PRO FORMA MERGER
------------- -------------- -------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
STATEMENT OF OPERATIONS DATA:
Net revenue................................ $6,107,857 $148,928 $6,256,785
Operating income (loss).................... (355,142) (22,038) (362,230)
Income (loss) from continuing operations... (778,427) (27,183) (794,407)
Income (loss) from continuing operations
per common share:
Basic.................................... $ (1.32) $ (0.78) $ (1.32)
Diluted.................................. $ (1.32) $ (0.78) $ (1.32)
Weighted-average common shares outstanding:
Basic.................................... 590,015 35,073 601,891
Diluted.................................. 590,015 35,073 601,891
CLEAR CHANNEL ACKERLEY GROUP PRO FORMA
HISTORICAL HISTORICAL MERGER
------------- -------------- -----------
BALANCE SHEET DATA:
Total assets............................... $48,390,411 $627,949 $49,339,602
Long-term debt, net of current............. 9,685,701 289,336 10,008,058
Shareholders' equity....................... 29,920,884 236,645 30,400,236
COMPARATIVE PER SHARE DATA
We have set forth below book value per share, historical income (loss) per
share from continuing operations, and cash dividends per share of Clear Channel,
Ackerley Group and of the combined company on a pro forma basis after giving
effect to the merger. You should read the data set forth below in conjunction
with the Ackerley Group and Clear Channel audited consolidated financial
statements, including the notes thereto, from which we have derived the data set
forth below. Clear Channel and Ackerley Group have incorporated their audited
consolidated financial statements into this document by reference. You should
also read the data in conjunction with the unaudited pro forma combined
condensed consolidated financial statements, including the notes thereto,
included elsewhere in this document.
AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2000
----------------------------------------------
CLEAR CHANNEL
AND ACKERLEY
CLEAR CHANNEL ACKERLEY GROUP GROUP
HISTORICAL HISTORICAL PRO FORMA(1)
------------- -------------- -------------
Book value per share:
Basic...................................... $ 71.58 $5.03 N.A.
Diluted.................................... 69.17 5.01 N.A.
Income (loss) per share from continuing
operations:
Basic...................................... .59 4.54 (.90)
Diluted.................................... .57 4.52 (.90)
Cash dividends per share..................... -- 0.02 --
(1) Book value per share is not presented as of December 31, 2000 as the
Unaudited Pro Forma Combined Condensed Consolidated Balance Sheet is only
presented as of September 30, 2001.
14
AS OF AND FOR THE NINE MONTH PERIOD ENDED
SEPTEMBER 30, 2001
-----------------------------------------------
CLEAR CHANNEL
AND
CLEAR CHANNEL ACKERLEY GROUP ACKERLEY GROUP
HISTORICAL HISTORICAL PRO FORMA
------------- -------------- --------------
Book value per share:
Basic..................................... $50.71 $ 6.75 $50.51
Diluted................................... 50.71 6.75 50.51
Income (loss) per share from continuing
operations:
Basic..................................... (1.32) (0.86) (1.32)
Diluted................................... (1.32) (0.86) (1.32)
Cash dividends per share.................... -- -- --
COMPARATIVE PER SHARE MARKET PRICE AND DIVIDEND INFORMATION
The following table sets forth the high and low closing sales prices for a
share of Clear Channel common stock and for a share of Ackerley ordinary common
stock for the period indicated. The prices are as reported on the NYSE Composite
Transaction Tape based on published financial sources. Ackerley ordinary common
stock is currently traded on the New York Stock Exchange under the symbol "AK."
Clear Channel common stock is currently traded on the New York Stock Exchange
under the symbol "CCU." The information below reflects a two-for-one stock split
of Clear Channel's outstanding common stock effected in July 1998.
CLEAR CHANNEL ACKERLEY ORDINARY
COMMON STOCK COMMON STOCK
--------------- -----------------
HIGH LOW HIGH LOW
------ ------ ------- -------
Fiscal Year 1998:
First Quarter.................................... $50.03 $36.72 $24.33 $14.78
Second Quarter................................... 54.56 44.06 22.15 19.65
Third Quarter.................................... 61.75 40.38 24.58 19.59
Fourth Quarter................................... 54.50 36.13 20.71 16.60
Fiscal Year 1999:
First Quarter.................................... $67.44 $53.13 $19.09 $16.66
Second Quarter................................... 74.00 65.06 19.97 16.73
Third Quarter.................................... 79.88 64.38 19.16 12.17
Fourth Quarter................................... 90.25 71.25 18.16 11.42
Fiscal Year 2000:
First Quarter.................................... $95.38 $60.00 $19.40 $12.67
Second Quarter................................... 81.88 62.25 15.00 11.19
Third Quarter.................................... 83.81 56.00 14.00 9.81
Fourth Quarter................................... 60.50 45.75 11.63 7.88
Fiscal Year 2001:
First Quarter.................................... $67.00 $49.99 $15.00 $ 8.75
Second Quarter................................... 63.98 51.10 12.75 10.45
Third Quarter.................................... 63.35 36.80 14.50 9.59
Fourth Quarter (through November 26, 2001)....... 48.70 37.50 16.66 10.00
15
The following table sets forth the prices for a share of Clear Channel
common stock and for a share of Ackerley ordinary common stock on November 26,
2001, a recent trading day prior to the printing of this document, and on
October 5, 2001, the last trading day prior to the public announcement of the
merger agreement. The prices are as reported on the NYSE Composite Transaction
Tape based on published financial sources.
CLEAR CHANNEL ACKERLEY ORDINARY
COMMON STOCK COMMON STOCK
------------- -----------------
NOVEMBER 26, 2001....................................... $46.65 $16.18
OCTOBER 5, 2001......................................... $40.31 $11.00
Because the exchange ratio in the merger is fixed and because the market
price of Clear Channel common stock is subject to fluctuation, the market value
of the shares of Clear Channel common stock that the Ackerley Group shareholders
will receive in the merger may increase or decrease before and after the special
meeting. WE URGE ACKERLEY GROUP SHAREHOLDERS TO OBTAIN CURRENT MARKET QUOTATIONS
FOR CLEAR CHANNEL COMMON STOCK AND ACKERLEY COMMON STOCK PRIOR TO MAKING ANY
DECISION WITH RESPECT TO THE MERGER. WE CANNOT GIVE ANY ASSURANCE AS TO THE
FUTURE PRICES OR MARKETS FOR CLEAR CHANNEL COMMON STOCK.
Clear Channel has not declared a cash dividend on its common stock since it
became a public company except for a $3.00 per share cash dividend which was
paid in July of 1989. Clear Channel intends to retain future earnings for use in
its business and does not anticipate paying any cash dividends on Clear Channel
common stock in the foreseeable future. Ackerley Group declared a cash dividend
of $0.02 per share in each of 1998, 1999 and 2000, but determined not to declare
a dividend in 2001. Ackerley Group is not permitted to pay any dividends by the
terms of the merger agreement, as more fully described under "The Merger
Agreement -- Covenants and Agreements -- Conduct of Business of Ackerley Group
Pending the Merger." Furthermore, the terms of Ackerley Group's senior debt
impose certain limits upon Ackerley Group's ability to pay dividends and make
other distributions. Subject to the aforementioned restrictions, the decision to
declare a dividend, and the amount thereof, if any, will be in the sole
discretion of the Ackerley Group Board.
16
RISK FACTORS
You should carefully consider the following important factors, in addition
to those discussed in the documents that we have filed with the Securities and
Exchange Commission which we have incorporated by reference in this document, to
determine whether to vote for the proposals relating to the merger.
RISK FACTORS RELATING TO THE MERGER
THE SEPTEMBER 11, 2001 TERRORIST ATTACKS MAY CONTINUE TO AFFECT THE RESULTS OF
OPERATION OF CLEAR CHANNEL AND ACKERLEY GROUP
Clear Channel and Ackerley Group may be affected by the events of September
11, 2001 in New York, Washington, D.C., and Pennsylvania, as well as by the
actions taken by the United States in response to such events. At this time, it
is not known how significantly these events will affect the radio broadcasting,
television, outdoor advertising or live entertainment industries. As of the date
of this prospectus, it is unclear whether the September 11 events and their
aftermath will materially impact Clear Channel and Ackerley Group. However, as a
result of expanded news coverage following the attacks and subsequent military
action, both Clear Channel and Ackerley Group experienced a loss in advertising
revenues and increased incremental operating expenses. The events of September
11 have further depressed economic activity in the United States and globally,
including the markets in which Clear Channel and Ackerley Group operate. If weak
economic conditions continue or worsen, the financial condition and results of
operations of Clear Channel or Ackerley Group may be materially and adversely
affected. Furthermore, there is no assurance that there will not be further
terrorist attacks against the United States or United States businesses,
including real or threatened attacks using chemical or biological agents.
Although neither Clear Channel nor Ackerley Group have received specific
threats, such attacks might directly impact Clear Channel and Ackerley Group
physical facilities or personnel, potentially causing substantial losses or
disruptions to their operations.
FIXED EXCHANGE RATIO DESPITE CHANGES IN OUR RESPECTIVE STOCK PRICES
The exchange ratio is a fixed ratio that will not be adjusted as a result
of any increase or decrease in the price of either Clear Channel common stock or
Ackerley common stock. The prices of Ackerley common stock and Clear Channel
common stock at the time the merger is completed may be higher or lower than its
prices on the date of this document or on the date of the meeting of Ackerley
Group's shareholders. Changes in the business, operations or prospects of
Ackerley Group or Clear Channel, market assessments of the likelihood that the
merger will be completed, the anticipated closing date of the merger, the
conditions, if any, imposed on Clear Channel or Ackerley Group to consummate the
merger, regulatory considerations, general market and economic conditions, or
other factors may affect the prices of Ackerley common stock, Clear Channel
common stock or both. Most of these factors are beyond the control of Clear
Channel and Ackerley Group. Since the merger will be completed only after all
the conditions to the merger are satisfied, including the holding of the meeting
of Ackerley Group's shareholders, there is no way to be sure that the price of
Ackerley common stock or of Clear Channel common stock on the date of the
meeting will be indicative of its price at the time the merger is completed. We
urge you to obtain current market quotations for both Ackerley common stock and
Clear Channel common stock.
INTEGRATION OF THE BUSINESSES OF CLEAR CHANNEL AND ACKERLEY GROUP
In determining to approve the merger and the merger agreement, the Ackerley
Group Board considered the potential complementary effects of combining its
company, assets, personnel and operational expertise with those of Clear
Channel. As soon as practicable following the merger, Clear Channel intends to
integrate the operations of Ackerley Group into its operations. However, there
can be no assurance that Clear Channel will successfully integrate the
operations of Ackerley Group with those of Clear Channel or that all of the
benefits expected from such integration will be realized. Any delays or
unexpected costs incurred in connection with such integration could adversely
affect Clear Channel. Additionally, integrating
17
businesses involves a number of special risks, including the possibility that
management may be distracted from regular business concerns by the need to
integrate operations, unforeseen difficulties in integrating operations and
systems, problems concerning assimilating and retaining the employees of the
acquired company, challenges in retaining customers and potential adverse
short-term effects on operating results.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of the Ackerley Group Board with respect
to the merger, shareholders should be aware that certain officers of Ackerley
Group and the members of the Ackerley Group Board have interests in the merger
that may be different from, or in addition to, the interests of shareholders
generally. For certain officers, these interests relate to accelerated vesting
of stock options, potential retention and severance payments, consulting fees or
indemnification rights. For certain directors, these interests relate to an
earlier payment of their quarterly non-employee director fees in the form of
Ackerley ordinary common stock. In addition, prior to the closing of the merger,
Ackerley Group will repay to an entity owned by certain officers and directors
the $500,000 loan from such entity to Ackerley Group and Ackerley Group will,
subject to documentation and arrangements reasonably acceptable to Clear
Channel, transfer a lease obligation of Ackerley Group to Mr. Barry A. Ackerley
or his designee. Members of the Ackerley Group Board were aware of these
interests and considered them, among other matters, in making their
recommendation to approve the merger and the merger agreement.
THE COMBINED COMPANY WILL HAVE SUBSTANTIAL PRO FORMA LOSSES
On a pro forma basis, after giving effect to the mergers with AMFM Inc. and
SFX Entertainment, Inc., which Clear Channel completed during 2000, Clear
Channel had a loss for the year ended December 31, 2000. The loss is primarily
related to the significant amount of amortization expense recorded related to
the goodwill and certain indefinite lived intangibles created by these two
mergers. Under the existing accounting principles, Clear Channel will not
amortize the goodwill amount or indefinite lived intangibles recorded in the
Ackerley Group merger. This accounting treatment is reflected in the "Unaudited
Pro Forma Combined Condensed Consolidated Financial Statements." Clear Channel
adopted Statement of Financial Accounting Standards No. 141, Business
Combinations, on July 1, 2001 and will adopt Statement of Financial Accounting
Standards No. 142, Goodwill and Other Intangible Assets, on January 1, 2002. As
a result of these statements, beginning in 2002, Clear Channel will cease
amortization on all recorded goodwill and indefinite lived intangibles. Instead,
goodwill and indefinite lived intangibles will be evaluated for possible
impairment using a "fair value" approach. Clear Channel is currently evaluating
different valuation techniques to be used in the impairment test as well as
other implementation issues. Clear Channel's preliminary assessment is that an
impairment charge under the new requirements of Statement 142 may possibly be
recorded upon adoption of Statement 142. See "Unaudited Pro Forma Combined
Condensed Consolidated Financial Statements."
CLEAR CHANNEL MAY NEED TO DIVEST ASSETS AND AGREE TO ONGOING OPERATING
RESTRICTIONS TO OBTAIN REGULATORY APPROVALS NECESSARY FOR THE MERGER
The FCC must complete its review before the merger can be completed. We can
give no assurance that the FCC will either complete its review in a timely
manner or do so without imposing significant restrictions, conditions, or
divestitures. Clear Channel expects to be required to divest television or radio
stations in five markets or geographical areas to comply with FCC rules as a
result of the merger. These divestitures and operating restrictions could
adversely affect the value of the combined company. A court could issue an
injunction before or after the Ackerley Group shareholders' meeting.
IF THE MERGER IS NOT COMPLETED THE COMPANIES' STOCK PRICES COULD DECLINE
The obligations of Clear Channel and Ackerley Group to complete the merger
are subject to the satisfaction or waiver of certain conditions. See page 57 for
a discussion of these conditions. These conditions might not be satisfied or
waived and the merger might not be completed. Noncompletion of the merger would
likely have a negative effect on the stock trading price of one or both parties.
18
RISK FACTORS ARISING AFTER THE SHAREHOLDERS' MEETING OR THE MERGER
CLEAR CHANNEL WILL HAVE MORE DEBT
Following the merger, Clear Channel's debt obligations will increase. At
September 30, 2001, Clear Channel had borrowings under its credit facilities and
other debt outstanding of approximately $10.0 billion. At September 30, 2001,
Clear Channel had shareholder's equity of $29.9 billion. At September 30, 2001,
Ackerley Group had total outstanding indebtedness of approximately $290.9
million. Clear Channel expects to continue to borrow funds to finance
acquisitions of media related properties, as well as for other purposes. Clear
Channel's debt obligations could increase substantially because of the debt
levels of companies that it may acquire in the future. Clear Channel is
permitted to borrow up to $1.8 billion under its reducing revolving line of
credit at a floating rate, which at September 30, 2001, was equal to the London
InterBank Offered Rate plus 0.40% and up to $3.0 billion under its other credit
facilities at a floating rate, which at September 30, 2001, was equal to the
London InterBank Offered Rate plus 0.625%. As of September 30, 2001, Clear
Channel had borrowed approximately $1.6 billion under its reducing revolving
line of credit and $1.1 billion under its other credit facilities.
Such a large amount of indebtedness could have negative consequences for
Clear Channel following the merger, including without limitation the following:
- limitations on its ability to obtain financing in the future;
- much of its cash flow will be dedicated to interest obligations and
unavailable for other purposes;
- the high level of indebtedness limits its flexibility to deal with
changing economic, business and competitive conditions; and
- the high level of indebtedness could make Clear Channel more vulnerable
to an increase in interest rates, a downturn in its operating performance
or a decline in general economic conditions.
The failure to comply with the covenants in the agreements governing the
terms of Clear Channel's or its subsidiaries' indebtedness, including Ackerley
Group, following the merger could be an event of default and could accelerate
the payment obligations and, in some cases, could affect other obligations with
cross-default and cross-acceleration provisions.
CLEAR CHANNEL MAY NEED TO REPAY OR REDEEM ACKERLEY GROUP INDEBTEDNESS
Ackerley Group's bank credit facility of $91.5 million will become payable
as a result of the merger. Clear Channel will have to refinance Ackerley Group's
bank credit facility under its credit facility after the merger. The merger will
also trigger the change in control provisions of Ackerley Group's publicly held
indebtedness of $200.0 million. Clear Channel must offer to purchase the
outstanding Ackerley Group public indebtedness for consideration equal to 101%
of the principal amount, plus any accrued and unpaid interest. If the holders
require that Clear Channel purchase all or a substantial portion of the Ackerley
Group public indebtedness, Clear Channel may be required to draw down on its
credit facilities to satisfy such obligations.
CLEAR CHANNEL'S OPERATIONS MAY BE RESTRICTED BY ACKERLEY GROUP INDEBTEDNESS AND
AMFM INDEBTEDNESS
If all or part of Ackerley Group's public indebtedness remains outstanding
after the merger because either the Ackerley Group debtholders do not accept
Clear Channel's mandatory offers to purchase such indebtedness or Clear Channel
does not otherwise purchase such indebtedness, the terms of such indebtedness
may restrict the ability of Ackerley Group and its subsidiaries to make funds
available to Clear Channel in the form of dividends, loans, advances or
otherwise. Much of Ackerley Group's indebtedness is high-yield indebtedness and
restricts Ackerley Group and its subsidiaries from incurring additional
indebtedness, repaying other debt, repurchasing or redeeming capital stock,
selling assets or stock, making certain investments or acquisitions, engaging in
asset swaps, mergers or consolidations and
19
entering into transactions with affiliates. The covenants for this type of
indebtedness are more restrictive than those contained in Clear Channel's public
indebtedness. In addition, some of AMFM's public indebtedness remains
outstanding. All of this indebtedness is also considered high yield indebtedness
and contains similar restrictions to that of Ackerley Group's indebtedness.
Accordingly, the Ackerley Group and AMFM indebtedness which remains outstanding
following the merger may continue to:
- cause Clear Channel to incur substantial consolidated interest expense
and principal repayment obligations;
- limit Clear Channel's ability to obtain additional debt financing;
- make it more difficult for Clear Channel to combine its operations with
Ackerley Group and AMFM; and
- place more restrictions on Clear Channel's ability to manage Ackerley
Group and AMFM than Clear Channel currently faces in the management of
the rest of its business.
CLEAR CHANNEL IS DEPENDENT ON KEY PERSONNEL
Clear Channel's business is dependent upon the performance of key
employees. Clear Channel employs or independently contracts with several on-air
personalities and hosts of syndicated radio programs with significant audiences
in their respective markets. Although Clear Channel has entered into long-term
agreements with some of its executive officers, key on-air talent and program
hosts to protect their interests in those relationships, Clear Channel can give
no assurance that after the merger all or any of these key employees will remain
with the combined entity or will retain their audiences.
CLEAR CHANNEL'S INTERNATIONAL OPERATIONS HAVE ADDED RISKS
Doing business in foreign countries carries with it risks that are not
found in doing business in the United States. Clear Channel currently derives a
portion of its revenues from international radio, outdoor and entertainment
operations in countries around the world and a key element of its business
strategy is to expand its international operations. The risks of doing business
in foreign countries which could result in losses against which Clear Channel is
not insured include:
- exposure to local economic conditions;
- potential adverse changes in the diplomatic relations of foreign
countries with the United States;
- hostility from local populations;
- the adverse effect of currency exchange controls;
- restrictions on the withdrawal of foreign investment and earnings;
- government policies against businesses owned by foreigners;
- investment restrictions or requirements;
- expropriations of property;
- the potential instability of foreign governments;
- the risk of insurrections;
- risks of renegotiation or modification of existing agreements with
governmental authorities;
- foreign exchange restrictions;
- withholding and other taxes on remittances and other payments by
subsidiaries; and
- changes in taxation structure.
20
EXCHANGE RATES MAY CAUSE FUTURE LOSSES IN CLEAR CHANNEL'S INTERNATIONAL
OPERATIONS
Because Clear Channel owns assets overseas and derives revenues from their
international operations, such companies may incur currency translation losses
due to changes in the values of foreign currencies and in the value of the U.S.
dollar. Clear Channel cannot predict the effect of exchange rate fluctuations
upon future operating results. To reduce a portion of its exposure to the risk
of international currency fluctuations, Clear Channel maintains a natural hedge
through borrowings in currencies other than the U.S. dollar. Clear Channel
reviews this debt position monthly. Clear Channel currently maintains no
derivative instruments to reduce the exposure to translation and/or transaction
risk but may adopt other hedging strategies in the future.
EXTENSIVE GOVERNMENT REGULATION MAY LIMIT CLEAR CHANNEL'S OPERATIONS
Broadcasting. The federal government extensively regulates the domestic
broadcasting industry, and any changes in the current regulatory scheme could
significantly affect the combined company. Clear Channel's broadcasting
businesses depend upon maintaining broadcasting licenses issued by the Federal
Communications Commission for maximum terms of eight years. Renewals of
broadcasting licenses can be attained only through the FCC's grant of
appropriate applications. Although the FCC rarely denies a renewal application,
the FCC could deny future renewal applications. Such a denial could adversely
affect the combined company's operations.
The federal communications laws limit the number of broadcasting properties
Clear Channel may own in a particular area. While the Telecommunications Act of
1996 relaxed the FCC's multiple ownership limits, any subsequent modifications
that tighten those limits could adversely affect the combined company following
the merger by making it impossible for Clear Channel to complete potential
acquisitions or requiring Clear Channel to divest stations it has already
acquired. For instance, the FCC has adopted modified rules that in some cases
permit a company to own fewer radio stations than allowed by the
Telecommunications Act of 1996 in markets or geographical areas where the
company also owns television stations. These modified rules could require Clear
Channel to divest radio stations it currently owns in markets or areas where
Clear Channel also owns television stations. As a result of these rules, Clear
Channel will need to divest radio or television stations in several markets or
geographical areas in connection with its merger with Ackerley Group.
Moreover, changes in governmental regulations and policies may have a
material impact upon Clear Channel. For example, Clear Channel currently
provides programming to several television stations it does not own and receives
programming from other parties for certain television stations it does own.
These programming arrangements are made through contracts known as local
marketing agreements. The FCC has revised its rules and policies regarding
television local marketing agreements. These revisions will restrict Clear
Channel's ability to enter into television local marketing agreements in the
future, and may eventually require Clear Channel to terminate its programming
arrangements under existing local marketing agreements. Additionally, the FCC
has adopted rules which under certain circumstances subject previously
nonattributable debt and equity interests in communications media to the FCC's
multiple ownership restrictions. These rules may limit Clear Channel's ability
to expand its media holdings. Also, the FCC has recently instituted a proceeding
to consider a broad range of possible changes to its rules governing radio
ownership in local markets. These possible changes may limit Clear Channel's
ability to make future radio acquisitions, and may eventually require Clear
Channel to terminate existing agreements whereby it provides programming to or
sells advertising on radio stations it does not own. Additionally, under an
interim policy announced by the FCC in connection with its proceeding to modify
the radio ownership rules, the FCC could designate for hearing or significantly
delay approval of certain pending Clear Channel radio acquisitions which, in the
FCC's view, raise local market concentration concerns.
Antitrust. Additional acquisitions by Clear Channel of radio and
television stations, outdoor advertising properties and live entertainment
operations or entities may require review by foreign antitrust agencies under
the antitrust laws of foreign jurisdictions and will require antitrust review by
the federal antitrust agencies. Clear Channel can give no assurances that the
Department of Justice or the Federal
21
Trade Commission or foreign antitrust agencies will not seek to bar it from
acquiring additional radio or television stations, outdoor advertising or
entertainment properties in any market where Clear Channel already has a
significant position. Following the passage of the Telecommunications Act of
1996, the DOJ has become more aggressive in reviewing proposed acquisitions of
radio stations, particularly in instances where the proposed acquirer already
owns one or more radio station properties in a particular market and seeks to
acquire another radio station in the same market. The DOJ 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 DOJ also actively reviews proposed acquisitions of
outdoor advertising properties. In addition, the antitrust laws of foreign
jurisdictions will apply if Clear Channel acquires international broadcasting
properties.
Environmental and Other Regulations. As the owner or operator of various
real properties and facilities, especially in Clear Channel's outdoor
advertising and venue operations, Clear Channel must comply with various
foreign, federal, state and local environmental, health, safety and land use
laws and regulations. Clear Channel and its properties are subject to such laws
and regulations relating to the use, storage, disposal, emission and release of
hazardous and non-hazardous substances and employee health and safety, as well
as zoning and noise level restrictions which may affect, among other things, the
hours of operations of its venues. Historically, neither Clear Channel nor
Ackerley Group has incurred significant expenditures to comply with these laws.
However, additional laws which may be passed in the future, or a finding of a
violation of or liability under existing laws, could require the combined
company to make significant expenditures and otherwise adversely affect its
operations.
GOVERNMENT REGULATION OF OUTDOOR ADVERTISING MAY ADVERSELY AFFECT CLEAR
CHANNEL'S OUTDOOR ADVERTISING OPERATIONS
The outdoor advertising industry is subject to extensive governmental
regulation at the federal, state and local level. These regulations include
restrictions on the construction, repair, upgrading, height, size and location
of and, in some instances, content of advertising copy being displayed on
outdoor advertising structures. In addition, the outdoor advertising industry is
subject to certain foreign governmental regulation. Compliance with existing and
future regulations could have a significant financial impact on Clear Channel.
Federal law, principally the Highway Beautification Act of 1965, requires,
as a condition to federal highway assistance, states to implement legislation to
restrict billboards located within 660 feet of, or visible from, highways except
in commercial or industrial areas and requires certain additional size, spacing
and other limitations. 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. Federal law does not require removal of existing lawful
billboards, but does require payment of compensation if a state or political
subdivision compels the removal of a lawful billboard along a federally aided
primary or interstate highway. State governments have purchased and removed
legal billboards for beautification in the past, using federal funding for
transportation enhancement programs, and may do so in the future.
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 billboard to the applicable regulations at its
own cost without any compensation. Several municipalities within Clear Channel's
existing markets have adopted amortization ordinances. Restrictive regulations
also limit Clear Channel's ability to rebuild or replace nonconforming
billboards. Clear Channel can give no assurance that it will be successful in
negotiating acceptable arrangements in
22
circumstances in which their billboards are subject to removal or amortization,
and what effect, if any, such regulations may have on its operations.
In addition, Clear Channel is unable to predict what additional regulations
may be imposed on outdoor advertising in the future. The outdoor advertising
industry is heavily regulated and at various times and in various markets can be
expected to be subject to varying degrees of regulatory pressure affecting the
operation of advertising displays. Legislation regulating the content of
billboard advertisements and additional billboard restrictions has 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 Clear Channel operates, could have a
material adverse effect on Clear Channel.
CHANGES IN RESTRICTIONS ON OUTDOOR TOBACCO ADVERTISING AND ALCOHOL ADVERTISING
MAY POSE RISKS
The outdoor advertising industry is subject to regulations related to
outdoor tobacco advertising. In addition, recent settlement agreements and
potential legislation related to outdoor tobacco advertising have and will
likely continue to affect Clear Channel's outdoor advertising operations.
Out-of-court settlements between the major U.S. tobacco companies and all 50
states include a ban on 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 Clear
Channel conducts business, and could have a similar impact. Any significant
reduction in alcohol related advertising due to content-related restrictions
could cause a reduction in Clear Channel's direct revenue from such
advertisements and a simultaneous increase in the available space on the
existing inventory of billboards in the outdoor advertising industry.
CLEAR CHANNEL'S ACQUISITION STRATEGY COULD POSE RISKS
Operational Risks. Clear Channel intends to grow through the acquisition
of media-related assets and other assets or businesses that Clear Channel
believes will assist its customers in marketing their products and services.
Clear Channel's acquisition strategy involves numerous risks, including:
- certain of such acquisitions may prove unprofitable and fail to generate
anticipated cash flows;
- to successfully manage a rapidly expanding and significantly larger
portfolio of broadcasting, outdoor advertising, entertainment and other
properties, Clear Channel may need to recruit additional senior
management and expand corporate infrastructure;
- entry into markets and geographic areas where it has limited or no
experience;
- Clear Channel may encounter difficulties in the integration of operations
and systems;
- management's attention may be diverted from other business concerns; and
- Clear Channel may lose key employees of acquired companies or stations.
Clear Channel frequently evaluates strategic opportunities both within and
outside its existing lines of business. Clear Channel expects from time to time
to pursue additional acquisitions and may decide to dispose of certain
businesses. These acquisitions or dispositions could be material. The merger
agreement does not prohibit Clear Channel from entering into acquisition
agreements or completing acquisitions, nor does it require Clear Channel to
obtain the consent of Ackerley Group prior to entering into acquisition
agreements or completing acquisitions.
23
Capital Requirements Necessary for Additional Acquisitions. Clear Channel
will face stiff competition from other broadcasting, outdoor advertising and
entertainment companies for acquisition opportunities. If the prices sought by
sellers of these companies continue to rise, Clear Channel may find fewer
acceptable acquisition opportunities. In addition, the purchase price of
possible acquisitions could require additional debt or equity financing on the
part of Clear Channel. Clear Channel can give no assurance that it will obtain
the needed financing or that it will obtain such financing on attractive terms.
Additional indebtedness could increase Clear Channel's leverage and make Clear
Channel more vulnerable to economic downturns and may limit its ability to
withstand competitive pressures. Additional equity financing could result in
dilution to Clear Channel's shareholders.
CLEAR CHANNEL FACES INTENSE COMPETITION IN THE BROADCASTING, OUTDOOR ADVERTISING
AND LIVE ENTERTAINMENT INDUSTRIES
Clear Channel's business segments are in highly competitive industries, and
it may not be able to maintain or increase its current audience ratings and
advertising and sales revenues. Clear Channel's radio stations and outdoor
advertising properties compete for audiences and advertising revenues with other
radio stations and outdoor advertising companies, as well as with other media,
such as newspapers, magazines, cable television, and direct mail, within their
respective markets. Audience ratings and market shares are subject to change,
which could have an adverse effect on Clear Channel's revenues in that market.
Clear Channel's live entertainment operations compete with other venues to serve
artists likely to perform in that general region and, in the markets in which
Clear Channel promotes musical concerts, Clear Channel faces competition from
promoters, as well as from certain artists who promote their own concerts. Other
variables that could affect Clear Channel's financial performance include:
- economic conditions, both general and relative to the radio broadcasting,
outdoor advertising and live entertainment industries;
- shifts in population and other demographics;
- the level of competition for advertising dollars;
- fluctuations in operating costs;
- technological changes and innovations;
- changes in labor conditions; and
- changes in governmental regulations and policies and actions of federal
regulatory bodies.
NEW TECHNOLOGIES MAY AFFECT CLEAR CHANNEL'S BROADCASTING OPERATIONS
The FCC has introduced or is considering ways to introduce new technologies
to the broadcasting industry, including satellite and terrestrial delivery of
digital audio broadcasting and the standardization of available technologies
which significantly enhance the sound quality of radio broadcasts. Clear Channel
is unable to predict the effect such technologies will have on its broadcasting
operations, but the capital expenditures necessary to implement such
technologies could be substantial and other companies employing such
technologies could compete with Clear Channel's businesses. Clear Channel also
faces risks in implementing the conversion of its television stations to digital
television, which the FCC has ordered and for which it has established a
timetable. Clear Channel will incur considerable expense in the conversion to
digital television and is unable to 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 Clear Channel's
operational costs. One issue yet to be resolved is the extent to which cable
systems will be required to carry broadcasters' new digital channels. Clear
Channel's 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
Clear Channel's television operations.
24
CLEAR CHANNEL'S LIVE ENTERTAINMENT BUSINESS IS HIGHLY SENSITIVE TO PUBLIC TASTES
AND DEPENDENT ON CLEAR CHANNEL'S ABILITY TO SECURE POPULAR ARTISTS, LIVE
ENTERTAINMENT EVENTS AND VENUES
Clear Channel's ability to generate revenues through its live entertainment
operations is highly sensitive to rapidly changing public tastes and dependent
on the availability of popular performers and events. Since Clear Channel relies
on unrelated parties to create and perform live entertainment content, any lack
of availability of popular musical artists, touring Broadway shows, specialized
motor sports talent and other performers could limit its ability to generate
revenues. In addition, Clear Channel requires access to venues to generate
revenues from live entertainment events. Clear Channel operates a number of its
live entertainment venues under leasing or booking agreements. Clear Channel's
long-term success in the live entertainment business will depend in part on its
ability to renew these agreements when they expire or end. Clear Channel may be
unable to renew these agreements on acceptable terms or at all, and may be
unable to obtain favorable agreements with new venues.
25
THE MEETING
This document is furnished in connection with the solicitation of proxies
from Ackerley Group shareholders for use at the Ackerley Group shareholders'
meeting. This document is also furnished to Ackerley Group shareholders as a
prospectus in connection with the issuance of Clear Channel common stock in the
merger. This document and accompanying form of proxy are first being mailed to
Ackerley Group shareholders on or about December 3, 2001.
WHEN AND WHERE THE MEETING WILL BE HELD
The meeting will be held on January 24, 2002 at 9:00 a.m. local time, at
351 Elliott Avenue West, Seattle, Washington.
WHAT WILL BE VOTED UPON
At the meeting, Ackerley Group shareholders will consider and vote upon a
proposal to adopt the merger agreement and approve the merger. You will also
consider any other matters that may properly come before the meeting or any
adjournment or postponement of the meeting.
ONLY ACKERLEY GROUP COMMON SHAREHOLDERS OF RECORD AS OF NOVEMBER 26, 2001, ARE
ENTITLED TO VOTE
Ackerley Group has established the close of business on November 26, 2001,
as the record date to determine Ackerley Group shareholders entitled to receive
notice of and vote at the meeting. At the close of business on the record date,
24,108,416 shares of Ackerley ordinary common stock were outstanding and
entitled to vote at the meeting, and were held by approximately 500 record
holders. Clear Channel has advised Ackerley Group that, as of the record date,
it held 1,170,000 shares of Ackerley ordinary common stock. At the close of
business on the record date, 11,020,622 shares of Ackerley Class B common stock
were outstanding and entitled to vote at the meeting and were held by 22 record
holders. Votes may be cast at the meeting in person or by proxy.
A MAJORITY OF THE VOTING POWER OF ALL OUTSTANDING SHARES MUST BE REPRESENTED FOR
A VOTE TO BE TAKEN
The presence at the meeting, either in person or by proxy, of a majority of
the voting power of the shares of Ackerley common stock outstanding on the
record date is necessary to constitute a quorum to transact business at that
meeting. In the absence of a quorum at the meeting, or for any other reason, the
holders of shares of Ackerley common stock representing a majority of the voting
power present in person or represented by proxy at the meeting may adjourn the
meeting for the purpose of allowing additional time to solicit and obtain
additional proxies or votes or for any other purpose. If a quorum is not
present, it is expected that the meeting will be adjourned or postponed in order
to solicit additional proxies. At any reconvened meeting at which a quorum is
present, all proxies will be voted in the same manner as those proxies would
have been voted at the meeting at which the adjournment is taken, except for any
proxies that have been effectively revoked or withdrawn. Once a quorum is
present, Ackerley Group may reconvene the meeting without notice to
shareholders, other than an announcement at the meeting at which the adjournment
is taken, unless the adjournment is for more than 30 days or a new record date
is set.
Abstentions and "broker non-votes" will be counted solely for the purpose
of determining whether a quorum is present. Broker non-votes are shares held by
brokers or nominees on behalf of customers that are represented at the meeting
but with respect to which the broker or nominee has not been instructed how to
vote. Brokers holding shares of Ackerley common stock in street name for
customers are prohibited from voting those customers' shares regarding the
merger and merger agreement in the absence of specific instructions from those
customers.
ABSTENTIONS AND BROKER NON-VOTES WILL NOT BE DEEMED TO BE CAST EITHER "FOR"
OR "AGAINST" THE PROPOSAL ALTHOUGH THEY WILL BE COUNTED FOR PURPOSES OF
DETERMINING WHETHER THERE IS A QUORUM. ACCORDINGLY, THE ACKERLEY GROUP BOARD
URGES YOU TO COMPLETE, DATE AND SIGN THE ACCOMPANYING PROXY AND RETURN IT
PROMPTLY IN THE ENCLOSED, POSTAGE-PAID ENVELOPE.
26
VOTE REQUIRED FOR APPROVAL
Approval and adoption of the merger and the merger agreement requires the
affirmative vote of the holders of a majority of the voting power of all of the
shares of Ackerley common stock outstanding on the record date, with the holders
of Ackerley ordinary common stock and the holders of Ackerley Class B common
stock voting together as a single class. Each outstanding share of Ackerley
ordinary common stock is entitled to one vote on each matter to be considered at
the meeting. Each outstanding share of Ackerley Class B common stock is entitled
to ten votes on each matter to be considered at the meeting. A shareholder's
failure to vote will have the effect of a vote against the adoption of the
merger agreement and the approval of the merger. Brokers generally will not have
discretionary authority to vote shares of common stock held in "street name" if
they have not received instructions from the beneficial owners. Broker non-votes
will have the same effect as votes cast against the merger agreement and the
merger.
As of the record date:
- Ackerley Group's directors and executive officers beneficially owned
9,086,970 shares of Ackerley ordinary common stock and 11,003,856 shares
of Ackerley Class B common stock, which represented approximately 57% of
the outstanding shares of Ackerley common stock and 89% of the vote
attributable to the common stock as a whole. As a condition to Clear
Channel's willingness to enter into the merger agreement, Mr. Barry A.
Ackerley, the Chairman of the Board and Chief Executive Officer of
Ackerley Group, has agreed to vote his shares of Ackerley ordinary common
stock, representing approximately 6.7% of the voting power of all
outstanding shares of Ackerley common stock entitled to vote at the
meeting, "FOR" the merger and the merger agreement. This voting
arrangement is described more fully under "The Merger
Agreement -- Stockholder Voting and Support Agreement."
- Ackerley Group's directors and executive officers held options or other
securities convertible into an additional 35,000 shares of Ackerley
ordinary common stock, of which such options or other securities, none
were vested and exercisable. The shares of Ackerley ordinary common stock
issuable pursuant to these securities cannot be voted unless the holders
elect to exercise the securities.
PROXIES
Shares of Ackerley common stock represented by properly executed proxies,
if such proxies are received before the date of the Ackerley Group meeting and
are not revoked, will be voted in accordance with instructions indicated on the
proxies. Except for the broker non-votes, if no instructions are indicated,
those proxies will be voted "FOR" the approval and adoption of the merger and
the merger agreement and as determined by the Ackerley Group Board as to any
other matter that may properly come before the meeting. In the event that a
quorum is not present at the time the Ackerley Group meeting is convened, or if
for any other reason Ackerley Group believes that additional time should be
allowed for the solicitation of proxies, Ackerley Group may postpone the meeting
or may adjourn the meeting with or without a vote of shareholders. If Ackerley
Group proposes to postpone or adjourn the Ackerley Group meeting by a vote of
shareholders, the persons named in the enclosed form of proxy will vote all
Ackerley Group shares for which they have voting authority in favor of a
postponement or adjournment. However, such persons will not vote any Ackerley
Group shares for which they have been instructed to vote against the merger and
the merger agreement in favor of that postponement or adjournment.
Any Ackerley Group shareholder who executes and returns a proxy may revoke
it at any time prior to the voting of the proxies by:
- writing to the Corporate Secretary or Assistant Secretary of Ackerley
Group at the address below;
- completing a new proxy card and sending it to the Corporate Secretary or
Assistant Secretary of Ackerley Group at the address below, in which case
the new proxy card will automatically replace any earlier dated proxy
card;
27
- voting in person at the meeting (attendance at the meeting will not
automatically revoke a proxy); or
- assuming that you instructed a broker to vote your shares, following your
broker's directions for changing those instructions.
All written notices of revocation and other communications with respect to
revocation of proxies should be addressed to:
The Ackerley Group, Inc.
1301 Fifth Avenue, Suite 4000
Seattle, Washington 98101
Attention: Corporate Secretary or Assistant Secretary
A proxy appointment will not be revoked by death or incapacity of the
Ackerley Group shareholder executing the proxy unless, before the shares are
voted, notice of such death or incapacity is filed with Ackerley Group's
Corporate Secretary, Assistant Secretary or other person responsible for
tabulating votes on Ackerley Group's behalf.
YOUR ATTENDANCE AT THE MEETING WILL NOT BY ITSELF CONSTITUTE REVOCATION OF
YOUR PROXY -- YOU MUST ALSO VOTE IN PERSON AT THE ACKERLEY GROUP MEETING. IF YOU
INSTRUCTED YOUR BROKER TO VOTE YOUR ACKERLEY GROUP SHARES, YOU MUST FOLLOW THE
BROKER'S DIRECTIONS IN ORDER TO CHANGE YOUR VOTE.
Ackerley Group will appoint one or more inspectors, who may be Ackerley
Group employees, to determine, among other things, the number of shares of
Ackerley common stock represented at the meeting and the validity of the proxies
submitted for vote at the meeting. The inspectors of election appointed for the
meeting will tabulate votes cast by proxy and in person.
SOLICITATION OF PROXIES
Ackerley Group will pay the cost of soliciting proxies. In addition to
solicitation by mail, Ackerley Group's and Clear Channel's directors, officers
and employees may solicit proxies by telephone, fax, telegram or in person.
Arrangements will also be made with brokerage houses and other nominees and
fiduciaries for forwarding solicitation material to the beneficial owners of
stock held of record by those persons, and Ackerley Group will reimburse those
custodians, nominees and fiduciaries for their reasonable out-of-pocket
expenses. This proxy is being solicited by Ackerley Group's Board of Directors.
Ackerley Group pays the costs of soliciting this proxy. Ackerley Group has
retained Georgeson Shareholder-New Jersey to assist in the solicitation for a
fee of approximately $5,000, plus reimbursement for reasonable out-of-pocket
expenses.
SURRENDER OF CERTIFICATES
IF THE MERGER IS CONSUMMATED, HOLDERS OF ACKERLEY COMMON STOCK WILL RECEIVE
INSTRUCTIONS REGARDING THE SURRENDER OF THEIR STOCK CERTIFICATES. SHAREHOLDERS
SHOULD NOT SEND THEIR STOCK CERTIFICATES UNTIL THEY RECEIVE THOSE INSTRUCTIONS.
RECOMMENDATION OF THE ACKERLEY GROUP BOARD
The Ackerley Group Board approved the merger and the merger agreement. The
Ackerley Group Board believes that the merger agreement and the transactions it
contemplates, including the merger, are fair to, and are in the best interests
of, Ackerley Group shareholders and Ackerley Group and recommends that you vote
"FOR" the approval of the merger and the merger agreement.
28
THE MERGER
STRUCTURE OF THE MERGER
At the time the merger becomes effective, a wholly owned merger subsidiary
of Clear Channel will merge with and into Ackerley Group and will cease to exist
as a separate corporation. After the merger Ackerley Group will remain in
existence as the surviving corporation and a wholly owned subsidiary of Clear
Channel. Clear Channel's merger subsidiary and Ackerley Group are both
incorporated in Delaware.
MERGER CONSIDERATION
In the merger, each share of Ackerley ordinary common stock, par value
$0.01 per share, outstanding immediately before the merger and each share of
Ackerley Class B common stock, par value $0.01 per share, outstanding
immediately before the merger will be converted into the right to receive 0.35
of a share of Clear Channel common stock. No fractional Clear Channel shares
will be issued in the merger, and cash equal to the value of any fraction of a
share will be paid in lieu thereof. All Ackerley Group shares held in the
treasury of Ackerley Group will be canceled. Clear Channel and Ackerley expect
that the merger generally will be tax-free to holders of Ackerley common stock
for federal income tax purposes except to the extent holders of Ackerley common
stock receive cash instead of fractional Clear Channel shares.
EFFECTIVE TIME OF THE MERGER
The merger will become effective when a certificate of merger is filed with
the Secretary of State of Delaware or at such other time as will be specified in
the certificate of merger. The effective time of the merger will occur no later
than the second business day following the satisfaction or waiver of all the
conditions in the merger agreement. We expect the effective time of the merger
to occur in the first quarter of 2002 if we obtain the required approval of
Ackerley Group shareholders and satisfy numerous other conditions. However, we
cannot give assurance that the merger will be completed within that time period
or at all because there are many conditions to the merger, some of which are not
within our control. For more information regarding these conditions, see "The
Merger Agreement -- Conditions."
BACKGROUND OF THE MERGER
As part of the continuous evaluation of its business, Ackerley Group
regularly considers a variety of strategic options and transactions and has in
the past held discussions regarding, and engaged in, transactions with Clear
Channel unrelated to the merger. In January 2000, Ackerley Group sold
substantially all of the assets of its Miami-Fort Lauderdale and West Palm
Beach-Fort Pierce, Florida outdoor billboard operations to Eller Media Company,
a subsidiary of Clear Channel, for approximately $300.0 million in cash, plus
the assumption of certain liabilities. In the spring of 2001, Ackerley Group and
Clear Channel engaged in discussions regarding the possible sale of certain
assets of Ackerley Group's radio segment; however, discussions were discontinued
and no transaction was consummated.
In early July 2001, Mr. Karl Eller, Chairman and Chief Executive Officer of
Clear Channel Outdoor, a subsidiary of Clear Channel, and Mr. Barry A. Ackerley,
Chairman and Chief Executive Officer of Ackerley Group, had a telephone
conversation during which they discussed the possible acquisition of Ackerley
Group by Clear Channel. Mr. Eller and Mr. Barry Ackerley agreed to meet in
person for further discussions.
Also in early July 2001, Clear Channel retained Salomon Smith Barney as its
financial advisor to advise Clear Channel with respect to a potential
transaction with Ackerley Group.
At a meeting on July 12, 2001, Mr. Eller and Mr. Barry Ackerley further
discussed the possible acquisition of Ackerley Group by Clear Channel. They
discussed the potential strategic fit of the two companies, but they did not
discuss any specific terms of such a transaction.
29
Subsequent to the July 12, 2001 meeting, Mr. Barry Ackerley and Mr. Eller
had a telephone conversation during which Mr. Eller proposed the acquisition of
Ackerley Group by Clear Channel and indicated that Clear Channel would be
willing to consider a fixed exchange ratio transaction pursuant to which each
outstanding share of Ackerley common stock would be exchanged for 0.35 of a
share of Clear Channel common stock.
On July 26, 2001, Mr. Barry Ackerley had a telephone conversation with Mr.
Eller during which Mr. Ackerley stated that he would present Mr. Eller's
proposal to the Ackerley Group Board seeking approval to proceed with
negotiations and preliminary due diligence. Mr. Eller indicated to Mr. Ackerley
that Clear Channel desired to move very quickly with a view to an announcement
of the transaction in early August.
On July 26, 2001, at a regularly scheduled meeting of the Clear Channel
Board, management of Clear Channel, including Mr. Eller and Mr. Randall Mays,
Executive Vice President and Chief Financial Officer of Clear Channel, presented
to the Clear Channel Board an overview of Ackerley Group's business and
operations, reviewed the discussions between Mr. Eller and Mr. Barry Ackerley
and the potential synergies between Clear Channel and Ackerley Group. After an
extensive discussion, the Clear Channel Board approved the proposed 0.35
exchange ratio and authorized the officers of Clear Channel to proceed with
further discussions with Ackerley Group.
Over the next several days, management of each company formed small teams
to determine whether a common basis existed for a business combination. At this
time, management of Clear Channel also notified its outside counsel, Akin, Gump,
Strauss, Hauer & Feld, L.L.P., of the potential transaction and retained the
firm of Richards, Layton & Finger, P.A., to advise it on certain matters of
Delaware law and the firm of Wiley, Rein & Fielding to advise it on certain FCC
matters. Management of Ackerley Group also notified its regular outside counsel,
Rubin, Winston, Diercks, Harris & Cooke, L.L.P., of the transaction and retained
that firm to advise it on certain FCC matters.
On July 31, 2001, at a regularly scheduled meeting of the Ackerley Group
Board, management of Ackerley Group, including Mr. Christopher H. Ackerley,
President of Ackerley Group and Mr. Kevin Hylton, Chief Financial Officer of
Ackerley Group, reviewed with the Ackerley Group Board the current state of the
business of Ackerley Group and the media and advertising industries in general
and management's outlook for Ackerley Group in light of economic, industry and
market trends. At this meeting, Mr. Barry Ackerley reported to the Ackerley
Group Board on the Clear Channel proposal. After an extensive discussion, the
Ackerley Group Board authorized the officers of Ackerley Group to proceed with
further discussions with Clear Channel and to keep the Ackerley Group Board
apprised of the negotiations.
During this time, management of Ackerley Group retained the firm of Dewey
Ballantine LLP as its special counsel with respect to the transaction.
Subsequently, Ackerley Group retained the firm of Morris, Nichols, Arsht &
Tunnell to advise it on certain matters of Delaware law.
On August 1, 2001, Clear Channel's legal advisors delivered a draft merger
agreement to Ackerley Group and its legal advisors.
On August 3, 2001, Ackerley Group retained Credit Suisse First Boston
Corporation as its financial advisor to advise Ackerley Group with respect to
the proposed transaction with Clear Channel.
On August 7, 2001, Ackerley Group and Clear Channel entered into a
confidentiality agreement relating to the exchange of nonpublic information for
the parties' use in evaluating a possible transaction.
On August 8, 2001, representatives of Clear Channel's management met with
representatives of Ackerley Group at Ackerley Group's headquarters in Seattle,
Washington to conduct a due diligence review. Also during this period,
representatives of Clear Channel indicated their desire to obtain an agreement
from Mr. Barry Ackerley pursuant to which he would support the proposed merger
by agreeing to vote the shares of Ackerley Group held by him in favor of the
transaction.
30
On August 10, 2001, Ackerley Group's legal advisor delivered to Clear
Channel and Clear Channel's legal advisor a markup of the draft merger
agreement, which, among other things, indicated that Ackerley Group wanted to
discuss the consideration to be paid in the proposed merger and issues relating
to the "deal protection" provisions contained in the merger agreement.
On August 14, 2001, representatives of Clear Channel and Clear Channel's
legal advisor contacted Ackerley Group's legal advisor and discussed certain
issues raised by the markup of the merger agreement provided by Ackerley Group's
legal advisor on August 10, 2001.
On August 15, 2001, Clear Channel delivered to Ackerley Group's legal
advisor a draft stockholder voting and support agreement. In light of the
requested stockholder voting and support agreement, Mr. Barry Ackerley retained
separate legal counsel, Heller Ehrman White & McAuliffe LLP, to advise him with
respect to any voting or other arrangements that he might enter into with Clear
Channel.
On August 17, 2001, Ackerley Group's legal advisor delivered to
representatives of Clear Channel a revised markup of the merger agreement which
addressed some of the issues raised by Clear Channel on the previous markup.
Also on August 17, 2001, Credit Suisse First Boston delivered to Clear
Channel's financial advisor a draft retention and severance plan that provided
for retention bonuses and severance payments to certain key employees of
Ackerley Group.
On August 21, 2001, the Ackerley Group Board held a special meeting to
discuss the current status of the negotiations with respect to the proposed
merger. At this meeting, Ackerley Group's legal advisor discussed with the
Ackerley Group Board their fiduciary duties in evaluating the proposed merger.
Prior to the meeting, each member of the Ackerley Group Board had received
copies of the August 17th markups prepared by Ackerley Group's legal advisor of
the draft agreements, as well as summaries of the draft agreements. Ackerley
Group's legal advisor reviewed with the Ackerley Group Board the principal terms
of the draft agreement as well as the modifications thereto proposed by Ackerley
Group, including the representations and warranties of the parties, covenants of
the parties, conditions to closing and, in particular, the issues raised by the
"deal protection" provisions requested by Clear Channel. The Ackerley Group
Board, including Mr. Barry Ackerley, expressed concerns that the deal protection
provisions, including the stockholder voting and support agreement, could result
in a transaction that did not afford the Ackerley Group Board a meaningful
opportunity to respond to unsolicited third-party acquisition proposals. Also at
this meeting, Credit Suisse First Boston reviewed with the Ackerley Group Board
its preliminary analysis of Ackerley Group, Clear Channel and the proposed
merger. The Ackerley Group Board also had extensive discussions with its legal
and financial advisors with respect to the use of collar mechanisms and
alternative pricing structures such as fixed value exchange ratios.
