Delaware
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1-32663
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86-0812139
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(State or other jurisdiction
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(Commission File Number)
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(I.R.S. Employer
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of incorporation)
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Identification No.)
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o
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
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o
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
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o
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
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o
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
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The Company agrees, not later than 30 calendar days following the approval of the settlement by the Delaware Chancery Court, to (i) demand payment of $200 million outstanding under the Note and (ii) declare a dividend of $200 million that shall be paid simultaneously on the date the payment from the demand is to be made (approximately 89% of the proceeds from such dividend would be distributed to Clear Channel Holdings, Inc., the Company’s direct parent and a direct wholly-owned subsidiary of CCU).
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●
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CCU and the Company agree to amend the Contract Rate such that, in the event that (x) the outstanding balance of the Note exceeds $1.0 billion, the per annum rate of interest applicable to such excess balance (i.e., the amount that exceeds $1.0 billion) will be an amount equal to the average yield-to-maturity for the series of CCU Legacy Notes (as defined below) that has the nearest future maturity date or (y) the Clear Channel Liquidity Ratio (as defined below) is less than 2.0x, the per annum rate of interest applicable to the entire outstanding balance of the Note will be an amount equal to the average yield-to-maturity for the series of CCU Legacy Notes that has the nearest future maturity date; provided, however, that, the Contract Rate shall in no event be less than 6.5% nor greater than 20%. Clear Channel Liquidity Ratio is defined to equal the (A) aggregate (i) cash and cash equivalents set forth on CCU’s balance sheet (excluding minority interests and unavailable cash) and (ii) borrowing availability under any revolving credit (or similar) facility of CCU (collectively, “Clear Channel Liquidity”) divided by (B) the amount that would be payable to non-affiliated holders of the Company’s common stock (the “Outdoor Public Share”) assuming (1) a demand by the Company of the aggregate amount outstanding under the Note and (2) a simultaneous dividend of the proceeds of such demand to the stockholders of the Company. CCU Legacy Notes is defined as CCU’s 5.5% Senior Notes Due 2014, 4.9% Senior Notes Due 2015, 5.5% Senior Notes Due 2016 and 6.875% Senior Debentures Due 2018, excluding any series of notes that has a maturity date less than 90 calendar days from the date of measurement.
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●
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The Company agrees to establish a committee of the Board (the “Committee”), composed of all then-serving independent and disinterested directors of the Company, for the specific purpose of monitoring the Note. The Committee will be provided reports on a monthly basis, have access to independent legal and financial advisors, and will have the non-exclusive authority (i.e., in addition to the authority of the full Board), if the Committee so desires and believes it to be in the best interests of the Company’s stockholders, to demand payments under the Note under the following specified circumstances (i.e., the Committee shall not be required to demand payment, but rather shall have the optional authority to do so under the following specified circumstances):
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o
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if the Clear Channel Liquidity Ratio is less than 2.0x on an actual or projected basis, the Committee will be authorized to demand payment up to the full balance outstanding under the Note; or
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o
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if the Outdoor Public Share is greater than $114.0 million on an actual or projected basis, then the Committee will be authorized to demand payment up to the amount required to reduce the Outdoor Public Share to $85.0 million;
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●
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A comprehensive release for liability arising out of claims asserted in the litigation.
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(d)
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Exhibits
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10.1
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Memorandum of Understanding, dated as of March 28, 2013, among legal counsel for Clear Channel Communications, Inc. and the other named defendants, the special litigation committee of the board of directors of Clear Channel Outdoor Holdings, Inc. and the plaintiffs.
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CLEAR CHANNEL OUTDOOR HOLDINGS, INC.
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Date: April 3, 2013
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By:
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/s/ Hamlet T. Newsom, Jr.
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Hamlet T. Newsom, Jr.
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Vice President, Associate General Counsel and
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Assistant Secretary
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Exhibit No.
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Description
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10.1
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Memorandum of Understanding, dated as of March 28, 2013, among legal counsel for Clear Channel Communications, Inc. and the other named defendants, the special litigation committee of the board of directors of Clear Channel Outdoor Holdings, Inc. and the plaintiffs.
