-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VY5UyRpsFzWLorw55RBc7dVEQTufFTRxMHE9v9FLm/4It9pMwSWUijzTucprmSIR uBPoChhte7BTtBjFnpEZvQ== 0000950134-01-002330.txt : 20010321 0000950134-01-002330.hdr.sgml : 20010321 ACCESSION NUMBER: 0000950134-01-002330 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 20001231 FILED AS OF DATE: 20010320 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CLEAR CHANNEL COMMUNICATIONS INC CENTRAL INDEX KEY: 0000739708 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-ADVERTISING [7310] IRS NUMBER: 741787536 STATE OF INCORPORATION: TX FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-09645 FILM NUMBER: 1572138 BUSINESS ADDRESS: STREET 1: 200 E BASSE RD CITY: SAN ANTONIO STATE: TX ZIP: 78209 BUSINESS PHONE: 2108222828 MAIL ADDRESS: STREET 1: 200 EAST BASSE ROAD CITY: SAN ANTONIO STATE: TX ZIP: 78209 10-K 1 h85063e10-k.txt FORM 10-K FOR FISCAL YEAR END DECEMBER 31, 2000 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-K [x] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended December 31, 2000, or [ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from ________ to _________. COMMISSION FILE NUMBER 1-9645 CLEAR CHANNEL COMMUNICATIONS, INC. (Exact name of registrant as specified in its charter) Texas 74-1787539 (State of Incorporation) (I.R.S. Employer Identification No.) 200 East Basse Road San Antonio, Texas 78209 Telephone (210) 822-2828 (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices) Securities registered pursuant to Section 12(b) of the Act: Common Stock, $.10 par value per share. Securities registered pursuant to Section 12(g) of the Act: None. Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO --- --- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ___ On March 9, 2001, the aggregate market value of the Common Stock beneficially held by non-affiliates of the Company was approximately $32.4 billion. (For purposes hereof, directors, executive officers and 10% or greater shareholders have been deemed affiliates). On March 9, 2001, there were 587,320,053 outstanding shares of Common Stock, excluding 121,491 shares held in treasury. DOCUMENTS INCORPORATED BY REFERENCE Portions of our Definitive Proxy Statement for the 2001 Annual Meeting, expected to be filed within 120 days of our fiscal year end, are incorporated by reference into Part III. 2 CLEAR CHANNEL COMMUNICATIONS, INC. INDEX TO FORM 10-K
Page Number PART I. - ------- Item 1. Business..................................................................................... 3 Item 2. Properties...................................................................................30 Item 3. Legal Proceedings........................................................................... 31 Item 4. Submission of Matters to a Vote of Security Holders..........................................31 PART II. - -------- Item 5. Market for Registrant's Common Stock and Related Stockholder Matters.........................32 Item 6. Selected Financial Data......................................................................33 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations..........................................................34 Item 7A. Quantitative and Qualitative Disclosures about Market Risk ..................................49 Item 8. Financial Statements and Supplementary Data .................................................50 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure..........................................................84 PART III. - --------- Item 10. Directors and Executive Officers of the Registrant...........................................85 Item 11. Executive Compensation.......................................................................87 Item 12. Security Ownership of Certain Beneficial Owners and Management...............................87 Item 13. Certain Relationships and Related Transactions...............................................87 PART IV. - -------- Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.............................88
2 3 PART I ITEM 1. BUSINESS THE COMPANY Clear Channel Communications, Inc. is a diversified media company with three reportable business segments: radio broadcasting, outdoor advertising and live entertainment. We were incorporated in Texas in 1974. As of December 31, 2000, we 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, we had equity interests in various domestic and international radio broadcasting companies. We were also one of the world's largest outdoor advertising companies based on total advertising display inventory of 149,171 domestic display faces and 549,094 international display faces. In addition, we were one of the world's largest diversified promoters, producers and venue operators for live entertainment events. As of December 31, 2000, we owned or operated 120 live entertainment venues. We also own or program 19 television stations, own a media representation firm, represent professional athletes and have operations in the Internet industry, all of which, along with corporate expense, is within the category "other". The following table presents each segment's percentage of total revenues for the year ended December 31, 2000:
Percentage of Segment Revenues ------- ----------------- Radio Broadcasting 45% Outdoor Advertising 32% Live Entertainment 17% Other 6% ---- Total 100%
Our principal executive offices are located at 200 East Basse Road, San Antonio, Texas 78209 (telephone: 210-822-2828). RADIO BROADCASTING Radio Stations As of December 31, 2000, we 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, we currently own two international FM radio stations and various interests in domestic and international radio broadcasting companies, which we account for under the equity method of accounting. Our radio stations employ various formats for their programming. A station's format is important in determining the size and characteristics of its listening audience. Advertisers tailor their advertisements to appeal to selected population or demographic segments. Most of our radio revenue is generated from the sale of national and local advertising. Additional revenue is generated from network compensation payments, barter and other miscellaneous transactions. Advertising rates charged by a radio station are based primarily on the station's ability to attract audiences having certain demographic characteristics in the market area which advertisers want to reach, as well as the number of stations competing in the market. 3 4 Advertising rates generally are the highest during morning and evening drive-time hours. Depending on the format of a particular station, there are predetermined numbers of advertisements that are broadcast each hour. We determine the number of advertisements broadcast hourly that can maximize available revenue dollars without jeopardizing listening levels. Although the number of advertisements broadcast during a given time period may vary, the total number of advertisements broadcast on a particular station generally does not vary significantly from year to year. Our radio broadcasting results are dependent on a number of factors, including the general strength of the economy, population growth, ability to provide popular programming, relative efficiency of radio broadcasting compared to other advertising media, signal strength, technological capabilities and developments and governmental regulations and policies. Radio Networks As of December 31, 2000, we owned one of the leading national radio networks, based on a total audience of over 180 million weekly listeners. The network syndicates talk programming including such talent as Rush Limbaugh, Dr. Laura Schlessinger, Jim Rome, and music programming including such talent as Rick Dees and Casey Kasem. We also operated several news and agricultural radio networks serving Oklahoma, Texas, Iowa, Kentucky, Virginia, Alabama, Tennessee, Florida and Pennsylvania. OUTDOOR ADVERTISING As of December 31, 2000, we owned or operated a total of 698,265 advertising display faces. We currently provide outdoor advertising services in over 52 domestic markets and over 43 international countries. Our display faces include billboards of various sizes, wallscapes, transit displays and street furniture displays. Additionally, we currently own various interests in outdoor advertising companies, which we account for under the equity method of accounting. Most of our outdoor revenue is derived from local sales. Local advertisers tend to have smaller advertising budgets and require greater assistance from our production and creative personnel to design and produce advertising copy. In local sales, we often expend more sales efforts on educating customers regarding the benefits of outdoor media and helping potential clients develop an advertising strategy using outdoor advertising. While price and availability are important competitive factors, service and customer relationships are also critical components of local sales. Advertising rates are based on a particular display's exposure, or number of "impressions" delivered, in relation to the demographics of the particular market and its location within that market. The number of "impressions" delivered by a display is measured by the number of vehicles passing the site during a defined period and is weighted to give effect to such factors as its proximity to other displays, the speed and viewing angle of approaching traffic, the national average of adults riding in vehicles and whether the display is illuminated. The number of impressions delivered by a display is verified by independent auditing companies. Our billboards consist of various sized panels on which advertising copy is displayed. Bulletin advertising copy is either printed with computer-generated graphics on a single sheet of vinyl that is "wrapped" around an outdoor advertising structure, placed on lithographed or silk-screened paper sheets supplied by the advertiser that are pasted and applied like wallpaper to the face of the display, or hand painted and attached to the structure. Over 90% of our billboard inventory has been retrofitted for vinyl. Billboards are generally mounted on structures we own and are located on sites that are either owned or 4 5 leased by us or on which we have acquired a permanent easement. Lease contracts are negotiated with both public and private landlords. Wallscapes are essentially billboards painted on vinyl surfaces or directly on the sides of buildings, typically four stories or less. Because of their greater impact and higher cost, larger billboards are usually located on major highways and freeways. Some of our billboards are illuminated, and located at busy traffic interchanges to offer maximum visual impact to vehicular audiences. Wallscapes are located on major freeways, commuter and tourist routes and in downtown business districts. Smaller billboards are concentrated on city streets targeting pedestrian traffic. Transit advertising incorporates all advertising on or in transit systems, including the interiors and exteriors of buses, trains, trams and taxis, and advertising at rail stations and airports. Transit advertising posters range from vinyl sheets, which are applied directly to transit vehicles, to billboards and panels mounted in station or airport locations. Transit advertising contracts are negotiated with public transit authorities and private transit operators, either on a fixed revenue guarantee or a revenue-share basis. Street furniture panels are developed and marketed under our global Adshel brand. Street furniture panels include bus shelters, free standing units, pillars and columns. The most numerous are bus shelters which are back illuminated and reach vehicular and pedestrian audiences. Street furniture is growing in popularity with local authorities. Bus shelters are usually constructed, owned and maintained by the outdoor service provider under revenue-sharing arrangements with a municipality or transit authority. Street furniture contracts are usually won in a competitive tender and last between 10 and 15 years. Tenders are won on the basis of revenues and community-related products offered to municipalities, including bus shelters, public toilets and information kiosks. LIVE ENTERTAINMENT We significantly expanded our presence in the live entertainment industry with our August 2000 acquisition of SFX Entertainment, Inc. We are 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 our 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, we owned or operated a total of 92 domestic venues and 28 international venues. We also produce touring and original Broadway shows and derive revenues from our theater operations. Additionally, we currently own various interests in live entertainment companies, which we account for under the equity method of accounting. We derive revenues from our venue operations primarily from ticket sales, rental income, corporate sponsorships and advertising, concessions, and merchandise. A venue operator typically receives for each event it hosts a fixed fee or percentage of ticket sales for use of the venue, as well as fees representing a percentage of total concession sales from the vendors and total merchandise sales from the performer or tour producer. We typically receive 100% of sponsorship and advertising revenues and a rebate of a portion of ticketing surcharges. OTHER Television As of December 31, 2000, we owned, programmed or sold airtime for 19 television stations. Our television stations are affiliated with various television networks, including FOX, UPN, ABC, NBC and CBS. Television revenue is generated primarily from the sale of local and national advertising, as well as from fees received from the affiliate television networks. Advertising rates depend primarily on the 5 6 quantitative and qualitative characteristics of the audience we can deliver to the advertiser. Local advertising is sold by our sales personnel, while national advertising is sold by national sales representatives. The primary sources of programming for our ABC, NBC and CBS affiliated television stations are their respective networks, which produce and distribute programming in exchange for each station's commitment to air the programming at specified times and for commercial announcement time during the programming. We supply the majority of programming to our FOX and UPN affiliates by selecting and purchasing syndicated television programs. We compete with other television stations within each market for these broadcast rights. The second source of programming is the production of local news programming on the FOX, CBS, ABC and NBC affiliate stations in Jacksonville, Florida; Harrisburg, Pennsylvania; Memphis, Tennessee; Mobile, Alabama; Providence, Rhode Island; Cincinnati, Ohio; and Albany, New York. Local news programming traditionally has appealed to a target audience of adults 25 to 54 years of age. Because these viewers generally have increased buying power relative to viewers in other demographic groups, they are one of the most sought-after target audiences for advertisers. With such programming, these stations are able to attract advertisers to which they otherwise would not have access. Media Representation As a result of our August 30, 2000 merger with AMFM Inc., we now own 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. Katz Media representation operations generate revenues primarily through contractual commissions realized from the sale of national spot advertising air time. National spot advertising is commercial air time sold to advertisers on behalf of radio and television stations and cable systems located outside the local markets of those stations and systems. Katz Media represents its media clients pursuant to media representation contracts, which typically have terms of up to ten years in initial length. Sports Representation As a result of our merger with SFX, we now operate in the sports representation business. Our 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 our clients are several hundred professional athletes, including Michael Jordan, Kobe Bryant (basketball), Roger Clemens (baseball), Greg Norman (golf), Andre Agassi (tennis), Jerry Rice (football) and David Beckham (soccer - UK). Our sports representation operations generate revenue primarily through the negotiation of professional sports contracts and endorsement contracts for clients. The amount of endorsement and other revenues that our clients generate is a function of, among other things, the clients' professional performances and public appeal. 6 7 Internet Group Our Internet group was formed in the fall of 2000. The goal of the Internet group is to develop and maintain an integral web network across all of our businesses, including radio broadcasting, outdoor advertising and live entertainment. COMPANY STRATEGY Since our inception, we have focused on helping our clients distribute their marketing messages in the most efficient ways possible. We believe our ultimate success is measured by how well we assist our clients in selling their products and services. To this end, we have assembled a variety of media assets designed to provide the most efficient and cost-effective ways for our clients to reach consumers. These assets are comprised of radio and television broadcasting assets, outdoor advertising displays and live entertainment venues and productions. We have combined these assets with the talent and motivation of our entrepreneurial managers to create strong internal growth. We plan to continue this effort in order to serve our clients, listeners, viewers, audiences and investors. A portion of our growth has been achieved through acquiring highly complementary assets in radio and television broadcasting, outdoor advertising and live entertainment. We have found that geographically diversified assets give our clients more flexibility in the distribution of their messages, and therefore allows us to provide these clients with a higher level of service. To this end, we evaluate potential acquisitions based on the returns they can potentially provide on invested capital, as well as the positive impact they might have on our existing businesses. In addition, given our experience in the industries in which we operate, we are able to improve the operations of assets we acquire, thus further enhancing our value of those assets. Additionally, we seek to create situations in which we own more than one type of medium in the same market. Aside from the provision of added flexibility to our clients, this "cross-ownership" allows us ancillary benefits, such as the use of otherwise vacant outdoor advertising space to promote our broadcasting assets, or the sharing of on-air talent across our broadcasting assets to promote one of our live entertainment events or venues. To support our radio broadcasting, outdoor advertising and live entertainment strategies, we have decentralized our operating structure in order to place authority, autonomy and accountability at the market level which provides local management with tools necessary to serve our clients. We believe that one of our strongest competitive advantages is our unique blend of highly experienced corporate and local market management. We believe that the combination of historically stable revenue growth within the industries we operate, coupled with a fixed expense structure and minimal requirements for ongoing capital expenditures, as well as our financial discipline, gives us an excellent forum in which to generate free cash flow and provide value to our investors. RADIO BROADCASTING Our radio broadcasting strategy entails improving the ongoing operations of our existing stations, as well as the acquisition of stations. Our acquisition strategy has created a national footprint that allows us to deliver targeted messages for specific audiences to advertisers on a local, regional, and national basis. We believe in clustering our radio stations in markets to increase our individual market share thereby allowing us to offer our advertisers more advertising options that can reach many audiences. We believe owning multiple radio stations in a market allows us to provide our listeners with a more diverse programming selection and a more efficient means for our advertisers to reach those listeners. By 7 8 clustering our stations, we are also able to operate our stations with more highly skilled local management teams and eliminate duplicative operating and overhead expenses. In addition to the economies of scale associated with our national footprint and our clustering of stations in our markets, our management seeks to improve the performance of our existing stations through effective programming, reduction of costs, and aggressive promotion, marketing, and sales. By complementing our radio operations with our other businesses, we are able to increase revenue and profitability through synergies such as cross selling and cross promoting utilizing our outdoor advertising and entertainment operations. OUTDOOR ADVERTISING Our outdoor advertising strategy involves expanding our market presence and improving the operating results of our existing operations. By acquiring additional displays in our existing markets and expanding into new markets, we strive to increase our market share while managing our advertising rates to maximize revenues. We focus on attracting new categories of advertisers to the outdoor medium through significant investments in sales, marketing, creative, and research services. We take advantage of technological advances that increase our sales force productivity, production department efficiency, and the quality of our product. We will continue to take advantage of the fragmented outdoor advertising industry in our international markets, which presents us with opportunities to increase our profitability both from our existing operations and from acquisitions. LIVE ENTERTAINMENT Our entry into live entertainment operations allowed us to take advantage of the natural synergies between radio and live music events and to gain immediate industry leadership. We can now leverage our broadcasting assets to reach listeners who have an affinity for music to promote our live entertainment events and ultimately increase ticket revenue. Our entry into the live entertainment industry enables us to reach revenue sources that we had not reached in the past. Our strategy involves improving operating results driven primarily by our ability to increase the utilization of venues, the number of tickets sold per event, sponsorship opportunities, and radio audiences. We strive to form strategic alliances with top brands for marketing opportunities, complete our footprint with investments in music and theater, and foster collaborations with our other media businesses. RECENT DEVELOPMENTS AMFM Merger On August 30, 2000, we closed our merger with AMFM Inc. Pursuant to the terms of the merger agreement, each share of AMFM common stock was exchanged for 0.94 shares of our common stock. Approximately 205.4 million shares of our common stock were issued in the AMFM merger, valuing the merger, based on the average market price of our common stock at the signing of the merger agreement, at $15.9 billion plus the assumption of AMFM's outstanding debt of $3.5 billion. Additionally, we assumed AMFM options and common stock warrants with a fair value of $1.2 billion, which are convertible, subject to applicable vesting, into approximately 25.5 million shares of our common stock. We refinanced $540.0 million of AMFM's $3.5 billion of long-term debt at the closing of the merger using our credit facilities. The AMFM merger was accounted for as a purchase with resulting goodwill of approximately $7.1 billion, which is being amortized over 25 years on a straight-line basis. This purchase price allocation is preliminary pending completion of appraisals and other fair value analysis of assets and liabilities. The results of operations of AMFM have been included in our financial statements beginning August 30, 2000. 8 9 Included in the purchase price of AMFM is $439.9 million of restricted cash related to the disposition of AMFM assets in connection with the merger. In addition, we swapped assets valued at $228.0 million and received proceeds of $839.7 million in transactions with third parties in order to comply with governmental directives regarding the AMFM merger, which resulted in a gain of $805.2 million and an increase in income tax expense (at our statutory rate of 38%) of $306.0 million in 2000. We deferred a portion of this tax expense based on our ability to replace the majority of the stations sold with qualified assets. A portion of the proceeds from divestitures is being held in restricted trusts until suitable replacement properties are identified. The following table details the reconciliation of divestiture and acquisition activity in the restricted trust accounts.
(In thousands) Restricted cash resulting from Clear Channel divestitures $ 839,717 Restricted cash purchased in AMFM merger 439,896 Restricted cash used in acquisitions (670,228) Interest, net of fees 18,756 ----------- Restricted cash balance at December 31, 2000 $ 628,141 ===========
In addition, we agreed to sell AMFM's 26.2 million shares in Lamar Advertising Company by December 31, 2002. Furthermore, our investment must be passive while we hold any interest in Lamar. As such, we account for this investment under the cost method of accounting. SFX Merger On August 1, 2000, we consummated our merger with SFX Entertainment, Inc. Pursuant to the terms of the merger agreement, each share of SFX Class A common stock was exchanged for 0.6 shares of our common stock and each share of SFX Class B common stock was exchanged for one share of our common stock. Approximately 39.2 million shares of our common stock were issued in the SFX merger. Based on the average market price of our common stock at the signing of the merger agreement, the merger was valued at $2.9 billion plus the assumption of SFX's outstanding debt of $1.5 billion. Additionally, we assumed all outstanding SFX options and warrants with a fair value of $211.8 million, which are exercisable for approximately 5.6 million shares of our common stock. We refinanced $815.8 million of SFX's $1.5 billion of long-term debt at the closing of the merger using our credit facilities. The SFX merger was accounted for as a purchase with resulting goodwill of approximately $4.1 billion, which is being amortized over 20 years on a straight-line basis. This purchase price allocation is preliminary pending completion of appraisals and other fair value analysis of assets and liabilities. The results of operations of SFX have been included in our financial statements beginning August 1, 2000. A number of lawsuits were filed by holders of SFX Class A common stock alleging, among other things, that the difference in consideration for the Class A and Class B shares constituted unfair consideration to the Class B holders and that the SFX board breached its fiduciary duties and that we aided and abetted the actions of the SFX board. On September 28, 2000, we issued approximately .4 million shares of our common stock, valued at $29.3 million, as settlement of these lawsuits and have included the value of such shares as part of the purchase price. Future Acquisitions We frequently evaluate strategic opportunities both within and outside our existing lines of business and from time to time enter into letters of intent to purchase assets. Although we have no 9 10 definitive agreements with respect to significant acquisitions not set forth in this report, we expect from time to time to pursue additional acquisitions and may decide to dispose of certain businesses. Such acquisitions or dispositions could be material. Public Offerings On June 14, 2000, we completed a debt offering of $250.0 million floating rate notes due June 15, 2002 and $750.0 million 7.875% notes due June 15, 2005. The net proceeds of approximately $993.9 million were used to reduce the outstanding balance on our credit facilities. On July 3, 2000, we completed a debt offering of Euro 650.0 million 6.50% notes due July 7, 2005. Interest on the notes is payable annually in arrears on July 7 of each year. The net proceeds of approximately $610.8 million were used to reduce the outstanding balance on our credit facilities. On September 7, 2000, we completed a debt offering of $750.0 million 7.25% senior notes due September 15, 2003 and $750.0 million 7.65% senior notes due on September 15, 2010. Interest is payable on both series of notes on March 15 and September 15 of each year. The net proceeds of approximately $1.5 billion were used to reduce the outstanding balance of our credit facilities. Shelf Registration Statement To facilitate possible future acquisitions as well as public offerings, we filed a shelf registration statement on Form S-3 on July 21, 2000 covering a combined $3.0 billion of debt securities, junior subordinated debt securities, preferred stock, common stock, warrants, stock purchase contracts and stock purchase units. The shelf registration statement also covers preferred securities that may be issued from time to time by our three Delaware statutory business trusts and guarantees of such preferred securities. After completing the debt offering during September 2000, the amount of securities available under the shelf registration statement at December 31, 2000 was $1.5 billion. EMPLOYEES At February 28, 2001 we had approximately 31,850 domestic employees and 4,500 international employees: approximately 36,000 in operations and approximately 350 in corporate and other activities. In addition, our live entertainment operations hire approximately 20,000 seasonal employees during peak time periods. OPERATING SEGMENTS Clear Channel consists of three reportable operating segments: radio broadcasting, outdoor advertising, and live entertainment. The radio broadcasting segment includes radio stations for which we are the licensee and for which we program and/or sell air time under local marketing agreements or joint sales agreements. The radio broadcasting segment also operates radio networks. The outdoor advertising segment includes advertising display faces for which we own or operate under lease management agreements. The live entertainment segment includes venues that we own or operate, the production of Broadway shows and theater operations. Information relating to the operating segments of our radio broadcasting, outdoor advertising and live entertainment operations for 2000, 1999 and 1998 are included in "Note M: Segment Data" in the Notes to Consolidated Financial Statements in Item 8 filed herewith. 10 11 The following table sets forth certain selected information with regard to our radio broadcasting stations, outdoor advertising display faces and live entertainment venues that we own or operate. At December 31, 2000, we owned, programmed, or sold airtime for 346 AM and 761 FM radio stations. At December 31, 2000, we owned or operated 149,171 domestic display faces and 549,094 international display faces. We also owned or operated 120 live entertainment venues at December 31, 2000.
Radio Outdoor Live Market Broadcasting Advertising Entertainment Market Rank* Stations Display Faces Venues ------ ---- -------- ------------- ------ New York, NY 1 5 13,301 6 Los Angeles, CA 2 8 13,593 3 Chicago, IL 3 5 15,612 4 San Francisco, CA 4 7 6,983 6 Philadelphia, PA 5 6 4,290 6 Dallas, TX 6 5 5,593 Detroit, MI 7 7 1,014 6 Boston, MA 8 3 4,283 8 Washington, DC 9 8 2,482 4 Houston, TX 10 8 5,269 2 Atlanta, GA 11 5 7,003 3 Miami, FL 12 7 4,844 2 Seattle, WA 14 100 1 San Diego, CA 15 9 829 Phoenix, AZ 16 8 1,554 1 Minneapolis, MN 17 7 1,837 1 Long Island, NY 18 2 St. Louis, MO 19 6 321 2 Baltimore, MD 20 3 1,441 Tampa, FL 21 9 2,490 Pittsburgh, PA 22 6 39 2 Denver, CO 23 9 628 1 Cleveland, OH 24 5 1,264 Portland, OR 25 5 51 Cincinnati, OH 26 8 16 3 San Jose, CA 27 2 886 Riverside, CA 28 4 Sacramento, CA 29 4 1,117 2 Kansas City, KS/MO 30 101 3 Milwaukee, WI 31 6 1,682 2 San Antonio, TX 32 7 3,401 2 Providence, RI 33 4 Columbus, OH 34 5 1,502 1 Salt Lake City, UT 35 11 52 Norfolk, VA 36 4 11 3 Charlotte, NC 37 5 30 1 Indianapolis, IN 38 3 1,653 2 Orlando, FL 39 7 2,825 Las Vegas, NV 40 4 7,139
11 12
Radio Outdoor Live Market Broadcasting Advertising Entertainment Market Rank* Stations Display Faces Venues ------ ---- -------- ------------- ------ New Orleans, LA 41 7 7,452 1 Greensboro, NC 42 4 Nashville, TN 43 5 6 1 Hartford, CT 44 5 17 2 Memphis, TN 46 6 2,465 Raleigh, NC 48 5 10 1 Austin, TX 49 8 13 West Palm Beach, FL 50 8 594 2 Jacksonville, FL 51 11 1,065 Rochester, NY 52 8 2 Louisville, KY 53 8 18 1 Oklahoma City, OK 54 7 1,079 Birmingham, AL 55 6 8 Dayton, OH 56 6 Richmond, VA 57 6 12 Greenville, SC 58 5 8 Albany, NY 59 7 1 Honolulu, HI 60 7 Tucson, AZ 61 5 1,498 Tulsa, OK 62 6 1,121 Brownsville & McAllen, TX 63 2 35 Wikes Barre - Scranton, PA 64 39 Fresno, CA 65 9 286 Grand Rapids, MI 66 7 Allentown, PA 67 4 Akron, OH 68 2 1,007 Knoxville, TX 69 13 El Paso, TX 70 5 1,386 Ft Myers, FL 71 5 Albuquerque, NM 72 8 1,026 1 Omaha, NE 73 4 32 Monterey, CA 74 6 27 Syracuse, NY 75 5 6 Wilmington, DE 76 4 1,052 Harrisburg, PA 77 6 36 Sarasota, FL 78 6 Toledo, OH 79 5 Springfield, MA 80 4 1 Baton Rouge, LA 82 6 20 Little Rock, AR 83 5 891 Wichita, KS 84 4 685 Stockton, CA 85 6 56 Bakersfield, CA 86 200 Charleston, SC 87 7 10 Mobile, AL 88 6 Columbia, SC 89 6
12 13
Radio Outdoor Live Market Broadcasting Advertising Entertainment Market Rank* Stations Display Faces Venues ------ ---- -------- ------------- ------ Gainsville-Ocala, FL 90 1,104 Spokane, WA 91 6 20 Des Moines, IA 92 5 678 Colorado Springs, CO 94 3 15 Melbourne, FL 95 4 830 Youngstown, OH 97 11 8 Lafayette, LA 100 11 Various U.S. Cities 101-150 138 3,823 2 Various U.S. Cities 151-200 127 2,474 Various U.S. Cities 201-250 114 218 Various U.S. Cities 251+ 72 754 Various U.S. Cities unranked 156 1,827 INTERNATIONAL: Australia - New Zealand (a), (b) n/a 10,068 Belgium n/a 17,067 Brazil n/a 3,522 Canada (b) n/a 650 1 China (b) n/a 16,391 Czech Republic (a) n/a Denmark n/a 2 4,493 Finland n/a 1,690 France (c) n/a 134,555 Germany (b) n/a Great Britain (a) n/a 48,489 26 Hong Kong (b) n/a 3,575 India (b) n/a 196 Ireland n/a 5,583 Italy n/a 10,591 Mexico (a) n/a 2,754 Netherlands (c) n/a Norway (a) n/a 10,434 Peru n/a 1,268 Poland n/a 11,042 Singapore (b) n/a 678 Spain n/a 19,908 Sweden n/a 33,826 1 Switzerland n/a 13,338 Taiwan n/a 1,730 Thailand (b) n/a 399 Turkey n/a 1,868 Small transit displays (d) n/a 194,979 ------- ---------- ------ Total 1,107 (a) 698,265 (b) 120 (c) ===== ======= ===
* Per Arbitron Rankings for Winter 2000 - ---------- 13 14 (a) Includes 79 radio stations programmed pursuant to a local marketing agreement (FCC licenses not owned by Clear Channel), 21 radio stations for which we sell airtime pursuant to a joint sales agreement (FCC license not owned by Clear Channel), one radio station programmed by another party pursuant to a local marketing agreement and one radio station programmed by another party pursuant to a joint sales agreement. Excluded from the above table are four Mexican radio stations that we provide programming to and sell airtime under exclusive sales agency arrangements. Excluded from the 1,107 radio stations owned or operated are radio stations in Australia, New Zealand, Czech Republic, Great Britain, Mexico and Norway. We own a 50%, 33%, 50%, 32%, 40% and 50% equity interest in companies that have radio broadcasting operations in these markets, respectively. Also excluded from the 1,107 radio stations owned or operated are radio stations operated by Hispanic Broadcasting Corporation, a leading domestic Spanish-language radio broadcaster. We own a 26% non-voting equity interest in Hispanic Broadcasting Corporation. (b) Excluded from the 698,265 outdoor display faces owned or operated are display faces in Australia -New Zealand, Canada, China, Germany, Hong Kong, India, Singapore and Thailand. We own a 50%, 50%, 50%, 10%, 50%, 20%, 30% and 31.9% equity interest in companies that have outdoor advertising operations in these markets, respectively. (c) Venues include 65 theaters, 40 amphitheaters, 10 clubs, 3 arenas, a concert hall and an arena/motor racing circuit. Of these 120 venues, we own 31, lease 42 with lease expiration dates from August 2001 to August 2045, lease 3 with lease terms in excess of 100 years, and operate 44 under various operating agreements. Excluded from the 120 live entertainment venues owned or operated are 14 venues in France and Netherlands. We own various equity interest in companies that have live entertainment operations in these markets. (d) Small transit displays are small display faces on the interior and exterior of various public transportation vehicles. Below is a discussion of our operations within each segment that are not presented in the above table. RADIO BROADCASTING In addition to the radio stations listed above, our radio broadcasting segment includes a national radio network that produces more than 60 syndicated radio programs and services for more than 7,800 radio stations including Rush Limbaugh, The Dr. Laura Show and The Rick Dees Weekly Top 40, which are three of the top rated radio programs in the United States. We also own various sports, news and agriculture networks. OUTDOOR ADVERTISING In addition to the outdoor advertising display faces listed above, our outdoor advertising segment operates numerous smaller displays, such as cube displays in retail malls. 14 15 LIVE ENTERTAINMENT In addition to the live entertainment venues listed above, our live entertainment segment produces touring and original Broadway shows. Touring Broadway shows are typically revivals of previous commercial successes or new productions of theatrical shows currently playing on Broadway in New York City. We invest in original Broadway productions as a lead producer or as a limited partner in productions produced by others. Frequently, we obtain touring rights and favorable scheduling for the productions in order to distribute them across its presenting network. OTHER Television As of December 31, 2000, we owned, programmed or sold airtime for 19 television stations. Our television stations are affiliated with various television networks, including FOX, UPN, ABC, NBC and CBS. Media Representation In connection with the AMFM merger, we now own 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 our merger with SFX, we now operate in the sports representation business. Among our clients are several hundred professional athletes, including Michael Jordan, Kobe Bryant (basketball), Roger Clemens (baseball), Greg Norman (golf), Andre Agassi (tennis), Jerry Rice (football) and David Beckham (soccer - UK). Internet Group Our Internet group was formed in the fall of 2000. The goal of the Internet group is to develop and maintain an integral web network across all of our businesses, including radio broadcasting, outdoor advertising and live entertainment. COMPETITION Our business segments are in highly competitive industries, and we may not be able to maintain or increase our current audience ratings and advertising revenues. Our radio 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 our revenues in that market. Our live entertainment operations compete with other venues to serve artists likely to perform in that general region and, in the markets in which we promote musical concerts, we face competition from promoters, as well as from certain artists who promote their own concerts. Other variables that could affect our financial performance include: - - economic conditions, both general and relative to the broadcasting, outdoor and live entertainment 15 16 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. REGULATION OF OUR BUSINESS Existing Regulation and 1996 Legislation Television and radio broadcasting are subject to the jurisdiction of the FCC under the Communications Act of 1934. The Communications Act prohibits the operation of a television or radio broadcasting station except under a license issued by the FCC and empowers the FCC, among other things, to: - - issue, renew, revoke and modify broadcasting licenses; - - assign frequency bands; - - determine stations' frequencies, locations, and power; - - regulate the equipment used by stations; - - adopt other regulations to carry out the provisions of the Communications Act; - - impose penalties for violation of such regulations; and - - impose fees for processing applications and other administrative functions. The Communications Act prohibits the assignment of a license or the transfer of control of a licensee without prior approval of the FCC. Under the Communications Act, the FCC also regulates certain aspects of the operation of cable television systems and other electronic media that compete with broadcasting stations. The Telecommunications Act of 1996 represented the most comprehensive overhaul of the country's telecommunications laws in more than 60 years. The Communications Act originated at a time when telephone and broadcasting technologies were quite distinct and addressed different consumer needs. As a consequence, both the statute and its implementing regulatory scheme were designed to compartmentalize the various sectors of the telecommunications industry. The 1996 Act removed or relaxed the statutory barriers to telephone company entry into the video programming delivery business, to cable company provision of telephone service, and to common ownership of broadcast television and cable properties. The 1996 Act also significantly changed both the process for renewal of broadcast station licenses and the broadcast ownership rules. The 1996 Act established a "two-step" renewal process that limits the FCC's discretion to consider applications filed in competition with an incumbent's renewal application. The 1996 Act also substantially liberalized the national broadcast ownership rules, eliminating the national radio limits and easing the national restrictions on TV ownership. The 1996 Act also relaxed local radio ownership restrictions, but left local TV ownership restrictions in place pending further FCC review. This new regulatory flexibility has engendered aggressive local, regional, and/or national acquisition campaigns. Removal of previous station ownership limitations on leading media companies, 16 17 such as existing networks and major station groups, increased sharply the competition for and the prices of attractive stations. License Grant and Renewal Prior to the passage of the 1996 Act, television and radio broadcasting licenses generally were granted or renewed for periods of five and seven years, respectively, upon a finding by the FCC that the "public interest, convenience, and necessity" would be served thereby. At the time an application is made for renewal of a television or radio license, parties in interest may file petitions to deny the application, and others may object informally to grant of the application. Such parties, including members of the public, may comment upon matters related to whether renewal is warranted, including the service the station has provided during the preceding license term. Prior to passage of the 1996 Act, any person or entity also was permitted to file a competing application for authority to operate on the station's channel and replace the incumbent licensee. Renewal applications were granted without a hearing if there were no competing applications and if issues raised by petitioners to deny or informal objectors to such applications were not serious enough to cause the FCC to order a hearing. If competing applications were filed, or if sufficiently serious issues were raised by a petitioner or objector, a full hearing was required. Under the 1996 Act, the statutory restriction on the length of broadcast licenses has been amended, and the FCC now grants broadcast licenses to both television and radio stations for terms of up to eight years. The 1996 Act also requires renewal of a broadcast license if the FCC finds that - - the station has served the public interest, convenience, and necessity; - - there have been no serious violations of either the Communications Act or the FCC's rules and regulations by the licensee; and - - there have been no other serious violations which taken together constitute a pattern of abuse. In making its determination, the FCC may still consider petitions to deny and informal objections, and may order a hearing if such petitions or objections raise sufficiently serious issues. The FCC, however, may no longer consider whether the public interest would be better served by a person or entity other than the renewal applicant. Instead, under the 1996 Act, competing applications for the incumbent's spectrum may be accepted only after the FCC has denied the incumbent's application for renewal of license. Although in the vast majority of cases broadcast licenses are renewed by the FCC even when petitions to deny or informal objections are filed, there can be no assurance that any of our stations' licenses will be renewed at the expiration of their terms. Multiple Ownership Restrictions The FCC has promulgated rules that, among other things, limit the ability of individuals and entities to own or have an "attributable interest" in broadcast stations and other specified mass media entities. Prior to the passage of the 1996 Act, these rules included limits on the number of radio and television stations that could be owned on both a national and local basis. On a national basis, the rules generally precluded any individual or entity from having an attributable interest in more than 20 AM radio stations, 20 FM radio stations and 12 television stations. Moreover, the aggregate audience reach of the co-owned television stations could not exceed 25% of all U.S. television households. 