Ackerley Group's legal advisors then met separately with the independent
directors of Ackerley Group to further discuss issues in connection with the
proposed transaction. The independent directors of Ackerley Group then held
further discussions among themselves. The consensus of the independent directors
of Ackerley Group was to continue to attempt to conclude a transaction with
Clear Channel.
Between August 24 and September 3, 2001, representatives of Clear Channel
and Ackerley Group and their respective legal and financial advisors held a
number of meetings and phone conversations to discuss various issues in
connection with the merger agreement and the stockholder voting and support
agreement, including deal protection provisions, the severance and retention
proposal, and a counterproposal regarding Ackerley Group's draft collar
provision.
On September 4, 2001, representatives of Ackerley Group, Clear Channel and
their respective financial and legal advisors held a conference call to discuss
the most recent Clear Channel proposals. The participants agreed that they would
continue negotiations on the basis of an uncollared 0.35 exchange ratio and also
discussed issues raised by Ackerley Group and Mr. Barry Ackerley related to the
proposed stockholder voting and support agreement. Later that day, Ackerley
Group's legal advisor provided Clear Channel with a revised merger agreement
reflecting this discussion.
31
On September 6, 2001, representatives of Clear Channel delivered to
Ackerley Group's legal advisor a revised stockholder voting and support
agreement and a revised severance and retention proposal. Also on that date,
representatives of Clear Channel and Ackerley Group's legal advisors continued
to discuss the deal protection provisions of the merger agreement and the
stockholder voting and support agreement.
On September 7, 2001, representatives of Clear Channel, Clear Channel's
legal advisors, Ackerley Group's legal advisor, and Mr. Barry Ackerley's legal
advisor had a discussion relating to the merger agreement and the stockholder
voting and support agreement. The parties discussed a "window period" of 30 days
from the execution of the merger agreement during which Ackerley Group would
retain the right to terminate the merger agreement in the event a third party
made a superior proposal to acquire Ackerley Group. After the window period, the
Ackerley Group Board would be required to convene a shareholders meeting to
approve the merger agreement regardless of whether the Ackerley Group Board had
withdrawn or modified its recommendation of the proposed Merger. In addition,
Mr. Barry Ackerley would agree to vote his shares of Ackerley ordinary common
stock, representing approximately 6.7% of the total outstanding voting power of
Ackerley Group, in favor of the Clear Channel proposal and against any competing
transactions.
On September 10, 2001, representatives of Ackerley Group called
representatives of Clear Channel to further discuss Clear Channel's September 7,
2001 proposal regarding a "window" period. Later that day, Clear Channel's legal
advisor delivered to Ackerley Group's legal advisor revised drafts of the merger
agreement and the stockholder voting and support agreement which were intended
to reflect these discussions.
On or about September 13, 2001, the Clear Channel Board held a special
meeting to discuss the current status of the negotiations with respect to the
proposed merger. The Clear Channel Board received an update on the status of
negotiations with Ackerley Group from Clear Channel's management and legal and
financial advisors. After discussions regarding the merger agreement, the
stockholder voting and support agreement, and the potential effect of the
terrorist attacks in the United States on the United States economy and the
advertising industry, the Clear Channel Board reaffirmed its approval of the
proposed merger between Clear Channel and Ackerley Group and authorized its
officers to continue their efforts toward closing the transaction with Ackerley
Group.
On September 16, 2001, Ackerley Group's legal advisor and representatives
of Clear Channel and its legal counsel held a conference call to discuss the
transaction documents. During this discussion the parties focused on the
termination fee provisions of the merger agreement, the non-solicitation
covenant, the proposed severance and retention plan for the employees of
Ackerley Group, the termination provisions of the stockholder voting and support
agreement and the alternative and second transaction provisions of the
stockholder voting and support agreement.
On September 17, 2001, the Ackerley Group Board held a special meeting to
discuss the current status of the negotiations with respect to the proposed
merger. Prior to the meeting, each member of the Ackerley Group Board had
received copies of the then current Clear Channel drafts of the merger agreement
and the stockholder voting and support agreement, as well as summaries of each
agreement prepared by Ackerley Group's legal advisor. The Ackerley Group Board
received an update on the status of negotiations with Clear Channel from
Ackerley Group's management and Ackerley Group's legal and financial advisors.
The Ackerley Group Board also discussed the uncertainty in the equity markets
and the current state and future prospects of the radio, outdoor and television
media industries, and in particular Ackerley Group, in light of the terrorist
attacks in the United States on September 11, 2001.
On September 19, 2001, representatives of Clear Channel and its legal
advisor and representatives of Ackerley Group and Ackerley Group's legal advisor
held a conference call to negotiate certain terms of the merger agreement, the
stockholder voting and support agreement and the severance and retention plan.
Also on September 19, 2001, the independent directors of Ackerley Group
held a telephonic meeting to discuss the proposed merger. At this meeting
Ackerley Group's legal and financial advisors answered questions regarding the
negotiations with Clear Channel to date. Among other things, the independent
directors considered the amount of the proposed termination fee under the merger
agreement and the
32
circumstances under which it could become payable, including in the absence of a
superior proposal. On September 20, 2001, the independent directors of Ackerley
Group held another telephonic meeting with Ackerley Group's legal and financial
advisors to continue their consideration of the proposed merger and the issues
relating to the payment of the termination fee under the merger agreement. The
independent directors also discussed the current condition of Ackerley Group's
business and its prospects. It was the consensus of the independent directors to
continue to attempt to enter into an acquisition agreement with Clear Channel.
On September 20, 2001, Ackerley Group's legal advisor delivered to
representatives of Clear Channel and Clear Channel's legal advisors a revised
markup of the merger agreement and the stockholder voting and support agreement,
which reflected the negotiations to date.
Over the next several days, Clear Channel, Ackerley Group and Mr. Barry
Ackerley and their respective legal and financial advisors continued to
negotiate the terms of the merger agreement, the stockholder voting and support
agreement and the severance and retention plan.
On September 25, 2001, Clear Channel's legal advisor delivered to Ackerley
Group's legal advisor and Mr. Barry Ackerley's legal advisor revised drafts of
the merger agreement and the stockholder voting and support agreement, which
reflected the negotiations to date.
On September 28, 2001, representatives of Clear Channel and its legal
advisor and representatives of Ackerley Group and its legal advisor held a
conference call in order to resolve remaining issues on the merger agreement,
including the termination and termination fee provisions, the non-solicitation
covenant and the proposed severance and retention plan for the employees of
Ackerley Group. Subsequent to this conference call, Clear Channel's legal
advisor delivered to Ackerley Group's legal advisor and Mr. Barry Ackerley's
legal advisor revised drafts of the merger agreement and the stockholder voting
and support agreement, which reflected the negotiations to date.
During the period from October 1, 2001 through October 5, 2001, the legal
and business representatives of Clear Channel and Ackerley Group negotiated and
finalized the terms and form of the merger agreement and the stockholder voting
and support agreement.
Also during this period, Salomon Smith Barney delivered to Clear Channel
representatives its opinion that the exchange ratio offered to Ackerley Group's
shareholders was fair to Clear Channel from a financial point of view, and also
presented the considerations supporting Salomon Smith Barney's opinion.
Late in the afternoon of October 5, 2001, the Ackerley Group Board met to
consider the proposed transaction. At this meeting Ackerley Group's legal
advisor reviewed the fiduciary duties of the Ackerley Group Board in considering
the proposed merger. Also at the meeting, representatives of Credit Suisse First
Boston made a presentation to the Ackerley Group Board regarding the financial
terms of the proposed merger. At the conclusion of this presentation, Credit
Suisse First Boston delivered its oral opinion, which opinion was confirmed by
delivery of a written opinion dated October 5, 2001, to the effect that, as of
that date and based on and subject to the procedures followed, assumptions made,
matters considered and limitations on review described in its opinion, the
exchange ratio in the merger agreement was fair to the holders of Ackerley
ordinary common stock from a financial point of view. In addition, Ackerley
Group's legal advisor reviewed with the Ackerley Group Board the terms of the
proposed merger agreement and the stockholder voting and support agreement
(copies and summaries of which had been provided to the Ackerley Group Board in
advance of the meeting) and responded to questions from directors. After a
discussion, the Ackerley Group Board unanimously approved the merger agreement,
the stockholder voting and support agreement and the transactions contemplated
by those agreements, and resolved to recommend that Ackerley Group's
shareholders approve and adopt the merger agreement.
Thereafter, the merger agreement was executed by Ackerley Group and Clear
Channel and the stockholder voting and support agreement was executed by Clear
Channel and Mr. Barry Ackerley. The merger was publicly announced prior to the
commencement of trading on the morning of Monday, October 8, 2001.
33
RECOMMENDATION OF THE ACKERLEY GROUP BOARD AND REASONS FOR THE MERGER
For the reasons discussed below, the Ackerley Group Board has determined
that the merger is advisable and fair to, and in the best interests of, Ackerley
Group and Ackerley Group shareholders, and therefore has unanimously approved
the merger and the merger agreement and the transactions contemplated by the
merger agreement. The Ackerley Group Board recommends that the Ackerley Group
shareholders vote "FOR" the approval and adoption of the merger and the merger
agreement.
In connection with the Ackerley Group Board's unanimous approval of the
merger agreement and its determination to recommend that the Ackerley Group
shareholders approve the merger agreement and the merger, the Ackerley Group
Board consulted with Ackerley Group's management and with Ackerley Group's
financial and legal advisors and considered the following factors:
- Ackerley Group's and Clear Channel's respective businesses, assets,
management, competitive position, operating performance, trading
performance and prospects, both individually and on a combined basis;
- the financial condition, cash flows and results of operations of Ackerley
Group and Clear Channel, on both an historical and prospective basis;
- that the common stock exchange ratio, based on the closing price of Clear
Channel shares on October 5, 2001, the trading day immediately prior to
the date of public announcement of the merger, represented a 28.3%
premium to the closing share price of Ackerley ordinary common stock on
October 5, 2001;
- the fact that the value, as of the effective time of the merger, of the
shares of Clear Channel common stock to be received by Ackerley Group
shareholders may increase or decrease as a result of fluctuations in the
price of the shares of Clear Channel common stock and that such increase
or decrease in value will not be limited by any "collar" arrangement;
- the opinion of Credit Suisse First Boston that, as of the date of the
opinion and based upon and subject to the matters and limitations set
forth in the opinion, the exchange ratio was fair to the holders of
shares of Ackerley ordinary common stock from a financial point of view,
and the financial presentation made on October 5, 2001, by Credit Suisse
First Boston to the Ackerley Group Board;
- the likelihood that the combined company presents improved business
prospects and will produce greater shareholder returns than Ackerley
Group could produce on its own;
- the risks associated with continuing to execute Ackerley Group's
strategic plan as an independent entity as an alternative to the merger,
including among others, risks associated with remaining independent
amidst industry-wide consolidation and the exposure of smaller, less
well-capitalized companies to continued deterioration in the national and
regional advertising markets;
- the complementary nature of the businesses of Ackerley Group and Clear
Channel and the prospect that the asset portfolio of the combined company
will result in the clustering of broadcasting assets together in
principal markets that will permit the combined company to offer
advertisers more attractive packages of advertising options, increase the
flexibility available to its clients in the distribution of their
messages and help the clients distribute their marketing messages in more
efficient and cost-effective ways;
- the combined company will have a more complete national presence owing to
the greater number of markets it will be able to offer to its clients,
which should enhance its ability to compete with other national
diversified media companies;
- the favorable business reputation and depth of the Clear Channel
management team;
- the fact that the markets, capital investment, personnel and other
resources of Ackerley Group and Clear Channel would allow the combined
company to focus on growth in expanded markets;
34
- the strategic alternatives available to Ackerley Group in the rapidly
changing industry environment, including remaining an independent company
and the Ackerley Group Board's belief that the merger represents the best
strategic alternative available to Ackerley Group and its shareholders
under present circumstances;
- the views of Ackerley Group's management as to the potential for other
third parties to acquire Ackerley Group;
- the ability, during the 30-day period following the day after the
execution of the merger agreement and subject to limited extensions and
specified conditions in the merger agreement, (a) of Ackerley Group to
provide information to, and negotiate with, a third party which has made
an unsolicited superior acquisition proposal, and (b) of the Ackerley
Group Board to terminate the merger agreement if such acquisition
proposal is made, and the belief of the Ackerley Group Board, after
consultation with its advisors, that such a period of time presented a
sufficient opportunity for third parties to approach Ackerley Group with
competing acquisition proposals;
- that the amount of the termination fee and reimbursable transaction
expenses and the limitation on Ackerley Group's ability to solicit other
offers are reasonable and customary for mergers similar in size and would
not meaningfully impair the possibility of a competing transaction;
- the other terms and conditions of the merger agreement, including the
limited number of closing conditions, which provides for increased
certainty that the merger will be completed;
- the fact that the voting provisions of the stockholder voting and support
agreement and the proxy granted by Mr. Barry Ackerley applied only to the
shares of Ackerley ordinary common stock held by Mr. Ackerley, which
represent only approximately 6.7% of the total voting power of Ackerley
Group;
- the fact that all Ackerley Group shareholders, including the Ackerley
family, will receive the same per share consideration for their shares;
- the fact that the merger generally is intended to be a tax-free exchange
to the holders of Ackerley common stock (except for cash received in lieu
of fractional shares) which means that holders who might have realized a
significant gain as a result of their disposition of Ackerley common
stock will be able to defer recognition of such gain;
- the impact of the merger on employees, including provisions of the merger
agreement intended to protect employee benefits and to encourage
retention of employees;
- the Ackerley Group Board's conclusion that the merger would provide
Ackerley Group shareholders with an opportunity for continued equity
participation in a larger, more diversified enterprise, with greater
liquidity and a successful trading record;
- historical market prices and trading information with respect to the
Ackerley common stock and Clear Channel common stock, and Ackerley
Group's relative contribution to the combined enterprise; and
- current industry, economic and market conditions.
This discussion of the information and factors considered by the Ackerley
Group Board is not intended to be exhaustive. In view of the variety of material
factors considered in connection with its evaluation of the merger, the Ackerley
Group Board did not find it practicable to, and did not quantify or otherwise
assign relative weights to, the specific factors considered in reaching its
determination. In addition, the Ackerley Group Board conducted an overall
analysis of the factors described above and, in considering these factors,
individual members of the Ackerley Group Board may have given different weights
to different factors. The Ackerley Group Board considered all of these factors
as a whole, and overall considered the factors to be favorable to and to support
its determination. For a discussion of the interests of some members of Ackerley
Group's management and the Ackerley Group Board, see "-- Interests of Certain
Persons in the Merger."
35
OPINION OF ACKERLEY GROUP'S FINANCIAL ADVISOR
Credit Suisse First Boston has acted as financial advisor to Ackerley Group
in connection with the merger. Ackerley Group selected Credit Suisse First
Boston based on Credit Suisse First Boston's experience, expertise and
reputation. Credit Suisse First Boston is an internationally recognized
investment banking firm and is regularly engaged in the valuation of businesses
and securities in connection with mergers and acquisitions, leveraged buyouts,
negotiated underwritings, competitive biddings, secondary distributions of
listed and unlisted securities, private placements and valuations for corporate
and other purposes.
In connection with Credit Suisse First Boston's engagement, Ackerley Group
requested that Credit Suisse First Boston advise it with respect to the fairness
to the holders of the Ackerley ordinary common stock from a financial point of
view of the exchange ratio pursuant to the merger. On October 5, 2001, at a
meeting of the Ackerley Group Board held to consider the merger, Credit Suisse
First Boston rendered its opinion, to the effect that, as of that date and based
on and subject to the assumptions, limitations and qualifications described
therein, the exchange ratio was fair to the holders of the Ackerley ordinary
common stock from a financial point of view.
THE FULL TEXT OF CREDIT SUISSE FIRST BOSTON'S WRITTEN OPINION, DATED
OCTOBER 5, 2001, TO THE ACKERLEY GROUP BOARD, WHICH SETS FORTH, AMONG OTHER
THINGS, THE PROCEDURES FOLLOWED, ASSUMPTIONS MADE, MATTERS CONSIDERED AND
LIMITATIONS ON THE REVIEW UNDERTAKEN, IS ATTACHED TO THIS PROXY
STATEMENT/PROSPECTUS AS APPENDIX C. HOLDERS OF ACKERLEY ORDINARY COMMON STOCK
ARE URGED TO READ THIS OPINION CAREFULLY IN ITS ENTIRETY.
Credit Suisse First Boston's opinion is addressed to the Ackerley Group
Board and relates only to the fairness of the exchange ratio to holders of the
Ackerley ordinary common stock from a financial point of view, does not address
any other aspect of the proposed merger or any related transaction and does not
constitute a recommendation to any shareholder as to any matter relating to the
merger. The summary of Credit Suisse First Boston's opinion in this document is
qualified in its entirety by reference to the full text of the opinion.
In arriving at its opinion, Credit Suisse First Boston:
- reviewed certain publicly available business and financial information
relating to Ackerley Group and Clear Channel;
- reviewed the merger agreement;
- reviewed certain other information, including financial forecasts, that
were provided to or discussed with Credit Suisse First Boston by Ackerley
Group and Clear Channel and met with Ackerley Group's management to
discuss the business and prospects of Ackerley Group;
- considered certain financial and stock market data of Ackerley Group and
Clear Channel and compared those data with similar data for other
publicly held companies in businesses similar to those of Ackerley Group;
- considered the financial terms of certain other business combinations and
other transactions that have recently been effected; and
- considered such other information, financial studies, analyses and
investigations and financial, economic and market criteria that it deemed
relevant.
In connection with its review, Credit Suisse First Boston did not assume
any responsibility for independent verification of any of the information
provided to or otherwise reviewed by it and relied on that information being
complete and accurate in all material respects. With respect to the financial
forecasts, Credit Suisse First Boston was advised and assumed that the forecasts
were reasonably prepared on bases reflecting the best currently available
estimates and judgments of Ackerley Group's management as to the future
financial performance of Ackerley Group and as to the cost savings and other
potential synergies, including the amount, timing and achievability thereof,
anticipated to result from the merger.
36
Credit Suisse First Boston also assumed, with the Ackerley Group Board's
consent, that the merger will be treated as a tax-free reorganization for United
States federal income tax purposes.
Credit Suisse First Boston was not requested to make, and did not make, an
independent evaluation or appraisal of the assets or liabilities, contingent or
otherwise, of Ackerley Group or Clear Channel, nor was Credit Suisse First
Boston furnished with any such evaluations or appraisals. Credit Suisse First
Boston's opinion was necessarily based upon information available to it and
financial, economic, market and other conditions as they existed and could be
evaluated on the date of the opinion. Credit Suisse First Boston did not express
any opinion as to what the actual value of the Clear Channel common stock will
be when issued to the holders of the Ackerley ordinary common stock pursuant to
the merger or the prices at which Clear Channel common stock will trade at any
time. Credit Suisse First Boston's opinion did not address the relative merits
of the merger as compared to other business strategies that might be available
to Ackerley Group or Ackerley Group's underlying business decision to engage in
the merger. Credit Suisse First Boston was not requested to, and did not,
solicit third party indications of interest in acquiring all or any part of
Ackerley Group.
Although Credit Suisse First Boston evaluated the fairness of the exchange
ratio to the holders of Ackerley ordinary common stock from a financial point of
view, Credit Suisse First Boston was not requested to, and did not, recommend
the specific consideration to be payable in the merger, which consideration was
determined in arm's-length negotiations between Ackerley Group and Clear
Channel. No limitations were imposed on Credit Suisse First Boston with respect
to the investigations made or procedures followed in rendering its opinion.
In preparing its opinion to the Ackerley Group Board, Credit Suisse First
Boston performed a variety of financial and comparative analyses, including
those described below. The preparation of a fairness opinion is a complex
analytical process involving various determinations as to the most appropriate
and relevant methods of financial analyses and the application of those methods
to the particular circumstances and, therefore, a fairness opinion is not
readily susceptible to partial analysis or summary description. In arriving at
its opinion, Credit Suisse First Boston made qualitative judgments as to the
significance and relevance of each analysis and factor that it considered.
Accordingly, Credit Suisse First Boston believes that its analyses must be
considered as a whole and that selecting portions of its analyses and factors or
focusing on information presented in tabular format, without considering all
analyses and factors or the narrative description of the analyses, could create
a misleading or incomplete view of the processes underlying its analyses and
opinion.
In its analyses, Credit Suisse First Boston considered industry
performance, regulatory, general business, economic, market and financial
conditions and other matters, many of which are beyond the control of Ackerley
Group and Clear Channel. No company, transaction or business used in Credit
Suisse First Boston's analyses as a comparison is identical to Ackerley Group or
Clear Channel or the proposed merger, and an evaluation of the results of those
analyses is not entirely mathematical. Rather, the analyses involve complex
considerations and judgments concerning financial and operating characteristics
and other factors that could affect the merger, public trading or other values
of the companies, business segments or transactions being analyzed.
The estimates contained in Credit Suisse First Boston's analyses and the
ranges of valuations resulting from any particular analysis are not necessarily
indicative of actual values or predictive of future results or values, which may
be significantly more or less favorable than those suggested by the analyses. In
addition, analyses relating to the value of businesses or securities do not
purport to be appraisals or to reflect the prices at which businesses or
securities actually may be sold. Accordingly, Credit Suisse First Boston's
analyses and estimates are inherently subject to substantial uncertainty.
Credit Suisse First Boston's opinion and financial analyses were only one
of many factors considered by the Ackerley Group Board in its evaluation of the
proposed merger and should not be viewed as determinative of the views of the
Ackerley Group Board or management with respect to the merger or the exchange
ratio.
37
SUMMARY OF FINANCIAL ANALYSES
The following is a summary of the material financial analyses underlying
Credit Suisse First Boston's opinion, dated October 5, 2001, delivered to the
Ackerley Group Board in connection with the merger. The financial analyses
summarized below include information presented in tabular format. In order to
fully understand Credit Suisse First Boston's financial analyses, the tables
must be read together with the text of each summary. Considering the data set
forth in the tables without considering the narrative description of the
financial analyses, including the methodologies and assumptions underlying the
analyses, could create a misleading or incomplete view of Credit Suisse First
Boston's analyses.
Comparable Public Companies Analysis
Credit Suisse First Boston analyzed the financial, operating and stock
market data of the following two publicly traded diversified media companies and
one publicly traded outdoor media company that Credit Suisse First Boston
believed were reasonably comparable to Ackerley Group:
- Clear Channel Communications, Inc.
- Emmis Communications Corporation
- Lamar Advertising Company
For each company, Credit Suisse First Boston reviewed the company's
enterprise value, calculated as equity value, using October 4, 2001 closing
prices, plus debt, preferred stock and minority interest less cash and
unconsolidated investments as a multiple of calendar year 2001 and 2002
estimated station operating income excluding depreciation, amortization,
corporate, general and administrative expenses, nonrecurring items and other
non-cash charges, commonly referred to as broadcast cash flow or BCF, and
earnings before interest, taxes, depreciation and amortization, commonly
referred to as EBITDA. Credit Suisse First Boston then selected a reference
range of multiples of enterprise value to estimated 2001 BCF and then applied
that reference range to the corresponding data for Ackerley Group. The estimated
financial data for the comparable companies was based on publicly available
research analysts' estimates and public filings. This analysis indicated an
implied exchange ratio reference range of .24x to .27x.
Segment Analysis
Comparable Public Companies Analysis. Credit Suisse First Boston compared
financial, operating and stock market data for companies that are comparable to
Ackerley Group's outdoor, television and radio segments to corresponding data
from Ackerley Group's segments. Credit Suisse First Boston compared data from
Lamar Advertising Company to Ackerley Group's outdoor advertising segment, data
from Hearst-Argyle Television, Inc., Sinclair Broadcast Group, Inc., and Young
Broadcasting, Inc., to Ackerley Group's television segment, and data from Cox
Radio, Inc., Entercom Communications Corporation, Beasley Broadcast Group, Inc.,
Cumulus Media, Inc., and Saga Communications, Inc., to Ackerley Group's radio
segment.
For each company, Credit Suisse First Boston reviewed the company's
enterprise value as a multiple of calendar year 2001 and 2002 estimated BCF and
EBITDA. Credit Suisse First Boston then selected a reference range of multiples
of enterprise value to estimated 2001 BCF for each business segment and then
applied that reference range to the corresponding segment data for Ackerley
Group. The estimated financial data for the comparable companies was based on
publicly available research analysts' estimates and public filings. This
analysis indicated an implied exchange ratio reference range of .21x to .26x.
38
Comparable Transactions Analysis
Credit Suisse First Boston reviewed selected implied transaction multiples
in selected acquisitions involving companies that Credit Suisse First Boston
believed to be reasonably comparable to Ackerley Group's outdoor, television and
radio segments. These transactions consist of:
OUTDOOR MEDIA COMPANY TRANSACTIONS
TARGET ACQUIROR
- Bowlin Outdoor Advertising & Travel - Lamar Advertising Company
Centers, Inc.
- Advantage Outdoor Company, Inc. - Lamar Advertising Company
- The Ackerley Group, Inc. (Florida outdoor - Clear Channel Communications, Inc.
assets)
- Chancellor Media Corporation (outdoor - Lamar Advertising Company
assets)
- Outdoor Systems, Inc. - Infinity Outdoor, Inc.
- Whiteco Industries, Inc. (Whiteco Outdoor - Chancellor Media Corporation
Advertising unit)
- Outdoor Communications, Inc. - Lamar Advertising Company
TELEVISION COMPANY TRANSACTIONS
TARGET ACQUIROR
- USA Networks, Inc. (acquired KHSC, WHSE, - Univision Communications, Inc.
WHSI, WQHS, WAMI, WEHS, KHSH, KSTR, WHSH,
WBHS, WHSP, WBSF and WHOT; acquired
minority interests in WHSL, KTVJ, KPST and
WTMV)
- Imes Communications (WMUR) - Hearst-Argyle Television, Inc.
- BHC Communications, Inc. - News Corporation, Ltd.
- Civic Communications - Liberty Corporation
- Lee Enterprises, Inc. (KOIN; KRQE including - Emmis Communications Corporation
satellite stations KBIM and KREZ; WSAZ;
KSNW including satellite stations KSNG,
KSNC and KSNK; KGMB including satellite
stations KGMD and KGMV; KGUN, KMTV; and
KSNT)
- Spartan Communications, Inc. - Media General, Inc.
- The Chronicle Publishing Company (KRON) - Young Broadcasting, Inc.
- The Chronicle Publishing Company (WOWT and - Benedek Broadcasting Corporation
KAKE) (subsidiary of Benedek Communications
Corporation)
- MAC America Communications, Inc. (KTVK and - The A.H. Belo Corporation
KASW)
- The A.H. Belo Corporation (KASA, KHNL, and - Raycom Media, Inc.
operating rights for KFVE)
- Press Communications L.L.C. (WKCF) - Emmis Communications Corporation
- GOCOM Communications - Grapevine Communications
- Granite Broadcasting Corporation (KEYE) - CBS Corporation
- Gaylord Entertainment Company (KTVT) - CBS Corporation
- Sinclair Broadcast Group, Inc. (WICS, WICD - Sunrise Television Corporation
and KGAN)
39
TARGET ACQUIROR
- Retlaw Entertainment, Inc. - Fisher Companies Inc.
- Guy Gannett Communications (WGME, WGGB, - Sinclair Broadcast Group, Inc.
KGAN, WICS, WCID, WTWC and WOKR)
- Kelly Broadcasting Company (KCRA and a time - Hearst-Argyle Television, Inc.
brokerage agreement for KQCA)
- Tribune Company (WGNX) - Meredith Corporation
- Kelly Broadcasting Company (KCPQ) - Meredith Corporation (later transferred to
Tribune Company)
- Pulitzer Publishing Company (WESH, WYFF, - Hearst-Argyle Television, Inc.
WDSU, WGAL, WXII, KOAT, WLKY, KCCI and
KETV)
- River City Broadcasting L.P. (substantially - Sinclair Broadcast Group, Inc.
all assets of WSYX, excluding FCC license)
- Malrite Communications Group - Raycom Media, Inc.
- SF Broadcasting of Wisconsin, Inc. and SF - Emmis Broadcasting Corporation (now Emmis
Multistations, Inc. and Subsidiaries Communications Corporation)
- Sullivan Broadcasting Company - Sinclair Broadcast Group, Inc.
- Granite Broadcasting Corporation (WWMT and - Freedom Communications Inc.
WLAJ)
RADIO COMPANY TRANSACTIONS
TARGET ACQUIROR
- Blue Chip Broadcasting, Inc. - Radio One, Inc.
- Citadel Communications Corporation - Forstmann, Little & Company
- Infinity Broadcasting Corporation - Viacom, Inc.
- Clear Channel Communications, Inc. (KXPX - Emmis Communications Corporation
and KKFR)
- Midwestern Broadcasting Company - Cox Radio, Inc.
- Hearst-Argyle Television, Inc. (KTAR, KMVP - Emmis Communications Corporation
and KKLT)
- Clear Channel Communications, Inc. (WJMO/ - Radio One, Inc.
WZAK, KBFB, WJMZ, KBXX/KMJQ, KKBT, WVCG,
WFXC/WFXK and WNNL/WQOK)
- Clear Channel Communications, Inc. (KOOL, - Infinity Broadcasting Corporation
KZON, KMLE, KPLN, KYXY, KDJM, KIMN, KXKL,
WDOK, WQAL, WZJM, WUBE, WJHM, WOCL, WOMX,
WMFR, WSJS and WSML)
- Clear Channel Communications, Inc. (WYGY/ - Salem Communications Corporation
WBOB, WKNR/WRMR, KDGE, KALC and KEZY/KXMX)
- Clear Channel Communications, Inc. (WKHK/ - Cox Radio, Inc.
WKLR, WMXB/WTVR, KKBQ/KKTL and KLDE)
- Sinclair Broadcast Group, Inc. (KPNT, KXOK, - Emmis Communications Corporation
WVRV, WRTH, WIL and KIHT)
- AMFM, Inc. - Clear Channel Communications, Inc.
40
TARGET ACQUIROR
- Sinclair Broadcast Group, Inc. - Entercom Communications Corporation
(substantially all radio stations)
- Jacor Communications, Inc. - Clear Channel Communications, Inc.
- Capstar Broadcasting Corporation - Chancellor Media Corporation
- Triathlon Broadcasting Company - Capstar Broadcasting Corporation
Credit Suisse First Boston compared the transaction value in each of the
comparable acquisitions as a multiple of estimated one year forward BCF. All
multiples were calculated based on financial information from publicly available
research analysts' estimates and public filings available at the time of the
relevant transaction. Credit Suisse First Boston then selected a reference range
of multiples of transaction value to one year forward BCF for each segment and
then applied that reference range to the corresponding 2002 segment data for
Ackerley Group. This analysis indicated an implied exchange ratio reference
range of .32x to .45x.
Discounted Cash Flow Analysis
Credit Suisse First Boston considered the present value of the stand-alone,
unlevered, after-tax free cash flows that Ackerley Group could produce over
calendar years 2002 through 2005, based on three scenarios: Scenario
I -- projections without reflecting synergies provided by management, Scenario
II -- projections reflecting synergies provided by management and Scenario
III -- Scenario I with adjustments provided by management to reflect a
challenging economic environment and the potential for lower revenue growth and
operating margins. Credit Suisse First Boston calculated ranges of estimated
terminal values for Ackerley Group by multiplying calendar year 2005 estimated
EBITDA, by multiples ranging from 12x to 14x. The free cash flows and terminal
values for Ackerley Group were then discounted to present value using discount
rates ranging from 9.5% to 13.5%. The mid-range of this analysis indicated an
implied exchange ratio reference range of .27x to .33x for Scenario I, .29x to
.35x for Scenario II and .22x to .28x for Scenario III.
Premiums Paid Analysis
Credit Suisse First Boston reviewed premiums paid in selected acquisitions
involving public broadcasting companies Credit Suisse First Boston believed to
be reasonably comparable to Ackerley Group. These transactions consist of:
TARGET ACQUIROR
- Citadel Communications Corporation - Forstmann, Little & Company
- Infinity Broadcasting Corporation - Viacom, Inc.
- AMFM, Inc. - Clear Channel Communications, Inc.
- Outdoor Systems, Inc. - Infinity Outdoor, Inc.
- Jacor Communications, Inc. - Clear Channel Communications, Inc.
- Capstar Broadcasting Corporation - Chancellor Media Corporation
- Triathlon Broadcasting Company - Capstar Broadcasting Corporation
Credit Suisse First Boston determined the premium over the common stock
trading prices for one day, one week and one month prior to the announcement
date in each of the selected transactions. Credit Suisse First Boston then
applied the premiums to the per share closing price of the Ackerley ordinary
common stock one day, one week and one month prior to October 4, 2001. This
analysis indicated an implied exchange ratio reference range of .25x to .47x.
Aggregate Reference Range
Based on the valuation methodologies described above, Credit Suisse First
Boston derived an aggregate exchange ratio reference range for the Ackerley
ordinary common stock of .21x to .47x.
41
Other Factors
In the course of preparing its opinion, Credit Suisse First Boston also
reviewed and considered other information and data, including:
- the historical stock prices and trading characteristics of the Ackerley
ordinary common stock and Clear Channel common stock;
- the historical implied exchange ratio for the Ackerley ordinary common
stock and Clear Channel common stock over various periods ending October
4, 2001; and
- selected research analysts' reports for Ackerley Group and Clear Channel,
including stock or share price estimates for those analysts.
Miscellaneous
Ackerley Group has agreed to pay Credit Suisse First Boston for its
financial advisory services fees that are customary for transactions of this
nature, a substantial portion of which are contingent on consummation of the
merger. Ackerley Group has also agreed to indemnify Credit Suisse First Boston
and related parties against liabilities, including liabilities under the federal
securities laws, arising out of its engagement.
Credit Suisse First Boston and its affiliates have in the past provided
financial services to Ackerley Group and Clear Channel unrelated to the merger,
for which Credit Suisse First Boston and its affiliates have received customary
compensation. In the ordinary course of business, Credit Suisse First Boston and
its affiliates may actively trade the debt and equity securities of Ackerley
Group and Clear Channel for its own accounts and for the accounts of customers
and, accordingly, may at any time hold a long or short position in such
securities.
ACCOUNTING TREATMENT
Upon consummation of the merger, Clear Channel will account for the
acquisition of Ackerley Group using the purchase method of accounting.
Accordingly, the consideration to be paid in the merger will be allocated to
assets acquired and liabilities assumed based on their estimated fair values at
the closing date of the merger. To the extent the total purchase price exceeds
the fair value of the assets acquired and liabilities assumed, Clear Channel
will record goodwill. Under existing accounting principles, the goodwill and
indefinite lived intangibles recorded from the merger will not be amortized.
Instead, in the future, this goodwill and indefinite lived intangibles will be
evaluated for possible impairment using a "fair value" approach. Income (or
loss) of Ackerley Group subsequent to the closing date will be included in the
consolidated results of Clear Channel.
The parties have prepared the unaudited pro forma financial information
contained in this document using the purchase method of accounting to account
for the merger. See "Summary -- Comparative Per Share Data" and "Unaudited Pro
Forma Combined Condensed Consolidated Financial Statements."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of the Ackerley Group Board with respect
to the merger, shareholders should be aware that certain officers of Ackerley
Group and the members of the Ackerley Group Board have interests in the merger
that may be different from, or in addition to, the interests of shareholders
generally. Members of the Ackerley Group Board were aware of these interests and
considered them, among other matters, in making their recommendation to approve
the merger.
ACKERLEY GROUP STOCK OPTIONS
Pursuant to the merger agreement, all of the outstanding stock options to
purchase Ackerley common stock will vest and become exercisable immediately
prior to the completion of the merger, and will be assumed by Clear Channel. Mr.
Christopher Ackerley, President and a director of Ackerley Group, has
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35,000 options to purchase Ackerley ordinary common stock for which vesting will
be accelerated. Based on the closing price of a share of Ackerley ordinary
common stock on the New York Stock Exchange on November 26, 2001 of $16.18, each
of these options have an exercise price that is in excess of the current market
price. Mr. Barry A. Ackerley, Chief Executive Officer, Chairman of the Board and
a director of Ackerley Group, Mrs. Gail A. Ackerley, Co-Chief Executive Officer,
Co-Chairman of the Board and a director of Ackerley Group, Mr. Kevin E. Hylton,
Senior Vice President, Finance and Chief Financial Officer of Ackerley Group and
Mr. Sean M. Tallarico, Corporate Controller of Ackerley Group, do not have any
Ackerley Group stock options.
NON-EMPLOYEE DIRECTORS' EQUITY COMPENSATION PLAN
Prior to the closing date of the merger, Ackerley Group will take all
necessary action to terminate on the business day prior to the closing date the
Non-employee Directors' Equity Compensation Plan, which provides that
non-employee directors of Ackerley Group may elect to receive directors' fees in
the form of shares of Ackerley ordinary common stock instead of cash. All
amounts deferred under the plan for the plan quarter in which the termination
occurs will be used to purchase newly issued shares of Ackerley ordinary common
stock in accordance with the terms of the plan or the date of termination of the
plan, at a purchase price equal to the trading price of the Ackerley ordinary
common stock on the last trading day before the purchase date.
RETENTION AND SEVERANCE PROGRAM
To foster the continued employment of key employees Ackerley Group has
entered or will enter into agreements with 54 employees that provide for
retention and/or severance benefits, including agreements with each of the
following executive officers: Christopher Ackerley, Kevin Hylton and Sean
Tallarico. Mr. Barry Ackerley and Mrs. Gail Ackerley are not parties to any
severance or retention agreements.
Except for Mr. Christopher Ackerley, whose agreement is described below,
the program provides that if the employee remains employed by Ackerley Group
until December 31, 2001, the employee will receive a lump sum retention bonus
payment based on a percentage of their annual compensation for 2001 ($105,000
for Mr. Hylton and $52,500 for Mr. Tallarico). If the employee remains employed
until the closing date of the merger in the case of Mr. Hylton, or until 45 days
after the closing date of the merger, in the case of Mr. Tallarico, the employee
will receive an additional retention bonus payment of the same amount.
Under this program, employees are also eligible for certain of the
following severance benefits if employment is terminated by Ackerley Group other
than for "cause," or if employment is terminated by the officer as a result of a
"constructive termination":
- a lump sum cash payment equal to a percentage of their annual
compensation for 2001 ($315,000 for Mr. Hylton and $13,552 for Mr.
Tallarico);
- continued medical and dental insurance coverage under COBRA for 12 months
following the date of termination, subject to earlier termination if
substitute coverage is obtained;
- transfer of title of company automobile for certain employees and
compensation for the tax liability resulting from the transfer;
- accelerated vesting of any Ackerley Group stock options held by the
employee on the closing date of the merger and cancellation of any
buy-back right of Ackerley Group with respect to such options or stock
purchased with such options;
- a gross-up payment for certain employees of any excise tax imposed on the
employee as a result of section 280G of the Internal Revenue Code; and
- any unpaid retention bonus and any accrued but unpaid salary, bonus or
other amounts.
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Under these agreements, "cause" is defined generally to include criminal
convictions, material and willful misconduct, and deliberate non-performance of
duties, and "constructive termination" is defined generally to include a
reduction in position or authority, a reduction in compensation or benefits, a
relocation of work location by more than 25 miles, or a failure to offer
continued employment on comparable terms for two years following the completion
of the merger.
Under the agreements, certain of the employees, including Mr. Hylton, are
subject to non-competition covenants for one year following termination of
employment, and have agreed to provide consulting services for 45 days following
termination of employment.
CONSULTING AND NON-COMPETITION AGREEMENT WITH CHRISTOPHER H. ACKERLEY
To provide financial incentives for the retention of Mr. Christopher
Ackerley as Ackerley Group's President prior to the closing date and for the
retention of his services as an independent consultant following the closing
date, it is expected that Ackerley Group will enter into a consulting and
non-competition agreement with Mr. Christopher Ackerley. The agreement provides
that in the event Mr. Ackerley remains in the service of Ackerley Group until
December 31, 2001, he will receive a retention bonus payment of $375,000, and an
additional retention bonus payment of $375,000 if he remains in the service of
Ackerley Group until the closing date. If Mr. Ackerley's service with Ackerley
Group is terminated prior to a payment date by his death or disability or by
Ackerley Group other than for "cause," the agreement provides that the retention
bonus payment will be accelerated.
The agreement with Mr. Ackerley also requires him to provide consulting
services to Ackerley Group as an independent consultant for a period of five
years following the closing date of the merger. Mr. Ackerley has also agreed to
a non-competition restriction covering such five-year period. As consideration
for the consulting services and the non-competition agreement, Ackerley Group
will pay to Mr. Ackerley an annual fee of $350,000. The agreement also provides
for a gross-up payment equal to any excise tax imposed on Mr. Ackerley as a
result of section 280G of the Internal Revenue Code.
INDEMNIFICATION; DIRECTORS AND OFFICERS INSURANCE
Clear Channel has agreed that all rights to indemnification and all
limitations on liability existing in favor of any of the directors, officers or
employees of Ackerley Group or any of its subsidiaries under Ackerley Group's
certificate of incorporation, by-laws or any indemnity agreement will survive
the merger and continue in full force and effect. Also, for six years after the
completion of the merger, Clear Channel has agreed to cause to be maintained in
effect the current directors and officers liability insurance policies
maintained by Ackerley Group, provided that Clear Channel may substitute
policies of at least the same coverage with other terms and conditions that are
no less advantageous to the indemnitee, and provided further that the annual
premiums to be paid with respect to the maintenance of such policies during such
six year period will not exceed 150% of the annual premium paid by Ackerley
Group for such policies as of the date of the merger agreement.
In addition, following the completion of the merger, Clear Channel must,
and must cause the surviving corporation to, to the fullest extent permitted by
applicable law, indemnify and hold harmless each present and former officer,
director or employee of Ackerley Group or any of its subsidiaries against all
losses, expenses, including reasonable attorneys' fees, claims, damages,
liabilities, judgments, and settlement amounts paid in respect to any
threatened, pending, or completed claim, action, suit or proceeding, arising out
of or relating to the fact that such person is or was a director, officer or
employee of Ackerley Group or any of its subsidiaries and arising out of acts or
omissions occurring on or prior to the completion of the merger, and advance to
such indemnitee all such expenses incurred in connection with any indemnifiable
claim, subject to repayment of such advances if it is ultimately determined that
such person is not entitled to indemnification from Clear Channel or the
surviving corporation.
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STOCKHOLDER VOTING AND SUPPORT AGREEMENT
Mr. Barry Ackerley entered into a Stockholder Voting and Support Agreement
with Clear Channel. See page 62 of this document for a description of the
Stockholder Voting and Support Agreement.
TRANSFER OF LEASE OBLIGATION
It is anticipated that Ackerley Group, prior to the closing of the merger
and subject to documentation and arrangements reasonably acceptable to Clear
Channel and any required consents, will transfer to Mr. Barry Ackerley or his
designee the lease relating to Ackerley Group's corporate headquarters in
Seattle, Washington, together with all improvements thereto.
SATISFACTION OF INDEBTEDNESS
It is anticipated that Ackerley Group, prior to the closing of the merger,
will repay an entity owned by certain officers and directors the $500,000 loan
from such entity to Ackerley Group.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
This tax discussion summarizes the material federal income tax consequences
of the merger to the holders of Ackerley common stock that exchange Ackerley
common stock solely for Clear Channel common stock pursuant to the merger. This
discussion is based upon current provisions of the Internal Revenue Code of
1986, as amended, existing regulations promulgated thereunder and current
rulings and court decisions, all of which are subject to change, possibly with
retroactive effect. Tax consequences under state, local and foreign laws are not
addressed.
The tax treatment described herein may vary depending upon each
shareholder's particular circumstances and tax position. This discussion does
not address all aspects of federal income taxation that may be important to
shareholders who are subject to special rules, such as:
- financial institutions;
- tax-exempt organizations;
- insurance companies;
- dealers in securities;
- traders in securities who elect to apply a mark-to-market method of
accounting;
- foreign holders;
- persons that hold shares as a hedge or as part of a straddle,
constructive sale or conversion transaction;
- holders that acquired their shares upon the exercise of employee stock
options or otherwise as compensation; or
- holders that do not hold their shares as capital assets.
The obligations of the parties to consummate the merger are conditioned
upon the receipt, by each of Clear Channel and Ackerley Group, of an opinion
from its tax advisor or counsel, respectively, in form and substance reasonably
satisfactory to Clear Channel and Ackerley Group to the effect that the merger
will qualify for federal income tax purposes as a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code.
In rendering their opinions, counsel to each of Ackerley Group and Clear
Channel will rely upon the representations contained in certificates provided by
Ackerley Group and Clear Channel and certain facts and customary assumptions set
forth in the opinions. Shareholders should be aware that neither the tax
opinions nor this discussion will be binding upon the Internal Revenue Service
and the Internal Revenue Service is not precluded from asserting a contrary
position. The parties have not requested and will not
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request a ruling from the Internal Revenue Service as to the federal income tax
consequences of the merger.
Assuming the merger qualifies as a "reorganization" within the meaning of
Section 368(a) of the Internal Revenue Code, the tax implications will be as
follows:
FEDERAL INCOME TAX IMPLICATIONS TO HOLDERS OF ACKERLEY COMMON STOCK
No gain or loss will be recognized for federal income tax purposes by
holders of Ackerley common stock who exchange their Ackerley common stock solely
for Clear Channel common stock pursuant to the merger, except with respect to
cash received in lieu of fractional shares. The aggregate tax basis of the Clear
Channel common stock to be received by an Ackerley Group shareholder in the
merger will be the same as such shareholder's aggregate tax basis in the
Ackerley common stock surrendered in the exchange, reduced by the amount of
basis allocable to fractional shares of Clear Channel common stock as discussed
below. The holding period of the Clear Channel common stock to be received by an
Ackerley Group shareholder as a result of the merger will include the period
during which such shareholder held the Ackerley common stock exchanged.
Cash received by a holder of Ackerley common stock instead of a fractional
share of Clear Channel common stock will be treated as received in exchange for
such fractional share interest, and gain or loss generally will be recognized
for federal income tax purposes, measured by the difference between the amount
of cash received and the portion of the tax basis of the Ackerley common stock
allocable to the fractional share interest. Such gain or loss will be capital
gain or loss and generally will be long term capital gain or loss if the
Ackerley common stock has been held for more than one year at the time of the
merger.
BACKUP WITHHOLDING
Under the Internal Revenue Code, a holder of Ackerley common stock may be
subject to backup withholding with respect to the amount of cash, if any,
received unless the holder provides proof of an applicable exemption or a
correct taxpayer identification number, and otherwise complies with applicable
requirements of the backup withholding rules. Any amounts withheld under the
backup withholding rules are not an additional tax and may be refunded or
credited against the holder's federal income tax liability, provided the
required information is furnished to the Internal Revenue Service.
THE FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE DOES NOT ADDRESS TAX
CONSEQUENCES WHICH MAY VARY WITH, OR ARE CONTINGENT ON, INDIVIDUAL
CIRCUMSTANCES. MOREOVER, THIS DISCUSSION DOES NOT ADDRESS ANY TAX CONSEQUENCES
OF THE DISPOSITION OF ACKERLEY COMMON STOCK BEFORE THE MERGER OR THE DISPOSITION
OF CLEAR CHANNEL COMMON STOCK AFTER THE MERGER. THIS DISCUSSION IS DIRECTED TO
HOLDERS OF ACKERLEY COMMON STOCK WHO ARE UNITED STATES CITIZENS OR RESIDENTS OR
DOMESTIC CORPORATIONS. NO ATTEMPT HAS BEEN MADE TO ADDRESS THE TAX CONSEQUENCES
TO A SHAREHOLDER UNDER THE LAWS OF THE COUNTRY, STATE OR JURISDICTION IN WHICH
THE HOLDER RESIDES, IS A CITIZEN OR IS ORGANIZED OTHER THAN THE MATERIAL FEDERAL
INCOME TAX CONSEQUENCES DISCUSSED HEREIN. HOLDERS OF ACKERLEY COMMON STOCK ARE
ADVISED TO CONSULT THEIR OWN TAX ADVISORS REGARDING THE FEDERAL INCOME TAX
CONSEQUENCES IN LIGHT OF THEIR PERSONAL CIRCUMSTANCES AND THE CONSEQUENCES UNDER
APPLICABLE STATE, LOCAL AND FOREIGN TAX LAWS.
REGULATORY MATTERS
Clear Channel and Ackerley Group have observed the notification and waiting
period requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended, and the rules and regulations promulgated thereunder. The HSR Act
provides for an initial 30-calendar-day waiting period following the filing with
the U.S. Federal Trade Commission and the Antitrust Division of the U.S.
Department of Justice of certain Notification and Report Forms by the parties to
the merger. The initial waiting period can be extended by a request for
additional information and documents, or shortened by a grant of early
termination. Clear Channel and Ackerley Group each filed Premerger Notification
and Report Forms with
46
the FTC and the Antitrust Division on October 24, 2001 and subsequently received
notification from the FTC of early termination of the statutory waiting period
on November 7, 2001.
Clear Channel and Ackerley Group must comply with all applicable FCC laws
and regulations before they can complete the merger. The FCC must approve the
transfer of control of Ackerley Group's FCC licenses from Ackerley Group's
existing shareholders 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.
Clear Channel and Ackerley Group filed applications for the consent to
transfer control of Ackerley Group's FCC licenses with the FCC on October 17,
2001. One petition to deny and two informal objections have been filed against
the FCC applications by various parties. Clear Channel intends to respond to
these petitions and objections and advise the FCC why the petitions and
objections should be denied. Although Clear Channel does not expect that these
or any other third-party petitions or objections will be a significant obstacle
to completion of the merger, Clear Channel can give no assurances in this
regard.
Clear Channel's acquisition of Ackerley's television stations will result
in Clear Channel owning both radio and television stations in a number of
markets or geographical areas. In several such markets or areas, Clear Channel
owns more radio stations than FCC rules permit in conjunction with ownership of
a television station in the same market or area. Based on Clear Channel's
analysis, Clear Channel will be required to divest either one television
station, or between one and four radio stations, in each of five markets or
areas (Syracuse, NY; Rochester, NY; Santa Barbara, Santa Maria, San Luis Obispo,
CA; Binghamton, NY; and Utica, NY). In Clear Channel's FCC applications for
consent to the merger, Clear Channel has requested the FCC to waive its
radio/television cross ownership rule for a period of 12 months following
closing of the merger to allow completion of the necessary divestitures. There
can be no assurance that the FCC will not require additional divestitures of
stations, that it will grant the requested rule waiver, or that, if such waiver
is granted, such waiver will be for the full 12-month duration Clear Channel has
requested.
Clear Channel and Ackerley Group believe that they will obtain all required
regulatory approvals prior to the Ackerley Group shareholders' meeting. However,
it is not certain that all such approvals will be received by such time and
governmental authorities may impose unfavorable conditions for granting the
required approvals.
While Clear Channel and Ackerley Group are hopeful that the anticipated
divestitures will satisfy all FCC multiple ownership rules, at any time before
or after the merger and notwithstanding expiration of the HSR waiting period,
the FCC, the FTC, the Antitrust Division of the DOJ and state antitrust
authorities could take action to challenge the merger, including seeking to
enjoin the completion of the merger, seeking the divestiture by Clear Channel of
all or part of the stock or assets of Ackerley Group or of other business
conducted by Clear Channel, or seeking to subject Clear Channel or Ackerley
Group to certain operating conditions. Private parties may also seek to take
legal action under the antitrust laws, if circumstances permit. There can be no
assurance that a challenge to the merger will not be made or that, if such a
challenge is made, Clear Channel will prevail. The obligations of Clear Channel
and Ackerley Group to complete the merger are subject to the condition that
there be no decree, order or injunction of a court of competent jurisdiction
that prohibits the completion of the merger.
APPRAISAL RIGHTS
Under the Delaware General Corporation Law, appraisal rights will not be
available to shareholders of Ackerley Group as a result of the merger.
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FEDERAL SECURITIES LAWS CONSEQUENCES
The shares of Clear Channel common stock to be issued to Ackerley Group
shareholders in the merger will be registered under the Securities Act of 1933,
as amended. Upon issuance, these shares may be traded freely and without
restriction by those shareholders not deemed to be affiliates of Ackerley Group
as that term is defined under the Securities Act. An "affiliate" of Ackerley
Group, as defined by the rules promulgated under the Securities Act, is a person
who directly or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with Ackerley Group. Any subsequent
transfer by an affiliate of Ackerley Group must be one permitted by the resale
provisions of Rule 145 promulgated under the Securities Act (or Rule 144
promulgated under the Securities Act, in the case of such persons who become
affiliates of Clear Channel) or as otherwise permitted under the Securities Act.