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IN RE CLEAR CHANNEL OUTDOOR HOLDINGS, INC. DERIVATIVE LITIGATION
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) CONSOLIDATED
)
) C.A. No. 7315-CS
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Clear Channel is overleveraged with debt arising from its 2008 $24 billion leveraged buyout arranged by Bain Capital Partners, LLC and Thomas H. Lee Partners, L.P.;
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Clear Channel’s increased leverage has, in turn, increased its risk of default, thereby making it difficult for Clear Channel to raise capital;
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In late 2009, to solve its liquidity issues, Clear Channel, as Outdoor’s controlling stockholder, forced Outdoor to agree to support and approve a $1 billion unsecured loan in the form of the Note at an “unreasonably low” interest rate of 9.25%;
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The Note is integrated into the combined cash management systems of Clear Channel and Outdoor pursuant to which Clear Channel sweeps Outdoor’s cash accounts on a daily basis into a Clear Channel master account and Clear Channel provides funds to Outdoor on days that Outdoor’s disbursements exceed its collections;
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As part of the cash management system, Outdoor records net amounts “due to” or “due from” Clear Channel on its consolidated balance sheets. The Note permits Clear Channel to borrow up to $1 billion from Outdoor, and Clear Channel’s borrowings under the Note are unsecured such that Outdoor would be treated as a general unsecured creditor in the event of a Clear Channel bankruptcy;
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The Note was originally due to expire by its own terms on August 10, 2010, and provided for an interest rate equal to the average one-month generic treasury bill rate. On December 23, 2009, Clear Channel and Outdoor agreed to extend the Note through December 15, 2017, and to increase the interest rate to a rate that Plaintiffs allege is an “unreasonably low” interest rate; and
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The Note is payable on demand and Outdoor could demand immediate repayment. Nonetheless, Outdoor has unreasonably refused to demand repayment and instead allowed outstanding indebtedness under the Note to grow to $650 million;
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A.
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Immediate Draw-Down of Note Balance by Outdoor. Outdoor agrees that, not later than 30 calendar days following the approval of the Settlement, Outdoor will demand repayment of $200 million outstanding under the Note and declare a dividend in an equal amount to be paid simultaneously on the date the demand is paid.
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B.
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Outdoor and Clear Channel Agree to Amend Note Interest Rate. Outdoor and Clear Channel agree that the definition of “Contract Rate” set forth in the Note will be amended to provide that, in the event that (x) the outstanding balance (which shall be calculated on a daily basis) due under the Note exceeds $1.0 billion, the per annum rate of interest applicable to such excess balance (i.e., the amount that exceeds $1.0 billion) will be an amount equal to the Average Yield-to-Maturity for the series of Clear Channel Reference Notes that has the nearest future maturity date or (y) the Clear Channel Liquidity Ratio (as defined below) is, on an actual basis, less than 2.0x, the per annum rate of interest applicable to the entire balance outstanding under the Note will be an amount equal to the Average Yield-to-Maturity for the series of Clear Channel Reference Notes that has the nearest future maturity date; provided, however, that, (a) any Clear Channel Reference Note that has a maturity date less than 90 calendar days from the date of measurement shall be disregarded and (b) the Contract Rate shall in no event be less than 6.5%, nor greater than 20%. Interest will be calculated by Clear Channel on the last day of each month using (x) daily Note balance amounts and (y) (if applicable) the Average Yield-to-Maturity for such month.
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i.
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“Average Yield-to-Maturity” shall mean the average yield to maturity for the applicable Clear Channel Reference Note during such month (using data reported by Bloomberg).
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ii.
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“Clear Channel Reference Notes” shall mean Clear Channel’s 5.5% Senior Notes Due 2014, 4.9% Senior Notes Due 2015, 5.5% Senior Notes Due 2016 and 6.875% Senior Debentures Due 2018.
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C.
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Outdoor to Establish Committee of Independent Directors with Authority to Demand Repayment Under the Note with Simultaneous Dividend of Such Proceeds.
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a.
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Outdoor agrees to establish a committee (the “Committee”) of the Outdoor Board for the specific purpose of monitoring the Note, and such Committee shall have the authority (pursuant to a Committee Charter, the “Charter”) to demand repayment under the Note under certain specified circumstances described below. The members of the Committee shall be all then-serving independent and disinterested directors of Outdoor. The Committee shall have the authority to retain and compensate (at Outdoor’s expense) independent legal counsel and an independent financial advisor as the Committee shall deem appropriate in order to perform its responsibilities. The Committee’s authority shall be incremental to (as opposed to in place of) that of the full Outdoor Board, and the Outdoor Board shall always have the right and authority to make demands under the Note if it so desires and believes it to be in the best interests of Outdoor’s stockholders.
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b.