17 18 The 1996 Act completely revised the television and radio ownership rules via changes the FCC implemented in two orders issued on March 8, 1996. With respect to television, the 1996 Act and the FCC's subsequently issued orders eliminated the 12-station national limit for station ownership and increased the national audience reach limitation from 25% to 35%. On a local basis, however, the 1996 Act did not alter FCC rules prohibiting an individual or entity from holding an attributable interest in more than one television station in a market. The 1996 Act did require the FCC to conduct a rulemaking proceeding, however, to determine whether to retain or modify this so-called "TV duopoly rule," including narrowing the rule's geographic scope and permitting some two-station combinations at least in certain (large) markets. In August 1999, the FCC completed this rulemaking and adopted a revised TV duopoly rule, which it slightly modified in January 2001. Under the current rule, permissible common ownership of television stations is dictated by Nielsen Designated Market Areas, or "DMAs." A company may own two television stations in a DMA if the stations' Grade B contours do not overlap. Conversely, a company may own television stations in separate DMAs even if the stations' service contours do overlap. Furthermore, a company may own two television stations in a DMA with overlapping Grade B contours if (i) at least eight independently owned and operating full-power television stations, the Grade B contours of which overlap with that of at least one of the commonly owned stations, will remain in the DMA after the combination; and (ii) at least one of the commonly owned stations is not among the top four stations in the market in terms of audience share. The FCC will presumptively waive these criteria and allow the acquisition of a second same-market television station where the station being acquired is shown to be "failed" or "failing" (under specific FCC definitions of those terms), or authorized but unbuilt. A buyer seeking such a waiver must also demonstrate, in most cases, that it is the only buyer ready, willing, and able to operate the station, and that sale to an out-of-market buyer would result in an artificially depressed price. Since the FCC's revision of the local television ownership rule, we have acquired a second television station in each of four DMAs where we previously owned a television station. With respect to radio licensees, the 1996 Act and the FCC's subsequently issued rule changes eliminated the national ownership restriction, allowing one entity to own nationally any number of AM or FM broadcast stations. The 1996 Act and the FCC's implementing rules also greatly eased local radio ownership restrictions. The maximum allowable number of radio stations that may be commonly owned in a market varies depending on the total number of radio stations in that market, as determined using a method prescribed by the FCC. In markets with 45 or more stations, one company may own, operate, or control eight stations, with no more than five in any one service (AM or FM). In markets with 30-44 stations, one company may own seven stations, with no more than four in any one service; in markets with 15-29 stations, one entity may own six stations, with no more than four in any one service. In markets with 14 stations or less, one company may own up to five stations or 50% of all of the stations, whichever is less, with no more than three in any one service. These new rules permit common ownership of substantially more stations in the same market than did the FCC's prior rules, which at most allowed ownership of no more than two AM stations and two FM stations even in the largest markets. Irrespective of FCC rules governing radio ownership, however, the Antitrust Division of the United States Department of Justice and the Federal Trade Commission have the authority to determine that a particular transaction presents antitrust concerns. Following the passage of the 1996 Act, the Antitrust Division has become more aggressive in reviewing proposed acquisitions of radio stations, particularly in instances where the proposed purchaser already owns one or more radio stations in a particular market and seeks to acquire additional radio stations in the same market. The Antitrust Division has, in some cases, obtained consent decrees requiring radio station divestitures in a particular market based on allegations that acquisitions would lead to unacceptable concentration levels. The FCC has also been more aggressive in independently examining issues of market concentration when considering radio station acquisitions. The FCC has delayed its approval of numerous proposed radio station purchases by various parties because of 18 19 market concentration concerns, and generally will not approve radio acquisitions when the Antitrust Division has expressed concentration concerns, even if the acquisition complies with the FCC's numerical station limits. Moreover, in recent years the FCC has followed a policy of giving specific public notice of its intention to conduct additional ownership concentration analysis, and soliciting public comment on "the issue of concentration and its effect on competition and diversity," with respect to certain applications for consent to radio station acquisitions based on advertising revenue shares or other criteria. Additionally, the FCC has recently solicited public comment on a variety of possible changes in the methodology by which it defines a radio "market" and counts stations for purposes of determining compliance with the local radio ownership restrictions. If adopted, any such changes could limit our ability to make future acquisitions of radio stations. Moreover, in the same proceeding, the FCC has announced a policy of deferring, until the rulemaking is completed, certain pending and future radio sale applications which raise "concerns" about how the FCC counts the number of stations a company may own in a market. This deferral policy has delayed FCC approval of a number of acquisitions we currently have pending, and may delay additional acquisitions for which we seek FCC approval in the near future. In 1992, the FCC adopted rules with respect to so-called local marketing agreements, or "LMAs", by which the licensee of one radio station provides substantially all the programming for another licensee's station in the same market and sells all of the advertising within that programming. Under these rules, an entity that owns one or more radio stations in a market and programs a station in the same market pursuant to an LMA is required, under certain circumstances, to count the LMA station toward its local radio ownership limits even though it does not own the station. As a result, in a market where we own one or more radio stations, we generally cannot provide programming under an LMA to another radio station if we cannot acquire that station under the local radio ownership rules. In August 1999, the FCC adopted rules for television LMAs similar to those that govern radio LMAs. As is the case for radio LMAs, an entity that owns a television station and programs more than 15% of the broadcast time on another television station in the same market is now required to count the LMA station toward its television ownership limits even though it does not own the station. Thus, in the future with respect to markets in which we own television stations, we generally will not be able to enter into an LMA with another television station in the same market if we cannot acquire that station under the revised television duopoly rule. In adopting these new rules concerning television LMAs, however, the FCC provided "grandfathering" relief for LMAs that were in effect at the time of the rule change. Television LMAs that were in place at the time of the new rules and were entered into before November 5, 1996, were allowed to continue at least through 2004, when the FCC is scheduled to undertake a comprehensive review and re-evaluation of its broadcast ownership rules. Such LMAs entered into after November 5, 1996 were allowed to continue until August 5, 2001 at which point they must be terminated unless they comply with the revised television duopoly rule. We provide programming under LMAs to television stations in four markets where we also own a television station. In one additional market, a third party which owns a television station in that market also programs our station under an LMA (we have agreed to sell our television station in that market to the third-party programmer). Each of our television LMAs was entered into before November 5, 1996. Therefore, under the FCC's August 1999 decision, each of our television LMAs is permitted to continue through at least the year 2004. Moreover, we may seek permanent grandfathering of our television LMAs by demonstrating to the FCC, among other things, the public interest benefits the LMAs have produced and the extent to which the LMAs have enabled the stations involved to convert to digital operation. Finally, in 19 20 one market in which we own a television station and program a second station under an LMA, the FCC's revised television duopoly rule permits us to own two television stations. Accordingly, we have applied for FCC approval to acquire our LMA station in that market. A number of cross-ownership rules pertain to licensees of television and radio stations. FCC rules, the Communications Act or both generally prohibit an individual or entity from having an attributable interest in both a television station and a cable television system that is located in the same market, and from having an attributable interest in a radio or television station and a daily newspaper located in the same market. Prior to August 1999, FCC rules also generally prohibited common ownership of a television station and one or more radio stations in the same market, although the FCC in many cases allowed such combinations under waivers of the rule. In August 1999, however, the FCC comprehensively revised its radio/television cross-ownership rule. The revised rule permits the common ownership of one television and up to seven same-market radio stations, or up to two television and six same-market radio stations, if the market will have at least twenty separately owned broadcast, newspaper and cable "voices" after the combination. Common ownership of up to two television and four radio stations is permissible when ten "voices" will remain, and common ownership of up to two television stations and one radio station is permissible in all markets regardless of voice count. The radio/television limits, moreover, are subject to the compliance of the television and radio components of the combination with the television duopoly rule and the local radio ownership limits, respectively. Waivers of the radio/television cross-ownership rule are available only where the station being acquired is "failed" (i.e., off the air for at least four months or involved in court-supervised involuntary bankruptcy or insolvency proceedings). A buyer seeking such a waiver must also demonstrate, in most cases, that it is the only buyer ready, willing, and able to operate the station, and that sale to an out-of-market buyer would result in an artificially depressed price. There are 14 markets where we own both radio and television stations. In the majority of these markets, the number of radio stations we own complies with the limit imposed by the revised rule. In those markets where our number of radio stations exceeds the limit under the revised rule, we are nonetheless authorized to retain our present television/radio combinations at least until 2004, when the FCC is scheduled to undertake a comprehensive review and re-evaluation of its broadcast ownership rules. As with grandfathered television LMAs, we may seek permanent authorization for our non-compliant radio/television combinations by demonstrating to the FCC, among other things, the public interest benefits the combinations have produced and the extent to which the combinations have enabled the television stations involved to convert to digital operation. Expansion of our broadcast operations in particular areas and nationwide will continue to be subject to the FCC's ownership rules and any further changes the FCC or Congress may adopt. Significantly, the 1996 Act requires the FCC to review its remaining ownership rules biennially as part of its regulatory reform obligations to determine whether its various rules are still necessary. The first such biennial review concluded on June 20, 2000, with the FCC's issuance of a report retaining the 35% national television reach limitation, the cable system/television station cross-ownership rule, and the limits on the number of radio stations a company may own in a given market. In its report, however, the FCC stated its intention to commence separate proceedings requesting specific comment on 20 21 - - possible revisions to the manner in which the FCC counts stations for purposes of the local radio multiple ownership rule; - - the possible modification of the dual network rule to allow one of the four major national networks to merge with one of the newer networks; and - - whether the prohibition on common ownership of a daily newspaper and a radio or TV broadcast station in the same market should be "tailored" to cover "only those circumstances in which it is necessary to protect the public interest." The FCC has commenced its separate proceedings related to the dual network rule and station counting for purposes of the local radio multiple ownership rule. It has not yet commenced its proceeding with respect to the newspaper/broadcast cross-ownership rule. In January 2001, the FCC completed its 2000 biennial review, making no additional relevant changes to its ownership rules. We cannot predict the impact of future biennial reviews or any other agency or legislative initiatives upon the FCC's broadcast rules. Further, the 1996 Act's relaxation of the FCC's ownership rules has increased the level of competition in many markets in which our stations are located. Under the FCC's ownership rules, a direct or indirect purchaser of certain types of our securities could violate FCC regulations or policies if that purchaser owned or acquired an "attributable" interest in other media properties in the same areas as our stations or in a manner otherwise prohibited by the FCC. All officers and directors of a licensee and any direct or indirect parent, general partners, limited partners and limited liability company members who are not properly "insulated" from management activities, and stockholders who own five percent or more of the outstanding voting stock of a licensee or its parent, either directly or indirectly, generally will be deemed to have an attributable interest in the licensee. Certain institutional investors who exert no control or influence over a licensee may own up to twenty percent of a licensee's or its parent's outstanding voting stock before attribution occurs. Under current FCC regulations, debt instruments, non-voting stock, and properly insulated limited partnership and limited liability company interests as to which the licensee certifies that the interest holders are not "materially involved" in the management and operation of the subject media property generally are not subject to attribution unless such interests implicate the FCC's "equity/debt plus," or "EDP," rule. Under the EDP rule, an aggregate interest in excess of 33% of a licensee's total asset value (equity plus debt) is attributable if the interest holder is either a major program supplier (providing over 15% of the licensee's station's total weekly broadcast programming hours) or a same-market media owner (including broadcasters, cable operators, and newspapers). To the best of our knowledge at present, none of our officers, directors or five percent stockholders holds an interest in another television station, radio station, cable television system or daily newspaper that is inconsistent with the FCC's ownership rules and policies. Alien Ownership Restrictions The Communications Act restricts the ability of foreign entities or individuals to own or hold certain interests in broadcast licenses. Foreign governments, representatives of foreign governments, non-U.S. citizens, representatives of non-U.S. citizens, and corporations or partnerships organized under the laws of a foreign nation are barred from holding broadcast licenses. Non-U.S. citizens, collectively, may own or vote up to twenty percent of the capital stock of a corporate licensee. A broadcast license may not be granted to or held by any corporation that is controlled, directly or indirectly, by any other corporation more than one-fourth of whose capital stock is owned or voted by non-U.S. citizens or their representatives, by foreign governments or their representatives, or by non-U.S. corporations, if the FCC finds that the public interest will be served by the refusal or revocation of such license. The FCC has interpreted this 21 22 provision of the Communications Act to require an affirmative public interest finding before a broadcast license may be granted to or held by any such corporation, and the FCC has made such an affirmative finding only in limited circumstances. Since we serve as a holding company for subsidiaries that serve as licensees for our stations, we are effectively restricted from having more than one-fourth of our stock owned or voted directly or indirectly by non-U.S. citizens or their representatives, foreign governments, representatives of non-foreign governments, or foreign corporations. Other Regulations Affecting Broadcast Stations General. The FCC has significantly reduced its past regulation of broadcast stations, including elimination of formal ascertainment requirements and guidelines concerning amounts of certain types of programming and commercial matter that may be broadcast. There are, however, FCC rules and policies, and rules and policies of other federal agencies, that regulate matters such as network-affiliate relations, the ability of stations to obtain exclusive rights to air syndicated programming, cable and satellite systems' carriage of syndicated and network programming on distant stations, political advertising practices, application procedures and other areas affecting the business or operations of broadcast stations. Public Interest Programming. Broadcasters are required to air programming addressing the needs and interests of their communities of license, and to place "issues/programs lists" in their public inspection files to provide their communities with information on the level of "public interest" programming they air. In October 2000, the FCC commenced a proceeding seeking comment on whether it should adopt a standardized form for reporting information on a station's public interest programming and whether it should require television broadcasters to post the new form - as well as all other documents in their public inspection files - either on station websites or the websites of state broadcasters' associations. Children's Television Programming. The FCC has adopted rules to implement the Children's Television Act of 1990, which, among other provisions, limits the permissible amount of commercial matter in children's programs and requires each television station to present "educational and informational" children's programming. The FCC also has adopted renewal processing guidelines effectively requiring television stations to broadcast an average of three hours per week of children's educational programming. Closed Captioning/Video Description. The FCC has adopted rules requiring closed captioning of broadcast television programming. By January 1, 2006, subject to certain exceptions, television broadcasters must provide closed captioning for 100% of their programming. Television Violence. The 1996 Act contains a number of provisions relating to television violence. First, pursuant to the 1996 Act, the television industry has developed a ratings system which the FCC has approved. In addition, the 1996 Act requires that all television license renewal applications contain summaries of written comments and suggestions received by the station from the public regarding violent programming. Equal Employment Opportunity. In April 1998, the U.S. Court of Appeals for the D.C. Circuit concluded that the affirmative action requirements of the FCC's Equal Employment Opportunity ("EEO") regulations were unconstitutional. The FCC responded to the court's ruling in September 1998 by suspending certain reporting requirements and commencing a proceeding to consider new rules that would not be subject to the court's constitutional objections. In January 2000, the FCC adopted new EEO rules, which (1) required broadcast licensees to widely disseminate information about job openings to all segments of the community; (2) gave broadcasters the choice of implementing two FCC-suggested 22 23 supplemental recruitment measures or, alternatively, designing their own broad recruitment/outreach programs; and (3) imposed significant reporting requirements concerning broadcasters' recruitment efforts. In January 2001, however, the same court of appeals struck down the FCC's new EEO rules. The FCC thereafter suspended the rules, except for the general obligation not to engage in employment discrimination based on race, color, religion, national origin or sex. The FCC has several procedural options which it may pursue in order to revive at least some part of its EEO rules. We cannot predict how long the suspension period may last or what actions, if any, the FCC may take in this area in the future. Digital Television Service. The FCC has taken a number of steps to implement digital television broadcasting service in the U.S. In December 1996, the FCC adopted a digital television broadcast standard and, in April 1997, it adopted decisions in several pending rulemaking proceedings that established service rules and a plan for implementing digital television. The FCC adopted a digital television table of allotments that provides all authorized television stations with a second channel on which to broadcast a digital television signal. The broadcaster will be required to "simulcast" its traditional free, analog, over-the-air service on its digital channel as follows: in 2003, it must simulcast 50% of the traditional broadcast service on its digital spectrum; in 2004, it must simulcast 75% of the traditional broadcast service; in 2005 it must simulcast 100% of the traditional broadcast service. The FCC has attempted to provide digital television coverage areas that are comparable to stations' existing service areas. The FCC has ruled that television broadcast licensees may use their digital channels for a wide variety of services such as high-definition television, multiple standard definition television programming, audio, data, and other types of communications, subject to the requirement that each broadcaster provide at least one free video channel equal in quality to the current technical standard. Digital television channels will generally be located in the range of channels from channel 2 through channel 51. Stations were required to construct their DTV facilities and be on the air with a digital signal according to a schedule set by the FCC based on the type of station and the size of the market in which it is located. For example, all ABC, CBS, NBC and FOX network affiliates in the 10 largest markets were required to be on the air with a digital signal by May 1, 1999. Affiliates of the four major networks in the top 30 markets were required to be transmitting digital signals by November 1, 1999. (Our WFTC-TV in Minneapolis, Minnesota was awaiting a construction permit for its DTV facilities from the FCC and, therefore, did not meet this deadline.) All other commercial broadcasters must follow suit by May 1, 2002. In January 2001, the FCC issued an order on DTV transition issues which sets a number of additional deadlines for commercial broadcasters. By December 31, 2003, commercial stations with both analog and digital channel assignments within the DTV core spectrum (channels 2-51) must elect the channel they will use for broadcasting after the DTV transition is concluded. On December 31, 2004, commercial broadcasters not replicating their existing analog service areas will lose interference protection in those portions of their existing service areas not covered by their digital signal. On the same date, new minimum signal strength standards for coverage of stations' communities of license will become effective. The FCC's plan calls for the digital television transition period to end in the year 2006, at which time the FCC expects that television broadcasters will cease non-digital broadcasting and return one of their two channels to the government, allowing that spectrum to be recovered for other uses. Some of the vacated spectrum has been allocated to public safety communications, while the remainder will be auctioned for use by other telecommunications services. The Balanced Budget Act of 1997, however, allows broadcasters to keep both their analog and digital licenses until at least 85% of the television households in their respective markets can receive a digital signal. Local zoning laws and the lack of qualified tall-tower builders to construct the facilities needed for DTV operations, as well as other factors including the pace of DTV receiver production and sales, may cause delays in the transition. The FCC will 23 24 review the progress of DTV periodically and make adjustments to the 2006 target date if necessary. In addition, the FCC has commenced a proceeding to consider setting strict time limits within which local zoning authorities must act on zoning petitions by local television stations. Implementation of digital television will improve the technical quality of television signals received by viewers and will give television broadcasters the flexibility to provide new services, including high definition television or multiple programs of standard definition television and data transmission. However, the implementation of digital television will also impose substantial additional costs on television stations because of the need to replace equipment and because some stations will need to operate at higher utility costs. There can be no assurance that our television stations will be able to increase revenue to offset such costs. In addition, the 1996 Act allows the FCC to charge a spectrum fee to broadcasters who use the digital spectrum to offer subscription-based services. The FCC has adopted rules that require broadcasters to pay a fee of 5% of gross revenues received from ancillary or supplementary uses of the digital spectrum for which they charge subscription fees. We cannot predict what future actions the FCC might take with respect to digital television, nor can we predict the effect of the FCC's present digital television implementation plan or such future actions on our business. We will incur considerable expense in the conversion to digital television and are unable to predict the extent or timing of consumer demand for digital television services. Digital Audio Radio Service. The FCC has adopted spectrum allocation and service rules for satellite digital audio radio service. Satellite digital audio radio service systems potentially could provide regional or nationwide distribution of radio programming with fidelity comparable to compact discs. The FCC has authorized two companies to launch and operate satellite digital audio radio service systems. Sirius Satellite Radio Inc. has launched three satellites. XM Radio's first of two satellite launches is scheduled for March 2001. Both licensees expect to begin providing service by the end of 2001. The FCC also has undertaken an inquiry regarding rules for the terrestrial broadcast of digital audio radio service signals, addressing, among other things, the need for spectrum outside the existing FM band and the role of existing broadcasters. We cannot predict the impact of either satellite or terrestrial digital audio radio service on our business. Low Power FM Radio Service. In January 2000, the FCC created two new classes of noncommercial low power FM radio stations ("LPFM"). One class (LP100) will operate with a maximum power of 100 watts and a service radius of about 3.5 miles. The other class (LP10) will operate with a maximum power of 10 watts and a service radius of about 1 to 2 miles. In establishing the new LPFM service, the FCC said that its goal is to create a class of radio stations designed "to serve very localized communities or underrepresented groups within communities." The FCC has begun accepting applications for LPFM stations. In December 2000, Congress passed the Radio Broadcasting Preservation Act of 2000. This legislation requires the FCC to maintain interference protection requirements between LPFM stations and full-power radio stations on third-adjacent channels. It also requires the FCC to conduct field tests to determine the impact of eliminating such requirements. We cannot predict the number of LPFM stations that will be authorized to operate or the impact of such stations on our business. Congress and the FCC currently have under consideration, and may in the future adopt, new laws, regulations and policies regarding a wide variety of matters that could affect, directly or indirectly, the operation and ownership of our broadcast properties. In addition to the changes and proposed changes noted above, such matters include, for example, spectrum use fees, political advertising rates, and potential restrictions on the advertising of certain products such as beer and wine. Other matters that could affect our broadcast properties include technological innovations and developments generally affecting competition in the mass communications industry, such as direct broadcast satellite service, the continued 24 25 establishment of wireless cable systems and low power television stations, "streaming" of audio and video programming via the Internet, digital television and radio technologies, the establishment of a low power FM radio service, and the advent of telephone company participation in the provision of video programming service. The foregoing is a brief summary of certain provisions of the Communications Act, the 1996 Act, the 1992 Cable Act, and specific regulations and policies of the FCC thereunder. This description does not purport to be comprehensive and reference should be made to the Communications Act, the 1996 Act, the 1992 Cable Act, the FCC's rules and the public notices and rulings of the FCC for further information concerning the nature and extent of federal regulation of broadcast stations. Proposals for additional or revised regulations and requirements are pending before and are being considered by Congress and federal regulatory agencies from time to time. Also, various of the foregoing matters are now, or may become, the subject of court litigation, and we cannot predict the outcome of any such litigation or its impact on our broadcasting business. Outdoor Advertising 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 us. 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 our existing markets have adopted amortization ordinances. Restrictive regulations also limit our ability to rebuild or replace nonconforming billboards. We can give no assurance that we will be successful in negotiating acceptable arrangements in circumstances in which our billboards are subject to removal or amortization, and what effect, if any, such regulations may have on our operations. 25 26 In addition, we are 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 we operate, could have a material adverse effect on us. Tobacco and Alcohol Advertising 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 our 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 we conduct business, and could have a similar impact. Any significant reduction in alcohol related advertising due to content-related restrictions could cause a reduction in our direct revenue from such advertisements and a simultaneous increase in the available space on the existing inventory of billboards in the outdoor advertising industry. Antitrust Matters An important element of our growth strategy involves the acquisition of additional radio stations, outdoor advertising display faces and live entertainment properties, many of which are likely to require preacquisition antitrust review by the Federal Trade Commission and the Antitrust Division. Following passage of the 1996 Act, the Antitrust Division has become more aggressive in reviewing proposed acquisitions of radio stations and radio station networks, particularly in instances where the proposed acquiror already owns one or more radio stations in a particular market and the acquisition involves another radio station in the same market. Recently, the Antitrust Division, in some cases, has obtained consent decrees requiring radio station divestitures in a particular market based on allegations that acquisitions would lead to unacceptable concentration levels. There can be no assurance that the Antitrust Division or the FTC will not seek to bar us from acquiring additional radio and television stations or outdoor advertising display faces in any market where our existing stations or display faces already have a significant market share. In addition, the antitrust laws of foreign jurisdictions will apply if we acquire international broadcasting properties. Environmental Matters As the owner, lessee or operator of various real properties and facilities, we are subject to various federal, state and local environmental laws and regulations. Historically, compliance with such laws and regulations has not had a material adverse effect on our business. There can be no assurance, however, 26 27 that compliance with existing or new environmental laws and regulations will not require us to make significant expenditures in the future. FINANCIAL LEVERAGE We currently use a significant portion of our operating income for debt service. Our leverage could make us vulnerable to an increase in interest rates or a downturn in the operating performance of our radio broadcast, outdoor advertising or live entertainment properties or a decline in general economic conditions. At December 31, 2000, we had debt outstanding of approximately $10.7 billion and shareholders' equity of $30.3 billion. We expect to continue to borrow funds to finance acquisitions of radio broadcasting, outdoor advertising and live entertainment properties, as well as for other purposes. We may borrow up to $3.0 billion under credit facilities at floating rates currently equal to the London InterBank Offered Rate plus .625% and an additional $1.9 billion under a credit facility at floating rates currently equal to the London InterBank Offered Rate plus .4%. DEPENDENCE ON KEY PERSONNEL Our business is dependent upon the performance of certain key employees, including our chief executive officer and other executive officers. We also employ or independently contract with several on-air personalities with significant loyal audiences in their respective markets. Although we have entered into long-term agreements with certain of our executive officers and key on-air talent to protect our interests, we can give no assurance that all such key personnel will remain with us or will retain their audiences. INTERNATIONAL BUSINESS RISKS Doing business in foreign countries carries with it certain risks that are not found in doing business in the U.S. We currently derive a portion of our revenues from international radio broadcasting, outdoor advertising and live entertainment operations in Europe, Asia, Mexico, South America, Canada, Australia and New Zealand. The risks of doing business in foreign countries which could result in losses against which we are not insured include: - - potential adverse changes in the diplomatic relations of foreign countries with the U.S.; - - 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; - - 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; and - - changes in taxation structure. EXCHANGE RATE RISK Because we own assets overseas and derive revenues from our international operations, we may incur currency translation losses due to changes in the values of foreign currencies and in the value of the U.S. dollar. We cannot predict the effect of exchange rate fluctuations upon future operating results. To 27 28 reduce a portion of our exposure to the risk of international currency fluctuations, we maintain a hedge by incurring debt in various other currencies. We review this hedge position monthly. We currently maintain no other derivative instruments to reduce the exposure to translation and/or transaction risk, but may adopt other hedging strategies in the future. OUR ACQUISITION STRATEGY COULD POSE RISKS Operational Risks. We intend to grow through the acquisition of radio broadcasting companies and assets, outdoor advertising companies, individual outdoor advertising display faces, live entertainment companies and assets and other assets that we believe will assist our clients in marketing their products and services. Our acquisition strategy involves numerous risks, including: - - certain of our acquisitions may prove unprofitable and fail to generate anticipated cash flows; - - successfully managing a rapidly expanding and significantly larger portfolio of broadcasting and outdoor advertising properties, possibly needing to recruit additional senior management and expand corporate infrastructure; - - successfully managing our new live entertainment assets; - - encountering difficulties in the integration of operations and systems; - - our management's attention may be diverted from other business concerns; and - - we may lose key employees of acquired companies or stations. Capital Requirements Necessary for Additional Acquisitions. We will face stiff competition from other radio broadcasting, outdoor advertising and live entertainment companies for acquisition opportunities. If the prices sought by sellers of these companies continue to rise, we may find fewer acceptable acquisition opportunities. In addition, the purchase price of possible acquisitions could require additional debt or equity financing on our part. We can give no assurance that we will obtain the needed financing or that we will obtain such financing on attractive terms. Additional indebtedness could increase our leverage and make us more vulnerable to economic downturns and may limit our ability to withstand competitive pressures. Additional equity financing could result in dilution to our stockholders. NEW TECHNOLOGIES MAY AFFECT OUR BROADCASTING OPERATIONS The FCC is considering ways to introduce new technologies to the broadcasting industry, including satellite and terrestrial delivery of digital audio broadcasting and the standardization of available technologies which significantly enhance the sound quality of AM broadcasts. We are unable to predict the effect such technologies will have on our broadcasting operations, but the capital expenditures necessary to implement such technologies could be substantial. We also face risks in implementing the conversion of our television stations to digital television, which the FCC has ordered and for which it has established a timetable. We will incur considerable expense in the conversion to digital television and are unable to predict the extent or timing of consumer demand for any such digital television services. Moreover, the FCC may impose additional public service obligations on television broadcasters in return for their use of the digital television spectrum. This could add to our operational costs. One issue yet to be resolved is the extent to which cable systems will be required to carry broadcasters' new digital channels. Our television stations are highly dependent on their carriage by cable systems in the areas they serve. Thus, FCC rules that impose no or limited obligations on cable systems to carry the digital television signals of television broadcast stations in their local markets could adversely affect our television operations. CAUTION CONCERNING FORWARD LOOKING STATEMENTS 28 29 The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements made by us or on our behalf. Except for the historical information, this report contains various forward-looking statements which represent our expectations or beliefs concerning future events, including the future levels of cash flow from operations. Management believes that all statements that express expectations and projections with respect to future matters, including the strategic fit of radio assets; expansion of market share; our ability to capitalize on synergies between the live entertainment and radio broadcasting businesses; our ability to negotiate contracts having more favorable terms; and the availability of capital resources; are forward-looking statements within the meaning of the Private Securities Litigation Reform Act. We caution that these forward-looking statements involve a number of risks and uncertainties and are subject to many variables which could have an adverse effect upon our financial performance. These statements are made on the basis of management's views and assumptions, as of the time the statements are made, regarding future events and business performance. There can be no assurance, however, that management's expectations will necessarily come to pass. A wide range of factors could materially affect future developments and performance, including: - - the impact of general economic conditions in the U.S. and in other countries in which we currently do business; - - our ability to integrate the operations of recently acquired companies; - - shifts in population and other demographics; - - industry conditions, including competition; - - fluctuations in operating costs; - - technological changes and innovations; - - changes in labor conditions; - - fluctuations in exchange rates and currency values; - - capital expenditure requirements; - - legislative or regulatory requirements; - - interest rates; - - the effect of leverage on our financial position and earnings; - - taxes; - - access to capital markets; and - - certain other factors set forth in our SEC filings. This list of factors that may affect future performance and the accuracy of forward-looking statements is illustrative, but by no means exhaustive. Accordingly, all forward-looking statements should be evaluated with the understanding of their inherent uncertainty. 29 30 ITEM 2. PROPERTIES CORPORATE Our corporate headquarters is in San Antonio, Texas, primarily housed in our company owned 55,000 square foot corporate office building. In addition, we own an 8,000 square foot data center and lease approximately 31,000 square feet of office space in San Antonio with the lease expiring in December 2002. OPERATIONS Radio Broadcasting The headquarters of our radio operations is in 21,201 square feet of leased office space in Covington, Kentucky. The lease on this premise expires in November 2008. The types of properties required to support each of our radio stations include offices, studios, transmitter sites and antenna sites. A radio station's studios are generally housed with its offices in downtown or business districts. A radio station's transmitter sites and antenna sites are generally located in a manner that provides maximum market coverage. Outdoor Advertising The headquarters of our domestic outdoor advertising operations is in 15,505 square feet of leased office space in Phoenix, Arizona. The lease on this premise expires in April 2006. The headquarters of our international outdoor advertising operations is in 8,688 square feet of leased office space in London, England. The lease on this premise expires in June 2014. The types of properties required to support each of our outdoor advertising branches include offices, production facilities and structure sites. An outdoor branch and production facility is generally located in an industrial/warehouse district. We own or have permanent easements on relatively few parcels of real property that serve as the sites for our outdoor displays. Our remaining outdoor display sites are leased. Our leases are for varying terms ranging from month-to-month to year-to-year and can be for terms of ten years or longer, and many provide for renewal options. There is no significant concentration of displays under any one lease or subject to negotiation with any one landlord. We believe that an important part of our management activity is to negotiate suitable lease renewals and extensions. Live Entertainment The headquarters of our live entertainment operations is in 100,227 square feet of leased office space in Houston, Texas. The lease on this premise expires in March 2009. The types of properties required to support each of our live entertainment operations include offices and venues. Our live entertainment venues generally include offices and are located in major metropolitan areas. The studios and offices of our radio stations, outdoor advertising branches and live entertainment venues are located in leased or owned facilities. These leases generally have expiration dates that range from one to twenty years. We either own or lease our transmitter and antenna sites. These leases generally have expiration dates that range from five to fifteen years. We do not anticipate any difficulties in renewing those leases that expire within the next several years or in leasing other space, if required. We own substantially all of the equipment used in our radio broadcasting, outdoor advertising and live entertainment businesses. As noted in Item 1 above, as of December 31, 2000, we own or program 1,107 radio stations, own or lease approximately 698,265 outdoor advertising display faces and own or operate 120 entertainment venues in various markets throughout the world. See "Business -- Operating Segments." Therefore, no 30 31 one property is material to our overall operations. We believe that our properties are in good condition and suitable for our operations. ITEM 3. LEGAL PROCEEDINGS From time to time we become involved in various claims and lawsuits incidental to our business, including defamation actions. In the opinion of our management, after consultation with counsel, any ultimate liability arising out of currently pending claims and lawsuits will not have a material effect on our financial condition or operations. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. There were no matters submitted to a vote of security holders in the fourth quarter of fiscal year 2000. 31 32 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS Our common stock trades on the New York Stock Exchange under the symbol "CCU." There were approximately 3,120 shareholders of record as of March 9, 2001. This figure does not include an estimate of the indeterminate number of beneficial holders whose shares may be held of record by brokerage firms and clearing agencies. The following table sets forth, for the calendar quarters indicated, the reported high and low sales prices of the common stock as reported on the NYSE.