These restrictions are expected to apply to the directors, executive officers
and holders of 10% or more of the Ackerley Group shares (as well as to certain
other related individuals or entities).
Ackerley Group will deliver to Clear Channel a list setting forth the names
and addresses of all persons who are, at the time of the Ackerley Group
shareholders' meeting, in Ackerley Group's reasonable judgment, affiliates of
Ackerley Group, and will use it reasonable efforts to cause its affiliates to
deliver to Clear Channel a written agreement that such person will not dispose
of any shares of Clear Channel common stock in violation of the Securities Act
or the rules and regulations promulgated under the Securities Act.
MANAGEMENT AFTER THE MERGER
At the time Clear Channel's merger subsidiary merges into Ackerley Group,
the directors of Clear Channel's merger subsidiary immediately before the merger
will become the directors of the surviving corporation, and the officers of
Ackerley Group immediately before the merger will become the officers of the
surviving corporation.
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THE MERGER AGREEMENT
The following is a description of the material terms of the merger
agreement but does not purport to describe all the terms of the merger
agreement. The full text of the merger agreement is attached as Appendix A to
this document and is incorporated herein by reference. Ackerley Group
shareholders are urged to read the merger agreement in its entirety.
THE MERGER
Subject to the terms and conditions of the merger agreement, Clear
Channel's merger subsidiary will merge with and into Ackerley Group at the
effective time of the merger. The separate corporate existence of Clear
Channel's merger subsidiary will cease. Ackerley Group will be the surviving
corporation in the merger and will continue its corporate existence as a wholly
owned subsidiary of Clear Channel and will continue to be governed by the laws
of the State of Delaware.
EFFECTIVE TIME
The merger agreement provides that the merger will become effective when a
certificate of merger is filed with the Secretary of State of the State of
Delaware. Ackerley Group, Clear Channel's merger subsidiary and Clear Channel
will file the certificate of merger no later than the second business day
following the satisfaction or waiver of all the conditions to the merger. See
"-- Conditions."
CERTIFICATE OF INCORPORATION AND BY-LAWS
The merger agreement provides that at the effective time of the merger, the
certificate of incorporation of Ackerley Group and by-laws of Clear Channel's
merger subsidiary in effect immediately prior to the effective time will become
the certificate of incorporation and by-laws of the surviving corporation after
the effective time of the merger.
DIRECTORS AND OFFICERS
The merger agreement provides that the directors of Clear Channel's merger
subsidiary immediately prior to the effective time of the merger will be the
initial directors of the surviving corporation and that the officers of Ackerley
Group immediately prior to the effective time of the merger will be the initial
officers of the surviving corporation.
CONVERSION OR CANCELLATION OF ACKERLEY COMMON STOCK IN THE MERGER
CONVERSION OF SHARES
The merger agreement provides that, at the effective time of the merger and
without any action on the part of the shareholders, each share of Ackerley
common stock and each outstanding option or their right to receive or acquire
shares of Ackerley common stock shall be treated as follows, subject to the
treatment of fractional shares of Clear Channel common stock described below:
- Each share of Ackerley ordinary common stock and each share of Ackerley
Class B common stock issued and outstanding immediately prior to the
effective time will be converted into the right to receive 0.35 of a
share of Clear Channel common stock.
- Each outstanding option to purchase shares of Ackerley common stock
granted under Ackerley Group's stock option plans or otherwise, which is
outstanding immediately prior to the effective time, whether or not then
exercisable, will vest and become exercisable and will be assumed by
Clear Channel and deemed to constitute an option to acquire, on the same
terms and conditions as were applicable under such option or agreement
prior to the effective time, including without limitation adjustments for
any stock dividend, subdivision, reclassification, recapitalization,
split, combination, exchange of shares or similar transaction, the number
of shares of Clear Channel common stock as the holder of such option
would be entitled to pursuant to the merger had the
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holder exercised such option in full immediately prior to the effective
time of the merger at a price per share equal to the aggregate exercise
price for Ackerley common stock purchasable pursuant to such option
divided by the ratio at which each share of Ackerley common stock is to
be converted into the right to receive Clear Channel common stock in the
merger. The number of shares of Clear Channel common stock that may be
purchased upon the exercise of any such option or agreement will not
include any fractional share. Upon the exercise of such option or
agreement, a cash payment will be made for any fractional share based
upon the last sale price per share of Clear Channel common stock on the
trading day preceding the day of exercise.
- Each share of Ackerley common stock held in the treasury of Ackerley
Group or by any of Ackerley Group's subsidiaries or by Clear Channel or
any of Clear Channel's subsidiaries will be canceled and extinguished
without any conversion or payment made with respect to such shares.
FRACTIONAL SHARES
No fractional shares of Clear Channel common stock will be issued in the
merger. In lieu of any fractional shares of Clear Channel common stock, each
holder of shares of Ackerley common stock who would otherwise have been entitled
to a fraction of a share of Clear Channel common stock pursuant to the merger
agreement will be paid an amount in cash, without interest, equal to such
holder's fractional share interest multiplied by the average of the closing
prices for a share of Clear Channel common stock on the New York Stock Exchange
for the five trading days prior to the closing of the merger.
EXCHANGE OF CERTIFICATES IN THE MERGER
Promptly after the effective time, Clear Channel will instruct the exchange
agent for its common stock to mail to each holder of certificates which
immediately prior to the effective time represented outstanding shares of
Ackerley common stock a letter of transmittal and instructions for use in
effecting the surrender of such Ackerley Group certificates. The letter of
transmittal and instructions are for use by each holder of record in
surrendering the Ackerley Group certificates in exchange for certificates
evidencing shares of Clear Channel common stock, together with any dividends or
distributions with respect to such shares and cash for any fractional shares
thereof to which such holder is entitled. WE REQUEST THAT YOU NOT SURRENDER YOUR
ACKERLEY GROUP CERTIFICATES FOR EXCHANGE UNTIL YOU RECEIVE SUCH LETTER OF
TRANSMITTAL FORM AND INSTRUCTIONS. At and after the effective time and until so
surrendered, the Ackerley Group certificates will represent only the right to
receive the appropriate consideration as described above. No dividends or other
distributions declared or made after the effective time with respect to shares
of Clear Channel common stock with a record date after the effective time will
be paid to the holder of any unsurrendered Ackerley Group certificate and no
cash payment in lieu of any fractional shares will be paid to any holder until
the holder of such certificate surrenders such certificate. Following the
surrender of any such certificate, the holder of record will be paid, without
interest:
- the amount of any cash payable with respect to a fractional share of
Clear Channel common stock to which such holder is entitled and the
amount of dividends or other distributions with a record date after the
effective time; and
- at the appropriate payment date, any dividends or distributions with a
record date after the effective time but prior to surrender of such
Ackerley Group certificate and a payment date after the surrender of such
Ackerley Group certificate.
LISTING OF CLEAR CHANNEL COMMON STOCK
In the merger agreement, Clear Channel has agreed to promptly prepare and
file with the NYSE and any other applicable exchange a listing application
covering the shares of Clear Channel common stock to be issued in the merger and
to use its reasonable efforts to have such shares approved for listing on such
exchange. Approval for listing on the NYSE of the shares of Clear Channel common
stock issuable to the Ackerley Group shareholders in the merger, subject only to
official notice of issuance, is a condition to the
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obligations of Clear Channel, Clear Channel's merger subsidiary and Ackerley
Group to complete the merger.
REPRESENTATIONS AND WARRANTIES
REPRESENTATIONS AND WARRANTIES BY ACKERLEY GROUP
The merger agreement includes customary representations and warranties by
Ackerley Group to Clear Channel and Clear Channel's merger subsidiary, including
representations and warranties as to:
- corporate organization, standing and power of Ackerley Group and its
subsidiaries;
- compliance with the fourth restated certificate of incorporation and
amended and restated by-laws of Ackerley Group;
- capitalization of Ackerley Group;
- power and authority, including the approval of the Ackerley Group Board,
to execute and deliver the merger agreement and to perform its
obligations under, and to complete the transactions contemplated by the
merger agreement, subject to shareholder approval;
- absence of conflict with organizational documents, laws and orders and
required consents and authorizations of governmental entities and third
parties;
- possession and validity of necessary government permits and compliance
with applicable laws;
- Ackerley Group's financial statements and reports filed with the SEC;
- undisclosed liabilities;
- conduct by Ackerley Group and its subsidiaries of their respective
businesses and possession of certain permits, licenses and governmental
authorizations;
- environmental matters;
- Ackerley Group's employee benefit plans;
- absence of certain changes;
- pending or threatened litigation;
- accounting and tax matters;
- this document;
- contracts, leases, agreements, or understandings of Ackerley Group;
- transactions with affiliates of Ackerley Group;
- intellectual property matters;
- insurance matters;
- opinions delivered by Ackerley Group's financial advisors;
- required vote of Ackerley Group shareholders;
- real property, title and leasehold interests;
- collective bargaining agreements and labor matters;
- brokers and finders employed by Ackerley Group; and
- defaults under any material contract, which for purposes of the merger
agreement was defined as any contract, agreement or other document or
instrument currently in effect that requires the payment in excess of
$1,000,000 over the remainder of its term.
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REPRESENTATIONS AND WARRANTIES BY CLEAR CHANNEL AND MERGER SUBSIDIARY
The merger agreement also contains customary representations and warranties
by Clear Channel and Clear Channel's merger subsidiary as to:
- corporate organization, standing, and power of Clear Channel and its
subsidiaries;
- capitalization of Clear Channel;
- power and authority of Clear Channel and its merger subsidiary to execute
and deliver the merger agreement and to perform their respective
obligations under, and to complete the transactions contemplated by, the
merger agreement, including board approval;
- power and authority of Clear Channel's merger subsidiary to execute and
deliver the merger agreement and to perform its obligations under, and to
complete the transactions contemplated by, the merger agreement,
including board approval;
- authorization and validity of the Clear Channel shares to be issued
pursuant to the merger agreement;
- absence of conflict with organizational documents, laws and orders and
required consents and authorizations of governmental entities and third
parties;
- Clear Channel's financial statements and reports filed with the SEC;
- conduct by Clear Channel and its subsidiaries of business in the ordinary
course and consistent with past practice since December 31, 2000 and the
absence of any event or development which would, in the aggregate,
reasonably be expected to have a material adverse effect on Clear Channel
or substantially impair or delay Clear Channel's performance under the
merger agreement;
- environmental matters;
- accounting and tax matters;
- brokers and finders employed by Clear Channel; and
- pending litigation.
COVENANTS AND AGREEMENTS
CONDUCT OF BUSINESS OF ACKERLEY GROUP PENDING THE MERGER
The merger agreement generally provides, with certain exceptions, that,
prior to the effective time of the merger, Ackerley Group agrees to:
- conduct its and its subsidiaries' businesses in the ordinary course
consistent with past practice;
- use its reasonable efforts to keep available the services of its officers
and employees of Ackerley Group and its subsidiaries;
- use reasonable efforts to maintain satisfactory relationships with
suppliers, distributors, customers and others having business
relationships with them; and
- notify Clear Channel as soon as practicable of any emergency or other
changes in the normal course of its or its subsidiaries' respective
business or operation of its respective properties and of any complaints,
investigations or hearings of any governmental authority.
Ackerley Group has agreed that it will not and will not permit any of its
subsidiaries to, unless required by applicable laws or stock exchange
regulations or unless otherwise agreed to by Clear Channel,
52
between the date of the merger agreement and the effective time of the merger,
directly or indirectly, do, or agree to do, any of the following without the
prior written consent of Clear Channel:
- authorize or pay any dividends on or make any distribution with respect
to its outstanding shares of stock;
- enter into or amend any employment, severance or similar agreements or
arrangements with any of their respective directors or executive officers
except for certain agreements or arrangements relating to the retention
and severance plans and arrangements;
- authorize, propose or announce an intention to authorize or propose, or
enter into an agreement with respect to, any merger, consolidation or
business combination, any acquisition of a material amount of assets or
securities, any disposition of assets or securities or any release or
relinquishment of any material contract rights, in each case, except in
the ordinary course;
- propose or adopt any amendments to its certificate of incorporation or
bylaws;
- (A) issue any shares of their capital stock, except upon exercise of
rights or options issued pursuant to existing employee incentive or
benefit plans, programs or arrangements and nonemployee director plans
(including, without limitation, shares issued in connection with stock
grants or awards or the exercise of rights or options granted in the
ordinary course of business consistent with past practice pursuant to
such plans, programs or arrangements) or (B) effect any stock split not
previously announced or (C) otherwise change its capitalization as it
existed on September 21, 2001, except as contemplated by the merger
agreement;
- grant, confer or award any options, warrants, conversion rights or other
rights, not existing on the date of the merger agreement, to acquire any
shares of its capital stock, other than rights under its employee stock
purchase plan for offering periods beginning after the date of the merger
agreement or other agreements or arrangements relating to the retention
and severance plans and arrangements;
- purchase or redeem any shares of its stock or pay any cash bonuses,
except for cash bonuses pursuant to agreements or employee incentive or
benefit plans, programs or arrangements or non-employee director plans
existing on the date of the merger agreement or agreements or
arrangements entered into as permitted by the merger agreement; provided,
however, Ackerley Group may adopt a bonus plan as an incentive to
employees to remain with Ackerley Group through and until the closing
date in an amount to be mutually agreed to by Clear Channel and Ackerley
Group;
- amend the terms of their respective employee benefit plans, programs or
arrangements or any severance or similar agreements or arrangements in
existence on the date of the merger agreement, except as required by law
or to maintain tax-qualified status, or adopt any new employee benefit
plans, programs or arrangements or any severance or similar agreements or
arrangements, except for agreements or arrangements entered into as
permitted by the merger agreement; provided, however, Ackerley Group may
change the renewal date on which plan premiums are adjusted under
Ackerley Group's medical and dental plans from November to January;
- incur any additional indebtedness for borrowed money, except for
indebtedness (A) in connection with interest payments on any of Ackerley
Group's outstanding public debt, or (B) pursuant to credit facilities,
indentures and other arrangements in existence on the date of the merger
agreement;
- incur any capital expenditures in excess of $5,000,000, except for
amounts budgeted for in Ackerley Group's capital budgets previously
provided to Clear Channel;
- except with respect to sign location related contracts or leases, sales
or advertising contracts or other agreements contemplated by or permitted
pursuant to the merger agreement, enter into any company material
contract;
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- enter into an agreement with any affiliate of Ackerley Group, any family
member of any affiliate of Ackerley Group or any shareholder who owns
more than 10% of the outstanding capital stock of Ackerley Group;
- make any material tax election or settle or compromise any material tax
liability;
- unless required by law, rule or regulation, call any meeting of the
shareholders of Ackerley Group, regardless of whether a special meeting
or otherwise, until the merger agreement is terminated in accordance with
its terms; and
- agree, in writing or otherwise, to take any of the above actions or take
any action which would make any representation or warranty of Ackerley
Group untrue or incorrect.
CONDUCT OF BUSINESS OF CLEAR CHANNEL PENDING THE MERGER
The merger agreement generally provides, with certain exceptions, that
Clear Channel will not and will not permit any of its subsidiaries (unless
required by applicable laws or regulations) to, between the date of the merger
agreement and the effective time of the merger, directly or indirectly, do, or
agree to do any of the following without the prior written consent of Ackerley
Group:
- authorize or pay any cash dividend on, or make any cash distribution with
respect to any of Clear Channel's outstanding shares of stock.
- take any of the foregoing actions or take any action which would make any
representation or warranty of Clear Channel or Clear Channel's merger
subsidiary untrue or incorrect.
NO SOLICITATION COVENANT
The merger agreement provides that neither Ackerley Group nor any of its
subsidiaries, officers, directors, employees or agents, or representatives or
affiliates will, directly or indirectly, take any action to:
- solicit or initiate or knowingly encourage, induce or facilitate the
making, submission or announcement of any Acquisition Proposal (as
defined below);
- participate in any substantive discussions or negotiations regarding, or
furnish to any person any information with respect to any proposal that
constitutes, or would reasonably be expected to lead to, any Acquisition
Proposal;
- recommend, endorse or approve any Acquisition Proposal; or
- enter into any letter of intent, agreement in principle, acquisition
agreement or any other document or contract with respect to any
Acquisition Proposal.
However, until the expiration of the Initial Period (as defined below),
Ackerley Group is not prohibited from furnishing information to or entering into
substantive discussions or negotiations with any person that makes an
unsolicited bona fide proposal to enter into a business combination with
Ackerley Group pursuant to an Acquisition Proposal which the Ackerley Group
Board in good faith determines is a Superior Proposal (as defined below) or
which the Ackerley Group Board in good faith determines could reasonably be
expected to lead to a Superior Proposal, so long as:
- prior to furnishing any information to, or entering into substantive
discussions with, such a person Ackerley Group provides written and oral
notice to Clear Channel to the effect that it is furnishing information
to, or entering into substantive discussions with, a person from whom
Ackerley Group will have received, prior to furnishing such information,
an executed confidentiality agreement in form and substance similar to
the confidentiality agreement executed by Ackerley Group and Clear
Channel on August 7, 2001;
- such notice will include the terms and conditions of such Acquisition
Proposal or any agreement proposed by, or any information supplied to,
any such person;
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- simultaneously with furnishing any nonpublic information to any such
person, Ackerley Group furnishes such nonpublic information to Clear
Channel (to the extent that such nonpublic information has not been
previously furnished by Ackerley Group to Clear Channel);
- Ackerley Group, its subsidiaries and representatives are in compliance
with these non-solicitation provisions in all material respects;
- such unsolicited bona fide proposal is made by a third party that the
Ackerley Group Board determines in good faith has the financial
capability to consummate a Superior Proposal; and
- the Ackerley Group Board, after consulting with outside legal counsel to
Ackerley Group, determines in good faith that such action is consistent
with the fiduciary duties of the Ackerley Group Board to shareholders of
Ackerley Group under applicable law.
Without limiting the above, it is agreed that any violation of the
above-listed restrictions by any Ackerley Group representative will be deemed to
be a breach of the non-solicitation provisions of the merger agreement by
Ackerley Group.
The merger agreement provides that Ackerley Group will notify Clear Channel
in writing within 24 hours of Ackerley Group's receipt of any inquiries, offers
or proposals with respect to an Acquisition Proposal. Ackerley Group will use
all reasonable efforts to inform Clear Channel promptly of all material
developments with respect to the status and the terms of any such substantive
discussions or negotiations (including without limitation the identity of the
person with whom such substantive discussions are being held), and will use its
reasonable efforts to provide Clear Channel copies of such written proposals and
any material amendments or revisions or material correspondence related to such
proposals.
"Acquisition Proposal" means any offer or proposal for, or any indication
of interest in (whether or not in writing and whether or not delivered to
Ackerley Group's shareholders generally), from any person relating to any (i)
direct or indirect acquisition or purchase of a business that constitutes 15% or
more of the net revenues, net income or the assets of Ackerley Group and its
subsidiaries taken as a whole, (ii) direct or indirect acquisition or purchase
of 15% or more of any class of equity securities of Ackerley Group or any of its
material subsidiaries, (iii) tender offer or exchange offer that if consummated
would result in any person beneficially owning 15% more of any class of equity
securities of Ackerley Group or of any of its material subsidiaries, or (iv)
merger, consolidation, business combination, recapitalization, liquidation,
dissolution, share exchange or similar transaction involving Ackerley Group or
any of its material subsidiaries, other than the transactions contemplated by
the merger agreement.
"Superior Proposal" means an Acquisition Proposal which the Ackerley Group
Board in good faith determines (after consultation with a financial advisor of
nationally recognized reputation and after taking into account all factors
deemed relevant by the Ackerley Group Board, including but not limited to
timing, breakup fees, expense reimbursement provisions, type of consideration
and conditions to consummation) that the consideration to the then holders of
Ackerley common stock is superior from a financial point of view to the
consideration provided for in the merger agreement.
The merger agreement further provides that neither the Ackerley Group Board
nor any committee thereof shall take any of the following actions, unless the
Ackerley Group Board determines in good faith, and after consultation with
outside counsel, that it is necessary to take such action in order to act in a
manner consistent with its fiduciary duties to Ackerley Group shareholders:
- withdraw, modify or change, or propose publicly to withdraw, modify or
change, in a manner adverse to Clear Channel, the approval or
recommendation by the Ackerley Group Board of the merger or the merger
agreement; or
- approve or recommend, or propose publicly to approve or recommend, any
Acquisition Proposal.
However, nothing contained in this non-solicitation covenant will prohibit
Ackerley Group:
- from taking and disclosing to its shareholders a position contemplated by
Rule 14d-9 or Rule 14e-2(a) promulgated under the Securities Exchange Act
of 1934, as amended;
55
- from engaging in discussions with any person for the sole purpose of
clarifying a bona fide unsolicited proposal; or
- from making any disclosure to the Ackerley Group shareholders if, in the
good faith judgment of the Ackerley Group Board, in consultation with
outside counsel, failure to so disclose would be inconsistent with the
Ackerley Group Board's obligations under applicable law.
The merger agreement further provides that Ackerley Group will immediately
cease and cause to be terminated any existing activities, discussions or
negotiations with any other person with respect to a potential Acquisition
Proposal.
ADDITIONAL COVENANTS AND AGREEMENTS
DOCUMENT AND REGISTRATION STATEMENT
The merger agreement provides that Ackerley Group will prepare and file
with the SEC a document relating to the Ackerley Group meeting which, subject to
the above provision under "-- No Solicitation Covenant," will include the
recommendation of the Ackerley Group Board to vote in favor of the merger. The
merger agreement provides that Clear Channel will prepare and file with the SEC
a registration statement for the registration of the Clear Channel common stock
to be issued in the merger.
SHAREHOLDERS' MEETING
In the merger agreement, Ackerley Group agreed to call and hold a meeting
relating to the required shareholder approval of the merger as promptly as
possible and to use its reasonable efforts to hold such meeting within 75 days
after the Clear Channel registration statement becomes effective but not earlier
than 20 business days after the date on which the document prepared by Ackerley
Group relating to the shareholder vote is first mailed. Ackerley Group further
agreed to hold the meeting even if Ackerley Group's approval or recommendation
of the merger agreement is withdrawn or modified in any adverse manner as
permitted by the merger agreement.
APPROPRIATE ACTION; CONSENTS AND FILINGS
The merger agreement provides that Ackerley Group and Clear Channel will
together, or pursuant to an allocation of responsibility to be agreed upon
between them:
- take, or cause to be taken, all appropriate action required under state
blue sky or securities laws;
- prepare and file with the NYSE, and such other stock exchanges as will be
agreed upon, listing applications of Clear Channel common stock issuable
in the merger or upon exercise after the merger of Ackerley Group's stock
options, warrants, conversion rights or other rights or vesting or other
payment of other Ackerley Group equity based awards;
- seek actions, consents, approvals or waivers or make all filings, and
cooperate with one another in order to lift any injunctions or remove any
impediment in connection with the merger; and
- cooperate with one another in obtaining opinions of Dewey Ballantine LLP,
special counsel to Ackerley Group, and Akin, Gump, Strauss, Hauer, &
Feld, L.L.P., counsel to Clear Channel, dated as of the closing date, to
the effect that the merger qualifies as a reorganization under the
provisions of Section 368(a) of the Internal Revenue Code.
EMPLOYEE BENEFIT MATTERS
Until December 31 of the calendar year in which the closing occurs, Clear
Channel will provide or cause to be provided to the current employees of
Ackerley Group benefits that are comparable in the aggregate, other than plans
or benefits providing for the issuance of Ackerley Group stock, to the benefits
currently provided to the current employees, and after such date will provide
the current employees with benefits comparable to those provided to
similarly-situated employees of Clear Channel.
56
From and after the closing date, Clear Channel will recognize any prior
service of current employees as of the closing date for all purposes other than
benefit accrual under Clear Channel benefit plans and Clear Channel's benefits
arrangements in which they become participants. Notwithstanding the foregoing,
Clear Channel will credit any prior service of the current employees with
Ackerley Group or its subsidiaries (to the extent credited by Ackerley Group and
its subsidiaries) for purposes of level of benefits under Clear Channel vacation
pay plans in which they become participants. Clear Channel and Ackerley Group
agreed in the merger agreement that where applicable with respect to any medical
or dental benefit plan of Clear Channel, Clear Channel will waive, with respect
to any current employees, any pre-existing condition exclusion and
actively-at-work requirements, to the extent such exclusion or requirement would
not have applied under the applicable plan of Ackerley Group or any of its
subsidiaries. Following the closing date, Clear Channel will cause the surviving
corporation to discharge all obligations under the retention and severance plans
and agreements to be entered into as set forth in the merger agreement.
PLAN OF REORGANIZATION
The merger agreement provides that from and after the date of the merger
agreement and until the effective time of the merger, each party to the merger
agreement will use its reasonable efforts to cause the merger to qualify, and
will not take, or fail to take, any action or cause, or fail to cause, any
action to be taken which could prevent the merger from qualifying, as a
reorganization under the provisions of Section 368(a) of the Internal Revenue
Code. Following the effective time of the merger, neither the surviving
corporation, Clear Channel nor any of their affiliates will take, or fail to
take, any action or cause, or fail to cause, any action to be taken which could
cause the merger to fail to qualify as a reorganization under Section 368(a) of
the Internal Revenue Code.
CONDITIONS
The merger agreement generally provides that the obligations of each party
to complete the transactions contemplated in the merger agreement are subject to
customary conditions, including the following:
EFFECTIVENESS OF THE CLEAR CHANNEL REGISTRATION STATEMENT
Declaration of effectiveness of the Clear Channel registration statement
and the absence of any stop order suspending the effectiveness of the Clear
Channel registration statement and of any proceedings by the SEC initiated for
that purpose.
SHAREHOLDER APPROVAL
Adoption and approval of the merger agreement and the merger by the
requisite vote of the Ackerley Group shareholders.
NO ORDER
Absence of any governmental entity, state or federal court of competent
jurisdiction or arbitrator having enacted, issued, promulgated, enforced or
entered any statute, rule, regulation, executive order, decree, judgment,
injunction or arbitration award or finding or other order, whether temporary,
preliminary or permanent, which is in effect and which prevents or prohibits the
completion of the merger and any other transaction contemplated by the merger
agreement.
CONSENTS AND APPROVALS
Receipt of certain consents, approvals and authorizations of governmental
entities and other persons necessary to complete the merger (in each case,
without the imposition of conditions, the requirement of divestiture or the
expenditure of money by Clear Channel or Ackerley Group to a third party in
exchange for any such consent that, in any such case, would be materially
adverse to Clear Channel, Ackerley
57
Group and their subsidiaries, taken as a whole) unless the failure to obtain
such consents would not, individually or in the aggregate, reasonably be
expected to have a material adverse effect on Ackerley Group or on Clear Channel
after the effective time of the merger.
HSR ACT
Expiration or termination of the applicable waiting period, together with
any extension of the waiting period, under the HSR Act.
COMMUNICATIONS ACT
All orders and approvals of the FCC required in connection with the
transactions contemplated by the merger agreement will have been obtained or
made.
NYSE
Approval of Clear Channel common stock issuable to Ackerley Group
shareholders in the merger for listing on the NYSE, subject only to official
notice of issuance.
REPRESENTATIONS AND WARRANTIES
The representations and warranties of the other party contained in the
merger agreement being true and correct in all material respects, which for
purposes of the representation relating to material contracts will be deemed to
be $10,000,000, unless such representations and warranties expressly include a
standard of materiality, in which case the statement will be true and correct in
all respects, as of the date of the merger agreement and at and as of the
effective time of the merger as though made at the effective time of the merger.
Representations and warranties which address matters of a particular date must
be true and correct in all material respects as of such date.
AGREEMENTS AND COVENANTS
The other party shall have performed in all material respects its
obligations contained in the merger agreement required to be performed by it
prior to the effective time, which for purposes of the covenant relating to
material contracts will be deemed to be $5,000,000.
NO MATERIAL ADVERSE CHANGE
As of the effective time, there has been no event, development or condition
which, in the aggregate, has had or could reasonably be expected to have, a
material adverse effect on Ackerley Group or Clear Channel.
TAX OPINIONS
Receipt by each of Clear Channel and Ackerley Group of an opinion from its
tax advisor or counsel, respectively, to the effect that the merger will qualify
for federal income tax purposes as a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code.
TERMINATION
The merger agreement may be terminated at any time prior to the effective
time of the merger, whether before or after approval and adoption of the merger
agreement and the merger by the Ackerley Group shareholders:
- by the mutual written consent of Ackerley Group and Clear Channel;
- by either Ackerley Group or Clear Channel, if the merger has not occurred
on or before the first anniversary of the merger agreement; provided,
that the party seeking to terminate the merger agreement pursuant to this
provision will not have breached in any material respect its obligations
58
under the merger agreement in any manner that will have proximately
contributed to the failure to consummate the merger on or before such
date.
- by Ackerley Group, if there has been a material breach by Clear Channel
of any representation, warranty, covenant or agreement set forth in the
merger agreement which breach, if susceptible to cure, has not been cured
in all material respects within twenty business days following receipt by
Clear Channel of notice of such breach;
- by Clear Channel, if there has been a material breach by Ackerley Group
of any representation, warranty, covenant or agreement set forth in the
merger agreement which breach, if susceptible to cure, has not been cured
in all material respects within twenty business days following receipt by
Ackerley Group of notice of such breach;
- by either Ackerley Group or Clear Channel, if
- there is a law, rule or regulation that makes the consummation of the
merger illegal or otherwise prohibited;
- any judgment, injunction, order or decree of a court or other
governmental entity of competent jurisdiction is entered that
permanently restrains, enjoins or otherwise prohibits either Ackerley
Group or Clear Channel from consummating the merger and such judgment,
injunction, order or decree will have become final and nonappealable;
or
- the Ackerley Group shareholder approval of the merger agreement and the
merger will not have been obtained by reason of the failure to obtain
the required vote at the Ackerley Group special meeting or at any
postponement or adjournment thereof;
- by Clear Channel, if:
- the Ackerley Group Board will have failed to recommend that Ackerley
Group's shareholders vote to adopt the merger agreement, or will have
withdrawn or modified in a manner adverse to Clear Channel the Ackerley
Group Board recommendation;
- Ackerley Group will have failed to include in the proxy statement the
Ackerley Group Board recommendation or a statement to the effect that
the Ackerley Group Board has determined and believes that the merger is
in the best interests of Ackerley Group's shareholders;
- the Ackerley Group Board fails to publicly reaffirm the Ackerley Group
Board recommendation, or fails to reaffirm its determination that the
merger is in the best interests of Ackerley Group's shareholders,
within ten business days after Clear Channel reasonably requests in
writing that such recommendation or determination be reaffirmed;
- the Ackerley Group Board will have approved, endorsed or recommended
any Acquisition Proposal;
- Ackerley Group will have entered into any letter of intent, acquisition
agreement or similar agreement relating to any Acquisition Proposal;
- a tender or exchange offer relating to any shares of the Ackerley
common stock will have been commenced and Ackerley Group will not have
sent to its security holders, within ten business days after the
commencement of such tender or exchange offer, a statement disclosing
that Ackerley Group recommends rejection of such tender or exchange
offer;
- an Acquisition Proposal is publicly announced, and Ackerley Group fails
to issue a press release that reaffirms the Ackerley Group Board
recommendation within ten business days after such Acquisition Proposal
is announced; or
- Ackerley Group or any of its subsidiaries or any Ackerley Group
representative will have violated in a material respect the
restrictions set forth in the non-solicitation covenant discussed
above;
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- by Clear Channel, if Ackerley Group will have failed to hold the Ackerley
Group special meeting within 75 days after the registration statement is
declared effective under the Securities Act; provided that such failure
is not due to circumstances beyond the reasonable control of Ackerley
Group, including, without limitation, the existence of any statute, rule,
regulation, executive order, decree, preliminary injunction or
restraining order enjoining, preventing, prohibiting or delaying the
Ackerley Group special meeting; and
- by Ackerley Group, but only until the expiration of the Initial Period,
if the Ackerley Group Board (i) has received a Superior Proposal and (ii)
after consultation with outside legal counsel to Ackerley Group,
determines in good faith that such action is consistent with the
fiduciary duties of the Ackerley Group Board to Ackerley Group's
shareholders under applicable law, but only after 72 hours following
Clear Channel's receipt of written notice advising Clear Channel that the
Ackerley Group Board is prepared to do so, and only if, during such
72-hour period, Ackerley Group and its advisors will have negotiated in
good faith with Clear Channel to make such adjustments in the terms and
conditions of the merger agreement as would enable the parties to proceed
with the transactions contemplated herein on such adjusted terms.
"Initial Period" means a period commencing on the day following the date of
the merger agreement and ending at 5:00 p.m. Dallas, Texas time on November 5,
2001; provided, however, that such period will be extended (and all such
extensions occurring in accordance herewith being deemed within the definition
of Initial Period) (i) for a period of up to ten additional business days after
the date of delivery by Ackerley Group to Clear Channel of a notice of an
Acquisition Proposal, so that at least ten business days elapse between the
delivery by Ackerley Group of the notice and the expiration of the Initial
Period (exclusive of the extensions provided in clauses (ii) and (iii) of this
definition); (ii) during the 72 hour period referred to above; and (iii) if,
during the 72 hour period referred to above, Clear Channel and Ackerley Group
have agreed to proceed with the transactions contemplated herein on adjusted
terms, for a period of up to 72 hours from the time of such agreement.
EFFECT OF TERMINATION
The merger agreement provides that, in the event of the termination of the
merger agreement by either Ackerley Group or Clear Channel as described above,
the merger agreement will become void and have no effect with no liability or
obligation under the merger agreement on the part of Clear Channel, Clear
Channel's merger subsidiary or Ackerley Group, except that certain agreements
will survive termination and no such termination will relieve any party of any
liability or damages resulting from any breach by that party of any of its
representations, warranties, covenants or agreements set forth in the merger
agreement.
TERMINATION FEE
In the merger agreement, Clear Channel and Ackerley Group agreed that
Ackerley Group will pay to Clear Channel the sum of $17.25 million, plus up to
$7.5 million of the reasonable, actual and documented out-of-pocket expenses of
Clear Channel in connection with the merger agreement solely as follows:
- if one of the following circumstances occur:
- Clear Channel or Ackerley Group terminates the merger agreement because
Ackerley Group shareholders fail to adopt the merger agreement at a
duly held shareholders' meeting or at any adjournment or postponement
thereof;
- (i) Clear Channel terminates the merger agreement due to the occurrence
of an Ackerley Group triggering event, (ii) at any time after the date
of the merger agreement an Acquisition Proposal is publicly announced
and (iii) within 15 months of the termination of the merger agreement,
Ackerley Group enters into a definitive agreement with any third party
with respect to a transaction similar to an Acquisition Proposal or any
such transaction is consummated; provided
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that for purposes of this provision only, references to 15% in the
definition of Acquisition Proposal are deemed to be references to 50%;
- Clear Channel terminates the merger agreement because Ackerley Group has
failed to hold the Ackerley Group special meeting within 75 days after
the registration statement is declared effective under the Securities
Act, provided that such failure is not due to circumstances beyond the
reasonable control of Ackerley Group, including, without limitation, the
existence of any statute, rule, regulation, executive order, decree,
preliminary injunction or restraining order enjoining, preventing,
prohibiting or delaying the Ackerley Group special meeting; or
- Ackerley Group terminates the merger agreement prior to the expiration of
the Initial Period because the Ackerley Group Board (i) has received a
Superior Proposal and (ii) after consultation with outside legal counsel
to Ackerley Group, has determined in good faith that such action is
consistent with the fiduciary duties of the Ackerley Group Board to
Ackerley Group's shareholders under applicable law, and as otherwise
provided in the merger agreement.
If Clear Channel rightfully terminates the merger agreement because
Ackerley Group has materially breached any representation, warranty, covenant or
agreement set forth in the merger agreement, which breach (if susceptible to
cure) has not been cured in all material respects within twenty business days
following receipt by Ackerley Group of notice of such breach, Ackerley Group
will pay to Clear Channel the reasonable, actual and documented out-of-pocket
expenses of Clear Channel up to $7.5 million.
AMENDMENT; EXTENSION; WAIVER
The merger agreement may be amended by the parties to the merger agreement
at any time before or after approval of the merger agreement by the shareholders
of Ackerley Group and Clear Channel. After approval of the merger by the
shareholders of Ackerley Group and Clear Channel, no amendment may be made
without further shareholder approval that by law requires further approval by
such shareholders. The merger agreement may not be amended except by an
instrument in writing signed by the parties to the merger agreement.
The merger agreement provides that at any time prior to the effective time
of the merger, Clear Channel, Clear Channel's merger subsidiary or Ackerley
Group may:
- extend the time for the performance of any of the obligations or other
acts of the other parties to the merger agreement;
- waive any inaccuracies in the representations and warranties of the other
party contained in the merger agreement or in any document delivered
pursuant to the merger agreement; or
- waive compliance by the other party with any of the agreements or
conditions contained in the merger agreement.
Any such extension or waiver will be valid only if it is set forth in a
written instrument signed by the party or parties to be bound thereby.
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STOCKHOLDER VOTING AND SUPPORT AGREEMENT
AGREEMENT TO VOTE
On October 5, 2001, in order to facilitate the merger, Mr. Barry A.
Ackerley entered into a Stockholder Voting and Support Agreement pursuant to
which he agreed not to sell any shares of Ackerley ordinary common stock owned
by him, representing approximately 6.7% of all the outstanding voting power of
Ackerley Group, and to vote all such shares owned by him:
- in favor of the merger and the merger agreement;
- against any action that is reasonably likely to result in a breach in any
material respect of any covenant, representation or warranty or any other
obligation of Ackerley Group under the merger agreement;
- against any Acquisition Proposal; and
- to the extent such action is reasonably likely to materially impede,
interfere with, delay, postpone or adversely affect the merger or the
merger agreement in any material respect,
- against any change in a majority of the Ackerley Group Board other than
in connection with an annual meeting of the Ackerley Group shareholders
with respect to the slate of directors proposed by the incumbent
Ackerley Group Board (in which case Mr. Ackerley agrees to vote for the
slate proposed by the incumbent Ackerley Group Board), or
- against any material change in Ackerley Group's corporate structure or
business, except for those actions contemplated by the merger
agreement.
However, Mr. Ackerley's agreement to vote in favor of the merger and the
merger agreement and the proxy described below are not applicable to the shares
of Ackerley Class B common stock owned by him, which represent approximately 82%
of the voting power of Ackerley Group.
IRREVOCABLE PROXY
Mr. Ackerley also agreed to deliver to Clear Channel an irrevocable proxy
with respect to the shares of Ackerley ordinary common stock, thereby allowing
Clear Channel to vote such shares at any time prior to the termination date of
the merger agreement in accordance with the terms of the Stockholder Voting and
Support Agreement.
ALTERNATIVE TRANSACTION
If the shares of Ackerley ordinary common stock or the shares of Ackerley
Class B common stock owned by Mr. Ackerley are sold, transferred, exchanged,
canceled, or disposed of in connection with any Acquisition Proposal made prior
to the termination date of the merger agreement, Mr. Ackerley will pay to Clear
Channel an amount equal to 50% of the additional or excess profit realized from
such alternative transaction.
SECOND TRANSACTION
If, after the date of the Stockholder Voting and Support Agreement, the
amount of consideration to be received by the holders of Ackerley common stock
in connection with the merger should be increased, then, as may be requested by
Clear Channel, Mr. Ackerley will either (i) execute and deliver to Clear Channel
such documents as may be necessary to waive the right to receive 50% of such
increase or (ii) pay to Clear Channel an amount equal to 50% of such increase.
The Stockholder Voting and Support Agreement is attached to this document
as APPENDIX B.
62
BUSINESS OF CLEAR CHANNEL
Clear Channel is a diversified media company with three reportable business
segments: radio broadcasting, outdoor advertising and live entertainment. As of
December 31, 2000, Clear Channel owned, programmed, or sold airtime for 1,105
domestic radio stations and two international radio stations and owned a leading
national radio network. In addition, at December 31, 2000, Clear Channel had
equity interests in various domestic and international radio broadcasting
companies. Clear Channel was also one of the world's largest outdoor advertising
companies based on total advertising display inventory of approximately 149,000
domestic display faces and approximately 549,000 international display faces. In
addition, Clear Channel was one of the world's largest diversified promoters,
producers and venue operators for live entertainment events. As of December 31,
2000, Clear Channel owned or operated 120 live entertainment venues. Clear
Channel also owned or programmed 22 television stations (including three
satellite stations), owned a media representation firm and represented
professional athletes. Clear Channel was incorporated in Texas in 1974.
Clear Channel's radio broadcasting segment includes both radio stations for
which Clear Channel is the licensee and for which Clear Channel programs or
sells air time under local marketing agreements or joint sales agreements. Clear
Channel's radio broadcasting segment also operates radio networks and produces
syndicated programming. Clear Channel's outdoor advertising segment includes
advertising display faces which Clear Channel owns or operates under lease
management agreements. Clear Channel's live entertainment segment operates
domestic and international entertainment venues which Clear Channel owns or
operates under lease management agreements. Clear Channel's live entertainment
segment also produces live music events, Broadway and touring Broadway shows,
family entertainment shows and specialized sports and motor sports events.
A brief description of each of Clear Channel's primary lines of business
follows.
RADIO BROADCASTING
RADIO STATIONS
As of December 31, 2000, Clear Channel owned, programmed or sold airtime
for 346 AM and 759 FM domestic radio stations, of which 498 radio stations were
in the top 100 markets, according to the Arbitron winter 2000 ranking of U.S.
markets. In addition, Clear Channel currently owns two international FM radio
stations and various interests in domestic and international radio broadcasting
companies. Clear Channel's radio stations employ various formats for their
programming.
RADIO NETWORKS
As of December 31, 2000, Clear Channel owned one of the leading national
radio networks, based on a total audience of over 180 million weekly listeners,
that produces more than 60 syndicated radio programs and services for more than
7,800 radio stations. The network syndicates talk programming including such
talent as Rush Limbaugh, Dr. Laura Schlessinger and Jim Rome, and music
programming, including such talent as Rick Dees and Casey Kasem. Clear Channel
also operated several news, sports and agricultural radio networks serving
Oklahoma, Texas, Iowa, Kentucky, Virginia, Alabama, Tennessee, Florida and
Pennsylvania.
OUTDOOR ADVERTISING
As of December 31, 2000, Clear Channel owned or operated approximately
698,000 advertising display faces. Clear Channel currently provides outdoor
advertising services in over 52 U.S. markets and in 43 countries outside the
U.S. Clear Channel's display faces include billboards of various sizes,
wallscapes, transit displays and street furniture displays. Additionally, Clear
Channel currently owns various interests in outdoor advertising companies, which
it accounts for under the equity method of accounting.
63
LIVE ENTERTAINMENT
Clear Channel significantly expanded its presence in the live entertainment
industry with its August 2000 acquisition of SFX. Clear Channel is one of the
world's largest producers, promoters and marketers of live entertainment. Last
year, more than 60 million people attended approximately 26,000 of Clear
Channel's events, including: live music events; Broadway and touring Broadway
shows; family entertainment shows; and specialized sports and motor sports
events. As of December 31, 2000, Clear Channel owned or operated a total of 92
domestic venues and 28 international venues. Clear Channel also produces touring
and original Broadway shows and derives revenues from its theater operations.
Additionally, Clear Channel currently owns various interests in live
entertainment companies, which it accounts for under the equity method of
accounting.
OTHER
TELEVISION
As of December 31, 2000, Clear Channel owned, programmed or sold airtime
for 22 television stations (including three satellite stations). Clear Channel's
television stations are affiliated with various television networks, including
FOX, UPN, ABC, NBC and CBS. The primary sources of programming for Clear
Channel's 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. Clear Channel supplies the
majority of programming to our FOX and UPN affiliates by selecting and
purchasing syndicated television programs.
MEDIA REPRESENTATION
As a result of Clear Channel's August 30, 2000 merger with AMFM, Clear
Channel now owns the Katz Media Group, a full-service media representation firm
that sells national spot advertising time for clients in the radio and
television industries throughout the United States. Katz Media is one of the
largest media representation firms in the country, representing over 2,000 radio
stations, 368 television stations and growing interests in cable television
stations.
SPORTS REPRESENTATION
As a result of its merger with SFX, Clear Channel now operates in the
sports representation business. Clear Channel's full-service sports marketing
and management operations specialize in the representation of professional
athletes, integrated event management, television programming/production, and
marketing consulting services. Among Clear Channel's clients are several hundred
professional athletes, including Michael Jordan (basketball), Kobe Bryant
(basketball), Roger Clemens (baseball), Greg Norman (golf), Andre Agassi
(tennis), Jerry Rice (football) and David Beckham (soccer -- UK).
BUSINESS OF ACKERLEY GROUP
Ackerley Group holds a diversified group of market-leading outdoor,
broadcasting and interactive media assets. Ackerley Group operates the nation's
fourth-largest outdoor media company with more than 6,000 advertising displays
in its primary markets of Boston, Massachusetts, Seattle, Washington and
Portland, Oregon. Ackerley Group owns or operates under management agreements 18
television stations making it one of the nation's 30 largest television owners.
Ackerley Group's radio broadcasting segment includes the No. 1 hit-music and No.
1 sports talk stations in the nation's 13th-largest media market. Through its
Interactive Media segment, Ackerley Group operates three local portals
connecting its television viewers with the Internet to bring them the latest in
local and national news. Ackerley Group's venture arm, Ackerley Ventures,
strategically invests in technologies that enhance the company's core
operations. Ackerley Group is a Delaware corporation and was founded in 1975.
64
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT OF CLEAR CHANNEL
The table below sets forth information concerning the beneficial ownership
of Clear Channel common stock as of November 26, 2001, for each director serving
on the Clear Channel board in 2001 and each of the named executive officers not
listed as a director; the directors and executive officers as a group; and each
person known to Clear Channel to own beneficially more than 5% of outstanding
Clear Channel common stock. Unless otherwise indicated, the address of each
person listed below is 200 East Basse Road, San Antonio, Texas 78209. At the
close of business on November 26, 2001, there were 597,813,629 shares of Clear
Channel common stock outstanding. Except as otherwise noted, each shareholder
has sole voting and investment power with respect to the shares beneficially
owned.
AMOUNT AND NATURE OF PERCENT
NAME BENEFICIAL OWNERSHIP OF CLASS
---- -------------------- --------
L. Lowry Mays........................................... 31,032,838(1) 5.2%
Karl Eller.............................................. 2,041,165(2) *
Mark P. Mays............................................ 1,034,127(3) *
Randall T. Mays......................................... 656,816(4) *
Robert L. Crandall...................................... 29,200(5) *
Alan D. Feld............................................ 83,300(6) *
Thomas O. Hicks......................................... 40,265,194(7)(16) 6.7%
Vernon E. Jordan, Jr. .................................. 90,300(8) *
Perry J. Lewis.......................................... 168,832(9) *
B. J. McCombs........................................... 14,456,986(10) 2.4%
Theodore H. Strauss..................................... 232,046(11) *
John H. Williams........................................ 25,620(12) *
Randy Michaels(13)...................................... 973,514(14) *
Hicks Muse Parties(15).................................. 34,825,777(16) 5.8%
FMR Corp.(17)........................................... 65,320,917(18) 10.9%
Capital Research and Management Company(19)............. 38,094,690(20) 6.4%
Janus Capital Corporation(21)........................... 31,861,019 5.3%
Putnam Investments, LLC(22)............................. 31,786,096 5.3%
All Directors and Executive Officers as a Group (20
persons).............................................. 91,775,909(23) 15.3%
---------------
* Percentage of shares beneficially owned by such person does not exceed one
percent of the class so owned.
(1) Includes 1,745,000 shares subject to options held by Mr. L. Mays and 98,456
shares held by trusts of which Mr. L. Mays is trustee, but not beneficiary,
468,283 shares held by the Mays Family Foundation, 1,159,787 shares held by
the Mays Family 2000 Charitable Lead Annuity Trust and 20,000,000 shares
held by 4-M Partners, Ltd., over which Mr. L. Mays has either sole or
shared investment or voting authority.
(2) Includes 798,112 shares subject to options held by Mr. Eller and 1,243,053
shares held by Red River Resources, a company jointly controlled by Mr.
Eller.
(3) Includes 62,380 shares subject to options held by Mr. M. Mays, 134,316
shares held by trusts of which Mr. M. Mays is trustee, but not beneficiary
and 629,193 shares held by the MPM Partners, Ltd., over which Mr. M. Mays
has control of the sole general partner.
(4) Includes 66,980 shares subject to options held by Mr. R. Mays and 13,041
shares held by trusts of which Mr. R. Mays is trustee, but not beneficiary.
(5) Includes 24,500 shares subject to options held by Mr. Crandall.
65
(6) Includes 67,000 shares subject to options held by Mr. Feld. Excludes 10,360
shares owned by Mr. Feld's wife, as to which Mr. Feld disclaims beneficial
ownership.
(7) Consists of 5,323,768 shares for which Thomas O. Hicks has sole voting and
dispositive power and 34,941,426 shares (including vested stock options to
purchase 94,000 shares) for which Thomas O. Hicks has shared voting and
dispositive power. Of the 5,323,768 shares for which Thomas O. Hicks has
sole voting and dispositive power, 4,552,561 shares are held of record by
Thomas O. Hicks, 252,358 shares are subject to options held of record by
certain trusts for the benefit of certain of Thomas O. Hicks' children that
are currently vested, 318,756 shares are held by Thomas O. Hicks as the
trustee of certain trusts for the benefit of certain of Thomas O. Hicks'
children, 1,000 shares held of record by Thomas O. Hicks as nominee that
are immediately exercisable pursuant to a stock option, 102,366 shares are
held of record by a private foundation controlled by Thomas O. Hicks, and
96,727 shares are held of record by two limited partnerships of which the
general partner is a limited liability company of which Thomas O. Hicks is
the sole member. Of the 34,941,426 shares of common stock for which Thomas
O. Hicks has shared voting and dispositive power, 115,649 shares are held
by Thomas O. Hicks as the co-trustee of a trust for the benefit of
unrelated parties, and 34,825,777 shares (including vested stock options to
purchase 94,000 shares) are held of record by the Hicks Muse Parties. Mr.
Thomas O. Hicks disclaims beneficial ownership of the shares of common
stock not owned of record by him.
(8) Includes 90,300 shares subject to options held by Mr. Jordan.
(9) Includes 118,500 shares subject to options held by Mr. Lewis.
(10) Includes 11,000 shares subject to options held by Mr. McCombs. Excludes
9,798,453 shares held by trusts of which Mr. McCombs' children are
trustees, as to which Mr. McCombs disclaims beneficial ownership.
(11) Includes 129,500 shares subject to options held by Mr. Strauss.
(12) Includes 11,000 shares subject to options held by Mr. Williams.
(13) Mr. Michaels is also known as Benjamin Homel and he files reports under
Section 16(a) of the Securities Exchange Act of 1934 under that name.
(14) Includes 532,135 shares subject to options held by Mr. Michaels.
(15) Address c/o Hicks, Muse, Tate & Furst Incorporated, 200 Crescent Court,
Suite 1600, Dallas, Texas 75201.
(16) Consists of (i) 127,027 shares held of record by Capstar Boston Partners,
L.L.C., a limited liability company of which the manager is a limited
partnership whose ultimate general partner is Hicks, Muse Fund III
Incorporated ("Fund III Inc."), (ii) 16,773,479 shares held of record by
two limited partnerships of which the ultimate general partner is Fund III
Inc., (iii) 17,831,012 shares held of record by six limited partnerships of
which the ultimate general partner is Hicks, Muse Fund IV LLC ("Fund IV"),
(iv) 259 shares held of record by HM 1-FOF Coinvestors, L.P. a limited
partnership of which the ultimate general partner is Hicks Muse Latin
America Fund Incorporated ("LA Fund"), (v) 94,000 shares issuable upon the
exercise of stock options that are already vested and held by Hicks, Muse &
Co. Partners, L.P., a limited partnership of which the ultimate general
partner is HM Partners Inc. ("HM Partners"). The entities affiliated with
Hicks, Muse, Tate & Furst Incorporated and described in this footnote as
holding shares of Clear Channel are collectively the "Hicks Muse Parties".