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Clear Channel agrees that, no later than the 16th calendar day of every month, Clear Channel will deliver to the Committee a report containing the following information compiled in good faith, in each case (x) calculated as of month’s end for the three preceding months; and (y) projected as of month’s end for the current month and the three succeeding months (the “Projection Period”) (for example, no later than February 16, 2013, Clear Channel would deliver a report reflecting calculations as of November 30, 2012; December 31, 2012; and January 31, 2013; and projections as of February 28, 2013; March 31, 2013; April 30, 2013; and May 31, 2013):
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i.
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Note balance.
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ii.
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Aggregate (a) Cash and cash equivalents set forth on Clear Channel’s balance sheet (excluding minority interests (e.g., Outdoor’s public stub) and Unavailable Cash (i.e., cash which is not accessible or restricted)) and (b) borrowing availability (including basket capacity) under any revolver or credit line of Clear Channel (collectively, “Clear Channel Liquidity”).
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iii.
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A calculation (the “Clear Channel Liquidity Ratio”) equal to (A) Aggregate (a) Cash and cash equivalents set forth on Clear Channel’s balance sheet (excluding minority interests (e.g., Outdoor’s public stub) and Unavailable Cash (i.e., cash which is not accessible or restricted)) and (b) borrowing availability (including basket capacity) under any revolver or credit line of Clear Channel (collectively, “Clear Channel Liquidity”) divided by (B) the amount that would be payable to non-affiliated holders of Outdoor’s common stock (the “Outdoor Public Share”) assuming (x) a demand by Outdoor of the aggregate amount outstanding under the Note and (y) a simultaneous dividend of the proceeds of such demand to the stockholders of Outdoor.
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c.
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Clear Channel agrees that at the same time as delivery of Clear Channel’s annual long-range forecast to the Clear Channel board of directors, but in all events no later than each July 1, Clear Channel will deliver to the Committee a report, compiled in good faith, containing projections for each of the metrics identified in subparagraphs b (i)-(iii) above and covering a period of three calendar years. Projections for the current calendar year will be on a monthly basis. Projections for the succeeding calendar years may track the periodicity of Clear Channel’s regular internal forecasting process, whether such forecasting is done on a quarterly, annual, or other basis.
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d.
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Clear Channel agrees that it shall provide to the Outdoor Board (and the Committee if it so desires) an annual presentation on Clear Channel capital structure status and outlook/financing plan, with quarterly updates if requested by the Outdoor Board or the Committee.
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e.
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Clear Channel covenants and agrees that if at any time after the delivery of the report described in subparagraph b above, an event, circumstance or discovery were to occur (or is reasonably likely to occur) such that the previously-projected balances of the Note or Clear Channel Liquidity were to no longer be accurate in any material respect, then Clear Channel shall notify the Outdoor Board and the Committee as soon as reasonably practicable (provided that any event or circumstance which would result in the projected Clear Channel Liquidity Ratio being less than 2.0x or the projected Outdoor Public Share exceeding $114.0 million will require notification even if not material).
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f.
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Clear Channel agrees to calculate the actual Clear Channel Liquidity Ratio on a monthly basis. If on any date the actual Clear Channel Liquidity Ratio falls below 2.0x (a “Liquidity Event”), Clear Channel shall notify the Outdoor Board and the Committee as soon as reasonably practicable.
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g.
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Outdoor’s Board shall grant the Committee the power and authority such that:
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i.
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if the Clear Channel Liquidity Ratio is projected to be less than 2.0x at any time during the Projection Period, then from the date the report is provided and for so long as Clear Channel continues to project that the Clear Channel Liquidity Ratio will fall below 2.0x at any time during the Projection Period, the Committee will be authorized by its Charter to give Notice of Demand (as that term is defined below) and may give such Notice if it believes doing so is in the best interests of Outdoor (up to the full balance outstanding under the Note);
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ii.
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if Outdoor receives notice of a Liquidity Event, then from the date of such notice and for thirty (30) calendar days after each such Liquidity Event, the Committee will be authorized by its Charter to give Notice of Demand and may give such Notice if it believes doing so is in the best interests of Outdoor (up to the full balance outstanding under the Note);
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iii.
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if the Outdoor Public Share is projected to be greater than $114.0 million at any time during the thirty days after the delivery of the report, then from the date the report is provided and for so long as Clear Channel continues to project that the Outdoor Public Share will exceed $114.0 million, the Committee will be authorized by its Charter to give Notice of Demand and may give such Notice if it believes doing so is in the best interests of Outdoor (up to the amount required to bring the projected Outdoor Public Share down to $85.0 million); or
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iv.