CLEAR CHANNEL COMMON STOCK ------------- MARKET PRICE ------------ HIGH LOW ---- --- 1999 First Quarter........................................ $ 68.1875 $ 52.0000 Second Quarter....................................... 74.3750 64.2500 Third Quarter........................................ 80.8125 60.7500 Fourth Quarter....................................... 91.5000 68.5000 2000 First Quarter........................................ 95.5000 60.0000 Second Quarter....................................... 83.0000 62.0625 Third Quarter........................................ 85.8125 54.7500 Fourth Quarter....................................... 61.0000 43.8750
DIVIDEND POLICY Presently, we expect to retain our earnings for the development and expansion of our business and do not anticipate paying cash dividends in 2001. However, any future decision by our Board of Directors to pay cash dividends will depend on, among other factors, our earnings, financial position, and capital requirements. 32 33 ITEM 6. SELECTED FINANCIAL DATA (In thousands, except per share data)
As of and for the Years ended December 31, (2) ----------------------------------------- 2000 1999 1998 1997 1996 ---- ---- ---- ---- ---- RESULTS OF OPERATIONS INFORMATION: Gross revenue $ 5,847,900 $ 2,992,018 $ 1,522,551 $ 790,178 $ 398,094 ============ ============ ============ ============ ============ Net revenue $ 5,345,306 $ 2,678,160 $ 1,350,940 $ 697,068 $ 351,739 Operating expenses 3,480,706 1,632,115 767,265 394,404 198,332 Non-cash compensation expense 16,032 -- -- -- -- Depreciation and amortization 1,401,063 722,233 304,972 114,207 45,790 Corporate expenses 142,627 70,146 37,825 20,883 8,527 ------------ ------------ ------------ ------------ ------------ Operating income 304,878 253,666 240,878 167,574 99,090 Interest expense 383,104 179,404 135,766 75,076 30,080 Gain on sale of assets related to mergers 783,743 138,659 -- -- -- Equity in earnings (loss) of nonconsolidated affiliates 25,155 18,183 10,305 9,132 (3,441) Other income (expense) - net (17,133) 7,292 12,810 11,579 2,230 ------------ ------------ ------------ ------------ ------------ Income before income taxes and extraordinary item 713,539 238,396 128,227 113,209 67,799 Income taxes 464,731 152,741 74,196 49,633 30,103 ------------ ------------ ------------ ------------ ------------ Income before extraordinary item 248,808 85,655 54,031 63,576 37,696 Extraordinary item -- (13,185) -- -- -- ------------ ------------ ------------ ------------ ------------ Net income $ 248,808 $ 72,470 $ 54,031 $ 63,576 $ 37,696 ============ ============ ============ ============ ============ Net income per common share (1) Basic: Income before extraordinary item $ .59 $ .27 $ .23 $ .36 $ .26 Extraordinary item -- (.04) -- -- -- ------------ ------------ ------------ ------------ ------------ Net income $ .59 $ .23 $ .23 $ .36 $ .26 ============ ============ ============ ============ ============ Diluted: Income before extraordinary item .57 $ .26 $ .22 $ .33 $ .25 Extraordinary item -- (.04) -- -- -- ------------ ------------ ------------ ------------ ------------ Net income $ .57 $ .22 $ .22 $ .33 $ .25 ============ ============ ============ ============ ============ Cash dividends per share $ -- $ -- $ -- $ -- $ -- ============ ============ ============ ============ ============ BALANCE SHEET DATA: Current assets $ 2,343,217 $ 925,109 $ 409,960 $ 210,742 $ 113,164 Property, plant and equipment - net 4,255,234 2,478,124 1,915,787 746,284 147,838 Total assets 50,056,461 16,821,512 7,539,918 3,455,637 1,324,711 Current liabilities 2,128,550 685,515 258,144 86,852 43,462 Long-term debt, net of current maturities 10,100,028 4,093,543 2,323,643 1,540,421 725,132 Shareholders' equity 30,347,173 10,084,037 4,483,429 1,746,784 513,431
(1) All per share amounts have been adjusted to reflect the two-for-one stock split effected in July 1998. (2) Acquisitions and dispositions significantly impact the comparability of the historical consolidated financial data reflected in this schedule of Selected Financial Data. The Selected Financial Data should be read in conjunction with Management's Discussion and Analysis. 33 34 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION OVERVIEW Management's discussion and analysis of the results of operation and financial condition of Clear Channel Communications, Inc. and its subsidiaries should be read in conjunction with the Consolidated Financial Statements and related Footnotes. The discussion is presented on both a consolidated and segment basis. During the third quarter of 2000, as a result of the acquisitions of AMFM Inc. and SFX Entertainment, Inc., we redefined our reportable operating segments. Accordingly, all prior years have been reclassified to conform to the 2000 presentation. The new reportable operating segments are: RADIO BROADCASTING which includes all domestic and international radio assets and radio networks; OUTDOOR ADVERTISING which includes domestic and international billboards, transit displays, street furniture and other outdoor advertising media; and LIVE ENTERTAINMENT which includes live music, theatrical, family entertainment and motor sports events. Included in the "other" segment is television broadcasting, sports representation, our media representation business, Katz Media, and Internet businesses as well as corporate expenses. We continued our strong financial performance in 2000 with record operating growth. This performance was the result of the strength of our management, the growth characteristics of the industries in which we operate and our financial discipline. During 2000, we completed several acquisitions that continued our strategic focus on building a national radio platform, filling out our outdoor advertising markets and creating a platform of media and entertainment assets, enabling us to provide a fuller breadth of marketing solutions for our clients. The most significant transactions are as follows: AMFM INC. On August 30, 2000, we completed the merger with AMFM. The AMFM assets provided a strategic fit with our radio assets to form a national radio platform, positioning our radio segment to expand its market share. Also, as a result of this merger, we have significant overlap such that we now have radio operations in most every domestic market where we operate outdoor or television assets. Pursuant to the terms of the merger agreement, each share of AMFM common stock was exchanged for 0.94 shares of our common stock. Approximately 205.4 million shares of our common stock were issued in the AMFM merger, valuing the merger, based on the average market price of our common stock at the signing of the merger agreement, at $15.9 billion plus the assumption of AMFM's outstanding debt of approximately $3.5 billion. Additionally, we assumed stock options and common stock warrants with a fair value of $1.2 billion, which are convertible, subject to applicable vesting, into approximately 25.5 million shares of our common stock. We refinanced $540.0 million of AMFM's $3.5 billion of long-term debt at the closing of the merger using our credit facilities. The AMFM merger was accounted for as a purchase with resulting goodwill of approximately $7.1 billion, which is being amortized over 25 years on a straight-line basis. The results of operations of AMFM have been included in our financial statements beginning August 30, 2000. SFX ENTERTAINMENT, INC. We closed the merger with SFX on August 1, 2000. With this acquisition, we are able to capitalize on the natural synergies between live entertainment and radio broadcasting and gain immediate industry leadership. In addition, the SFX acquisition strategically fits with our other businesses as live entertainment provides our existing clients an additional avenue for reaching their target consumers. Pursuant to the terms of the merger agreement, each share of SFX Class A common stock was 34 35 exchanged for 0.6 shares of our common stock and each share of SFX Class B common stock was exchanged for one share of our common stock. Approximately 39.2 million shares of our common stock were issued in the SFX merger. Based on the average market price of our common stock at the signing of the merger agreement, the merger was valued at $2.9 billion plus the assumption of SFX's outstanding debt of approximately $1.5 billion. Additionally, we assumed all stock options and common stock warrants with a fair value of $211.8 million, which are exercisable for approximately 5.6 million shares of our common stock. We refinanced $815.8 million of SFX's $1.5 billion of long-term debt at the closing of the merger using our credit facilities. This merger has been accounted for as a purchase with resulting goodwill of approximately $4.1 billion, which is being amortized over 20 years on a straight-line basis. The results of operations of SFX have been included in our financial statements beginning August 1, 2000. A number of lawsuits were filed by holders of SFX Class A common stock alleging, among other things, that the difference in consideration for the Class A and Class B shares constituted unfair consideration to the Class B holders, that the SFX board breached its fiduciary duties and that we aided and abetted the actions of the SFX board. On September 28, 2000, we issued approximately .4 million shares of our common stock, valued at $29.3 million, as settlement of these lawsuits and have included the value of these shares as part of the purchase price. DONREY MEDIA GROUP On September 1, 2000, we completed the acquisition of the assets of Donrey Media Group for $372.6 million in cash consideration. The Donrey acquisition added ten additional markets to our outdoor advertising business, including Las Vegas, Nevada; Albuquerque, New Mexico; Columbus, Ohio; Oklahoma City, Oklahoma; Tulsa, Oklahoma; Little Rock, Arkansas; Fort Smith, Arkansas; and Wichita, Kansas. Donrey added markets that benefit our customers trying to target these growing areas with our extensive sales network. We funded the acquisition with advances on our credit facilities. The acquisition was accounted for as a purchase, with resulting goodwill of approximately $290.3 million, which is being amortized over 25 years on a straight-line basis. The results of operations of the Donrey markets have been included in our financial statements beginning September 1, 2000. ACKERLEY'S SOUTH FLORIDA OUTDOOR ADVERTISING DIVISION On January 5, 2000, we closed the acquisition of Ackerley's South Florida outdoor advertising division for $300.2 million. Ackerley complements the existing outdoor and radio assets we have in South Florida. We funded the acquisition with advances on our credit facilities. The acquisition was accounted for as a purchase, with resulting goodwill of approximately $208.3 million, which is amortized over 25 years on a straight-line basis. The results of operations of Ackerley have been included in our financial statements beginning January 5, 2000. RESULTS OF OPERATIONS We evaluate the operating performance of our businesses using several measures, one of them being EBITDA (defined as net revenue less operating and corporate expenses). EBITDA eliminates the uneven effect across our business segments, as well as in comparison to other companies, of considerable amounts of non-cash depreciation and amortization recognized in business combinations accounted for under the purchase method. We have used the purchase method of accounting for all mergers and acquisitions in the history of our company. Non-cash depreciation and amortization is significant due to the consolidation in our industry. While we and many in the financial community consider EBITDA to be an important measure of operating performance, it should be considered in addition to, but not as a substitute for or superior to, other measures of financial performance prepared in accordance with 35 36 generally accepted accounting principles such as operating income and net income. We measure the performance of our operating segments and managers based on a like period pro forma measurement. Like period pro forma includes adjustments to the prior period for all acquisitions. For each acquisition other than the AMFM merger, an adjustment was made to the prior period to include the operating results of the acquisition for the corresponding period of time that the acquisition was owned in the current period. Due to the significance of the AMFM merger, its results of operations are included in both 1999 and 2000 for the twelve-month period. Results of operations from divested assets are excluded from all periods presented. We believe that like period pro forma is the best measure of our operating performance as it includes the performance of assets for the period of time we managed the assets. Like period pro forma is compared in constant U.S. dollars (i.e. a currency exchange adjustment is made to the 2000 actual results to present foreign revenues and expenses in 1999 dollars) allowing for comparison of operations independent of foreign exchange movements. We also include our proportionate share of the results of operations of actively managed equity investments in the like period pro forma. These investments include Australian Radio Network, New Zealand Radio Network, Grupo ACIR, and White Horse Media and other less significant investments. The following tables set forth our consolidated and segment results of operations on both a reported and a like period pro forma basis. FISCAL YEAR 2000 COMPARED TO FISCAL YEAR 1999 CONSOLIDATED (In thousands)
Reported Basis: Years Ended December 31, - --------------- ------------------------- % Change 2000 1999 2000 v. 1999 ---- ---- ------------ Net Revenue $5,345,306 $2,678,160 100% Operating Expenses 3,480,706 1,632,115 113% Corporate Expenses 142,627 70,146 103% ---------- ---------- EBITDA $1,721,973 $ 975,899 76% ========== ==========
Pro Forma Basis: Years Ended December 31, - ---------------- ------------------------- % Change 2000 1999 2000 v. 1999 ---- ---- ------------ Net Revenue $6,891,290 $6,098,744 13% Operating Expenses 4,330,370 3,962,343 9% Corporate Expenses 207,473 186,365 11% ---------- ---------- EBITDA $2,353,447 $1,950,036 21% ========== ==========
Net revenue and operating expenses increased on a reported basis due to our 1999 and 2000 acquisitions as well as internal growth. Included in our fiscal year 2000 reported basis amounts are the net revenues and operating expenses for a twelve-month period from our 1999 acquisitions, the most significant being Jacor Communications in May 1999 and Dame Media Inc. and Dauphin OTA in July 1999. Also included in our fiscal year 2000 reported basis amounts are the net revenues and operating expenses of our 2000 acquisitions for the time period that we operated them in fiscal year 2000. Our 2000 36 37 acquisitions included Ackerley in January 2000, SFX in August 2000, AMFM in August 2000, and Donrey in September 2000. Corporate expenses increased on a reported basis due to the above acquisitions and some duplication of efforts at the corporate level due to the integration of AMFM into Clear Channel. On a pro forma basis, net revenues increased in fiscal year 2000 due to higher advertising rates in our radio and outdoor businesses as well as increased inventory demand within the advertising industry. The increase in the number of live entertainment events and the number of show dates in fiscal year 2000 also contributed to the increase of net revenue on a pro forma basis. Operating expenses increased on a pro forma basis in fiscal year 2000 due primarily to the increase in selling costs related to the increase in net revenue. Corporate expenses increased on a pro forma basis in fiscal year 2000 due to additional costs associated with the integration of the numerous acquisitions mentioned above. Other Income and Expense Information Non-cash compensation expense of $16.0 million was recorded in fiscal year 2000. In the AMFM merger, we assumed stock options granted to AMFM employees that are now convertible into Clear Channel stock. To the extent that these employees' options continue to vest, we will recognize non-cash compensation expense over the remaining vesting period. Vesting dates range from January 2001 to April 2005. If no employees forfeit their unvested options by leaving the company, we expect to recognize non-cash compensation expense of approximately $28.1 million over the remaining vesting period. Depreciation and amortization expense increased from $722.2 million in 1999 to $1.4 billion in 2000, a 94% increase. The increase is due primarily to additional amortization of approximately $315.7 million for the FCC licenses and goodwill from the AMFM acquisition and amortization of approximately $88.3 million for the goodwill from the SFX acquisition. The remaining increase is due to additional depreciation and amortization associated with the other less significant acquisitions accounted for under the purchase method as well as the inclusion of a full year of depreciation and amortization associated with acquisitions completed during 1999. Interest expense was $383.1 million and $179.4 million in 2000 and 1999, respectively, an increase of $203.7 million or 114%. Approximately 89% of the increase was due to the overall increase in average amounts of debt outstanding and approximately 11% of the increase was due to increases in LIBOR. Currently, approximately 50% of our debt bears interest rates based upon LIBOR. During 2000, LIBOR rates increased from 5.82% at December 31, 1999 to 6.57% at December 31, 2000. The gain on sale of assets related to mergers of $783.7 million in 2000 is primarily due to the sale of 39 stations in connection with governmental directives regarding the AMFM merger, which realized a gain of $805.2 million. This gain for 2000 was partially offset by a loss of $5.8 million related to the sale of 1.3 million shares of Lamar Advertising Company that we acquired in the AMFM merger; and a net loss of $15.7 million related to write-downs of investments acquired in mergers. The gain in 1999 of $138.7 million relates to the sale of 12 radio stations as a result of governmental directives related to the Jacor merger. 37 38 Equity in earnings of nonconsolidated affiliates for 2000 was $25.2 million as compared to $18.2 million for 1999. The increase was due to improved operations primarily in our international outdoor equity investments. Other income (expense) net was an expense of $17.1 million in 2000 as compared to income of $7.3 million in 1999. The additional expense recognized in 2000 related primarily to the reimbursements of capital costs within certain operating contracts. The income amount in 1999 includes a $22.9 million gain on sale of marketable securities. Income tax expense was $464.7 million in 2000, an increase of 204% or $312.0 million from 1999 income tax expense of $152.7 million. The increase is primarily related to the taxes on the gain on sale of assets related to mergers recorded in 2000. The provision for income taxes represents federal, state and foreign income taxes on earnings before income taxes. The annual effective tax rates of 65% for 2000 and 64% for 1999 were both adversely affected by amortization of intangibles in excess of amounts that are deductible for tax purposes. For the reasons described above, net income of $248.8 million for 2000 increased $176.3 million, or 243%, from $72.5 million for 1999. RADIO BROADCASTING (In thousands)
As Reported Years Ended December 31, % Change % Change ------------------------- As Reported Pro Forma 2000 1999 2000 v. 1999 2000 v. 1999 ---- ---- ------------ ------------ Net Revenue $2,431,544 $1,230,754 98% 15% Operating Expenses 1,385,848 731,062 90% 9% ---------- ---------- EBITDA $1,045,696 $ 499,692 109% 22% ========== ==========
Net revenues and operating expenses increased on a reported basis due to our 2000 and 1999 acquisitions and internal growth. Included in our fiscal year 2000 reported basis amounts are net revenues and operating expenses for a twelve-month period from our acquisition of Jacor that was acquired in May 1999 and Dame Media which was acquired in July 1999. In addition, our acquisition of AMFM in August 2000 increased net revenues and operating expenses in fiscal year 2000. On a pro forma basis, net revenue increased due to various factors. During the first part of fiscal year 2000, advertising rates were significantly higher than the prior year as rates reacted to inventory sell-outs primarily related to the rapid growth period of the Internet industry as well as an overall increase in advertising demand across the industry. Although some of our larger markets continued to enjoy significantly higher rates in the second part of fiscal year 2000, when the Internet industry demand slowed, rates in our other markets normalized compared to the prior year. In addition, our national platform approach to selling advertising to our national clients helped increase our overall rates, especially in our larger markets. On a pro forma basis, operating expenses increased primarily due to incremental selling costs associated with the increase in net revenue. 38 39 OUTDOOR ADVERTISING (In thousands)
As Reported Years Ended December 31, % Change % Change ------------------------- As Reported Pro Forma 2000 1999 2000 v. 1999 2000 v. 1999 ---- ---- ------------ ------------ Net Revenue $1,729,438 $1,253,732 38% 14% Operating Expenses 1,078,540 785,636 37% 9% ---------- ---------- EBITDA $ 650,898 $ 468,096 39% 24% ========== ==========
Net revenues and operating expenses increased on a reported basis due to our 2000 and 1999 acquisitions and internal growth. Included in our fiscal year 2000 reported basis amounts are net revenues and operating expenses for a twelve-month period from our acquisition of Dauphin in July 1999 and other less significant acquisitions. In addition, net revenues and operating expenses increased on a reported basis in fiscal year 2000 due to our acquisitions of Ackerley in January 2000, and Donrey in September 2000, as well as less significant acquisitions to fill out our existing markets. On a pro forma basis, net revenues increased due to various factors. Higher rates and improved occupancy in fiscal year 2000 as compared to fiscal year 1999 increased net revenue for the entire year. In addition, our national platform approach to selling advertising to our national customers helped increase our overall rates, especially in our larger markets. High growth rates were primarily achieved internationally in our United Kingdom and France markets. On a pro forma basis, operating expenses increased primarily due to incremental selling costs associated with the increase in net revenue. LIVE ENTERTAINMENT (In thousands)
As Reported Years Ended December 31, % Change % Change ----------------------- As Reported Pro Forma 2000 1999 2000 v. 1999 2000 v. 1999 ---- ---- ------------ ------------ Net Revenue $902,374 $ -- n/a 11% Operating Expenses 830,717 -- n/a 12% -------- -------- EBITDA $ 71,657 $ -- n/a ( 1%) ======== ========
We entered the live entertainment business with our acquisition of SFX in August 2000. On a pro forma basis, net revenue increased due to an increase in the number of events and the number of show dates in fiscal year 2000 as compared to fiscal year 1999. Expenses increased on a pro forma basis as numerous contracts with less favorable terms signed by prior management were fulfilled during the five-month period after our acquisition. Our future expectation is to have contracts with more favorable terms, resulting in more profitable shows. 39 40 FISCAL YEAR 1999 COMPARED TO FISCAL YEAR 1998 CONSOLIDATED (In thousands)
Reported Basis: Years Ended December 31, - --------------- ------------------------- % Change 1999 1998 1999 v. 1998 ---- ---- ------------ Net Revenue $2,678,160 $1,350,940 98% Operating Expenses 1,632,115 767,265 113% Corporate Expenses 70,146 37,825 85% ---------- ---------- EBITDA $ 975,899 $ 545,850 79% ========== ==========
The growth in net revenue and operating expenses was primarily due to the acquisitions of Universal Outdoor in April of 1998, More Group in July 1998, Jacor in May 1999 and Dame Media and Dauphin in July 1999. The acquisitions of Jacor and Dame Media added approximately 230 radio stations and Premiere Radio Networks and contributed 27% of 1999 net revenue. The acquisition of Dauphin added approximately 103,000 display faces, including joint ventures, and contributed 5% of 1999 net revenue. Other Income and Expense Information Depreciation and amortization expense increased from $305.0 million in 1998 to $722.2 million in 1999, a 137% increase, primarily due to the acquisition of the tangible and intangible assets associated with the acquisitions of Jacor in May 1999 and Dauphin and Dame Media in July 1999 as well as the inclusion of a full year's depreciation and amortization expense relating to the acquisitions of Universal in April 1998 and More Group in July 1998. Interest expense increased 32% from $135.8 million in 1998 to $179.4 million in 1999 primarily due to higher average interest rates and an increase in the average amount of debt outstanding, which resulted from the above-mentioned acquisitions. Equity in earnings of nonconsolidated affiliates increased 77% to $18.2 million in 1999 over $10.3 million in 1998 primarily due to the improvement in the operating results of Hispanic Broadcasting Corporation and Grupo ACIR Comunicaciones. Income tax expense increased 106% from $74.2 million in 1998 to $152.7 million in 1999 primarily from the increase in the average effective tax rate from 58% in 1998 to 64% in 1999, and the increase in income before income taxes. The effective tax rate increased as a result of the increase in nondeductible amortization expense principally associated with the acquisition of Jacor. Net income increased from $54.0 million in 1998 to $72.5 million in 1999 due to a $138.7 million gain realized during 1999 relating to the divestiture of certain stations in connection with governmental directives associated with the Jacor merger. This gain was partially offset by higher interest expense, higher depreciation and amortization and the extraordinary loss related to the early extinguishment of debt acquired in the Jacor merger. 40 41 RADIO BROADCASTING (In thousands)
Reported Basis: Years Ended December 31, - --------------- ------------------------- % Change 1999 1998 1999 v. 1998 ---- ---- ------------ Net Revenue $1,230,754 $ 474,936 159% Operating Expenses 731,062 284,798 157% ---------- ---------- EBITDA $ 499,692 $ 190,138 163% ========== ==========
The majority of the increase in net revenue and operating expenses was due to the acquisitions of Jacor in May 1999 and Dame Media in July 1999. Net revenue also increased due to increased advertising rates associated with improved ratings within our radio stations. OUTDOOR ADVERTISING (In thousands)
Reported Basis: Years Ended December 31, - --------------- ------------------------ % Change 1999 1998 1999 v. 1998 ---- ---- ------------ Net Revenue $1,253,732 $ 709,189 77% Operating Expenses 785,636 395,127 99% ---------- ---------- EBITDA $ 468,096 $ 314,062 49% ========== ==========
The majority of the increase in net revenue and operating expenses was due to the inclusion of a full year's operating results of Universal, acquired in April 1998 and More Group, acquired in July 1998 and the inclusion of the partial year's operating results of Dauphin, which was acquired in July 1999. In addition, increased occupancy and advertising rates were achieved in 1999. LIQUIDITY AND CAPITAL RESOURCES We expect to fund anticipated cash requirements (including acquisitions, anticipated capital expenditures, share repurchases, payments of principal and interest on outstanding indebtedness and commitments) with cash flows from operations and various externally generated funds. SOURCES OF CAPITAL As of December 31, 2000 and 1999 we had the following debt outstanding:
(In millions) December 31, ----------------------------------- 2000 1999 ---- ---- Credit facilities - domestic $ 3,203.8 $ 1,227.6 Credit facility - international 118.3 120.4 Senior convertible notes 1,575.0 1,575.0 Liquid Yield Option Notes 497.1 490.8 Long-term bonds 5,153.6 1,171.4 Other borrowings 117.0 47.8 ----------- ----------- Total $ 10,664.8 $ 4,633.0 =========== ===========
We had $196.8 million in unrestricted cash and cash equivalents on hand at December 31, 2000. 41 42 DOMESTIC CREDIT FACILITIES We currently have three separate domestic credit facilities. These provide cash for both working capital needs as well as to fund certain acquisitions. The first credit facility is a $1.9 billion revolving credit facility, of which, $1.8 billion was outstanding at December 31, 2000 and, taking into account outstanding letters of credit, $86.0 million was available for future borrowings. This credit facility began reducing on September 30, 2000, with quarterly repayment of the outstanding principal balance to continue over the next five years and the entire balance to be repaid by the last business day of June 2005. During the year, we made principal payments totaling $3.5 billion and drew down $4.6 billion on this credit facility. The second facility was a 364-day multi-currency revolving credit facility for $1.0 billion. During the first eight months of the year, we made principal payments on this credit facility totaling $1.4 billion and drew down $1.0 billion. On August 30, 2000, we repaid all outstanding borrowings, terminated the $1.0 billion facility and entered into a new $1.5 billion credit facility, concurrent with the closing of the AMFM merger. This new facility is a $1.5 billion, 364-day revolving credit facility, which we have the option upon maturity to convert into a term loan with a five-year maturity. At December 31, 2000, the outstanding balance was $.1 billion with $1.4 billion available for future borrowings under this $1.5 billion credit facility. Also, on August 30, 2000, we entered into a third facility for $1.5 billion. This is a five-year multi-currency revolving credit facility. At December 31, 2000, the outstanding balance was $1.3 billion with $.2 billion available for future borrowings under this $1.5 billion credit facility As of March 15, 2001, the credit facilities aggregate outstanding balance was $3.1 billion and, taking into account outstanding letters of credit, $1.7 billion was available for future borrowings. INTERNATIONAL CREDIT FACILITY We entered into a new $150.0 million five-year revolving credit facility with a group of international banks on December 8, 2000. This facility refinanced a previous 88.0 million British pound credit facility. The facility allows for borrowings in various foreign currencies, which are used to hedge net assets in those currencies and provides funds to our international operations for certain working capital needs and smaller acquisitions. At December 31, 2000, approximately $31.7 million was available for future borrowings and $118.3 million was outstanding under this credit facility. The credit facility expires on December 8, 2005. LIQUID YIELD OPTION NOTES We assumed 4.75% Liquid Yield Option Notes ("LYONs") due 2018 and 5.50% LYONs due 2011 as a part of the merger with Jacor. At the date of acquisition, the assumed fair value of the LYONs was $490.1 million. Each LYON has a principal amount at maturity of $1,000 and is convertible, at the option of the holder, at any time on or prior to maturity, into our common stock at a conversion rate of 7.227 shares per LYON and 15.522 shares per LYON for the 2018 and 2011 issues, respectively. The LYONs aggregated balance, net of conversions to common stock, amortization of purchase accounting premium, and accretion of interest, at December 31, 2000 was $497.1 million. 42 43 LONG-TERM BONDS On June 14, 2000, we completed a debt offering of $250.0 million Floating Rate Notes due June 15, 2002 and $750.0 million 7.875% Notes due June 15, 2005. Interest is payable on June 15 and December 15 on the 7.875% Notes and is payable quarterly on the Floating Rate Notes. The Floating Rate Notes rate per annum is equal to LIBOR plus .55%. On June 14, 2000 we entered into interest rate swap agreements that effectively float the interest on the $750.0 million 7.875% notes based upon LIBOR. The aggregate net proceeds of approximately $993.9 million were used to reduce the outstanding balance on our credit facilities. On July 3, 2000, we completed a debt offering of Euro 650.0 million 6.50% Notes due July 7, 2005. Interest on the notes is payable annually in arrears on July 7 of each year. The net proceeds of approximately $610.8 million were used to reduce the outstanding balance on our credit facilities. On September 7, 2000, we completed a debt offering of $750.0 million in 7.25% Senior Notes due September 15, 2003 and $750.0 million in 7.65% Senior Notes due on September 15, 2010. Interest is payable on both series of notes on March 15 and September 15 of each year. On September 7, 2000, we entered into an interest rate swap agreement that effectively floats the interest based upon LIBOR for the $750 million of the 7.25% Senior Notes. The aggregate net proceeds of approximately $1.5 billion were used to reduce the outstanding balance of our credit facilities. JACOR LONG-TERM BONDS On December 14, 1999, we completed a tender offer for the 10.125% Senior Subordinated Notes due June 15, 2006; 9.75% Senior Subordinated Notes due December 15, 2006; 8.75% Senior Subordinated Notes due June 15, 2007; and 8.0% Senior Subordinated Notes due February 15, 2010 acquired in the Jacor merger. An agent acting on our behalf redeemed notes with a redemption value of approximately $570.4 million. Cash settlement of the amount due to the agent was completed on January 14, 2000. After redemption, approximately $1.0 million face value of the notes remain outstanding. AMFM LONG-TERM BONDS We assumed long-term bonds with a face value of $2.8 billion and fair value of $3.0 billion in the AMFM merger. On September 29, 2000, we redeemed all of the outstanding 9% Senior Subordinated Notes due 2008, originally issued by Chancellor Media Corporation or one of its subsidiaries, for $829.0 million subject to change of control provisions in the bond indentures. In October 2000, we redeemed, subject to change of control provisions in the bond indentures, all of the outstanding 9.25% Senior Subordinated Notes due 2007, originally issued by Capstar Radio Broadcasting Partners, Inc., the 12% Exchange Debentures due 2009, originally issued by Capstar Broadcasting Partners, Inc. and the 12.75% Senior Discount Notes due 2009, originally issued by Capstar Broadcasting Partners, Inc., for a total of $508.5 million. On October 6, 2000, we made payments of $231.4 million pursuant to mandatory offers required to repurchase due to a change of control on the following series of AMFM debt: 8% Senior Notes due 2008, 8.125% Senior Subordinated Notes due 2007 and 8.75% Senior Subordinated Notes due 2007, originally issued by Chancellor Media Corporation or one of its subsidiaries, as well as the 12.625% Exchange Debentures due 2006, originally issued by SFX Broadcasting. The aggregate remaining balance of these series of AMFM long-term bonds was $1.4 billion at December 31, 2000. Chancellor Media Corporation, Capstar Radio Broadcasting Partners, Capstar Broadcasting Partners, Inc. and AMFM Operating Inc., or their successors are all indirect wholly-owned subsidiaries of 43 44 Clear Channel Communications. The debt redemptions were financed with borrowings under our domestic credit facilities. SFX LONG-TERM BONDS We assumed long-term bonds with a face value of $550.0 million in the SFX merger. On October 10, 2000, we launched a tender offer for any and all of the 9.125% Senior Subordinated Notes due 2008. An agent acting on our behalf redeemed notes with a redemption value of approximately $602.9 million. Cash settlement of the amount due to the agent was completed in a series of transactions from November 8, 2000 to November 20, 2000. After redemption, approximately $1.6 million face value of the notes remains outstanding. The tender offer was financed with borrowings under our credit facilities. At December 31, 2000, we were in compliance with all debt covenants and had satisfied all financial ratios and tests under the indentures. We expect to be in compliance and satisfy all such covenants and ratios as may be applicable from time to time during 2001. SHELF REGISTRATION On July 21, 2000, we filed a Registration Statement on Form S-3 covering a combined $3.0 billion of debt securities, junior subordinated debt securities, preferred stock, common stock, warrants, stock purchase contracts and stock purchase units (the "shelf registration statement"). The shelf registration statement also covers preferred securities that may be issued from time to time by our three Delaware statutory business trusts and guarantees of such preferred securities by us. In September 2000, we issued $1.5 billion of debt securities registered under the shelf registration statement, leaving $1.5 billion available for future issuance. AUTHORIZED SHARES OF COMMON STOCK On April 27, 2000, our shareholders approved an increase to the number of shares of common stock authorized for issuance from 900 million to 1.5 billion in order to have additional shares available for possible future acquisitions or financing transactions, stock splits, stock dividends and other issuances, or to satisfy requirements for additional reservations of shares by reason of future transactions which might require increased reservations. We currently have no plans to issue any of the additional shares of common stock. RESTRICTED CASH In connection with the AMFM merger and governmental directives, we divested 39 radio stations for $1.2 billion. Of these proceeds, $839.7 million was placed in restricted trusts for the purchase of replacement properties. In addition, restricted cash of $439.9 million was acquired from AMFM related to the divestiture of AMFM radio stations in connection with the merger. The following table details the reconciliation of divestiture and acquisition activity in the restricted trust accounts:
(In thousands) Restricted cash resulting from Clear Channel divestitures $ 839,717 Restricted cash purchased in AMFM merger 439,896 Restricted cash used in acquisitions (670,228) Interest, net of fees 18,756 ------------ Restricted cash balance at December 31, 2000 628,141 Less current portion 308,691 ------------ Long-term restricted cash $ 319,450 ============
44 45 On February 21, 2001, the restricted trusts expired and the $308.7 million not expended on replacement radio assets was refunded to us. The amount was used to reduce the outstanding balance of our domestic credit facilities. USES OF CAPITAL ACQUISITIONS During 2000, including the acquisitions discussed above, we acquired approximately 24,000 additional outdoor display faces in 30 domestic markets and approximately 54,500 additional display faces in 17 international markets for a total of $1.7 billion in cash. We also acquired 148 radio stations in 45 markets for $113.1 million in cash and $670.2 million in restricted cash. In the live entertainment segment, we acquired sporting, music and theatrical event promotions, racing promotion, and venue management assets for $86.6 million in cash. We intend to continue to pursue businesses that fit our strategic goals. There are currently no significant acquisitions or mergers pending. From January 1, 2001 through February 28, 2001, we have acquired 120 radio stations (primarily through the use of our restricted cash), 531 outdoor display faces and our live entertainment segment acquired sporting and music event promotions. CAPITAL EXPENDITURES Capital expenditures in 2000 increased from $238.7 million in 1999 to $495.6 million in 2000. Overall, capital expenditures increased due to recent acquisitions and the increase in the number of radio stations, billboards and displays owned in 2000 as compared to 1999. In addition, we incurred capital expenditures related to our new live entertainment segment in 2000 that we did not incur in 1999. The increase in 2000 primarily relates to more spending relating to facility consolidation resulting from our acquisitions, technological upgrades of operating assets, a one-time capital expenditure in conjunction with the long-term extension of a certain operating contract, and the construction of new revenue-producing advertising displays. In 1999, capital expenditures included non-recurring expenditures relating to the implementation of Year 2000 compliant systems and integration of the Jacor stations.
(In millions) 2000 Capital Expenditures --------------------------------------------------------------- Radio Outdoor Entertainment Other Total ----- ------- ------------- ----- ----- Recurring $ 23.6 $ 84.8 $ 12.7 $ 18.3 $ 139.4 Non-recurring projects 116.3 12.8 30.1 40.4 199.6 Revenue producing -- 152.7 3.9 -- 156.6 -------- -------- ------- ------ -------- $ 139.9 $ 250.3 $ 46.7 $ 58.7 $ 495.6 ======== ======== ======= ====== ========