Thomas O. Hicks is a controlling stockholder and serves as executive
officer of Fund III Inc., LA Fund, and HM Partners, and Thomas O. Hicks is
the sole member of Fund IV. Accordingly, Thomas O. Hicks may be deemed to
be the beneficial owner of the common stock beneficially owned by the Hicks
Muse Parties. Mr. Thomas O. Hicks disclaims beneficial ownership of the
shares of common stock not owned of record by him.
(17) Address: 82 Devonshire Street, Boston, Massachusetts 02109.
(18) Includes 186,412 shares issuable upon conversion of $17,500,000 principal
amount of Clear Channel's 1.5% Senior Convertible Notes due 2002 and
221,868 shares issuable upon conversion of
66
$30,700,000 principal amount of Jacor Communications Company Liquid Yield
Option Notes due 2018.
(19) Address: 333 South Hope Street, Los Angeles, California 90071.
(20) Includes 863,602 shares issuable upon conversion of $53,500,000 principal
amount of Clear Channel's 2 5/8% Senior Convertible Notes due 2003.
(21) Address: 100 Filmore Street, Denver, Colorado 80206-4923.
(22) Address: One Post Office Square, Boston, Massachusetts 02109.
(23) Includes 4,150,469 shares subject to options held by such persons,
1,161,839 shares held by trusts of which such persons are trustees, but not
beneficiaries, 468,283 shares held by the Mays Family Foundation, 1,159,787
shares held by the Mays Family 2000 Charitable Lead Annuity Trust,
20,000,000 shares held by 4-M Partners, Ltd., 629,193 shares held by the
MPM Partners, Ltd., 1,243,053 shares held by Red River Resources and
34,825,777 shares held by Hick Muse Parties as more fully described in note
(16) above.
67
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT OF ACKERLEY GROUP
All of Ackerley Group's directors and executive officers own shares of
Ackerley ordinary common stock; some of Ackerley Group's directors and executive
officers also own shares of Ackerley Class B common stock. Barry A. Ackerley
beneficially owns in excess of five percent of the outstanding shares of
Ackerley ordinary common stock and Ackerley Class B common stock. In addition,
there is one other shareholder, Gabelli Funds, Inc., which owns in excess of
five percent of the outstanding shares of Ackerley ordinary common stock.
The following table sets forth information regarding the share ownership of
Ackerley Group's current directors, named executives and principal shareholders,
as well as information for our directors and executive officers as a group.
Unless otherwise indicated, the address of each person listed below is 1301
Fifth Avenue, Suite 4000, Seattle, Washington 98101. At the close of business on
November 26, 2001, there were 24,108,416 shares of Ackerley ordinary common
stock outstanding and 11,020,622 shares of Ackerley Class B common stock
outstanding. The information in the following table is current as of November
26, 2001.
SHARES OF ACKERLEY ORDINARY COMMON STOCK AND
ACKERLEY CLASS B COMMON STOCK AND PERCENT OF CLASS BENEFICIALLY OWNED(1)
ORDINARY
NAME, AGE, ADDRESS AND POSITION COMMON PERCENT CLASS B PERCENT
WITH ACKERLEY GROUP STOCK OF CLASS COMMON STOCK OF CLASS
------------------------------- --------- -------- ------------ --------
Barry A. Ackerley, 67.......................... 9,002,855(2) 37.3 10,949,299(2) 99.4
Chairman, Chief Executive Officer, and
Director
Gail A. Ackerley, 63........................... 9,002,855(3) 37.3 10,949,299(3) 99.4
Co-Chairman, Co-Chief Executive Officer, and
Director
Christopher H. Ackerley, 32.................... 18,928 * 13,698 *
President and Director
Edward G. Ackerley, 32......................... 16,845 * 13,530 *
Director
Deborah L. Bevier, 50.......................... 5,756(4) * -0- *
Director
Chris W. Birkeland, 36......................... 2,767 * -0- *
Director
Kimberley A. Cleworth, 37...................... 98,114(5) * 27,329 *
Director
Keith D. Grinstein, 41......................... 1,986 * -0- *
Director
Michael T. Lennon, 39.......................... 2,767 * -0- *
Director
Michel C. Thielen, 67.......................... 7,943 * -0- *
Director
Kevin E. Hylton, 45............................ 427 * -0- *
Senior Vice President and Chief Financial
Officer
Sean M. Tallarico, 36.......................... 2,394 * -0- *
Corporate Controller
Gabelli Funds, Inc. ........................... 6,095,240 25.3 -0- *
One Corporate Center
Rye, NY 10580-1434
All Directors and Executive Officers as a group
(12 persons)................................. 9,086,970 37.7 11,003,856 99.8
68
---------------
(1) Unless otherwise indicated, represents shares over which each nominee
exercises sole voting or investment power.
(2) Mr. Barry Ackerley and Mrs. Ackerley are husband and wife. The amount shown
includes (i) 7,264 shares of Ackerley ordinary common stock and 264 shares
of Ackerley Class B common stock held by Mrs. Ackerley, of which Mr.
Ackerley disclaims beneficial ownership; and (ii) 73,812 shares of Ackerley
ordinary common stock held by The Ginger and Barry Ackerley Foundation, of
which he is a director and shares voting and investment power.
(3) Mr. Barry Ackerley and Mrs. Ackerley are husband and wife. The amount shown
includes (i) 8,921,779 shares of Ackerley ordinary common stock and
10,949,035 shares of Ackerley Class B common stock held by Mr. Ackerley, of
which Mrs. Ackerley disclaims beneficial ownership; and (ii) 73,812 shares
of Ackerley ordinary common stock held by The Ginger and Barry Ackerley
Foundation, of which she is a director and shares voting and investment
power.
(4) The amount shown includes 500 shares held by Ms. Bevier's husband.
(5) The amount shown includes (i) 4,000 shares held by Ms. Cleworth's husband of
which Ms. Cleworth disclaims beneficial ownership; (ii) 73,812 shares of
Ackerley ordinary common stock held by The Ginger and Barry Ackerley
Foundation, of which she is President and Executive Director and shares
voting and investment power; and (iii) 14,675 shares held by Ms. Cleworth's
minor children.
* Indicates amounts equal to less than 1% of the outstanding shares.
69
DESCRIPTION OF CLEAR CHANNEL CAPITAL STOCK
The following description of certain terms of the capital stock of Clear
Channel does not purport to be complete and is qualified in its entirety by
reference to the Clear Channel restated articles of incorporation, as amended.
For more information as to how you can obtain the Clear Channel restated
articles of incorporation, as amended, see "Where You Can Find More
Information."
CLEAR CHANNEL COMMON STOCK
Clear Channel's board of directors has the authority to issue up to
1,500,000,000 shares of common stock. As of November 26, 2001, 597,813,629
shares of common stock were outstanding. Common shareholders are entitled to one
vote per share on all matters submitted to a vote of shareholders. In addition,
common shareholders may receive dividends, if any, on a pro rata basis that may
be declared from time to time by the Clear Channel board from legally available
funds. However, the payment of any dividends on shares of Clear Channel common
stock would be subject to the payment of any preferential dividends on any
shareholders' preferred stock that may be outstanding. Upon liquidation,
dissolution or winding up of Clear Channel, common shareholders are entitled to
share ratably in any assets available for distribution to shareholders after
payment of all Clear Channel's obligations and all preferential distributions
payable of the holders of any shares of Clear Channel preferred stock then
outstanding. Common shareholders do not have cumulative voting rights or
preemptive or other rights to acquire or subscribe to additional, unissued or
treasury shares. The shares of Clear Channel common stock currently outstanding
are, and the shares of Clear Channel common stock offered hereby will be, upon
issuance thereof, validly issued, fully paid and nonassessable.
CLEAR CHANNEL PREFERRED STOCK
Clear Channel's board of directors may issue up to 2,000,000 shares of
Class A preferred stock and up to 8,000,000 shares of Class B preferred stock.
Either class of preferred stock may be issued in one or more series, and the
rights, preferences, privileges and qualifications of the preferred stock may be
fixed by the board of directors without any further vote or action by the
shareholders. However, shares of Class B preferred stock will not be entitled to
more than one vote per share when the shares are voted as a class with common
shareholders. In addition, the board of directors and management of Clear
Channel have undertaken not to issue, without prior shareholder approval, Class
B preferred stock
- for any defensive or anti-takeover purpose;
- to implement any shareholder's rights plan; or
- with features intended to make any attempted acquisition of Clear Channel
more difficult or costly.
However, the restrictions do not apply to the 2,000,000 shares of Class A
preferred stock which are currently authorized. The issuance of either class of
preferred stock could decrease the amount of earnings and assets available for
distribution to common shareholders. In addition, the issuance of either class
of preferred stock could adversely affect the rights and powers, including
voting rights, of common shareholders and may have the effect of delaying,
deferring or preventing a change in control of Clear Channel. No shares of
either class of preferred stock have ever been issued.
TRANSFER AGENT AND REGISTRAR
The Bank of New York is the transfer agent and registrar for the Clear
Channel common stock.
70
COMPARISON OF CERTAIN RIGHTS OF SHAREHOLDERS
OF CLEAR CHANNEL AND ACKERLEY GROUP
Upon completion of the merger, the shareholders of Ackerley Group will
become shareholders of Clear Channel, and the Clear Channel restated articles of
incorporation, as amended, and third amended and restated by-laws will govern
the rights of former Ackerley Group shareholders. Clear Channel is incorporated
under Texas law and is subject to the Texas Business Corporation Act. Ackerley
Group is incorporated under Delaware law and is subject to the Delaware General
Corporation Law.
The following is a summary of material differences between the rights of
holders of Clear Channel common stock and the rights of holders of Ackerley
common stock. These differences arise from differences between the Clear Channel
restated articles of incorporation, as amended, and the Clear Channel third
amended and restated by-laws, on the one hand, and the Ackerley Group fourth
restated certificate of incorporation and the amended and restated Ackerley
Group by-laws, on the other hand. This discussion is not, and does not purport
to be, complete or to identify all differences that may, under given situations,
be material to shareholders. The following summaries are qualified in their
entirety by reference to the Clear Channel restated articles of incorporation,
as amended, and the Clear Channel third amended and restated by-laws and to the
Ackerley Group fourth restated certificate of incorporation and the Ackerley
Group amended and restated by-laws all incorporated into this document by
reference. To obtain these documents, see "Where You Can Find More Information."
ACKERLEY GROUP SHAREHOLDER RIGHTS CLEAR CHANNEL SHAREHOLDER RIGHTS
--------------------------------- --------------------------------
Authorized Capital
Stock: The authorized capital stock of The authorized capital stock of
Ackerley Group consists of Clear Channel consists of
61,406,510 shares, consisting of 1,510,000,000 shares, consisting
50,000,000 shares of Ackerley of 1,500,000,000 shares of
ordinary common stock and common stock, 2,000,000 shares
11,406,510 shares of Ackerley of Class A preferred stock and
Class B common stock. 8,000,000 shares of Class B
preferred stock.
Number of Directors: The Ackerley Group by-laws The Clear Channel by-laws
provide that the Ackerley Group provide that the Clear Channel
board shall consist of up to board shall consist of up to
fifteen (15) directors. Currently fourteen (14) directors. The
the board consists of ten (10) number of directors may be
directors. The number of increased or decreased from time
directors may be increased or to time by the affirmative vote
decreased by action of the of a majority of the directors
shareholders or of the board of at any meeting of the board of
directors. directors; provided that at all
times the number of directors
shall be at least one and no
decrease shall have the effect
of shortening the term of any
incumbent director.
Classification of Board
of Directors: Ackerley Group does not have a Clear Channel does not have a
classified board. classified board.
71
ACKERLEY GROUP SHAREHOLDER RIGHTS CLEAR CHANNEL SHAREHOLDER RIGHTS
--------------------------------- --------------------------------
Quorum for Meeting of
Directors: The Ackerley Group by-laws The Clear Channel by-laws
provide that a simple majority of provide that a majority of the
the whole Board of Directors directors fixed in accordance
shall constitute a quorum except with the provisions of the Clear
when a vacancy or vacancies Channel by-laws shall constitute
prevents such majority, whereupon a quorum.
a majority of directors then in
office shall constitute a quorum.
Election of Directors: The Ackerley Group by-laws The Clear Channel by-laws
provide that directors shall be provide that directors shall be
elected by a majority of the elected by plurality vote.
shares present in person or by Cumulative voting shall not be
proxy at a meeting at which there permitted.
is a quorum. Cumulative voting
shall not be permitted.
Removal of Directors: The Ackerley Group by-laws The Clear Channel by-laws
provide that any Director may be provide that any director may be
removed at any time, with or removed either for or without
without cause, upon the cause at any meeting of
affirmative vote of the holders shareholders by the affirmative
of a majority of the outstanding vote of the holders of at least
shares of Ackerley common stock two- thirds of the outstanding
entitled to vote for the election shares then entitled to vote at
of such director, cast at a an election of directors present
meeting of shareholders called in person or represented by
for such purpose. proxy and entitled to vote at an
election of directors, if notice
of the intention to act upon
such matter shall have been
given in the notice calling such
meeting.
Director Vacancies: Vacancies on the Board of Vacancies on the Board of
Directors may be filled by a vote Directors other than as a result
of a majority of remaining of an increase in the Board of
directors, even if less than a Directors may be filled by vote
quorum. of (1) a majority of the
remaining directors, even if
less than a quorum or (2)
holders of stock representing at
least a majority of the
outstanding stock entitled to
vote, at a special meeting
called for that purpose. Any
vacancy filled by reason of an
increase in Board of Directors
are to be filled by election at
an annual shareholders' meeting
or a special meeting called for
that purpose.
72
ACKERLEY GROUP SHAREHOLDER RIGHTS CLEAR CHANNEL SHAREHOLDER RIGHTS
--------------------------------- --------------------------------
Amendment of Certificate
of Incorporation: The Ackerley Group certificate of The Clear Channel certificate of
incorporation may be amended, incorporation may be amended,
altered or repealed by a altered or repealed by a
resolution of the Board of resolution of the Board of
Directors that is approved by Directors that is approved by
holders of common stock holders of common stock
representing a majority of the representing two-thirds of the
outstanding voting power. outstanding voting power.
Amendment of By-Laws: The Ackerley Group by-laws may be The Clear Channel by-laws
amended, altered or repealed or provide that the by-laws may be
new by-laws may be adopted at any altered, amended or repealed or
regular or special meeting of the new by-laws may be adopted at
shareholders or the Board of any meeting of the Board of
Directors if notice of such Directors at which a quorum is
alteration or repeal is contained present by the affirmative vote
in the notice of such special of a majority of the directors
meeting. present at such meeting or at
any meeting of the shareholders
by the affirmative vote of the
holders of at least two-thirds
of the outstanding shares
entitled to vote on such matter
and represented in person or by
proxy at such meeting.
Voting Stock: The outstanding voting securities The outstanding voting
of Ackerley Group are the securities of Clear Channel are
Ackerley common stock, consisting the Clear Channel common stock.
of the Ackerley ordinary common Each outstanding share,
stock and the Ackerley Class B regardless of class, is entitled
common stock. The holders of the to one vote.
Ackerley ordinary common stock
and the Ackerley Class B common
stock shall vote as a single
class on all matters submitted to
a vote of the shareholders, with
each share of Ackerley ordinary
common stock being entitled to
one vote and each share of
Ackerley Class B common stock
being entitled to ten votes,
except as otherwise provided by
law.
73
ACKERLEY GROUP SHAREHOLDER RIGHTS CLEAR CHANNEL SHAREHOLDER RIGHTS
--------------------------------- --------------------------------
Meetings of
Shareholders: The Ackerley Group by-laws The by-laws of Clear Channel
provide that the Board of provide that meetings of the
Directors, the Chairman of the shareholders may be called by
Board, the President, or any the Chairman of the Board, the
shareholder or shareholders president, the Board of
holding in the aggregate Directors or the holders of not
one-third of the voting power of less than one-tenth of all the
all shareholders may call a shares entitled to vote at the
meeting. Business transacted at meetings, for any purpose or
any special meeting of purposes. Business transacted at
shareholders shall be limited to all meetings shall be confined
the purposes specified in the to the purposes stated in the
meeting notice. notice of meeting.
Notice of Shareholder
Meetings: Written notice shall be given to Written notice shall be given to
shareholders entitled to vote not shareholders entitled to vote
less than 10 days nor more than not less than 10 days nor more
60 days before the date of the than 60 days before the date of
meeting. the meeting.
Action by Written
Consent: Action may be taken by written Action may be taken by written
consent by holders of outstanding consent by holders of
stock having not less than the outstanding stock having not
minimum number of votes that less than the minimum number of
would be necessary to take such votes that would be necessary to
action at a meeting. take such action at a meeting.
Shareholders' Rights
Plan: None None
Dividends: Under Delaware law, Ackerley Under Texas law, Clear Channel
Group may pay dividends to may pay dividends to holders of
holders of common stock out of common stock only out of
surplus or, if no surplus exists, surplus.
out of net profits.
74
ACKERLEY GROUP SHAREHOLDER RIGHTS CLEAR CHANNEL SHAREHOLDER RIGHTS
--------------------------------- --------------------------------
State Anti-Takeover
Statutes: Under Delaware law, Ackerley Under Texas law, Clear Channel
Group is prohibited from engaging is prohibited from engaging in a
in a business combination with an business combination with an
interested shareholder who, interested shareholder who,
together with its affiliates, together with its affiliates,
beneficially owns 15% or more of beneficially owns 20% or more of
Ackerley Group voting stock for a Clear Channel voting stock
three year period following the during the three year period
time the shareholder became an immediately following the time
interested shareholder unless: that the shareholder became an
(1) prior to the shareholder interested shareholder unless:
becoming an interested (1) prior to the shareholder
shareholder, the Ackerley Group becoming an interested
Board approved the business shareholder, the Board approved
combination, (2) the interested the business combination or (2)
shareholder owns at least 85% of the business combination is
Ackerley Group's voting stock, or approved by the shareholders by
(3) the Ackerley Group Board a vote of two-thirds of the
approves the business combination outstanding voting shares not
and shareholders approve the owned by the interested
combination by a two-thirds vote. shareholder or its affiliates
not less than six months after
the interested shareholder
became an interested
shareholder.
75
EXPERTS
The consolidated financial statements of Clear Channel at December 31, 2000
and 1999, and for each of the three years in the period ended December 31, 2000,
and the financial statement schedule, appearing in Clear Channel's Annual Report
on Form 10-K for the year ended December 31, 2000, have been audited by Ernst &
Young LLP, independent auditors, as set forth in their reports thereon included
therein and incorporated herein by reference which, as to the years 1999 and
1998, are based in part on the reports of KPMG LLP, independent auditors. Such
consolidated financial statements referred to above are incorporated herein by
reference in reliance upon such reports given on the authority of such firms as
experts in accounting and auditing.
The consolidated financial statements of The Ackerley Group, Inc. appearing
in The Ackerley Group's Annual Report on Form 10-K for the year ended December
31, 2000 have been audited by Ernst & Young LLP, independent auditors, as set
forth in their report thereon included therein and incorporated herein by
reference. Such consolidated financial statements are incorporated herein by
reference in reliance upon such report given on the authority of such firm as
experts in accounting and auditing.
The consolidated financial statements of SFX at December 31, 1999 and 1998,
and for each of the three years in the period ended December 31, 1999, and the
related financial statement schedule, appearing in Clear Channel's Current
Report on Form 8-K dated June 14, 2000, have been audited by Ernst & Young LLP,
independent auditors, as set forth in their report thereon included therein and
incorporated by reference herein. Such consolidated financial statements and
schedule referred to above are incorporated herein by reference in reliance upon
such report given on the authority of such firm as experts in accounting and
auditing.
The consolidated financial statements of AMFM Inc. and Subsidiaries
(formerly Chancellor Media Corporation) as of December 31, 1999 and 1998 and for
each of the three years in the period ended December 31, 1999 incorporated into
this document by reference to the Current Report on Form 8-K of Clear Channel
Communications, Inc., dated June 14, 2000, have been so incorporated in reliance
on the report of PricewaterhouseCoopers LLP, independent accountants, given on
the authority of said firm as experts in auditing and accounting.
The consolidated financial statements of Capstar Broadcasting Corporation
and Subsidiaries as of December 31, 1998 and 1997 and for each of the three
years in the period ended December 31, 1998 incorporated into this document by
reference to the Current Report on Form 8-K of Clear Channel Communications,
Inc., dated November 19, 1999, have been so incorporated in reliance on the
report of PricewaterhouseCoopers LLP, independent accountants, given on the
authority of said firm as experts in auditing and accounting.
LEGAL MATTERS
The validity of the shares of Clear Channel common stock to be issued in
connection with the merger is being passed upon for Clear Channel by Akin, Gump,
Strauss, Hauer & Feld, L.L.P.
Certain of the tax consequences of the merger will be passed upon at the
effective time of the merger, as a condition to the merger, by Akin, Gump,
Strauss, Hauer & Feld, L.L.P., tax advisor to Clear Channel, and by Dewey
Ballantine LLP, special tax counsel to Ackerley Group. See "The Merger
Agreement -- Conditions." Alan D. Feld, the sole shareholder of a professional
corporation which is a partner of Akin, Gump, Strauss, Hauer & Feld, L.L.P., is
a director of Clear Channel and as of November 26, 2001, owned approximately
83,300 shares of Clear Channel common stock (including presently exercisable
options to acquire approximately 67,000 shares). Vernon E. Jordan, Jr., of
counsel to Akin, Gump, Strauss, Hauer & Feld, L.L.P., is also a director of
Clear Channel and as of November 26, 2001, held options exercisable to acquire
90,300 shares of common stock.
76
DELISTING AND DEREGISTRATION OF ACKERLEY ORDINARY COMMON STOCK
If the transactions are consummated, Ackerley ordinary common stock will
cease to be listed on the New York Stock Exchange or any other exchange and will
be deregistered under the Securities Act of 1933.
SHAREHOLDER PROPOSALS
Ackerley Group will hold an annual meeting in the year 2002 only if the
merger has not already been completed. If an annual meeting of Ackerley Group
shareholders is held in 2002, proposals of Ackerley Group shareholders intended
to be presented at the 2002 annual meeting must have been received by the
Corporate Secretary or Assistant Secretary of Ackerley Group at 1301 Fifth
Avenue, Suite 4000, Seattle, Washington 98101 no later than December 1, 2001, in
order to be considered for inclusion in Ackerley Group's 2002 proxy materials,
and shareholder proposals submitted outside the process of Rule 14a-8 under the
Securities Exchange Act must be received no later than February 13, 2002, to be
eligible for consideration at the 2002 annual meeting.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This document contains certain forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995, with respect to
the financial condition, results of operations, cash flows, dividends, financing
plans, business strategies, operating efficiencies or synergies, budgets,
capital and other expenditures, competitive positions, growth opportunities for
plans and objectives of management, markets for stock of Clear Channel, Ackerley
Group and other matters. Statements in this document that are not historical
facts are hereby identified as "forward-looking statements" for the purpose of
the safe harbor provided by Section 21E of the Exchange Act and Section 27A of
the Securities Act. Such forward-looking statements wherever they occur in this
document are necessarily estimates reflecting the best judgment of the senior
management of Clear Channel and Ackerley Group and involve a number of risks and
uncertainties that could cause actual results to differ materially from those
suggested by the forward-looking statement. Such forward-looking statements
should, therefore, be considered in light of various important factors,
including those set forth in this document. Important factors that could cause
actual results to differ materially from estimates or projections contained in
the forward-looking statements include without limitation:
- expected cost savings from the merger may not be fully realized or
realized within the expected time frame;
- revenues following the merger may be lower than expected;
- costs or difficulties related to the integration of the business of Clear
Channel and Ackerley Group may be greater than expected;
- dependence on key personnel to manage the integration of the two
companies;
- difficulties related to the integration of Clear Channel's and Ackerley
Group's management teams;
- the effects of vigorous competition in the markets in which these
entities operate;
- the impact of general economic conditions and political developments in
the U.S. and in other countries in which we currently do business,
including the effects of the September 11, 2001 terrorist attacks or
their aftermath;
- industry conditions, including competition;
- fluctuations in exchange rates and currency values;
- capital expenditure requirements;
- legislative or regulatory requirements;
77
- the effect of leverage on Clear Channel's and Ackerley Group's financial
position;
- interest rates;
- taxes;
- access to capital markets; or
- changes in the securities markets.
The statements before, after or including the words "may," "will," "could,"
"should," "believe," "expect," "future," "potential," "anticipate," "intend,"
"plan," "estimate" or "continue" or the negative or other variations of these
words are intended to identify forward-looking statements. These forward-looking
statements are found at various places throughout this document and the other
documents incorporated herein by reference, including, but not limited to, the
December 31, 2000, Annual Report on Form 10-K of Clear Channel (including any
amendments thereto) and the December 31, 2000, Annual Report on Form 10-K of
Ackerley Group (including any amendments thereto). Readers are cautioned not to
place undue reliance on these forward-looking statements, which speak only as of
the date thereof. Neither Clear Channel nor Ackerley Group undertakes any
obligation to publicly release any revisions to these forward-looking statements
to reflect events or circumstances after the date hereof or to reflect the
occurrence of unanticipated events.
WHERE YOU CAN FIND MORE INFORMATION
Clear Channel and Ackerley Group file annual, quarterly and special
reports, proxy statements and other information with the Securities and Exchange
Commission. You may read and copy any reports, statements or other information
we file at the SEC's public reference room at 450 Fifth Street, N.W.,
Washington, D.C., and at the Regional Offices of the SEC in New York, New York
and Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further
information on the public reference room. Our SEC filings are also available to
the public from commercial document retrieval services and at the Internet world
wide web site maintained by the SEC at www.sec.gov.
Clear Channel filed a registration statement on Form S-4 to register with
the SEC the Clear Channel common stock to be issued to Ackerley Group
shareholders in the merger. This document is a part of the Clear Channel
registration statement and constitutes both a prospectus of Clear Channel and a
proxy statement of Ackerley Group for its meeting.
As allowed by SEC rules, this document does not contain all the information
you can find in the Clear Channel registration statement or the exhibits to the
Clear Channel registration statement.
78
The SEC allows us to "incorporate by reference" information into this
document, which means that we can disclose important information to you by
referring you to another document filed separately with the SEC. The information
incorporated by reference is deemed to be part of this document, except for any
information superseded by information contained directly in this document. This
document incorporates by reference the documents set forth below that we have
previously filed with the SEC. These documents contain important information
about our companies and their financial condition.
CLEAR CHANNEL SEC FILINGS (FILE NO. 1-9645) PERIOD
------------------------------------------- ------
Quarterly Report on Form 10-Q..................... Quarter Ended September 30, 2001
Current Report on Form 8-K........................ Filed on October 9, 2001
Quarterly Report on Form 10-Q..................... Quarter Ended June 30, 2001
Quarterly Report on Form 10-Q..................... Quarter Ended March 31, 2001
Annual Report on Form 10-K........................ Year Ended December 31, 2000
Current Report on Form 8-K........................ Filed January 31, 2001
Current Report on Form 8-K........................ Filed June 14, 2000
Portions of the Current Report on Form 8-K
relating to the consolidated financial
statements of Capstar Broadcasting Corporation
and Subsidiaries and the report of
PricewaterhouseCoopers LLP dated February 26,
1999, except Note 3, which is as of March 15,
1999 (pgs. 56-104 of said Form 8-K)............. Filed November 19, 1999
ACKERLEY GROUP SEC FILINGS (FILE NO. 1-10321) PERIOD
--------------------------------------------- ------
Current Report on Form 8-K........................ Filed on November 6, 2001
Quarterly Report on Form 10-Q..................... Quarter Ended September 30, 2001
Current Report on Form 8-K........................ Filed on October 9, 2001
Current Report on Form 8-K........................ Filed on September 14, 2001
Quarterly Report on Form 10-Q..................... Quarter Ended June 30, 2001
Current Report on Form 8-K........................ Filed on August 7, 2001
Quarterly Report on Form 10-Q..................... Quarter Ended March 31, 2001
Current Report on Form 8-K........................ Filed on April 16, 2001
Annual Report on Form 10-K........................ Year Ended December 31, 2000
Current Report on Form 8-K........................ Filed on January 18, 2001
Clear Channel and Ackerley Group also incorporate by reference into this
document additional documents that may be filed with the SEC from the date of
this document to the date of the Ackerley Group meeting. These include periodic
reports, such as Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and
Current Reports on Form 8-K, as well as proxy statements.
Clear Channel has supplied all information contained or incorporated by
reference in this document relating to Clear Channel, and Ackerley Group has
supplied all such information relating to Ackerley Group.
79
If you are a shareholder, we may already have sent you some of the
documents incorporated by reference, but you can obtain any of them through us,
the SEC or the SEC's Internet world wide web site as described above. Documents
incorporated by reference are available from us without charge, excluding all
exhibits unless we have specifically incorporated by reference an exhibit in
this document. Shareholders may obtain documents incorporated by reference in
this document by requesting them in writing or by telephone from the appropriate
company at the following addresses:
Clear Channel Communications, Inc. The Ackerley Group, Inc.
200 East Basse Road 1301 Fifth Avenue, Suite 4000
San Antonio, Texas 78209 Seattle, Washington 98101
Tel: (210) 822-2828 Tel: (206) 624-2888
Attn.: Investor Relations Attn.: Investor Relations
If you would like to request documents from us, please do so by January 17,
2002, to receive them before the Ackerley Group meeting.
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE IN THIS DOCUMENT TO VOTE ON THE TRANSACTIONS. WE HAVE NOT AUTHORIZED
ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT FROM WHAT IS CONTAINED
IN THIS DOCUMENT. THIS DOCUMENT IS DATED NOVEMBER 29, 2001. YOU SHOULD NOT
ASSUME THAT THE INFORMATION CONTAINED IN THIS DOCUMENT IS ACCURATE AS OF ANY
DATE OTHER THAN THAT DATE, AND NEITHER THE MAILING OF THIS DOCUMENT TO
SHAREHOLDERS NOR THE ISSUANCE OF CLEAR CHANNEL COMMON STOCK IN THE MERGER SHALL
CREATE ANY IMPLICATION TO THE CONTRARY.
80
UNAUDITED PRO FORMA COMBINED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma combined condensed consolidated financial
statements give effect to the merger. For accounting purposes, Clear Channel has
accounted for the merger as a purchase of Ackerley Group; accordingly, the net
assets of Ackerley Group have been adjusted to their estimated fair values based
upon a preliminary purchase price allocation. Additionally, as the merger was
initiated after June 30, 2001, it will be accounted for under the newly issued
Statement of Financial Accounting Standards No. 141, Business Combinations and
Statement of Financial Accounting Standards No. 142, Goodwill and Other
Intangible Assets. Under the new rules, goodwill and intangible assets deemed to
have indefinite lives, such as FCC licenses, will no longer be amortized but
will be subject to annual impairment tests. Accordingly, the pro forma financial
statements reflect no amortization expense relating to Ackerley Group's goodwill
or FCC licenses. The pro forma financial statements do not reflect adjustments
to Clear Channel's amortization expense of goodwill or FCC licenses, as adoption
of the new rules will not take effect with Clear Channel's financial statements
until January 1, 2002.
The unaudited pro forma combined condensed consolidated balance sheet at
September 30, 2001 gives effect to the merger as if it occurred on September 30,
2001. The unaudited pro forma combined condensed consolidated statements of
operations for the year ended December 31, 2000 and for the nine month period
ended September 30, 2001 gives effect to the merger as if it had occurred on
January 1, 2000.
The unaudited pro forma combined condensed consolidated balance sheet was
prepared based upon the historical balance sheets of Clear Channel and Ackerley
Group adjusted to reflect the merger as if it occurred on September 30, 2001.
The unaudited pro forma combined condensed consolidated statement of
operations for the year ended December 31, 2000 was prepared based upon the
historical consolidated statement of operations of Clear Channel, adjusted to
reflect:
- the merger with SFX Entertainment, Inc. ("SFX"), which closed on August
1, 2000, as if such merger had occurred on January 1, 2000,
- the merger with AMFM Inc. ("AMFM"), which closed on August 30, 2000, as
if such merger had occurred on January 1, 2000,
- the sale of radio stations Clear Channel and AMFM divested and the
change in the accounting for AMFM's approximate 30% ownership (11%
voting) in Lamar Advertising from the equity method to the cost method
due to the discontinuance of any and all control over the operations of
Lamar Advertising per governmental directives as if such transactions
had occurred on January 1, 2000, and
- Certain other AMFM financing transactions as if such transactions had
occurred on January 1, 2000
all collectively referred to as ("2000 Clear Channel Pro Forma"), and based upon
the historical consolidated statement of operations of Ackerley Group adjusted
to reflect the disposition of substantially all of the assets of Ackerley
Group's Sports & Entertainment operations, which closed on April 2, 2001 as if
such disposition had occurred on January 1, 2000 ("2000 Ackerley Group Pro
Forma"). The 2000 Clear Channel Pro Forma and 2000 Ackerley Group Pro Forma have
been adjusted to reflect the Ackerley Group merger as if it occurred on January
1, 2000.
The unaudited pro forma combined condensed consolidated statement of
operations for the nine month period ended September 30, 2001 was prepared based
upon the historical consolidated statements of operations of Clear Channel and
the historical consolidated statement of operation of Ackerley Group adjusted to
reflect the disposition of substantially all of the assets of Ackerley Group's
Sports and Entertainment operations, which closed on April 2, 2001 as if such
disposition had occurred on January 1,
P-1
2000 ("2001 Ackerley Group Pro Forma"). The historical Clear Channel and the
2001 Ackerley Group Pro Forma have been adjusted to reflect the merger as if it
occurred on January 1, 2000.
The unaudited pro forma combined condensed consolidated financial
statements should be read in conjunction with the historical financial
statements and the notes thereto of Clear Channel and Ackerley Group
incorporated by reference in this document.
The unaudited pro forma combined condensed consolidated financial
statements are not necessarily indicative of the actual results of operations or
financial position that would have been achieved had the above described
transactions involving Clear Channel or Ackerley Group occurred on the dates
indicated or had the merger been consummated on the dates indicated nor are they
necessarily indicative of future operating results or financial position.
P-2
CLEAR CHANNEL AND ACKERLEY GROUP
UNAUDITED PRO FORMA COMBINED CONDENSED CONSOLIDATED BALANCE SHEET
(IN THOUSANDS OF DOLLARS)
AT SEPTEMBER 30, 2001
CLEAR CHANNEL
ACKERLEY AND ACKERLEY
CLEAR CHANNEL GROUP PRO FORMA GROUP PRO
HISTORICAL HISTORICAL ADJUSTMENTS(a) FORMA MERGER
------------- ---------- -------------- -------------
Current Assets:
Cash and cash equivalents............... $ 266,399 $ 6,787 $(26,000) $ 247,186
Restricted cash......................... -- 54,000 -- 54,000
Accounts receivable, net................ 1,577,463 41,038 -- 1,618,501
Prepaids................................ 200,853 5,909 -- 206,762
Other current assets.................... 147,113 16,161 -- 163,274
----------- -------- -------- -----------
Total Current Assets............ 2,191,828 123,895 (26,000) 2,289,723
Property, Plant and Equipment, net........ 3,951,345 127,867 -- 4,079,212
Intangible Assets, net.................... 40,542,334 332,308 359,761 41,234,403
Other Assets:
Notes receivable -- long-term........... 37,933 -- -- 37,933
Equity investments in, and advances to,
non-consolidated affiliates.......... 491,473 21,005 -- 512,478
Other assets............................ 580,891 22,874 -- 603,765
Other investments....................... 594,607 -- (12,519) 582,088
----------- -------- -------- -----------
TOTAL ASSETS.................... $48,390,411 $627,949 $321,242 $49,339,602
=========== ======== ======== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable, accrued expenses and
other current liabilities............ $ 1,372,225 $ 59,227 $ -- $ 1,431,452
Current portion of long-term debt....... 336,858 1,547 -- 338,405
Deferred income......................... 225,316 797 -- 226,113
Other current liabilities............... 20,526 10,290 -- 30,816
----------- -------- -------- -----------
Total Current Liabilities....... 1,954,925 71,861 -- 2,026,786
Long-term debt............................ 9,685,701 289,336 33,021 10,008,058
Deferred income taxes..................... 6,437,181 13,534 45,514 6,496,229
Other long-term liabilities............... 312,075 16,573 -- 328,648
Minority interest......................... 79,645 -- -- 79,645
Shareholders' Equity:
Common stock............................ 59,785 364 824 60,973
Additional paid-in capital.............. 30,303,912 58,862 418,289 30,781,063
Common stock warrants................... 13,626 -- -- 13,626
Retained earnings (deficit)............. (233,487) 187,508 (187,508) (233,487)
Accumulated other comprehensive income
(loss)............................... (197,074) -- 1,013 (196,061)
Other................................... (10,631) -- -- (10,631)
Cost of shares held in treasury......... (15,247) (10,089) 10,089 (15,247)
----------- -------- -------- -----------
Total Shareholders' Equity...... 29,920,884 236,645 242,707 30,400,236
----------- -------- -------- -----------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY.......... $48,390,411 $627,949 $321,242 $49,339,602
=========== ======== ======== ===========
P-3
CLEAR CHANNEL AND ACKERLEY GROUP
UNAUDITED PRO FORMA COMBINED CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA)
YEAR ENDED DECEMBER 31, 2000
CLEAR CHANNEL
2000 AND ACKERLEY
2000 ACKERLEY PRO FORMA GROUP
CLEAR CHANNEL GROUP MERGER PRO FORMA
PRO FORMA PRO FORMA ADJUSTMENTS(b) MERGER
------------- --------- -------------- -------------
Net revenue........................................... $7,655,965 $ 224,564 $ -- $7,880,529
Operating expenses.................................... 5,110,631 157,852 -- 5,268,483
Non-cash compensation expense......................... 60,305 100 -- 60,405
Depreciation and amortization......................... 2,199,503 39,161 (15,464) 2,223,200
Merger, nonrecurring & sys. dev. expenses............. 110,659 (178) -- 110,481
Corporate expenses.................................... 199,856 23,792 -- 223,648
---------- --------- --------- ----------
Operating income (loss)............................... (24,989) 3,837 15,464 (5,688)
Interest expense...................................... 632,044 10,295 (3,672) 638,667
Gain on sale of assets related to mergers............. 152,470 277,650 (269,325) 160,795
Equity in earnings (loss) of nonconsolidated
affiliates.......................................... 17,634 (801) -- 16,833
Other income (expense) -- net......................... 17,375 -- -- 17,375
---------- --------- --------- ----------
Income (loss) before income taxes..................... (469,554) 270,391 (250,189) (449,352)
Income tax (expense) benefit.......................... (87,795) (102,143) 100,193 (89,745)
---------- --------- --------- ----------
Income (loss) from continuing operations.............. $ (557,349) $ 168,248 $(149,996) $ (539,097)
========== ========= ========= ==========
Income (loss) from continuing operations per common
share:
Basic............................................... $ (.95) $ 4.81 $ (.90)
========== ========= ==========
Diluted............................................. $ (.95) $ 4.79 $ (.90)
========== ========= ==========
P-4
CLEAR CHANNEL AND ACKERLEY GROUP
UNAUDITED PRO FORMA COMBINED CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA)
NINE MONTH PERIOD ENDED SEPTEMBER 30, 2001
CLEAR CHANNEL
2001 AND ACKERLEY
ACKERLEY MERGER PRO GROUP PRO
CLEAR CHANNEL GROUP PRO FORMA FORMA
HISTORICAL FORMA ADJUSTMENTS(b) MERGER
------------- --------- -------------- -------------
Net revenue......................................... $6,107,857 $148,928 $ -- $6,256,785
Operating expenses.................................. 4,395,864 122,133 -- 4,517,997
Non-cash compensation expense....................... 14,931 305 -- 15,236
Depreciation and amortization....................... 1,911,372 31,916 (14,950) 1,928,338
Merger, nonrecurring & sys. dev. expenses........... -- 2,435 -- 2,435
Corporate expenses.................................. 140,832 14,177 -- 155,009
---------- -------- -------- ----------
Operating income (loss)............................. (355,142) (22,038) 14,950 (362,230)
Interest expense.................................... 428,683 15,816 (3,096) 441,403
Gain (loss) on sale of assets related to mergers.... (57,390) (2,198) -- (59,588)
Gain (loss) on marketable securities................ 29,512 -- -- 29,512
Equity in earnings (loss) of nonconsolidated
affiliates........................................ 11,619 -- -- 11,619
Other income (expense) -- net....................... (19,049) -- -- (19,049)
---------- -------- -------- ----------
Income (loss) before income taxes,.................. (819,133) (40,052) 18,046 (841,139)
Income tax (expense) benefit........................ 40,706 12,869 (6,843) 46,732
---------- -------- -------- ----------
Net income (loss) from continuing operations........ $ (778,427) $(27,183) $ 11,203 $ (794,407)
========== ======== ======== ==========
Net income (loss) per common share before
extraordinary item:
Basic............................................. $ (1.32) $ (0.78) $ (1.32)
========== ======== ==========
Diluted........................................... $ (1.32) $ (0.78) $ (1.32)
========== ======== ==========
P-5
CLEAR CHANNEL AND ACKERLEY GROUP
NOTES TO UNAUDITED PRO FORMA COMBINED
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE DATA)
Clear Channel and Ackerley Group unaudited pro forma combined condensed
consolidated financial statements reflect the Merger, accounted for as a
purchase as follows:
Ackerley Group ordinary common stock outstanding less shares
held in treasury.......................................... 24,078,472
Ackerley Group Class B common stock outstanding............. 11,020,622
Less: ordinary common stock held by Clear Channel........... 1,170,000
-----------
Adjusted common stock outstanding........................... 33,929,094
Share conversion number..................................... .35
-----------
Clear Channel's common stock to be issued................... 11,875,183
Estimated value per share (based on the average price
between October 2, 2001 and October 10, 2001)............. $ 39.9914
-----------
$ 474,905
Estimated value of common stock options..................... 3,433
Historical cost of Ackerley Group common shares held by
Clear Channel............................................. 14,153
Estimated transaction costs................................. 26,000
-----------
Total estimated purchase price.................... $ 518,491
===========
For purposes of these statements, the total estimated purchase price was
allocated as follows:
Total estimated purchase price.............................. $ 518,491
Plus deferred tax liability associated with estimated fair
value of FCC licenses in excess of carrying value......... 57,441
Plus -- estimated fair value of long-term debt in excess of
carrying value, net of deferred tax....................... 20,474
Less -- Ackerley Group net assets at September 30, 2001..... 236,645
Plus -- elimination of Ackerley Group's existing net
goodwill and other intangible assets...................... 332,308
-----------
Estimated purchase price allocated to goodwill and other
intangible assets......................................... $ 692,069
===========
Clear Channel will be required to refinance certain outstanding Ackerley Group
long-term debt.
P-6
CLEAR CHANNEL AND ACKERLEY GROUP
NOTES TO UNAUDITED PRO FORMA COMBINED
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(A) The pro forma merger adjustments at September 30, 2001 are as follows:
INCREASE
(DECREASE)
----------
(1) Decrease in cash resulting from estimated merger expenses... (26,000)
(2) Increase in intangible assets, net equal to the excess
purchase price of the merger and the elimination of Ackerley
Group's pre-existing intangible assets...................... 359,761
(3) Decrease in other investments resulting from the elimination
of Clear Channel's investment in Ackerley Group common
stock....................................................... (12,519)
(4) Increase in long-term debt resulting from the mark-up of
Ackerley Group's debt to fair value in excess of carrying
value....................................................... 33,021
(5) Increase in deferred taxes resulting from the fair value
write-up of FCC licenses and the elimination of deferred tax
on the unrealized loss related to Clear Channel's investment
in Ackerley Group common stock, partially offset by the
mark-up of debt to fair value............................... 45,514
(6) Increase in common stock to account for Clear Channel common
stock issued in the merger, net of Ackerley Group's
outstanding shares, at $0.10 par value...................... 824
(7) Increase in additional paid-in capital to account for Clear
Channel common stock issued in the merger at $39.9914 per
share less $0.10 par value plus the value of Ackerley Group
stock options included in the merger less Ackerley Group's
additional paid-in capital balance.......................... 418,289
(8) Decrease in retained earnings (accumulated deficit) to
eliminate Ackerley Group's existing retained earnings....... (187,508)
(9) Increase in accumulated other comprehensive income (loss)
resulting from the elimination of the unrealized loss
related to Clear Channel's investment in Ackerley Group
common stock................................................ 1,013
(10) The cancellation of Ackerley Group's shares held in
treasury.................................................... 10,089
P-7
CLEAR CHANNEL AND ACKERLEY GROUP
NOTES TO UNAUDITED PRO FORMA COMBINED
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(B) The pro forma merger adjustments for the year ended December 31, 2000
and for the nine month period ended September 30, 2001 are as follows:
INCREASE (DECREASE)
TO INCOME
-------------------
12/31/00 9/30/01
-------- --------
(11) Decrease in amortization expense resulting from the
elimination of Ackerley Group's amortization expense for
the year ended December 31, 2000 of $11,676 and $3,788
relating to goodwill and FCC licenses, respectively, and
amortization expense for the nine month period ended
September 30, 2001 of $12,227 and $2,723 relating to
goodwill and FCC licenses, respectively.................... 15,464 14,950
(12) Decrease in interest expense resulting from the
amortization of premium on long-term debt resulting from
the mark-up to fair value.................................. 3,672 3,096
(13) Decrease in gain on sale of assets related to mergers to
eliminate the gain Ackerley Group recognized on its sale of
its Florida division to Clear Channel during 2000.......... (269,325) --
(14) Change in income tax (expense) benefit associated with the
tax effect of adjustments (11) through (13) at estimated
tax rates in effect for the year ended December 31, 2000
and for the nine month period ended September 30, 2001..... 100,193 (6,843)
(15) These pro forma adjustments do not include certain benefits
Clear Channel believes it will achieve through the
discontinuance of a corporate headquarters solely for
Ackerley Group's operations. Ackerley Group's historical
statements of operations for the year ended December 31,
2000 and for the nine month period ended September 30, 2001
include approximately $20.5 million and $11.6 million,
respectively within total corporate expenses relating to
direct and indirect employee costs, corporate services and
certain one-time costs at Ackerley Group's corporate
headquarters.