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if the Outdoor Public Share is at any time greater than $114.0 million, then the Committee will be authorized by its Charter to give Notice of Demand and may give such Notice if it believes doing so is in the best interests of Outdoor (up to the amount required to bring the projected Outdoor Public Share down to $85.0 million);
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D.
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Legal Counsel and Financial Advisors in Connection with Transactions Between Outdoor and Clear Channel. In connection with any proposed intercompany transaction between Clear Channel and Outdoor for which the approval of a majority of the Outdoor Board’s independent directors is sought (including, without limitation, in connection with any transaction as to which independent director approval is required by contract or otherwise), Clear Channel shall agree to pay the fees and any expenses related to any independent counsel and/or independent financial advisor whom the independent directors in their sole discretion shall choose to retain.
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E.
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Payment of Attorneys’ Fees. Payment of attorneys’ fees and expenses as provided in Paragraph 11 below.
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A.
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An acknowledgement of the derivative nature of the claims asserted in this action and a customary general release (i) by Plaintiffs and the SLC (on behalf of Outdoor) of the following parties, in connection with any and all claims related to the subject matter of the lawsuit from the beginning of time through the date of the Stipulation: all current and former directors of Outdoor, all Defendants, and any and all of their respective employers, parent entities, controlling persons, principals, affiliates or subsidiaries and each and all of their respective past or present officers, directors, partners, stockholders, representatives, employees, attorneys, financial or investment advisors, consultants, accountants, investment bankers, commercial bankers, agents, heirs, executors, trustees, personal representatives, estates, administrators, predecessors, successors, assigns, insurers, reinsurers) (the “Defendant Released Parties”); and (ii) by Defendants of Plaintiffs and the members of the SLC (together with Defendant Released Parties, the “Released Parties”) and their respective counsel in connection with any claims related to the institution, prosecution, or settlement of the claims asserted in the lawsuit.
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B.
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a statement that the Releases contemplated by this MOU extends to claims that the SLC (on behalf of Outdoor), Plaintiffs, and Defendants (the “Releasing Parties”) did not know or suspect to exist at the time of the release, which if known, might have affected the decision to enter into this release. The Releasing Parties shall be deemed to have waived any and all provisions, rights, and benefits conferred by any law of the United States, any law of any state, or principle of common law which governs or limits a person’s release of unknown claims. The Releasing Parties shall be deemed to relinquish, to the full extent permitted by law, the provisions, rights, and benefits of Section 1542 of the California Civil Code which provides:
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C.
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a statement that the Releasing Parties shall also be deemed to have waived any and all provisions, rights, and benefits conferred by any law of any state of the United States or principle of common law, which is similar, comparable, or equivalent to California Civil Code Section 1542. The Releasing Parties acknowledge that they may discover facts in addition to or different from those that they now know or believe to be true with respect to the subject matter of the Releases, but that it is their intention to fully, finally, and forever settle and release any and all claims released hereby, known or unknown, suspected or unsuspected, which now exist or heretofore existed, from the beginning of time to the date of the Stipulation, without regard to the subsequent discovery or existence of such additional or different facts.
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D.
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the form, content and manner of providing notice of settlement to Outdoor’s stockholders, subject to Court approval (when approved by the Court, the “Notice”). Outdoor shall be responsible for providing the Notice to stockholders in the manner provided in the Stipulation and approved by the Court, and shall pay all reasonable costs and expenses incurred in providing the Notice, including any costs and expenses associated with any additional copies of the notice requested by record holders of Outdoor stock (whether for purpose of providing the Notice to beneficial owners or otherwise);
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E.
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a requirement for entry of a judgment dismissing the Action, subject to Final Court Approval and pursuant to Court of Chancery Rule 23.1, with prejudice on the merits; and
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F.
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such other terms and conditions as are customary or appropriate to the Settlement contemplated herein.
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4.
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Conditions. This MOU and the Stipulation shall be null and void and of no force and effect, unless otherwise agreed to by the parties hereto pursuant to the terms hereof, if (i) the Settlement is terminated pursuant to the terms of the Stipulation, or (ii) the Settlement does not obtain Final Court Approval for any other reason. If the Settlement is terminated pursuant to the terms of the Stipulation, or the Settlement does not obtain Final Court Approval for any other reason, this MOU and the Stipulation shall not be deemed to prejudice in any way the respective positions of the SLC (acting for and on behalf of Outdoor, with the full power and authority delegated to it by the Outdoor Board), the Plaintiffs, or any Defendant with respect to the Action. In such event, and consistent with the applicable evidentiary rules, none of this MOU, the Stipulation, their contents, or the existence of either shall be admissible in evidence or shall be referred to for any purpose in the Action or in any other proceeding, except in connection with any claim for breach of this MOU or the Stipulation and damages flowing therefrom to Outdoor or the Plaintiffs and their counsel.