Our radio capital expenditures in 2000 are related primarily to expenditures associated with the consolidation of operations in certain markets in conjunction with acquisitions that are expected to result in improved operating results in such markets. In addition, our radio capital expenditures in 2000 include approximately $12.5 million in technological upgrades of our operating assets, $29.6 million related to assets purchased in a contract extension negotiation, and expenditures related to the integration of the AMFM stations. 45 46 Our outdoor advertising capital expenditures in 2000 are related primarily to the construction of new revenue producing advertising displays as well as replacement expenditures on our existing advertising displays. Our live entertainment capital expenditures in 2000 include expenditures primarily related to a consolidated sales and operations facility, new venues and improvements to existing venues. Included in "other" capital expenditures for 2000 is the construction of a new corporate headquarters facility to accommodate our growth, upgrades of our television related operating assets, and other technological expenditures. SHARE REPURCHASE In October 2000 the Board of Directors authorized the repurchase of up to $1.0 billion of Clear Channel common stock in the open market. As of December 31, 2000, we had purchased 100,000 shares of common stock for an aggregate purchase price of $4.7 million, including brokers fees and commissions, which are held in treasury. COMMITMENTS AND CONTINGENCIES See Note G of Notes to the Consolidated Financial Statements for a description of our future minimum lease commitments. There are various lawsuits and claims pending against us. We believe that any ultimate liability resulting from those actions or claims will not have a material adverse effect on our results of operations, financial position or liquidity. Certain agreements relating to acquisitions provide for purchase price adjustments and other future contingent payments based on the financial performance of the acquired companies. We will continue to accrue additional amounts related to such contingent payments if and when it is determinable that the applicable financial performance targets will be met. The aggregate of these contingent payments, if performance targets are met, would not significantly impact our financial position or results of operations. DEBT MATURITIES The scheduled maturities of our credit facilities through December 31, 2005 are $10.8 million in 2001, $306.2 million in 2002, $437.5 million 2003, $437.5 million in 2004 and $2.0 billion in 2005. Our maturities of all long-term debt outstanding at December 31, 2000, are $67.7 million in 2001, $1.6 billion in 2002, $1.8 billion in 2003, $.4 billion in 2004, $3.5 billion in 2005, and $3.4 billion thereafter. MARKET RISK INTEREST RATE RISK At December 31, 2000, approximately 50% of our long-term debt, including fixed rate debt on which we have entered interest rate swap agreements, bears interest at variable rates. Accordingly, our earnings and after tax cash flow are affected by changes in interest rates. Assuming the current level of borrowings at variable rates and assuming a two percentage point change in the year's average interest rate under these borrowings, it is estimated that our 2000 interest expense would have changed by $101.7 46 47 million and that our 2000 net income would have changed by $63.1 million. In the event of an adverse change in interest rates, management may take actions to further mitigate its exposure. However, due to the uncertainty of the actions that would be taken and their possible effects, the analysis assumes no such actions. Further the analysis does not consider the effects of the change in the level of overall economic activity that could exist in such an environment. We have entered into interest rate swap agreements that effectively float interest at rates based upon LIBOR on $1.5 billion of our current fixed rate borrowings. These agreements expire from September 2003 to June 2005. The fair value of these agreements at December 31, 2000 was $49.0 million. EQUITY PRICE RISK The carrying value of our available-for-sale equity securities is affected by changes in their quoted market prices. It is estimated that a 20% change in the market prices of these securities would change their carrying value at December 31, 2000 by $307.2 million and would change comprehensive income by $199.7 million. In connection with the completion of the AMFM merger, Clear Channel and AMFM entered into a Consent Decree with the Department of Justice regarding our investment in Lamar Advertising Company. The Consent Decree, among other things, required us to sell all of our shares of Lamar by December 31, 2002. In accordance with ABP 16, Business Combinations, our 26.2 million shares of Lamar were recorded at their quoted market price on the closing date of the merger, which was significantly higher than AMFM's historical purchase price. We will be exposed to changes in Lamar's market price, which may result in large gains and losses related to this disposition in future periods. FOREIGN CURRENCY We have operations in 43 countries throughout Europe, Asia, Australia and North and South America. Foreign operations are measured in their local currencies except in our hyper-inflationary countries in which we operate. As a result, our financial results could be affected by factors such as changes in foreign currency exchange rates or weak economic conditions in the foreign markets in which we have operations. To mitigate a portion of the exposure to risk of currency fluctuations throughout Europe and Asia, we have a natural hedge through borrowings in Euros, Sterling and other currencies. This hedge position is reviewed monthly. We maintain no derivative instruments to mitigate the exposure to translation and/or transaction risk. However, this does not preclude the adoption of specific hedging strategies in the future. Our foreign operations reported a loss of $9.3 million for the year ended December 31, 2000. It is estimated that a 10% change in the value of the U.S. dollar to foreign currencies would change net loss for the year ended December 31, 2000 by $.9 million. Our earnings are also affected by fluctuations in the value of the U.S. dollar as compared to foreign currencies as a result of our investments in various countries, all of which are accounted for under the equity method. It is estimated that the result of a 10% fluctuation in the value of the dollar relative to these foreign currencies at December 31, 2000 would change net income for the year ended December 31, 2000 by approximately $.1 million. This analysis does not consider the implications that such fluctuations could have on the overall economic activity that could exist in such an environment in the U.S. or the foreign countries or on the results of operations of these foreign entities. RECENT ACCOUNTING PRONOUNCEMENTS 47 48 In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133 Accounting for Derivative Instruments and Hedging Activities ("Statement 133"). Statement 133 establishes new rules for the recognition and measurement of derivatives and hedging activities. Statement 133 is amended by Statement 137 Accounting for Derivative Instruments and Hedging Activities - Deferral of the Effective Date of FASB Statement No. 133, and Statement 138 Accounting for Derivative Instruments and Hedging Activities (an amendment to Statement 133), is effective for years beginning after June 15, 2000. We adopted this statement January 1, 2001. Had we elected early adoption of Statement 133, total assets and long-term debt at December 31, 2000 would have increased by $49.0 million each. As part of our adoption of Statement 133 on January 1, 2001, we reclassified 2.0 million shares of our investment in American Tower Corporation that had been classified as available-for-sale securities under Financial Accounting Standards No. 115 Accounting for Certain Investments in Debt and Equity Securities ("Statement 115") to a trading securities classification. In accordance with Statement 115 and Statement 133, on January 1, 2001, the shares were transferred to a trading classification at their fair market value of $76.2 million, and an unrealized pretax holding gain of $69.7 million was recognized in earnings. In December 1999, the SEC issued Staff Accounting Bulletin 101, Revenue Recognition in Financial Statements, ("SAB 101"). The bulletin summarizes certain of the SEC staff's views in applying generally accepted accounting principles to revenue recognition. SAB 101, as amended through June 26, 2000, is required to be implemented in the fourth quarter of 2000. Accordingly, we have implemented SAB 101 in the financial statements filed herewith. Implementation of this statement did not impact our financial position or results of operations. In March 2000, the Financial Accounting Standards Board issued FASB Interpretation No. 44. "Accounting for Certain Transactions involving Stock Compensation" ("FIN 44"). FIN 44 provides guidance for issues arising in applying APB Opinion No. 25 "Accounting for Stock Issued to Employees." FIN 44 applies specifically to new awards, exchanges of awards in a business combination, modification to outstanding awards, and changes in grantee status that occur on or after July 1, 2000, except for the provisions related to repricings and the definition of an employee which apply to awards issued after December 15, 1998. The requirements of FIN 44 are consistent with our existing accounting policies. The Financial Accounting Standards Board has proposed new accounting for business combinations that, among other things, would change the accounting for goodwill and other intangibles recorded in business acquisitions as of the date of the new Statement. An important part of the proposed Statement is that amortization of goodwill and certain other intangibles with indefinite lives would cease for both assets acquired prior to the effective date of the Statement and for any new goodwill and other intangibles acquired after the effective date of the Statement. Rather than amortizing these assets, goodwill and other intangibles would be reviewed for impairment using a "market value" approach. The proposed Statement is expected to be finalized in June 2001. As our amortization of goodwill and certain other intangibles is a significant non-cash expense that we currently record, this proposed Statement, if finalized in its current form, will have a material impact on our financial statements. We feel that it is not appropriate to forecast the impact until the proposed Statement is finalized. 48 49 INFLATION Inflation has affected our performance in terms of higher costs for wages, salaries and equipment. Although the exact impact of inflation is indeterminable, we believe we have offset these higher costs by increasing the effective advertising rates of most of our broadcasting stations and outdoor display faces. RATIO The ratio of earnings to fixed charges is as follows:
Year Ended December 31, - ----------------------------------------------------------------------------- 2000 1999 1998 1997 1996 ---- ---- ---- ---- ---- 2.20 2.04 1.83 2.32 3.63
The ratio of earnings to fixed charges was computed on a total enterprise basis. Earnings represent income from continuing operations before income taxes less equity in undistributed net income (loss) of unconsolidated affiliates plus fixed charges. Fixed charges represent interest, amortization of debt discount and expense, and the estimated interest portion of rental charges. We had no preferred stock outstanding for any period presented. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. Required information is within Item 7 49 50 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA MANAGEMENT'S REPORT ON FINANCIAL STATEMENTS The consolidated financial statements and notes related thereto were prepared by and are the responsibility of management. The financial statements and related notes were prepared in conformity with accounting principles generally accepted in the United States and include amounts based upon management's best estimates and judgments. It is management's objective to ensure the integrity and objectivity of its financial data through systems of internal controls designed to provide reasonable assurance that all transactions are properly recorded in our books and records, that assets are safeguarded from unauthorized use, and that financial records are reliable to serve as a basis for preparation of financial statements. The financial statements have been audited by our independent auditors, Ernst & Young LLP, to the extent required by auditing standards generally accepted in the United States and, accordingly, they have expressed their professional opinion on the financial statements in their report included herein. The Board of Directors meets with the independent auditors and management periodically to satisfy itself that they are properly discharging their responsibilities. The independent auditors have unrestricted access to the Board, without management present, to discuss the results of their audit and the quality of financial reporting and internal accounting controls. /s/ Lowry Mays Chairman/Chief Executive Officer /s/ Herbert W. Hill, Jr. Senior Vice President/Chief Accounting Officer 50 51 REPORT OF INDEPENDENT AUDITORS SHAREHOLDERS AND BOARD OF DIRECTORS CLEAR CHANNEL COMMUNICATIONS, INC. We have audited the accompanying consolidated balance sheets of Clear Channel Communications, Inc. and subsidiaries (the Company) as of December 31, 2000 and 1999, and the related consolidated statements of earnings, changes in shareholders' equity, and cash flows for each of the three years in the period ended December 31, 2000. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. The financial statements of Hispanic Broadcasting Corporation (formerly Heftel Broadcasting Corporation), in which the Company has a 26% equity interest, have been audited by other auditors whose reports have been furnished to us; insofar as our opinion on the consolidated financial statements relates to data included for Hispanic Broadcasting Corporation for 1999 and 1998, it is based solely on their reports. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits and the reports of other auditors provide a reasonable basis for our opinion. In our opinion, based on our audits and the reports of other auditors, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Clear Channel Communications, Inc. and subsidiaries at December 31, 2000 and 1999, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2000, in conformity with accounting principles generally accepted in the United States. /s/ ERNST & YOUNG LLP San Antonio, Texas February 23, 2001 51 52 CONSOLIDATED BALANCE SHEETS ASSETS (In thousands)
December 31, ------------------------------- 2000 1999 ---- ---- CURRENT ASSETS Cash and cash equivalents $ 196,838 $ 76,724 Restricted cash 308,691 -- Accounts receivable, less allowance of $60,631 in 2000 and $26,095 in 1999 1,557,048 724,900 Prepaid expenses 146,767 35,791 Other current assets 133,873 87,694 -------------- ------------- TOTAL CURRENT ASSETS 2,343,217 925,109 PROPERTY, PLANT AND EQUIPMENT Land, buildings and improvements 1,197,951 338,764 Structures and site leases 2,395,934 1,870,731 Transmitter and studio equipment 744,571 427,063 Furniture and other equipment 479,532 222,581 Construction in progress 222,286 89,901 -------------- ------------- 5,040,274 2,949,040 Less accumulated depreciation 785,040 470,916 -------------- ------------- 4,255,234 2,478,124 INTANGIBLE ASSETS Contracts 1,075,472 817,227 Licenses and goodwill 40,973,198 11,809,882 Other intangible assets 175,451 80,102 -------------- ------------- 42,224,121 12,707,211 Less accumulated amortization 1,731,557 758,889 -------------- ------------- 40,492,564 11,948,322 OTHER Restricted cash 319,450 4,349 Notes receivable 99,818 53,675 Investments in, and advances to, nonconsolidated affiliates 427,303 380,918 Other assets 513,773 251,604 Other investments 1,605,102 779,411 -------------- ------------- TOTAL ASSETS $ 50,056,461 $ 16,821,512 ============== =============
See Notes to Consolidated Financial Statements 52 53 LIABILITIES AND SHAREHOLDERS' EQUITY (In thousands, except share data)
December 31, ------------------------------- 2000 1999 ---- ---- CURRENT LIABILITIES Accounts payable $ 383,588 $ 196,222 Accrued interest 105,581 16,449 Accrued expenses 886,904 319,690 Accrued income taxes 445,499 29,769 Current portion of long-term debt 67,736 48,610 Deferred income 218,670 54,113 Other current liabilities 20,572 20,662 -------------- ------------- TOTAL CURRENT LIABILITIES 2,128,550 685,515 Long-term debt 10,100,028 4,093,543 Liquid Yield Option Notes 497,054 490,809 Deferred income taxes 6,771,198 1,289,783 Other long-term liabilities 150,713 149,032 Minority interest 61,745 28,793 SHAREHOLDERS' EQUITY Preferred Stock - Class A, par value $1.00 per share, authorized 2,000,000 shares, no shares issued and outstanding -- -- Preferred Stock, - Class B, par value $1.00 per share, authorized 8,000,000 shares, no shares issued and outstanding -- -- Common Stock, par value $.10 per share, authorized 1,500,000,000 and 900,000,000 shares, issued and outstanding 585,766,166 and 338,609,503 shares in 2000 and 1999, respectively 58,577 33,861 Additional paid-in capital 29,558,908 9,216,957 Common stock warrants 249,312 252,862 Retained earnings 544,940 296,132 Accumulated other comprehensive income (32,433) 282,745 Other (26,298) 2,304 Cost of shares (115,557 in 2000 and 11,612 in 1999) held in treasury (5,833) (824) -------------- ------------- TOTAL SHAREHOLDERS' EQUITY 30,347,173 10,084,037 -------------- ------------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 50,056,461 $ 16,821,512 ============== =============
See Notes to Consolidated Financial Statements 53 54 CONSOLIDATED STATEMENTS OF EARNINGS (In thousands, except per share data)
Year Ended December 31, ------------------------------------------- 2000 1999 1998 ---- ---- ---- REVENUE Gross revenue $ 5,847,900 $ 2,992,018 $ 1,522,551 Less: agency commissions 502,594 313,858 171,611 ------------- ------------- ------------- Net revenue 5,345,306 2,678,160 1,350,940 EXPENSE Operating expenses 3,480,706 1,632,115 767,265 Non-cash compensation expense 16,032 -- -- Depreciation and amortization 1,401,063 722,233 304,972 Corporate expenses 142,627 70,146 37,825 ------------- ------------- ------------- Operating income 304,878 253,666 240,878 Interest expense 383,104 179,404 135,766 Gain on sale of assets related to mergers 783,743 138,659 -- Equity in earnings of nonconsolidated affiliates 25,155 18,183 10,305 Other income (expense) - net (17,133) 7,292 12,810 ------------- ------------- ------------- Income before income taxes and extraordinary item 713,539 238,396 128,227 Income taxes 464,731 152,741 74,196 ------------- ------------- ------------- Income before extraordinary item 248,808 85,655 54,031 Extraordinary item -- (13,185) -- ------------- -------------- ------------- Net income 248,808 72,470 54,031 Other comprehensive income, net of tax: Foreign currency translation adjustments (92,296) (47,814) 5,801 Unrealized gain (loss) on securities: Unrealized holding gain (loss) (193,634) 182,315 162,925 Less: reclassification adjustment for gains on SFX shares held prior to merger (36,526) -- -- Less: reclassification adjustment for (gain) loss included in net income 7,278 (14,904) (25,494) ------------- -------------- ------------- Comprehensive income (loss) $ (66,370) $ 192,067 $ 197,263 ============= ============= ============= PER SHARE DATA Net income per common share: Basic: Income before extraordinary item $ .59 $ .27 $ .23 Extraordinary item -- (.04) -- ------------- -------------- ------------- Net income $ .59 $ .23 $ .23 ============= ============= ============= Diluted: Income before extraordinary item $ .57 $ .26 $ .22 Extraordinary item -- (.04) -- ------------- -------------- ------------- Net income $ .57 $ .22 $ .22 ============= ============= =============
See Notes to Consolidated Financial Statements 54 55 CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (In thousands)
Accumulated Additional Common Other Common Paid-in Stock Retained Comprehensive Treasury Stock Capital Warrants Earnings Income Other Stock Total ----- ------- -------- -------- ------ ----- ----- ----- Balances at December 31, 1997 $ 9,823 $ 1,541,865 $ -- $ 169,631 $ 19,916 $ 6,236 $ (687) $ 1,746,784 Net income 54,031 54,031 Proceeds from sale of Common Stock 2,100 1,279,318 1,281,418 Common Stock issued related to Eller put/call agreement 13 5,820 5,833 Common Stock and stock options issued for business acquisitions 1,929 1,199,928 1,201,857 Exercise of stock options 89 52,782 (1,311) (1,286) 50,274 Currency translation adjustment 5,801 5,801 Unrealized gains on investments 137,431 137,431 Stock split 12,416 (12,416) -- ------- ----------- --------- --------- --------- ---------- ------- ----------- Balances at December 31, 1998 26,370 4,067,297 -- 223,662 163,148 4,925 (1,973) 4,483,429 Net income 72,470 72,470 Proceeds from sale of Common Stock 805 512,112 512,917 Common Stock issued related to Eller put/call agreement 190 130,440 130,630 Common Stock, stock options and common stock warrants issued for business acquisitions 6,180 4,413,530 253,428 4,673,138 Conversion of Liquid Yield Option Notes 10 3,271 3,281 Exercise of stock options and common stock warrants 306 90,307 (566) (2,621) (2,953) 84,473 Charitable donation of treasury shares 4,102 4,102 Currency translation adjustment (47,814) (47,814) Unrealized gains on investments 167,411 167,411 ------- ----------- --------- --------- --------- ---------- ------- ----------- Balances at December 31, 1999 33,861 9,216,957 252,862 296,132 282,745 2,304 (824) 10,084,037 Net income 248,808 248,808 Common Stock, stock options and common stock warrants issued for business acquisitions 24,497 20,258,721 (61) 20,283,157 Deferred compensation acquired (49,311) (49,311) Purchase of treasury shares (4,745) (4,745) Conversion of Liquid Yield Option Notes 76 76 Exercise of stock options and common stock warrants 219 83,154 (3,550) (203) 79,620 Amortization and adjustment of deferred compensation 20,709 20,709 Currency translation adjustment (92,296) (92,296) Unrealized gains (losses) on investments (222,882) (222,882) ------- ----------- --------- --------- ---------- ---------- ------- ----------- Balances at December 31, 2000 $58,577 $29,558,908 $ 249,312 $ 544,940 $ (32,433) $ (26,298) $(5,833) $30,347,173 ======= =========== ========= ========= ========== ========== ======= ===========
See Notes to Consolidated Financial Statements 55 56 CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)
Year Ended December 31, -------------------------------------------- 2000 1999 1998 ---- ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 248,808 $ 72,470 $ 54,031 Reconciling Items: Depreciation 367,639 263,242 134,042 Amortization of intangibles 1,033,424 458,991 170,930 Deferred taxes 386,711 31,653 35,329 Amortization of deferred financing charges, bond premiums and accretion of note discounts 16,038 5,667 2,444 Amortization of deferred compensation 16,032 -- -- (Recognition) deferral of deferred income (121,539) 18,647 (11,371) Loss (gain) on sale of assets (780,926) (141,556) 13,845 Loss (gain) on sale of other investments 5,369 (22,930) (39,221) Equity in earnings of non- consolidated affiliates (20,820) (10,775) (4,471) Extraordinary item -- 13,185 -- Increase (decrease) other, net 8,002 15,489 (6,474) Changes in operating assets and liabilities, net of effects of acquisitions: Decrease (increase) in accounts receivable (5,721) (87,529) (47,699) Increase (decrease) in accounts payable, accrued expenses and other liabilities (356,131) 1,757 9,663 Increase (decrease) in accrued interest (3,388) (10,778) (12,309) Increase (decrease) in accrued income taxes (38,413) 31,873 (19,750) ----------- ---------- ----------- Net cash provided by operating activities 755,085 639,406 278,989
56 57
Year Ended December 31, ---------------------------------------------- 2000 1999 1998 ---- ---- ---- CASH FLOWS FROM INVESTING ACTIVITIES: (Investment) in liquidation of restricted cash (183,896) 78,651 -- Cash acquired in stock-for-stock mergers 311,861 -- -- (Increase) decrease in notes receivable, net (15,807) -- (18,302) Decrease (increase) in investments in, and advances to nonconsolidated affiliates - net (8,044) (36,647) (91,527) Purchases of investments (55,275) (174,698) (44,931) Proceeds from sale of investments 61,277 29,659 56,408 Purchases of property, plant and equipment (495,551) (238,738) (141,938) Proceeds from disposal of assets 392,729 12,203 7,977 Proceeds from divestitures placed in restricted cash 839,717 205,800 -- Acquisition of radio broadcasting assets (113,094) (209,185) (209,327) Acquisition of radio broadcasting assets with restricted cash (670,228) (246,228) -- Acquisition of outdoor advertising assets (1,684,506) (854,135) (1,102,668) Acquisition of live entertainment assets (86,596) -- -- Decrease (increase) in other - net (48,241) (40,852) (58,010) ------------- ------------ ----------- Net cash used in investing activities (1,755,654) (1,474,170) (1,602,318) CASH FLOWS FROM FINANCING ACTIVITIES: Draws on credit facilities 7,904,488 2,414,480 1,953,076 Payments on credit facilities (7,199,185) (3,085,486) (2,195,365) Proceeds from long-term debt 3,128,386 1,005,830 882,592 Payments on long-term debt (2,757,223) (9,023) (631,516) Proceeds from exercise of stock options, stock purchase plan and common stock warrants 48,962 36,273 44,965 Payments for purchase of treasury shares (4,745) -- -- Proceeds from issuance of common stock -- 512,916 1,281,418 ------------ ------------ ----------- Net cash provided by financing activities 1,120,683 874,990 1,335,170 ------------ ------------ ----------- Net increase in cash and cash equivalents 120,114 40,226 11,841 Cash and cash equivalents at beginning of year 76,724 36,498 24,657 ------------ ------------ ----------- Cash and cash equivalents at end of year $ 196,838 $ 76,724 $ 36,498 ============ ============ =========== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Cash paid during the year for: Interest $ 358,504 $ 201,127 $ 130,049 Income taxes 96,643 58,005 10,856
See Notes to Consolidated Financial Statements 57 58 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES NATURE OF BUSINESS Clear Channel Communications, Inc., incorporated in Texas in 1974, is a diversified media company with three principal business segments: radio broadcasting, outdoor advertising and live entertainment. The Company owns, programs and sells airtime for various radio stations. The Company also is one of the world's largest outdoor advertising companies based on total advertising display inventory in the United States and internationally. In addition, the Company is one of the world's largest diversified promoters, producers and venue operators of live entertainment events based on the total number of events, productions and owned or operated venues. PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of the Company and its subsidiaries, substantially all of which are wholly-owned. Significant intercompany accounts have been eliminated in consolidation. Investments in nonconsolidated affiliates are accounted for using the equity method of accounting. Certain amounts in prior years have been reclassified to conform to the 2000 presentation. CASH AND CASH EQUIVALENTS Cash and cash equivalents include all highly liquid investments with an original maturity of three months or less. LAND LEASES AND OTHER STRUCTURE LICENSES Most of the Company's outdoor advertising structures are located on leased land. Domestic land rents are typically paid in advance for periods ranging from one to twelve months. International land rents are paid both in advance and in arrears, for periods ranging from one to twelve months. Most international street furniture advertising display faces are licensed through municipalities for up to 20 years. The street furniture licenses often include a percent of revenue to be paid along with a base rent payment. Prepaid land leases are recorded as an asset and expensed ratably over the related rental term and license and rent payments in arrears are recorded as an accrued liability. PREPAID EXPENSES Included in prepaid expenses are event expenses including show advances and deposits and other costs directly related to future entertainment events. Such costs are charged to operations upon completion of the related events. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are stated at cost. Depreciation is computed principally using the straight-line method at rates that, in the opinion of management, are adequate to allocate the cost of such assets over their estimated useful lives, which are as follows: Buildings and improvements- 10 to 30 years Structures and site leases - 2 to 20 years Transmitter and studio equipment - 7 to 15 years Furniture and other equipment - 2 to 10 years Leasehold improvements - generally life of lease 58 59 Expenditures for maintenance and repairs are charged to operations as incurred, whereas expenditures for renewal and betterments are capitalized. INTANGIBLE ASSETS Intangible assets are stated at cost and are being amortized using the straight-line method. Excess cost over the fair value of net assets acquired (goodwill) and certain licenses are amortized generally over 20 to 25 years. Transit and street furniture contract intangibles are amortized over the respective lives of the agreements, typically four to eleven years. Contracts are amortized over the respective lives of the agreements. Other intangible assets are amortized over their appropriate lives. The periods of amortization are evaluated annually to determine whether circumstances warrant revision. LONG-LIVED ASSETS The Company periodically evaluates the propriety of the carrying amount of goodwill and other intangible assets and related amortization periods to determine whether current events or circumstances warrant adjustments to the carrying value and/or revised estimates of amortization periods. These evaluations consist of the projection of undiscounted cash flows over the remaining amortization periods of the related intangible assets. The projections are based on historical trend lines of actual results, adjusted for expected changes in operating results. To the extent such projections indicate that undiscounted cash flows are not expected to be adequate to recover the carrying amount of the related intangible assets, such carrying amounts are written down to fair value by charges to expense. At this time, the Company believes that no impairment of goodwill or other intangible assets has occurred and that no revisions to the amortization periods are warranted. OTHER INVESTMENTS Other investments are composed primarily of equity securities. These securities are classified as available-for-sale and carried at fair value based on quoted market prices. Securities are carried at historical value when quoted market prices are unavailable. The net unrealized gains or losses on these investments, net of tax, are reported as a separate component of shareholders' equity. The average cost method is used to compute the realized gains and losses on sales of equity securities. EQUITY METHOD INVESTMENTS Investments in companies in which the Company owns 20 percent to 50 percent of the voting common stock or otherwise exercises significant influence over operating and financial policies of the company are accounted for under the equity method. The Company does not recognize gains or losses upon the issuance of securities by any of its equity method investees. FINANCIAL INSTRUMENTS Due to their short maturity, the carrying amounts of accounts and notes receivable, accounts payable, accrued liabilities, and short-term borrowings approximated their fair values at December 31, 2000 and 1999. The carrying amounts of long-term debt and Liquid Yield Option Notes approximated their fair value at the end of 2000 and 1999, except as disclosed in Note D and Note F, respectively. INCOME TAXES The Company accounts for income taxes using the liability method. Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting bases and tax bases of assets and liabilities and are measured using the enacted tax rates expected to apply to taxable income in the periods in which the deferred tax asset or liability is expected to be realized or settled. As all earnings from 59 60 the Company's foreign operations are permanently reinvested and not distributed, the Company's income tax provision does not include additional U.S. taxes on foreign operations. REVENUE RECOGNITION Radio broadcasting revenue is recognized as advertisements or programs are broadcast and is generally billed monthly. Outdoor advertising provides services under the terms of contracts covering periods up to three years, which are generally billed monthly. Revenue for outdoor advertising space rental is recognized ratably over the term of the contract. Payments received in advance of billings are recorded as deferred income. Entertainment revenue from the presentation and production of an event is recognized on the date of the performance. Revenue collected in advance of the event is recorded as deferred income until the event occurs. Entertainment revenue collected from advertising and other revenue, which is not related to any single event, is classified as deferred revenue and generally amortized over the operating season during the term of the contract. Revenue from barter transactions is recognized when advertisements are broadcast or outdoor advertising space is utilized. Merchandise or services received are charged to expense when received or used. The Company believes that the credit risk, with respect to trade receivables is limited due to the large number and the geographic diversification of its customers. INTEREST RATE PROTECTION AGREEMENTS Periodically, the Company enters into interest rate swap agreements to modify the interest characteristics of its outstanding debt. Each interest rate swap agreement is designated with all or a portion of the principal balance and term of a specific debt obligation. These agreements involve the exchange of amounts based on a fixed interest rate for amounts based on variable interest rates over the life of the agreement without an exchange of the notional amount upon which the payments are based. The differential to be paid or received as interest rate change is accrued and recognized as an adjustment to interest expense related to the debt. The fair value of the swap agreements and changes in the fair value as a result of changes in market interest rates are not recognized in these consolidated financial statements. FOREIGN CURRENCY Results of operations for foreign subsidiaries and foreign equity investees are translated into U.S. dollars using the average exchange rates during the year. The assets and liabilities of those subsidiaries and investees, other than those of operations in highly inflationary countries, are translated into U.S. dollars using the exchange rates at the balance sheet date. The related translation adjustments are recorded in a separate component of shareholders' equity, "Currency translation adjustment". Foreign currency transaction gains and losses, as well as gains and losses from translation of financial statements of subsidiaries and investees in highly inflationary countries, are included in operations. STOCK BASED COMPENSATION The Company accounts for its stock-based award plans in accordance with Accounting Principles Board ("APB") Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations, under which compensation expense is recorded to the extent that the current market price of the underlying stock exceeds the exercise price. Note J provides pro forma net income and pro forma earnings per share disclosures as if the stock-based awards had been accounted for using the provisions of Statement of Financial Accounting Standards ("SFAS") No. 123, Accounting for Stock-Based Compensation. 60 61 USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. NEW ACCOUNTING PRONOUNCEMENTS In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133 Accounting for Derivative Instruments and Hedging Activities ("Statement 133"). Statement 133 establishes new rules for the recognition and measurement of derivatives and hedging activities. Statement 133 is amended by Statement 137 Accounting for Derivative Instruments and Hedging Activities - Deferral of the Effective Date of FASB Statement No. 133, and Statement 138 Accounting for Derivative Instruments and Hedging Activities (an amendment to Statement 133), is effective for years beginning after June 15, 2000. The Company adopted this statement January 1, 2001. Had the Company elected early adoption of Statement 133, total assets and long-term debt at December 31, 2000 would have increased $49.0 million each. As part of the adoption of Statement 133 on January 1, 2001, the Company reclassified 2.0 million shares of its investment in American Tower Corporation that had been classified as available-for-sale securities under Financial Accounting Standards No. 115 Accounting for Certain Investments in Debt and Equity Securities ("Statement 115") to a trading securities classification. In accordance with Statement 115 and Statement 133, on January 1, 2001, the shares were transferred to a trading classification at their fair market value of $76.2 million, and an unrealized holding gain of $69.7 million was recognized in earnings. In December 1999, the SEC issued Staff Accounting Bulletin 101, Revenue Recognition in Financial Statements, ("SAB 101"). The bulletin summarizes certain of the SEC staff's views in applying generally accepted accounting principles to revenue recognition. SAB 101, as amended through June 26, 2000 is required to be implemented in the fourth quarter of 2000. Accordingly, the Company has implemented SAB 101 in the financial statements filed herewith. Implementation of this statement did not materially impact the financial position or results of operations of the Company. In March 2000, the Financial Accounting Standards Board issued FASB Interpretation No. 44. "Accounting for Certain Transactions involving Stock Compensation" ("FIN 44"). FIN 44 provides guidance for issues arising in applying APB Opinion No. 25 "Accounting for Stock Issued to Employees." FIN 44 applies specifically to new awards, exchanges of awards in a business combination, modification to outstanding awards, and changes in grantee status that occur on or after July 1, 2000, except for the provisions related to repricings and the definition of an employee which apply to awards issued after December 15, 1998. The requirements of FIN 44 are consistent with the Company's existing accounting policies. NOTE B - BUSINESS ACQUISITIONS 2000 ACQUISITIONS: ACKERLEY'S SOUTH FLORIDA OUTDOOR ADVERTISING DIVISION On January 5, 2000, the Company closed its acquisition of Ackerley's South Florida outdoor advertising division ("Ackerley") for $300.2 million. The Company funded the acquisition with advances on its credit facilities. The acquisition was accounted for as a purchase, with resulting goodwill of approximately 61 62 $208.3 million, which is being amortized over 25 years on a straight-line basis. The results of operations of Ackerley have been included in the financial statements of the Company beginning January 5, 2000. AMFM MERGER On August 30, 2000, the Company closed its merger with AMFM Inc. ("AMFM") Pursuant to the terms of the merger agreement, each share of AMFM common stock was exchanged for 0.94 shares of the Company's common stock. Approximately 205.4 million shares of the Company's common stock were issued in the AMFM merger, valuing the merger, based on the average market price of the Company's common stock at the signing of the merger agreement, at $15.9 billion plus the assumption of AMFM's outstanding debt of $3.5 billion. Additionally, the Company assumed options and common stock warrants with a fair value of $1.2 billion, which are convertible, subject to applicable vesting, into approximately 25.5 million shares of the Company's common stock. The Company refinanced $540.0 million of AMFM's long-term debt at the closing of the merger using its credit facility. The AMFM merger was accounted for as a purchase with resulting goodwill of approximately $7.1 billion, which is being amortized over 25 years on a straight-line basis. This purchase price allocation is preliminary pending completion of appraisals and other fair value analysis of assets and liabilities. The results of operations of AMFM have been included in the financial statements of the Company beginning August 30, 2000. In connection with the AMFM merger and governmental directives, the Company divested 39 radio stations for $1.2 billion, resulting in a gain on sale of $805.2 million and an increase in income tax expense of $306.0 million. The Company deferred a portion of this tax expense based on its replacing the stations sold with qualified assets. Of the $1.2 billion proceeds, $839.7 million was placed in restricted trusts for the purchase of replacement properties. In addition, restricted cash of $439.9 million was acquired from AMFM related to the divestiture of AMFM radio stations in connection with the merger. The following table details the reconciliation of divestiture and acquisition activity in the restricted trust accounts:
(In thousands) Restricted cash resulting from Clear Channel divestitures $ 839,717 Restricted cash purchased in AMFM merger 439,896 Restricted cash used in acquisitions (670,228) Interest, net of fees 18,756 ------------ Restricted cash balance at December 31, 2000 628,141 Less current portion 308,691 ------------ Long-term restricted cash $ 319,450 ============
On February 21, 2001, the restricted trusts expired and the $308.7 million not expended on replacement radio assets was refunded to the Company. SFX MERGER On August 1, 2000, the Company consummated its merger with SFX Entertainment, Inc. ("SFX") Pursuant to the terms of the merger agreement, each share of SFX Class A common stock was exchanged for 0.6 shares of the Company's common stock and each share of SFX Class B common stock was exchanged for one share of the Company's common stock. Approximately, 39.2 million shares of the Company's common stock were issued in the SFX merger. Based on the average market price of the Company's common stock at the signing of the merger agreement, the merger was valued at $2.9 billion plus the assumption of SFX's outstanding debt of $1.5 billion. Additionally, the Company assumed all 62 63 stock options and common stock warrants with a fair value of $211.8 million, which are exercisable for approximately 5.6 million shares of the Company's common stock. The Company refinanced $815.8 million of SFX's $1.5 billion of long-term debt at the closing of the merger using its credit facilities. The SFX merger was accounted for as a purchase with resulting goodwill of approximately $4.1 billion, which is being amortized over 20 years on a straight-line basis. This purchase price allocation is preliminary pending completion of appraisals and other fair value analysis of assets and liabilities. The results of operations of SFX have been included in the financial statements of the Company beginning August 1, 2000. A number of lawsuits were filed by holders of SFX Class A common stock alleging, among other things, that the difference in consideration for the Class A and Class B shares constituted unfair consideration to the Class B holders and that the SFX board breached its fiduciary duties and that the Company aided and abetted the actions of the SFX board. On September 28, 2000, the Company issued approximately .4 million shares of its common stock, valued at $29.3 million, as settlement of these lawsuits and has included the value of these shares as part of the purchase price. DONREY MEDIA GROUP On September 1, 2000, the Company completed its acquisition of the assets of Donrey Media Group ("Donrey") for $372.6 million in cash consideration. The Company funded the acquisition with advances on its credit facilities. The acquisition was accounted for as a purchase, with resulting goodwill of approximately $290.3 million, which is amortized over 25 years on a straight-line basis. The results of operations of the Donrey markets have been included in the financial statements of the Company beginning September 1, 2000. OTHER In addition to the acquisitions discussed above, the Company acquired substantially all of the assets of 148 radio stations, 66,286 outdoor display faces and the live entertainment segment acquired sporting, music and theatrical events promotions, racing promotion, and venue management assets. The aggregate cash paid for these acquisitions was approximately $1.2 billion. The Company has entered in various acquisition agreements that provide for purchase price adjustments and other future contingent payments based on the financial performance of the acquired company. The Company will continue to accrue additional amounts related to such contingent payments when it can be determined that the applicable financial targets will be reached and the amount can be estimated. The results of operations for 2000 and 1999 include the operations of each business acquired from the respective date of acquisition. Unaudited pro forma consolidated results of operations, assuming the 1999 acquisitions of Jacor, Dame Media and Dauphin and the 2000 acquisitions of Ackerley, SFX, AMFM and Donrey had occurred at January 1, 1999, would have been as follows: 63 64 (In thousands, except per share data)
Pro Forma (Unaudited) Year Ended December 31, ---------------------------- 2000 1999 ---- ---- Net revenue $ 7,997,849 $ 6,615,391 Net loss $ (711,133) $ (502,044) Net loss per common share: Basic and Diluted $ (1.22) $ (.86)
The pro forma information above is presented in response to applicable accounting rules relating to business acquisitions and is not necessarily indicative of the actual results that would have been achieved had these acquisitions occurred at the beginning of 1999, nor is it indicative of future results of operations. The Company made other acquisitions during 2000, the effects of which, individually and in aggregate, were not material to the Company's consolidated financial position or results of operations. 1999 ACQUISITIONS: DAME MEDIA On July 1, 1999, the Company closed its merger with Dame Media, Inc. ("Dame Media"). Pursuant to the terms of the agreement, the Company exchanged approximately 1.0 million shares of its common stock for 100% of the outstanding stock of Dame Media, valuing this merger at approximately $65.0 million. In addition the Company assumed $32.7 million of long term debt, which was immediately refinanced utilizing the Company's credit facility. Dame Media's operations include 21 radio stations in five markets located in New York and Pennsylvania. The Company began consolidating the results of operations on July 1, 1999. DAUPHIN On June 11, 1999, the Company acquired a 50.5% equity interest in Dauphin OTA, ("Dauphin") a French company engaged in outdoor advertising. In August 1999 the Company completed its tender offer for over 99% of the remaining shares outstanding. At December 31, 1999, all of the shares had been surrendered for an aggregate cost of approximately $487.2 million. Dauphin's operations include approximately 103,000 outdoor advertising display faces in France, Spain, Italy, and Belgium. This acquisition is being accounted for as a purchase with resulting goodwill of approximately $449.7 million, which is being amortized over 25 years on a straight-line basis. The Company began consolidating the results of operations on the date of acquisition. JACOR On May 4, 1999, the Company closed its merger with Jacor Communications, Inc. ("Jacor"). Pursuant to the terms of the agreement, each share of Jacor common stock was exchanged for 1.1573151 shares of the Company's common stock or approximately 60.9 million shares valued at $4.2 billion. In addition, the Company assumed approximately $1.4 billion of Jacor's long-term debt, as well as Jacor's Liquid Yield Option Notes with a fair value of approximately $490.1 million, which are convertible into approximately 7.1 million shares of the Company's common stock. The Company also assumed options, stock appreciation rights and common stock warrants with a fair value of $414.9 million, which are convertible into approximately 9.2 million shares of the Company's common stock. The Company refinanced $850.0 64 65 million of Jacor's long-term debt at the closing of the merger using the Company's credit facility. Subject to a change in control tender, the Company redeemed an additional $22.1 million of Jacor's long-term debt. Included in the Jacor assets acquired is $83.0 million of restricted cash related to the disposition of Jacor assets in connection with the merger. This merger has been accounted for as a purchase with resulting goodwill of approximately $3.1 billion, which is being amortized over 25 years on a straight-line basis. The results of operations of Jacor have been included in the Company's financial statements beginning May 4, 1999. In order to comply with governmental directives regarding the Jacor merger, the Company divested certain assets valued at $205.8 million and swapped other assets valued at $35.0 million in transactions with various third parties, resulting in a gain on sale of assets related to mergers of $138.7 million and an increase in income tax expense (at the Company's statutory rate of 38%) of $52.0 million during 1999. The Company deferred the majority of this tax expense based on its replacing the stations sold with qualified assets. The proceeds from divestitures were held in restricted trusts until the replacement properties were purchased. The following table details the reconciliation of divestiture and acquisition activity in the restricted trust accounts: (In thousands) Restricted cash resulting from Clear Channel divestitures $ 205,800 Restricted cash purchased in Jacor Merger 83,000 Restricted cash used in acquisitions (246,228) Restricted cash refunded (41,451) Other changes to restricted cash 3,228 --------- Restricted cash balance at December 31, 1999 $ 4,349 =========
During 2000, this restricted trust expired and the residual balance was refunded to the Company. OTHER Also during 1999, the Company acquired substantially all of the assets of nine radio stations in six domestic markets, 2,789 outdoor display faces in 29 domestic markets and in malls throughout the U.S. and 72,326 outdoor display faces in eight international markets. The aggregate cash paid for these acquisitions was approximately $739.3 million. The results of operations for 1999 and 1998 include the operations of each station, for which the Company purchased the license, as well as all other businesses acquired, from the respective date of acquisition. Unaudited pro forma consolidated results of operations, assuming the acquisitions of Dauphin, Dame and Jacor as well as significant acquisitions from 1998 had occurred at January 1, 1998, would have been as follows: 65 66 (In thousands, except per share data)