P-8
CLEAR CHANNEL AND ACKERLEY GROUP
UNAUDITED PRO FORMA COMBINED CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS -- (CONTINUED)
There is no dilutive effect related to stock options and other potentially
dilutive securities on weighted-average shares outstanding as a pro forma net
loss is reported for the year ended December 31, 2000 and for the nine month
period ended September 30, 2001. Pro forma basic and diluted share information
is as follows (In thousands):
December 31, 2000:
2000 Clear Channel pro forma weighted-average shares
outstanding............................................ 584,443
Ackerley Group weighted-average shares outstanding........ 34,994
Decrease weighted-average common stock outstanding to
account for Clear Channel's common stock issued in the
merger at the share conversion number of .35 for each
common share of Ackerley Group......................... (23,119)
-------
Clear Channel pro forma weighted-average shares
outstanding............................................ 596,318
=======
September 30, 2001:
Clear Channel weighted-average shares outstanding......... 590,015
Ackerley Group weighted-average shares outstanding........ 35,073
Decrease weighted-average common stock outstanding to
account for Clear Channel's common stock issued in the
merger at the share conversion number of .35 for each
common share of Ackerley Group......................... (23,197)
-------
Clear Channel pro forma weighted-average shares
outstanding............................................ 601,891
=======
P-9
CLEAR CHANNEL
UNAUDITED PRO FORMA COMBINED CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA)
YEAR ENDED DECEMBER 31, 2000
PRO FORMA
CLEAR SFX PRO FORMA AMFM ADJUSTMENTS
CHANNEL HISTORICAL SFX MERGER HISTORICAL TO AMFM
HISTORICAL 6/30/2000 ADJUSTMENTS(a) 8/31/2000 AMFM(b) DIVESTITURES(c)
---------- ---------- -------------- ---------- ----------- ---------------
Net revenue....................... $5,345,306 $1,034,175 $ (7,250) $1,545,411 $ -- $(179,839)
Operating expenses................ 3,480,706 945,662 (1,032) 819,924 -- (97,032)
Non-cash compensation expense..... 16,032 -- -- 36,137 -- --
Depreciation and amortization..... 1,401,063 97,220 33,119 588,633 -- (60,399)
Merger, nonrecurring & sys. dev.
expenses........................ -- 108,566 (13,000) 112,357 (96,264) --
Corporate expenses................ 142,627 13,670 -- 43,559 -- --
---------- ---------- -------- ---------- -------- ---------
Operating income (loss)........... 304,878 (130,943) (26,337) (55,199) 96,264 (22,408)
Interest expense.................. 383,104 73,983 (3,408) 319,840 (1,520) (101,944)
Gain (loss) on sale of assets
related to mergers.............. 783,743 -- -- 1,666,385 -- --
Equity in earnings (loss) of
nonconsolidated affiliates...... 25,155 -- 954 (61,851) 53,376 --
Other income (expense) -- net..... (17,133) 3,973 -- 30,535 -- --
---------- ---------- -------- ---------- -------- ---------
Income (loss) before income taxes,
and credit on preferred stock
subsidiary...................... 713,539 (200,953) (21,975) 1,260,030 151,160 79,536
Income tax (expense) benefit...... (464,731) (4,300) (1,363) (533,664) (34,224) (13,332)
Credit on preferred stock of
subsidiary...................... -- -- -- 3,310 (3,310) --
---------- ---------- -------- ---------- -------- ---------
Net income (loss)................. 248,808 (205,253) (23,338) 729,676 113,626 66,204
Preferred stock dividends......... -- -- -- 321 (321) --
---------- ---------- -------- ---------- -------- ---------
Net income (loss) attributable to
common shareholders............. $ 248,808 $ (205,253) $(23,338) $ 729,355 $113,947 $ 66,204
========== ========== ======== ========== ======== =========
Net income (loss) attributable to
common shareholders per common
share:
Basic........................... $ .59
==========
Diluted......................... $ .57
==========
2000
PRO FORMA CLEAR
CLEAR CHANNEL AMFM MERGER CHANNEL
DIVESTITURES(d) ADJUSTMENTS(e) PRO FORMA
--------------- -------------- ----------
Net revenue....................... $(65,100) $ (16,738) $7,655,965
Operating expenses................ (31,946) (5,651) 5,110,631
Non-cash compensation expense..... -- 8,136 60,305
Depreciation and amortization..... (9,259) 149,126 2,199,503
Merger, nonrecurring & sys. dev.
expenses........................ -- (1,000) 110,659
Corporate expenses................ -- -- 199,856
-------- ----------- ----------
Operating income (loss)........... (23,895) (167,349) (24,989)
Interest expense.................. (27,964) (10,047) 632,044
Gain (loss) on sale of assets
related to mergers.............. -- (2,297,658) 152,470
Equity in earnings (loss) of
nonconsolidated affiliates...... -- -- 17,634
Other income (expense) -- net..... -- -- 17,375
-------- ----------- ----------
Income (loss) before income taxes,
and credit on preferred stock
subsidiary...................... 4,069 (2,454,960) (469,554)
Income tax (expense) benefit...... (2,244) 966,063 (87,795)
Credit on preferred stock of
subsidiary...................... -- -- --
-------- ----------- ----------
Net income (loss)................. 1,825 (1,488,897) (557,349)
Preferred stock dividends......... -- -- --
-------- ----------- ----------
Net income (loss) attributable to
common shareholders............. $ 1,825 $(1,488,897) $ (557,349)
======== =========== ==========
Net income (loss) attributable to
common shareholders per common
share:
Basic........................... $ (.95)
==========
Diluted......................... $ (.95)
==========
P-10
CLEAR CHANNEL
NOTES TO UNAUDITED PRO FORMA COMBINED
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(A) The pro forma SFX merger adjustments for the six month period ended June 30,
2000 are as follows:
INCREASE (DECREASE)
TO INCOME
-------------------
(1) Decrease in revenue due to the elimination of services SFX
provided to Clear Channel and services Clear Channel
provided to SFX and the reclassification of earnings from
equity method investments out of net revenue (SFX's policy)
into equity in earnings of nonconsolidated affiliates (Clear
Channel's policy)........................................... $ (7,250)
(2) Change in operating expense due to the elimination of
services SFX provided to Clear Channel and services Clear
Channel provided to SFX of $6,296, offset by the increase in
operating expenses resulting from change in classification
of integration and start-up costs of $5,264 from treatment
as depreciation expense (SFX's policy) to treatment as
operating expense (Clear Channel's policy).................. 1,032
(3) Increase in amortization expense resulting from the
additional goodwill created by the merger, other intangible
assets acquired in the merger and a change in the life of
intangible assets amortization from an average of 15 years
(SFX's policy) to an average of 20 years (Clear Channel's
policy) of $38,383 partially offset by the reclassification
of $5,264 from depreciation expense to operating expense.... (33,119)
(4) Decrease in merger and non-recurring costs due to the
elimination of direct merger related expenses............... 13,000
(5) Decrease in interest expense resulting from the amortization
of premium on long-term debt resulting from the mark-up to
fair value.................................................. 3,408
(6) Increase in equity in earnings (loss) of nonconsolidated
affiliates resulting from the reclassification of earnings
from equity method investments out of revenue (SFX's policy)
into equity in earnings of nonconsolidated affiliates (Clear
Channel's policy)........................................... 954
(7) Increase in income tax expense associated with the tax
effect of adjustment (3) at Clear Channel's estimated tax
rate of 40%................................................. (1,363)
(B) The pro forma adjustments to AMFM historical for the eight months ended
August 31, 2000 are as follows:
INCREASE (DECREASE)
TO INCOME
-------------------
(8) Decrease in merger, nonrecurring and sys. dev. expenses to
eliminate AMFM's historical merger costs associated with the
Clear Channel merger........................................ 96,264
(9) Reflects the net decrease in interest expense related to the
purchase of $200,000 of aggregate principal amount of AMFM's
9 3/8% Senior Subordinated Notes due 2004 and estimated fees
and expenses which was completed on February 15, 2000,
funded with borrowings under the credit agreement, and the
net decrease in interest expense related to the purchase of
$99,400 aggregate principal amount of AMFM's 10 1/2% Senior
Subordinated Notes due 2007 and estimated fees and expenses
which was completed on June 2, 2000, funded with borrowings
under the credit agreement.................................. 1,520
P-11
CLEAR CHANNEL
NOTES TO UNAUDITED PRO FORMA COMBINED
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
INCREASE (DECREASE)
TO INCOME
-------------------
(10) As a condition for approval of the merger with Clear Channel
from the Department of Justice, AMFM is prohibited from
exercising any governance rights over Lamar. Since AMFM may
no longer exercise significant influence over the operations
of Lamar, AMFM's investment in Lamar will be accounted for
using the cost method instead of the equity method
subsequent to the merger date. This adjustment removes the
historical equity in losses of Lamar for the period from
January 1 to August 30, 2000................................ 53,376
(11) Reflects the tax effect of the pro forma adjustments........ (34,224)
(12) Reflects the elimination of the credit on exchange of
preferred stock of subsidiary for the period from January 1
to August 30, 2000 related to the exchange of the 12% Senior
Exchangeable Preferred Stock of AMFM for 12% Subordinated
Exchange Debentures due 2009 completed effective January 1,
2000........................................................ (3,310)
(13) Reflects the elimination of preferred stock dividends
related to the conversion of AMFM's 7% Convertible Preferred
Stock to AMFM common stock on January 19, 2000 pursuant to a
notice of redemption issued to holders...................... 321
The pro forma adjustments for the year ended December 31, 2000 relating to
the sale of radio stations Clear Channel and AMFM divested, are as follows:
(C) AMFM Divestitures
INCREASE (DECREASE)
TO INCOME
-------------------
(14) Decrease in revenue......................................... $(179,839)
(15) Decrease in operating expenses.............................. 97,032
(16) Decrease in depreciation and amortization, of which 45,351
results in a permanent difference and will not be deducted
for federal income tax purposes............................. 60,399
(17) Decrease in interest expense associated with the reduction
of long-term debt resulting from the use of net proceeds.... 101,944
(18) Increase in income tax expense associated with the tax
effect of adjustments (13) through (16) at AMFM's estimated
tax rate of 39%............................................. (13,332)
P-12
CLEAR CHANNEL
NOTES TO UNAUDITED PRO FORMA COMBINED
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(D) Clear Channel Divestitures
INCREASE (DECREASE)
TO INCOME
-------------------
(19) Decrease in revenue......................................... $(65,100)
(20) Decrease in operating expenses.............................. 31,946
(21) Decrease in depreciation and amortization, of which $1,541
results in a permanent difference and will not be deducted
for federal income tax purposes............................. 9,259
(22) Decrease in interest expense associated with the reduction
of long-term debt resulting from the use of net proceeds.... 27,964
(23) Change in income tax expense associated with the tax effect
of adjustments (18) through (21) at Clear Channel's
estimated tax rate of 40%................................... (2,244)
(E) The pro forma AMFM merger adjustments for the year ended December 31,
2000 are as follows:
INCREASE
(DECREASE)
TO INCOME
-----------
(24) Decrease in revenue due to the elimination of services AMFM
provided to Clear Channel and services Clear Channel
provided to AMFM............................................ $ (16,738)
(25) Decrease in operating expense due to the elimination of
services AMFM provided to Clear Channel and services Clear
Channel provided to AMFM of $16,738, partially offset by the
increase in operating expense resulting from change in
classification for start-up and development costs of $10,087
from treatment as depreciation expense and as merger and
non-recurring costs (AMFM's policy) to treatment as
operating expense (Clear Channel's policy).................. 5,651
(26) Increase in non-cash compensation expense due to the
assumption of unvested options held by AMFM employees....... (8,136)
(27) Increase in amortization expense resulting from the
additional licenses and goodwill created by the merger and a
change in the life of licenses and goodwill amortization
from 15 years (AMFM's policy) to 25 years (Clear Channel's
policy). $39,803 in a permanent difference and will not be
deductible for federal income tax purposes. This is
partially offset by the decrease in amortization expense
resulting from the change of classification of start-up and
development costs of $10,087 from treatment as depreciation
expense (AMFM's policy) to treatment as operating expense
(Clear Channel's policy).................................... (149,126)
(28) Decrease in merger and non-recurring costs resulting from
the change in classification for start-up and development
costs from treatment as merger and non-recurring costs
(AMFM's policy) to treatment as operating expense (Clear
Channel's policy)........................................... 1,000
P-13
CLEAR CHANNEL
NOTES TO UNAUDITED PRO FORMA COMBINED
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
INCREASE
(DECREASE)
TO INCOME
-----------
(29) Decrease in interest expense associated with the
amortization of the premium on long term debt resulting from
the mark-up of debt to fair value, partially offset by an
increase in interest expense associated with the increased
long-term debt resulting from the merger expenses of
$250,000.................................................... 10,047
(30) Decrease in gain on sale of assets related to mergers
associated with the realized gain on the sale of radio
stations Clear Channel and AMFM divested in order to obtain
regulatory approvals for the merger......................... (2,297,658)
(31) Decrease in income tax expense associated with the tax
effect of the adjustments in note (25), (26) and (28) at
Clear Channel's estimated tax rate of 40%................... 966,063
There is no dilutive effect related to stock options and other potentially
dilutive securities on weighted-average shares outstanding as a pro forma net
loss is reported for the year ended December 31, 2000. Pro forma basic and
diluted share information is as follows (In thousands):
Clear Channel historical weighted-average shares
outstanding............................................... 423,969
Increase weighted-average common stock outstanding to
account for 39.6 million shares of Clear Channel's common
stock given in the SFX merger weighted for the full
year...................................................... 23,200
Increase weighted-average common stock outstanding to
account for 205.4 million shares of Clear Channel's common
stock given in the AMFM merger weighted for the full
year...................................................... 137,274
-------
Clear Channel pro forma weighted-average shares
outstanding............................................... 584,443
=======
P-14
ACKERLEY GROUP
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 2000
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
2000
ACKERLEY ACKERLEY
GROUP PRO FORMA GROUP
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
Net Revenue............................................. $ 224,564 $ -- $ 224,564
Expenses (other income)
Operating expenses.................................... 181,644 -- 181,644
Restructuring expense................................. (178) -- (178)
Amortization expense.................................. 23,713 -- 23,713
Depreciation expense.................................. 15,448 -- 15,448
Interest expense...................................... 25,795 (15,500)(a) 10,295
Net gain on dispositions of assets.................... (277,650) -- (277,650)
Stock compensation expense............................ 100 -- 100
Equity in losses of affiliates........................ 801 -- 801
--------- -------- ---------
Total expenses (other income)................. (30,327) (15,500) (45,827)
--------- -------- ---------
Income from continuing operations before income taxes... 254,891 15,500 270,391
Income tax expense...................................... 96,284 5,859(b) 102,143
--------- -------- ---------
Income from continuing operations....................... $ 158,607 $ 9,641 $ 168,248
========= ======== =========
Income from continuing operations per common share...... $ 4.54 $ 4.81
========= =========
Income from continuing operations per common share,
assuming dilution..................................... $ 4.52 $ 4.79
========= =========
P-15
ACKERLEY GROUP
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
NINE MONTH PERIOD ENDED SEPTEMBER 30, 2001
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
2001
ACKERLEY ACKERLEY
GROUP PRO FORMA GROUP
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
Net revenue.......................................... $148,928 $ -- $148,928
Expenses (other income)
Operating expenses................................. 136,310 -- 136,310
Workforce reduction costs.......................... 2,435 -- 2,435
Amortization expense............................... 19,711 -- 19,711
Depreciation expense............................... 12,205 -- 12,205
Interest expense................................... 20,646 (4,830)(a) 15,816
Net loss on dispositions of assets................. 2,198 -- 2,198
Stock compensation expense......................... 305 -- 305
-------- ---------- --------
Total expenses (other income)................. 193,810 (4,830) 188,980
-------- ---------- --------
Income (loss) from continuing operations before
income taxes....................................... (44,882) 4,830 (40,052)
Income tax benefit (expense)......................... 14,613 (1,744)(b) 12,869
-------- ---------- --------
Income (loss) from continuing operations............. $(30,269) $ 3,086 $(27,183)
======== ========== ========
Income (loss)from continuing operations per common
share.............................................. $ (0.86) $ (0.78)
======== ========
Income (loss)from continuing operations per common
share, assuming dilution........................... $ (0.86) $ (0.78)
======== ========
P-16
ACKERLEY GROUP
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
The accompanying Unaudited Pro Forma Condensed Consolidated Financial
Statements consist of the consolidated historical financial statements of
Ackerley Group, less the historical financial statements of Ackerley Group's
Sports & Entertainment operations, adjusted for certain pro forma adjustments,
as described below:
(a) Represents the reduction in interest expense assuming cash
proceeds of $200.0 million, from the sale of the Sports & Entertainment
operations, are applied to the reduction of Ackerley Group's borrowings.
The impact on interest expense is based on Ackerley Group's historical
annual interest rate on borrowings.
(b) Represents income tax expense based on Ackerley Group's estimated
statutory income tax rate.
P-17
APPENDIX A
AGREEMENT AND PLAN OF MERGER
AMONG
CLEAR CHANNEL COMMUNICATIONS, INC.,
CCMM SUB, INC.
AND
THE ACKERLEY GROUP, INC.
DATED AS OF OCTOBER 5, 2001
TABLE OF CONTENTS
PAGE
----
ARTICLE I THE MERGER..........................................................
SECTION 1.1. The Merger.................................................. A-1
SECTION 1.2. Closing..................................................... A-2
SECTION 1.3. Effective Time.............................................. A-2
SECTION 1.4. Effects of the Merger....................................... A-2
SECTION 1.5. Certificate of Incorporation and Bylaws of the Surviving
Corporation................................................. A-2
SECTION 1.6. Directors................................................... A-2
SECTION 1.7. Officers.................................................... A-2
ARTICLE II EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT
CORPORATIONS; EXCHANGE OF CERTIFICATES
SECTION 2.1. Capital Stock of Merger Sub................................. A-2
SECTION 2.2. Cancellation of Treasury Stock and Parent Owned Stock....... A-2
SECTION 2.3. Conversion of Company Common Stock.......................... A-3
SECTION 2.4. Exchange of Certificates.................................... A-3
SECTION 2.5. Stock Transfer Books........................................ A-5
ARTICLE III REPRESENTATIONS AND WARRANTIES OF COMPANY
SECTION 3.1. Organization, Qualification, Etc............................ A-5
SECTION 3.2. Capital Stock............................................... A-7
SECTION 3.3. Corporate Authority Relative to this Agreement; No
Violation................................................... A-7
SECTION 3.4. Reports and Financial Statements............................ A-8
SECTION 3.5. No Undisclosed Liabilities.................................. A-8
SECTION 3.6. No Violation of Law......................................... A-8
SECTION 3.7. Environmental Laws and Regulations.......................... A-8
SECTION 3.8. No Undisclosed Employee Benefit Plan Liabilities or
Severance Arrangements...................................... A-9
SECTION 3.9. Absence of Certain Changes or Events........................ A-11
SECTION 3.10. Investigations; Litigation.................................. A-11
SECTION 3.11. Proxy Statement; Registration Statement; Other
Information................................................. A-11
SECTION 3.12. Tax Matters................................................. A-11
SECTION 3.13. Opinion of Financial Advisor................................ A-12
SECTION 3.14. Required Vote of Company Stockholders....................... A-12
SECTION 3.15. Insurance................................................... A-12
SECTION 3.16. Real Property; Title; Valid Leasehold Interests............. A-12
SECTION 3.17. Collective Bargaining Agreements and Labor.................. A-13
SECTION 3.18. Material Contracts.......................................... A-13
SECTION 3.19. Takeover Statute............................................ A-13
SECTION 3.20. Transactions With Affiliates................................ A-13
SECTION 3.21. Intellectual Property....................................... A-14
SECTION 3.22. Company FCC Licenses; Operation of Company Licensed
Facilities.................................................. A-14
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB............
SECTION 4.1. Organization, Qualification, Etc............................ A-15
SECTION 4.2. Capital Stock............................................... A-16
SECTION 4.3. Corporate Authority Relative to This Agreement; No
Violation................................................... A-17
A-i
PAGE
----
SECTION 4.4. Reports and Financial Statements............................ A-17
SECTION 4.5. No Undisclosed Liabilities.................................. A-17
SECTION 4.6. No Violation of Law......................................... A-18
SECTION 4.7. Environmental Laws and Regulations.......................... A-18
SECTION 4.8. Absence of Certain Changes or Events........................ A-18
SECTION 4.9. Investigations; Litigation.................................. A-18
SECTION 4.10. Proxy Statement; Registration Statement; Other
Information................................................. A-18
SECTION 4.11. Tax Matters................................................. A-19
ARTICLE V COVENANTS RELATING TO CONDUCT OF BUSINESS...........................
SECTION 5.1. Conduct of Business by Company or Parent.................... A-19
SECTION 5.2. Proxy Material; Registration Statement...................... A-21
SECTION 5.3. Stockholders' Meeting....................................... A-22
SECTION 5.4. Approvals and Consents; Cooperation......................... A-23
SECTION 5.5. Access to Information; Confidentiality...................... A-23
SECTION 5.6. Affiliates.................................................. A-24
SECTION 5.7. Rights Under Stock Plans.................................... A-24
SECTION 5.8. Filings; Other Action....................................... A-25
SECTION 5.9. Further Assurances.......................................... A-27
SECTION 5.10. No Solicitation............................................. A-27
SECTION 5.11. Director and Officer Liability.............................. A-29
SECTION 5.12. Accountants' "Comfort" Letters.............................. A-30
SECTION 5.13. Additional Reports.......................................... A-30
SECTION 5.14. Plan of Reorganization...................................... A-31
SECTION 5.15. Conveyance Taxes; Fees...................................... A-31
SECTION 5.16. Public Announcements........................................ A-31
SECTION 5.17. Employee Benefits........................................... A-31
SECTION 5.18. Transaction Expenses and Termination Fee.................... A-31
ARTICLE VI CONDITIONS TO THE MERGER...........................................
SECTION 6.1. Conditions to the Obligations of each Party................. A-32
SECTION 6.2. Conditions to the Obligations of Parent and Merger Sub...... A-33
SECTION 6.3. Conditions to the Obligations of Company.................... A-34
ARTICLE VII TERMINATION, AMENDMENT AND WAIVER.................................
SECTION 7.1. Termination or Abandonment.................................. A-34
SECTION 7.2. Effect of Termination....................................... A-36
ARTICLE VIII GENERAL PROVISIONS...............................................
SECTION 8.1. Nonsurvival of Representations and Warranties; Survival of
Certain Covenants........................................... A-36
SECTION 8.2. Notices..................................................... A-36
SECTION 8.3. Counterparts................................................ A-37
SECTION 8.4. Entire Agreement; No Third-Party Beneficiaries.............. A-37
SECTION 8.5. Assignment.................................................. A-37
SECTION 8.6. Governing Law............................................... A-37
SECTION 8.7. Enforcement................................................. A-37
SECTION 8.8. Severability................................................ A-37
SECTION 8.9. Headings.................................................... A-37
A-ii
PAGE
----
SECTION 8.10. Finders or Brokers.......................................... A-38
SECTION 8.11. Amendment................................................... A-38
SECTION 8.12. Extension; Waiver........................................... A-38
SECTION 8.13. Procedure for Termination, Amendment, Extension or Waiver... A-38
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INDEX OF DEFINED TERMS
TERM DEFINED IN SECTION
---- ------------------
Acquisition Proposal........................................ 5.10(a)
Affiliate................................................... 3.1
Agreement................................................... Preamble
Antitrust Divestiture Condition............................. 5.8(b)
Benefit Plan................................................ 3.8(a)
Business Combination........................................ 5.10(c)
Certificate of Merger....................................... 1.3
Certificates................................................ 2.4(b)
Closing Date................................................ 1.2
Code........................................................ Preamble
Communications Act.......................................... 3.3
Company..................................................... Preamble
Company Board Recommendation................................ 5.3
Company Certificate of Incorporation........................ 1.5(a)
Company Class B Stock....................................... Preamble
Company Common Stock........................................ Preamble
Company Disclosure Letter................................... Article III Introduction
Company Group............................................... 3.12(a)
Company FCC Licenses........................................ 3.22(a)
Company Filed SEC Reports................................... 3.5
Company Licensed Facility................................... 3.22(a)
Company LMA Facility........................................ 3.22(b)
Company LMA Facility FCC Licenses........................... 3.22(b)
Company Material Contracts.................................. 3.18(a)
Company Ordinary Common Stock............................... Preamble
Company Representatives..................................... 5.10(a)
Company SEC Reports......................................... 3.4
Company Special Meeting..................................... 5.3
Company Stockholder Approval................................ 5.3
Confidentiality Agreement................................... 5.5
Conversion Ratio............................................ 2.3
Conveyance Taxes............................................ 5.15
Current Employees........................................... 5.17
DGCL........................................................ 1.1
Effective Time.............................................. 1.3
Employee.................................................... 3.8(a)
Employee Stock Option Plan.................................. 3.2(a)
Environmental Laws.......................................... 3.7(a)
ERISA....................................................... 3.8(a)
ERISA Affiliate............................................. 3.8(c)
ESPP........................................................ 3.2(c)
Exchange Act................................................ 3.3
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TERM DEFINED IN SECTION
---- ------------------
Exchange Agent.............................................. 2.4(a)
Exchange Fund............................................... 2.4(a)
FCC......................................................... 3.3
FCC Divestiture Condition................................... 5.8(c)
GAAP........................................................ 3.4
Government Antitrust Entity................................. 5.8(b)
Governmental Entity......................................... 6.1(c)
HSR Act..................................................... 3.3
Indemnifiable Claim......................................... 5.11(b)
Indemnitees................................................. 5.11(b)
Indemnitee Costs............................................ 5.11(b)
Indemnitee Expenses......................................... 5.11(b)
Indemnity Agreement......................................... 5.11(a)
Initial Period.............................................. 7.1
Intellectual Property....................................... 3.21(g)
interested stockholder...................................... 5.10(c)
Jacor....................................................... 4.2(j)
Knowledge................................................... 3.7(b)
Liens....................................................... 3.1
Material Adverse Effect..................................... 3.1
Material Subsidiary......................................... 5.10(a)
Merger...................................................... Preamble
Merger Consideration........................................ 2.3
Merger Sub.................................................. Preamble
NYSE........................................................ 5.4(a)(ii)
Option...................................................... 5.7(a)
Parent...................................................... Preamble
Parent Common Stock......................................... Preamble
Parent Disclosure Letter.................................... Article IV Introduction
Parent Filed SEC Reports.................................... 4.5
Parent Group................................................ 4.11(a)
Parent Preferred Stock...................................... 4.2
Parent SEC Reports.......................................... 4.4
Pension Plan................................................ 3.8(b)
person...................................................... 2.4(j)
Plans....................................................... 3.8(b)
Proxy Statement............................................. 5.2(a)
Purchase Date............................................... 5.7(c)
Registration Statement...................................... 5.2(a)
SEC......................................................... 3.4
Securities Act.............................................. 3.1
Significant Subsidiary...................................... 3.1
Subsidiary.................................................. 3.1
Superior Proposal........................................... 5.10(a)
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TERM DEFINED IN SECTION
---- ------------------
Surviving Corporation....................................... 1.1
Taxes....................................................... 3.12(a)
Tax Returns................................................. 3.12(a)
Termination Fee............................................. 5.18(c)
Transaction Expenses........................................ 5.18(b)
Voting Agreements........................................... Preamble
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AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER, dated October 5, 2001, is entered into
by and among Clear Channel Communications, Inc., a Texas corporation ("PARENT"),
CCMM Sub, Inc., a Delaware corporation and a wholly-owned subsidiary of Parent
("MERGER SUB"), and The Ackerley Group, Inc., a Delaware corporation
("COMPANY").
WITNESSETH:
WHEREAS, the respective Boards of Directors of Parent, Merger Sub and
Company have approved the acquisition of Company by Parent upon the terms and
subject to the conditions set forth in this Agreement and Plan of Merger,
including, without limitation, the exhibits attached hereto (collectively, this
"AGREEMENT");
WHEREAS, the respective Boards of Directors of Parent, Merger Sub and
Company have approved the merger of Merger Sub with and into Company as set
forth below (the "MERGER") upon the terms and subject to the conditions set
forth in this Agreement, whereby each issued and outstanding share of common
stock, par value $0.01 per share, of Company ("COMPANY ORDINARY COMMON STOCK")
and each issued and outstanding share of Class B common stock, par value $0.01
per share, of Company ("COMPANY CLASS B STOCK" and, together with Company
Ordinary Common Stock, "COMPANY COMMON STOCK"), other than shares owned directly
or indirectly by Parent, Merger Sub or Company, will be converted into shares of
common stock, par value $0.10 per share, of Parent ("PARENT COMMON STOCK") in
accordance with the provisions of Article II of this Agreement;
WHEREAS, as a condition and inducement to Parent's willingness to enter
into this Agreement, concurrently with the execution and delivery of this
Agreement, Parent and certain stockholders of Company are entering into voting
agreements dated as of the date of this Agreement (collectively, the "VOTING
AGREEMENTS") pursuant to which each such stockholder has agreed to, among other
things, (a) vote all the shares of Company Ordinary Common Stock held by it in
favor of the proposal to approve and adopt this Agreement and the Merger and (b)
in lieu of any damages to be paid by a stockholder to Parent, the payment to
Parent of a specified amount in connection with the consummation of certain
alternative transactions to the Merger;
WHEREAS, for federal income tax purposes, the Merger is intended to qualify
as a reorganization under the provisions of Section 368(a) of the United States
Internal Revenue Code of 1986, as amended (the "CODE");
WHEREAS, Merger Sub is a direct, wholly-owned subsidiary of Parent formed
solely for the purpose of effecting the Merger and will conduct no activity and
incur no liability or obligation other than as contemplated by this Agreement;
and
WHEREAS, Parent, Merger Sub and Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger and also to prescribe certain conditions to the Merger.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements herein contained, and intending to be legally bound hereby,
Parent, Merger Sub and Company hereby agree as follows:
ARTICLE I
THE MERGER
SECTION 1.1. The Merger. Upon the terms and subject to the conditions set
forth in this Agreement and the Delaware General Corporation Law (the "DGCL"),
Merger Sub will be merged with and into Company at the Effective Time of the
Merger. Following the Merger, the separate corporate existence of Merger Sub
will cease, and Company will continue as the surviving corporation (the
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"SURVIVING CORPORATION") and will succeed to and assume all the rights and
obligations of Merger Sub in accordance with the DGCL.
SECTION 1.2. Closing. The closing of the Merger will take place at 10:00
a.m. on a date to be specified by the parties which will be no later than the
second business day after the satisfaction or waiver of the conditions set forth
in Article VI (other than those conditions that by their nature are to be
satisfied at the Closing, but subject to the satisfaction or waiver of such
conditions) (the "CLOSING DATE") at the offices of Akin, Gump, Strauss, Hauer &
Feld, L.L.P., 1700 Pacific Avenue, Suite 4100, Dallas, Texas 75201, unless
another date or place is agreed to in writing by the parties hereto.
SECTION 1.3. Effective Time. On the Closing Date, the parties will
execute and file in the office of the Secretary of State of Delaware a
certificate of merger (a "CERTIFICATE OF MERGER") executed in accordance with
the DGCL and will make all other filings or recordings, if any, required under
DGCL. The Merger will become effective at the time of filing of the Certificate
of Merger, or at such later time as is agreed upon by the parties hereto and set
forth therein (such time as the Merger becomes effective is referred to herein
as the "EFFECTIVE TIME").
SECTION 1.4. Effects of the Merger. The Merger will have the effects set
forth in the DGCL.
SECTION 1.5. Certificate of Incorporation and Bylaws of the Surviving
Corporation.
(a) Certificate of Incorporation. The Fourth Restated Certificate of
Incorporation of Company (the "COMPANY CERTIFICATE OF INCORPORATION") as in
effect immediately prior to the Effective Time will become the Certificate of
Incorporation of the Surviving Corporation after the Effective Time, and
thereafter may be amended as provided therein and as permitted by law and this
Agreement.
(b) Bylaws. The Bylaws of Merger Sub as in effect immediately prior to the
Effective Time will become the Bylaws of the Surviving Corporation after the
Effective Time, and thereafter may be amended as provided therein and as
permitted by law and this Agreement.
SECTION 1.6. Directors. The directors of Merger Sub immediately prior to
the Effective Time will become the directors of the Surviving Corporation, until
the earlier of their resignation or removal or until their respective successors
are duly elected and qualified, as the case may be.
SECTION 1.7. Officers. The officers of Company immediately prior to the
Effective Time will become the officers of the Surviving Corporation, until the
earlier of their resignation or removal or until their respective successors are
duly elected and qualified, as the case may be.
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT
CORPORATIONS; EXCHANGE OF CERTIFICATES
SECTION 2.1. Capital Stock of Merger Sub. As of the Effective Time, by
virtue of the Merger and without any action on the part of the holder of any
shares of Company Common Stock or any shares of capital stock of Merger Sub,
each share of common stock, par value $0.01 per share, of Merger Sub issued and
outstanding immediately prior to the Effective Time will be converted into and
become one fully paid and nonassessable share of common stock, par value $0.01
per share, of the Surviving Corporation, and such converted shares,
collectively, will represent all of the issued and outstanding capital stock of
the Surviving Corporation.
SECTION 2.2. Cancellation of Treasury Stock and Parent Owned Stock. As of
the Effective Time, by virtue of the Merger and without any action on the part
of the holder of any shares of Company Common Stock or any shares of capital
stock of Merger Sub, each share of Company Common Stock issued and held,
immediately prior to the Effective Time, in Company's treasury or by any of
Company's direct or indirect wholly-owned subsidiaries, and each share of
Company Common Stock that is owned by Parent, Merger Sub or any other direct or
indirect wholly-owned subsidiary of Parent, will automatically
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be cancelled and retired and will cease to exist, and no consideration will be
delivered in exchange therefor.
SECTION 2.3. Conversion of Company Common Stock.
(a) Merger Consideration. As of the Effective Time, by virtue of the
Merger and without any action on the part of the holder of any shares of Company
Common Stock or any shares of capital stock of Merger Sub, subject to this
Section 2.3 and Section 2.4(f), each share of Company Ordinary Common Stock and
each share of Company Class B Stock issued and outstanding immediately prior to
the Effective Time (other than shares to be cancelled in accordance with Section
2.2) will be converted into the right to receive 0.35 (the "CONVERSION RATIO")
duly authorized, validly issued, fully paid and nonassessable shares of Parent
Common Stock (together with the amount of cash in lieu of fractional shares
payable pursuant to Section 2.4(f), the "MERGER CONSIDERATION"); provided,
however, that, in any event, if between the date of this Agreement and the
Effective Time, the outstanding shares of Parent Common Stock will have been
changed into a different number of shares or a different class, by reason of any
stock dividend, subdivision, reclassification, recapitalization, split,
combination or exchange of shares, then the Conversion Ratio will be
correspondingly adjusted to the extent appropriate to reflect such stock
dividend, subdivision, reclassification, recapitalization, split, combination or
exchange of shares. As of the Effective Time, all such shares of Company Common
Stock will no longer be outstanding and will automatically be cancelled and
retired and will cease to exist, and each holder of a certificate or a
certificate which immediately prior to the Effective Time represented
outstanding shares of Company Common Stock will cease to have any rights with
respect thereto, except the right to receive the Merger Consideration.
SECTION 2.4. Exchange of Certificates.
(a) Exchange Agent. From and after the Effective Time, Parent will make
available to a bank or trust company designated by Parent and reasonably
satisfactory to Company (the "EXCHANGE AGENT"), for the benefit of the holders
of Company Common Stock for exchange in accordance with this Article II, through
the Exchange Agent, certificates evidencing such number of shares of Parent
Common Stock issuable to holders of Company Common Stock in the Merger pursuant
to Section 2.3 and an amount of cash payable to the holders of Company Common
Stock pursuant to Section 2.4(d) and Section 2.4(f) (such certificates for
shares of Parent Common Stock, together with any dividends or distributions with
respect thereto and cash in lieu of fractional shares as contemplated by Section
2.4(f), being hereinafter referred to as the "EXCHANGE FUND"). The Exchange
Agent will, pursuant to irrevocable instructions, deliver the Merger
Consideration contemplated to be issued pursuant to Section 2.3, together with
any dividends or distributions with respect thereto, and the cash in lieu of
fractional shares of Parent Common Stock to which such holders are entitled
pursuant to Section 2.4(f) hereof out of the Exchange Fund. Except as
contemplated by Section 2.4(g) hereof, the Exchange Fund will not be used for
any other purpose.
(b) Exchange Procedures. As promptly as practicable after the Effective
Time, Parent will cause the Exchange Agent to mail to each holder of a
certificate or certificates which immediately prior to the Effective Time
represented outstanding shares of Company Common Stock (the "CERTIFICATES") (i)
a letter of transmittal (which will be in customary form and will specify that
delivery will be effected, and risk of loss and title to the Certificates will
pass, only upon proper delivery of the Certificates to the Exchange Agent) and
(ii) instructions for use in effecting the surrender of the Certificates in
exchange for certificates evidencing shares of Parent Common Stock, together
with any dividends or distributions with respect thereto or cash in lieu of
fractional shares of Parent Common Stock to which such holder is entitled
pursuant to Section 2.4(f) hereof.
(c) Exchange of Certificates. Upon surrender to the Exchange Agent of a
Certificate for cancellation, together with such letter of transmittal, duly
executed and completed in accordance with the instructions thereto, and such
other documents as may be reasonably required pursuant to such instructions, the
holder of such Certificate will be entitled to receive in exchange therefor a
certificate representing that number of whole shares of Parent Common Stock
which such holder's shares of Company Common Stock have been converted into
pursuant to this Article II (and any cash in lieu of any
A-3
fractional shares of Parent Common Stock to which such holder is entitled
pursuant to Section 2.4(f)and any dividends or other distributions to which such
holder is entitled pursuant to Section 2.4(d)), and the Certificate so
surrendered will forthwith be cancelled. In the event of a transfer of ownership
of shares of Company Common Stock which is not registered in the transfer
records of Company, shares of Parent Common Stock, cash in lieu of any
fractional shares of Parent Common Stock to which such holder is entitled
pursuant to Section 2.4(f) and any dividends or other distributions to which
such holder is entitled pursuant to Section 2.4(d) may be issued to a transferee
if the Certificate representing such shares of Company Common Stock is presented
to the Exchange Agent, accompanied by all documents required to evidence and
effect such transfer and by evidence that any applicable stock transfer taxes
have been paid. Until surrendered as contemplated by this Section 2.4, each
Certificate will be deemed at all times after the Effective Time to represent
only the right to receive upon such surrender the number of whole shares of
Parent Common Stock into which the shares of Company Common Stock formerly
represented thereby have been converted, cash in lieu of any fractional shares
of Parent Common Stock to which such holder is entitled pursuant to Section
2.4(f) and any dividends or other distributions to which such holder is entitled
pursuant to Section 2.4(d).
(d) Distributions with Respect to Unexchanged Shares of Parent Common
Stock. No dividends or other distributions declared or made after the Effective
Time with respect to Parent Common Stock with a record date after the Effective
Time will be paid to the holder of any unsurrendered Certificate with respect to
the shares of Parent Common Stock represented thereby, and no cash payment in
lieu of any fractional shares will be paid to any such holder pursuant to
Section 2.4(f), until the holder of such Certificate surrenders such
Certificate. Subject to the effect of escheat, tax or other applicable laws,
following surrender of any such Certificate, there will be paid to the holder of
the certificates representing whole shares of Parent Common Stock issued in
exchange therefor, without interest, (i) promptly, the amount of any cash
payable with respect to a fractional share of Parent Common Stock to which such
holder is entitled pursuant to Section 2.4(f) and the amount of dividends or
other distributions with a record date after the Effective Time and theretofore
paid with respect to such whole shares of Parent Common Stock, and (ii) at the
appropriate payment date, the amount of dividends or other distributions, with a
record date after the Effective Time but prior to surrender and a payment date
occurring after surrender, payable with respect to such whole shares of Parent
Common Stock.
(e) No Further Rights in Company Common Stock. All shares of Parent Common
Stock issued upon conversion of the shares of Company Common Stock in accordance
with the terms hereof (including cash paid pursuant to Section 2.4(d) or Section
2.4(f)) will be deemed to have been issued in full satisfaction of all rights
pertaining to such shares of Company Common Stock.
(f) No Fractional Shares.
(i) No certificates or scrip representing fractional shares of Parent
Common Stock will be issued upon the surrender for exchange of
Certificates, no dividend or distribution of Parent will relate to such
fractional share interests and such fractional share interests will not
entitle the owner thereof to vote or to any rights of a stockholder of
Parent.
(ii) In lieu of the issuance of certificates or scrip representing
fractional shares of Parent Common Stock, Parent will pay each holder of
Company Common Stock an amount in cash equal to the product obtained by
multiplying (A) the fractional share interest to which such holder (after
taking into account all shares of Company Common Stock held at the
Effective Time by such holder) would otherwise be entitled by (B) the
average of the closing prices for a share of Parent Common Stock as
reported on the NYSE Composite Transaction Tape (as reported in THE WALL
STREET JOURNAL, or, if not reported thereby, any other authoritative
source) for the five trading days immediately preceding the Closing Date.
(iii) As soon as practicable after the determination of the amount of
cash, if any, to be paid to holders of Company Common Stock with respect to
any fractional share interests, the Exchange Agent will make available such
amounts to such holders of Company Common Stock subject to and in
accordance with the terms of Section 2.4(d).
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(g) Termination of Exchange Fund. Any portion of the Exchange Fund
(including any shares of Parent Common Stock) which remains undistributed to the
holders of Company Common Stock for nine months after the Effective Time will be
delivered to Parent, upon demand, and any holders of Company Common Stock who
have not theretofore complied with this Article II will thereafter look only to
Parent for the Merger Consideration, any cash in lieu of fractional shares of
Parent Common Stock to which they are entitled pursuant to Section 2.4(f) and
any dividends or other distributions with respect to Parent Common Stock to
which they are entitled pursuant to Section 2.4(d).
(h) No Liability. None of the Exchange Agent, Parent nor the Surviving
Corporation will be liable to any holder of shares of Company Common Stock for
any such shares of Parent Common Stock (or dividends or distributions with
respect thereto) or cash delivered to a public official pursuant to any
abandoned property, escheat or similar law.
(i) Withholding Rights. Each of the Surviving Corporation and Parent will
be entitled to deduct and withhold from the consideration otherwise payable
pursuant to this Agreement to any holder of shares of Company Common Stock such
amounts as it is required to deduct and withhold with respect to the making of
such payment under the Code, or any provision of state, local or foreign tax
law. To the extent that amounts are so withheld by the Surviving Corporation or
Parent, as the case may be, such withheld amounts will be treated for all
purposes of this Agreement as having been paid to the holder of the shares of
Company Common Stock in respect of which such deduction and withholding was made
by the Surviving Corporation or Parent, as the case may be.
(j) Lost Certificates. If any Certificate will have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such Certificate to be lost, stolen or destroyed and, if required by the
Surviving Corporation, the posting by such person of a bond, in such reasonable
amount as the Surviving Corporation may direct, as indemnity against any claim
that may be made against it with respect to such Certificate, the Exchange Agent
will issue in exchange for such lost, stolen or destroyed Certificate the Merger
Consideration, any cash in lieu of fractional shares of Parent Common Stock to
which the holders thereof are entitled pursuant to Section 2.4(f) and any
dividends or other distributions to which the holders thereof are entitled
pursuant to this Agreement. For the purposes of this Agreement, "PERSON" means
any natural person, firm, individual, business trust, trust, association,
corporation, partnership, joint venture, company, unincorporated entity or
Governmental Entity.
SECTION 2.5. Stock Transfer Books. At the Effective Time, the stock
transfer books of Company will be closed and there will be no further
registration of transfers of shares of Company Common Stock thereafter on the
records of Company. From and after the Effective Time, the holders of
Certificates representing shares of Company Common Stock outstanding immediately
prior to the Effective Time will cease to have any rights with respect to such
shares of Company Common Stock, except as otherwise provided herein or by law.
On or after the Effective Time, any Certificates presented to the Exchange Agent
or Parent for any reason will be converted into the Merger Consideration, any
cash in lieu of fractional shares of Parent Common Stock to which the holders
thereof are entitled pursuant to Section 2.4(f) and any dividends or other
distributions to which the holders thereof are entitled pursuant to Section
2.4(d).
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF COMPANY
Except as set forth in the disclosure letter delivered by Company to Parent
on the date of this Agreement ("COMPANY DISCLOSURE LETTER"), Company hereby
represents and warrants to Parent and Merger Sub as follows:
SECTION 3.1. Organization, Qualification, Etc. Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has the corporate power and authority to own its
properties and assets and to carry on its business as it is now being conducted
and is duly qualified to do business and is in good standing in each
jurisdiction in which the ownership of its
A-5
properties or the conduct of its business requires such qualification, except
for jurisdictions in which such failure to be so qualified or to be in good
standing would not, in the aggregate, reasonably be expected to have a Material
Adverse Effect on Company. The copies of Company's charter and bylaws which have
been made available for inspection by Parent are complete and correct and in
full force and effect on the date of this Agreement. Each of Company's
Subsidiaries is a corporation, limited partnership or limited liability company
duly organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation or organization, has the corporate, limited
partnership or limited liability company power and authority to own its
properties and to carry on its business as it is now being conducted, and is
duly qualified to do business and is in good standing in each jurisdiction in
which the ownership of its property or the conduct of its business requires such
qualification, except for jurisdictions in which such failure to be so qualified
or to be in good standing would not, in the aggregate, reasonably be expected to
have a Material Adverse Effect on Company. Company has made available for
inspection by Parent true and correct copies of the charter and bylaws of each
significant Subsidiary (as defined in Regulation S-X promulgated under the
Securities Act of 1933, as amended (the "SECURITIES ACT")) ("SIGNIFICANT
SUBSIDIARY") and each such organizational document is in full force and effect
on the date of this Agreement. All the outstanding shares of capital stock of,
or other ownership interests in, Company's Subsidiaries are validly issued,
fully paid and nonassessable and are owned by Company, directly or indirectly,
free and clear of any encumbrance, hypothecation, infringement, lien, mortgage,
pledge, restriction, security interest, title retention or other security
arrangement, or any adverse right or interest, charge or claim of any nature
whatsoever of, on, or with respect to any asset, property or property interest,
not including (i) liens for water and sewer charges and current taxes not yet
due and payable or being contested in good faith, (ii) mechanics', carriers',
workers', repairers', materialmen's, warehousemen's and other similar liens
arising or incurred in the ordinary course of business (iii) all liens approved
in writing by Parent or (iv) restrictions on transfer imposed by federal or
state securities laws ("LIENS"). There are no existing options, rights of first
refusal, preemptive rights, calls or commitments of any character relating to
the issued or unissued capital stock or other securities of, or other ownership
interests in, any Subsidiary of Company.
For purposes of this Agreement, "MATERIAL ADVERSE EFFECT" means, when used
in connection with Company or Parent, any change or effect that (i) is
materially adverse to the business, financial condition or results of operations
of such party and its Subsidiaries taken as a whole or (ii) substantially
impairs or delays the consummation of the transactions contemplated hereby;
provided, however, in either such event, "MATERIAL ADVERSE EFFECT" will not
include any change or effect that results from any legal, financial or other
effects on or to Company and its Subsidiaries taken as a whole, Parent and its
Subsidiaries taken as a whole, or their respective businesses taken as a whole,
that may arise from or are in any way related to: (A) any public or nonpublic
discussion initiated by or involving public officials, any announcement,
development, action or potential action, settlement, negotiation, legislation,
proposed or enacted, judicial decision, order, judgment or change in status of
any nature or type, which contemplates, proposes, threatens or results in any
voluntary or nonvoluntary cessation of or a legal ban or restrictions on the use
of the outdoor advertising services of any person, (including Company, Parent or
any of their respective Subsidiaries) by any person or group of persons seeking
to advertise tobacco products or products containing alcohol; (B) any economic
conditions affecting the outdoor advertising services industry as a whole; and
(C) any economic conditions affecting the radio industry as a whole.
For purposes of this Agreement, "AFFILIATE" of any person means another
person that directly or indirectly, through one or more intermediaries,
controls, is controlled by, or is under common control with, such first person.
For purposes of this Agreement, "SUBSIDIARY" or "SUBSIDIARIES" of any
person means another person, an amount of the voting securities, other voting
ownership or voting partnership interests of which is sufficient to elect at
least a majority of its board of directors or other governing body (or, if there
are no such voting interests, 50% or more of the equity interests of which) is
owned directly or indirectly by such first person.
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For purposes of this Agreement, with respect to any person, "KNOWLEDGE"
means the actual knowledge of the executive officers of such person.
SECTION 3.2. Capital Stock. The authorized stock of Company consists of
50,000,000 shares of Company Ordinary Common Stock and 11,406,510 shares of
Company Class B Stock. As of September 21, 2001, 24,078,472 shares of Company
Ordinary Common Stock and 11,020,622 shares of Company Class B Stock were issued
and outstanding. All the outstanding shares of Company Ordinary Common Stock and
Company Class B Stock have been validly issued and are fully paid and
nonassessable. As of September 21, 2001, there were no outstanding
subscriptions, options, warrants, rights or other arrangements or commitments
obligating Company to issue any shares of its stock other than:
(a) options or other rights to receive or acquire 612,000 shares of
Company Ordinary Common Stock pursuant to the Fifth Amended and Restated
Employees Stock Option Plan, as amended and restated in 2001 (the "EMPLOYEE
STOCK OPTION PLAN");
(b) rights to acquire the number of shares of Company Ordinary Common
Stock eligible to be purchased pursuant to the Non-employee-Directors'
Equity Compensation Plan; and
(c) rights to acquire the number of shares of Company Ordinary Common
Stock eligible to be purchased pursuant to payroll deductions under
Company's Employee Stock Purchase Plan (the "ESPP") for purchase periods
ending prior to the Closing Date.
Except for the issuance of shares of Company Ordinary Common Stock pursuant
to the options and other rights referred to in Section 3.2(a) and Section 3.2(b)
above and except as provided for in Section 5.1(a)(viii), since December 31,
2000, no shares of Company Common Stock have been issued.
SECTION 3.3. Corporate Authority Relative to this Agreement; No
Violation. Company has the corporate power and authority to enter into this
Agreement and to carry out its obligations hereunder. The execution and delivery
of this Agreement and the consummation of the transactions contemplated hereby
have been duly and validly authorized by the Board of Directors of Company and,
except for the approval of its stockholders, no other corporate proceedings on
the part of Company are necessary to authorize this Agreement and the
transactions contemplated hereby. As of the date of this Agreement, the Board of
Directors of Company has determined that the transactions contemplated by this
Agreement are advisable and in the best interest of its stockholders and to
recommend to such stockholders that they vote in favor thereof. This Agreement
has been duly and validly executed and delivered by Company and, assuming this
Agreement has been duly and validly executed and delivered by the other parties
hereto, this Agreement constitutes a valid and binding agreement of Company,
enforceable against Company in accordance with its terms (except insofar as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights
generally, or by principles governing the availability of equitable remedies).
Company is not subject to or obligated under any charter, bylaw or contract
provision or any license, franchise or permit, or subject to any order or
decree, which would be breached or violated by its executing or, subject to the
approval of its stockholders, carrying out this Agreement, except for any
breaches or violations which would not, in the case of any contract provision,
license, franchise, permit, order or decree, in the aggregate, reasonably be
expected to have a Material Adverse Effect on Company. Other than in connection
with or in compliance with the provisions of the DGCL, the Securities Act, the
Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
ACT"), applicable approvals of the Federal Communications Commission (the "FCC")
pursuant to the Communications Act of 1934, as amended, and any regulations
promulgated thereunder (the "COMMUNICATIONS ACT"), Section 4043 of ERISA, any
other competition, antitrust and investment laws and the securities or blue sky
or antitrust laws of the various states, and, other than the filing of the
Certificate of Merger with the Delaware Secretary of State and any necessary
state filings to maintain the good standing or qualification of the Surviving
Corporation, no authorization, consent or approval of, or filing with, any
Governmental Entity is necessary for the consummation by Company of the
transactions contemplated by this Agreement, except for such authorizations,
consents, approvals or filings, the failure to obtain or make which would not,
in the aggregate, reasonably be expected to have a Material Adverse Effect on
Company;
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provided that Company makes no representation with respect to such of the
foregoing as are required by reason of the regulatory status of Parent or any of
its Subsidiaries or facts specifically pertaining to any of them.
SECTION 3.4. Reports and Financial Statements. Since January 1, 1999,
Company has timely filed all material reports, registration statements and other
filings required to be filed by it with the U.S. Securities and Exchange
Commission (the "SEC") under the rules and regulations of the SEC (collectively,
the "COMPANY SEC REPORTS"). As of their respective dates, the Company SEC
Reports (i) complied as to form in all material respects with the applicable
requirements of the Securities Act, the Exchange Act and the rules and
regulations promulgated thereunder and (ii) did not contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; provided, that the
foregoing clause (ii) will not apply to the financial statements included in
Company SEC Reports (which are covered by the following sentence). The audited
consolidated financial statements and unaudited consolidated interim financial
statements included in Company SEC Reports (including any related notes and
schedules) fairly present in all material respects the financial position of
Company and its consolidated Subsidiaries as of the dates thereof and the
results of operations and cash flows for the periods or as of the dates then
ended (subject, where appropriate, to normal year-end adjustments), in each case
in accordance with generally accepted accounting principles in the United States
("GAAP") consistently applied during the periods involved (except as otherwise
disclosed in the notes thereto and except that the unaudited financial
statements therein do not contain all of the footnote disclosures required by
GAAP).
SECTION 3.5. No Undisclosed Liabilities. Neither Company nor any of its
Subsidiaries has any liabilities or obligations of any nature, whether or not
accrued, contingent or otherwise, that would be required by GAAP to be reflected
on a consolidated balance sheet, except liabilities or obligations (a) reflected
in any of the Company SEC Reports filed and publicly available prior to the date
of this Agreement (as amended to the date of this Agreement, the "COMPANY FILED
SEC REPORTS"), (b) incurred since December 31, 2000 in the ordinary course of
business in accordance with past practice or (c) which would not, in the
aggregate, reasonably be expected to have a Material Adverse Effect on Company.
SECTION 3.6. No Violation of Law. The businesses of Company and its
Subsidiaries are not being conducted in violation of any law, ordinance or
regulation of any Governmental Entity applicable to them (provided that no
representation or warranty is made in this Section 3.6 with respect to
Environmental Laws which are dealt with exclusively in Section 3.7) except (a)
as described in any of the Company Filed SEC Reports and (b) for violations
which would not, in the aggregate, reasonably be expected to have a Material
Adverse Effect on Company. Company and its Subsidiaries have all permits,
licenses and governmental authorizations material to ownership or occupancy of
their respective properties and assets and the carrying on of their respective
businesses, except for such permits, licenses and governmental authorizations
the failure of which to have would not, in the aggregate, reasonably be expected
to have a Material Adverse Effect on Company.
SECTION 3.7. Environmental Laws and Regulations. The representations and
warranties set forth in this Section 3.7 will be the exclusive representations
and warranties of Company with respect to the subject matter hereof. Except as
described in any of the Company Filed SEC Reports, and except as would not, in
the aggregate, reasonably be expected to have a Material Adverse Effect on
Company:
(a) Compliance with Laws. Company and each of its Subsidiaries is in
material compliance with all applicable federal, state, local and foreign
laws and regulations currently in effect relating to pollution or
protection of human health or the environment (including, without
limitation, ambient air, surface water, ground water, land surface or
subsurface strata) (collectively, "ENVIRONMENTAL LAWS"), which compliance
includes, but is not limited to, the possession by Company and its
Subsidiaries of material permits and other governmental authorizations
required under applicable Environmental Laws, and compliance with the terms
and conditions thereof;
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(b) Environmental Actions. Neither Company nor any of its
Subsidiaries has received written notice of, nor, to the Knowledge of
Company, is Company the subject of, any pending actions, causes of action,
claims, investigations, demands or notices by any person alleging liability
under or noncompliance with any Environmental Law or that Company or any
Subsidiary is a potentially responsible party at any Superfund site or
state-equivalent site;
(c) No Hazardous Substances. To the Knowledge of Company, there are
no hazardous or toxic substances or materials (as those terms are defined
by applicable Environmental Laws) at a concentration or level which
requires remedial action under any Environmental Law at, on, under or in
any real property currently or formerly owned or leased by Company or any
Subsidiary;
(d) Material Compliance. To the Knowledge of Company, there are no
circumstances that are reasonably likely to prevent or interfere with
material compliance with Environmental Laws by Company or its Subsidiaries
in the future;
(e) No Disposal or Release. To the Knowledge of Company, Company and
its Subsidiaries have not disposed of or released hazardous or toxic
substances or materials (as those terms are defined by applicable
Environmental Laws) at a concentration or level which requires remedial
action under any Environmental Law at any real property currently owned by
or leased to Company or any Subsidiary or at any other real property; and
(f) No Environmental Indemnification. Neither Company nor its
Subsidiaries have agreed in writing to indemnify any predecessor or other
party with respect to any environmental liability, other than customary
indemnity provisions contained in agreements entered into in the ordinary
course of business.
SECTION 3.8. No Undisclosed Employee Benefit Plan Liabilities or Severance
Arrangements.
(a) Employee Benefit Plans. Each plan, program, policy, contract,
agreement or other arrangement providing for severance, termination pay, stock
or stock related awards, change in control, employment agreement, deferred
compensation or other employee benefits of any kind, whether formal or informal,
funded or unfunded, written or oral, including, without limitation, each
"EMPLOYEE BENEFIT PLAN," within the meaning of Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended and any regulations
promulgated or proposed thereunder ("ERISA") (each a "BENEFIT PLAN") is listed
in Section 3.8(a) of the Company Disclosure Letter other than any Benefit Plan
which has an annual cost of less than fifty thousand dollars ($50,000). True and
complete copies of all (i) Benefit Plans, including, but not limited to, any
trust instruments and insurance contracts forming a part of any Benefit Plans,
and all amendments thereto; (ii) the most recent reports (Series 5500 and all
schedules thereto), if any, required under ERISA or the Code in connection with
each Benefit Plan or related trust; (iii) the most recent determination letters
received from the Internal Revenue Service, if any, for each Benefit Plan and
related trust which is intended to satisfy the requirements of Section 401(a) of
the Code; (iv) the most recent summary plan description together with the most
recent summary of material modifications, if any, required under ERISA with
respect to each Benefit Plan; and (v) all material communications to any
current, former, or retired employee, officer, consultant, independent
contractor, agent or director of Company or any Subsidiary ("EMPLOYEE") relating
to each Benefit Plan have been provided or made available to Parent.