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OF COUNSEL:
Mark Lebovitch
Jeremy Friedman
Bernstein Litowitz Berger
& Grossmann LLP
1285 Avenue of the Americas
New York, NY 10019
(212) 554-1400
Robert D. Klausner
Klausner, Kaufman, Jensen
& Levinson
10059 Northwest 1st Court
Plantation, FL 33324
(954) 916-1202
Attorneys for Plaintiff City of Pinellas Park Firefighters Pension Board
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GRANT & EISENHOFER P.A.
By: /s/ Stuart M. Grant
Stuart M. Grant (#2526)
Michael J. Barry (#4368)
Nathan A. Cook (#4841)
123 Justison Street
Wilmington, DE 19801
(302) 622-7000
Attorneys for Plaintiffs City of Pinellas Park Firefighters Pension Board and NECA-IBEW Pension Trust Fund
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Joseph E. White, III
Jonathan M. Stein
Lester R. Hooker
SAXENA WHITE, P.A.
2424 North Federal Hwy. Suite 257
Boca Raton, Florida 33431
(561) 394-3399
Attorneys for Plaintiff NECA-IBEW Pension Trust Fund
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OF COUNSEL:
Michael Chertoff
Elaine W. Stone
COVINGTON & BURLING, LLP
1201 Pennsylvania Avenue, NW
Washington, DC 20004
(202) 662-6000
Jonathan M. Sperling
COVINGTON & BURLING, LLP
The New York Times Building
New York, NY 10018
(212) 841-1000
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POTTER ANDERSON & CORROON LLP
By: /s/ Donald J. Wolfe, Jr.
Donald J. Wolfe, Jr. (#285)
Michael A. Pittenger (#3212)
Berton W. Ashman (#4681)
Samuel L. Closic (#5468)
Hercules Plaza – 6th Floor
1313 North Market
P.O. Box 951
Wilmington, DE 19899
(302) 984-6000
Attorneys for the Special Litigation Committee of the Board of Directors of Clear Channel Outdoor Holdings, Inc. (acting for and on behalf of Nominal Defendant Clear Channel Outdoor Holdings, Inc.)
ASHBY & GEDDES
By: /s/ Philip Trainer, Jr.
Philip Trainer, Jr. (#2788)
Toni-Ann Platia (#5051)
500 Delaware Avenue, 8th Floor
P.O. Box 1150
Wilmington, DE 19899
(302) 654-1888
Attorneys for Defendants Douglas L. Jacobs and Christopher M. Temple
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OF COUNSEL:
Kevin B. Huff
Brendan J. Crimmins
KELLOGG, HUBER, HANSEN,
TODD, EVANS & FIGEL, P.L.L.C.
1615 m Street, N.W., Suite 400
Washington, D.C. 20036
(202) 326-7900
Attorneys for Defendants Margaret W. Covell, Blair E. Hendrix,
Daniel G. Jones, Mark P. Mays, Randall T. Mays, Scott R. Wells,
James C. Carlisle, Clear Channel Communications, Inc.,
Bain Capital Partners, LLC, and Thomas H. Lee Partners, L.P.
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SEITZ ROSS ARONSTAM & MORITZ LLP
By: /s/ Collins J. Seitz, Jr.
Collins J. Seitz, Jr. (#2237)
David E. Ross (#5228)
S. Michael Sirkin (#5389)
100 S. West Street, Suite 400
Wilmington, DE 19801
(302) 576-1600
Attorneys for Defendants Margaret W. Covell, Blair E. Hendrix,
Daniel G. Jones, Mark P. Mays, Randall T. Mays, Robert Pittman, Scott R. Wells,
James C. Carlisle, Clear Channel Communications, Inc.,
Bain Capital Partners, LLC, and Thomas H. Lee Partners, L.P.
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Barry G. Sher
Jodi Kleinick
PAUL HASTINGS LLP
75 East 55th Street
New York, NY 10022
(212) 318-6000
Attorneys for Defendant Robert Pittman
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BOUCHARD MARGULES & FRIEDLANDER, P.A.
By: /s/ Andre G. Bouchard
Andre G. Bouchard (#2504)
222 Delaware Avenue, Suite 1400
Wilmington, DE 19801
(302) 573-3500
Attorneys for Defendants Thomas R. Shepherd, Marsha M. Shields, and Dale W. Tremblay
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