Pro Forma (Unaudited) Year Ended December 31, ---------------------------- 1999 1998 ---- ---- Net revenue $ 3,082,640 $ 2,629,290 Net loss $ (65,728) $ (125,633) Net loss per common share: Basic and Diluted $ (.20) $ (.41)
The pro forma information above is presented in response to applicable accounting rules relating to business acquisitions and is not necessarily indicative of the actual results that would have been achieved had the acquisitions occurred at the beginning of 1998, nor is it indicative of future results of operations. The Company made other acquisitions during 1999, the effects of which, individually and in aggregate, were not material to the Company's consolidated financial position or results of operations. The following is a summary of the assets acquired and the consideration given for acquisitions: (In thousands)
2000 1999 ---- ---- Property, plant and equipment $ 1,703,871 $ 654,430 Accounts receivable 826,426 329,999 Goodwill and FCC licenses 29,705,197 7,465,495 Investments 1,316,241 20,210 Other assets 1,611,208 672,330 ------------- ----------- 35,162,943 9,142,464 Long-term debt (4,999,900) (1,942,185) Other liabilities (2,016,676) (511,407) Deferred tax (5,223,905) (789,186) SFX shares held prior to merger (84,881) -- Common stock issued (20,283,157) (4,673,138) -------------- ----------- (32,608,519) (7,915,916) ------------- ----------- Total cash consideration 2,554,424 1,226,548 Less: Restricted cash used 670,228 246,228 ------------- ----------- Cash paid for acquisitions $ 1,884,196 $ 980,320 ============= ===========
RESTRUCTURING Due to the AMFM and SFX mergers, the Company formalized a plan to restructure the AMFM and SFX operations. The Company communicated to all effected employees that the AMFM corporate offices in Dallas and Austin, Texas would close by March 31, 2001 and that the SFX corporate office in New York would close by June 30, 2001. Other operations of AMFM have or will be either discontinued or integrated into existing similar operations. As of December 31, 2000, the restructuring has resulted in the actual termination of 361 employees and the pending termination of approximately 100 more employees. It is expected that the majority of the restructuring will be completed by June 30, 2001. The Company has recorded a liability in purchase accounting primarily related to severance for terminated employees as follows: 66 67 (In thousands)
December 31, ------------------ 2000 1999 ---- ---- Severance costs: Severance accrual at January 1 $ 1,882 $ 975 Estimated costs charged to restructuring accrual in purchase accounting 147,525 13,000 Adjustments to purchase accounting (1,735) -- Payments charged against restructuring accrual (37,407) (12,093) ----------- ----------- Remaining severance accrual $ 110,265 $ 1,882 =========== =========== Lease termination and other restructuring costs: Lease accrual at January 1 $ 2,466 $ 5,000 Estimated costs charged to restructuring accrual in purchase accounting 46,473 -- Adjustments to purchase accounting (2,466) -- Payments charged against restructuring accrual (3,447) (2,534) ----------- ----------- Remaining lease and other restructuring cost accrual $ 43,026 $ 2,466 =========== ===========
NOTE C - INVESTMENTS The Company's most significant investments in non-consolidated affiliates are listed below: AUSTRALIAN RADIO NETWORK The Company owns a fifty-percent (50%) interest in Australian Radio Network ("ARN"), an Australian company that owns and operates radio stations, a narrowcast radio broadcast service and a radio representation company in Australia. HISPANIC BROADCASTING CORPORATION The Company owns 26% of the total number of shares of Hispanic Broadcasting Corporation ("HBC"), a leading domestic Spanish-language radio broadcaster. At December 31, 2000, the fair market value of the Company's shares of HBC was $2.1 billion. GRUPO ACIR COMUNICACIONES In April 1998 the Company purchased a forty-percent (40%) interest in Grupo ACIR Comunicaciones ("ACIR"), a Mexican radio broadcasting company. ACIR owns and operates 157 radio stations throughout Mexico. 67 68 WHITE HORSE In April 1998 the Company purchased a fifty-percent (50%) interest in Hainan White Horse Advertising Media Investment Co. Ltd. ("White Horse"), a Chinese company that operates street furniture displays throughout China. SUMMARIZED FINANCIAL INFORMATION The following table summarizes the Company's investments in these nonconsolidated affiliates: (In thousands)
White All ARN HBC ACIR Horse Others Total --- --- ---- ----- ------ ----- At December 31, 1999 $ 65,364 $ 146,775 $ 54,265 $ 39,971 $ 74,543 $ 380,918 Acquisition of new investments -- -- -- -- 31,240 31,240 Additional investment, net (5,898) -- 11 -- 12,412 6,525 Equity in net earnings 2,153 10,854 3,136 3,009 5,080 24,232 Amortization of excess cost -- -- (1,896) -- (1,024) (2,920) Foreign currency transaction adjustment (492) -- -- -- -- (492) Foreign currency translation adjustment (3,321) -- (73) 71 (8,877) (12,200) --------- ---------- --------- --------- --------- ----------- At December 31, 2000 $ 57,806 $ 157,629 $ 55,443 $ 43,051 $ 113,374 $ 427,303 ========= ========== ========= ========= ========= ===========
These investments are not consolidated, but are accounted for under the equity method of accounting, whereby the Company records its investments in these entities in the balance sheet as "Investments in, and advances to, nonconsolidated affiliates." The Company's interests in their operations are recorded in the statement of earnings as "Equity in earnings of nonconsolidated affiliates." Other income derived from transactions with nonconsolidated affiliates consists of interest, management fees and other transaction gains, which aggregated $4.3 million in 2000, $7.4 million in 1999 and $5.8 million in 1998, and are recorded in the Consolidated Statement of Earnings as "Equity in earnings of nonconsolidated affiliates." Accumulated undistributed earnings included in Retained Earnings for these investments was $39.0 million, $18.2 million and $7.4 million for December 31, 2000, 1999 and 1998, respectively. OTHER INVESTMENTS Other investments at December 31, 2000 and 1999 include marketable equity securities recorded at market value of $1.6 billion and $.8 billion (cost basis of $1.4 billion and $.3 billion), respectively. In connection with the completion of the AMFM merger, Clear Channel and AMFM entered into a Consent Decree with the Department of Justice regarding AMFM's investment in Lamar Advertising Company. The Consent Decree, among other things, required the Company to sell all of its 26.2 million shares of Lamar by December 31, 2002 and relinquish all shareholder rights during the disposition period. As a result, the Company does not exercise significant influence and has accounted for this investment under the cost method of accounting. During 2000, a loss of $5.8 million was realized on the sale of 1.3 million shares of Lamar, which was recorded in "Gain on sale of assets related to mergers." During 1999 and 1998, gains of $22.9 million and $39.2 million were realized on the sale of various available-for-sale marketable equity securities, which was recorded in "Other income (expense) - net", respectively. At December 31, 2000 and 68 69 1999, accumulated unrealized gains, net of tax, of $105.7 million and $328.6 million, respectively, were recorded as a separate component of shareholders' equity. NOTE D - LONG-TERM DEBT Long-term debt at December 31, 2000 and 1999 consisted of the following: (In thousands)
December 31, --------------------- 2000 1999 ---- ---- Revolving line of credit facilities $ 3,203,756 $ 743,750 Multi-currency revolving line of credit facility -- 483,868 Senior Notes: 1.5% Convertible Notes Due 2002 1,000,000 1,000,000 Floating Rate Notes Due 2002 250,000 -- 2.625% Convertible Notes Due 2003 575,000 575,000 7.25% Senior Notes Due 2003 750,000 -- 7.875% Notes Due 2005 750,000 -- 6.5% Notes (denominated in Euro) Due 2005 612,560 -- 6.6250% Senior Notes Due 2008 125,000 125,000 7.65% Senior Notes Due 2010 750,000 -- 6.875% Senior Debentures Due 2018 175,000 175,000 7.25% Debentures Due 2027 300,000 300,000 Various subsidiary level notes 1,441,070 571,405 Other long-term debt 235,378 168,130 ------------- -------------- 10,167,764 4,142,153 Less: current portion 67,736 48,610 ------------- -------------- Total long-term debt $ 10,100,028 $ 4,093,543 ============= ==============
REVOLVING LINE OF CREDIT FACILITIES The Company has three separate revolving lines of credit facilities. Interest rates for each facility are based upon prime, LIBOR, or Federal funds rates at the Company's discretion. The first is a $1.9 billion revolving long-term line of credit facility payable to banks, which converted into a reducing revolving line of credit on the last business day of September 2000, with quarterly repayment of the principal to continue through the last business day of June 2005, when the commitment must be paid in full. At December 31, 2000, $1.8 billion was outstanding and $.1 billion was available for future borrowings. The second is a new $1.5 billion credit facility, entered into in August 2000. This is a five-year multi-currency revolving credit facility. At December 31, 2000, $1.3 billion was outstanding and $.2 billion was available for future borrowings. The third is a $1.5 billion credit facility that is a 364-day revolving credit facility, which the Company has the option upon maturity to convert into a term loan with a five-year maturity. At December 31, 2000, the outstanding balance was $.1 billion and $1.4 billion was available for future borrowings. At December 31, 2000, interest rates on the revolving line of credit facilities varied from 5.575% to 7.335%. 69 70 MULTI-CURRENCY REVOLVING LINE OF CREDIT FACILITY The Company had a 364-day multi-currency revolving credit facility for $1.0 billion. On August 30, 2000, in conjunction with the closing of the new $1.5 billion credit facility, the Company repaid all outstanding borrowings and terminated the facility. SENIOR NOTES All fees and initial offering discounts are being amortized as interest expense over the life of the note. The aggregate face value and market value of the senior notes was approximately $5.3 billion and $5.2 billion, respectively at December 31, 2000. 1.5% Convertible Notes: The notes are convertible into the Company's common stock at any time following the date of original issuance, unless previously redeemed, at a conversion price of $105.82 per share, subject to adjustment in certain events. The Company has reserved 9,453,582 of its common stock for the conversion of these notes. 2.625% Convertible Notes: The notes are convertible into the Company's common stock at any time following the date of original issuance, unless previously redeemed, at a conversion price of $61.95 per share, subject to adjustment in certain events. The Company has reserved 9,281,679 of its common stock for the conversion of these notes. The notes are redeemable, in whole or in part, at the option of the Company at any time on or after April 1, 2001 and until March 31, 2002 at 101.050%; on or after April 1, 2002 and until March 31, 2003 at 100.525%; and on or after April 1, 2003 at 100%, plus accrued interest. VARIOUS SUBSIDIARY LEVEL NOTES The aggregate face value and market value of the various subsidiary level notes was approximately $1.4 billion at December 31, 2000. Notes assumed in Jacor Merger: On December 14, 1999 the Company completed a tender offer for the 10.125% senior subordinated notes due June 15, 2006; 9.75% senior subordinated notes due December 15, 2006; 8.75% senior subordinated notes due June 15, 2007; and 8.0% senior subordinated notes due February 15, 2010. An agent acting on behalf of the Company redeemed notes with a face value of approximately $516.6 million and a redemption value of $570.4 million. Cash settlement of the amount due to the agent was completed on January 14, 2000 and was funded through the Company's credit facilities. Including premiums, discounts, and agency fees, the Company recognized approximately $13.2 million as an extraordinary charge against net income, net of tax of approximately $8.1 million. After redemption, approximately $1.0 million of the notes remain outstanding at December 31, 2000. Notes assumed in SFX Merger: On October 10, 2000, the Company, launched a tender offer for any and all of its 9.125% Senior Subordinated Notes due 2008. An agent acting on the Company's behalf redeemed notes with a redemption value of approximately $602.9 million. Cash settlement of the amount due to the agent was completed in November 2000. After redemption, approximately $1.6 million of the notes remain outstanding at December 31, 2000. Notes assumed in AMFM Merger: On September 29, 2000, the Company redeemed all of the outstanding 9% Senior Subordinated Notes due 2008, originally issued by Chancellor Media Corporation or one of its subsidiaries, for $829.0 million subject to change of control provisions in the indentures. In October, the Company redeemed, also subject to change of control provisions in the indentures, all of the outstanding 9.25% Senior Subordinated Notes due 2007, originally issued by Capstar Radio Broadcasting Partners, Inc. the 12% Exchange Debentures due 2009, originally issued by Capstar Broadcasting Partners, Inc. and the 12.75% Senior Discount Notes due 2009, originally issued by Capstar Broadcasting Partners, Inc., for 70 71 a total of $508.5 million. On October 6, 2000, the Company made payments of $231.4 million pursuant to mandatory offers to repurchase due to a change of control on the following series of AMFM debt: 8% Senior Notes due 2008, 8.125% Senior Subordinated Notes due 2007 and 8.75% Senior Subordinated Notes due 2007, originally issued by Chancellor Media Corporation or one of its subsidiaries, as well as the 12.625% Exchange Debentures due 2006, originally issued by SFX Broadcasting (AMFM Operating Inc.). The aggregate remaining balance of these series of AMFM long-term bonds was $1.4 billion at December 31, 2000. Chancellor Media Corporation, Capstar Radio Broadcasting Partners, Inc., Capstar Broadcasting Partners, Inc., SFX Broadcasting, and AMFM Operating Inc., or their successors are all indirect wholly-owned subsidiaries of the Company. Future maturities of long-term debt at December 31, 2000 are as follows: (In thousands) 2001 $ 67,736 2002 1,570,304 2003 1,773,644 2004 445,074 2005 3,504,150 Thereafter 2,806,856 ------------- $ 10,167,764 =============
NOTE E - FINANCIAL INSTRUMENTS The Company is exposed to market risks, such as changes in interest rate and currency exchange rates. To manage the volatility relating to these exposures, the Company enters into various derivative transactions. The financial impact of these hedging instruments are offset in part or in whole by corresponding changes in the underlying exposures being hedged. The Company does not hold or issue derivative financial instruments for trading purposes. INTEREST RATE MANAGEMENT The Company's policy is to manage interest cost using a mix of fixed and variable rate debt. To manage this mix in a cost-efficient manner, the Company enters into interest rate swaps in which the Company agrees to exchange, at specified variables, the difference between fixed and variable interest amounts calculated by reference to an agreed-upon notional principal amount. These swaps are designated to hedge underlying debt obligations. The terms of the underlying debt and the interest rate swap agreement coincide, therefore the hedge will perfectly offset the changes in the fair value of the underlying debt. Currently, the interest rate differential is reflected as an adjustment to interest expense over the life of the swap. The incremental effect on interest expense for 2000 was not material. At December 31, 2000, the notional amount of interest rate swaps and the underlying principal amount of the debt were $1.5 billion. The fair value of the underlying debt and the related interest rate swaps as of December 31, 2000, was $1.5 billion and $49 million, respectively. 71 72 CURRENCY RATE MANAGEMENT As a result of the Company's foreign operations, the Company is exposed to foreign currency exchange risks related to its net assets in foreign countries. To manage the risk, from time to time the Company enters into foreign denominated debt to hedge movements in currency exchange rates. The Company's major foreign currency exposure involves markets operating in Euros and the British pound. The primary purpose of the Company's foreign currency hedging activities is to offset the changes in the fair value of the underlying debt with the translation gain or losses associated with the Company's foreign operating results. Since the debt is denominated in the same currency of the foreign operation, the hedge will offset the changes in the foreign currency and the change in the corresponding net investment. At December 31, 2000, the notional amount and fair value of foreign currency denominated debt was $787.2 million and $824.5 million, respectively. Currency translation gains and (losses) related to such debt was $30.0 million, $24.4 million and $(3.0) million in 2000, 1999 and 1998, respectively. NOTE F - LIQUID YIELD OPTION NOTES The Company assumed two issues of Liquid Yield Option Notes ("LYONs") as a part of the merger with Jacor on May 4, 1999. LYONs due 2018 The Company assumed 4.75% LYONs due 2018 with a fair value of $225.4 million. Each LYON has a principal amount at maturity of $1,000 and is convertible, at the option of the holder, at any time on or prior to maturity, into the Company's common stock at a conversion rate of 7.227 shares per LYON. The LYONs due 2018 had a balance, net of redemptions, conversions to common stock, amortization of premium, and accretion of interest, at December 31, 2000, of $237.0 million and approximate fair value of $208.0 million. At December 31, 2000, approximately 3.1 million shares of common stock were reserved for the conversion of the LYONs due 2018. The LYONs due 2018 are not redeemable by the Company prior to February 9, 2003. Thereafter, the LYONs are redeemable for cash at any time at the option of the Company in whole or in part, at redemption prices equal to the issue price plus accrued original issue discount to the date of redemption. The LYONs due 2018 can be purchased by the Company, at the option of the holder, on February 9, 2003; February 9, 2008; and February 9, 2013; for a purchase price of $494.52, $625.35 and $790.79, respectively, representing a 4.75% yield per annum to the holder on such date. The Company, at its option, may elect to pay the purchase price on any such purchase date in cash or common stock, or any combination thereof. LYONs due 2011 The Company assumed 5.5% LYONs due 2011 with a fair value of $264.8 million. Each LYON has a principal amount at maturity of $1,000 and is convertible, at the option of the holder, at any time on or prior to maturity, into the Company's common stock at a conversion rate of 15.522 shares per LYON. The LYONs due 2011 had a balance, net of redemptions, conversions to common stock, amortization of premium, and accretion of interest, at December 31, 2000, of $260.1 million and approximate fair value of $200.2 million. At December 31, 2000, approximately 3.9 million shares of common stock were reserved 72 73 for the conversion of the LYONs due 2011. The LYONs due 2011 are not redeemable by the Company prior to June 12, 2001. Thereafter, the LYONs are redeemable for cash at any time at the option of the Company in whole or in part, at redemption prices equal to the issue price plus accrued original issue discount to the date of redemption. The LYONs due 2011 can be purchased by the Company, at the option of the holder, on June 12, 2001 and June 12, 2006 for a purchase price of $581.25 and $762.39, respectively, representing a 5.5% yield per annum to the holder on such date. The Company, at its option, may elect to pay the purchase price on any such purchase date in cash or common stock, or any combination thereof. NOTE G - COMMITMENTS The Company leases office space, certain broadcasting facilities, equipment and the majority of the land occupied by its outdoor advertising structures under long-term operating leases. Some of the lease agreements contain renewal options and annual rental escalation clauses (generally tied to the consumer price index or a maximum of 5%), as well as provisions for the payment of utilities and maintenance by the Company. As of December 31, 2000, the Company's future minimum rental commitments, under noncancelable lease agreements with terms in excess of one year, consist of the following: (In thousands) 2001 $ 346,187 2002 312,225 2003 272,892 2004 227,864 2005 194,371 Thereafter 1,220,989 ------------ $ 2,574,528 ============
Rent expense charged to operations for 2000, 1999 and 1998 was $429.5 million, $306.4 million and $200.6 million, respectively. NOTE H - CONTINGENCIES From time to time, claims are made and lawsuits are filed against the Company, arising out of the ordinary business of the Company. In the opinion of the Company's management, liabilities, if any, arising from these actions are either covered by insurance or accrued reserves, or would not have a material adverse effect on the financial condition of the Company. In various areas in which the Company operates, outdoor advertising is the object of restrictive and, in some cases, prohibitive zoning and other regulatory provisions, either enacted or proposed. The impact to the Company of loss of displays due to governmental action has been somewhat mitigated by federal and state laws mandating compensation for such loss and constitutional restraints. As of December 31, 2000 and 1999, the Company guaranteed third party debt of approximately $280.0 million and $40.1 million, respectively, primarily related to long-term operating contracts. A substantial 73 74 portion of the debt is secured by the third party's associated operating assets. NOTE I - INCOME TAXES Significant components of the provision for income taxes are as follows: (In thousands)
2000 1999 1998 ---- ---- ---- Current - federal $ 63,366 $ 82,452 $ 36,084 Deferred - domestic 340,999 30,111 30,627 Deferred - state 29,228 13,275 4,702 Deferred - foreign 16,484 (10,049) -- State 10,364 14,547 3,156 Foreign 4,290 14,324 (373) ----------- ---------- ----------- Total $ 464,731 $ 144,660 $ 74,196 =========== ========== ===========
Included in current - federal for 1999 is $8.1 million of benefit related to the extraordinary loss resulting from early extinguishment of long-term debt. Significant components of the Company's deferred tax liabilities and assets as of December 31, 2000 and 1999 are as follows: (In thousands)
2000 1999 ---- ---- Deferred tax liabilities: Intangibles and fixed assets $ 6,597,084 $ 1,158,688 Unrealized gain in marketable securities 232,273 181,114 Accrued liabilities 120,636 -- Foreign 115,039 98,720 Equity in earnings 5,156 -- Other 4,914 1,612 ------------- ------------- Total deferred tax liabilities 7,075,102 1,440,134 Deferred tax assets: Accrued expenses 144,917 10,651 Long-term debt 93,284 76,864 Operating loss carryforwards 15,454 84,934 Bad debt reserves 22,355 6,271 Deferred income 11,403 -- Other 16,491 9,248 ------------- ------------- Total gross deferred tax assets 303,904 187,968 Valuation allowance -- 37,617 ------------- ------------- Total deferred tax assets 303,904 150,351 ------------- ------------- Net deferred tax liabilities $ 6,771,198 $ 1,289,783 ============= =============
The reconciliation of income tax computed at the U.S. federal statutory tax rates to income tax expense is: 74 75 (In thousands)
2000 1999 1998 ------------------ ------------------ ------------------ Amount Percent Amount Percent Amount Percent ------ ------- ------ ------- ------ ------- Income tax expense at statutory rates $ 249,739 35% $ 83,439 35 % $44,880 35% State income taxes, net of federal tax benefit 25,686 3% 18,084 8 % 5,108 4% Amortization of goodwill 169,365 24% 54,279 23 % 21,365 17% Other, net 19,941 3% (11,142) (5)% 2,843 2% --------- ----- -------- ------ ------- ------ $ 464,731 65% $144,660 61% $74,196 58% ========= ===== ======== ====== ======= ======
Included in the above reconciliation of income tax for 1999 is $8.1 million of benefit related to extraordinary loss resulting from early extinguishment of long-term debt. The Company has certain net operating loss carryforwards amounting to $40.7 million, which expire in the year 2018. These loss carryforwards were generated by certain acquired companies prior to their acquisition by the Company. During the current year, the Company utilized $188.4 million in net operating loss carryforwards. The Company established a valuation allowance against its acquired operating loss carryforwards generated by certain companies acquired during 1999 and 1998 following an assessment of the likelihood of realizing such amounts. During 2000, based on a reassessment of the likelihood of the realization of future benefits, the Company reduced the valuation allowance to zero. NOTE J - CAPITAL STOCK ELLER PUT/CALL AGREEMENT The holders of the approximately 7% of the outstanding capital stock of Eller, not purchased by the Company in April 1997, had the right to put such stock to the Company for approximately 2.2 million shares of the Company's common stock until April 10, 2002. During 1998, the former Eller stockholders exercised their put right for 260,000 shares of the Company's common stock. In June 1999, the former Eller stockholders and the Company terminated the put rights agreement and at which time the Eller stockholders received the remaining 1.9 million shares of the Company's common stock. COMMON STOCK WARRANTS The Company assumed two issues of fully exercisable common stock warrants as a part of the merger with Jacor in 1999 with a fair value of $253.4 million. Warrants expiring September 18, 2001 The Company assumed 21.6 million common stock warrants that expire on September 18, 2001. Each warrant represents the right to receive .2355422 shares of the Company's common stock, at an exercise price of $24.19 per full share of the Company's common stock. The Company issued 220 and 5,850 shares of common in 2000 and 1999, respectively, on exercises of these common stock warrants. At December 31, 2000, approximately 5.1 million shares of common stock were reserved for the conversion of these warrants. 75 76 Warrants expiring February 27, 2002 The Company assumed 3.6 million common stock warrants that expire on February 27, 2002. Each warrant represents the right to receive .1304410 shares of the Company's common stock, at an exercise price of $34.56 per full share of the Company's common stock. The Company issued 99,550 and 8,255 shares of common in 2000 and 1999, respectively, on exercises of these common stock warrants. At December 31, 2000, approximately .4 million shares of common stock were reserved for the conversion of these warrants. STOCK OPTIONS The Company has granted options to purchase its common stock to employees and directors of the Company and its affiliates under various stock option plans at no less than the fair market value of the underlying stock on the date of grant. These options are granted for a term not exceeding ten years and are forfeited in the event the employee or director terminates his or her employment or relationship with the Company or one of its affiliates. All option plans contain anti-dilutive provisions that require the adjustment of the number of shares of the Company common stock represented by each option for any stock splits or dividends. As a result of the mergers with Jacor in 1999 and AMFM and SFX in 2000, the Company assumed stock options that were granted to employees and affiliates of these companies. These options were granted in accordance with each respective company's policy and under the terms of each respective company's stock option plans. Pursuant to the respective merger agreements, the Company assumed the obligation to fulfill all options granted in accordance with the original grant terms. The following table presents a summary of the Company's stock options outstanding at and stock option activity during the years ended December 31, 2000, 1999 and 1998.
(In thousands, except per share data) Weighted Average Exercise Price Options (1) Per Share ----------- --------- Options outstanding at January 1, 1998 5,858 8.00 Options granted in acquisitions 215 25.00 Options granted 1,401 44.00 Options exercised (3) (1,339) 5.00 Options forfeited (128) 43.00 ------ Options outstanding at December 31, 1998 6,007 17.00 ====== Weighted average fair value of options granted during 1998 21.00 Options outstanding at January 1, 1999 6,007 17.00 Options assumed in acquisitions 3,666 28.00 Options granted 1,580 63.00 Options exercised (3) (2,989) 13.00 Options forfeited (214) 38.00 ------ Options outstanding at December 31, 1999 8,050 32.00 ====== Weighted average fair value of options granted during 1999 26.00
76 77
(In thousands, except per share data) Weighted Average Exercise Price Options (1) Per Share ----------- --------- Options outstanding at January 1, 2000 8,050 32.00 Options assumed in acquisitions (2) 31,075 40.00 Options granted 3,540 62.00 Options exercised (3) (1,915) 21.00 Options forfeited (638) 55.00 ------- Options outstanding at December 31, 2000 (4) 40,112 41.00 ======= Weighted average fair value of options granted during 2000 46.00
(1) Adjusted to reflect two-for-one stock split paid on July 1998. (2) Includes 2.6 million options assumed in the AMFM merger that will vest from January 2001 to April 2005. Non-cash compensation expense of $16.0 million was recorded in 2000, which relates primarily to options held by employees within the Company's radio broadcasting operations. (3) The Company recognized an income tax benefit of $30.6 million, $48.2 million and $5.3 million relating to the options exercised during 2000, 1999 and 1998, respectively. (4) Of the 40.1 million options outstanding at December 31, 2000, 33.2 million were exercisable at a weighted average exercise price of $38.24. There were 12.7 million shares available for future grants under the various option plans at December 31, 2000. Vesting dates range from February 2001 to October 2005, and expiration dates range from February 2001 to October 2010 at exercise prices and average contractual lives as follows:
(In thousands of shares) Outstanding Weighted Average Exercisable Weighted Range of as of Remaining Weighted Average as of Average Exercise Prices 12/31/00 Contractual Life Exercise Price 12/31/00 Exercise Price --------------- -------- ---------------- -------------- -------- -------------- $ 0.0000 -$ 11.2467 3,800 1.9 $ 5.4315 3,800 $ 5.4315 11.2468 - 22.4933 2,810 4.6 15.6382 2,314 15.1000 22.4934 - 33.7400 7,530 4.9 27.2304 7,371 27.2104 33.7401 - 44.9867 5,387 6.0 42.5789 4,730 42.7850 44.9868 - 56.2334 12,171 6.9 49.7825 11,011 49.6714 56.2335 - 67.4800 6,303 5.3 61.9523 2,863 60.7268 67.4801 - 78.7267 1,417 6.2 71.7202 600 73.3870 78.7268 - 89.9734 595 4.5 83.2357 471 82.9732 89.9735 - 101.2200 74 3.3 97.4899 64 98.3194 101.2201 - 112.4667 25 0.9 112.4667 25 112.4667 ------ ---- ---------- ------ ---------- 40,112 5.5 $ 41.3460 33,249 $ 38.2413
The fair value for these options was estimated at the date of grant using a Black-Scholes option pricing model with the following weighted average assumptions for 2000, 1999 and 1998: risk-free interest rates of 6.0%, 6.0% and 5.0% for 2000, 1999 and 1998, respectively; a dividend yield of 0%; the volatility factors of the expected market price of the Company's common stock used was 34%, 30% and 36% for 2000, 1999 and 1998, respectively; and the weighted average expected life of the option was eight years for all 77 78 options granted on or after July 27, 2000 and six years for options granted prior to July 27, 2000. Pro forma net income and earnings per share, assuming that the Company had accounted for its employee stock options using the fair value method and amortized such to expense over the options' vesting period is as follows:
2000 1999 1998 ---- ---- ---- Net income before extraordinary item (in thousands) As reported $ 248,808 $ 85,655 $ 54,031 Pro forma $ 219,898 $ 70,781 $ 47,982 Net income before extraordinary item per common share Basic: As reported $ .59 $ .27 $ .23 Pro forma $ .52 $ .23 $ .20 Diluted: As reported $ .57 $ .26 $ .22 Pro forma $ .50 $ .21 $ .20
COMMON STOCK RESERVED FOR FUTURE ISSUANCE Common stock is reserved for future issuances of, approximately 55.7 million shares for issuance upon the various stock option plans to purchase the Company's common stock (including 40.1 million options currently granted), 9.3 million shares for issuance upon conversion of the Company's 2.625% Senior Convertible Notes, 9.5 million for issuance upon conversion of the Company's 1.5% Senior Convertible Notes, 7.0 million for issuance upon conversion of the Company's LYONs and 5.5 million for issuance upon conversion of the Company's Common Stock Warrants. 78 79 RECONCILIATION OF EARNINGS PER SHARE (In thousands, except per share data)
2000 1999 1998 ---- ---- ---- NUMERATOR: Net income before extraordinary item $ 248,808 $ 85,655 $ 54,031 Extraordinary item -- (13,185) -- --------- --------- --------- Net income 248,808 72,470 54,031 Effect of dilutive securities: Eller put/call option agreement -- (2,300) (4,299) Convertible debt - 2.625% issued in 1998 9,811 * 9,811 * 7,358 Convertible debt - 1.5% issued in 1999 9,750 * 964 * -- LYONs - 1996 issue -- (311) -- LYONs - 1998 issue 4,595 * 2,944 * -- Less: Anti-dilutive items (24,156) (13,719) -- --------- --------- --------- -- (2,611) 3,059 Numerator for net income per common share - diluted $ 248,808 $ 69,859 $ 57,090 ========= ========= ========= DENOMINATOR: Weighted average common shares 423,969 312,610 236,060 Effect of dilutive securities: Stock options and common stock warrants 10,872 8,395 4,098 Eller put/call option agreement -- 847 1,972 Convertible debt - 2.625% issued in 1998 9,282 * 9,282 * 6,993 Convertible debt - 1.5% issued in 1999 9,454 * 927 * -- LYONs - 1996 issue 3,870 2,556 -- LYONs - 1998 issue 3,085 * 2,034 * -- Less: Anti-dilutive items (21,821) (12,243) -- --------- --------- --------- 14,742 11,798 13,063 Denominator for net income per common share - diluted 438,711 324,408 249,123 ========= ========= ========= Net income per common share: Basic: Net income before extraordinary item .59 $ .27 $ .23 Extraordinary item -- (.04) -- --------- --------- --------- Net income $ .59 $ .23 $ .23 ========= ========= ========= Diluted: Net income before extraordinary item .57 $ .26 $ .22 Extraordinary item -- (.04) -- --------- --------- --------- Net income $ .57 $ .22 $ .22 ========= ========= =========
* Denotes items that are anti-dilutive to the calculation of earnings per share. 79 80 NOTE K - EMPLOYEE STOCK AND SAVINGS PLANS The Company has various 401(K) savings and other plans for the purpose of providing retirement benefits for substantially all employees. Both the employees and the Company make contributions to the plan. The Company matches a portion of an employee's contribution. Company matched contributions vest to the employees based upon their years of service to the Company. Contributions to these plans of $12.5 million, $7.9 million and $3.8 million were charged to expense for 2000, 1999 and 1998, respectively. In 2000, the Company initiated a non-qualified employee stock purchase plan for all eligible employees. Under the plan, shares of the company's common stock may be purchased at 85% of the market value on the day of purchase. Employees may purchase shares having a value not exceeding ten percent (10%) of their annual gross compensation or $25,000, whichever is lower. During 2000, employees purchased 118,941 shares at a weighted average share price of $64.00. NOTE L - OTHER INFORMATION (In thousands)
For the year ended December 31, ------------------------------- 2000 1999 1998 ---- ---- ---- The following details the components of "Other income (expense) - net": Gain (loss) on sale of marketable securities $ (5,369) $ 22,930 $39,221 Reimbursement of capital cost (14,370) -- -- Gain (loss) on disposal of fixed assets 1,901 2,897 (13,845) Minority interest (4,059) (2,769) (327) Compensation expense relating to subsidiary options -- -- (8,791) IRS and legal settlements -- -- (7,400) Charitable contribution of treasury shares -- (4,102) -- Other 4,764 (11,664) 3,952 --------- -------- ------- Total Other income (expense) - net $ (17,133) $ 7,292 $12,810 ========= ======== ======= The following details the income tax expense (benefit) on items of other comprehensive income: Foreign currency translation adjustments $ 4,270 $ 3,036 $ 3,124 Unrealized gains on securities: Unrealized holding gain (loss) arising during period $(104,264) $ 98,170 $87,729 Less: reclassification adjustment for gains on SFX shares held prior to merger $ (19,668) $ -- $ -- Less: reclassification adjustments for gain (loss) included in net income $ 3,919 $ (8,026) $(13,727)
80 81
(In thousands) As of December 31, ------------------ 2000 1999 ---- ---- The following details the components of "Other current assets": Current film rights $ 17,533 $ 19,584 Inventory 37,017 42,672 Other 79,323 25,438 ---------- ----------- Total Other current assets $ 133,873 $ 87,694 ========== =========== The following details the components of "Accrued expenses": Acquisition reserves $ 384,025 $ 61,922 Accrued liabilities - other 502,879 257,768 ---------- ----------- Total Accrued expenses $ 886,904 $ 319,690 ========== =========== The following details the components of "Accumulated other comprehensive income": Cumulative currency translation adjustment $ (138,147) $ (45,851) Cumulative unrealized gain on investments 105,714 328,596 ---------- ----------- Total Accumulated other comprehensive income $ (32,433) $ 282,745 ========== ===========
NOTE M - SEGMENT DATA As a result of the fiscal year 2000 acquisitions of SFX and AMFM, the Company determined that three reportable operating segments - radio broadcasting, outdoor advertising and live entertainment best reflect how the Company is currently managed. Prior years presented have been reclassified to be consistent with the 2000 presentation. Revenue and expenses earned and charged between segments are recorded at fair value. At December 31, 2000, the radio broadcasting segment included 1,007 radio stations for which the Company is the licensee and 100 radio stations operated under lease management or time brokerage agreements. Of these stations, 1,105 operate in domestic markets and two stations operate in internationally. The radio broadcasting segment also operates various radio networks. At December 31, 2000, the outdoor advertising segment owned or operated 698,265 advertising display faces. Of these, 149,171 are in over 52 domestic markets and the remaining 549,094 displays are in over 43 international markets. At December 31, 2000, the live entertainment segment owned or operated 120 venues. Of these, 92 venues are in 38 domestic markets and the remaining 28 venues are in three international markets. "Other" includes television broadcasting, sports representation, media representation, Internet businesses and corporate expenses. 81 82 (In thousands)
2000 1999 1998 ---- ---- ---- Net revenue Radio Broadcasting $ 2,431,544 $ 1,230,754 $ 474,936 Outdoor Advertising 1,729,438 1,253,732 709,189 Live Entertainment 902,374 -- -- Other 364,210 199,532 171,021 Eliminations (82,260) (5,858) (4,206) ----------- ----------- ----------- Consolidated $ 5,345,306 $ 2,678,160 $ 1,350,940 Operating expenses Radio Broadcasting $ 1,385,848 $ 731,062 $ 284,798 Outdoor Advertising 1,078,540 785,636 395,127 Live Entertainment 830,717 -- -- Other 267,861 121,275 91,546 Eliminations (82,260) (5,858) (4,206) ----------- ----------- ----------- Consolidated $ 3,480,706 $1,632,115 $ 767,265 Depreciation Radio Broadcasting $ 84,345 $ 47,890 $ 23,821 Outdoor Advertising 228,630 201,083 97,461 Live Entertainment 23,354 -- -- Other 31,310 14,269 12,760 ----------- ----------- ----------- Consolidated $ 367,639 $ 263,242 $ 134,042 Amortization of intangibles Radio Broadcasting $ 714,398 $ 276,295 $ 59,298 Outdoor Advertising 208,719 171,215 100,168 Live Entertainment 91,040 -- -- Other 19,267 11,481 11,464 ----------- ----------- ----------- Consolidated $ 1,033,424 $ 458,991 $ 170,930 Operating income Radio Broadcasting $ 241,043 $ 165,264 $ 110,799 Outdoor Advertising 171,974 64,859 92,307 Live Entertainment (54,782) -- -- Other (53,357) 23,543 37,772 ----------- ----------- ----------- Consolidated $ 304,878 $ 253,666 $ 240,878 Total identifiable assets Radio Broadcasting $33,685,182 $ 9,562,183 $ 1,912,683 Outdoor Advertising 7,683,182 5,056,549 4,887,490 Live Entertainment 5,233,960 -- -- Other 3,454,137 2,202,780 739,745 ----------- ----------- ----------- Consolidated $50,056,461 $16,821,512 $ 7,539,918 Capital expenditures Radio Broadcasting $ 139,923 $ 58,346 $ 12,318 Outdoor Advertising 250,271 154,133 95,124 Live Entertainment 46,707 -- -- Other 58,650 26,259 34,496 ----------- ----------- ----------- Consolidated $ 495,551 $ 238,738 $ 141,938
82 83 Net revenue of $1.0 billion, $567.2 million and $175.1 million and identifiable assets of $2.7 billion, $1.3 billion and $1.2 billion derived from the Company's foreign operations are included in the data above for the years ended December 31, 2000, 1999 and 1998, respectively. NOTE N - QUARTERLY RESULTS OF OPERATIONS (UNAUDITED) (In thousands, except per share data)
March 31, June 30, September 30, December 31, --------- -------- ------------- ------------ 2000 1999 2000 1999 2000 1999 2000 1999 ---- ---- ---- ---- ---- ---- ---- ---- Gross revenue $871,375 $421,607 $1,078,642 $ 696,13 $1,684,787 $887,854 $2,213,096 $ 986,42 ======== ======== ========== ======== ========== ======== ========== ======== Net revenue 782,539 $376,787 $ 965,875 $617,691 $1,576,719 $796,157 $2,020,173 $887,525 Operating expenses 519,961 244,822 562,729 356,549 1,062,284 495,800 1,335,732 534,944 Non-cash compensation -- -- -- -- 3,151 -- 12,881 -- Depreciation and amortization 220,054 110,648 228,687 154,379 372,059 208,627 580,263 248,579 Corporate expenses 24,578 12,447 27,867 15,884 39,417 16,254 50,765 25,561 -------- -------- ---------- -------- ---------- -------- ---------- -------- Operating income 17,946 8,870 146,592 90,879 99,808 75,476 40,532 78,441 Interest expense 55,549 30,731 69,911 44,949 105,335 50,962 152,309 52,762 Gain (loss) on sale of assets related to mergers -- -- -- 136,925 805,183 -- (21,440) 1,734 Equity in earnings of nonconsolidated affiliates 2,936 2,196 6,667 1,620 8,433 2,925 7,119 11,442 Other income (expenses) 398 9,818 1,226 1,987 (8,964) (2,221) (9,793) (2,292) -------- -------- ---------- -------- ---------- -------- ---------- -------- Income (loss) before income taxes and extraordinary items (34,269) (9,847) 84,574 186,462 799,125 25,218 (135,891) 36,563 Income taxes (1) 5,133 2,889 53,339 79,962 350,198 23,695 56,061 46,195 -------- -------- ---------- -------- ---------- -------- ---------- -------- Income (loss) before extraordinary item (39,402) (12,736) 31,235 106,500 448,927 1,523 (191,952) (9,632) Extraordinary item -- -- -- -- -- -- -- (13,185) -------- -------- ---------- -------- ---------- -------- ---------- -------- Net income (loss) $(39,402) $(12,736) $ 31,235$ 106,500 $448,927 $ 1,523 $ (191,952) $(22,817) ======== ======== ========== ======== ========== ======== ========== ======== Net income (loss) per common share: Basic: Income (loss) before extraordinary item $ (.12) $ (.05) $ .09 $ .35 $ 1.04 $ .00 $ (.33) $ (.03) Extraordinary item -- -- -- -- -- -- -- (.04) -------- -------- ---------- -------- ---------- -------- ---------- -------- Net income (loss) $ (.12) $ (.05) $ .09 $ .35 $ 1.04 $ .00 $ (.33) $ (.07) ======== ======== ========== ======== ========== ======== ========== ======== Diluted: Income (loss) before extraordinary item $ (.12) $ (.05) $ .09 $ .33 $ .96 $ .00 $ (.33) $ (.03) Extraordinary item -- -- -- -- -- -- -- (.04) -------- -------- ---------- -------- ---------- -------- ---------- -------- Net income (loss) $ (.12) $ (.05) $ .09 $ .33 $ .96 $ .00 $ (.33) $ (.07) ======== ======== ========== ======== ========== ======== ========== ======== Stock price: High $95.5000 $68.1875 $ 83.0000 $74.3750 $ 85.8125 $80.8125 $ 61.0000 $91.5000 Low 60.0000 52.0000 62.0625 64.2500 54.7500 60.7500 43.8750 68.5000
(1) Income tax expense in the quarters ended September 30, 2000 and December 31, 2000 includes estimated taxes related to divestiture gains. The Company's Common Stock is traded on the New York Stock Exchange under the symbol CCU. 83 84 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Not Applicable 84 85 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT We believe that one of our most important assets is our experienced management team. With respect to our operations, managers are responsible for the day-to-day operation of their respective location. We believe that the autonomy of our management enables us to attract top quality managers capable of implementing our aggressive marketing strategy and reacting to competition in the local markets. Most of our managers have options to purchase our common stock. As an additional incentive, a portion of each manager's compensation is related to the performance of the profit centers for which he or she is responsible. In an effort to monitor expenses, corporate management routinely reviews staffing levels and operating costs. Combined with the centralized financial functions, this monitoring enables us to control expenses effectively. Corporate management also advises local managers on broad policy matters and is responsible for long-range planning, allocating resources, and financial reporting and controls. The information required by this item with respect to the directors and nominees for election to our Board of Directors is incorporated by reference to the information set forth under the caption "Election of Directors" and "Compliance With Section 16(A) of the Exchange Act," in our Definitive Proxy Statement, which will be filed with the Securities and Exchange Commission within 120 days of our fiscal year end. The following information is submitted with respect to our executive officers as of December 31, 2000.