(b) Compliance. All employee benefit plans covering Employees other than
"MULTIEMPLOYER PLANS" within the meaning of Section 3(37) of ERISA (the
"PLANS"), to the extent subject to ERISA, are in material compliance with ERISA,
the Code, and all other applicable law. Each Plan which is an "EMPLOYEE PENSION
BENEFIT PLAN" within the meaning of Section 3(2) of ERISA ("PENSION PLAN") and
which is intended to be qualified under Section 401(a) of the Code, has received
a favorable determination letter from the Internal Revenue Service with respect
to "TRA" (as defined in Section 1 of Rev. Proc. 93-39), and Company has no
Knowledge of any circumstances likely to result in revocation of any such
favorable determination letter. There is no material pending or, to the
Knowledge of Company, threatened litigation relating to the Plans. Neither
Company nor any of its Subsidiaries has engaged in a
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transaction with respect to any Plan that, assuming the taxable period of such
transaction expired as of the date of this Agreement, could subject Company or
any Subsidiary to a tax or penalty imposed by either Section 4975 of the Code or
Section 502(i) of ERISA in an amount which would be material.
(c) No Liabilities. No liability under Subtitle C or D of Title IV of
ERISA has been or is expected to be incurred by Company or any Subsidiary with
respect to any ongoing, frozen or terminated "SINGLE-EMPLOYER PLAN," within the
meaning of Section 4001(a)(15) of ERISA currently or formerly maintained by any
of them, or a single employer plan of any entity which is considered one
employer with Company under Section 4001 of ERISA or Section 414 of the Code (an
"ERISA AFFILIATE"). No "ACCUMULATED FUNDING DEFICIENCY" as defined in Section
412 of the Code (whether or not waived) has been incurred with respect to any
ongoing, frozen or terminated single-employer plan maintained by Company, its
Subsidiaries or any ERISA Affiliates that has not been satisfied in full.
Neither Company nor any of its subsidiaries has provided, or is required to
provide, security to any Pension Plan or to any single-employer plan of an ERISA
Affiliate pursuant to Section 401(a)(29) of the Code. Under each Pension Plan
which is a single-employer plan, as of the last day of the most recent plan year
ended prior to the date hereof, the actuarially determined present value of all
"BENEFIT LIABILITIES", within the meaning of Section 4001(a)(16) of ERISA (as
determined on the basis of the actuarial assumptions contained in the Plan's
most recent actuarial valuation), did not exceed the then current value of the
assets of such Plan, and there has been no material change in the financial
condition of such Plan since the last day of the most recent plan year. Company
and its Subsidiaries have not incurred and do not expect to incur any withdrawal
liability with respect to a multiemployer plan under Subtitle E of Title IV of
ERISA. The withdrawal liability of Company and its Subsidiaries under each
Benefit Plan which is a multiemployer plan to which Company or any of its
Subsidiaries has contributed during the preceding 12 months, determined as if a
"COMPLETE WITHDRAWAL" within the meaning of Section 4203 of ERISA had occurred
as of the date hereof, would not, in the aggregate, reasonably be expected to
have a Material Adverse Effect on Company. No notice of a "REPORTABLE EVENT",
within the meaning of Section 4043 of ERISA for which the 30-day reporting
requirement has not been waived, has been required to be filed for any Plans or
by any ERISA Affiliate within the 12-month period ending on the date hereof or
will be required to be filed in connection with the transactions contemplated by
this Agreement.
(d) Contributions. All contributions required to be made under the terms
of any Benefit Plan have been timely made or have been reflected on the Company
Filed SEC Reports in all material respects.
(e) Retiree Obligations. Neither Company nor any of its Subsidiaries has
any obligations for retiree health and life benefits under any Benefit Plan.
(f) No Severance, Acceleration or Violation. The consummation of the
transactions contemplated by this Agreement will not (x) entitle any Employees
to severance pay, (y) accelerate the time of payment or vesting or trigger any
payment or funding (through a grantor trust or otherwise) of compensation or
benefits under, increase the amount payable or trigger any other material
obligation pursuant to, any of the Benefit Plans or (z) result in any breach or
violation of, or a default under, any of the Benefit Plans.
(g) Excess Parachute Payments. Any amount that could be received (whether
in cash, property, or vesting of property) as a result of the transactions
contemplated by this Agreement (or their termination of service) by any officer,
director, employee or independent contractor of Company or any of its
Subsidiaries, who is a "DISQUALIFIED INDIVIDUAL" (as defined in proposed
Treasury Regulation Section 1.280G-1), under any employment arrangement or
Benefit Plan would not be characterized as an "EXCESS PARACHUTE PAYMENT" (as
defined in Section 280G of the Code).
(h) Non-U.S. Employees. No Benefit Plan has ever been maintained primarily
or exclusively for the benefit of Employees who are not citizens or residents of
the United States.
(i) Compliance. Except as would not, in the aggregate, reasonably be
expected to have a Material Adverse Effect on Company, each of Company and its
Subsidiaries (i) has correctly categorized all Employees as either employees or
independent contractors for federal tax purposes, and is in compliance with all
applicable federal, state and local laws, rules and regulations (domestic and
foreign) respecting
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their employment, employment practices, labor, terms and conditions of
employment and wages and hours, in each case, with respect to Employees; (ii)
has withheld all amounts required by law or by agreement to be withheld from the
wages, salaries and other payments to Employees; (iii) is not liable for any
arrears of wages or any taxes or any penalty for failure to comply with any of
the foregoing; (iv) is not liable for any payment to any trust or other fund or
to any governmental or administrative authority, with respect to unemployment
compensation benefits, social security or other benefits for Employees; and (v)
has provided Employees with the benefits to which they are entitled pursuant to
the terms of all Benefit Plans.
(j) No Prepayment or Prefunding. Company has not prepaid or prefunded any
material welfare plan through a trust, reserve, premium stabilization or similar
account, other than pursuant to any insurance contract which does not include a
"FUND" as defined in Sections 419(e)(3) and (4) of the Code.
SECTION 3.9. Absence of Certain Changes or Events. Except as disclosed in
the Company Filed SEC Reports or as required or permitted by this Agreement,
since December 31, 2000, the businesses of Company and its Subsidiaries have
been conducted in all material respects in the ordinary course and from such
date to the date of this Agreement there has not been any event, occurrence,
development or state of circumstances or facts that would, in the aggregate,
reasonably be expected to have a Material Adverse Effect on Company. Since
December 31, 2000, no dividends or distributions have been declared or paid on
or made with respect to the shares of capital stock or other equity interests of
Company or its Subsidiaries nor have any such shares been repurchased or
redeemed, other than dividends or distributions paid to Company or a Subsidiary.
SECTION 3.10. Investigations; Litigation. Except as described in any of
the Company Filed SEC Reports:
(a) No Governmental Investigation. To the Knowledge of Company, no
investigation or review by any Governmental Entity with respect to Company or
any of its Subsidiaries which would, in the aggregate, reasonably be expected to
have a Material Adverse Effect on Company is pending nor has any Governmental
Entity notified Company in writing of an intention to conduct the same; and
(b) No Actions. There are no actions, suits or proceedings pending (or, to
Company's Knowledge, threatened) against or affecting Company or its
Subsidiaries, or any of their respective properties at law or in equity, or
before any federal, state, local or foreign Governmental Entity which would, in
the aggregate, reasonably be expected to have a Material Adverse Effect on
Company.
SECTION 3.11. Proxy Statement; Registration Statement; Other
Information. None of the information with respect to Company or its
Subsidiaries to be included in the Proxy Statement or the Registration Statement
will, in the case of the Proxy Statement or any amendments thereof or
supplements thereto, at the time of the mailing of the Proxy Statement or any
amendments or supplements thereto, and at the time of the Company Special
Meeting, or, in the case of the Registration Statement, at the time it becomes
effective or at the time of any post-effective amendment, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading, except that no
representation is made by Company with respect to information supplied in
writing by Parent or any Affiliate of Parent specifically for inclusion in the
Proxy Statement. The Proxy Statement will comply as to form in all material
respects with the provisions of the Exchange Act and the rules and regulations
promulgated thereunder.
SECTION 3.12. Tax Matters.
(a) Company Group Tax Returns. All federal, state, local and foreign
returns, reports or similar statements (including the attached schedules)
required to be filed with respect to any Tax, including, without limitation, any
information return, claim for refund, amended return or declaration of estimated
Tax ("TAX RETURNS") required to be filed by or on behalf of Company, each of its
Subsidiaries, and each affiliated, combined, consolidated or unitary group of
which Company or any of its Subsidiaries is a member (a "COMPANY GROUP") have
been timely filed or requests for extensions of time to file such returns or
reports have been timely filed and granted and have not expired, and all Tax
Returns filed are
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complete and accurate, except to the extent any failure to file or any
inaccuracies in filed Tax Returns would not, in the aggregate, reasonably be
expected to have a Material Adverse Effect on Company. Any and all federal,
state, local, foreign or other taxes of any kind (together with any and all
interest, penalties, additions to tax and additional amounts imposed with
respect thereto) imposed by any taxing authority, including, without limitation,
taxes or other charges on or with respect to income, franchises, windfall or
other profits, gross receipts, property, sales, use, transfer, capital stock,
payroll, employment, social security, workers' compensation, unemployment
compensation, or net worth, and taxes or other charges in the nature of excise,
withholding, ad valorem or value added ("TAXES") due and owing by Company, any
Subsidiary of Company or any Company Group have been paid, or adequately
reserved for, except to the extent any failure to pay or reserve would not, in
the aggregate, reasonably be expected to have a Material Adverse Effect on
Company. There is no audit examination, deficiency assessment, refund
litigation, proposed adjustment or matter in controversy with respect to any
Taxes due and owing by Company, any Subsidiary of Company or any Company Group,
nor has Company or any Subsidiary of Company filed any waiver of the statute of
limitations applicable to the assessment or collection of any Tax, in each case,
which would, in the aggregate, reasonably be expected to have a Material Adverse
Effect on Company. All assessments for Taxes due and owing by Company, any
Subsidiary of Company or any Company Group with respect to completed and settled
examinations or concluded litigation have been paid. Neither Company nor any
Subsidiary of Company is a party to any tax indemnity agreement, tax sharing
agreement or other agreement under which Company or any Subsidiary of Company
could become liable to another person as a result of the imposition of a Tax
upon any person, or the assessment or collection of such a Tax, except for such
agreements as would not, in the aggregate, reasonably be expected to have a
Material Adverse Effect on Company. As soon as practicable after the public
announcement of the Agreement, Company will provide Parent with written
schedules of (i) the taxable years of Company for which the statutes of
limitations with respect to federal income Taxes have not expired, and (ii) with
respect to federal income Taxes, those years for which examinations have been
completed, those years for which examinations are presently being conducted, and
those years for which examinations have not yet been initiated. Company and each
of its Subsidiaries has complied in all material respects with all rules and
regulations relating to the withholding of Taxes, except to the extent any such
failures to comply would not, in the aggregate, reasonably be expected to have a
Material Adverse Effect on Company.
(b) Tax-Free Reorganization. Neither Company nor any of its Subsidiaries
knows of any fact or has taken, or failed to take, any action that could prevent
the Merger from qualifying as a reorganization within the meaning of Section
368(a) of the Code.
SECTION 3.13. Opinion of Financial Advisor. The Board of Directors of
Company has received the opinion of Credit Suisse First Boston dated the date of
this Agreement, to the effect that, as of such date, the Conversion Ratio is
fair to the holders of Company Ordinary Common Stock from a financial point of
view. A copy of the written opinion of Credit Suisse First Boston will be
delivered to Parent as soon as practicable after the date of this Agreement.
SECTION 3.14. Required Vote of Company Stockholders. The affirmative vote
of the holders of a majority of the voting power of the outstanding shares of
Company Common Stock (with the holders of Company Ordinary Common Stock and the
holders of Company Class B Common Stock voting together as a single class) is
required to approve the Merger. No other vote of the stockholders of Company is
required by law, the Company Certificate of Incorporation or Bylaws of Company
or otherwise in order for Company to consummate the Merger and the transactions
contemplated hereby.
SECTION 3.15. Insurance. Company and its Subsidiaries have insurance
policies, including without limitation fire, casualty and other liability
insurance policies, that are customary for the industry in which it operates and
such policies are in full force and effect, except for the failure to have or
maintain in full force and effect such policies as would not, in the aggregate,
reasonably be expected to have a Material Adverse Effect on Company.
SECTION 3.16. Real Property; Title; Valid Leasehold Interests. Company
has previously provided or made available to Parent a true and complete list of
all real property owned by Company or its
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Subsidiaries which is material to the business of Company and its Subsidiaries
taken as a whole. Company or its Subsidiaries have good and marketable title to
all such properties except where the failure to have such title would not, in
the aggregate, reasonably be expected to have a Material Adverse Effect on
Company. With respect to all leases for the use or occupancy of real estate
owned by a third party to which Company or a Subsidiary is a party, such leases
are in full force and effect as of the date of this Agreement, and no party
thereto is in default or breach under any such lease except, in each case, as
would not, in the aggregate, reasonably be expected to have a Material Adverse
Effect on Company.
SECTION 3.17. Collective Bargaining Agreements and Labor. Company has
previously provided or made available to Parent all labor or collective
bargaining agreements which pertain to a material number of the employees of
Company and its Subsidiaries. There are no pending complaints, charges or claims
against Company or its Subsidiaries filed with any public or governmental
authority, arbitrator or court based upon the employment or termination by
Company of any individual, except for such complaints, charges or claims which
if adversely determined would not, in the aggregate, reasonably be expected to
have a Material Adverse Effect on Company. Further, there is no outstanding
demand, and to the Knowledge of Company, no threat exists which would reasonably
be expected to give rise to a demand, for recognition with respect to any
Company employee by any labor organization.
SECTION 3.18. Material Contracts.
(a) Material Contracts. Neither Company nor any of its Subsidiaries has
entered into any contract, agreement or other document or instrument (other than
this Agreement) that is currently in effect and requires the remaining payment
(regardless of the nature of such payment) over the term of such contract,
agreement or other document or instrument (including, without limitation, during
any automatic renewal periods) in excess of one million dollars ($1,000,000) (a
"COMPANY MATERIAL CONTRACT") or any material amendment, modification or waiver
under any Company Material Contract (other than any such amendments,
modifications or waivers entered into following the date of this Agreement in
connection with the transactions contemplated hereby).
(b) Enforceability of Material Contracts. Each of the Company Material
Contracts is valid and enforceable against Company in accordance with its terms,
and there is no default under any Company Material Contracts either by Company
or any of its Subsidiaries which is a party to such Company Material Contracts
or, to the Knowledge of Company, by any other party thereto, and no event has
occurred that with the lapse of time or the giving of notice or both would
constitute a default thereunder by Company or, to the Knowledge of Company, any
other party thereto. Neither Company nor any Subsidiary of Company has received
any written notice of default or termination under any Company Material
Contract.
SECTION 3.19. Takeover Statute. The Board of Directors of Company has
approved this Agreement and the transactions contemplated hereby (including the
execution and delivery of the Voting Agreement) and, such approval constitutes
approval of the Merger and the other transactions contemplated hereby (including
the execution and delivery of the Voting Agreement) by the Board of Directors of
Company under the provisions of Section 203 of the DGCL such that Section 203 of
the DGCL does not apply to this Agreement and the transactions contemplated
hereby. To the Knowledge of Company, no other state takeover statute is
applicable to the Merger or the other transactions contemplated hereby.
SECTION 3.20. Transactions With Affiliates. Other than the transactions
contemplated by this Agreement or except to the extent disclosed in the Company
Filed SEC Reports, there have been no transactions, agreements, arrangements or
understandings between Company or its Subsidiaries, on the one hand, and
Company's Affiliates (other than Subsidiaries of Company) or any other person,
on the other hand, that would be required to be disclosed under Item 404 of
Regulation S-K under the Securities Act.
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SECTION 3.21. Intellectual Property. Except as would not, in the
aggregate, reasonably be expected to have a Material Adverse Effect on Company:
(a) Ownership of Intellectual Property. Company and each of its
Subsidiaries owns and possesses all right, title and interest in and to, or
is licensed to use (in each case, free and clear of any Liens), all
Intellectual Property necessary for the operation of its business as
currently conducted, all items of such Intellectual Property are valid,
subsisting and enforceable, and Company is unaware of any fact which,
individually or in the aggregate, could reasonably be determined to
detrimentally affect the validity, ownership or enforceability of such
items of Intellectual Property;
(b) No Violation by Company. To Company's Knowledge, the activities
of Company and its Subsidiaries, including the operation of Company's
business as currently conducted by Company and its Subsidiaries, do not
infringe or otherwise violate the Intellectual Property rights of any
person and are in accordance in all material respects with any applicable
license pursuant to which Company or any Subsidiary acquired the right to
use any applicable Intellectual Property;
(c) No Violation by Third Parties. To the Knowledge of Company, no
person is challenging, infringing or otherwise violating any material right
of Company or any of its Subsidiaries with respect to any Intellectual
Property owned or used by Company or its Subsidiaries;
(d) No Claims. Neither Company nor any of its Subsidiaries has
received any written notice of any pending claim with respect to any
Intellectual Property owned or used by Company and its Subsidiaries and no
action is pending in any administrative or judicial proceeding with respect
to any Intellectual Property owned by Company and its Subsidiaries;
(e) No Abandonment. To the Knowledge of Company, no Intellectual
Property owned by Company or its Subsidiaries is being used or enforced in
a manner that may result in the abandonment, cancellation or
unenforceability of such Intellectual Property, except with respect to any
such Intellectual Property which Company or any of its Subsidiaries has
decided in its reasonable business judgment to abandon or permit to be
cancelled;
(f) No Judgments. To the Knowledge of Company, no item of
Intellectual Property owned by Company is subject to any outstanding order,
judgment or decree; and
(g) Definition of Intellectual Property. For purposes of this
Agreement, "INTELLECTUAL PROPERTY" will mean trademarks, service marks,
brand names, trade dress, logos, trade names, domain names, corporate names
and other indications of origin, the goodwill associated with the foregoing
and registrations in any jurisdiction of, and applications in any
jurisdiction to register, the foregoing, including any extension,
modification or renewal of any such registration or application;
inventions, discoveries, designs and ideas, whether patentable or not, in
any jurisdiction; patents, applications for patents (including, without
limitation, divisions, continuations, continuations in part and renewal
applications), and any renewals, extensions, reexaminations or reissues
thereof, in any jurisdiction; design registrations and applications, in any
jurisdiction; nonpublic information, trade secrets and confidential
information (including know-how, technical data, manufacturing and
production processes and techniques, customer and supplier lists, pricing
and cost information, and business and marketing plans and proposals) and
rights in any jurisdiction to limit the use or disclosure thereof by any
person; writings, computer software, and other works, whether copyrightable
or not, in any jurisdiction; registrations or applications for registration
of copyrights in any jurisdiction, and any renewals or extensions thereof;
and any similar intellectual property or proprietary rights.
SECTION 3.22. Company FCC Licenses; Operation of Company Licensed
Facilities. Except as would not, in the aggregate, reasonably be expected to
have a Material Adverse Effect on Company:
(a) Company and its Subsidiaries have operated the television and
radio stations for which Company and any of its Subsidiaries hold licenses
from the FCC, in each case which are owned or operated by Company and its
Subsidiaries (each a "COMPANY LICENSED FACILITY" and collectively, the
"COMPANY LICENSED FACILITIES"), in compliance with the terms of the
licenses issued by the FCC to
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Company and its Subsidiaries (the "COMPANY FCC LICENSES"), and in
compliance with the Communications Act;
(b) To the Knowledge of Company, each broadcast television and radio
station for which Company or any of its Subsidiaries provides programming
or advertising services pursuant to a local marketing or joint sales
agreement (each a "COMPANY LMA FACILITY" and collectively, the "COMPANY LMA
FACILITIES") has been operated in compliance with the terms of the licenses
issued by the FCC to the owner of such Company LMA Facility (each a
"COMPANY LMA FACILITY FCC LICENSE" and collectively, the "COMPANY LMA
FACILITY FCC LICENSES");
(c) Company has, and each of its Subsidiaries has, timely filed or
made all applications, reports and other disclosures required by the FCC to
be made with respect to Company Licensed Facilities and has timely paid all
FCC regulatory fees with respect thereto;
(d) Company and each of its Subsidiaries have, and are the authorized
legal holders of, all Company FCC Licenses necessary for or used in the
operation of the business of Company Licensed Facilities;
(e) To the Knowledge of Company, the third parties with which Company
or its Subsidiaries have entered into local marketing agreements or joint
sales agreements with respect to Company LMA Facilities have, and are the
authorized legal holders of, the Company LMA Facility FCC Licenses
necessary for or used in the operation of the business of the respective
Company LMA Facility to which such local marketing or joint sales agreement
relates;
(f) All Company FCC Licenses and, to the Knowledge of Company, Company
LMA Facility FCC Licenses, are validly held and are in full force and
effect, unimpaired by any act or omission of Company, any of its
Subsidiaries (or their respective predecessors) or their respective
officers, employees or agents;
(g) There is not before the FCC any investigation, proceeding, notice
of violation or order of forfeiture relating to any Company Licensed
Facility or Company LMA Facility;
(h) No application, action or proceeding is pending for the renewal of
any Company FCC Licenses or, to the Knowledge of Company, Company LMA
Facility FCC License, and, to the Knowledge of Company, there is no basis
for the FCC not to renew any of Company FCC Licenses or the Company LMA
Facility FCC Licenses (other than proceedings to amend FCC rules or the
Communications Act of general applicability to the broadcast industry);
(i) There is not pending and, to the Knowledge of Company, there is
not threatened any action by or before the FCC to revoke, suspend, cancel,
rescind or modify any of Company FCC Licenses or any of the Company LMA
Facility FCC Licenses (other than proceedings to amend FCC rules or the
Communications Act of general applicability to the broadcast industry); and
(j) Neither Company nor any of its Subsidiaries has any applications
pending before the FCC.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Except as set forth in the disclosure letter delivered by Parent and Merger
Sub to Company on the date of this Agreement (the "PARENT DISCLOSURE LETTER"),
Parent and Merger Sub hereby jointly and severally represent and warrant to
Company as follows:
SECTION 4.1. Organization, Qualification, Etc. Each of Parent and Merger
Sub is a corporation duly organized, validly existing and in good standing under
the laws of its jurisdiction of organization and has the corporate power and
authority to own its properties and assets and to carry on its business as it is
now being conducted and is duly qualified to do business and is in good standing
in each jurisdiction in which the ownership of its properties or the conduct of
its business requires such qualification, except for
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jurisdictions in which such failure to be so qualified or to be in good standing
would not, in the aggregate, reasonably be expected to have a Material Adverse
Effect on Parent. The copies of Parent's Articles of Incorporation, as amended,
and Amended and Restated Bylaws and Merger Sub's charter and bylaws which have
been made available to Company are complete and correct and in full force and
effect on the date of this Agreement. Each of Parent's Significant Subsidiaries
is a corporation, partnership or limited liability company duly organized,
validly existing and in good standing under the laws of its jurisdiction of
incorporation or organization, has the corporate, partnership or limited
liability company power and authority to own its properties and to carry on its
business as it is now being conducted, and is duly qualified to do business and
is in good standing in each jurisdiction in which the ownership of its property
or the conduct of its business requires such qualification, except for
jurisdictions in which such failure to be so qualified or to be in good standing
would not, in the aggregate, reasonably be expected to have a Material Adverse
Effect on Parent. Except as disclosed in Parent Filed SEC Reports, all the
outstanding shares of capital stock of, or other ownership interests in,
Parent's Significant Subsidiaries and Merger Sub are validly issued, fully paid
and nonassessable and are owned by Parent, directly or indirectly, free and
clear of all Liens, except for restrictions contained in credit agreements and
similar instruments to which Parent is a party. Except as disclosed in the
Parent Filed SEC Reports, there are no existing options (except for those set
forth in Section 4.2 below), rights of first refusal, preemptive rights, calls
or commitments of any character relating to the issued or unissued capital stock
or other securities of, or other ownership interests in, any Significant
Subsidiary of Parent or Merger Sub.
SECTION 4.2. Capital Stock. The authorized capital stock of Parent
consists of 1,500,000,000 shares of Parent Common Stock, par value $0.10 per
share, and 2,000,000 shares of Class A Preferred Stock, par value $1.00 per
share, and 8,000,000 shares of Class B Preferred Stock, par value $1.00 per
share (such Class A Preferred Stock and the Class B Preferred Stock together,
the "PARENT PREFERRED STOCK"). The shares of Parent Common Stock to be issued in
the Merger or upon the exercise of Company stock options, warrants, conversion
rights or other rights or upon vesting or payment of other Company equity-based
awards thereafter will, when issued, be validly issued fully paid and
nonassessable. As of September 21, 2001, 597,458,849 shares of Parent Common
Stock and no shares of Parent Preferred Stock were issued and outstanding. All
the outstanding shares of Parent Common Stock have been validly issued and are
fully paid and nonassessable. As of September 21, 2001, there were no
outstanding subscriptions, options, warrants, rights or other arrangements or
commitments obligating Parent to issue any shares of its capital stock other
than options and other rights to receive or acquire an aggregate of up to
65,111,885 shares of Parent Common Stock pursuant to:
(a) the 1984 Incentive Stock Option Plan of Parent;
(b) the 1994 Non-Qualified Stock Option Plan;
(c) Parent Director's Nonqualified Stock Option Plan;
(d) the 1998 Stock Incentive Plan;
(e) the 2001 Stock Incentive Plan;
(f) the 2000 Employee Stock Purchase Plan;
(g) various other option agreements with officers or employees of
Parent or Parent's Subsidiaries, option assumption agreements, and
incentive compensation grants;
(h) Parent's 2 5/8% Senior Convertible Notes due 2003, convertible
into Parent Common Stock;
(i) Parent's 1 1/2% Senior Convertible Notes due 2002, convertible
into Parent Common Stock;
(j) the warrants of Jacor Communications, Inc. ("JACOR") assumed by
Parent;
(k) Jacor liquid yield option notes due 2001; and
(l) Jacor liquid yield option notes due 2018.
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SECTION 4.3. Corporate Authority Relative to This Agreement; No
Violation. Each of Parent and Merger Sub has the corporate power and authority
to enter into this Agreement and to carry out its obligations hereunder. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the
Boards of Directors of Parent and Merger Sub and no other corporate or
stockholder proceedings on the part of Parent or Merger Sub are necessary to
authorize this Agreement, the issuance of Parent Common Stock and the other
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by Parent and Merger Sub and, assuming this Agreement has
been duly and validly executed and delivered by the other parties hereto, this
Agreement constitutes a valid and binding agreement of Parent and Merger Sub,
enforceable against each of them in accordance with its terms (except insofar as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights
generally, or by principles governing the availability of equitable remedies).
Neither Parent nor Merger Sub is subject to or obligated under any charter,
bylaw or contract provision or any license, franchise or permit, or subject to
any order or decree, which would be breached or violated by its executing or
carrying out this Agreement, except for any breaches or violations which would
not, in the aggregate, reasonably be expected to have a Material Adverse Effect
on Parent. Other than in connection with or in compliance with the provisions of
the DGCL, the Securities Act, the Exchange Act, the HSR Act, the Communications
Act, Section 4043 of ERISA, any non-United States competition, antitrust and
investments laws and the securities, blue sky or antitrust laws of the various
states, and, other than the filing of the Certificate of Merger with the
Delaware Secretary of State and any necessary state filings to maintain the good
standing or qualification of the Surviving Corporation, no authorization,
consent or approval of, or filing with, any Governmental Entity is necessary for
the consummation by Parent of the transactions contemplated by this Agreement,
except for such authorizations, consents, approvals or filings, the failure to
obtain or make which would not, in the aggregate, reasonably be expected to have
a Material Adverse Effect on Parent; provided that Parent makes no
representation with respect to such of the foregoing as are required by reason
of the regulatory status of Company or any of its Significant Subsidiaries or
facts specifically pertaining to any of them.
SECTION 4.4. Reports and Financial Statements. Since January 1, 1999,
Parent has timely filed all material reports, registration statements and other
filings required to be filed by it with the SEC under the rules and regulations
of the SEC (collectively, the "PARENT SEC REPORTS"). As of their respective
dates, the Parent SEC Reports (i) complied as to form in all material respects
with the applicable requirements of the Securities Act, the Exchange Act, and
the rules and regulations promulgated thereunder and (ii) did not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; provided, that the
foregoing clause (ii) will not apply to the financial statements included in the
Parent SEC Reports (which are covered by the following sentence). The audited
consolidated financial statements and unaudited consolidated interim financial
statements included in the Parent SEC Reports (including any related notes and
schedules) fairly present in all material respects the financial position of
Parent and its consolidated Subsidiaries as of the dates thereof and the results
of their operations and their cash flows for the periods or as of the dates then
ended (subject, where appropriate, to normal year-end adjustments), in each case
in accordance with GAAP consistently applied during the periods involved (except
as otherwise disclosed in the notes thereto and except that the unaudited
financial statements therein do not contain all of the footnote disclosures
required by GAAP).
SECTION 4.5. No Undisclosed Liabilities. Neither Parent nor any of its
Subsidiaries has any liabilities or obligations of any nature, whether or not
accrued, contingent or otherwise, that would be required by GAAP to be reflected
on a consolidated balance sheet, except liabilities or obligations (a) reflected
in any of the Parent SEC Reports filed and publicly available prior to the date
of this Agreement (as amended to the date of this Agreement, the "PARENT FILED
SEC REPORTS"), (b) incurred since December 31, 2000 in the ordinary course of
business consistent with past practice or (c) which would not, in the aggregate,
reasonably be expected to have a Material Adverse Effect on Parent.
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SECTION 4.6. No Violation of Law. The businesses of Parent and its
Subsidiaries are not being conducted in violation of any law, ordinance or
regulation of any Governmental Entity (provided that no representation or
warranty is made in this Section 4.6 with respect to Environmental Laws) except
(a) as described in any of the Parent Filed SEC Reports and (b) for violations
which would not, in the aggregate, reasonably be expected to have a Material
Adverse Effect on Parent.
SECTION 4.7. Environmental Laws and Regulations. The representations and
warranties set forth in this Section 4.7 will be the exclusive representations
and warranties of Parent and Merger Sub with respect to the subject matter
hereof. Except as described in any of the Parent Filed SEC Reports, and except
as would not, in the aggregate, reasonably be expected to have a Material
Adverse Effect on Parent:
(a) Compliance with Laws. Parent and each of its Subsidiaries is in
material compliance with all applicable Environmental Laws, which
compliance includes, but is not limited to, the possession by Parent and
its Subsidiaries of material permits and other governmental authorizations
required under applicable Environmental Laws, and compliance with the terms
and conditions thereof;
(b) Environmental Actions. Neither Parent nor any of its Subsidiaries
has received written notice of, nor, to the Knowledge of Parent, is the
subject of, any pending actions, causes of action, claims, investigations,
demands or notices by any person alleging liability under or noncompliance
with any Environmental Law or that Parent or any Subsidiary is a
potentially responsible party at any Superfund site or state-equivalent
site; and
(c) Material Compliance. To the Knowledge of Parent, there are no
circumstances that are reasonably likely to prevent or interfere with
compliance with Environmental Laws by Parent or its Subsidiaries in the
future.
SECTION 4.8. Absence of Certain Changes or Events. Except as disclosed in
the Parent Filed SEC Reports or as required or permitted by this Agreement,
since December 31, 2000, the businesses of Parent and its Subsidiaries have been
conducted in all material respects in the ordinary course and from such date to
the date of this Agreement there has not been any event, occurrence, development
or state of circumstances or facts that would, in the aggregate, reasonably be
expected to have a Material Adverse Effect on Parent. Since December 31, 2000,
no dividends or distributions have been declared or paid on or made with respect
to the shares of capital stock or other equity interests of Parent nor have any
such shares been repurchased or redeemed.
SECTION 4.9. Investigations; Litigation. Except as described in any of
the Parent Filed SEC Reports:
(a) No Governmental Investigations. To the Knowledge of Parent, no
investigation or review by any Governmental Entity with respect to Parent
or any of its Subsidiaries which would, in the aggregate, reasonably be
expected to have a Material Adverse Effect on Parent is pending nor has any
Governmental Entity notified Parent in writing of an intention to conduct
the same; and
(b) No Actions. There are no actions, suits or proceedings pending
(or, to Parent's Knowledge, threatened) against or affecting Parent or its
Subsidiaries, or any of their respective properties at law or in equity, or
before any federal, state, local or foreign Governmental Entity which
would, in the aggregate, reasonably be expected to have a Material Adverse
Effect on Parent.
SECTION 4.10. Proxy Statement; Registration Statement; Other
Information. None of the information with respect to Parent or its Significant
Subsidiaries to be included in the Proxy Statement or the Registration Statement
will, in the case of the Proxy Statement or any amendments thereof or
supplements thereto, at the time of the mailing of the Proxy Statement or any
amendments or supplements thereto, and at the time of the Company Special
Meeting, or, in the case of the Registration Statement, at the time it becomes
effective or at the time of any post-effective amendment, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading, except that no
representation is made by Parent or Merger Sub with respect to
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information supplied in writing by Company or any Affiliate of Company
specifically for inclusion in the Proxy Statement or the Registration Statement.
Each of the Proxy Statement and the Registration Statement will comply as to
form in all material respects with the provisions of the Exchange Act and the
rules and regulations promulgated thereunder.
SECTION 4.11. Tax Matters.
(a) Parent Group Tax Returns. All federal, state, local and foreign Tax
Returns required to be filed by or on behalf of Parent, each of its
Subsidiaries, and each affiliated, combined, consolidated or unitary group of
which Parent or any of its Subsidiaries is a member (a "PARENT GROUP") have been
timely filed or requests for extensions of time to file such returns or reports
have been timely filed and granted and have not expired, and all Tax Returns
filed are complete and accurate, except to the extent any failure to file or any
inaccuracies in filed Tax Returns would not, in the aggregate, reasonably be
expected to have a Material Adverse Effect on Parent. All Taxes due and owing by
Parent, any Subsidiary of Parent or any Parent Group have been paid, or
adequately reserved for, except to the extent any failure to pay or reserve
would not, in the aggregate, reasonably be expected to have a Material Adverse
Effect on Parent. There is no audit examination, deficiency assessment, refund
litigation, proposed adjustment or matter in controversy with respect to any
Taxes due and owing by Parent, any Subsidiary of Parent or any Parent Group, nor
has Parent or any Subsidiary of Parent filed any waiver of the statute of
limitations applicable to the assessment or collection of any Tax, in each case,
which would, in the aggregate, reasonably be expected to have a Material Adverse
Effect on Parent. All assessments for Taxes due and owing by Parent, any
Subsidiary of Parent or any Parent Group with respect to completed and settled
examinations or concluded litigation have been paid. Neither Parent nor any
Subsidiary of Parent is a party to any tax indemnity agreement, tax sharing
agreement or other agreement under which Parent or any Subsidiary of Parent
could become liable to another person as a result of the imposition of a Tax
upon any person, or the assessment or collection of such a Tax, except for such
agreements as would not, in the aggregate, reasonably be expected to have a
Material Adverse Effect on Parent. As soon as practicable after the public
announcement of the Merger Agreement, Parent will provide Company with written
schedules of (i) the taxable years of Parent for which the statutes of
limitations with respect to federal income Taxes have not expired, and (ii) with
respect to federal income Taxes, those years for which examinations have been
completed, those years for which examinations are presently being conducted, and
those years for which examinations have not yet been initiated. Parent and each
of its Subsidiaries has complied in all material respects with all rules and
regulations relating to the withholding of Taxes, except to the extent any such
failure to comply would not, in the aggregate, reasonably be expected to have a
Material Adverse Effect on Parent. Merger Sub is a direct, wholly-owned
subsidiary of Parent formed solely for the purpose of effecting the Merger and
has conducted no activity and has incurred no liability or obligation other than
as contemplated by this Agreement.
(b) Tax-Free Reorganization. Neither Parent nor any of its Subsidiaries
knows of any fact or has taken, or failed to take, any action that could prevent
the Merger from qualifying as a reorganization within the meaning of Section
368(a) of the Code.
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS
SECTION 5.1. Conduct of Business by Company or Parent. Prior to the
Effective Time or the date, if any, on which this Agreement is earlier
terminated pursuant to Section 7.1, and except as consented to in writing by the
other parties hereto (which consent will not be unreasonably withheld), as set
forth in the Company Disclosure Letter or the Parent Disclosure Letter or as may
be permitted pursuant to this Agreement:
(a) Covenants of Company. Company:
(i) will, and will cause each of its Subsidiaries to, conduct its
operations in all material respects according to their ordinary and
usual course of business;
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(ii) will, and will cause each of its Significant Subsidiaries to,
use reasonable efforts to (A) preserve intact its business organizations
and goodwill, (B) keep available the services of its officers and
employees as a group, and (C) maintain satisfactory relationships with
suppliers, distributors, customers and others having business
relationships with them;
(iii) will notify Parent as soon as practicable of any emergency or
other change in the normal course of its or its Subsidiaries' respective
businesses or in the operation of its or its Subsidiaries' respective
properties and of any complaints, investigations or hearings (or
communications indicating that the same may be contemplated) of any
governmental body or authority;
(iv) will not authorize or pay any dividends on or make any
distribution with respect to its outstanding shares of stock;
(v) except for the agreements or arrangements relating to the
retention and severance plans and arrangements set forth in Section
3.8(f) of the Company Disclosure Letter, will not, and will not permit
any of its Subsidiaries to, enter into or amend any employment,
severance or similar agreements or arrangements with any of their
respective directors or executive officers;
(vi) will not, and will not permit any of its Subsidiaries to,
authorize, propose or announce an intention to authorize or propose, or
enter into an agreement with respect to, any merger, consolidation or
business combination, any acquisition of a material amount of assets or
securities, any disposition of assets or securities or any release or
relinquishment of any material contract rights, in each case, except in
the ordinary course;
(vii) will not propose or adopt any amendments to its certificate
of incorporation or bylaws;
(viii) will not, and will not permit any of its Subsidiaries to,
(A) issue any shares of their capital stock, except upon exercise of
rights or options issued pursuant to existing employee incentive or
benefit plans, programs or arrangements and nonemployee director plans
(including, without limitation, shares issued in connection with stock
grants or awards or the exercise of rights or options granted in the
ordinary course of business consistent with past practice pursuant to
such plans, programs or arrangements) or (B) effect any stock split not
previously announced or (C) otherwise change its capitalization as it
existed on September 21, 2001, except as contemplated herein;
(ix) will not, and will not permit any of its Subsidiaries to,
grant, confer or award any options, warrants, conversion rights or other
rights, not existing on the date of this Agreement, to acquire any
shares of its capital stock (other than rights under the ESPP for
offering periods beginning after the date of this Agreement or
agreements or arrangements entered into as permitted by clause (v) of
this Section 5.1(a));
(x) will not, and will not permit any of its Subsidiaries to,
purchase or redeem any shares of its stock or pay any cash bonuses
(except for cash bonuses pursuant to agreements or employee incentive or
benefit plans, programs or arrangements or non-employee director plans
existing on the date of this Agreement or agreements or arrangements
entered into as permitted by clause (v) of this Section 5.1(a));
provided, however, Company may adopt a bonus plan as an incentive to
employees to remain with Company through and until the Closing Date in
an amount to be mutually agreed to by Parent and Company;
(xi) will not, and will not permit any of its Subsidiaries to,
amend the terms of their respective employee benefit plans, programs or
arrangements or any severance or similar agreements or arrangements in
existence on the date of this Agreement (except as required by law or to
maintain tax-qualified status), or adopt any new employee benefit plans,
programs or arrangements or any severance or similar agreements or
arrangements (except for agreements or arrangements entered into as
permitted by clause (v) of this Section 5.1(a)); provided, however,
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Company may change the renewal date on which plan premiums are adjusted
under Company's medical and dental plans from November to January;
(xii) will not, and will not permit any of its Subsidiaries to,
incur any additional indebtedness for borrowed money, except for
indebtedness (A) in connection with interest payments on any of
Company's outstanding public debt, or (B) pursuant to credit facilities,
indentures and other arrangements in existence on the date of this
Agreement;
(xiii) will not, and will not permit any of its Subsidiaries to,
incur any capital expenditures in excess of five million dollars
($5,000,000), except for amounts budgeted for in Company's capital
budgets previously provided to Parent;
(xiv) will not, and will not permit any of its Subsidiaries to,
except with respect to sign location related contracts or leases, sales
or advertising contracts or other agreements contemplated by or
permitted pursuant to this Agreement, enter into any Company Material
Contract;
(xv) will not, and will not permit any of its Subsidiaries to,
enter into an agreement with any Affiliate of Company, any family member
of any Affiliate of Company or any stockholder who owns more than 10% of
the outstanding capital stock of Company;
(xvi) will not, and will not permit any of its Subsidiaries to,
make any material Tax election or settle or compromise any material Tax
liability;
(xvii) will not, unless required by law, rule or regulation, call
any meeting of the stockholders of Company, regardless of whether a
special meeting or otherwise, until this Agreement is terminated in
accordance with its terms; and
(xviii) will not, and will not permit any of its Subsidiaries to,
agree, in writing or otherwise, to take any of the foregoing actions in
paragraphs (iv)-(xvii) above or take any action which would make any
representation or warranty in Article III hereof untrue or incorrect.
(b) Covenants of Parent. Parent:
(i) will, and will cause each of its Subsidiaries to, conduct its
operations, in all material respects, according to their ordinary and
usual course of business; provided, however, that nothing contained in
this proviso will limit Parent's ability to authorize or propose, or
enter into, an agreement with respect to any acquisitions or to issue
any debt or equity securities;
(ii) will take all action necessary to cause Merger Sub to perform
its obligations under this Agreement and to consummate the Merger on the
terms and conditions set forth in this Agreement;
(iii) will not authorize or pay any cash dividends on or make any
cash distribution with respect to its outstanding shares of stock; and
(iv) will not, and will not permit any of its Subsidiaries to
agree, in writing or otherwise, to take any of the foregoing actions
listed in clause (iii) or take any action which would make any
representation or warranty in Article IV hereof untrue or incorrect.
SECTION 5.2. Proxy Material; Registration Statement.
(a) Proxy and Registration Statement. As promptly as practicable after the
execution of this Agreement, Company will prepare and file with the SEC a proxy
statement relating to the meeting of Company's stockholders to be held in
connection with the Merger (together with any amendments thereof or supplements
thereto, in each case in the form or forms mailed to Company's stockholders, the
"PROXY STATEMENT") and Parent will prepare and file with the SEC a registration
statement on Form S-4 (together with all amendments thereto, the "REGISTRATION
STATEMENT") in which the Proxy Statement will be included as a prospectus, in
connection with the registration under the Securities Act of the shares of
Parent Common Stock to be issued to the stockholders of Company pursuant to the
Merger. Each of
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Parent and Company will use its reasonable efforts to cause the Registration
Statement to become effective as promptly as practicable, and, prior to the
effective date of the Registration Statement, Parent will take all or any action
required under any applicable federal or state securities laws in connection
with the issuance of share of Parent Common Stock in the Merger. Each of Parent
and Company will furnish all information concerning it and the holders of its
capital stock as the other may reasonably request in connection with such
actions and the preparation of the Registration Statement and Proxy Statement.
As promptly as practicable after the Registration Statement will become
effective, Company will mail the Proxy Statement to its stockholders. The Proxy
Statement will include the recommendation of the Board of Directors of Company
in favor of the Merger (subject to Section 5.10 hereof).
Subject to Section 5.10 hereof, neither the Proxy Statement nor the
Registration Statement will be filed with the SEC by, and no amendment or
supplement to the Proxy Statement or the Registration Statement will be made by,
Parent or Company without the approval of the other party (which approval will
not be unreasonably withheld or delayed). Parent and Company each will advise
the other, promptly after it receives notice thereof, of the time when the
Registration Statement has become effective or any supplement or amendment has
been filed, of the issuance of any stop order, the suspension of the
qualification of Parent Common Stock issuable in connection with the Merger for
offering or sale in any jurisdiction, or any request by the SEC for amendment of
the Proxy Statement or the Registration Statement or comments thereon and
responses thereto or requests by the SEC for additional information.
(b) Accuracy of Information Furnished by Parent. The information supplied
by Parent for inclusion in the Registration Statement and the Proxy Statement
will not, at (i) the time the Registration Statement is declared effective, (ii)
the time the Proxy Statement (or any amendment thereof or supplement thereto) is
first mailed to the stockholders of Company, (iii) the time of the Company
Special Meeting, and (iv) the Effective Time, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein not misleading. If at any
time prior to the Effective Time any event or circumstance relating to Parent or
any of its officers or directors should be discovered by Parent which should be
set forth in an amendment or a supplement to the Registration Statement or Proxy
Statement, Parent will promptly inform Company. All documents that Parent is
responsible for filing with the SEC in connection with the transactions
contemplated herein will comply as to form and substance in all material
respects with the applicable requirements of the Securities Act and the rules
and regulations thereunder and the Exchange Act and the rules and regulations
thereunder.
(c) Accuracy of Information Furnished by Company. The information supplied
by Company for inclusion in the Registration Statement and the Proxy Statement
will not, at (i) the time the Registration Statement is declared effective, (ii)
the time the Proxy Statement (or any amendment thereof or supplement thereto) is
first mailed to the stockholders of Company, (iii) the time of the Company
Special Meeting, and (iv) the Effective Time, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein not misleading. If at any
time prior to the Effective Time any event or circumstance relating to Company
or any of its officers or directors should be discovered by Company which should
be set forth in an amendment or a supplement to the Registration Statement or
Proxy Statement, Company will promptly inform Parent. All documents that Company
is responsible for filing with the SEC in connection with the transactions
contemplated herein will comply as to form and substance in all material
respects with the applicable requirements of the Securities Act and the rules
and regulations thereunder and the Exchange Act and the rules and regulations
thereunder.
SECTION 5.3. Stockholders' Meeting. Company will, in accordance with
applicable law and the Company Certificate of Incorporation and its Bylaws duly
call, give notice of, convene and hold a special meeting (which, as may be duly
adjourned, the "COMPANY SPECIAL MEETING") of its stockholders for the purpose of
approving and adopting the agreement of merger (as such term is used in Section
251 of the DGCL) set forth in this Agreement and approving the Merger, in each
case by the holders of a majority of the voting power of the outstanding shares
of Company Common Stock (with the holders of Company Ordinary Common Stock and
the holders of Company Class B Common Stock voting together as a single
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class) (the "COMPANY STOCKHOLDER APPROVAL"). Company will use its reasonable
efforts to cause the Company Special Meeting to occur within seventy five (75)
days after the date on which the Registration Statement becomes effective, but
not earlier than twenty (20) business days after the date the Proxy Statement is
first mailed to stockholders. Company will include in the Proxy Statement the
recommendation of its Board of Directors ("COMPANY BOARD RECOMMENDATION") that
its stockholders vote in favor of the Company Stockholder Approval, subject to
the right to withdraw, modify or change such recommendation in accordance with
Section 5.10 of this Agreement. If, after the Initial Period, the Board of
Directors of Company withdraws, modifies or changes its recommendation of this
Agreement or the Merger in a manner adverse to Parent or resolves to do any of
the foregoing, Company will nevertheless remain obligated to call, give notice
of, convene and hold the Company Special Meeting within the time period
specified above. Company will (a) cause its transfer agent to make stock
transfer records relating to Company available to the extent reasonably
necessary to effectuate the intent of this Agreement, and (b) otherwise render
reasonable assistance to Parent in the solicitation of proxies by Parent in
favor of approval of this Agreement and the Merger; provided, however, Company
will not be obligated to take the actions under clause (b) if Company has taken
any of the actions contemplated by the second sentence of Section 5.10(d).
SECTION 5.4. Approvals and Consents; Cooperation.
(a) Approvals and Consents. Company and Parent will together, or pursuant
to an allocation of responsibility to be agreed upon between them:
(i) as soon as is reasonably practicable take all such action as may
be required under state blue sky or securities laws in connection with the
transactions contemplated by this Agreement;
(ii) promptly prepare and file with the New York Stock Exchange, Inc.
(the "NYSE") and such other stock exchanges as will be agreed upon listing
applications covering the shares of Parent Common Stock issuable in the
Merger or upon exercise of Company stock options, warrants, conversion
rights or other rights or vesting or payment of other Company equity-based
awards and use its reasonable efforts to obtain, prior to the Effective
Time, approval for the listing of such Parent Common Stock, subject only to
official notice of issuance;
(iii) in addition to their respective obligations contained in Section
5.8, cooperate with one another in order to lift any injunctions or remove
any other impediment to the consummation of the transactions contemplated
herein; and
(iv) cooperate with one another in obtaining opinions of Dewey
Ballantine LLP, special counsel to Company, and Akin, Gump, Strauss, Hauer,
& Feld, L.L.P., counsel to Parent, dated as of the Closing Date, to the
effect that the Merger qualifies as a reorganization under the provisions
of Section 368(a) of the Code. In connection therewith, each of Company and
Parent will deliver to Dewey Ballantine LLP and Akin, Gump, Strauss, Hauer,
& Feld, L.L.P. such representation letters as reasonably requested by Dewey
Ballantine LLP and Akin, Gump, Strauss, Hauer & Feld, L.L.P.
(b) Cooperation. Subject to the limitations contained in Section 5.2,
Company and Parent will each furnish to one another and to one another's counsel
all such information as may be reasonably required in order to effect the
foregoing actions and each represents and warrants to the other that no
information furnished by it in connection with such actions or otherwise in
connection with the consummation of the transactions contemplated by this
Agreement will contain any untrue statement of a material fact or omit to state
a material fact required to be stated in order to make any information so
furnished, in light of the circumstances under which it is so furnished, not
misleading.
SECTION 5.5. Access to Information; Confidentiality. As permitted by law,
Company will afford to Parent, and to Parent's officers, employees, accountants,
counsel, financial advisors and other representatives, reasonable access during
normal business hours during the period prior to the Effective Time to all the
properties, books, contracts, commitments and records of Company and its
subsidiaries, and during such period, Company will furnish promptly to Parent
(a) a copy of each report, schedule, registration statement and other document
filed by it or its subsidiaries during such period pursuant to the
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requirements of applicable federal or state securities laws and (b) all other
information concerning its business, properties and personnel as Parent may
reasonably request; provided, that Parent will use its reasonable efforts to
minimize the disruption to the operations of the business of Company.
Notwithstanding anything to the contrary in this Agreement, neither Company nor
any or its Subsidiaries will be required to disclose any information to Parent
or its authorized representatives if doing so could violate any federal, state,
local or foreign law, rule or regulation to which Company or any of its
Subsidiaries is subject. Parent will keep such information provided to it by
Company confidential in accordance with the terms of the Confidentiality
Agreement, dated August 7, 2001, between Parent and Company (the
"CONFIDENTIALITY AGREEMENT").
SECTION 5.6. Affiliates. Company will, prior to the Effective Time,
deliver to Parent a list (reasonably satisfactory to counsel for Parent),
setting forth the names and addresses of all persons who are, at the time of the
Company Special Meeting, in Company's reasonable judgment, "AFFILIATES" of
Company for purposes of Rule 145 under the Securities Act. Company will make
available for inspection such information and documents as Parent may reasonably
request for the purpose of reviewing such list. Company will use its reasonable
efforts to cause all persons who (a) are, on the date of this Agreement,
"AFFILIATES" of Company (for purposes of Rule 145 under the Securities Act) to
execute and deliver to Parent not later than ten (10) days prior to the date of
the Company Special Meeting, a written agreement substantially in the form
attached as Exhibit 5.6, with such modifications as may be appropriate, and (b)
become "AFFILIATES" of Company (for purposes of Rule 145 under the Securities
Act) after the date of the Company Special Meeting to execute and deliver to
Parent not later than five (5) days prior to the Closing Date a written
agreement substantially in the form attached as Exhibit 5.6, with such
modifications as may be appropriate.
SECTION 5.7. Rights Under Stock Plans.
(a) Assumption of Options by Parent. At the Effective Time, each
outstanding option to purchase shares of Company Common Stock ("OPTION") granted
under the Employee Stock Option Plan or otherwise, which is outstanding
immediately prior to the Effective Time, whether or not then exercisable, will
vest and become exercisable and will be assumed by Parent and deemed to
constitute an option to acquire, on the same terms and conditions, mutatis
mutandis (including without limitation adjustments for any stock dividend,
subdivision, reclassification, recapitalization, split, combination, exchange of
shares or similar transaction), as were applicable under such Option or
agreement prior to the Effective Time, the number of shares of Parent Common
Stock as the holder of such Option would have been entitled to receive pursuant
to the Merger had such holder exercised such Option in full immediately prior to
the Effective Time (not taking into account whether or not such Option was in
fact exercisable) at a price per share equal to (i) the aggregate exercise price
for Company Common Stock purchasable pursuant to such Option divided by (ii) the
Conversion Ratio; provided, that the number of shares of Parent Common Stock
that may be purchased upon exercise of any such Option or agreement will not
include any fractional share and, upon exercise of such Option or agreement, a
cash payment will be made for any fractional share based upon the last sale
price per share of Parent Common Stock on the trading day immediately preceding
the date of exercise. From and after the Effective Time, Parent and the
Surviving Corporation will comply with the terms of the Employee Stock Option
Plan and the agreements governing any Options. The adjustments provided herein
with respect to any Options that are "INCENTIVE STOCK OPTIONS" (as defined in
Section 422 of the Code) will be effected in a manner consistent with Section
424(a) of the Code.
(b) Reservation of Shares; Form S-8. Parent will cause to be taken all
corporate action necessary to reserve for issuance a sufficient number of shares
of Parent Common Stock for delivery upon exercise of Options in accordance with
this Section 5.7. As promptly as practicable after the Effective Time, Parent
will cause Parent Common Stock subject to assumed Options to be registered under
the Securities Act pursuant to a registration statement on Form S-8 (or any
successor or other appropriate forms) and will use its reasonable efforts to
cause the effectiveness of such registration statement (and current status of
the prospectus or prospectuses contained therein) to occur promptly after the
Effective Time and to be maintained for so long as such Options remain
outstanding.
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(c) Employee Stock Purchase Plan. Prior to the Closing Date, Company will
take all necessary action pursuant to the ESPP to provide that, on the business
day prior to the Closing Date (the "PURCHASE DATE"), the ESPP will be terminated
and no further offering will be made and that all amounts allocated to each
participant's account under the ESPP will thereupon, at the election of the
participant either (i) be used to purchase from Company newly-issued whole
shares of Company Ordinary Common Stock at a price equal to 90% of the closing
price per share of Company Ordinary Common Stock on the first day of the
then-current offering period, or on the Purchase Date, whichever is less, or
(ii) refunded to the participant. At the Effective Time, any shares of Company
Ordinary Common Stock so purchased will be treated as provided in Section 2.3 of
this Agreement.
(d) Non-employee Directors' Equity Compensation Plan. Prior to the Closing
Date, Company will take all necessary action pursuant to its Non-employee
Directors' Equity Compensation Plan to provide that, on the Purchase Date, the
Non-employee Directors' Equity Compensation Plan will be terminated and that all
amounts deferred under the Non-employee Directors' Equity Compensation Plan for
the plan quarter in which the Purchase Date occurs will be used to purchase
newly-issued whole shares of Company Ordinary Common Stock in accordance with
the terms of the Plan as if the Purchase Date was a "QUARTER DATE" (as defined
under the Non-employee Directors' Equity Compensation Plan). At the Effective
Time, any shares of Company Ordinary Common Stock so purchased will be treated
as provided in Section 2.3 of this Agreement.
SECTION 5.8. Filings; Other Action.
(a) Governmental Approvals. Subject to the terms and conditions herein
provided, Company and Parent will (i) promptly make their respective filings and
thereafter make any other required submissions under the HSR Act and the
Communications Act, (ii) use reasonable efforts to cooperate with one another in
(A) determining whether any filings are required to be made with, or consents,
permits, authorizations or approvals are required to be obtained from, any third
party, the United States government or any agencies, departments or
instrumentalities thereof or other governmental or regulatory bodies or
authorities of federal, state, local and foreign jurisdictions in connection
with the execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby and (B) timely making all such filings and
timely seeking all such consents, permits, authorizations or approvals, and
(iii) use reasonable efforts to take, or cause to be taken, all other actions
and do, or cause to be done, all other things necessary, proper or advisable to
consummate and make effective the transactions contemplated hereby, including,
without limitation, taking all such further action as reasonably may be
necessary to resolve such objections, if any, as the FCC, the Federal Trade
Commission, the Antitrust Division of the Department of Justice, state antitrust
enforcement authorities or competition authorities of any other nation or other
jurisdiction or any other person may assert under relevant antitrust,
competition or communications laws with respect to the transactions contemplated
hereby.
(b) Other Antitrust Matters. Without limiting the generality of the
undertakings pursuant to this Section 5.8, Parent and Company agree to take or
cause to be taken the following actions: (i) provide promptly to Governmental
Entities with regulatory jurisdiction over enforcement of any applicable
antitrust laws ("GOVERNMENT ANTITRUST ENTITY") information and documents
requested by any Government Antitrust Entity or necessary, proper or advisable
to permit consummation of the transactions contemplated by this Agreement; (ii)
without in any way limiting the provisions of Section 5.8(a)(i) above, file any
Notification and Report Form and related material required under the HSR Act as
soon as practicable after the date of this Agreement, and, if deemed advisable
by Parent, thereafter use its reasonable efforts to certify as soon as
practicable its substantial compliance with any requests for additional
information or documentary material that may be made under the HSR Act; and
(iii) the proffer by each of Parent and Company of its willingness to (A) sell
or otherwise dispose of, or hold separate and agree to sell or otherwise dispose
of, such assets, categories of assets or businesses of Company or its
Subsidiaries or, if deemed advisable by Parent, of Parent or its Subsidiaries,
(B) terminate such existing relationships and contractual rights and obligations
of Company, and (C) amend or terminate such existing licenses or other
intellectual property agreements and enter into such new licenses or other
intellectual property agreements of Company (and, in each case, to enter into
agreements with the relevant Government Antitrust Entity
A-25
with respect thereto) in each case with respect to the foregoing clauses (A),
(B) or (C) (each an "ANTITRUST DIVESTITURE CONDITION"), if such action is
necessary to avoid or prevent any action by any Government Antitrust Entity
which would restrain, enjoin or otherwise prevent consummation of the
transactions contemplated by this Agreement; provided, however, that the
consummation of each such action or transaction contemplated by this clause
(iii) will be conditioned on consummation of the Merger. Each of Company and
Parent will keep the other informed of any material communication (including,
without limitation, any meeting, conference or telephonic call) and will provide
to the other copies of all correspondence between it (or its advisors) and any
Government Antitrust Entity relating to this Agreement or any of the matters
described in this Section 5.8(b), and each of Company and Parent will permit the
other to review any material communication to be given by it to any Government
Antitrust Entity. Without limiting the immediately preceding sentence, Company
will consult with Parent in advance (to the extent practicable on any call
initiated by any Antitrust Government Entity) of any telephonic call, meeting or
conference with any Government Antitrust Entity and, to the extent permitted by
such Government Antitrust Entity, give Parent the opportunity to attend and
participate in such telephonic calls, meetings and conferences. Company agrees
to use its reasonable efforts to ensure that all telephonic calls and meetings
with a Government Antitrust Entity regarding the transactions contemplated
hereby or any of the matters described in this Section 5.8(b) will include
representatives of Parent. Except as expressly provided in this Section 5.8(b)
(i) no failure by Parent or Company to obtain termination of the waiting period
under the HSR Act will be deemed to be a breach hereunder, and (ii) no Antitrust
Divestiture Condition imposed or requested by any Governmental Entity will
excuse Company or Parent from its obligation to consummate the transactions
contemplated hereby, provided that no Antitrust Divestiture Condition is, in
Parent's judgment, individually or in the aggregate, reasonably likely to have a
Material Adverse Effect on Parent or Company and that each Antitrust Divestiture
Condition is conditioned upon the consummation of the Merger. Parent will be
principally responsible for and in control of the process of dealing with any
Government Antitrust Entity with respect to the transactions contemplated
hereby, including the timing (subject to the express limitations on timing set
forth in this Section 5.8(b)), negotiation and determination of any actions
proposed to be taken by Company or Parent or either's respective Subsidiaries.
Without limiting the foregoing, with respect to any television or radio stations
or outdoor advertising assets owned or operated by Company or any of its
Subsidiaries that are identified by Parent, if requested by Parent, Company will
provide prospective buyers with customary access and due diligence information,
subject to customary confidentiality arrangements reasonably satisfactory to
Company, and will enter into divestiture purchase agreements, the consummation
of which will be conditioned upon the consummation of the Merger.
Notwithstanding the foregoing in this Section 5.8(b), neither of Parent or
Company will be required to take any action under this Section 5.8(b)that is
inconsistent with applicable law.
(c) FCC Approvals. Without limiting the generality of the undertakings
pursuant to this Section 5.8, Parent and Company agree to take or cause to be
taken the following actions: (i) provide promptly to the FCC information and
documents requested by the FCC or necessary, proper or advisable to permit
consummation of the transactions contemplated by this Agreement, and thereafter
use its reasonable efforts to comply with any requests for additional
information or documentary material that may be made under the Communications
Act; and (ii) the proffer by each of Parent and Company of its willingness to
(A) sell or otherwise dispose of, or hold separate and agree to sell or
otherwise dispose of, or transfer to an interim custodian, such assets,
categories of assets or businesses of Company or its Subsidiaries or, if deemed
advisable by Parent, of Parent or its Subsidiaries, and (B) terminate such
existing relationships and contractual rights and obligations of Company and
(and, in each case, to enter into agreements with the FCC giving effect thereto)
in each case with respect to the foregoing clauses (A) or (B) (each an "FCC
DIVESTITURE CONDITION"), if such action is necessary or reasonably advisable for
the purpose of promptly obtaining the FCC's approval of the transactions
contemplated by this Agreement; provided, however, that the consummation of each
such action or transaction contemplated by this clause (ii) will be conditioned
on consummation of the Merger. Each of Company and Parent will keep the other
informed of any material communication (including, without limitation, any
meeting, conference or telephonic call), and will provide the other copies of
all correspondence between it (or its advisors) and
A-26
the FCC, and each of Company and Parent will permit the other to review any
material communication to be given by it to the FCC. Without limiting the
immediately preceding sentence, Company will consult with Parent in advance (to
the extent practicable on any call initiated by the FCC) of any telephonic call,
meeting or conference with, the FCC and, to the extent permitted by the FCC,
give Parent the opportunity to attend and participate in such telephonic calls,
meetings and conferences. Company agrees to use its reasonable efforts to ensure
that all telephonic calls and meetings with the FCC regarding the transactions
contemplated hereby or any of the matters described in this Section 5.8(c) will
include representatives of Parent. Except as expressly provided in this Section
5.8(c), no FCC Divestiture Condition imposed or requested by the FCC will excuse
Company or Parent from its obligation to consummate the transactions
contemplated hereby, provided that no FCC Divestiture Condition is, in Parent's
judgment, individually or in the aggregate, reasonably likely to have a Material
Adverse Effect on Parent or Company and that each FCC Divestiture Condition is
conditioned upon the consummation of the Merger. Parent will be principally
responsible for and in control of the process of dealing with the FCC with
respect to the transactions contemplated hereby, including the timing (subject
to the express limitations on timing set forth in this Section 5.8(c)),
negotiation and determination of any actions proposed to be taken by Company or
Parent or either's respective Subsidiaries. Without limiting the foregoing, (i)
the FCC applications contemplated herein will include a request for a
twelve-month waiver of the FCC's radio-television cross-ownership rule, and (ii)
with respect to any television or radio stations owned or operated by Company or
any of its Subsidiaries that are identified by Parent, if requested by Parent,
Company will provide prospective buyers with customary access and due diligence
information, subject to customary confidentiality arrangements reasonably
satisfactory to Company, and will enter into divestiture purchase agreements,
the consummation of which will be conditioned upon the consummation of the
Merger. Notwithstanding the foregoing in this Section 5.8(c), neither of Parent
or Company will be required to take any action under this Section 5.8(c) that is
inconsistent with applicable law.
SECTION 5.9. Further Assurances. In case at any time after the Effective
Time any further action is reasonably necessary or desirable to carry out the
purposes of this Agreement, the proper officers of Company and Parent will use
reasonable efforts to take all such necessary action.
SECTION 5.10. No Solicitation.
(a) No Solicitation. Company agrees that from the date of this Agreement
through the Effective Time, it will not, directly or indirectly, nor will it
permit any of its Subsidiaries to, nor will it authorize or knowingly permit any
officer, director or employee of, or any investment banker, attorney, accountant
or other advisor or representative of, Company or any of its Subsidiaries
(collectively, the "COMPANY REPRESENTATIVES") to directly or indirectly through
another person, solicit or initiate or knowingly encourage, induce or facilitate
the making, submission or announcement of any Acquisition Proposal, or
participate in any substantive discussions or negotiations regarding, or furnish
to any Person any information with respect to any proposal that constitutes, or
would reasonably be expected to lead to, any Acquisition Proposal, or approve,
endorse or recommend any Acquisition Proposal, or enter into any letter of
intent, agreement in principle, acquisition agreement or other document or
contract contemplating or otherwise relating to an Acquisition Proposal;
provided, however, that the foregoing will not prohibit Company until the
expiration of the Initial Period from furnishing information to or entering into
substantive discussions or negotiations with any person that makes an
unsolicited bona fide proposal to enter into a business combination with Company
pursuant to an Acquisition Proposal which the Board of Directors of Company in
good faith determines is a Superior Proposal or which the Board of Directors of
Company in good faith determines could reasonably be expected to lead to a
Superior Proposal, so long as:
(i) prior to furnishing any information to, or entering into
substantive discussions with, such a person Company provides written and
oral notice to Parent to the effect that it is furnishing information to,
or entering into substantive discussions with, a person from whom Company
will have received an executed confidentiality agreement in form and
substance similar to the Confidentiality Agreement prior to furnishing such
information;
A-27
(ii) such notice will include the terms and conditions of such
Acquisition Proposal or any agreement proposed by, or any information
supplied to, any such person;
(iii) simultaneously with furnishing any nonpublic information to any
such person, Company furnishes such nonpublic information to Parent (to the
extent that such nonpublic information has not been previously furnished by
Company to Parent);
(iv) Company, its Subsidiaries and Company Representatives are in
compliance with the provisions of this Section 5.10 in all material
respects;
(v) such unsolicited bona fide proposal is made by a third party that
the Board of Directors of Company determines in good faith has the
financial capability to consummate a Superior Proposal; and
(vi) the Board of Directors of Company, after consulting with outside
legal counsel to Company, determines in good faith that such action is
consistent with the fiduciary duties of the Board of Directors of Company
to stockholders of Company under applicable law.
Without limiting the foregoing, it is agreed that any violation of the
restrictions set forth in Section 5.10(a)(i)-(vi) by any Company Representative
will be deemed to be a breach of this Section 5.10 by Company. For purposes of
this Agreement, (A) "ACQUISITION PROPOSAL" means any offer or proposal for, or
any indication of interest in (whether or not in writing and whether or not
delivered to Company's stockholders generally), from any person relating to any
(i) direct or indirect acquisition or purchase of a business that constitutes
15% or more of the net revenues, net income or the assets of Company and its
Subsidiaries taken as a whole, (ii) direct or indirect acquisition or purchase
of 15% or more of any class of equity securities of Company or any of its
Subsidiaries whose business constitutes 15% or more of the net revenues, net
income or assets of Company and its Subsidiaries, taken as a whole (each, a
"MATERIAL SUBSIDIARY"), (iii) tender offer or exchange offer that if consummated
would result in any person beneficially owning 15% more of any class of equity
securities of Company or of any of its Material Subsidiaries, or (iv) merger,
consolidation, business combination, recapitalization, liquidation, dissolution,
share exchange or similar transaction involving Company or any of its Material
Subsidiaries, other than the transactions contemplated by this Agreement and (B)
"SUPERIOR PROPOSAL" means an Acquisition Proposal which the Board of Directors
of Company in good faith determines (after consultation with a financial advisor
of nationally recognized reputation and after taking into account all factors
deemed relevant by the Board of Directors of Company, including but not limited
to timing, breakup fees, expense reimbursement provisions, type of consideration
and conditions to consummation) that the consideration to the then holders of
Company Common Stock is superior from a financial point of view to the
consideration provided for in this Agreement.
(b) Notification. Company will notify Parent in writing of the fact that
it received inquiries, offers or proposals with respect to an Acquisition
Proposal within 24 hours after Company obtains Knowledge of the receipt thereof
and Company will use all reasonable efforts to inform Parent promptly of all
material developments with respect to the status and the terms of any such
substantive discussions or negotiations (including without limitation the
identity of the person with whom such substantive discussions are being held)
and uses its reasonable efforts to provide Parent copies of such written
proposals and any material amendments or revisions thereto or material
correspondence related thereto. Company will immediately cease and cause to be
terminated any existing activities, discussions or negotiations with any other
person that have been conducted heretofore with respect to a potential
Acquisition Proposal. Company agrees to inform Company Representatives of the
obligations undertaken in this Section 5.10; provided, however, that nothing
contained in this Agreement will prevent the Board of Directors of Company from
referring any third-party to this Section 5.10.
(c) No Release or Waiver or Approval. Company agrees not to (i) release or
permit the release of any person from, or to waive or permit the waiver of any
provision of, any confidentiality, "STANDSTILL" or similar agreement to which
Company or any of its Subsidiaries is a party, and will use its reasonable
efforts to enforce or cause to be enforced each such agreement at the request of
Parent, and (ii) approve
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of any "BUSINESS COMBINATION" or any transaction in which a person or entity
becomes an "INTERESTED STOCKHOLDER" of Company (in each case, as defined in
Section 203 of the DGCL) other than such approval (A) given in connection with
the Merger or (B) which by its terms becomes effective only upon the termination
of this Agreement in compliance with the terms of Section 7.1(i).
(d) No Action to be Taken. Except as expressly permitted by this Section
5.10, neither the Board of Directors of Company nor any committee thereof will
(i) withdraw, modify or change, or propose publicly to withdraw, modify or
change, in a manner adverse to Parent, the approval or recommendation by such
Board of Directors of the Merger or this Agreement or (ii) approve or recommend,
or propose publicly to approve or recommend, any Acquisition Proposal.
Notwithstanding the foregoing, in the event that the Board of Directors of
Company determines in good faith, after consultation with outside counsel, that
it is necessary to do so in order to act in a manner consistent with its
fiduciary duties to Company's stockholders under applicable law, the Board of
Directors of Company may take any action otherwise prohibited by the immediately
preceding sentence.
(e) Compliance with Exchange Act and Disclosure Obligations. Nothing
contained in this Section 5.10 will prohibit Company from taking and disclosing
to its stockholders a position contemplated by Rule 14d-9 and 14e-2(a)
promulgated under the Exchange Act, from engaging in discussions with any person
for the sole purpose of clarifying a bona fide unsolicited proposal or from
making any disclosure to Company's stockholders if, in the good faith judgment
of the Board of Directors of Company, after consultation with outside counsel,
failure to so discuss or disclose would be inconsistent with its or the Board of
Directors' obligations under applicable law.
Section 5.11. Director and Officer Liability.
(a) Survival of Indemnification. Parent, Merger Sub and Company agree that
all rights to indemnification and all limitations on liability existing in favor
of any Indemnitee as provided in the Company Certificate of Incorporation,
Bylaws of Company or any Indemnity Agreement will survive the Merger and
continue in full force and effect. To the extent permitted by (i) the DGCL, or
(ii) the Company Certificate of Incorporation and the Bylaws of Company,
advancement of Indemnitee Expenses pursuant to this Section 5.11 will be
mandatory rather than permissive and the Surviving Corporation and Parent will
advance Indemnitee Costs in connection with such indemnification. Parent will,
and will cause the Surviving Corporation to, expressly assume and honor in
accordance with their terms any agreement providing for indemnification by
Company or any Subsidiary of Company of any Indemnitee previously made available
for inspection by Parent in effect on the date of this Agreement (including any
indemnity provisions contained in any agreement providing for the registration
of securities) (each, an "INDEMNITY AGREEMENT").
(b) Indemnification by Parent and Surviving Corporation. In addition to
the other rights provided for in this Section 5.11 and not in limitation
thereof, from and after the Effective Time, Parent will, and will cause the
Surviving Corporation to, to the fullest extent permitted by applicable law, (i)
indemnify and hold harmless the individuals who on or prior to the Effective
Time were officers, directors or employees of Company or any of its
Subsidiaries, and the heirs, executors, trustees, fiduciaries and administrators
of such officers, directors or employees (collectively, the "INDEMNITEES")
against all losses, Indemnitee Expenses (as hereinafter defined), claims,
damages, liabilities, judgments, or amounts paid in settlement (collectively,
"INDEMNITEE COSTS") in respect to any threatened, pending or completed claim,
action, suit or proceeding, whether criminal, civil, administrative or
investigative based on, or arising out of or relating to the fact that such
person is or was a director, officer or employee of Company or any of its
Subsidiaries and arising out of acts or omissions occurring on or prior to the
Effective Time (including, without limitation, in respect of acts or omissions
in connection with this Agreement and the transactions contemplated hereby) (an
"INDEMNIFIABLE CLAIM") and (ii) advance to such Indemnitees all Indemnitee
Expenses incurred in connection with any Indemnifiable Claim promptly after
receipt of reasonably detailed statements therefor; provided, that, the person
to whom Indemnitee Expenses are to be advanced would be required to repay such
advances if it is ultimately determined that such person is not entitled to
indemnification from Parent or the Surviving Corporation. Parent will not be
liable for any settlement
A-29
effected without its written consent (which consent will not be unreasonably
withheld or delayed). Except as otherwise may be provided pursuant to any
Indemnity Agreement, the Indemnitees as a group may retain only one law firm
with respect to each related matter except to the extent there is, in the
opinion of counsel to an Indemnitee, under applicable standards of professional
conduct, a conflict on any significant issue between positions of any two or
more Indemnitees. For the purposes of this Section 5.11, "INDEMNITEE
EXPENSES"will include reasonable attorneys' fees and all other costs, charges
and expenses paid or incurred in connection with investigating, defending, being
a witness in or participating in (including on appeal), or preparing to defend,
be a witness in or participate in any Indemnifiable Claim.
(c) Binding Effect on Successors and Assigns. Notwithstanding any other
provisions hereof, the obligations of Company, the Surviving Corporation and
Parent contained in this Section 5.11 will be binding upon the successors and
assigns of Parent and the Surviving Corporation. In the event Company or the
Surviving Corporation or any of their respective successors or assigns (i)
consolidates with or merges into any other person or (ii) transfers all or
substantially all of its properties or assets to any person, then, and in each
case, proper provision will be made so that successors and assigns of Company or
the Surviving Corporation, as the case may be, honor the indemnification
obligations set forth in this Section 5.11.
(d) Termination or Modification of Indemnification Obligations. The
obligations of Company, the Surviving Corporation, and Parent under this Section
5.11 will not be terminated or modified in such a manner as to adversely affect
any Indemnitee to whom this Section 5.11 applies without the consent of such
affected Indemnitee (it being expressly agreed that the Indemnitees to whom this
Section 5.11 applies will be third party beneficiaries of this Section 5.11).
(e) Advancement of Indemnitee Expenses. Parent will, and will cause the
Surviving Corporation to, advance all Indemnitee Expenses to any Indemnitee
incurred by enforcing the indemnity or other obligations provided for in this
Section 5.11.
(f) Continuation of Insurance Policy. For a period of six years after the
Effective Time, Parent will cause to be maintained in effect the current
directors and officers liability insurance policies maintained by Company
(provided that Parent may substitute policies of at least the same coverage with
other terms and conditions that are no less advantageous to the Indemnitee, and
provided further that the annual premiums to be paid with respect to the
maintenance of such policies during such six year period will not exceed one
hundred fifty percent (150%) of the annual premium paid by Company for such
policies as of the date of this Agreement with respect to claims arising from
facts or events that occurred prior to the Effective Time.
SECTION 5.12. Accountants' "Comfort" Letters. Company and Parent will
each use reasonable efforts to cause to be delivered to each other letters from
their respective independent accountants, dated a date within two business days
before the effective date of the Registration Statement, in form reasonably
satisfactory to the recipient and customary in scope for comfort letters
delivered by independent accountants in connection with registration statements
on Form S-4 under the Securities Act.
SECTION 5.13. Additional Reports. Company and Parent will each furnish to
the other copies of any reports which it files with the SEC on or after the date
of this Agreement, and Company and Parent, as the case may be, represents and
warrants that as of the respective dates thereof, such reports will not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statement therein, in
light of the circumstances under which they were made, not misleading; provided,
that the foregoing will not apply to the financial statements contained therein
(which are covered by the following sentence). Any consolidated financial
statements included in such reports (including any related notes and schedules)
will fairly present in all material respects the financial position of Company
and its consolidated Subsidiaries or Parent and its consolidated Subsidiaries,
as the case may be, as of the dates thereof and the results of operations and
changes in financial position or other information included therein for the
periods or as of the date then ended (subject, where appropriate, to normal
year-end adjustments), in each case in accordance with GAAP consistently applied
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during the periods involved (except as otherwise disclosed in the notes thereto
and except that such financial statements will not include all of the notes
required by GAAP).
SECTION 5.14. Plan of Reorganization. This Agreement constitutes a "PLAN
OF REORGANIZATION" within the meaning of Sections 1.368-2(g) and 1.368-3(a) of
the income tax regulations promulgated under the Code. From and after the date
of this Agreement and until the Effective Time, each party hereto will use its
reasonable efforts to cause the Merger to qualify, and will not take, or fail to
take, any action or cause, or fail to cause, any action to be taken which could
prevent the Merger from qualifying, as a reorganization under the provisions of
Section 368(a) of the Code. Following the Effective Time, neither the Surviving
Corporation, Parent nor any of their Affiliates will take, or fail to take, any
action or cause, or fail to cause, any action to be taken which could cause the
Merger to fail to qualify as a reorganization under Section 368(a) of the Code.
SECTION 5.15. Conveyance Taxes; Fees. Each of Parent and Company,
respectively, will timely pay any real property transfer or gains, sales, use,
transfer, value added, stock transfer and stamp taxes, any transfer, recording,
registration and other fees, and any similar taxes or fees not including any
income tax, gross receipt tax or any similar tax measured with respect to gross
or net income (collectively, the "CONVEYANCE TAXES") imposed on it at or prior
to the Effective Time in connection with the transactions contemplated hereunder
that are required to be paid in connection therewith. Parent and Company will
cooperate in the preparation, execution and filing of all Tax Returns,
questionnaires, applications, or other documents regarding any such Conveyance
Taxes.
SECTION 5.16. Public Announcements. Unless otherwise required by
applicable law or the requirements of any listing agreement with any applicable
stock exchange, Parent and Company will each use their reasonable efforts to
consult with each other before issuing any press release or otherwise making any
public statements with respect to this Agreement or any transaction contemplated
by this Agreement and will not issue any such press release or make any such
public statement prior to such consultation.
SECTION 5.17. Employee Benefits. Until December 31 of the calendar year
in which the Closing occurs, Parent will provide or cause to be provided to the
current employees of Company (the "CURRENT EMPLOYEES") benefits that are
comparable in the aggregate (other than plans or benefits providing for the
issuance of Company stock) to the benefits currently provided to the Current
Employees, and thereafter will provide the Current Employees with benefits
comparable to those provided to similarly-situated employees of Parent. From and
after the Closing Date, Parent will recognize any prior service of Current
Employees as of the Closing Date for all purposes other than benefit accrual
under Parent benefit plans and Parent's benefits arrangements in which they
become participants. Notwithstanding the foregoing, Parent will credit any prior
service of the Current Employees with Company or its Subsidiaries (to the extent
credited by Company and its Subsidiaries) for purposes of level of benefits
under Parent vacation pay plans in which they become participants. Parent and
Company agree that where applicable with respect to any medical or dental
benefit plan of Parent, Parent will waive, with respect to any Current
Employees, any pre-existing condition exclusion and actively-at-work
requirements, to the extent such exclusion or requirement would not have applied
under the applicable plan of Company or any of its subsidiaries. Following the
Closing Date, Parent will cause the Surviving Corporation to discharge all
obligations under the retention and severance plans and agreements to be entered
into as set forth in Section 3.8(f) of the Company Disclosure Letter.
SECTION 5.18. Transaction Expenses and Termination Fee.
(a) Expense Allocation. Except as provided in Section 5.18(c), all
Transaction Expenses incurred by the parties hereto will be borne solely and
entirely by the party that incurred such Transaction Expenses.
(b) Definition. "TRANSACTION EXPENSES" as used in this Agreement will
include all reasonable, actual and documented out-of-pocket expenses (including,
without limitation, all reasonable fees and expenses of counsel, accountants and
investment bankers to a party hereto and its Affiliates) incurred by a party or
on its behalf in connection with or related to the authorization, preparation,
negotiation, execution and
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performance of this Agreement, the preparation, printing, filing and mailing of
the Registration Statement, the Proxy Statement, the solicitation of stockholder
approval, requisite HSR Act filings and all other matters related to the
consummation of the transactions contemplated hereby.
(c) Payment of Transaction Expenses and Termination Fee. Company agrees
that, if:
(i) Company or Parent terminates this Agreement pursuant to Section
7.1(f);
(ii) (A) Parent terminates this Agreement pursuant to Section 7.1(g),
(B) at any time after the date of this Agreement an Acquisition Proposal
will have been publicly announced and (C) within fifteen (15) months of the
termination of this Agreement, Company enters into a definitive agreement
with any third party with respect to a transaction similar to an
Acquisition Proposal or any such transaction is consummated;
(iii) Parent terminates this Agreement pursuant to Section 7.1(h); or
(iv) Company terminates this Agreement pursuant to Section 7.1(i);
then Company will pay by wire transfer of immediately available funds to
Parent a termination fee in an amount equal to seventeen million, two hundred
fifty thousand dollars ($17,250,000) (the "TERMINATION FEE") plus the actual and
documented Transaction Expenses of Parent up to seven million, five hundred
thousand dollars ($7,500,000). For purposes of Section 5.18(c)(ii) only,
"ACQUISITION PROPOSAL" will have the meaning otherwise assigned to the term
"ACQUISITION PROPOSAL," except that the references to "15%" in such definition
will be deemed to be references to "50%."
(d) Payment of Transaction Expenses. Company agrees that, if Parent
rightfully terminates this Agreement pursuant to Section 7.1(d), then Company
will pay by wire transfer of immediately available funds to Parent the actual
and documented Transaction Expenses of Parent up to seven million, five hundred
thousand dollars ($7,500,000). The payment of the Transaction Expenses under
this Section 5.18(d) will not relieve any party of any liability or damages
resulting from any breach by that party of any of its representations,
warranties, covenants or agreements set forth in this Agreement; provided,
however, that Company may offset the amount of any such liability or damages
payable by Company by an amount equal to the Transaction Expenses actually paid
by Company to Parent pursuant to this Section 5.18(d).
ARTICLE VI
CONDITIONS TO THE MERGER
SECTION 6.1. Conditions to the Obligations of each Party. The obligations
of Company, Parent and Merger Sub to consummate the Merger are subject to the
satisfaction or waiver on or prior to the Closing Date of the following
conditions:
(a) Registration Statement. The Registration Statement will have
become effective under the Securities Act and no stop order suspending the
effectiveness of the Registration Statement will have been issued by the
SEC and no proceeding for that purpose will have been initiated by the SEC.
(b) Company Stockholder Approval. This Agreement will have been
approved by the requisite affirmative vote of the stockholders of Company
in accordance with the Company Certificate of Incorporation and the DGCL.
(c) No Injunction or Restraint. No statute, rule, regulation,
executive order, decree, preliminary or permanent injunction or restraining
order will have been enacted, entered or enforced by 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 ("GOVERNMENTAL ENTITY") which
prohibits the consummation of the transactions contemplated hereby. No
action or proceeding by any Governmental Entity will have been commenced
(and be pending) against Company or Parent or any of their respective
Affiliates,
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partners, associates, officers or directors, or any officers or directors
of such partners, seeking to prevent or delay the transactions contemplated
hereby or challenging any of the material terms or provisions of this
Agreement or seeking material damages in connection therewith.
(d) Consents. All consents and approvals (other than any consent or
approval required pursuant to or in connection with antitrust laws,
including the Sherman Act, as amended, the Clayton Act, as amended, the HSR
Act, the Federal Trade Commission Act, as amended, and all other federal,
state or foreign statutes, rules, regulations, orders, decrees,
administrative and judicial doctrines and other laws that are designed or
intended to prohibit, restrict or regulate actions having the purpose or
effect of monopolization or restraint of trade, or the Communications Act)
of Governmental Entities or any person necessary for consummation of the
transactions contemplated hereby will have been obtained, other than those
which, if not obtained, would not, in the aggregate, reasonably be expected
to have a Material Adverse Effect.
(e) HSR Act. Any waiting period (and any extension thereof)
applicable to the consummation of the Merger under the HSR Act will have
expired or been terminated.
(f) Communications Act. All orders and approvals of the FCC required
in connection with the consummation of the transactions contemplated hereby
will have been obtained or made, whether or not any appeal or request for
reconsideration of such order is pending, or whether the time for filing
any such appeal or request for reconsideration or for any sua sponte action
by the FCC has expired; provided, however, Parent may elect to consummate
the Merger on an initial order from the FCC.
(g) Stock Exchange Listing. The shares of Parent Common Stock to be
issued in the Merger will have been authorized for listing on the NYSE,
subject to official notice of listing.
SECTION 6.2. Conditions to the Obligations of Parent and Merger Sub. The
obligations of Parent and Merger Sub to consummate the Merger are subject to the
satisfaction or waiver by Parent on or prior to the Closing Date of the
following further conditions:
(a) Performance of Covenants; Accuracy of Representations and
Warranties. Company will have performed in all material respects its
obligations under this Agreement (which for purposes of Section 5.1(a)(xiv)
will be deemed to be Company Material Contracts not in excess of five
million dollars ($5,000,000) in the aggregate) required to be performed by
it at or prior to the Effective Time and the representations and warranties
of Company contained in this Agreement, to the extent qualified with
respect to materiality will be true and correct in all respects, and to the
extent not so qualified will be true and correct in all material respects
(which for purposes of Section 3.18 will be deemed to be Company Material
Contracts not in excess of ten million dollars ($10,000,000) in the
aggregate), in each case as of the date of this Agreement and at and as of
the Effective Time as if made at and as of such time, except that the
accuracy of representations and warranties that by their terms speak as of
the date of this Agreement or some other date will be determined as of such
date, and Parent will have received a certificate of an executive officer
of Company as to the satisfaction of this condition;
(b) No Material Adverse Change. From the date of this Agreement
through the Effective Time, no event, development or condition has occurred
which, in the aggregate, has had or could reasonably be expected to have, a
Material Adverse Effect on Company.
(c) Tax Opinion. Parent will have received an opinion of its tax
counsel, Akin, Gump, Strauss, Hauer & Feld, L.L.P., in form and substance
reasonably satisfactory to it, and dated on the Closing Date, to the effect
that the Merger will qualify for federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the Code. In
rendering such opinion, Akin, Gump, Strauss, Hauer & Feld, L.L.P. may rely
upon reasonably requested representation letters of Company and Parent and
upon certain facts and customary assumptions set forth in the opinion.
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SECTION 6.3. Conditions to the Obligations of Company. The obligations of
Company to consummate the Merger are subject to the satisfaction or waiver by
Company on or prior to the Closing Date of the following further conditions:
(a) Performance of Covenants; Accuracy of Representations and
Warranties. Each of Parent and Merger Sub will have performed in all
material respects its obligations under this Agreement required to be
performed by it at or prior to the Effective Time and the representations
and warranties of Parent and Merger Sub contained in this Agreement, to the
extent qualified with respect to materiality will be true and correct in
all respects, and to the extent not so qualified will be true and correct
in all material respects, in each case as of the date of this Agreement and
at and as of the Effective Time as if made at and as of such time, except
that the accuracy of representations and warranties that by their terms
speak as of the date of this Agreement or some other date will be
determined as of such date, and Company will have received a certificate of
an executive officer of each of Parent and Merger Sub as to the
satisfaction of this condition;
(b) No Material Adverse Change. From the date of this Agreement
through the Effective Time, no event, development or condition has occurred
which, in the aggregate, has had or could reasonably be expected to have, a
Material Adverse Effect on Parent.
(c) Tax Opinion. Company will have received an opinion of its special
tax counsel, Dewey Ballantine LLP, in form and substance reasonably
satisfactory to it, and dated on the Closing Date, to the effect that the
Merger will qualify for federal income tax purposes as a reorganization
within the meaning of Section 368(a) of the Code. In rendering such
opinion, Dewey Ballantine LLP may rely upon reasonably requested
representation letters of Company and Parent and upon certain facts and
customary assumptions set forth in the opinion.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
SECTION 7.1. Termination or Abandonment. Notwithstanding anything
contained in this Agreement to the contrary, this Agreement may be terminated
and abandoned at any time prior to the Effective Time, whether before or after
any approval of the matters presented in connection with the Merger by the
stockholders of Company:
(a) by the mutual written consent of Company and Parent;
(b) by either Company or Parent, if the Effective Time will not have
occurred on or before the date one year after the date of this Agreement;
provided, that the party seeking to terminate this Agreement pursuant to
this Section 7.1(b) will not have breached in any material respect its
obligations under this Agreement in any manner that will have proximately
contributed to the failure to consummate the Merger on or before such date.
(c) by Company, if there has been a material breach by Parent of any
representation, warranty, covenant or agreement set forth in this Agreement
which breach (if susceptible to cure) has not been cured in all material
respects within twenty business days following receipt by Parent of notice
of such breach;
(d) by Parent, if there has been a material breach by Company of any
representation, warranty (which for purposes of Section 3.18 will be deemed
to be Company Material Contracts in excess of ten million dollars
($10,000,000) in the aggregate), covenant or agreement (which for purposes
of Section 5.1(a)(xiv) will be deemed to be Company Material Contracts in
excess of five million dollars ($5,000,000) in the aggregate) set forth in
this Agreement which breach (if susceptible to cure) has not been cured in
all material respects within twenty business days following receipt by
Company of notice of such breach;
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(e) by either Company or Parent, if (i) there is a law, rule or
regulation that makes the consummation of the Merger illegal or otherwise
prohibited or (ii) any judgment, injunction, order or decree of a court or
other Governmental Entity of competent jurisdiction is entered that
permanently restrains, enjoins or otherwise prohibits either Company or
Parent from consummating the Merger and such judgment, injunction, order or
decree will have become final and nonappealable;
(f) by either Company or Parent, if the Company Stockholder Approval
referred to in Section 5.3 will not have been obtained by reason of the
failure to obtain the required vote at the Company Special Meeting or at
any postponement or adjournment thereof;
(g) by Parent, if: (i) the Board of Directors of Company will have
failed to recommend that Company's stockholders vote to adopt this
Agreement, or will have withdrawn or modified in a manner adverse to Parent
the Company Board Recommendation; (ii) Company will have failed to include
in the Proxy Statement the Company Board Recommendation or a statement to
the effect that the Board of Directors of Company has determined and
believes that the Merger is in the best interests of Company's
stockholders; (iii) the Board of Directors of Company fails to publicly
reaffirm the Company Board Recommendation, or fails to reaffirm its
determination that the Merger is in the best interests of Company's
stockholders, within ten business days after Parent reasonably requests in
writing that such recommendation or determination be reaffirmed; (iv) the
Board of Directors of Company will have approved, endorsed or recommended
any Acquisition Proposal; (v) Company will have entered into any letter of
intent, acquisition agreement or similar agreement relating to any
Acquisition Proposal; (vi) a tender or exchange offer relating to any
shares of the Company Common Stock will have been commenced and Company
will not have sent to its security holders, within ten business days after
the commencement of such tender or exchange offer, a statement disclosing
that Company recommends rejection of such tender or exchange offer; (vii)
an Acquisition Proposal is publicly announced, and Company fails to issue a
press release that reaffirms the Company Board Recommendation within ten
business days after such Acquisition Proposal is announced or (viii)
Company or any of its Subsidiaries or any Company Representative will have
violated in a material respect the restrictions set forth in Section 5.10;
(h) by Parent, if Company will have failed to hold the Company Special
Meeting within seventy-five (75) days after the Form S-4 Registration
Statement is declared effective under the Securities Act; provided that
such failure is not due to circumstances beyond the reasonable control of
Company, including, without limitation, the existence of any statute, rule,
regulation, executive order, decree, preliminary injunction or restraining
order enjoining, preventing, prohibiting or delaying the Company Special
Meeting; and
(i) by Company, but only until the expiration of the Initial Period,
if the Board of Directors of Company (i) has received a Superior Proposal
and (ii) after consultation with outside legal counsel to Company,
determines in good faith that such action is consistent with the fiduciary
duties of the Board of Directors to Company's stockholders under applicable
law, but only after 72 hours following Parent's receipt of written notice
advising Parent that the Board of Directors of Company is prepared to do
so, and only if, during such 72-hour period, Company and its advisors will
have negotiated in good faith with Parent to make such adjustments in the
terms and conditions of this Agreement as would enable the parties to
proceed with the transactions contemplated herein on such adjusted terms.
For purposes of this Agreement, "INITIAL PERIOD" means a period commencing
on the day following the date of this Agreement and ending at 5:00 p.m. Dallas,
Texas time on the thirtieth (30th) calendar day after such commencement;
provided, however, that such period will be extended (and all such extensions
occurring in accordance herewith being deemed within the definition of Initial
Period) (i) for a period of up to ten (10) additional business days after the
date of delivery by Company to Parent of the notice specified in Section
5.10(a)(i), so that at least ten (10) business days elapse between the delivery
by Company of the notice specified in Section 5.10(a)(i) and the expiration of
the Initial Period (exclusive of the extensions provided in clauses (ii) and
(iii) of this definition); (ii) during the 72 hour period referred to in Section
7.1(i); and (iii) if, during the 72 hour period referred to in Section 7.1(i),
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Parent and Company have agreed to proceed with the transactions contemplated
herein on adjusted terms, for a period of up to 72 hours from the time of such
agreement.
The party desiring to terminate this Agreement pursuant to this Section 7.1
will give written notice of such termination to the other party, specifying the
provision pursuant to which such termination is effected.
SECTION 7.2. Effect of Termination. If this Agreement is terminated
pursuant to Section 7.1, then this Agreement will become void and have no effect
with no liability or obligation on the part of Parent, Merger Sub or Company,
except that (a) the agreements contained in the last sentence of Section 5.5
(Access to Information; Confidentiality), Section 5.15 (Public Announcements),
Section 5.18 (Transaction Expenses and Termination Fee), this Section 7.2
(Effect of Termination) and Article VIII (General Provisions) will survive the
termination hereof and (b) no such termination will relieve any party of any
liability or damages resulting from any breach by that party of any of its
representations, warranties, covenants or agreements set forth in this
Agreement.
ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.1. Nonsurvival of Representations and Warranties; Survival of
Certain Covenants. Except as provided in the immediately following sentence,
none of the representations, warranties, covenants or agreements in this
Agreement or in any instrument delivered pursuant to this Agreement will survive
the Effective Time. This Section 8.1 will not limit in any manner whatsoever any
covenant or agreement of the parties the terms of which contemplate performance
after the Effective Time. Nothing contained in this Section 8.1 will relieve any
party from liability for any willful breach of this Agreement.
SECTION 8.2. Notices. All notices, requests, claims, demands and other
communications under this Agreement will be in writing and will be deemed given
if delivered personally or sent by overnight courier (providing proof of
delivery) to the parties at the following addresses (or at such address for a
party as will be specified by like notice):
(a) if to Company, to:
The Ackerley Group, Inc.
1301 Fifth Avenue, Suite 4000
Seattle, Washington 98101
Attention: Christopher H. Ackerley
Facsimile No.: (206) 623-7853
with a copy to:
Dewey Ballantine LLP
1301 Avenue of the Americas
New York, New York 10019
Attention: Morton A. Pierce, Esq.
Facsimile No.: (212) 259-6333
(b) if to Parent or Merger Sub, to:
Clear Channel Communications, Inc.
200 East Basse Road
San Antonio, Texas 78209
Attention: Randall T. Mays
Facsimile No.: (210) 805-0734
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with a copy to:
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
1700 Pacific Avenue
Suite 4100
Dallas, Texas 75201
Attention: J. Kenneth Menges, Jr., P.C.
Facsimile No.: (214) 969-4343
SECTION 8.3. Counterparts. This Agreement may be executed in one or more
counterparts, all of which will be considered one and the same agreement and
will become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
SECTION 8.4. Entire Agreement; No Third-Party Beneficiaries. This
Agreement constitutes the entire agreement, and supersedes all prior agreements
and understandings, both written and oral, among the parties with respect to the
subject matter of this Agreement (provided, however, that the provisions of the
Confidentiality Agreement will remain valid and in effect) and, except for the
provisions of Article II (Effect of the Merger), Section 5.7 (Rights Under Stock
Plans) and Section 5.11 (Director and Officer Liability) is not intended to
confer upon any person other than the parties any rights or remedies hereunder.
SECTION 8.5. Assignment. Neither this Agreement nor any of the rights,
interests or obligations under this Agreement will be assigned, in whole or in
part, by operation of law or otherwise by any of the parties hereto without the
prior written consent of the other parties, except that Merger Sub may assign,
in its sole discretion, any or all of its rights, interests and obligations
under this Agreement to Parent or to any direct or indirect wholly-owned
subsidiary of Parent, but no such assignment will relieve Merger Sub of any of
its obligations under this Agreement. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of, and be enforceable by,
the parties and their respective successors and assigns.
SECTION 8.6. Governing Law. This Agreement will be governed by, and
construed in accordance with, the laws of the State of Delaware, without regard
to any applicable conflicts of law.
SECTION 8.7. Enforcement. The parties agree that irreparable damage would
occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the parties will be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any court of the United States
located in the State of Delaware or in Delaware state court, this being in
addition to any other remedy to which they are entitled at law or in equity. In
addition, each of the parties hereto (a) consents to submit itself to the
personal jurisdiction of any federal court located in the State of Delaware or
any Delaware state court in the event any dispute arises out of this Agreement
or any of the transactions contemplated by this Agreement, (b) agrees that it
will not attempt to deny or defeat such personal jurisdiction by motion or other
request for leave from any such court and (c) agrees that it will not bring any
action relating to this Agreement or any of the transactions contemplated by
this Agreement in any court other than a federal or state court sitting in the
State of Delaware.
SECTION 8.8. Severability. Any term or provision of this Agreement which
is invalid or unenforceable in any jurisdiction will, as to that jurisdiction,
be ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement in any other jurisdiction. If any provision of this Agreement is so
broad as to be unenforceable, such provision will be interpreted to be only so
broad as is enforceable.
SECTION 8.9. Headings. Headings of the Articles and Sections of this
Agreement are for convenience of the parties only, and will be given no
substantive or interpretive effect whatsoever.
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SECTION 8.10. Finders or Brokers. Except for Credit Suisse First Boston
with respect to Company, a copy of whose engagement agreement has been or will
be provided to Parent, and Salomon Smith Barney with respect to Parent, a copy
of whose engagement agreement has been or will be provided to Company, neither
Company nor Parent nor any of their respective Subsidiaries has employed any
investment banker, broker, finder or intermediary in connection with the
transactions contemplated hereby who might be entitled to any fee or any
commission in connection with or upon consummation of the Merger.
SECTION 8.11. Amendment. This Agreement may be amended by the parties at
any time before or after approval hereof by the stockholders of Company and
Parent; provided, however, that after such stockholder approval there will not
be made any amendment that by law requires further approval by the stockholders
of Company or Parent without the further approval of such stockholders. This
Agreement may not be amended except by an instrument in writing signed on behalf
of each of the parties.
SECTION 8.12. Extension; Waiver. At any time prior to the Effective Time,
the parties may (a) extend the time for the performance of any of the
obligations or other acts of the other parties, (b) waive any inaccuracies in
the representations and warranties contained in this Agreement or in any
document delivered pursuant to this Agreement or (c) subject to the proviso of
Section 8.11, waive compliance with any of the agreements or conditions
contained in this Agreement. Any agreement on the part of a party to any such
extension or waiver will be valid only if set forth in an instrument in writing,
signed on behalf of such party. The failure of any party to this Agreement to
assert any of its rights under this Agreement or otherwise will not constitute a
waiver of those rights.
SECTION 8.13. Procedure for Termination, Amendment, Extension or
Waiver. A termination of this Agreement or other action attributed to the Board
of Directors pursuant to Section 7.1, an amendment of this Agreement pursuant to
Section 8.11 or an extension or waiver pursuant to Section 8.12 will, in order
to be effective, require in the case of Parent, Merger Sub or Company, action by
its Board of Directors, acting by the affirmative vote of a majority of the
members of the entire Board of Directors.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, Parent, Merger Sub and Company have caused this
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the date first written above.
CLEAR CHANNEL COMMUNICATIONS, INC.
By: /s/ RANDALL T. MAYS
------------------------------------
Name: Randall T. Mays
Title: Executive Vice President
and Chief Financial
Officer
CCMM SUB, INC.
By: /s/ RANDALL T. MAYS
------------------------------------
Name: Randall T. Mays
Title: Executive Vice President
and Chief Financial
Officer
THE ACKERLEY GROUP, INC.
By: /s/ CHRISTOPHER H. ACKERLEY
------------------------------------
Name: Christopher H. Ackerley
Title: President
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APPENDIX B
STOCKHOLDER VOTING AND SUPPORT AGREEMENT
This STOCKHOLDER VOTING AND SUPPORT AGREEMENT (the "AGREEMENT"), dated as
of October 5, 2001, is entered into by and between Clear Channel Communications,
Inc., Inc., a Texas corporation ("PARENT") and Barry A. Ackerley
("STOCKHOLDER").
WITNESSETH:
WHEREAS, Parent, CCMM Sub, Inc., a Delaware corporation ("MERGER SUB"), and
The Ackerley Group, Inc., a Delaware corporation ("COMPANY"), have entered into
an Agreement and Plan of Merger of even date herewith (as the same may be
amended from time to time, 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 Company (the "MERGER");
WHEREAS, as of the date hereof, Stockholder is the record or Beneficial
Owner of the number of shares of (a) common stock, par value $0.01 per share, of
Company ("COMPANY ORDINARY COMMON STOCK"), and (b) Class B common stock, par
value $0.01 per share, of Company ("COMPANY CLASS B STOCK" and, together with
Company Ordinary Common Stock, the "COMPANY COMMON STOCK"), set forth in Part A,
Column 1 of Schedule I attached hereto, the "TOTAL SHARES"); and
WHEREAS, as a condition to its willingness to enter into the Merger
Agreement, Parent has required that Stockholder agree, and in order to induce
Parent to enter into the Merger Agreement, Stockholder is willing to agree, to
(a) vote the shares of Company Ordinary Common Stock set forth in Part A, Column
2 of Schedule I attached hereto (the "SUBJECT SHARES") in the manner specified
in Section 2(a) with respect to matters bearing directly or indirectly on the
consummation of the Merger, and to provide an irrevocable proxy in connection
with such agreement to vote the Subject Shares in such manner; (b) pay to Parent
a specified amount in connection with the consummation of certain alternative
transactions to the Merger and (c) such other matters as are set forth herein.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants,
agreements, representations and warranties herein contained, and intending to be
legally bound hereby, Parent and Stockholder hereby agree as follows:
1. Definitions. Capitalized terms not expressly defined in this Agreement
will have the meanings ascribed to them in the Merger Agreement. For purposes of
this Agreement:
(a) "AFFILIATE" of any person means another person that directly or
indirectly, through one or more intermediaries, controls, is controlled by,
or is under common control with, such first person.
(b) "BENEFICIALLY OWN," "BENEFICIAL OWNER" or "BENEFICIAL OWNERSHIP"
with respect to any securities will mean having voting power or investment
power with respect to such securities (as determined pursuant to Rule
13d-3(a) under the Exchange Act), including pursuant to any agreement,
arrangement or understanding, whether or not in writing.
(c) "TERMINATION DATE" means the earlier to occur of (i) the date on
which the Merger Agreement is terminated in accordance with the provisions
of Article VII of the Merger Agreement and (ii) the Effective Time.