Age on December 31, Officer Name 2000 Position Since L. Lowry Mays 65 Chairman/Chief Executive Officer 1972 Mark P. Mays 37 President/Chief Operating Officer 1989 Randall T. Mays 35 Executive Vice President/Chief Financial Officer 1993 Herbert W. Hill, Jr. 41 Senior Vice President/Chief Accounting Officer 1989 Kenneth E. Wyker 39 Senior Vice President/General Counsel and Secretary 1993 W. A. Ripperton Riordan 43 Executive Vice President/Chief Operating Officer - 1995 Television Karl Eller 72 Chief Executive Officer - Eller Media 1997 Roger Parry 47 Chief Executive Officer - Clear Channel International 1998 Paul Meyer 58 President/Chief Operating Officer - Eller Media 1999 Juliana F. Hill 31 Senior Vice President/Finance 1999 Randy Michaels 48 Chairman/Chief Executive Officer - Radio Group 1999 Brian Becker 44 Chairman/Chief Executive Officer - Live Entertainment 2000 Kenneth J. O'Keefe 46 President/Chief Operating Officer - Radio Group 2000
The officers named above serve until the next Board of Directors meeting immediately following the Annual Meeting of Shareholders. Mr. L. Mays is our founder and was our President and Chief Executive Officer from 1972 to February 1997. Since that time, Mr. L. Mays has served as our Chairman and Chief Executive Officer. He has been one of our directors since our inception. Mr. L. Mays is the father of Mark P. Mays, our 85 86 President and Chief Operating Officer, and Randall T. Mays, our Executive Vice President and Chief Financial Officer. Mr. M. Mays was our Senior Vice President of Operations from February 1993 until his appointment as our President and Chief Operating Officer in February 1997. He has been one of our directors since May 1998. Mr. M. Mays is the son of L. Lowry Mays, our Chairman and Chief Executive Officer and the brother of Randall T. Mays, our Executive Vice President and Chief Financial Officer. Mr. R. Mays was appointed Executive Vice President and Chief Financial Officer in February 1997. Prior thereto, he served as our Vice President and Treasurer since he joined us in January 1993. Mr. R. Mays is the son of L. Lowry Mays, our Chairman and Chief Executive Officer and the brother of Mark P. Mays, our President and Chief Operating Officer. Mr. Hill was appointed Senior Vice President and Chief Accounting Officer in February 1997. Prior thereto, he served as our Vice President/Controller since January 1989. Mr. Wyker was appointed Senior Vice President, General Counsel and Secretary in February 1997. Prior thereto he served as Vice President for Legal Affairs since he joined us in July 1993. Mr. Riordan was appointed Executive Vice President/Chief Operating Officer - Television in November 1995. Mr. Riordan tendered his resignation effective February 15, 2001. Mr. Eller was appointed Chief Executive Officer - Eller Media in April 1997. Prior thereto, he was the Chief Executive Officer of Eller Media Company from August 1995 to April 1997. Mr. Parry was appointed Chief Executive Officer - Clear Channel International in June 1998. Prior thereto, he was the Chief Executive of More Group plc for the remainder of the relevant five-year period. Mr. Meyer was appointed President - Eller Media in March 1999. Prior thereto he was the Executive Vice President and General Counsel of Eller Media from March 1996 to March 1999. Ms. Hill was appointed Senior Vice President/Finance in May 2000. Prior thereto, she was Vice President/Finance and Strategic Development from March 1999 to May 2000. She was an Associate at US WEST Communications from August 1998 to March 1999 and she was a student at J.L. Kellogg Graduate School of Management, Northwestern University from September 1996 to June 1998. She was an Audit Manager of Ernst & Young LLP for the remainder of the relevant five-year period. Mr. Michaels was appointed Chairman/Chief Executive Officer of our Radio Group in May 2000. Prior thereto he was President of Radio from May 1999 to May 2000. Prior thereto he was the Chief Executive Officer of Jacor Communications, Inc. from November 1996 to May 1999 and he was President and Company Chief Operating Officer of Jacor Communications, Inc. for the remainder of the relevant five-year period. Mr. Becker was appointed Chairman/Chief Executive Officer - Live Entertainment in October 2000. Prior thereto he was the Executive Vice President of SFX Entertainment, Inc. from February 1998 to October 2000 and he was Chief Executive Officer of PACE Entertainment Corp. for the remainder of the relevant five-year period. 86 87 Mr. O'Keefe was appointed President/Chief Operating Officer - Radio Group in October 2000. Prior thereto he was the President and Chief Executive Officer of the AMFM Radio Group from February 2000 to October 2000 and he was the Executive Vice President of AMFM Inc. since September 1997. Mr. O'Keefe had been an Executive Vice President of Evergreen Media Corporation for the remainder of the relevant five-year period. ITEM 11. EXECUTIVE COMPENSATION The information required by this item is incorporated by reference to the information set forth under the caption "Executive Compensation" in our Definitive Proxy Statement, expected to be filed within 120 days of our fiscal year end. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information required by this item is incorporated by reference to our Definitive Proxy Statement under the headings "Security Ownership of Certain Beneficial Owners and Management", expected to be filed within 120 days of our fiscal year end. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information required by this item is incorporated by reference to our Definitive Proxy Statement under the heading "Certain Transactions", expected to be filed within 120 days of our fiscal year end. 87 88 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K (a)1. Financial Statements. The following consolidated financial statements are included in Item 8. Consolidated Balance Sheets as of December 31, 2000 and 1999 Consolidated Statements of Earnings for the Years Ended December 31, 2000, 1999 and 1998. Consolidated Statements of Changes in Shareholders' Equity for the Years Ended December 31, 2000, 1999 and 1998. Consolidated Statements of Cash Flows for the Years Ended December 31, 2000, 1999 and 1998. Notes to Consolidated Financial Statements (a)2. Financial Statement Schedules. The following financial statement schedules for the years ended December 31, 2000, 1999 and 1998 and related report of independent auditors are filed as part of this report and should be read in conjunction with the consolidated financial statements. Schedule II Valuation and Qualifying Accounts All other schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange Commission are not required under the related instructions or are inapplicable, and therefore have been omitted. 88 89 SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS Allowance for Doubtful Accounts (In thousands)
Charges Balance at to Costs, Write-off Balance Beginning Expenses of Accounts at end of Description of period and other Receivable Other (1) Period - ----------- --------- --------- ----------- --------- --------- Year ended December 31, 1998 $ 9,850 $ 6,031 $ 7,840 $ 5,467 $13,508 ======= ======= ======= ======= ======= Year ended December 31, 1999 $13,508 $12,975 $15,640 $15,252 $26,095 ======= ======= ======= ======= ======= Year ended December 31, 2000 $26,095 $34,168 $36,065 $36,433 $60,631 ======= ======= ======= ======= =======
(1) Allowance for accounts receivable acquired in acquisitions net of deletions related to dispositions. 89 90 SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS Deferred Tax Asset Valuation Allowance (In thousands)
Charges Balance at to Costs, Balance Beginning Expenses at end of Description of period and other Deletions (2) Other (1) Period ----------- ---------- --------- ------------- --------- --------- Year ended December 31, 1998 $ -- $ -- $ -- $ 19,837 $19,837 ========= ========= ========= ========= ======= Year ended December 31, 1999 $ 19,837 $ -- $ -- $ 17,780 $37,617 ========= ========= ========= ========= ======= Year ended December 31, 2000 $ 37,617 $ -- $ 37,617 $ -- $ -- ========= ========= ========= ========= =======
(1) Related to allowance for net operating loss carryforwards assumed in acquisitions. (2) Based on the Company's reassessment of the likelihood of the realization of future benefits, the valuation allowance was reduced to zero. 90 91 (a)3. Exhibits. EXHIBIT NUMBER DESCRIPTION 2.1 Agreement and Plan of Merger dated as of October 8, 1998, as amended on November 11, 1998, among Clear Channel Communications, Inc., CCU Merger Sub, Inc. and Jacor Communications, Inc. (incorporated by reference to Annex A to the Company's Registration Statement on Form S-4 (Reg. No. 333-72839) dated February 23, 1999). 2.2 Agreement and Plan of Merger dated as of October 2, 1999, among Clear Channel, CCU Merger Sub, Inc. and AMFM Inc. (incorporated by reference to the exhibits of Clear Channel's Current Report on Form 8-K filed October 5, 1999). 2.3 Agreement and Plan of Merger dated as of February 28, 2000, among Clear Channel, CCU II Merger Sub, Inc. and SFX Entertainment, Inc. (incorporated by reference to the exhibits of Clear Channel's Current Report on Form 8-K filed February 29, 2000). 3.1 Current Articles of Incorporation of the Company (incorporated by reference to the exhibits of the Company's Registration Statement on Form S-3 (Reg. No. 333-33371) dated September 9, 1997). 3.2 Second Amended and Restated Bylaws of the Company (incorporated by reference to the exhibits of the Company's Registration Statement on Form S-3 (Reg. No. 333-33371) dated September 9, 1997). 3.3 Amendment to the Company's Articles of Incorporation (incorporated by reference to the exhibits to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1998). 3.4 Second Amendment to Clear Channel's Articles of Incorporation (incorporated by reference to the exhibits to Clear Channel's Quarterly Report on Form 10-Q for the quarter ended March 31, 1999). 3.5 Third Amendment to Clear Channel's Articles of Incorporation (incorporated by reference to the exhibits to Clear Channel's Quarterly Report on Form 10-Q for the quarter ended May 31, 2000). 4.1 Buy-Sell Agreement by and between Clear Channel Communications, Inc., L. Lowry Mays, B. J. McCombs, John M. Schaefer and John W. Barger, dated May 31, 1977 (incorporated by reference to the exhibits of the Company's Registration Statement on Form S-1 (Reg. No. 33-289161) dated April 19, 1984). 4.2 Senior Indenture dated October 1, 1997, by and between Clear Channel Communications, Inc. and The Bank of New York as Trustee (incorporated by reference to exhibit 4.2 of the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1997). 91 92 EXHIBIT NUMBER DESCRIPTION 4.3 First Supplemental Indenture dated March 30, 1998 to Senior Indenture dated October 1, 1997, by and between the Company and The Bank of New York, as Trustee (incorporated by reference to the exhibits to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1998). 4.4 Second Supplemental Indenture dated June 16, 1998 to Senior Indenture dated October 1, 1997, by and between Clear Channel Communications, Inc. and the Bank of New York, as Trustee (incorporated by reference to the exhibits to the Company's Current Report on Form 8-K dated August 27, 1998). 4.5 Third Supplemental Indenture dated June 16, 1998 to Senior Indenture dated October 1, 1997, by and between Clear Channel Communications, Inc. and the Bank of New York, as Trustee (incorporated by reference to the exhibits to the Company's Current Report on Form 8-K dated August 27, 1998). 4.6 Fourth Supplement Indenture dated November 24, 1999 to Senior Indenture dated October 1, 1997, by and between Clear Channel and The Bank of New York as Trustee. 4.7 Fifth Supplemental Indenture dated June 21, 2000, to Senior Indenture dated October 1, 1997, by and between Clear Channel Communications, Inc. and The Bank of New York, as Trustee (incorporated by reference to the exhibits of Clear Channel's registration statement on Form S-3 (Reg. No. 333-42028) dated July 21, 2000). 4.8 Sixth Supplemental Indenture dated June 21, 2000, to Senior Indenture dated October 1, 1997, by and between Clear Channel Communications, Inc. and The Bank of New York, as Trustee (incorporated by reference to the exhibits of Clear Channel's registration statement on Form S-3 (Reg. No. 333-42028) dated July 21, 2000). 4.9 Seventh Supplemental Indenture dated July 7, 2000, to Senior Indenture dated October 1, 1997, by and between Clear Channel Communications, Inc. and The Bank of New York, as Trustee (incorporated by reference to the exhibits of Clear Channel's registration statement on Form S-3 (Reg. No. 333-42028) dated July 21, 2000). 4.10 Eighth Supplemental Indenture dated September 12, 2000, to Senior Indenture dated October 1, 1997, by and between Clear Channel Communications, Inc. and The Bank of New York, as Trustee (incorporated by reference to the exhibits to Clear Channel's Quarterly Report on Form 10-Q for the quarter ended September 30, 2000). 4.11 Ninth Supplemental Indenture dated September 12, 2000, to Senior Indenture dated October 1, 1997, by and between Clear Channel Communications, Inc. and The Bank of New York, as Trustee (incorporated by reference to the exhibits to Clear Channel's Quarterly Report on Form 10-Q for the quarter ended September 30, 2000). 10.1 Incentive Stock Option Plan of Clear Channel Communications, Inc. as of January 1, 1984 (incorporated by reference to the exhibits of the Company's Registration Statement on Form S-1 (Reg. No. 33-289161) dated April 19, 1984). 92 93 EXHIBIT NUMBER DESCRIPTION 10.2 Clear Channel Communications, Inc. 1994 Incentive Stock Option Plan (incorporated by reference to the exhibits of the Company's Registration Statement on Form S-8 dated November 20, 1995). 10.3 Clear Channel Communications, Inc. 1994 Nonqualified Stock Option Plan (incorporated by reference to the exhibits of the Company's Registration Statement on Form S-8 dated November 20, 1995). 10.4 Clear Channel Communications, Inc. Directors' Nonqualified Stock Option Plan (incorporated by reference to the exhibits of the Company's Registration Statement on Form S-8 dated November 20, 1995). 10.5 Option Agreement for Officer (incorporated by reference to the exhibits of the Company's Registration Statement on Form S-8 dated November 20, 1995). 10.6 Registration Rights Agreements dated as October 8, 1998, by and among the Company and the Zell/Chilmark Fund, L.P., Samstock, L.L.C., the SZ2 (IGP) Partnership and Samuel Zell (incorporated by reference to the exhibits to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1998). 10.7 The Clear Channel Communications, Inc. 1998 Stock Incentive Plan (incorporated by reference to Appendix A to the Company's Definitive 14A Proxy Statement dated March 24, 1998). 10.8 Voting Agreement dated as of October 8, 1998, by and among Jacor Communications, Inc. and L. Lowry Mays, Mark P. Mays and Randall T. Mays and certain related family trusts (incorporated by reference to the exhibits to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1998). 10.9 Shareholders Agreement dated October 2, 1999, by and among Clear Channel, L. Lowry Mays, 4-M Partners, Ltd., Hicks, Muse, Tate & Furst Equity Fund II, L.P., HM2/HMW, L.P., HM2/Chancellor, L.P., HM4/Chancellor, L.P., Capstar Broadcasting Partners, L.P., Capstar BT Partners, L.P., Capstar Boston Partners, L.L.C., and Thomas O. Hicks. 10.10 Registration Rights Agreement dated as of October 2, 1999, among Clear Channel and Hicks, Muse, Tate & Furst Equity Fund II, L.P., HM2/HMW, L.P., HM2/Chancellor, L.P., HM4/Chancellor, L.P., Capstar Broadcasting Partners, L.P., Capstar BT Partners, L.P., Capstar Boston Partners, L.L.C., Thomas O. Hicks, John R. Muse, Charles W. Tate, Jack D. Furst, Michael J. Levitt, Lawrence D. Stuart, Jr., David B Deniger and Dan H. Blanks. 10.11 Voting Agreement dated as of October 2, 1999, by and among Clear Channel and Thomas O. Hicks (incorporated by reference to exhibits to Amendment No. 6 to Schedule 13D of Thomas O. Hicks, et. Al., filed on October 14, 1999). 10.12 Voting Agreement dated as of October 2, 1999, by and among AMFM and L. Lowry Mays and 4-M Partners, Ltd. (incorporated by reference to exhibits to Schedule 13D of L. Lowry Mays, et. Al., filed on October 14, 1999). 93 94 EXHIBIT NUMBER DESCRIPTION 10.13 Voting Agreement dated as of October 2, 1999, by and among Clear Channel and HM2/HMW, L.P., HM2/Chancellor, L.P., HM4/Chancellor, L.P. and Capstar Broadcasting Partners, L.P. (incorporated by reference to exhibits to Amendment No. 6 to Schedule 13D of Thomas O. Hicks, et. Al., filed on October 14, 1999). 10.14 Employment Agreement by and between Clear Channel Communications, Inc. and L. Lowry Mays dated October 1, 1999. (incorporated by reference to the exhibits to Clear Channel's Quarterly Report on Form 10-Q for the quarter ended September 30, 1999). 10.15 Employment Agreement by and between Clear Channel Communications, Inc. and Mark P. Mays dated October 1, 1999. (incorporated by reference to the exhibits to Clear Channel's Quarterly Report on Form 10-Q for the quarter ended September 30, 1999). 10.16 Employment Agreement by and between Clear Channel Communications, Inc. and Randall T. Mays dated October 1, 1999. (incorporated by reference to the exhibits to Clear Channel's Quarterly Report on Form 10-Q for the quarter ended September 30, 1999). 10.17 Fourth Amended and Restated Credit Agreement by and among Clear Channel Communications, Inc., 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 the exhibits of Clear Channel's registration statement on Form S-3 (Reg. No. 333-42028) dated July 21, 2000). 10.18 Credit Agreement among Clear Channel Communications, Inc., Bank of America, N.A., as administrative agent, Chase Securities Inc., as syndication agent, and certain other lenders dated August 30, 2000. 11 Statement re: Computation of Per Share Earnings. 12 Statement re: Computation of Ratios. 21 Subsidiaries of the Company. 23.1 Consent of Ernst & Young LLP. 23.2 Consent of KPMG LLP. 24 Power of Attorney (included on signature page). 99.1 Report of Independent Auditors on Financial Statement Schedules - Ernst & Young LLP. 99.2 Report of Independent Auditors - KPMG LLP. 94 95 (b) Reports on Form 8-K. We filed a report on Form 8-K dated October 6, 2000 that reported that we had issued a press release on October 5, 2000 announcing that our Board of Directors had authorized the repurchase of up to $1 billion of our common stock over the next 12 months. We filed a report on Form 8-K dated December 13, 2000 that reported that we had issued a press release on December 12, 2000 announcing that we extended our offer to exchange Euro 650,000,000 6.5% Notes due 2005 issued by us in July 2000. We filed a report on Form 8-K dated December 20, 2000 that reported that we had issued a press release that day announcing that we extended our offer to exchange Euro 650,000,000 6.5% Notes due 2005 issued by us in July 2000. 95 96 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on March 15, 2001. CLEAR CHANNEL COMMUNICATIONS, INC. By:/S/ L. Lowry Mays L. Lowry Mays Chairman and Chief Executive Officer POWER OF ATTORNEY Each person whose signature appears below authorizes L. Lowry Mays, Mark P. Mays, Randall T. Mays and Herbert W. Hill, Jr., or any one of them, each of whom may act without joinder of the others, to execute in the name of each such person who is then an officer or director of the Registrant and to file any amendments to this annual report on Form 10-K necessary or advisable to enable the Registrant to comply with the Securities Exchange Act of 1934, as amended, and any rules, regulations and requirements of the Securities and Exchange Commission in respect thereof, which amendments may make such changes in such report as such attorney-in-fact may deem appropriate. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
NAME TITLE DATE ---- ----- ---- /S/ L. Lowry Mays Chairman, Chief Executive Officer and March 15, 2001 L. Lowry Mays Director /S/ Mark P. Mays President and Chief Operating Officer March 15, 2001 Mark P. Mays and Director /S/ Randall T. Mays Executive Vice President and Chief March 15, 2001 Randall T. Mays Financial Officer (Principal Financial Officer) and Director /S/ Herbert W. Hill, Jr. Senior Vice President and Chief March 15, 2001 Herbert W. Hill, Jr. Accounting Officer (Principal Accounting Officer) /S/ Robert L. Crandall Director March 15, 2001 Robert L. Crandall
97
NAME TITLE DATE ---- ----- ---- /S/ Karl Eller Director March 15, 2001 Karl Eller /S/ Alan D. Feld Director March 15, 2001 Alan D. Feld /S/ Thomas O. Hicks Director March 15, 2001 Thomas O. Hicks /S/ Vernon E. Jordan, Jr. Director March 15, 2001 Vernon E. Jordan, Jr. /S/ Michael J. Levitt Director March 15, 2001 Michael J. Levitt /S/ Perry J. Lewis Director March 15, 2001 Perry J. Lewis /S/ B. J. McCombs Director March 15, 2001 B. J. McCombs /S/ Theodore H. Strauss Director March 15, 2001 Theodore H. Strauss /S/ John H. Williams Director March 15, 2001 John H. Williams
98 EXHIBIT NUMBER DESCRIPTION 2.1 Agreement and Plan of Merger dated as of October 8, 1998, as amended on November 11, 1998, among Clear Channel Communications, Inc., CCU Merger Sub, Inc. and Jacor Communications, Inc. (incorporated by reference to Annex A to the Company's Registration Statement on Form S-4 (Reg. No. 333-72839) dated February 23, 1999). 2.2 Agreement and Plan of Merger dated as of October 2, 1999, among Clear Channel, CCU Merger Sub, Inc. and AMFM Inc. (incorporated by reference to the exhibits of Clear Channel's Current Report on Form 8-K filed October 5, 1999). 2.3 Agreement and Plan of Merger dated as of February 28, 2000, among Clear Channel, CCU II Merger Sub, Inc. and SFX Entertainment, Inc. (incorporated by reference to the exhibits of Clear Channel's Current Report on Form 8-K filed February 29, 2000). 3.1 Current Articles of Incorporation of the Company (incorporated by reference to the exhibits of the Company's Registration Statement on Form S-3 (Reg. No. 333-33371) dated September 9, 1997). 3.2 Second Amended and Restated Bylaws of the Company (incorporated by reference to the exhibits of the Company's Registration Statement on Form S-3 (Reg. No. 333-33371) dated September 9, 1997). 3.3 Amendment to the Company's Articles of Incorporation (incorporated by reference to the exhibits to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1998). 3.4 Second Amendment to Clear Channel's Articles of Incorporation (incorporated by reference to the exhibits to Clear Channel's Quarterly Report on Form 10-Q for the quarter ended March 31, 1999). 3.5 Third Amendment to Clear Channel's Articles of Incorporation (incorporated by reference to the exhibits to Clear Channel's Quarterly Report on Form 10-Q for the quarter ended May 31, 2000). 4.1 Buy-Sell Agreement by and between Clear Channel Communications, Inc., L. Lowry Mays, B. J. McCombs, John M. Schaefer and John W. Barger, dated May 31, 1977 (incorporated by reference to the exhibits of the Company's Registration Statement on Form S-1 (Reg. No. 33-289161) dated April 19, 1984). 4.2 Senior Indenture dated October 1, 1997, by and between Clear Channel Communications, Inc. and The Bank of New York as Trustee (incorporated by reference to exhibit 4.2 of the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1997). 4.3 First Supplemental Indenture dated March 30, 1998 to Senior Indenture dated October 1, 1997, by and between the Company and The Bank of New York, as Trustee (incorporated by reference to the exhibits to the Company's Quarterly Report on Form 10-Q for the quarter 99 EXHIBIT NUMBER DESCRIPTION ended March 31, 1998). 4.4 Second Supplemental Indenture dated June 16, 1998 to Senior Indenture dated October 1, 1997, by and between Clear Channel Communications, Inc. and the Bank of New York, as Trustee (incorporated by reference to the exhibits to the Company's Current Report on Form 8-K dated August 27, 1998). 4.5 Third Supplemental Indenture dated June 16, 1998 to Senior Indenture dated October 1, 1997, by and between Clear Channel Communications, Inc. and the Bank of New York, as Trustee (incorporated by reference to the exhibits to the Company's Current Report on Form 8-K dated August 27, 1998). 4.6 Fourth Supplement Indenture dated November 24, 1999 to Senior Indenture dated October 1, 1997, by and between Clear Channel and The Bank of New York as Trustee. 4.7 Fifth Supplemental Indenture dated June 21, 2000, to Senior Indenture dated October 1, 1997, by and between Clear Channel Communications, Inc. and The Bank of New York, as Trustee (incorporated by reference to the exhibits of Clear Channel's registration statement on Form S-3 (Reg. No. 333-42028) dated July 21, 2000). 4.8 Sixth Supplemental Indenture dated June 21, 2000, to Senior Indenture dated October 1, 1997, by and between Clear Channel Communications, Inc. and The Bank of New York, as Trustee (incorporated by reference to the exhibits of Clear Channel's registration statement on Form S-3 (Reg. No. 333-42028) dated July 21, 2000). 4.9 Seventh Supplemental Indenture dated July 7, 2000, to Senior Indenture dated October 1, 1997, by and between Clear Channel Communications, Inc. and The Bank of New York, as Trustee (incorporated by reference to the exhibits of Clear Channel's registration statement on Form S-3 (Reg. No. 333-42028) dated July 21, 2000). 4.10 Eighth Supplemental Indenture dated September 12, 2000, to Senior Indenture dated October 1, 1997, by and between Clear Channel Communications, Inc. and The Bank of New York, as Trustee (incorporated by reference to the exhibits to Clear Channel's Quarterly Report on Form 10-Q for the quarter ended September 30, 2000). 4.11 Ninth Supplemental Indenture dated September 12, 2000, to Senior Indenture dated October 1, 1997, by and between Clear Channel Communications, Inc. and The Bank of New York, as Trustee (incorporated by reference to the exhibits to Clear Channel's Quarterly Report on Form 10-Q for the quarter ended September 30, 2000). 10.1 Incentive Stock Option Plan of Clear Channel Communications, Inc. as of January 1, 1984 (incorporated by reference to the exhibits of the Company's Registration Statement on Form S-1 (Reg. No. 33-289161) dated April 19, 1984). 10.2 Clear Channel Communications, Inc. 1994 Incentive Stock Option Plan (incorporated by reference to the exhibits of the Company's Registration Statement on Form S-8 dated November 20, 1995). 100 EXHIBIT NUMBER DESCRIPTION 10.3 Clear Channel Communications, Inc. 1994 Nonqualified Stock Option Plan (incorporated by reference to the exhibits of the Company's Registration Statement on Form S-8 dated November 20, 1995). 10.4 Clear Channel Communications, Inc. Directors' Nonqualified Stock Option Plan (incorporated by reference to the exhibits of the Company's Registration Statement on Form S-8 dated November 20, 1995). 10.5 Option Agreement for Officer (incorporated by reference to the exhibits of the Company's Registration Statement on Form S-8 dated November 20, 1995). 10.6 Registration Rights Agreements dated as October 8, 1998, by and among the Company and the Zell/Chilmark Fund, L.P., Samstock, L.L.C., the SZ2 (IGP) Partnership and Samuel Zell (incorporated by reference to the exhibits to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1998). 10.7 The Clear Channel Communications, Inc. 1998 Stock Incentive Plan (incorporated by reference to Appendix A to the Company's Definitive 14A Proxy Statement dated March 24, 1998). 10.8 Voting Agreement dated as of October 8, 1998, by and among Jacor Communications, Inc. and L. Lowry Mays, Mark P. Mays and Randall T. Mays and certain related family trusts (incorporated by reference to the exhibits to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1998). 10.9 Shareholders Agreement dated October 2, 1999, by and among Clear Channel, L. Lowry Mays, 4-M Partners, Ltd., Hicks, Muse, Tate & Furst Equity Fund II, L.P., HM2/HMW, L.P., HM2/Chancellor, L.P., HM4/Chancellor, L.P., Capstar Broadcasting Partners, L.P., Capstar BT Partners, L.P., Capstar Boston Partners, L.L.C., and Thomas O. Hicks. 10.10 Registration Rights Agreement dated as of October 2, 1999, among Clear Channel and Hicks, Muse, Tate & Furst Equity Fund II, L.P., HM2/HMW, L.P., HM2/Chancellor, L.P., HM4/Chancellor, L.P., Capstar Broadcasting Partners, L.P., Capstar BT Partners, L.P., Capstar Boston Partners, L.L.C., Thomas O. Hicks, John R. Muse, Charles W. Tate, Jack D. Furst, Michael J. Levitt, Lawrence D. Stuart, Jr., David B Deniger and Dan H. Blanks. 10.11 Voting Agreement dated as of October 2, 1999, by and among Clear Channel and Thomas O. Hicks (incorporated by reference to exhibits to Amendment No. 6 to Schedule 13D of Thomas O. Hicks, et. Al., filed on October 14, 1999). 10.12 Voting Agreement dated as of October 2, 1999, by and among AMFM and L. Lowry Mays and 4-M Partners, Ltd. (incorporated by reference to exhibits to Schedule 13D of L. Lowry Mays, et. Al., filed on October 14, 1999). 10.13 Voting Agreement dated as of October 2, 1999, by and among Clear Channel and HM2/HMW, L.P., HM2/Chancellor, L.P., HM4/Chancellor, L.P. and Capstar Broadcasting 101 EXHIBIT NUMBER DESCRIPTION Partners, L.P. (incorporated by reference to exhibits to Amendment No. 6 to Schedule 13D of Thomas O. Hicks, et. Al., filed on October 14, 1999). 10.14 Employment Agreement by and between Clear Channel Communications, Inc. and L. Lowry Mays dated October 1, 1999. (incorporated by reference to the exhibits to Clear Channel's Quarterly Report on Form 10-Q for the quarter ended September 30, 1999). 10.15 Employment Agreement by and between Clear Channel Communications, Inc. and Mark P. Mays dated October 1, 1999. (incorporated by reference to the exhibits to Clear Channel's Quarterly Report on Form 10-Q for the quarter ended September 30, 1999). 10.16 Employment Agreement by and between Clear Channel Communications, Inc. and Randall T. Mays dated October 1, 1999. (incorporated by reference to the exhibits to Clear Channel's Quarterly Report on Form 10-Q for the quarter ended September 30, 1999). 10.17 Fourth Amended and Restated Credit Agreement by and among Clear Channel Communications, Inc., 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. 10.18 Credit Agreement among Clear Channel Communications, Inc., Bank of America, N.A., as administrative agent, Chase Securities Inc., as syndication agent, and certain other lenders dated August 30, 2000. 11 Statement re: Computation of Per Share Earnings. 12 Statement re: Computation of Ratios. 21 Subsidiaries of the Company. 23.1 Consent of Ernst & Young LLP. 23.2 Consent of KPMG LLP. 24 Power of Attorney (included on signature page). 99.1 Report of Independent Auditors on Financial Statement Schedules - Ernst & Young LLP. 99.2 Report of Independent Auditors - KPMG LLP. EX-10.18 2 h85063ex10-18.txt CREDIT AGREEMENT DATED AUGUST 20, 2000 1 EXHIBIT 10.18 ================================================================================ $3,000,000,000 CREDIT AGREEMENT AMONG CLEAR CHANNEL COMMUNICATIONS, INC. BANK OF AMERICA, N.A., AS ADMINISTRATIVE AGENT, AND CHASE SECURITIES INC., AS SYNDICATION AGENT AND CERTAIN LENDERS AUGUST 30, 2000 ------------------------------- BANC OF AMERICA SECURITIES, LLC and CHASE SECURITIES INC. AS JOINT LEAD ARRANGERS and JOINT BOOK MANAGERS ================================================================================ 2 TABLE OF CONTENTS
Page ---- ARTICLE 1 Definitions Section 1.1 Defined Terms............................................... 1 Section 1.2 Amendments and Renewals..................................... 30 Section 1.3 Construction................................................ 30 ARTICLE 2 Loans Section 2.1 The Loans and Advances Thereunder........................... 31 Section 2.2 Manner of Borrowing and Disbursement........................ 33 Section 2.3 Interest.................................................... 41 Section 2.4 Fees........................................................ 43 Section 2.5 Prepayment.................................................. 44 Section 2.6 Reduction and Change of Commitments......................... 45 Section 2.7 Non-Receipt of Funds by the Administrative Agent............ 46 Section 2.8 Payment of Principal of Advances............................ 46 Section 2.9 Reimbursement............................................... 47 Section 2.10 Manner of Payment........................................... 47 Section 2.11 Lending Offices............................................. 50 Section 2.12 Sharing of Payments......................................... 50 Section 2.13 Calculation of LIBOR Rate, Offshore Dollar Rate and Approved Offshore Currency Rate............................. 50 Section 2.14 Booking Loans............................................... 50 Section 2.15 Taxes....................................................... 51 Section 2.16 Letters of Credit........................................... 53 Section 2.17 Extension Option and Conversion Option Relating to the Working Line Loan....................................... 60 Section 2.18 Uncommitted Increase of the Revolving Credit Commitment..... 61 ARTICLE 3 Conditions Precedent Section 3.1 Conditions Precedent to Closing and the Initial Advance and the Letters of Credit................................... 63 Section 3.2 Conditions Precedent to All Advances and Letters of Credit.. 65 ARTICLE 4 Representations and Warranties Section 4.1 Representations and Warranties.............................. 66 Section 4.2 Survival of Representations and Warranties, etc. ........... 74 ARTICLE 5 General Covenants Section 5.1 Preservation of Existence and Similar Matters............... 74 Section 5.2 Business; Compliance with Applicable Law.................... 75
ii 3 Section 5.3 Maintenance of Properties................................... 75 Section 5.4 Accounting Methods and Financial Records.................... 75 Section 5.5 Insurance................................................... 75 Section 5.6 Payment of Taxes and Claims................................. 75 Section 5.7 Visits and Inspections...................................... 76 Section 5.8 Payment of Debt for Borrowed Money.......................... 76 Section 5.9 Use of Proceeds............................................. 76 Section 5.10 Indemnity................................................... 76 Section 5.11 Environmental Law Compliance................................ 77 Section 5.12 Conversion of Unrestricted Subsidiaries..................... 78 Section 5.13 Year 2000 Compliance........................................ 78 Section 5.14 AMFM Entities and SFX Entities.............................. 78 Section 5.15 Collateral Sharing and Intercreditor Arrangement............ 80 ARTICLE 6 Information Covenants Section 6.1 Quarterly Financial Statements and Information.............. 80 Section 6.2 Annual Financial Statements and Information; Certificate of No Default .............................................. 81 Section 6.3 Compliance Certificates..................................... 81 Section 6.4 Copies of Other Reports and Notices......................... 81 Section 6.5 Notice of Litigation, Default and Other Matters............. 82 Section 6.6 ERISA Reporting Requirements................................ 83 ARTICLE 7 Negative Covenants Section 7.1 Debt for Borrowed Money..................................... 84 Section 7.2 Liens....................................................... 85 Section 7.3 Investments................................................. 86 Section 7.4 Amendment and Waiver........................................ 86 Section 7.5 Liquidation, Disposition or Acquisition of Assets, Merger, New Subsidiaries ........................................... 86 Section 7.6 Dividends................................................... 87 Section 7.7 Affiliate Transactions...................................... 87 Section 7.8 Compliance with ERISA....................................... 87 Section 7.9 Leverage Ratio.............................................. 88 Section 7.10 Interest Coverage Ratio. ................................... 88 Section 7.11 Sale and Leaseback.......................................... 88 Section 7.12 Sale or Discount of Receivables............................. 88 Section 7.13 Business of Clear Channel Television Licenses, Inc. and Clear Channel Broadcasting Licenses, Inc. .............. 88 ARTICLE 8 Default Section 8.1 Events of Default........................................... 89 Section 8.2 Remedies.................................................... 92
iii 4 ARTICLE 9 Changes in Circumstances Section 9.1 LIBOR Basis Determination Inadequate........................ 92 Section 9.2 Offshore Basis Determination Inadequate..................... 93 Section 9.3 Illegality.................................................. 93 Section 9.4 EMU Changes................................................. 93 Section 9.5 Increased Costs............................................. 94 Section 9.6 Effect On Base Rate Advances................................ 95 Section 9.7 Mandatory Revolver Advance.................................. 95 Section 9.8 Capital Adequacy............................................ 96 Section 9.9 Rights of a Borrower in Respect of Consequential Losses..... 96 ARTICLE 10 Agreement Among Lenders Section 10.1 Agreement Among Lenders..................................... 97 Section 10.2 Lender Credit Decision...................................... 99 Section 10.3 Benefits of Article......................................... 99 ARTICLE 11 Miscellaneous Section 11.1 Notices..................................................... 99 Section 11.2 Expenses.................................................... 100 Section 11.3 Waivers..................................................... 101 Section 11.4 Determination by the Lenders Conclusive and Binding......... 101 Section 11.5 Set-Off..................................................... 101 Section 11.6 Assignment.................................................. 102 Section 11.7 Counterparts................................................ 104 Section 11.8 Severability................................................ 104 Section 11.9 Interest and Charges........................................ 104 Section 11.10 Headings.................................................... 104 Section 11.11 Amendment and Waiver........................................ 105 Section 11.12 Exception to Covenants...................................... 105 Section 11.13 No Liability of any Issuing Bank............................ 106 Section 11.14 Conversion of Currencies.................................... 106 Section 11.15 Credit Agreement Governs.................................... 106 SECTION 11.16 GOVERNING LAW............................................... 107 SECTION 11.17 WAIVER OF JURY TRIAL........................................ 107 SECTION 11.18 ENTIRE AGREEMENT............................................ 107 Section 11.19 Confidentiality............................................. 107 Section 11.20 Qualified Commercial Loan................................... 108
iv 5 SCHEDULES AND EXHIBITS Schedule 1.2: Lending Offices, including Approved Offshore Lending and Payment Offices Schedule 1.3: Existing Liens Schedule 1.4: Acquired Letters of Credit Schedule 4.1(a): Subsidiaries Schedule 4.1(h): Existing Litigation Schedule 4.1(k): Material Adverse Changes and Defaults or Events of Defaults Schedule 7.1: Existing Indebtedness Schedule 7.3: Existing Investments Exhibit A: Form of Revolving Credit Note Exhibit B: Form of Swingline Note Exhibit C: Form of Working Line Note Exhibit D: Form of Bid Rate Note-Revolving Credit Exhibit E: Form of Bid Rate Note-Working Line Exhibit F: Form of SFX/AMFM Limited Subsidiary Guaranty Exhibit G: Form of Compliance Certificate Exhibit H: Form of Assignment Agreement Exhibit I: Form of Intercompany Notes Exhibit J: Form of Intercompany Note Pledge Agreement Exhibit K: Form of Notice of Change of Senior Unsecured Debt Rating Exhibit L: Form of Notice of Borrowing Exhibit M: Form of Notice of Continuation/Conversion Exhibit N: Form of Bid Rate Advance Request Exhibit O: Form of Confirmation of Bid Exhibit P: Form of Invitation to Bid Exhibit Q: Form of Notice of Acceptance of Bid v 6 CREDIT AGREEMENT THIS CREDIT AGREEMENT is dated as of August 30, 2000, among CLEAR CHANNEL COMMUNICATIONS, INC., a Texas corporation ("Borrower"), the Lenders from time to time party hereto, BANK OF AMERICA, N.A., a national banking association, as administrative agent for the Lenders and CHASE SECURITIES INC., as Syndication Agent. BACKGROUND The Borrower has asked, and the Administrative Agent, the Syndication Agent and certain lenders have agreed to provide, (a) a $3,000,000,000 credit facility for the Borrower in the form of (i) a $1,500,000,000 five year revolving credit facility (which will have subfacilities for competitive bid loans, letters of credit, offshore currencies and swingline borrowings (swingline borrowings to be available in Dollars and in certain offshore currencies), and (ii) a $1,500,000,000 364-day working line revolving credit facility which may be (at the Borrower's option) (A) converted to a term loan with one payment in full on the maturity date of the revolving credit facility or (B) with the consent of the Lenders as required herein, extended annually for additional 364 day periods (but not beyond the maturity of the revolving credit facility) (which will have a subfacility for competitive bid loans); and (b) an uncommitted increase possibility of the revolving credit facility by an aggregate amount of up to $2,000,000,000. In consideration of the mutual covenants and agreements contained herein, and other good and valuable consideration hereby acknowledged, the parties hereto agree as follows: ARTICLE 1 Definitions Section 1.1 Defined Terms. For purposes of this Agreement: "Acquired Letters of Credit" means (a) after the consummation of the AMFM Acquisition, those stand-by letters of credit described on Schedule 1.4 hereto issued by a Secondary Issuing Bank on behalf of an AMFM Entity, and/or (b) after the consummation of the SFX Acquisition, those stand-by letters of credit described on Schedule 1.4 hereto issued by a Secondary Issuing Bank on behalf of an SFX Entity, and in the case of each letter of credit described in (a) and (b) above, each 1 7 extension or replacement thereof, or amendment thereto, so long as in each case the face amount of each such stand-by letter of credit is not increased. "Acquisition" means (whether by purchase, exchange, issuance of stock or other equity or debt securities, merger, reorganization or any other method) (i) any acquisition by the Borrower or any of its Restricted Subsidiaries of any other Person, which Person shall then become consolidated with the Borrower or any such Restricted Subsidiary in accordance with GAAP, or (ii) any acquisition by the Borrower or any of its Restricted Subsidiaries of all or any substantial amount of the assets of any other Person. For purposes of the preceding sentence, an amount of assets shall be deemed to be "substantial" if such assets have a fair market value in excess of $1,000,000; provided, however, that the purchase of equipment and other goods and services in the ordinary course of business shall not be deemed to be "Acquisitions". "ARN" means the Australian Radio Network Limited, PTY, an Australian propriety company, 50% of whose Capital Stock is owned by the Borrower. "Additional Costs" has the meaning set forth in Section 9.8 hereof. "Administrative Agent" means Bank of America, N.A., as administrative agent for the Lenders, or such successor administrative agent appointed pursuant to Section 10.1(b) hereof. "Advance" means a Revolving Credit Advance, an Offshore Bid Rate Advance, a Working Line Advance, a Base Rate Advance, a Bid Rate Advance or a LIBOR Advance, as applicable, including, without limitation, any Mandatory Revolver Advance, and "Advances" means Revolving Credit Advances, Offshore Bid Rate Advances and Working Line Advances (including all Base Rate Advances and LIBOR Advances), including, without limitation, any Mandatory Revolver Advance. "Affiliate" means any Person that directly or indirectly through one or more Subsidiaries Controls, or is Controlled By or Under Common Control with, the Borrower. "Affiliation Agreements" means all affiliation agreements of the Borrower and each Subsidiary with Fox Broadcasting. "Agreement" means this Credit Agreement, as amended or renewed from time to time. "Agreement Currency" has the meaning specified in Section 11.14 hereof. "AMFM" means AMFM, Inc. "AMFM Acquisition" means the acquisition by the Borrower of AMFM and its direct and indirect subsidiaries in accordance with the terms of the AMFM Acquisition Documentation. 2 8 "AMFM Acquisition Documentation" means that certain Agreement and Plan of Merger, dated as of October 2, 1999, among the Borrower, AMFM and CCU Merger Sub, Inc. and all related documentation in effect on May 1, 2000. "AMFM Entities" means AMFM and all of its direct and indirect subsidiaries that are Restricted Subsidiaries at the time of determination. "AMFM Reduced Public Debt Permitted Amount" means an amount equal to $125,000,000. "AMFM/SFX Obligor" means AMFM Operating, Inc., Capstar Broadcasting Partners, Inc. and SFX Entertainment, Inc., provided that, the term AMFM/SFX Obligor may include any other AMFM Entity or SFX Entity that receives an Investment from the Borrower or any Restricted Subsidiary (other than another AMFM Entity or SFX Entity), so long as the Administrative Agent has consented to such Person as an AMFM/SFX Obligor in writing. "Applicable Commitment" means the Revolving Credit Commitment or the Working Line Commitment, as applicable in the context used. "Applicable Commitment Fee Percentage" means the per annum commitment fees set forth below for the Revolving Credit Loan and the Working Line Loan, as adjusted in each case according to the circumstances set forth below:
Applicable Commitment Fee Percentages ----------------------------- Senior Unsecured Revolving Working Line Debt Ratings Credit Loan Loan ----------- ------------- BB+/Ba1 or lower 0.225% 0.200% BBB-/Baa3 0.175% 0.150% BBB/Baa2 0.125% 0.100% BBB+/Baa1 or higher 0.100% 0.090%