2. Voting Agreement; Proxy.
(a) Agreement to Vote the Subject Shares. From the date of this Agreement
and ending on the Termination Date, Stockholder hereby agrees to vote (or cause
to be voted) all of the Subject Shares (and any and all securities issued or
issuable in respect thereof) which such Stockholder is entitled to vote (or to
provide his written consent thereto), at any annual, special or other meeting of
the stockholders of
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Company, and at any adjournment or adjournments thereof, or pursuant to any
consent in lieu of a meeting or otherwise:
(i) in favor of the Merger and the approval and adoption of the terms
contemplated by the Merger Agreement and any other actions or agreements
required in furtherance thereof;
(ii) against any action or agreement that is reasonably likely to
result in a breach in any material respect of any covenant, representation
or warranty or any other obligation of Company under the Merger Agreement;
and
(iii) against any (A) direct or indirect acquisition or purchase by a
third party of a business that constitutes 15% or more of the net revenues,
net income or the assets of Company and its Subsidiaries taken as a whole,
(B) direct or indirect acquisition or purchase by a third party of 15% or
more of any class of equity securities of Company or any of its
Subsidiaries whose business constitutes 15% or more of the net revenues,
net income or assets of Company and its Subsidiaries, taken as a whole
(each, a "MATERIAL SUBSIDIARY"), (C) tender offer or exchange offer that if
consummated would result in any person beneficially owning 15% more of any
class of equity securities of Company or any Material Subsidiary, (D)
merger, consolidation, business combination, recapitalization, liquidation,
dissolution or similar transaction involving Company or any Material
Subsidiary, other than the transactions contemplated by this Agreement (any
transaction described in clauses (A), (B), (C) and (D) is referred to as an
"ACQUISITION PROPOSAL"), and (E) to the extent that such action is
reasonably likely to materially impede, interfere with, delay, postpone or
adversely affect in any material respect the Merger and the transactions
contemplated by the Merger Agreement, (1) any change in a majority of the
Board of Directors of Company other than in connection with an annual
meeting of the stockholders of Company with respect to the slate of
directors proposed by the incumbent Board of Directors of Company (in which
case Stockholder agrees to vote for the slate proposed by the incumbent
Board of Directors of Company) or (2) except for such actions as are
contemplated by the Merger Agreement, any material change in Company's
corporate structure or business.
(b) Irrevocable Proxy. Simultaneously with the execution of this
Agreement, Stockholder will deliver to Parent a proxy in the form attached
hereto as Exhibit A (the "PROXY"), which will be irrevocable with respect to the
Subject Shares; provided, that the Proxy will survive only until the Termination
Date. The parties agree that by reason of the Merger Agreement the Proxy is a
proxy coupled with an interest.
3. Alternative Disposition; Second Transaction.
(a) Alternative Disposition. If any of the Total Shares are sold,
transferred, exchanged, canceled or disposed of in connection with or as a
result of any Acquisition Proposal (as defined for purposes of Section
5.18(c)(ii) of the Merger Agreement) that is in existence on or that has been
otherwise made prior to the Termination Date (an "ALTERNATIVE DISPOSITION")
then, within five business days after the closing of such Alternative
Disposition, Stockholder will tender and pay to, or will cause to be tendered
and paid to, Parent, or its designee, in immediately available funds, an amount
equal to 50% of the Profit realized from such Alternative Disposition. As used
in this Section 3, "PROFIT" will mean an amount equal to the excess, if any, of
(i) the Alternative Transaction Consideration over (ii) the Current Transaction
Consideration. As used in this Section 3, "ALTERNATIVE TRANSACTION
CONSIDERATION" will mean all cash, securities, settlement or termination
amounts, notes or other debt instruments, and other consideration received or to
be received, directly or indirectly, by Stockholder in respect of the Total
Shares in connection with or as a result of such Alternative Disposition or any
agreements or arrangements (including, without limitation, any employment
agreement (except a bona fide employment agreement pursuant to which Stockholder
is required to devote, and under which Stockholder in good faith intends to
devote, substantially all of Stockholder's business time and effort to the
performance of executive services for the Company in a manner substantially
similar to Stockholder's current employment arrangements with the Company),
consulting agreement, non-competition agreement, confidentiality agreement,
settlement agreement or release agreement) entered into, directly or indirectly,
by Stockholder as a part of or in
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connection with the Alternative Disposition or associated Acquisition Proposal
(such amounts to be calculated as of the date of consummation of such
Alternative Disposition and assuming, for calculation purposes, Stockholder
holds such number of Total Shares as set forth in Part A, Column 1 of Schedule I
attached hereto without regard to the actual beneficial ownership of such
shares). As used in this Agreement, "CURRENT TRANSACTION CONSIDERATION" will
mean the sum of all amounts to be received, directly or indirectly, by
Stockholder pursuant to Article II of the Merger Agreement (such amounts to be
calculated as of the Termination Date and assuming, for calculation purposes,
Stockholder holds such number of Total Shares as set forth in Part A, Column 1
of Schedule I attached hereto without regard to the actual beneficial ownership
of such shares) as well as the value of all Options to be received by
Stockholder in connection with the Merger and the aggregate amount of all other
payments or other consideration to be received by Stockholder as a direct result
of the Merger.
(b) Profit Determination. For purposes of determining Profit under this
Section 3, (i) all non-cash items will be valued based upon the fair market
value thereof as determined by an independent expert selected by Parent and who
is reasonably acceptable to Stockholder, (ii) all deferred payments or
consideration will be discounted to reflect a market rate of net present value
thereof as determined by the above-referenced independent expert, (iii) all
contingent payments will be assumed to have been paid and (iv) if less than all
of the Total Shares are subject to the Alternative Disposition, then the Current
Transaction Consideration will be deemed to be an amount equal to the Current
Transaction Consideration multiplied by a fraction, the numerator of which is
the number of the Total Shares sold, transferred, exchanged, canceled or
disposed of in such Alternative Disposition and the denominator of which is the
total number of the Total Shares. If any contingent payments included in the
determination of Profits ultimately are not paid pursuant to an Alternative
Disposition, then Parent will reimburse Stockholder for any amounts paid to
Parent hereunder in respect of such uncollected contingent payments promptly
after receipt of written notice of such nonpayment, unless Stockholder has not
used its reasonable efforts to receive such contingent payments.
(c) Second Transaction. If, after the date of this Agreement, the amount
of consideration to be received by the holders of Company Common Stock in
connection with the Merger should be increased (a "SECOND TRANSACTION"), then,
as may be requested by Parent, Stockholder will either (i) execute and deliver
to Parent such documents or instruments as may be necessary to waive the right
to receive fifty percent (50%) of such increase to the extent that such increase
results in any Profit or (ii) tender and pay, or cause to be tendered and paid,
to Parent, or its designee, in immediately available funds fifty percent (50%)
of the Profit realized from such Second Transaction. As used in this Section
3(c), "PROFIT" will mean an amount equal to the excess, if any, of (y) the
Second Transaction Consideration over (z) the Current Transaction Consideration.
As used in this Agreement, "SECOND TRANSACTION CONSIDERATION" will mean all
cash, securities, settlement or termination amounts, notes or other debt
instruments, and other consideration received or to be received, directly or
indirectly, by Stockholder in respect of the Total Shares in connection with or
as a result of the Second Transaction or any agreements or arrangements
(including, without limitation, any employment agreement (except a bona fide
employment agreement pursuant to which Stockholder is required to devote, and
under which Stockholder in good faith intends to devote, substantially all of
Stockholder's business time and effort to the performance of executive services
for the Company in a manner substantially similar to Stockholder's current
employment arrangements with the Company), consulting agreement, non-competition
agreement, confidentiality agreement, settlement agreement or release agreement)
entered into, directly or indirectly, by Stockholder as a part of or in
connection with the Second Transaction (such amounts to be calculated as of the
date of consummation of such Second Transaction and assuming, for calculation
purposes, Stockholder holds such number of Total Shares as set forth in Part A,
Column 1 of Schedule I attached hereto without regard to the actual beneficial
ownership of such shares).
(4) No Ownership Interest. Nothing contained in this Agreement will be
deemed to vest in Parent any direct or indirect ownership or incidents of
ownership of or with respect to the Total Shares. All rights, ownership and
economic benefits of and relating to the Total Shares will remain and belong to
Stockholder, and Parent will have no authority to manage, direct, superintend,
restrict, regulate, govern or
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administer any of the policies or operations of Company or exercise any power or
authority to direct Stockholder in the voting of any of the Total Shares, except
as otherwise expressly provided herein with respect to the Subject Shares.
(5) Covenants, Representations and Warranties of Stockholder. Stockholder
hereby represents, warrants and covenants to Parent as follows:
(a) Ownership. As of the date of this Agreement, Stockholder is
either (i) the record and Beneficial Owner of, or (ii) the Beneficial Owner
but not the record holder of, the number of issued and outstanding Total
Shares set forth in Part A, Column 1 of Schedule I hereto and the Options,
stock appreciation rights and securities convertible into or exercisable
for shares of Company Common Stock set forth on Part B of Schedule I
hereto. As of the date of this Agreement, the Total Shares set forth in
Part A, Column 1 of Schedule I hereto constitute all of the issued and
outstanding shares of Company Common Stock owned of record or Beneficially
Owned by Stockholder. Stockholder has the sole power to agree to all of the
matters set forth in this Agreement, in each case with respect to all of
the Subject Shares, with no material limitations, qualifications or
restrictions on such rights, subject to applicable securities laws and the
terms of this Agreement.
(b) Power; Binding Agreement. Stockholder has the legal capacity,
power and authority to enter into and perform all of Stockholder's
obligations under this Agreement. This Agreement has been duly and validly
executed and delivered by Stockholder and constitutes a valid and binding
agreement of Stockholder, enforceable against Stockholder in accordance
with its terms (except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization or similar laws affecting creditors'
rights generally and by general equitable principles). There is no
beneficiary or holder of a voting trust certificate or other interest of
any trust of which Stockholder is trustee whose consent is required for the
execution and delivery of this Agreement or the consummation by Stockholder
of the transactions contemplated hereby. If Stockholder is married and any
of the Total Shares constitute community property, this Agreement has been
duly authorized, executed and delivered by, and constitutes a valid and
binding agreement of, Stockholder's spouse, enforceable against such person
in accordance with its terms (except as such enforceability may be limited
by applicable bankruptcy, insolvency, reorganization or similar laws
affecting creditors' rights generally and by general equitable principles).
(c) No Conflicts. As of the date of this Agreement, except for
filings under the Exchange Act, if applicable, no filing with, and no
permit, authorization, consent or approval of, any state or federal public
body or authority is necessary for the execution of this Agreement by
Stockholder and the consummation by Stockholder of the transactions
contemplated hereby, except where the failure to file or obtain such
permit, authorization, consent or approval would not materially interfere
with Stockholder's ability to perform Stockholder's obligations hereunder,
and none of the execution and delivery of this Agreement by Stockholder,
the consummation by Stockholder of the transactions contemplated hereby or
compliance by Stockholder with any of the provisions hereof will (i)
conflict with or result in any breach of any applicable organizational
documents applicable to Stockholder, (ii) result in a violation or breach
of, or constitute (with or without notice or lapse of time or both) a
default (or give rise to any third party right of termination,
cancellation, material modification or acceleration) under any of the
terms, conditions or provisions of any note, bond, mortgage, indenture,
license, contract, commitment, arrangement, understanding, agreement or
other instrument or obligation of any kind to which Stockholder is a party
or by which Stockholder or any of Stockholder's properties or assets may be
bound, (iii) require any material consent, authorization or approval of any
person other than a governmental entity or (iv) violate any order, writ,
injunction, decree, judgment, order, statute, rule or regulation applicable
to Stockholder or any of the Total Shares, in each such case except to the
extent that any conflict, breach, default or violation would not materially
interfere with the ability of Stockholder to perform its obligations
hereunder.
(d) No Encumbrances. Except (i) as required by Section 2 and (ii)
items listed in Schedule I, at all times during the term hereof, all of the
Subject Shares will be held by Stockholder, or by a
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nominee or custodian for the benefit of Stockholder, or by a family member
or Affiliate of Stockholder (subject to the conditions set forth in clause
(f) below) free and clear of all liens, claims, security interests,
proxies, voting trusts or agreements, understandings or arrangements or any
other encumbrances whatsoever, except for any liens, claims, security
interests, proxies, voting trusts or agreements, understandings or
arrangements or other encumbrances that do not limit or impair
Stockholder's ability to perform the obligations under this Agreement.
(e) No Solicitation. Stockholder will comply with the terms of
Section 5.10 of the Merger Agreement, provided, however, that Stockholder
will be deemed to be a Company Representative at all times for purposes of
Section 5.10 (regardless of whether Stockholder is in fact a Company
Representative at the relevant time).
(f) Restriction on Transfer, Proxies and Non-Interference. Except as
otherwise contemplated by the Merger Agreement or this Agreement, from and
after the date of this Agreement and ending on the Termination Date,
Stockholder will not, directly or indirectly without the consent of Parent
in respect of any Acquisition Proposal or otherwise: (i) offer for sale,
sell, transfer, tender, pledge, encumber, assign or otherwise dispose of,
or enter into any contract, option or other arrangement or understanding
with respect to or consent to the offer for sale, sale, transfer, tender,
pledge, encumbrance, assignment or other disposition of, any or all of the
Subject Shares, or any interest therein, (ii) grant any proxies or powers
of attorney, deposit any of the Subject Shares into a voting trust or enter
into a voting agreement with respect to any of the Subject Shares, (iii)
enter into any agreement or arrangement providing for any of the actions
described in clause (i) or (ii) above, (iv) take any action that would
reasonably be expected to have the effect of preventing or disabling
Stockholder from performing Stockholder's obligations under this Agreement
or (v) request that Company register the transfer (book-entry or otherwise)
of any certificate or uncertificated interest representing any of the
Subject Shares, except as otherwise contemplated hereby.
(g) Further Assurances. From time to time, at Parent's reasonable
request and without further consideration, Stockholder will perform such
further acts and execute and deliver such additional documents as may be
necessary or desirable to consummate and make effective, in the most
expeditious manner practicable, the transactions contemplated by this
Agreement and the Proxy.
6. Covenants, Representations and Warranties of Parent. Parent hereby
represents, warrants and covenants to Stockholder as follows:
(a) Organization, Standing and Corporate Power. Parent is a
corporation duly organized, validly existing and in good standing under the
laws of its jurisdiction of organization, with full corporate power and
authority to own its properties and carry on its business as presently
conducted. Parent has the corporate power and authority to enter into and
perform all of its obligations under this Agreement and to consummate the
transactions contemplated hereby.
(b) No Conflicts. As of the date of this Agreement, except for
filings under the Exchange Act, if applicable, no filing with, and no
permit, authorization, consent or approval of, any state or federal public
body or authority is necessary for the execution of this Agreement by
either Parent and the consummation by Parent of the transactions
contemplated hereby, except where the failure to file or obtain such
permit, authorization, consent or approval would not interfere with its
ability to perform its obligations hereunder, and none of the execution and
delivery of this Agreement by Parent, the consummation by Parent of the
transactions contemplated hereby or compliance by Parent with any of the
provisions hereof will (i) conflict with or result in any breach of any
applicable organizational documents applicable to Parent, (ii) result in a
violation or breach of, or constitute (with or without notice or lapse of
time or both) a default (or give rise to any third party right of
termination, cancellation, material modification or acceleration) under any
of the terms, conditions or provisions of any note, bond, mortgage,
indenture, license, contract, commitment, arrangement, understanding,
agreement or other instrument or obligation of any kind to which Parent is
a party or by which Parent or any of Parent's properties or assets may be
bound, (iii) require any material consent, authorization or approval of any
person other than a governmental entity or (iv) violate any order, writ,
injunction,
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decree, judgment, order, statute, rule or regulation applicable to Parent
or any of Parent's properties or assets, in each such case except to the
extent that any conflict, breach, default or violation would not interfere
with the ability of Parent to perform its obligations hereunder.
(c) Execution, Delivery and Performance by Parent. The execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by
the Board of Directors of Parent, and Parent has taken all other actions
required by law, its Amended and Restated Certificate of Incorporation and
its Bylaws to consummate the transactions contemplated by this Agreement.
This Agreement constitutes the valid and binding obligations of Parent and
is enforceable in accordance with its terms, except as enforceability may
be subject to bankruptcy, insolvency, reorganization, moratorium or other
similar laws relating to or affecting creditors' rights generally.
7. Share Purchases; Recapitalization; Option Exercises.
(a) Total Shares. Stockholder agrees that, for purposes of this Agreement,
the defined term "TOTAL SHARES" will include any shares of Company Common Stock
acquired by Stockholder after the date of this Agreement and before the
Termination Date (i) by purchase or by any other means of acquiring Beneficial
Ownership, and (ii) in connection with any stock dividend and distribution and
any shares into which or for which any or all of the Company Common Stock (or
any class thereof) may be changed or exchanged as may be appropriate to reflect
any stock dividend or distribution, or any change in the Company Common Stock
(or any class thereof) by reason of any split-up, recapitalization, combination,
exchange of shares or the like. All shares of Company Common Stock included as
"TOTAL SHARES" pursuant to this Section 7(a)will be subject to the terms and
conditions of this Agreement applicable to "Total Shares" without any further
action on the part of Stockholder or Parent.
(b) Subject Shares. Stockholder agrees that, for purposes of this
Agreement and the Proxy, the defined term "SUBJECT SHARES" will include any
shares of Company Ordinary Common Stock acquired by Stockholder after the date
of this Agreement and before the Termination Date (i) by purchase or by any
other means of acquiring Beneficial Ownership, and (ii) in connection with any
stock dividend and distribution and any shares into which or for which any or
all of the Company Ordinary Common Stock (or any class thereof) may be changed
or exchanged as may be appropriate to reflect any stock dividend or
distribution, or any change in the Company Ordinary Common Stock (or any class
thereof) by reason of any split-up, recapitalization, combination, exchange of
shares or the like. All shares of Company Ordinary Common Stock included as
"SUBJECT SHARES" pursuant to this Section 7(b) will be subject to the terms and
conditions of this Agreement and the Proxy without any further action on the
part of Stockholder or Parent.
8. Stockholder Capacity. Stockholder does not make any agreement or
understanding herein in Stockholder's capacity as a director or officer of
Company. Stockholder executes this Agreement solely in Stockholder's capacity as
a record owner and/or Beneficial Owner of the Total Shares and nothing herein
will limit or affect any actions taken by Stockholder or any designee of
Stockholder in Stockholder's capacity as an officer or director of Company or
any of its Subsidiaries in order to comply with his fiduciary obligations as an
officer or director of Company, including, without limitation, participating in
his capacity as an officer or director of Company in any negotiations pursuant
to Section 5.10 of the Merger Agreement.
9. Miscellaneous.
(a) Entire Agreement. This Agreement constitutes the entire agreement, and
supersedes all prior agreements and understandings, both written and oral, among
the parties with respect to the subject matter of this Agreement.
(b) Amendments. This Agreement may be amended by the parties at any time
by an instrument in writing signed on behalf of each of the parties.
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(c) Waiver. The parties may (i) extend the time for the performance of any
of the obligations or other acts of the other parties, (ii) waive any
inaccuracies in the representations and warranties contained in this Agreement
or in any document delivered pursuant to this Agreement or (iii) waive
compliance with any of the agreements or conditions contained in this Agreement.
Any agreement on the part of a party to any such extension or waiver will be
valid only if set forth in an instrument in writing, signed on behalf of each
party hereto. The failure of any party to this Agreement to assert any of its
rights under this Agreement or otherwise will not constitute a waiver of those
rights.
(d) Notices. All notices, requests, claims, demands and other
communications under this Agreement will be in writing and will be deemed given
if delivered personally or sent by overnight courier (providing proof of
delivery) to the parties at the following addresses (or at such address for a
party as will be specified by like notice):
(i) if to Stockholder, to:
Barry A. Ackerley
1301 Fifth Avenue, Suite 4000
Seattle, Washington 98101
Facsimile No.: (206) 623-7853
with copies to:
Heller Ehrman White & McAuliffe LLP
701 Fifth Avenue, Suite 6100
Seattle, Washington 98104
Attention: Bruce M. Pym, Esq.
Facsimile No.: (206) 447-0849
and
Dewey Ballantine LLP
1301 Avenue of the Americas
New York, New York 10019
Attention: Morton A. Pierce, Esq.
Facsimile No.: (212) 259-6333
(ii) if to Parent or Merger Sub, to:
Clear Channel Communications, Inc.
200 East Basse Road
San Antonio, Texas 78209
Attention: Randall T. Mays
Facsimile No.: (210) 805-0734
with a copy to:
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
1700 Pacific Avenue
Suite 4100
Dallas, Texas 75201
Attention: J. Kenneth Menges, Jr., P.C.
Facsimile No.: (214) 969-4343
(e) Severability. Any term or provision of this Agreement which is invalid
or unenforceable in any jurisdiction will, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement in any other jurisdiction. If any provision of this Agreement is so
broad as to be unenforceable, such provision will be interpreted to be only so
broad as is enforceable.
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(f) Enforcement. Each of the parties hereto recognizes and acknowledges
that a breach by Stockholder of any covenants or agreements contained in this
Agreement will cause Parent to sustain damages for which it would not have an
adequate remedy at law for money damages, and therefore each of the parties
hereto agrees that in the event of any such breach Parent will be entitled to
the remedy of specific performance of such covenants and agreements and
injunctive and other equitable relief in addition to any other remedy to which
it may be entitled, at law or in equity. Any action or claim relating to this
Agreement will be brought in any court of the United States located in the State
of Delaware or in Delaware state court, this being in addition to any other
remedy to which it is entitled at law or in equity. In addition, each of the
parties hereto (i) consents to submit itself to the personal jurisdiction of any
federal court located in the State of Delaware or any Delaware state court in
the event any dispute arises out of this Agreement or any of the transactions
contemplated by this Agreement, (ii) agrees that it will not attempt to deny or
defeat such personal jurisdiction by motion or other request for leave from any
such court and (iii) agrees that it will not bring any action or claim relating
to this Agreement or any of the transactions contemplated by this Agreement in
any court other than a federal or state court sitting in the State of Delaware.
(g) Remedies Cumulative. All rights, powers and remedies provided under
this Agreement or otherwise available in respect hereof at law or in equity will
be cumulative and not alternative, and the exercise of any thereof by any party
will not preclude the simultaneous or later exercise of any other such right,
power or remedy by such party.
(h) No Third Party Beneficiaries. This Agreement is not intended to be for
the benefit of, and will not be enforceable by, any person or entity who or
which is not a party hereto; provided that, in the event of Stockholder's death,
the benefits and obligations of Stockholder hereunder will inure to
Stockholder's successors and heirs.
(i) Governing Law. This Agreement will be governed by, and construed in
accordance with, the laws of the State of Delaware, without regard to any
applicable conflicts of law.
(j) Descriptive Headings. Headings of the sections and subsections of this
Agreement are for convenience of the parties only, and will be given no
substantive or interpretive effect whatsoever.
(k) Counterparts. This Agreement may be executed in one or more
counterparts, all of which will be considered one and the same agreement and
will become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
(l) Trust Funds. If any party hereto should receive any funds that are to
be paid to another party pursuant to the terms of this Agreement, then the
receiving party will hold such funds in trust for the benefit of the party
entitled to receive such funds and will promptly pay such funds to the party
entitled to receive such funds in accordance with this Agreement.
10. Termination. This Agreement will terminate without any further action
on the part of any party hereto on the Termination Date; provided, however, that
if the Merger Agreement is terminated prior to the Effective Time, then each of
Section 1, Section 3, Section 4, Section 5(b), Section 5(c), Section 5(g),
Section 6, Section 7(a), Section 8, Section 9, and this Section 10 will survive
the termination of the Merger Agreement until the earlier of (a) the closing of
an Alternative Disposition or a Second Transaction and the payment of the
amounts owing pursuant to Section 3 and (b) eighteen months (18) following the
termination of the Merger Agreement.
B-8
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by
the stockholder and a duly authorized officer of Parent on the day and year
first written above.
Parent:
CLEAR CHANNEL COMMUNICATIONS, INC.
By: /s/ RANDALL T. MAYS
------------------------------------
Name: Randall T. Mays
Title: Executive Vice President and
Chief Financial Officer
STOCKHOLDER:
/s/ BARRY A. ACKERLEY
--------------------------------------
Barry A. Ackerley, in his individual
capacity
B-9
SCHEDULE I
TOTAL SHARES, SUBJECT SHARES, AND ADDITIONAL SHARES
PART A
COLUMN 1 COLUMN 2
TOTAL SHARES SUBJECT SHARES
------------ --------------
Company Ordinary Common Stock............... 9,002,855 9,002,855
Company Class B Stock....................... 10,949,299 0
Total............................. 19,952,154 9,002,855
PART B
NUMBER OF SHARES OF COMPANY COMMON STOCK THAT
STOCKHOLDER MAY PURCHASE (WHETHER OR NOT VESTED OR
EXERCISABLE) PURSUANT TO ANY OPTIONS, STOCK APPRECIATION
RIGHTS AND SECURITIES CONVERTIBLE INTO OR EXERCISABLE FOR ANY
SHARES OF COMPANY COMMON STOCK
-------------------------------------------------------------
Company Ordinary Common Stock.... 0
Company Class B Stock............ 0
Total............................ 0
B-I-1
EXHIBIT A
IRREVOCABLE PROXY
The undersigned, a stockholder of The Ackerley Group, Inc., a Delaware
corporation ("COMPANY"), hereby irrevocably appoints Clear Channel
Communications, Inc., a Texas corporation ("PARENT"), and Randall T. Mays, an
executive officer of Parent, and each of them as the sole and exclusive
attorneys and proxies of the undersigned, with full power of substitution and
resubstitution, to the full extent of the undersigned's rights with respect to:
(a) the number of shares of common stock, par value $0.01 per share,
of Company ("COMPANY ORDINARY COMMON STOCK") listed on the final page of
this irrevocable proxy;
(b) any shares of Company Ordinary Common Stock acquired by
Stockholder by purchase or by any other means of acquiring Beneficial
Ownership (as defined below), including the conversion of any securities of
Company into shares of Company Ordinary Common Stock, after the date of
this Agreement and before the Termination Date (as defined below); and
(c) any shares of Company Ordinary Common Stock acquired after the
date of this Agreement and before the Termination Date in connection with
any stock dividend and distribution and any shares into which or for which
any or all of the Company Ordinary Common Stock (or any class thereof)
listed on the final page of this irrevocable proxy may be changed or
exchanged as may be appropriate to reflect any stock dividend or
distribution, or any change in the Company Ordinary Common Stock (or any
class thereof) by reason of any split-up, recapitalization, combination,
exchange of shares or the like with respect to such shares of Company
Ordinary Common Stock listed on the final page of this irrevocable proxy;
in each case Beneficially Owned by the undersigned (collectively, the "SHARES"),
with respect to the matters set forth in the second paragraph following this
paragraph, until the earlier of (y) the date on which that certain Agreement and
Plan of Merger, dated of even date herewith, among Parent, CCMM Sub, Inc., a
Delaware corporation, and Company (the "MERGER AGREEMENT") is terminated in
accordance with its terms or (z) the Effective Time (as defined in the Merger
Agreement) (such earlier date, the "TERMINATION DATE"). For purposes of this
irrevocable proxy, "BENEFICIALLY OWN," "BENEFICIAL OWNER" or "BENEFICIAL
OWNERSHIP" with respect to any securities will mean having voting power or
investment power with respect to such securities (as determined pursuant to Rule
13d-3(a) under the Exchange Act), including pursuant to any agreement,
arrangement or understanding, whether or not in writing.
This irrevocable proxy is irrevocable, is coupled with an interest, is
granted pursuant to the Stockholder Voting and Support Agreement, and is granted
in consideration of Parent entering into the Merger Agreement, and relates to
the matters set forth immediately following this paragraph. Upon the execution
hereof, all prior proxies given by the undersigned with respect to the Shares
are hereby revoked and no subsequent proxies will be given.
The attorneys and proxies named above will be empowered at any time prior
to the Termination Date to vote (or cause to be voted) all of the Shares (or to
provide his written consent thereto), at any annual, special or other meeting of
the stockholders of Company, and at any adjournment or adjournments thereof, or
pursuant to any consent in lieu of a meeting or otherwise:
(x) in favor of the Merger and the approval and adoption of the terms
contemplated by the Merger Agreement and any other actions or agreements
required in furtherance thereof;
(y) against any action or agreement that is reasonably likely to
result in a breach in any material respect of any covenant, representation
or warranty or any other obligation of Company under the Merger Agreement;
and
(z) against any (A) direct or indirect acquisition or purchase of a
business that constitutes 15% or more of the net revenues, net income or
the assets of Company and its Subsidiaries taken as a whole, (B) direct or
indirect acquisition or purchase of 15% or more of any class of equity
securities
B-A-1
of Company or any of its Subsidiaries whose business constitutes 15% or
more of the net revenues, net income or assets of Company and its
Subsidiaries, taken as a whole (each, a "MATERIAL SUBSIDIARY"), (C) tender
offer or exchange offer that if consummated would result in any person
beneficially owning 15% more of any class of equity securities of Company
or any Material Subsidiary, (D) merger, consolidation, business
combination, recapitalization, liquidation, dissolution or similar
transaction involving Company or any Material Subsidiary, other than the
transactions contemplated by this Agreement and (E) to the extent that such
action is reasonably likely to materially impede, interfere with, delay,
postpone or adversely affect in any material respect the Merger and the
transactions contemplated by the Merger Agreement, (1) any change in a
majority of the Board of Directors of Company other than in connection with
an annual meeting of the stockholders of Company with respect to the slate
of directors proposed by the incumbent Board of Directors of Company (in
which case Stockholder agrees to vote for the slate proposed by the
incumbent Board of Directors of Company) or (2) except for such actions as
are contemplated by the Merger Agreement, any material change in Company's
corporate structure or business.
Other than the matter set forth in the immediately preceding paragraph, the
undersigned Stockholder may vote the Shares on all other matters.
Any obligation of the undersigned hereunder will be binding upon the
successors and assigns of the undersigned. THIS PROXY IS IRREVOCABLE.
9,002,855 Number of shares of Company Ordinary Common Stock that are
Beneficially Owned by the undersigned and subject to this
irrevocable proxy pursuant to subsection (a) above
Dated: October 5, 2001
Signature of Stockholder:
----------------------------------------------
Name of Stockholder: Barry A. Ackerley
B-A-2
APPENDIX C
[LETTERHEAD OF CREDIT SUISSE FIRST BOSTON CORPORATION]
October 5, 2001
Board of Directors
The Ackerley Group, Inc.
1301 Fifth Avenue
Seattle, WA 98101
Ladies and Gentlemen:
You have asked us to advise you with respect to the fairness to the holders
of Company Ordinary Common Stock (as defined below) from a financial point of
view of the Exchange Ratio (as defined below) pursuant to the terms of the
Agreement and Plan of Merger, dated as of October 5, 2001 (the "Merger
Agreement"), among Clear Channel Communications, Inc. (the "Acquiror"), CCMM
Sub, Inc., a wholly owned subsidiary of the Acquiror (the "Merger Sub"), and The
Ackerley Group, Inc. (the "Company"). The Merger Agreement provides for the
merger of Merger Sub with and into the Company (the "Merger") pursuant to which
the Company will become a wholly owned subsidiary of the Acquiror and each
issued and outstanding share of common stock, par value $0.01 per share
("Company Ordinary Common Stock"), of the Company and each issued and
outstanding share of Class B common stock, par value $0.01 per share, of the
Company will be converted into 0.35 of a share of common stock, par value $0.10
per share ("Acquiror Common Stock"), of the Acquiror in accordance with the
provisions of the Merger Agreement (the "Exchange Ratio").
In arriving at our opinion, we have reviewed certain publicly available
business and financial information relating to the Company and the Acquiror, as
well as the Merger Agreement. We have also reviewed certain other information,
including financial forecasts, provided to or discussed with us by the Company
and the Acquiror, and have met with the Company's management to discuss the
business and prospects of the Company.
We have also considered certain financial and stock market data of the
Company and the Acquiror, and we have compared those data with similar data for
other publicly held companies in businesses similar to the Company, and we have
considered the financial terms of certain other business combinations and other
transactions which have recently been effected. We also considered such other
information, financial studies, analyses and investigations and financial,
economic and market criteria which we deemed relevant.
In connection with our review, we have not assumed any responsibility for
independent verification of any of the foregoing information and have relied on
it being complete and accurate in all material respects. With respect to the
financial forecasts, we have been advised and have assumed that they have been
reasonably prepared on bases reflecting the best currently available estimates
and judgments of the Company's management as to the future financial performance
of the Company and as to the cost savings and other potential synergies
(including the amount, timing and achievability thereof) anticipated to result
from the Merger. You also have informed us, and we have assumed, that the Merger
will be treated as a tax-free reorganization for federal income tax purposes. In
addition, we have not been requested to make, and have not made, an independent
evaluation or appraisal of the assets or liabilities (contingent or otherwise)
of the Company or the Acquiror, nor have we been furnished with any such
evaluations or appraisals. Our opinion is necessarily based upon information
available to us and financial, economic, market and other conditions as they
exist and can be evaluated on the date hereof. We are not expressing any opinion
as to the actual value of the Acquiror Common Stock when issued to the holders
of Company Ordinary Common Stock pursuant to the Merger or the prices at which
the Acquiror Common Stock will trade at any time. Our opinion does not address
the relative merits of the Merger as compared to other business strategies that
might be available to the Company or the Company's underlying business decision
C-1
Page 2
to engage in the Merger. We were not requested to, and did not, solicit third
party indications of interest in acquiring all or any part of the Company.
We have acted as financial advisor to the Company in connection with the
Merger and will receive a fee for our services, a significant portion of which
is contingent upon the consummation of the Merger. We will also receive an
initial fee for rendering this opinion.
In the past, we and our affiliates have performed certain financial and
investment banking services to both the Company and the Acquiror for which we
have received compensation.
In the ordinary course of our business, we and our affiliates may actively
trade the debt and equity securities of both the Company and the Acquiror for
our and such affiliates' own accounts and for the accounts of customers and,
accordingly, may at any time hold a long or short position in such securities.
It is understood that this letter is for the information of the Board of
Directors in connection with its consideration of the Merger and does not
constitute a recommendation as to how any shareholder of the Company should vote
or act on any matter relating to the Merger.
Based upon and subject to the foregoing, it is our opinion that, as of the
date hereof, the Exchange Ratio is fair to the holders of the Company Ordinary
Common Stock from a financial point of view.
Very truly yours,
CREDIT SUISSE FIRST BOSTON CORPORATION
C-2
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article 2.02-1 of the TBCA provides for indemnification of directors and
officers in certain circumstances. In addition, the Texas Miscellaneous
Corporation Law provides that a corporation may amend its articles of
incorporation to provide that no director shall be liable to the corporation or
its shareholders for monetary damages for an act or omission in the director's
capacity as a director, provided that the liability of a director is not
eliminated or limited (i) for any breach of the director's duty of loyalty to
the corporation or its shareholders, (ii) for acts or omissions not in good
faith or which involve intentional misconduct or knowing violation of law, (iii)
any transaction from which such director derived an improper personal benefit,
or (iv) an act or omission for which the liability of a director is expressly
provided by an applicable statute. Clear Channel has amended its Charter and
added provisions adopting such limitations on a director's liability. The Clear
Channel Charter also provides in Article Eight for indemnification of directors
or officers in connection with the defense or settlement of suits brought
against them in their capacities as directors or officers of Clear Channel,
except in respect of liabilities arising from gross negligence or willful
misconduct in the performance of their duties.
Article IX(8) of the Clear Channel Bylaws provides for indemnification of
any person made a party to a proceeding by reason of such person's status as a
director, officer, employee, partner or trustee of Clear Channel, except in
respect of liabilities arising from negligence or misconduct in the performance
of their duties.
An insurance policy obtained by Clear Channel provides for indemnification
of officers and directors of Clear Channel and certain other persons against
liabilities and expenses incurred by any of them in certain stated proceedings
and under certain stated conditions.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
EXHIBITS DESCRIPTION
-------- -----------
2.1 -- Agreement and Plan of Merger dated as of October 5, 2001,
among Clear Channel, CCMM Sub, Inc. and Ackerley Group.
(Incorporated by reference to Appendix A to the proxy
statement/prospectus included in this Registration
Statement.)
2.2 -- Stockholder Voting and Support Agreement, dated as of
October 5, 2001, by and between Clear Channel and Barry A.
Ackerley. (Incorporated by reference to Appendix B to the
proxy statement/prospectus included in this Registration
Statement.)
3.1 -- Current Articles of Incorporation of Clear Channel.
(Incorporated by reference to exhibit 3.1 to Clear Channel's
Registration Statement on Form S-3 (Reg. No. 333-33371)
dated August 11, 1997.)
3.2 -- Third Amended and Restated Bylaws of Clear Channel.
3.3 -- Amendment to Clear Channel's Articles of Incorporation.
(Incorporated by reference to exhibit 3.3 to Clear Channel'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 exhibit 3.4 to
Clear Channel's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1999.)
3.5 -- Third Amendment to Clear Channel's Articles of
Incorporation. (Incorporated by reference to exhibit 3.5 to
Clear Channel's Quarterly Report on Form 10-Q for the
quarter ended March 31, 2000.)
4.1 -- Buy-Sell Agreement by and between Clear Channel, L. Lowry
Mays, B. J. McCombs, John M. Schaefer, and John W. Barger,
dated May 31, 1977. (Incorporated by reference to exhibit
4.0 to Clear Channel's Registration Statement on Form S-1
(Reg. No. 002-89161) dated April 19, 1984.)
II-1
EXHIBITS DESCRIPTION
-------- -----------
4.2 -- Fourth Amended and Restated Credit Agreement by and among
Clear Channel, Bank of America, N.A., as administrative
agent, Fleet National Bank as documentation agent, the Bank
of Montreal and Toronto Dominion (Texas), Inc., as
co-syndication agents, and certain other lenders dated June
15, 2000. (Incorporated by reference to exhibit 4.2 to Clear
Channel's registration statement on Form S-3 (Reg. No.
333-42028) dated July 21, 2000.)
4.3 -- Credit Agreement by and among Clear Channel, Bank of
America, N.A. as administrative agent, Chase Securities
Inc., as syndication agent, and certain other lenders dated
August 30, 2000. (Incorporated by reference to exhibit 10.18
to Clear Channel's Annual Report on Form 10-K for the year
ended December 31, 2000.)
4.4 -- Senior Indenture dated October 1, 1997, by and between Clear
Channel and The Bank of New York, as Trustee. (Incorporated
by reference to exhibit 4.2 to Clear Channel's Quarterly
Report on Form 10-Q for the quarter ended September 30,
1997.)
4.5 -- First Supplemental Indenture dated March 30, 1998 to Senior
Indenture dated October 1, 1997, by and between Clear
Channel and the Bank of New York, as Trustee. (Incorporated
by reference to exhibit 4.4 to Clear Channel's Quarterly
Report on Form 10-Q for the quarter ended March 31, 1998.)
4.6 -- Second Supplemental Indenture dated June 16, 1998 to Senior
Indenture dated October 1, 1997, by and between Clear
Channel and the Bank of New York as Trustee. (Incorporated
by reference to exhibit 4.1 to Clear Channel's Current
Report on Form 8-K dated August 27, 1998.)
4.7 -- Third Supplemental Indenture dated June 16, 1998 to Senior
Indenture dated October 1, 1997, by and between Clear
Channel and the Bank of New York, as Trustee. (Incorporated
by reference to exhibit 4.2 to Clear Channel's Current
Report on Form 8-K dated August 27, 1998.)
4.8 -- Fourth Supplemental 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. (Incorporated
by reference to exhibit 4.6 to Clear Channel's Annual Report
on Form 10-K for the year ended December 31, 1999.)
4.9 -- Fifth Supplemental Indenture dated June 21, 2000, to Senior
Indenture dated October 1, 1997, by and between Clear
Channel and The Bank of New York, as Trustee. (Incorporated
by reference to exhibit 4.8 to Clear Channel's registration
statement on Form S-3 (Reg. No. 333-42028) dated July 21,
2000.)
4.10 -- Sixth Supplemental Indenture dated June 21, 2000, to Senior
Indenture dated October 1, 1997, by and between Clear
Channel and The Bank of New York, as Trustee. (Incorporated
by reference to exhibit 4.9 to Clear Channel's registration
statement on Form S-3 (Reg. No. 333-42028) dated July 21,
2000.)
4.11 -- Seventh Supplemental Indenture dated July 7, 2000, to Senior
Indenture dated October 1, 1997, by and between Clear
Channel and The Bank of New York, as Trustee. (Incorporated
by reference to exhibit 4.10 to Clear Channel's registration
statement on Form S-3 (Reg. No. 333-42028) dated July 21,
2000.)
4.12 -- Eighth Supplemental Indenture dated September 12, 2000, to
Senior Indenture dated October 1, 1997, by and between Clear
Channel and The Bank of New York, as Trustee. (Incorporated
by reference to exhibit 4.10 to Clear Channel's Quarterly
Report on Form 10-Q for the quarter ended September 30,
2000.)
4.13 -- Ninth Supplemental Indenture dated September 12, 2000, to
Senior Indenture dated October 1, 1997, by and between Clear
Channel and The Bank of New York, as Trustee. (Incorporated
by reference to exhibit 4.11 to Clear Channel's Quarterly
Report on Form 10-Q for the quarter ended September 30,
2000.)
4.14 -- Tenth Supplemental Indenture dated October 26, 2001, to
Senior Indenture dated October 1, 1997, by and between Clear
Channel and the Bank of New York, as Trustee. (Incorporated
by reference to exhibit 4.12 to Clear Channel's Quarterly
Report on Form 10-Q for the quarter ended September 30,
2001.)
5 -- Opinion of Akin, Gump, Strauss, Hauer & Feld, L.L.P.
II-2
EXHIBITS DESCRIPTION
-------- -----------
8 -- Opinion of Akin, Gump, Strauss, Hauer & Feld, L.L.P.
23.1 -- Consent of Akin, Gump, Strauss, Hauer & Feld, L.L.P.
(Included in opinion filed as Exhibit 5 and Exhibit 8.)
23.2 -- Consent of Ernst & Young LLP, Independent Auditors.
23.3 -- Consent of KPMG LLP.
23.4 -- Consent of Ernst & Young LLP, Independent Auditors.
23.5 -- Consent of Ernst & Young LLP, Independent Auditors.
23.6 -- Consent of PricewaterhouseCoopers LLP.
23.7 -- Consent of PricewaterhouseCoopers LLP.
24 -- Power of Attorney for Clear Channel. (Included on Signature
Page.)
99.1 -- Form of Proxy for The Ackerley Group, Inc.
99.2 -- Consent of Credit Suisse First Boston Corporation.
Clear Channel agrees to furnish supplementally a copy of any omitted
schedules or exhibits to the SEC upon request.
ITEM 22. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period which offers or sales are being made, a
post-effective amendment to this Registration Statement;
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20 percent change
in the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective Registration Statement:
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the Registration Statement
or any material change to such information in the Registration
Statement.
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if
the Registration Statement is on Form S-3, Form S-8 or Form F-3, and the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the SEC
by the Registrant pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934 that are incorporated by reference in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
II-3
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to section 15(d) of the Exchange Act) that is
incorporated by reference in the Registration Statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(c) (1) The undersigned Registrant hereby undertakes as follows: that prior
to any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this Registration Statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other Items of the applicable form.
(2) The Registrant undertakes that every prospectus: (i) that is filed
pursuant to paragraph (1) immediately preceding, or (ii) that purports to meet
the requirements of section 10(a)(3) of the Act and is used in connection with
an offering of securities subject to Rule 415, will be filed as a part of an
amendment to the Registration Statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(d) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the SEC such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
(e) The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the Proxy
Statement/Prospectus pursuant to Items 4, 10(b), 11, or 13 herein, within one
business day of receipt of such request, and to send the incorporated documents
by first class mail or other equally prompt means. This includes information
contained in documents filed subsequent to the effective date of the
Registration Statement through the date of responding to the request.
(f) The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
II-4
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-4 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of San Antonio, State of Texas, on the 29th day of
November, 2001.
CLEAR CHANNEL COMMUNICATIONS, INC.
BY: /s/ L. LOWRY MAYS
--------------------------------------
L. LOWRY MAYS
Chief Executive Officer
POWER OF ATTORNEY
Each of the undersigned directors and officers of Clear Channel
Communications, Inc., hereby constitutes and appoints L. Lowry Mays, Mark P.
Mays, Randall T. Mays and Herbert W. Hill, Jr., and each of them, his true and
lawful attorneys-in-fact and agents with full power of substitution and
resubstitution, for him and his name place and stead, in any and all capacities,
to execute any and all amendments (including post-effective amendments) to this
Registration Statement, to sign any Registration Statement filed pursuant to
Rule 424(b) of the Securities Act of 1933, and to cause the same to be filed
with all exhibits thereto, and all documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and desirable to be done in and about the premises
as fully and to all intents and purposes as the undersigned might or could do in
person, hereby ratifying and confirming all acts and things that said
attorneys-in-fact and agents or any of them, or their or his substitute or
substitutes may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated below.
NAME TITLE DATE
---- ----- ----
/s/ L. LOWRY MAYS Chairman and Chief Executive November 29, 2001
------------------------------------------------ Officer
L. Lowry Mays
/s/ RANDALL T. MAYS Executive Vice President/Chief November 29, 2001
------------------------------------------------ Financial Officer (Principal
Randall T. Mays Financial Officer) and Director
/s/ HERBERT W. HILL, JR. Senior Vice President/Chief November 29, 2001
------------------------------------------------ Accounting Officer (Principal
Herbert W. Hill, Jr. Accounting Officer)
/s/ THOMAS O. HICKS Director November 29, 2001
------------------------------------------------
Thomas O. Hicks
/s/ MARK P. MAYS Director November 29, 2001
------------------------------------------------
Mark P. Mays
II-5
NAME TITLE DATE
---- ----- ----
/s/ B.J. MCCOMBS Director November 29, 2001
------------------------------------------------
B.J. McCombs
/s/ ALAN D. FELD Director November 29, 2001
------------------------------------------------
Alan D. Feld
/s/ THEODORE H. STRAUSS Director November 29, 2001
------------------------------------------------
Theodore H. Strauss
/s/ JOHN H. WILLIAMS Director November 29, 2001
------------------------------------------------
John H. Williams
/s/ KARL ELLER Director November 29, 2001
------------------------------------------------
Karl Eller
/s/ ROBERT L. CRANDALL Director November 29, 2001
------------------------------------------------
Robert L. Crandall
/s/ VERNON E. JORDAN, JR. Director November 29, 2001
------------------------------------------------
Vernon E. Jordan, Jr.
/s/ PERRY J. LEWIS Director November 29, 2001
------------------------------------------------
Perry J. Lewis
II-6
INDEX TO EXHIBITS
EXHIBITS DESCRIPTION
-------- -----------
2.1 -- Agreement and Plan of Merger dated as of October 5, 2001,
among Clear Channel, CCMM Sub, Inc. and Ackerley Group.
(Incorporated by reference to Appendix A to the proxy
statement/prospectus included in this Registration
Statement.)
2.2 -- Stockholder Voting and Support Agreement, dated as of
October 5, 2001, by and between Clear Channel and Barry A.
Ackerley. (Incorporated by reference to Appendix B to the
proxy statement/prospectus included in this Registration
Statement.)
3.1 -- Current Articles of Incorporation of Clear Channel.
(Incorporated by reference to exhibit 3.1 to Clear Channel's
Registration Statement on Form S-3 (Reg. No. 333-33371)
dated August 11, 1997.)
3.2 -- Third Amended and Restated Bylaws of Clear Channel.
3.3 -- Amendment to Clear Channel's Articles of Incorporation.
(Incorporated by reference to exhibit 3.3 to Clear Channel'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 exhibit 3.4 to
Clear Channel's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1999.)
3.5 -- Third Amendment to Clear Channel's Articles of
Incorporation. (Incorporated by reference to exhibit 3.5 to
Clear Channel's Quarterly Report on Form 10-Q for the
quarter ended March 31, 2000.)
4.1 -- Buy-Sell Agreement by and between Clear Channel, L. Lowry
Mays, B. J. McCombs, John M. Schaefer, and John W. Barger,
dated May 31, 1977. (Incorporated by reference to exhibit
4.0 to Clear Channel's Registration Statement on Form S-1
(Reg. No. 002-89161) dated April 19, 1984.)
4.2 -- Fourth Amended and Restated Credit Agreement by and among
Clear Channel, Bank of America, N.A., as administrative
agent, Fleet National Bank as documentation agent, the Bank
of Montreal and Toronto Dominion (Texas), Inc., as
co-syndication agents, and certain other lenders dated June
15, 2000. (Incorporated by reference to exhibit 4.2 to Clear
Channel's registration statement on Form S-3 (Reg. No.
333-42028) dated July 21, 2000.)
4.3 -- Credit Agreement by and among Clear Channel, Bank of
America, N.A. as administrative agent, Chase Securities
Inc., as syndication agent, and certain other lenders dated
August 30, 2000. (Incorporated by reference to exhibit 10.18
to Clear Channel's Annual Report on Form 10-K for the year
ended December 31, 2000.)
4.4 -- Senior Indenture dated October 1, 1997, by and between Clear
Channel and The Bank of New York, as Trustee. (Incorporated
by reference to exhibit 4.2 to Clear Channel's Quarterly
Report on Form 10-Q for the quarter ended September 30,
1997.)
4.5 -- First Supplemental Indenture dated March 30, 1998 to Senior
Indenture dated October 1, 1997, by and between Clear
Channel and the Bank of New York, as Trustee. (Incorporated
by reference to exhibit 4.4 to Clear Channel's Quarterly
Report on Form 10-Q for the quarter ended March 31, 1998.)
4.6 -- Second Supplemental Indenture dated June 16, 1998 to Senior
Indenture dated October 1, 1997, by and between Clear
Channel and the Bank of New York as Trustee. (Incorporated
by reference to exhibit 4.1 to Clear Channel's Current
Report on Form 8-K dated August 27, 1998.)
4.7 -- Third Supplemental Indenture dated June 16, 1998 to Senior
Indenture dated October 1, 1997, by and between Clear
Channel and the Bank of New York, as Trustee. (Incorporated
by reference to exhibit 4.2 to Clear Channel's Current
Report on Form 8-K dated August 27, 1998.)
EXHIBITS DESCRIPTION
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4.8 -- Fourth Supplemental 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. (Incorporated
by reference to exhibit 4.6 to Clear Channel's Annual Report
on Form 10-K for the year ended December 31, 1999.)
4.9 -- Fifth Supplemental Indenture dated June 21, 2000, to Senior
Indenture dated October 1, 1997, by and between Clear
Channel and The Bank of New York, as Trustee. (Incorporated
by reference to exhibit 4.8 to Clear Channel's registration
statement on Form S-3 (Reg. No. 333-42028) dated July 21,
2000.)
4.10 -- Sixth Supplemental Indenture dated June 21, 2000, to Senior
Indenture dated October 1, 1997, by and between Clear
Channel and The Bank of New York, as Trustee. (Incorporated
by reference to exhibit 4.9 to Clear Channel's registration
statement on Form S-3 (Reg. No. 333-42028) dated July 21,
2000.)
4.11 -- Seventh Supplemental Indenture dated July 7, 2000, to Senior
Indenture dated October 1, 1997, by and between Clear
Channel and The Bank of New York, as Trustee. (Incorporated
by reference to exhibit 4.10 to Clear Channel's registration
statement on Form S-3 (Reg. No. 333-42028) dated July 21,
2000.)
4.12 -- Eighth Supplemental Indenture dated September 12, 2000, to
Senior Indenture dated October 1, 1997, by and between Clear
Channel and The Bank of New York, as Trustee. (Incorporated
by reference to exhibit 4.10 to Clear Channel's Quarterly
Report on Form 10-Q for the quarter ended September 30,
2000.)
4.13 -- Ninth Supplemental Indenture dated September 12, 2000, to
Senior Indenture dated October 1, 1997, by and between Clear
Channel and The Bank of New York, as Trustee. (Incorporated
by reference to exhibit 4.11 to Clear Channel's Quarterly
Report on Form 10-Q for the quarter ended September 30,
2000.)
4.14 -- Tenth Supplemental Indenture dated October 26, 2001, to
Senior Indenture dated October 1, 1997, by and between Clear
Channel and the Bank of New York, as Trustee. (Incorporated
by reference to exhibit 4.12 to Clear Channel's Quarterly
Report on Form 10-Q for the quarter ended September 30,
2001.)
5 -- Opinion of Akin, Gump, Strauss, Hauer & Feld, L.L.P.
8 -- Opinion of Akin, Gump, Strauss, Hauer & Feld, L.L.P.
23.1 -- Consent of Akin, Gump, Strauss, Hauer & Feld, L.L.P.
(Included in opinion filed as Exhibit 5 and Exhibit 8.)
23.2 -- Consent of Ernst & Young LLP, Independent Auditors.
23.3 -- Consent of KPMG LLP.
23.4 -- Consent of Ernst & Young LLP, Independent Auditors.
23.5 -- Consent of Ernst & Young LLP, Independent Auditors.
23.6 -- Consent of PricewaterhouseCoopers LLP.
23.7 -- Consent of PricewaterhouseCoopers LLP.
24 -- Power of Attorney for Clear Channel. (Included on Signature
Page.)
99.1 -- Form of Proxy for The Ackerley Group, Inc.
99.2 -- Consent of Credit Suisse First Boston Corporation.