On each date on which there is a change in the Borrower's Senior Unsecured Debt Rating, the Applicable Commitment Fee Percentage payable by the Borrower shall be subject to reduction or increase, as applicable and as set forth in the table above, effective on such date. If the Senior Unsecured Debt Rating has ratings differing (a) by up to one level, the lowest Applicable Commitment Fee Percentage will apply and (b) by more than one level, the Applicable Commitment Fee Percentage for the level immediately below the highest Senior Unsecured Debt Rating will apply. "Applicable Currency" means, as to any particular payment or Advance, Dollars or the Approved Offshore Currency in which it is denominated or is payable. 3 9 "Applicable Environmental Laws" means applicable federal, state or local laws, rules and regulations pertaining to health or the environment, including without limitation, the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of 1986 (as amended from time to time, "CERCLA"), the Resource Conservation and Recovery Act of 1976, as amended by the Used Oil Recycling Act of 1980, the Solid Waste Disposal Act amendments of 1980, and the Hazardous and Solid Waste Amendments of 1984 (as amended from time to time, "RCRA"), the Texas Water Code, and the Texas Solid Waste Disposal Act. "Applicable Law" means (i) in respect of any Person, all provisions of constitutions, statutes, laws, ordinances, rules, regulations and orders of governmental bodies, or regulatory agencies applicable to such Person, and all orders and decrees of all courts and arbitrators in proceedings or actions to which the Person in question is a party and (ii) in respect of contracts made or performed in the State of Texas, "Applicable Law" shall also mean the laws of the United States of America, including, without limiting the foregoing, 12 USC Sections 85 and 86, as amended to the date hereof and as the same may be amended at any time and from time to time hereafter, and any other statute of the United States of America now or at any time hereafter prescribing the maximum rates of interest on loans and extensions of credit, and the laws of the State of Texas, including, without limitation, Chapter 303 of the Texas Finance Code, as amended, and any other statute of the State of Texas now or at any time hereafter prescribing maximum rates of interest on loans and extensions of credit, including, without limitation and to the extent available, Chapter 306 of the Texas Finance Code, provided however, that the parties hereto agree pursuant to Texas Finance Code Section 346.004 that the provisions of Chapter 346 of Texas Finance Code, as amended, shall not apply to this Agreement, the Advances or any other Loan Papers hereunder. "Applicable Lender" has the meaning specified in Section 11.14 hereof. "Applicable Margin" means, (a) with respect to LIBOR Advances and Offshore Advances, 0.750% per annum which may be adjusted based on the below listed situations, and (b) with respect to Base Rate Advances, 0.000% per annum, in each case which may be adjusted based on the below listed situations. The Applicable Margin will be adjusted as set forth in the last paragraph of this definition to the following per annum percentages set forth in Column B below applicable in the following situations set forth in Column A below:
Column A Column B -------- -------- Applicable Margin Percentages ---------------------------------- LIBOR Advances Senior Unsecured Base Rate and Offshore Debt Rating Advances Advances ---------------- --------- -------------- BB+/Ba1 or lower 0.000% 0.750%
4 10 BBB-/Baa3 0.000% 0.625% BBB/Baa2 0.000% 0.500% BBB+/Baa1 or higher 0.000% 0.400%
On each date on which there is a change in the Borrower's Senior Unsecured Debt Rating, the Applicable Margin payable by the Borrower shall be subject to reduction or increase, as applicable and as set forth in the table above, effective on such date. If the Senior Unsecured Debt Rating of the Borrower has ratings differing (i) by up to one level, the highest Senior Unsecured Debt Rating will apply and (ii) by more than one level, the Applicable Margin for the level immediately below the highest Senior Unsecured Debt Rating will apply. "Applicable Specified Percentage" means with respect to any Lender, in the case of the Revolving Credit Loan or Revolving Credit Advances, such Lender's Revolving Credit Specified Percentage, and in the case of the Working Line Loan or Working Line Advances, such Lender's Working Line Loan Specified Percentage, as applicable in the context used. "Approved Offshore Currency" means (a) with respect to Offshore Advances and Offshore Bid Rate Advances, the Euro, and the lawful currency of Switzerland, England and Australia, provided that with respect to Offshore Advances in the opinion of Determining Lenders of the Revolving Credit Lenders in their aggregate discretion, such currency is at such time freely traded in the offshore interbank foreign exchange markets and is freely transferable and freely convertible into Dollars, (b) with respect to Swingline Advances, the lawful currency of Mexico, Denmark, Norway, Sweden, Turkey, New Zealand, Singapore, Taiwan, Thailand and Hong Kong, provided that in the opinion of the Swingline Bank, in its sole discretion, such currency is at such time freely traded in the offshore interbank foreign exchange markets and is freely transferable and freely convertible into Dollars, and (c) with respect to any Letter of Credit, any lawful currency described in clauses (a) and (b), and, at the sole discretion of the Primary Issuing Bank, any other lawful currency. "Approved Offshore Currency Payment Office" means the addresses of the Administrative Agent specified on Schedule 1.2 hereto. "Approved Offshore Currency Rate" means, for any Offshore Advance, Offshore Bid Rate Advance or Swingline Advance to be made in an Approved Offshore Currency for any Interest Period therefor, the interest rate per annum (rounded upward to the nearest 1/100th of one percent) determined by the Administrative Agent at approximately 11:00 a.m. (London time), on the date which is two Business Days before the first day of such Interest Period, as the offered quotations that appear on Telerate Screen 3740, 3750 and 3751 for deposits in the applicable Approved Offshore Currency in the applicable Interbank Market for such Approved Offshore Currency for a length of time approximately equal to the Interest Period for the Offshore Advance, Offshore Bid Rate Advance or Swingline Advance sought by the Borrower. If at least two such offered quotations appear on Telerate Screen 3740, 3750 and 3751, the Approved Offshore Currency Rate shall be the 5 11 arithmetic mean (rounded upward to the nearest 1/100th of one percent) of such offered quotations, as determined by the Administrative Agent. If Telerate Screen 3740, 3750 and 3751 is not available or has been discontinued, the Approved Offshore Currency Rate shall be the rate per annum that the Administrative Agent determines to be the arithmetic mean (rounded as aforesaid) of the per annum rates of interest at which deposits in the applicable Approved Offshore Currency in an amount approximately equal to the principal amount of, and for a length of time approximately equal to the Interest Period for, the Offshore Advance, Offshore Bid Rate Advance or Swingline Advance sought by the Borrower are offered to the Administrative Agent in immediately available funds in the applicable Interbank Market for such Approved Offshore Currency, on the date which is two Business Days prior to the first day of an Interest Period. "Assignment Agreement" has the meaning ascribed thereto in Section 11.6 hereof. "Authorized Signatory" means such senior personnel of the Borrower as may be duly authorized and designated in writing by the Borrower to execute documents, agreements and instruments on behalf of the Borrower, and to request Advances and Letters of Credit hereunder. "Bank Affiliate" means the holding company of any Lender, or any wholly owned direct or indirect subsidiary of such holding company or of such Lender. "Base Rate Advance" means any Advance bearing interest at the Base Rate Basis, including, without limitation, any Mandatory Revolver Advance. "Base Rate Basis" means, for any day, a per annum interest rate equal to the lesser of (a) the Highest Lawful Rate on such day, or (b) the Applicable Margin plus the higher of (i) the sum of (A) 0.50% plus (B) the Federal Funds Rate on such day or (ii) the Prime Rate on such day. The Base Rate Basis shall be adjusted automatically as of the opening of business on the effective date of each change in the Prime Rate or Federal Funds Rate, as the case may be, to account for such change. "Bid Rate Advances" means Bid Rate Advances - Revolving Credit and Bid Rate Advances Working Line, and "Bid Rate Advance" means any Bid Rate Advance - Revolving Credit or Bid Rate Advance - Working Line, as applicable under the circumstances used. "Bid Rate Advance Request" means any certificate signed by an Authorized Signatory requesting Bid Rate Advances hereunder, which certificate shall be substantially in the form of Exhibit N hereto. "Bid Rate Advance - Revolving Credit" means an Advance under the Revolving Credit Loan in Dollars or Approved Offshore Currencies pursuant to Section 2.1(a)(iii) hereof, the interest rate on which is determined by agreement between the Borrower and the Lender making such Advance, which shall include Offshore Bid Rate Advances made under the Revolving Credit Loan. "Bid Rate Advance - Working Line" means an Advance under the Working Line Loan in Dollars pursuant to Section 2.1(b)(ii) hereof, the Margin on which is determined by agreement between the Borrower and the Lender making such Advance. "Bid Rate Borrowing - Revolving Credit" - means any bid rate borrowing under the Revolving Credit Loan, which shall include borrowings for Offshore Bid Rate Advances made under the Revolving Credit Loan. 6 12 "Bid Rate Borrowing - Working Line" - means any bid rate borrowing under the Working Line Loan. "Bid Rate Borrowings" - means Bid Rate Borrowings - Revolving Credit and Bid Rate Borrowings - Working Line, and "Bid Rate Borrowing" means any Bid Rate Borrowing - Revolving Credit or Bid Rate Borrowing - Working Line, as applicable in the context used. "Bid Rate Notes" means Bid Rate Notes - Revolving Credit and Bid Rate Notes - Working Line, and "Bid Rate Note" means any Bid Rate Note - Revolving Credit or Bid Rate Note - Working Line, as applicable under the circumstances used. "Bid Rate Note - Revolving Credit" means any promissory note of the Borrower evidencing Bid Rate Advances - Revolving Credit requested by a Lender in accordance with the terms of Section 2.10(g) hereof, substantially in the form of Exhibit D hereto, together with any extension, renewal or amendment thereof or substitution therefor. "Bid Rate Note - Working Line" means any promissory note of the Borrower evidencing Bid Rate Advances - Working Line requested by a Lender in accordance with the terms of Section 2.10(g) hereof, substantially in the form of Exhibit E hereto, together with any extension, renewal or amendment thereof or substitution therefor. "Borrower" means Clear Channel Communications, Inc., a Texas corporation. "Borrowing" means either a Revolving Credit Borrowing, any borrowing that is a Mandatory Revolver Advance, a Swingline Borrowing, an Offshore Borrowing, a Bid Rate Borrowing or a Working Line Borrowing. "Business Day" means any day other than a Saturday, Sunday or other day on which commercial banks in (a) Dallas, Texas are authorized or required by Applicable Law to close or (b) New York City are authorized or required by applicable law to close or, and, if the applicable Business Day relates to: (i) a LIBOR Advance, a domestic business day in London, England (including dealings in United States dollar deposits); 7 13 (ii) an Offshore Advance or Offshore Bid Rate Advance denominated in Dollars, any such day on which dealings are carried on in the applicable offshore Dollar market; (iii) any borrowing for an Offshore Advance or Offshore Bid Rate Advance in Euros, any such day which is: (A) for payments or purchases of the Euro, a TARGET Business Day; and (B) for all other purposes, including without limitation the giving and receiving of notices hereunder, a TARGET Business Day on which banks are generally open for business in London, Frankfurt and in any other principal financial center as the Administrative Agent may from time to time determine for this purpose; and (iv) any borrowing for an Offshore Advance, Offshore Bid Rate Advance or Swingline Advance in an Approved Offshore Currency other than the Euro, a day on which commercial banks are open for foreign exchange business in London, England, and on which dealings in the relevant Approved Offshore Currency are carried on in the applicable offshore foreign exchange interbank market in which disbursement of or payment in such Approved Offshore Currency will be made or received hereunder. "Calculation Date" means (i) the last Business Day of each fiscal quarter, (ii) if a Default exists or an Event of Default exists, at the discretion of the Administrative Agent or the Revolving Credit Lenders, or (iii) with respect to any determination related to a Letter of Credit, any Business Day at the discretion of the Primary Issuing Bank. "Capital Expenditures" means expenditures for the purchase of tangible assets of long-term use which are capitalized in accordance with GAAP; provided, however, Capital Expenditures shall not include assets acquired through trade without any expenditure of cash, such trade capital expenditures not to exceed $25,000,000 in aggregate value per year, such valuation to be determined using the lesser of the fair market value of assets received or the value of air-time run in exchange for the assets received. "Capital Stock" means, as to any Person, the equity interests in such Person, including, without limitation, the shares of each class of capital stock of any Person that is a corporation and each class of partnership interests (including, without limitation, general, limited and preference units) in any Person that is a partnership. "Capitalized Lease Obligations" means that portion of any obligation of the Borrower or any Restricted Subsidiary as lessee under a lease which at the time would be required to be capitalized on a balance sheet prepared in accordance with GAAP. "CCC-Houston" means CCC-Houston AM, Ltd., a Texas limited partnership and a Subsidiary of the Borrower. 8 14 "Change in Control" means the occurrence of any of the following: (a) the sale, lease or transfer of all or substantially all of the Borrower's assets to any Person or group (as such term is used in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended), or (b) the adoption of a plan relating to the liquidation or dissolution of the Borrower or (c) (i) the acquisition by any Person or group (as such term is used in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended), other than Permitted Holders, of a direct or indirect majority in interest (more than 50%) of the voting power of the Capital Stock of the Borrower by way of merger or consolidation or otherwise except transactions in which more than 50% of the voting power of the common stock of the transferee are held by the Persons who were holders of the voting power of such common stock prior to such transfer and (ii) the first day on which a majority of the members of the board of directors of the Borrower are not Continuing Directors. "Closing Date" means the date of this Agreement. "Code" means the Internal Revenue Code of 1986, as amended. "Collateral Release Date" means, (a) when applicable to any AMFM Entity or any Intercompany Notes executed by any AMFM Entity, that date upon which all public indebtedness of all AMFM Entities in the aggregate is less than or equal to the AMFM Reduced Public Debt Permitted Amount, and (b) when applicable to any SFX Entity or any Intercompany Notes executed by any SFX Entity, that date upon which all public indebtedness of all SFX Entities in the aggregate is less than or equal to the SFX Reduced Public Debt Permitted Amount. "Commitment Fees" means the Revolving Credit Commitment Fee and the Working Line Commitment Fee. "Commitments" means the Revolving Credit Commitment and the Working Line Commitment, and "Commitment" means either the Revolving Credit Commitment or the Working Line Commitment, as applicable in the context used. "Communications Act" means, collectively, the Communications Act of 1934, as amended by the Telecommunications Act of 1996, and as further amended, and the rules and regulations promulgated thereunder, as from time to time in effect. "Confirmation of Bid" means any certificate executed by an Authorized Signatory confirming the terms of its Bid Rate Advance, which certificate shall be in substantially the form of Exhibit O hereto. "Continuing Directors" means, as of any date of determination, any member of the board of directors of the Borrower who (a) was a member of such board of directors on the date hereof or (b) was nominated for election or elected to such board of directors with the affirmative vote of a majority of the Continuing Directors who were members of such board of directors at the time of such nomination or election. 9 15 "Control" or "Controlled By" or "Under Common Control" means possession, directly or indirectly, of power to direct or cause the direction of management or policies (whether through ownership of voting securities, by contract or otherwise); provided, however, that (a) in the event that no one Person owns more than 50% of the outstanding Capital Stock of a corporation or entity, any Person which beneficially owns, directly or, by contract or law, indirectly, 10% or more (in number of votes) of the securities having ordinary voting power for the election of directors (or other managing authority) of such corporation or entity shall be conclusively presumed to control such corporation or entity or (b) in the event that one Person owns greater than 50% of the outstanding Capital Stock of a corporation or entity, any Person which beneficially owns, directly or, by contract or law, indirectly, greater than 20% or more (in number of votes) of the securities having ordinary voting power for the election of directors (or other managing authority) of such corporation or entity shall be conclusively presumed to control such corporation. "Controlled Group" means, as to any Person, all members of a controlled group of corporations and all trades or businesses (whether or not incorporated) which are under common control with such Person and which, together with such Person, are treated as a single employer under Section 414(b), (c), (m) or (o) of the Code; provided, however, that the Subsidiaries of the Borrower shall be deemed to be members of the Borrower's Controlled Group, and the Borrower and any other entities (whether incorporated or not incorporated) which are under common Control with the Borrower and which, together with the Borrower, are treated as a single employer under Section 414(b), (c), (m) or (o) of the Code, shall be deemed to be members of the Borrower's Controlled Group on and after the Closing Date. "Conversion Date" means, with respect to the Working Line Loan, the date upon which (if any) the Working Line Loan converts from a revolving loan to a term loan, in accordance with the terms of Section 2.17(b) hereof. "Conversion Option" means, with respect to the Working Line Loan, the option that may be exercised by the Borrower on the Option Date or the Extension Final Maturity in accordance with the terms of Section 2.17(b) hereof, to convert the Working Line Loan to a Term loan. "Debt for Borrowed Money" means, with respect to any Person or Persons at any date, without duplication, all indebtedness of such Person or Persons that constitutes (a) all obligations of such Person or Persons for borrowed money, or in respect of letters of credit (or applications for letters of credit) or other similar instruments, (b) obligations of such Person or Persons evidenced by bonds, debentures, notes or other similar instruments, excluding any surety, bid, appeal or performance bonds, (c) obligations of such Person or Persons to pay the deferred purchase price of property or services, but only if such deferral is in excess of 120 days, provided that, trade accounts payable and other accrued liabilities arising in the ordinary course of business shall not be considered Debt for Borrowed Money, (d) Capitalized Lease Obligations of such Person or Persons, (e) installment payment non-compete agreements for such Person or Persons (f) debt evidenced by Interest Rate Protection Agreements and (g) Guaranties relating to obligations of another Person (other than the Borrower or a Restricted Subsidiary of the Borrower with respect to indebtedness of another Restricted Subsidiary or the Borrower) of the type described in (a) through (f) above. 10 16 "Debtor Relief Law" means any applicable liquidation, conservatorship, bankruptcy, moratorium, rearrangement, insolvency, reorganization or similar debtor relief law affecting the rights of creditors generally from time to time in effect. "Default" means an Event of Default and/or any of the events specified in Section 8.1, regardless of whether there shall have occurred any passage of time or giving of notice that would be necessary in order to constitute such event an Event of Default. "Default Rate" means a simple per annum interest rate equal to the lesser of (a) the Highest Lawful Rate, or (b) the sum of the Base Rate Basis plus two percent. "Determining Lenders" means, a group of Lenders on any date of determination that meet or exceed each of the following requirements: (a) with respect to the Revolving Credit Lenders, (i) any combination of the Revolving Credit Lenders having at least 51% of the aggregate amount of the Revolving Credit Advances and Reimbursement Obligations then outstanding, or (ii) if there are no Revolving Credit Advances or Reimbursement Obligations outstanding hereunder, any combination of Revolving Credit Lenders whose Revolving Credit Specified Percentages aggregate at least 51%, and (b) with respect to the Working Line Lenders, (i) any combination of the Working Line Lenders having at least 51% of the aggregate amount of the Working Line Advances then outstanding, or (ii) if there are no Working Line Advances outstanding hereunder, any combination of Working Line Lenders whose Working Line Specified Percentages aggregate at least 51%. "Dividend" means, as to any Person, (a) any declaration or payment of any dividend (other than a dividend paid solely in shares of the common stock of such Person) on, or the making of any distribution, loan, advance or Investment to or in any holder of, any shares of Capital Stock of such Person (other than salaries and bonuses paid in the ordinary course of business), or (b) any purchase, redemption, or other acquisition or retirement for value of any shares of Capital Stock of such Person; provided, however, that the acquisition of shares of Capital Stock of such Person for the purpose of acquiring a Subsidiary (whether by merger, consolidation, asset acquisition, stock acquisition, or otherwise) shall not be deemed a Dividend if (a) such shares are used as a portion or all of the purchase price for the acquisition of a Subsidiary within a period of ninety days from the date the initial shares of such Capital Stock were acquired and (b) except with respect to the acquisition of SFX and AMFM, such Person shall have given the Administrative Agent prior written notice of its intention to acquire such Capital Stock for the purpose of acquiring a Subsidiary. "Dollar Equivalent" means (a) in relation to any amount denominated in Dollars, the amount thereof and (b) in relation to an amount denominated in an Approved Offshore Currency, the amount of such Dollars required to purchase the relevant stated amount of Approved Offshore Currency at the Exchange Rate on the date of determination. For the purposes of this Agreement with respect to any Borrowing, unless otherwise expressly stated herein, the Dollar Equivalent principal amount of any Advance shall be determined on the date on which the Notice of Borrowing is received with respect thereto, provided, however, that the Notice of Borrowing is received by 10 a.m., Dallas, Texas time, at least four days prior to the requested Borrowing, and shall be recalculated on each 11 17 Calculation Date and on the date on which a Notice of Continuation/Conversion is received with respect thereto. "Dollar Equivalent Excess" has the meaning specified in Section 2.5(b) hereof. "Dollars" means the lawful currency of the United States of America. "Eligible Assignee" means (a) a Lender, (ii) a Bank Affiliate, and (iii) any other financial institution approved by the Administrative Agent and, unless an Event of Default has occurred and is continuing at the time any assignment is effected in accordance with Section 11.6 hereof, the Borrower, such approval not to be unreasonably withheld or delayed by the Borrower or the Administrative Agent and such approval to be deemed given by the Borrower if no objection is received by the assigning Lender and the Administrative Agent from the Borrower within two Business Days after notice of such proposed assignment has been provided by the assigning Lender to the Borrower; provided, however, that neither the Borrower nor any of its Affiliates shall qualify as an Eligible Assignee. "Eller" means Eller Media Corporation, a Delaware corporation, formerly known as EMC Group, Inc., formerly Eller Media Company. "EMU" means Economic and Monetary Union as contemplated in the Treaty. "EMU Legislation" means (a) the Treaty and (b) legislative measures of the European Council for the introduction of, changeover to, or operation of, the Euro, in each case as amended or supplemented from time to time. "Equity" means shares of Capital Stock, or options, warrants or any other right to subscribe for or otherwise acquire Capital Stock, of the Borrower or any Subsidiary. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and any regulation promulgated thereunder. "ERISA Event" means, with respect to the Borrower and its Subsidiaries, (a) a Reportable Event (other than a Reportable Event not subject to the provision for 30-day notice to the PBGC under regulations issued under Section 4043 of ERISA), (b) the withdrawal of any such Person or any member of its Controlled Group from a Plan during a plan year in which it was a "substantial employer" as defined in Section 4001(a)(2) of ERISA, (c) the filing of a notice of intent to terminate under Section 4041 of ERISA, (d) the institution of proceedings to terminate a Plan by the PBGC, (e) the failure to make required contributions which could result in the imposition of a lien under Section 412 of the Code or Section 302 of ERISA, or (f) any other event or condition which might reasonably be expected to constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan or the imposition of any liability under Title IV of ERISA other than PBGC premiums due but not delinquent under Section 4007 of ERISA. 12 18 "Euro" means the single currency of Participating Member States introduced in accordance with the provisions of Article 109(l)4 of the Treaty and, in respect of all payments to be made under this Agreement in euros, means immediately available, freely transferable funds. "Event of Default" means any of the events specified in Section 8.1, provided that any requirement for notice or lapse of time has been satisfied. "Exchange Rate" means with respect to any Approved Offshore Currency on a particular date, the rate at which such Approved Offshore Currency may be exchanged into Dollars, as set forth on such date on the Reuters currency page for exchanges of Dollars into such Approved Offshore Currency. In the event that such rate does not appear on any Reuters currency page, the Exchange Rate with respect to such Approved Offshore Currency shall be determined by reference to such other publicly available service for displaying exchange rates as may be agreed upon by the Administrative Agent and the Borrower or, in the absence of such agreement, such Exchange Rate shall instead be the arithmetic mean of the spot rates of exchange for the Administrative Agent and two other money center banks in the interbank market where the foreign currency exchange operations of the Administrative Agent and such two other money center banks in respect of such Approved Offshore Currency are then being conducted, at or about 10:00 a.m. local time in the offices of such money center banks, at such date for the purchase of Dollars with such Approved Offshore Currency, for delivery two Business Days later; provided, however, that if at the time of any such determination, for any reason, no such spot rate is being quoted by the Administrative Agent, the Administrative Agent may use any reasonable method it deems applicable to determine its respective spot rate, and such determination shall be prima facie evidence of such rate. "Extension Final Maturity" means, with respect to the Working Line Loan, the earlier of (a) the Maturity Date and (b) that date which is 364 days after the most recent Option Date on which the Borrower and the Facility Determining Lenders agreed in writing to an Extension Option. "Extension Option" means, with respect to the Working Line Loan, that option that may be exercised by the Borrower and agreed to by the Facility Determining Lenders in accordance with the terms of Section 2.17 hereof, to extend the Working Line Loan an additional 364 day period beyond the most recent Option Date. "Facility Determining Lenders" means, on any date of determination, (a) with respect to the issues only affecting the Revolving Credit Lenders, (i) any combination of the Revolving Credit Lenders having at least 51% of the aggregate amount of the Revolving Credit Advances and Reimbursement Obligations then outstanding, or (ii) if there are no Revolving Credit Advances or Reimbursement Obligations outstanding hereunder, any combination of Revolving Credit Lenders whose Revolving Credit Specified Percentages aggregate at least 51%, and (b) with respect to the issues only affecting Working Line Lenders, (i) any combination of the Working Line Lenders having at least 51% of the aggregate amount of the Working Line Advances then outstanding, or (ii) if there are no Working Line Advances outstanding hereunder, any combination of Working Line Lenders whose Working Line Specified Percentages aggregate at least 51%. 13 19 "FCC" means the Federal Communications Commission, or any governmental agency succeeding to the functions thereof. "Federal Funds Rate" means, for any day, the rate per annum (rounded upwards if necessary, to the nearest 1/100th of 1%) equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Business Day next succeeding such day, provided that (a) if such day is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day, and (b) if no such rate is so published on such next succeeding Business Day, the Federal Funds Rate for such day shall be the average rate quoted to the Administrative Agent on such day on such transactions as determined by Administrative Agent. "Fee Letters" means those certain fee letters executed by the Borrower and the Administrative Agent or the Borrower and the Syndication Agent, or such other fee letters among the Borrower and any Lenders from time to time executed in connection herewith, and all replacements, amendments, substitutions and additions thereto. "GAAP" means generally accepted accounting principles applied on a consistent basis, set forth in the Opinions of the Accounting Principles Board of the American Institute of Certified Public Accountants, or their successors which are applicable in the circumstances as of the date in question. The requisite that such principles be applied on a consistent basis shall mean that the accounting principles observed in a current period are comparable in all material respects to those applied in a preceding period. "Guaranty" or "Guaranteed", as applied to an obligation, means and includes (a) a guaranty, direct or indirect, in any manner, of any part or all of such obligation, and (b) an agreement, direct or indirect, contingent or otherwise, the practical effect of which is to assure in any way the payment or performance (or payment of damages in the event of nonperformance) of any part or all of such obligation, including, without limiting the foregoing, any reimbursement obligations with respect to amounts which may be drawn by beneficiaries of outstanding letters of credit, but excluding endorsement of checks, drafts and other instruments in the ordinary course of business. "Highest Lawful Rate" shall mean at the particular time in question the maximum rate of interest which, under Applicable Law, any Lender is then permitted to charge on the Obligations. If the maximum rate of interest which, under Applicable Law, any Lender is permitted to charge on the Obligations shall change after the date hereof, the Highest Lawful Rate shall be automatically increased or decreased, as the case may be, from time to time as of the effective time of each change in the Highest Lawful Rate without notice to the Borrower. For purposes of determining the Highest Lawful Rate under Applicable Law, the indicated rate ceiling shall be the lesser of (a)(i) the "weekly ceiling", as that expression is defined in Section 303.003 of the Texas Finance Code, as amended, or (ii) if available in accordance with the terms thereof and at Administrative Agent's option after notice to the Borrower and otherwise in accordance with the terms of Section 303.103 of the Texas Finance Code, as amended, the "annualized ceiling" and (b)(i) if the amount outstanding under this 14 20 Agreement is less than $250,000, twenty-four percent (24%) per annum, or (ii) if the amount under this Agreement is equal to or greater than $250,000, twenty-eight (28%) per annum. "Increased Letter of Credit Costs" has the meaning set forth in Section 2.16(d) hereof. "Increased Letter of Credit Costs Retroactive Effective Date" has the meaning set forth in Section 2.16(d) hereof. "Increased Letter of Credit Costs Set Date" has the meaning set forth in Section 2.16(d) hereof. "Indemnified Matters" has the meaning ascribed to it in Section 5.10(a) hereof. "Indemnitees" has the meaning ascribed to it in Section 5.10(a) hereof. "Institutional Debt" means Debt for Borrowed Money which may be raised by the Borrower in the private placement or public debt markets. "Intercompany Notes" means those promissory notes payable to the Borrower or any Restricted Subsidiary from any AMFM/SFX Obligor, in each case evidencing Investments made by the Borrower or any Restricted Subsidiary in such AMFM/SFX Obligor, each in the form of Exhibit I hereto. "Interest Expense" means, for any period, determined in accordance with GAAP on a consolidated basis for the Borrower and the Restricted Subsidiaries, the gross interest expense (after giving effect to interest rate swaps, caps, collars and hedges) for such period on Total Debt, minus the sum of (a) interest income for such period, plus (b) to the extent not included in the determination of such gross interest expense, upfront costs or fees expended during such period in connection with the execution and delivery of documentation relating to the Loan Papers, provided that, if any upfront costs and fees have been previously included in a prior period, such costs and fees shall be deducted in determining Interest Expense for such period. If during any period for which Interest Expense is being determined the Borrower or any of its Subsidiaries shall have made an Acquisition or asset disposition, then, for all purposes of this Agreement, Interest Expense shall be adjusted for the relevant period on a pro forma basis as if the relevant Acquisition or asset disposition had been made or consummated on the first day of such period and assuming (i) in the case of an Acquisition, the principal amount of any Debt for Borrowed Money incurred in connection with such Acquisition had been outstanding for the entire duration of such period at the rate of interest applicable to such Debt for Borrowed Money at the time of incurrence of such Debt for Borrowed Money or (ii) in the case of any asset disposition, any Debt for Borrowed Money which on a pro forma basis has been repaid or which is no longer an obligation of the Borrower or any of its Subsidiaries as a result of such asset disposition had been repaid or was not an obligation of the Borrower or any of its Subsidiaries as of the first day of such period. 15 21 "Interest Period" means for (a) any LIBOR Advance, the period beginning on the day the Advance is made and ending one, two, three, six or, subject to each Lender's good faith determination of availability, twelve months thereafter (as the Borrower shall select), provided that, with respect to the LIBOR Advances under the Working Line Loan, Interest Periods shall never be more than six months, (b) any Offshore Advance, the period beginning on the day the Advance is made and ending one, two, or three months thereafter (as the Borrower shall select), (c) any Bid Rate Advance, the period commencing on the date of such Advance and ending one, two, three or six months thereafter (as the Borrower shall select) and (d) any Swingline Advance (i) to be made in Dollars, the period commencing on the date of such Swingline Advance and ending not less than 3 calendar days nor more than 90 days thereafter (as the Borrower shall select) and (ii) to be made in an Approved Offshore Currency, the period beginning on the day the Advance is made and ending one, two, or three months thereafter (as the Borrower shall select). Notwithstanding the foregoing, if (i) any Interest Period would end on a day which shall not be a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless, with respect to LIBOR Advances, Offshore Advances and Swingline Advances made in Approved Offshore Currencies only, such next succeeding Business Day would fall in the next calendar month, in which case such Interest Period shall end on the next preceding Business Day and (ii) no Interest Period may be selected for any Borrowing that ends later than (A) the Maturity Date, for Advances under the Revolving Credit Loan, and (B) the Option Date or the Extension Final Maturity, as applicable, for Advances made under the Working Line Loan. Interest shall accrue from and including the first day of an Interest Period to but excluding the last day of such Interest Period. "Interest Rate Protection Agreement" means an interest rate swap, cap, collar or similar interest rate protection agreement between the Borrower or any Restricted Subsidiary of the Borrower and any Lender or any Bank Affiliate. "Investment" means any direct or indirect purchase or other acquisition of, or beneficial interest in, Capital Stock or other securities of any other Person, or any direct or indirect loan, advance (other than advances to employees for moving and travel expenses, drawing accounts and similar expenditures in the ordinary course of business) or capital contribution to, or investment in any other Person, including without limitation the incurrence or sufferance of Debt for Borrowed Money or accounts receivable of any other Person that are not current assets or do not arise in the ordinary course of business, provided that investments constituting Acquisitions shall not be included in this definition of "Investment", and such definition shall exclude endorsement of checks, drafts and other instruments in the ordinary course of business. "Invitation to Bid" means any certificate executed by the Administrative Agent notifying each Lender of the Borrower's Bid Rate Advance Request, which certificate shall be in substantially the form of Exhibit P hereto. "Issuing Banks" means the Primary Issuing Bank and the Secondary Issuing Banks, and "Issuing Bank" means any of the Primary Issuing Bank or Secondary Issuing Banks, as applicable in the context used. 16 22 "Jacor Bond Debt and Option Notes" means those 10 and 1/8% Senior Subordinated Notes due 2006, 9 and 3/4% Senior Subordinated notes due 2006, 8 and 3/4% Senior Subordinated notes due 2007 and 8% Senior Subordinated notes due 2010, Liquid Yield Option Notes due 2011 and those Liquid Yield Option Notes due 2018, in each case issued by Jacor Communications Company, Jacor Communications, Inc. or a predecessor. "Judgment Currency" has the meaning specified in Section 11.14 hereof. "L/C Cash Collateral Account" has the meaning specified in Section 2.16(g) hereof. "L/C Related Documents" has the meaning specified in Section 2.16(e) hereof. "Lender" means each financial institution or fund shown on the signature pages hereof so long as such financial institution or fund maintains any portion of any Commitment or is owed any part of the Obligations (including the Administrative Agent in its individual capacity) or which hereafter becomes a party hereto pursuant to Section 2.18 hereof, and each Eligible Assignee that hereafter becomes party hereto pursuant to Section 11.6 hereof. "Lending Office" means, with respect to a Lender, the office designated as its office for LIBOR Advances, its Offshore Lending Office, and its office for Base Rate Advances, each as described on Schedule 1.2 attached hereto, and such other office of the Lender or any of its affiliates hereafter designated by notice to the Borrower and the Administrative Agent. "Letter of Credit" has the meaning specified in Section 2.16(a) hereof. "Letter of Credit Agreement" has the meaning specified in Section 2.16(b) hereof. "Letter of Credit Facility" has the meaning specified in Section 2.16(a) hereof. "Leverage Ratio" means, for any date of determination, the ratio of Total Debt as of the date of determination to Operating Cash Flow for the four most recently ended fiscal quarters preceding such date of determination. "LIBOR Advance" means any Revolver Advance or Working Advance which the Borrower requests to be made as a LIBOR Advance or which is reborrowed as a LIBOR Advance, in accordance with the provisions of Section 2.2 hereof. "LIBOR Basis" means a simple per annum interest rate equal to the lesser of (a) the Highest Lawful Rate, or (b) the sum of the LIBOR Rate plus the Applicable Margin. The LIBOR Basis shall, with respect to LIBOR Advances with Interest Periods in excess of six months, be subject to premiums assessed by each Lender, which are payable directly to each Lender. 17 23 "LIBOR Rate" means, for any LIBOR Advance for any Interest Period therefor, the rate per annum (rounded upwards, if necessary, to the nearest one-one hundredth (1/100th) of one percent (1%)) appearing on Telerate Page 3750 (or any successor page) as the London interbank offered rate for deposits in United States dollars at approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period. If for any reason such rate is not available, the term "LIBOR Rate" shall mean, for any LIBOR Advance for any Interest Period therefor, the rate per annum (rounded upwards, if necessary, to the nearest one-one hundredth (1/100th) of one percent (1%)) appearing on Reuters Screen LIBO page as the London interbank offered rate for deposits in United States dollars at approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period for a term comparable to such Interest Period; provided, however, if more than one rate is specified on Reuters Screen LIBO Page, the applicable rate shall be the arithmetic mean of all such rates. "Lien" means, with respect to any property, any mortgage, lien, pledge, collateral assignment, hypothecation, charge, security interest, title retention agreement, levy, execution, seizure, attachment, garnishment or other encumbrance of any kind in respect of such property, whether or not choate, vested or perfected. "Like-Kind Exchange" means the disposition by the Borrower or any Restricted Subsidiary of certain of their assets, and their acquisition of like assets, in each case in order to effectuate a like-kind exchange under the Code and avoid the payment by such Person of federal taxes on the proceeds of the asset sales. "Limited Subsidiary Guaranty" means each Limited Subsidiary Guaranty, in the form of Exhibit F hereto, delivered to the Administrative Agent and guaranteeing a portion of the Obligations in a maximum aggregate amount for all such Limited Subsidiary Guaranties not to exceed the Limited Subsidiary Guaranty Amount, executed from time to time by an AMFM/SFX Obligor, in accordance with the terms of Section 5.14 hereof. "Limited Subsidiary Guaranty Amount" means, on any date of determination after the Acquisition of AMFM or SFX, respectively, and in each case until their respective Collateral Release Date, an amount equal to the lesser of (a) the excess, if any, of (i) the aggregate principal amount (which such amount shall include accretion) of all outstanding and unpaid public and/or high yield indebtedness owed by all AMFM Entities or all SFX Entities, as applicable, over (ii) the principal face amount of all Pledged Intercompany Notes of the AMFM/SFX Obligors, as applicable and (b) the excess, if any, of (i) the aggregate amount of all Investments made in all AMFM/SFX Obligors by the Borrower and its Restricted Subsidiaries(other than AMFM Entities and SFX Entities) for the period from the Closing Date until such date of determination, over (ii) the aggregate principal amount owing under all Pledged Intercompany Notes as of such date, provided that the Limited Subsidiary Guaranty Amount shall never be less than $1,000,000,000 and shall never be more than the greatest amount that would still permit the issuer under each of the AMFM Entity and SFX Entity indentures for public indebtedness to incur $1.00 of additional indebtedness (other than indebtedness specifically permitted thereunder) after giving effect to the aggregate principal amount then outstanding of all Intercompany Notes executed by such AMFM Entity or SFX Entity, as 18 24 applicable, and all other indebtedness then outstanding which was permitted to be incurred under such indentures prior to the date of the SFX Acquisition or AMFM Acquisition and this Agreement, as applicable. "Loan Papers" means this Agreement, the Revolving Credit Notes (if any), the Bid Rate Notes (if any), the Swingline Notes (if any), the Working Line Notes (if any), each Limited Subsidiary Guaranty, each pledge agreement pledging a Pledged Intercompany Note, the Fee Letters, each Interest Rate Protection Agreement, and any other document or agreement executed or delivered from time to time by the Borrower, any Subsidiary or any other Person in connection herewith or as security for the Obligations, with, or on behalf of, any Lender or any Bank Affiliate. "Loans" means the Revolving Credit Loan and the Working Line Loan, and "Loan" means either of the Revolving Credit Loan or the Working Line Loan, as applicable in the context used. "Local Marketing Agreement" means any time brokerage agreements, local market affiliation agreements or related or similar agreements entered into between the Borrower or any Subsidiary and any other Person, as any of the above may be amended, substituted, replaced or modified. "Mandatory Revolver Advance" means a Revolver Advance made (a) to repay either (i) an Offshore Advance pursuant to Section 2.2(e)(ii) hereof or (ii) a Swingline Advance pursuant to Section 2.2(h) hereof, as appropriate, (b) pursuant to Section 2.3(f) hereof, or (c) pursuant to Section 9.7 hereof. "Margin" means, as to any Bid Rate Advance that is (a) an Offshore Bid Rate Advance, the margin (expressed as a percentage rate per annum in the form of a decimal to no more than four decimal places) quoted by any Lender offering a Bid Rate Advance that is an Offshore Bid Rate Advance, pursuant to Section 2.2(i)(iii) hereof to be added or subtracted from the Approved Offshore Currency Rate or the Offshore Dollar Rate, as the case may be, to determine the interest rate applicable to such Advance or (b) a domestic Advance made in Dollars, the margin (expressed as a percentage rate per annum in the form of a decimal to no more than four decimal places) quoted by any Lender offering a Bid Rate Advance that is a domestic Advance made in Dollars, pursuant to Section 2.2(i)(iii) hereof to be added or subtracted from the LIBOR Rate, as the case may be, to determine the interest rate applicable to such Advance. "Material Adverse Effect" means any act or circumstance or event that (a) causes a Default, or (b) otherwise could reasonably be expected to be material and adverse to the business, consolidated assets, liabilities, financial condition or results of operations of the Borrower and its Restricted Subsidiaries, together taken as a whole. "Material Subsidiaries" means, for purposes of Article 3, the Borrower, Clear Channel Broadcasting (Nevada), Clear Channel Broadcasting Licensing (Nevada), Eller Media, Jacor Communications Company, AMFM, Inc, Capstar Broadcasting Partners, L.P., AMFM Operating, Inc., Katz Media Corp., SFX, More Group PLC, and Dauphin (OTA). 19 25 "Maturity Date" means August 30, 2005. "Maximum Amount" means the maximum amount of interest which, under Applicable Law, the Lenders are permitted to charge on the Obligations. "Maximum Pledged Intercompany Note Amount" means an amount (on any date of determination, but adjusted quarterly as set forth below) equal to the lesser of (a) the aggregate principal amount (which such amount shall include accretion) of all outstanding and unpaid public and/or high yield indebtedness owed by all AMFM Entities and all SFX Entities, and (b) 14.5% of the Borrower's Consolidated Stockholders' Equity as reflected in the most recent audited balance sheet included in the Annual Shareholders' report of the Borrower, determined and changed as follows: Subsection (a) in this definition of Maximum Pledged Intercompany Note Amount will be determined and adjusted quarterly based on financial information delivered to the Administrative Agent and Lenders in accordance with the terms of Section 6.1 hereof, and subsection (b) in this definition of Maximum Pledged Intercompany Note Amount will be determined and adjusted annually based on financial information delivered to the Administrative Agent and Lenders in accordance with the terms of Section 6.2 hereof. "Moody's" means Moody's Investors Services, Inc. "More Group" means the More Group Plc, a company incorporated in England (number 309019) of 33 Golden Square, London, W1R 3PA. "More Group Credit Facility" means that certain unsecured multi-currency credit facility among Barclays Bank Plc, Bank of Scotland, A1B Group Plc, Svenska Handelsbank AB, Skandinaviska Engkilda Banken AB, The Chase Manhattan Bank (as Lenders, as such Lenders may be replaced from time to time) and More Group, as parent, borrower and guarantor, as such may be amended, modified, supplemented, refinanced or replaced from time to time, provided that after the Closing Date (a) no such action shall result in any term being materially more restrictive than the terms of the More Group Credit Facility documentation existing on the date hereof taken as a whole, and (b) no such action shall result in any change that is both material and adverse to the interests of the Lenders. "Multiemployer Plan" means, as to any Person, at any time, a "multiemployer plan" within the meaning of Section 4001(a)(3) of ERISA and to which such Person or any member of its Controlled Group is making, or is obligated to make contributions or has made, or been obligated to make, contributions. "Necessary Authorization" means any license, permit, consent, approval or authorization from, or any filing or registration with, any governmental or other regulatory authority (including without limitation the FCC) necessary or appropriate to enable the Borrower or any Subsidiary to maintain and operate its business and properties. "Net Cash Proceeds" means, with respect to any sale, lease, transfer or disposition of any asset by any Person or the issuance of Institutional Debt or Equity by any Person (other than the net 20 26 cash proceeds from the consolidation of any Restricted Subsidiary with another Restricted Subsidiary), the aggregate amount of cash Received by such Person in connection with such transaction minus reasonable fees, costs and expenses and related taxes. "Notice of Acceptance of Bid" means any certificate signed by an Authorized Signatory of the Borrower accepting Bid Rate Advances, which certificate shall be in substantially the form of Exhibit Q hereto. "Notice of Borrowing" has the meaning ascribed to it in Section 2.2(a) hereof. "Notice of Change of Senior Unsecured Debt Rating" means that certain Notice of Change in the Senior Unsecured Debt Rating in the form of Exhibit K hereto. "Notice of Continuation/Conversion" has the meaning specified in Section 2.2(e)(i) hereof. "Notice of Issuance" has the meaning ascribed to it in Section 2.16(b) hereof. "Notes" means, to the extent requested by any Lender in accordance with the terms of Section 2.10(g) hereof, the Revolving Credit Notes, Swingline Notes, Bid Rate Notes and Working Line Notes and "Note" means any of the Revolving Credit Notes, Swingline Notes, Bid Rate Notes or Working Line Notes. "NRNZ" means NRNZ Holdings, Limited, a New Zealand corporation of which 33 1/3% of the outstanding Capital Stock is owned by the Borrower. "Obligations" means (a) all obligations of any nature (whether matured or unmatured, fixed or contingent, including the Reimbursement Obligations) of the Borrower or any Subsidiary to the Lenders or Bank Affiliates under the Loan Papers, as they may be amended from time to time, and (b) all obligations of the Borrower or any Subsidiary for losses, damages, expenses or any other liabilities of any kind that any Lender or Bank Affiliate may suffer by reason of a breach by the Borrower or any Subsidiary of any obligation, covenant or undertaking with respect to any Loan Paper. "Offshore Advance" means any advance under the Revolving Credit Loan made (a) in an Approved Offshore Currency, or (b) as an Offshore Advance in Dollars, in accordance with the terms of Section 2.1(a)(i) hereof. "Offshore Basis" means a simple per annum interest rate equal to the lesser of (a) the Highest Lawful Rate, and (b) the sum of (i) the Offshore Dollar Rate or Approved Offshore Currency Rate, as applicable, plus (ii) the Applicable Margin. "Offshore Bid Rate" means a rate per annum equal to (a) the Offshore Dollar Rate or Approved Offshore Currency Rate, as the case may be, plus or minus (b) the Margin. 21 27 "Offshore Bid Rate Advance" means any Bid Rate Advance - Revolving Credit subject to an Offshore Bid Rate. "Offshore Borrowing" means a borrowing made hereunder consisting of Offshore Advances or Offshore Bid Rate Advances. "Offshore Commitment" means, on any date of determination, the lesser of (a) the Dollar Equivalent of $1,000,000,000 and (b) the Revolving Credit Commitment minus the sum of (i) the Dollar Equivalent of all outstanding Revolving Credit Advances plus (ii) the sum of all outstanding Reimbursement Obligations. "Offshore Dollar Rate" means, for any Offshore Advance to be made in Dollars for any Interest Period therefor, the rate per annum (rounded upwards, if necessary, to the nearest one-one hundredth (1/100th) of one percent (1%)) appearing on Telerate Page 3750 (or any successor page) as the London interbank offered rate for deposits in United States dollars at approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period. If for any reason such rate is not available, the term "Offshore Dollar Rate" shall mean, for any Offshore Advance to be made in Dollars for any Interest Period therefor, the rate per annum (rounded upwards, if necessary, to the nearest one-one hundredth (1/100th) of one percent (1%)) appearing on Reuters Screen LIBO page as the London interbank offered rate for deposits in United States dollars at approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period for a term comparable to such Interest Period; provided, however, if more than one rate is specified on Reuters Screen LIBO Page, the applicable rate shall be the arithmetic mean of all such rates. "Offshore Lending Office" means, with respect to a Lender, the office described on Schedule 1.2 hereto and designated as its Offshore Lending Office for Offshore Advances, certain Swingline Advances (if applicable) and certain Bid Rate Advances (if applicable), and such other office of the Lender or any of its affiliates hereafter designated by notice to the Borrower and the Administrative Agent. "Operating Cash Flow" means, for any period, determined in accordance with GAAP on a consolidated basis for the Borrower and its Restricted Subsidiaries, the sum of (a) pre-tax net income (excluding therefrom (i) any items of extraordinary gain, including net gains on the sale of assets other than asset sales in the ordinary course of business, and (ii) any items of extraordinary loss, including net losses on the sale of assets other than asset sales in the ordinary course of business), plus (b) interest expense, depreciation and amortization (including amortization of film contracts), deferred and other non-cash charges, and minus (c) cash payments made or scheduled to be made with respect to film contracts. Operating Cash Flow shall be adjusted to exclude (i) any extraordinary non-cash items deducted from or included in the calculation of pre-tax net income and (ii) without duplication, any accrued but not paid income or loss from Investments. For purpose of calculation of Operating Cash Flow with respect to assets not owned at all times during the four fiscal quarters preceding the date of determination of Operating Cash Flow there shall be (i) included in Operating Cash Flow on a pro forma basis, the Operating Cash Flow of any assets acquired during 22 28 any of such four fiscal quarters for the twelve month period preceding the date of determination, and (ii) excluded from Operating Cash Flow on a pro forma basis, the Operating Cash Flow of any assets disposed of during any of such four fiscal quarters for the twelve month period preceding the date of determination. "Operating Lease" means any operating lease, as defined in the Financial Accounting Standard Board Statement of Financial Accounting Standards No. 13, dated November, 1976 or otherwise in accordance with GAAP, with an initial or remaining noncancellable lease term in excess of one year. "Option Date" means, with respect to the Working Line Loan (a) for the 364 day period after the Closing Date, August 29, 2001, (b) for the 364 day period after August 29, 2001, August 28, 2002, (c) for the 364 day period after August 28, 2002, August 27, 2003 and (d) for the 364 day period after August 27, 2003, August 25, 2004. "Original Credit Facility" means that certain credit facility pursuant to the terms of the Original Credit Facility Documentation. "Original Credit Facility Documentation" means that certain Fourth Amended and Restated Credit Agreement, dated as of June 15, 2000, among the Borrower, Bank of America, N.A., as administrative agent, Fleet National Bank (formerly The First National Bank of Boston), as documentation agent, Bank of Montreal, as co-syndication agent, Toronto Dominion (Texas), Inc., as co-syndication agent, and the lenders described therein, with Banc of America Securities LLC, as arranger, and the "Loan Papers" as defined therein, as such agreement and the loan papers may be amended, increased, restated, replaced or substituted from time to time. "Participating Lender" has the meaning specified in Section 2.18 hereof. "Participating Member State" means each country which from time to time becomes a Participating Member State as described in EMU Legislation. "Participation" has the meaning ascribed to it in Section 11.6(c) hereof. "Payment Date" means the last day of the Interest Period for any LIBOR Advance, Offshore Advance, Swingline Advance or Bid Rate Advance. "PBGC" means the Pension Benefit Guaranty Corporation or any entity succeeding to any or all of its functions under ERISA. "Permitted Holders" means L. Lowry Mays, Mark P. Mays, Randall T. Mays and any person related to any of them by kinship or marriage, trusts or similar arrangements established solely on the behalf of one or more of them, and partnerships and other entities that are controlled by them. "Permitted Liens" means, as applied to any Person: 23 29 (a) any Lien in favor of the Administrative Agent on behalf of the Lenders to secure the Obligations hereunder; (b) (i) Liens for taxes not yet delinquent, (ii) Liens created by lease agreements to secure the payments of rental amounts and other sums not yet due thereunder, (iii) Liens on leasehold interests created by the lessor in favor of any mortgagee of the leased premises, and (iv) Liens for taxes, assessments, governmental charges, levies or claims that are being diligently contested in good faith by appropriate proceedings and for which adequate reserves shall have been set aside on such Person's books, but only so long as no foreclosure, restraint, sale or similar proceedings have been commenced with respect thereto; (c) Liens of carriers, warehousemen, mechanics, laborers and materialmen and other similar Liens incurred in the ordinary course of business for sums not yet due or being contested in good faith, if such reserve or appropriate provision, if any, as shall be required by GAAP shall have been made therefor; (d) Liens incurred in the ordinary course of business in connection with worker's compensation, unemployment insurance or similar legislation; (e) Easements, right-of-way and zoning restrictions and other similar encumbrances on the use of real property which do not interfere with the ordinary conduct of the business of such Person; (f) Liens created to secure the purchase price of property acquired by (i) any Restricted Subsidiary, or created to secure Debt for Borrowed Money of the Restricted Subsidiaries permitted by Section 7.1(b) hereof in an amount not to exceed $50,000,000 in the aggregate outstanding at any time for all Restricted Subsidiaries and (ii) the Borrower, or created to secure Debt for Borrowed Money of the Borrower permitted by the first sentence of Section 7.1 hereof in an amount not to exceed $50,000,000 in the aggregate outstanding at any time, which, in the case of both (i) and (ii) foregoing, is incurred solely for the purpose of financing the acquisition of such assets and incurred at the time of acquisition, so long as (A) each such Lien shall at all times be confined solely to the asset or assets so acquired (and proceeds thereof and improvements and accessions thereto), and refinancings thereof, and (B) the amount of Debt for Borrowed Money related thereto is not increased (except for prepayment fees and expenses of such refinancing); (g) Liens in respect of judgments or awards for which appeals or proceedings for review are being prosecuted and in respect of which a stay of execution upon any such appeal or proceeding for review shall have been secured, provided that (i) such Person shall have established adequate reserves for such judgments or awards, (ii) such judgments or awards shall be fully insured and the insurer shall not have denied coverage, or (iii) such judgments or awards shall have been bonded to the satisfaction of the Determining Lenders; 24 30 (h) Any Liens existing on the Closing Date which are described on Schedule 1.3 hereto or permitted to exist under the terms of Section 7.2 hereof, and Liens resulting from the refinancing of the related Debt for Borrowed Money, provided that the Debt for Borrowed Money secured thereby shall not be increased and the Liens shall not cover additional assets (except improvements and accessions thereto) of the Borrower or any of its Restricted Subsidiaries; and (i) Liens securing acquired Debt for Borrowed Money permitted to exist under Section 7.1(e) hereof, but only to the extent that such Liens and Debt for Borrowed Money existed prior to the date of the related Acquisition (such Liens shall not cover additional assets, except improvements and accessions thereto), and provided that such Lien and such Debt for Borrowed Money were not incurred in anticipation of the consummation of such Acquisition. "Person" means an individual, corporation, partnership, trust or unincorporated organization, limited liability company, or a government or any agency or political subdivision thereof. "Plan" means an employee pension benefit plan as defined in Section 3(2) of ERISA (including a Multiemployer Plan) that is covered by Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Code and is maintained for the employees of the Borrower, its Subsidiaries or any member of their Controlled Group. "Pledged Intercompany Notes" means Intercompany Notes pledged to the Administrative Agent on behalf of the Lenders to secure the Obligations in accordance with the terms of Section 5.14 hereof, pursuant to documentation substantially in the form of Exhibit J hereto. "Primary Issuing Bank" means Bank of America, N.A., in its capacity as issuer of the Primary Letters of Credit. "Primary Letters of Credit" has the meaning specified in Section 2.16(a) hereof. "Prime Rate" means, at any time, the prime interest rate announced or published by the Administrative Agent from time to time as its reference rate for the determination of interest rates for loans of varying maturities in United States dollars to United States residents of varying degrees of creditworthiness and being quoted at such time by the Administrative Agent as its "prime rate;" it being understood that such rate may not be the lowest rate of interest charged by the Administrative Agent. "Quarterly Date" means March 31, June 30, September 30 and December 31, beginning September 30, 2000. "Received" means on any date of determination for any Person with respect to any sale or disposition, the actual cash amount in the possession of, under the control of, and at the disposal of, such Person from such sale or disposition, provided that, so long as there exists no Default, proceeds from any sale or disposition held in escrow by any "qualified intermediary" as defined in the Code for a period not in excess of 180 days, for the purpose of consummating a Like-Kind Exchange, 25 31 which such proceeds are subsequently reinvested in like assets during the 180 day period in accordance with the Code, shall not be deemed to be Received by such Person unless (or until such time as) such proceeds are not held or reinvested in accordance with the Code in order to effectuate a Like-Kind Exchange. "Refinancing Advance" means any Advance which is used to pay the principal amount (or any portion thereof) of a LIBOR Advance, Offshore Advance or Bid Rate Advance at the end of its Interest Period and which, after giving effect to such application, does not result in an increase in the aggregate amount of outstanding LIBOR Advances, Base Rate Advances, Offshore Advances, or Bid Rate Advances at the time of the Refinancing Advance. "Regulatory Modification" has the meaning set forth in Section 9.8 hereof. "Regulatory Modification Retroactive Effective Date" has the meaning set forth in Section 9.8 hereof. "Regulatory Modification Set Date" has the meaning set forth in Section 9.8 hereof. "Reimbursement Obligations" means, in respect of any Letters of Credit as at any date of determination, the Dollar Equivalent of the maximum aggregate amount which is then available to be drawn under such Letter of Credit (whether or not the conditions to drawing thereunder have been met) plus any unreimbursed amounts under Letters of Credit. "Release Date" means the date on which the notes have been paid, all other Obligations due and owing have been paid and performed in full, and all of the Commitments have been terminated. "Reportable Event" has the meaning set forth in Title IV of ERISA. "Reset Date" means the first Business Day following the relevant Calculation Date. "Restricted Subsidiary" means any Subsidiary of Borrower which is not an Unrestricted Subsidiary, including, without limitation, ARN and NRNZ, provided that, upon the acquisition by the Borrower of the AMFM Entities and the SFX Entities, such Persons shall not be "Restricted Subsidiaries" under the terms of this document until, in each case, one Business Day has elapsed after their respective acquisitions by the Borrower, at which time each of the AMFM Entities and each of the SFX Entities, respectively, shall each be included as a "Restricted Subsidiary" under this Agreement and the Loan Papers. "Revolver Advance" means an Advance in Dollars under the Revolving Credit Loan made by (a) the Lenders in accordance with the terms of Section 2.1(a)(i) hereof or (b) any Issuing Bank in accordance with the terms of Section 2.16(c) hereof, and shall include all Mandatory Revolver Advances. 26 32 "Revolving Credit Advances" means all Advances made under the Revolving Credit Loan, including (without limitation) all Revolver Advances, Swingline Advances, Offshore Advances and Bid Rate Advances - Revolving Credit, and "Revolving Credit Advance" means any Advance made under the Revolving Credit Loan, which such Advance may be (without limitation) a Revolver Advance, Swingline Advance, an Offshore Advance or a Bid Rate Advance - Revolving Credit, as applicable in the context used. "Revolving Credit Borrowing" means a borrowing made hereunder consisting of Revolver Advances and/or Offshore Advances, including without limitation, any borrowing that is Mandatory Revolver Advance. "Revolving Credit Commitment" means, on any date of determination, $1,500,000,000, plus any increase to such amount effected by the Borrower from time to time in accordance with the terms of Section 2.18 hereof, and minus any reduction of such amount effected by the Borrower from time to time in accordance with the terms of Section 2.6 hereof. "Revolving Credit Commitment Fee" has the meaning ascribed thereto in Section 2.4(a)(i) hereof. "Revolving Credit Lenders" means, on any date of determination, those Lenders having Revolving Credit Specified Percentages in excess of zero. "Revolving Credit Loan" means the loan made in accordance with the provisions of Section 2.1 hereof. "Revolving Credit Note" means any promissory note of the Borrower evidencing Revolver Advances and Offshore Advances under the Revolving Credit Loan hereunder requested by a Lender in accordance with the terms of Section 2.10(g) hereof, substantially in the form of Exhibit A hereto, together with any extension, renewal or amendment thereof or substitution therefor. "Revolving Credit Specified Percentage" means, as to any Lender, the percentage indicated beside its name on the signature pages hereof designated as its Revolving Credit Specified Percentage, or as adjusted or specified (i) in any Assignment and Acceptance, (ii) in any amendment to this Agreement, or (iii) in connection with any increase in the Revolving Credit Commitment affected in accordance with Section 2.18 hereof. "Secondary Issuing Banks" means The Bank of New York, in its capacity as issuer of certain of the Acquired Letters of Credit and Bankers Trust Company, in its capacity as issuer of certain of the Acquired Letters of Credit, and "Secondary Issuing Bank" means either of The Bank of New York, in its capacity as issuer of certain of the Acquired Letters of Credit, or Bankers Trust Company, in its capacity as issuer of certain of the Acquired Letters of Credit, as applicable in the context used. 27 33 "Senior Unsecured Debt Rating" means the Borrower's senior unsecured debt rating as announced by S&P or Moody's. "S&P" means Standard & Poor's Ratings Group, a division of The McGraw-Hill Companies, Inc., a New York corporation. "SFX" means SFX Entertainment, Inc. "SFX Acquisition" means the acquisition by the Borrower of SFX and its direct and indirect subsidiaries in accordance with the terms of the SFX Acquisition Documentation. "SFX Acquisition Documentation" means that certain Agreement and Plan of Merger, dated as of February 28, 2000, among the Borrower, SFX and CCU II Merger Sub, Inc., and all related documentation in effect on May 1, 2000. "SFX Entities" means SFX and all of its direct and indirect subsidiaries that are Restricted Subsidiaries at the time of determination. "SFX Reduced Public Debt Permitted Amount" means an amount equal to $25,000,000. "Solvent", when used with respect to any Person, means that, as of any date of determination, (a) the amount of the "present fair saleable value" of the assets of such Person and its subsidiaries, taken as a whole, will, as of such date, exceed the amount that will be required to pay all "liabilities of such Person and its Subsidiaries, taken as a whole, contingent or otherwise", as of such date (as such quoted terms are determined in accordance with applicable Debtor Relief Laws as such debts become absolute and matured, (b) such Person and its Subsidiaries, taken as a whole, will not have, as of such date, an unreasonably small amount of capital with which to conduct their businesses, taking into account the particular capital requirements of such Person and its projected capital requirements and availability and (c) such Person and its Subsidiaries, taken as a whole, will be able to pay their debts as they mature, taking into account the timing of and amounts of cash to be received by such Person and its Subsidiaries, taken as a whole, and the timing of and amounts of cash to be payable on or in respect of indebtedness of such Person and its Subsidiaries, taken as a whole. For purposes of this definition, (i) "debt" means liability on a "claim", and (ii) "claim" means any (x) right to payment, whether or not such a right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, real or equitable, secured or unsecured or (y) right to an equitable remedy for breach of performance if such breach gives rise to a right of payment, whether or not such right to an equitable remedy is reduced to judgment, fixed, contingent, matured or unmatured, disputed, undisputed, secured or unsecured. "Special Counsel" means the law firm of Donohoe, Jameson & Carroll, P.C., or such other legal counsel as the Administrative Agent may select. "Subsidiary" means (a) any corporation of which 50% or more of the outstanding stock (other than directors' qualifying shares) having ordinary voting power to elect a majority of its board 28 34 of directors, regardless of the existence at the time of a right of the holders of any class of securities of such corporation to exercise such voting power by reason of the happening of any contingency, is at the time owned by the Borrower, directly or through one or more intermediaries, and (b) any other entity which is Controlled or then capable of being Controlled by the Borrower, directly or through one or more intermediaries, whether a Restricted Subsidiary or Unrestricted Subsidiary. "Swingline Advance" means an Advance made by the Swingline Bank under the Swingline Loan. "Swingline Bank" means Bank of America, N.A. and any successor thereto appointed in accordance with Section 10.1(b) hereof. "Swingline Borrowing" means a borrowing made hereunder consisting of Swingline Advances. "Swingline Commitment" means, on any date of determination, $150,000,000. "Swingline Loan" means that certain swingline facility available to the Borrower in accordance with the terms of Section 2.1(a)(ii) hereof. "Swingline Note" means any Swingline Note of the Borrower payable to the order of the Swingline Bank requested by a Lender in accordance with the terms of Section 2.10(g) hereof, evidencing Swingline Advances hereunder, substantially in the form of Exhibit B hereto, together with any extension, renewal or amendment thereof or substitution therefor. "Syndication Agent" means Chase Securities Inc. "TARGET Business Day" means a day when TARGET (Trans-European Automated Real- time Gross settlement Express Transfer system), or any successor thereto, is scheduled to be open for business. "Termination Event" means, with respect to the Borrower, any of its Subsidiaries or any Plan, (a) a Reportable Event, (b) the withdrawal from a Plan during a Plan year in which it was a "substantial employer" as defined in Section 4001(a)(2) of ERISA, (c) the filing of a notice of intent to terminate a Plan or the treatment of a Plan amendment as a termination under Section 4041 of ERISA, (d) the institution of proceedings by the Pension Benefit Guaranty Corporation to terminate a Plan or appoint a trustee to administer a Plan, (e) the failure to comply with the minimum funding requirements of ERISA with respect to any Plan, or (f) any other event or condition which might constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan. "Term Loan" has the meaning ascribed thereto in Section 2.17(b) hereof. 29 35 "Total Debt" means, as of any date of determination, determined for the Borrower and its Restricted Subsidiaries on a consolidated basis, the sum (without duplication) of (a) all principal and interest owing under the Loan Papers and (b) all other Debt for Borrowed Money. "Total Specified Percentage" means, as to any Lender on any date of determination, the percentage that such Lender's maximum Dollar (or Dollar Equivalent) commitment to lend under the aggregate Loans on such date, bears to the sum of the Revolving Credit Commitment plus the Working Line Commitment. If all or any portion of the Commitments have been terminated or expired, Total Specified Percentage shall be determined based upon the Commitments most recently in effect, giving effect to any assignments. "Treaty" means the Treaty establishing the European Economic Community, being the Treaty of Rome of March 25, 1957 as amended by the single European Act 1986 and the Maastricht Treaty (which was signed on February 7, 1992 and came into force on November 1, 1993) as amended, varied or supplemented from time to time. "Universal $325 Million 9.75% Bonds" means those certain $325 million in 9.75% bonds of Universal Outdoor Holdings, Inc. maturing October 15, 2006. "Unrestricted Subsidiary" means those Subsidiaries designated as Unrestricted Subsidiaries on Schedule 4.1(a) hereto, any entity acquired as an Acquisition after the Closing Date unless such Investment is designated as a Restricted Subsidiary by Borrower prior to the completion of such Acquisition, or by complying with the terms and provisions of Section 5.12(a) hereof. An Unrestricted Subsidiary may become a Restricted Subsidiary and subject to the provisions hereof by Borrower's designation thereof in accordance with the terms and provisions of Section 5.12(b), as applicable. "Weighted Average Life to Maturity" means, as of the date of determination, with respect to any debt instrument, the quotient obtained by dividing (i) the sum of the products of the number of years from the date of determination to the dates of each successive scheduled principal payment of such debt instrument by the amount of such principal payment by (ii) the sum of all such principal payments. "Working Advance" means an Advance in Dollars made by Lenders under the Working Line Loan. "Working Line Advance" means any advance made under the Working Line Loan, including without limitation, Working Advances and Bid Rate Advances - Working Line. "Working Line Borrowing" means a borrowing made hereunder consisting of Working Advances. "Working Line Commitment" means, with respect to the Working Line Loan prior to the Conversion Date, $1,500,000,000, as reduced from time to time pursuant to Section 2.6 and 30 36 Section 2.17 hereof, provided that, (a) on any Option Date, if the Borrower and the Facility Determining Lenders have not agreed to an Extension Option or the Borrower has not exercised its Conversion Option in each case in accordance with the terms of Section 2.17 hereof, the Working Line Commitment shall mean $0.00, (b) on and after the Extension Final Maturity, the Working Line Commitment shall mean $0.00, and (c) on and after the Conversion Date, the Working Line Commitment shall mean $0.00. "Working Line Commitment Fee" has the meaning ascribed thereto in Section 2.4(a)(ii) hereof. "Working Line Lenders" means, on any date of determination, those Lenders having Working Line Specified Percentages in excess of zero. "Working Line Loan" means the revolving 364 day short term revolving loan made by the Lenders pursuant to Section 2.1(b) of this Agreement (which such definition shall include the Term Loan, if the Borrower exercises the Conversion Option). "Working Line Note" means any Note of the Borrower evidencing Working Advances hereunder requested by a Lender in accordance with the terms of Section 2.10(g) hereof, substantially in the form of Exhibit C hereto with respect to Working Advances made under the Working Line Loan, together with any extension, renewal or amendment thereof, or substitution therefor, and each note evidencing the Working Line Loan after the Conversion Date, in accordance with the terms of Section 2.17 hereof, together with any extension, renewal or amendment thereof, or substitution therefor. "Working Line Specified Percentage" means, as to any Lender, the percentage indicated beside its name on the signature pages hereof designated as its Working Line Specified Percentage, or as adjusted or specified (i) in accordance with the terms of Section 2.17 hereof, (ii) in any Assignment and Acceptance or (iii) in any amendment to this Agreement. "Year 2000 Problem" means the risk that computer applications and devices containing imbedded computer chips used by the Borrower or any of its Subsidiaries (or their respective customers and vendors) may be unable to recognize and perform properly date-sensitive functions involving certain dates prior to and any date after December 31, 1999. Section 1.2 Amendments and Renewals. Each definition of an agreement in this Article 1 shall include such agreement as amended to date, and as amended or renewed from time to time in accordance with its terms, but only with the prior written consent of the Determining Lenders or Facility Determining Lenders, as appropriate. Section 1.3 Construction. The terms defined in this Article 1 (except as otherwise expressly provided in this Agreement) for all purposes shall have the meanings set forth in Section 1.1 hereof, and the singular shall include the plural, and vice versa, unless otherwise specifically required by the context. All accounting terms used in this Agreement which are not 31 37 otherwise defined herein shall be construed in accordance with GAAP on a consolidated basis for the Borrower and its Subsidiaries, unless otherwise expressly stated herein. To the extent that a material change in GAAP occurs after the Closing Date, the Borrower and Lenders agree to negotiate in good faith to effect conforming changes to the financial covenants set forth in Article 7 hereof. ARTICLE 2 Loans Section 2.1 The Loans and Advances Thereunder. (a) Revolving Credit Loan. (i) Revolver Advances and Offshore Advances under the Revolving Credit Loan. Each Lender severally agrees, upon the terms and subject to the conditions of this Agreement, to make Revolver Advances under the Revolving Credit Loan in Dollars, and Offshore Advances under the Revolving Credit Loan in Dollars and Approved Offshore Currencies, to the Borrower on any Business Day from time to time up to and including the Maturity Date, in an aggregate amount for both Revolver Advances and Offshore Advances not to exceed its Revolving Credit Specified Percentage of the Revolving Credit Commitment (assuming compliance with all conditions to drawing); provided that at the time of the proposed incurrence of an Offshore Advance, the aggregate Dollar Equivalent amount of outstanding Offshore Advances shall not then exceed the Offshore Commitment. Notwithstanding any provision in any Loan Paper to the contrary, in no event shall the Lenders be required to make Revolver Advances or Offshore Advances if after giving effect to the making of such Revolver Advances or Offshore Advances, (A) (1) the Dollar Equivalent amount of all outstanding Revolving Credit Advances, plus (2) all outstanding Reimbursement Obligations would exceed the Revolving Credit Commitment, or (B) the Dollar Equivalent amount of all outstanding Offshore Advances would exceed the Offshore Commitment. On the Maturity Date unless sooner paid as provided herein, the outstanding Revolver Advances and Offshore Advances shall be repaid in full. No provision of this Section 2.1(a)(i) shall limit the ability of any Issuing Bank to make a Revolver Advance pursuant to Section 2.16(c) hereof. (ii) Swingline Advances under the Revolving Credit Loan. The Borrower may request the Swingline Bank to make, and the Swingline Bank shall make, on the terms and conditions hereinafter set forth, Swingline Advances under the Revolving Credit Loan in Dollars and Approved Offshore Currencies for Swingline Advances to the Borrower from time to time on any Business Day up to and including the Maturity Date in an aggregate principal Dollar Equivalent amount not to exceed at the time of the proposed incurrence of a Swingline Advance, the Swingline Commitment (assuming compliance with all conditions to drawing). Notwithstanding any provision of any Loan Paper to the contrary, in no event shall the Swingline Bank be required to make any Swingline Advance if after giving effect 32 38 to the making of such Advance (A) the Dollar Equivalent principal amount of all outstanding Swingline Advances would exceed the Swingline Commitment, or (B) the Dollar Equivalent principal amount of all Revolving Credit Advances, plus the amount of all Reimbursement Obligations would exceed the Revolving Credit Commitment. (iii) Bid Rate Advances under the Revolving Credit Loan. Each Revolving Credit Lender may, in its sole discretion and on the terms and conditions set forth in this Agreement, make Bid Rate Advances - Revolving Credit under the Revolving Credit Loan to the Borrower in Dollars and Approved Offshore Currencies from time to time on any Business Day up to and including the Maturity Date in an aggregate amount not in excess of the difference between (A) the Revolving Credit Commitment, minus at any one time outstanding (B) the sum of the aggregate outstanding principal amount of all Revolving Credit Advances and all Reimbursement Obligations (assuming compliance with all conditions to drawing). Notwithstanding any provision of any Loan Paper to the contrary, (A) the Dollar Equivalent of all Bid Rate Advances - Revolving Credit may not exceed $300,000,000 in the aggregate at any time, and (B) in no event shall the Revolving Credit Lenders be required to make any Bid Rate Advance - Revolving Credit if after giving effect to the making of such Advance (i) the Dollar Equivalent principal amount of all outstanding Revolving Credit Advances, plus the amount of all Reimbursement Obligations, would exceed the Revolving Credit Commitment. There shall not be outstanding to any Lender, at any time, more than five Bid Rate Advances - Revolving Credit. The Borrower shall select an Interest Period for each Bid Rate Advance. Each Bid Rate Advance - Revolving Credit shall be in an aggregate principal amount which is at least $5,000,000, and which is an integral multiple of $1,000,000 in excess thereof (or the Dollar Equivalent of each such amount), and each Bid Rate Advance - Revolving Credit by a Lender shall be in a principal amount which is at least $1,000,000 and which is an integral multiple of $1,000,000 in excess thereof (or the Dollar Equivalent of each such amount). No Lender shall have any obligation to make Bid Rate Advances - Revolving Credit, and the Borrower shall have no obligation to accept an offer for Bid Rate Advances - Revolving Credit. (iv) Revolving Credit Advances, General. All Revolving Credit Advances shall be used for the purposes set forth in Section 5.9 hereof. Subject to Section 2.8 hereof, until the Maturity Date, Revolver Advances, Offshore Advances and Swingline Advances may be repaid and then reborrowed. On the Maturity Date unless sooner paid as provided herein, the outstanding Revolving Credit Advances shall be repaid in full. Any Revolver Advance shall, at the option of the Borrower as provided in Section 2.2 hereof (and, in the case of LIBOR Advances, subject to availability and the provisions of Article 9 hereof), be made as a Base Rate Advance or a LIBOR Advance; provided that there shall not be outstanding to any Lender, at any one time, more than fifteen LIBOR Advances under the Revolving Credit Loan. Any Offshore Advance shall, subject to availability and the provisions of Article 9 hereof, be made in Dollars or Approved Offshore Currencies, and bear interest at the Offshore Basis; provided that there shall not be outstanding to any Lender, at any one time, more than ten Offshore Advances. Any Swingline Advance shall, subject to availability and the provisions of Article 9 hereof, be made in Dollars or Approved Offshore Currencies, and 33 39 bear interest at , with respect to Swingline Advances made in Dollars, the Base Rate Basis, and with respect to Swingline Advances made in Approved Offshore Currencies, the Offshore Basis. Notwithstanding any provision of any Loan Paper to the contrary, in no event shall the Lenders be required to make Revolving Credit Advances if after giving effect to the making of such Revolving Credit Advances (A) the Dollar Equivalent principal amount of all outstanding Revolving Credit Advances, plus (B) all outstanding Reimbursement Obligations, would exceed the Revolving Credit Commitment. No provision of this Section 2.1(a) shall limit the ability of any Issuing Bank to make a Revolver Advance pursuant to Section 2.16(c) hereof. (b) Working Line Loan. (i) Working Advances under the Working Line Loan. Each Lender severally agrees, on the terms and subject to the conditions of this Agreement, to make revolving Working Advances under the Working Line Loan in Dollars to the Borrower on a Business Day during the period from the Closing Date to the Option Date (or the next Extension Final Maturity if the Borrower exercised its Extension Option in accordance with the terms of Section 2.17(a) hereof), in an aggregate principal amount not to exceed at any time outstanding such Lender's Working Line Specified Percentage of the Working Line Commitment (assuming compliance with all conditions to drawings) for the purposes set forth in Section 5.9 hereof. Any Working Advance shall, at the option of the Borrower as provided in Section 2.2 hereof (and, in the case of LIBOR Advances, subject to availability and the provisions of Article 9 hereof), be made as a Base Rate Advance or a LIBOR Advance; provided that there shall not be outstanding to any Lender, at any one time, more than ten LIBOR Advances that are Working Advances. On the Conversion Date (if any), in accordance with the terms of Section 2.17(b) hereof, all outstanding Working Advances shall convert to a Term Loan in the amount of the Working Advances outstanding on the Conversion Date, and such Term Loan shall be due and payable in one payment on the Maturity Date. Subject to the terms and conditions of this Agreement, until the earlier of the (x) Option Date (or the Extension Final Maturity if the Borrower exercised its first Extension Option in accordance with the terms of Section 2.17(a) hereof) and (y) Conversion Date (if any), the Borrower may borrow, repay and reborrow the Working Advances; provided, however, that at no time shall the sum of the aggregate outstanding principal amount of all Working Line Advances exceed the Working Line Commitment. After the Conversion Date (if any) and prior to the Extension Final Maturity, no Advances will be available under the Working Line Loan, except Refinancing Advances. 34 40 (ii) Bid Rate Advances under the Working Line Loan. Each Working Line Lender may, in its sole discretion and on the terms and conditions set forth in this Agreement, make Bid Rate Advances - Working Line under the Working Line Loan to the Borrower in Dollars from time to time in an aggregate amount not in excess of the difference between (i) the Working Line Commitment minus (ii) the sum of the aggregate outstanding principal amount of all Working Line Advances (assuming compliance with all conditions to drawings) for the purposes set forth in Section 5.9 hereof. There shall not be outstanding to any Lender, at any time, more than five Bid Rate Advances - Working Line. Each Bid Rate Advance - Working Line shall be in an aggregate principal amount which is at least $5,000,000, and which is an integral multiple of $1,000,000 in excess thereof, and each Bid Rate Advance - Working Line by a Lender shall be in a principal amount which is at least $1,000,000 and which is an integral multiple of $1,000,000 in excess thereof. No Lender shall have any obligation to make Bid Rate Advances - Working Line, and the Borrower shall have no obligation to accept an offer for Bid Rate Advances - Working Line. Section 2.2 Manner of Borrowing and Disbursement. (a) Base Rate Advances. In the case of Base Rate Advances, the Borrower, through an Authorized Signatory, shall give the Administrative Agent at least one Business Day's irrevocable written notice, or irrevocable telephonic notice followed immediately by written notice in the form of Exhibit L hereto (a "Notice of Borrowing") (provided, however, that the Borrower's failure to confirm any telephonic notice in writing shall not invalidate any notice so given), of its intention to borrow or reborrow a Base Rate Advance hereunder. Notice shall be given to the Administrative Agent prior to 11:00 a.m., Dallas, Texas time, in order for such Business Day to count toward the minimum number of Business Days required. Such Notice of Borrowing shall specify (i) the requested funding date, which shall be a Business Day, (ii) the amount of the proposed aggregate Base Rate Advances to be made by Lenders and (iii) whether such Base Rate Advances are Revolver Advances, Working Advances or Swingline Advances. (b) LIBOR Advances. In the case of LIBOR Advances, the Borrower, through an Authorized Signatory, shall give the Administrative Agent at least three Business Days' irrevocable written notice, or irrevocable telephonic notice followed immediately by a Notice of Borrowing (provided, however, that the Borrower's failure to confirm any telephonic notice in writing shall not invalidate any notice so given), of its intention to borrow or reborrow a LIBOR Advance hereunder. Notice shall be given to the Administrative Agent prior to 11:00 a.m., Dallas, Texas time, in order for such Business Day to count toward the minimum number of Business Days required. LIBOR Advances shall in all cases be subject to availability and to Article 9 hereof. For LIBOR Advances, the Notice of Borrowing shall specify (i) the requested funding date, which shall be a Business Day, (ii) the amount of the proposed aggregate LIBOR Advances to be made by Lenders, (iii) the Interest Period selected by the Borrower, provided that no such Interest Period shall (A) extend past (I) the Maturity Date, with respect to the Revolving Credit Loan, and (II) the Option Date or the Extension Final Maturity, as applicable, with respect to the Working Line Loan, or (B) prohibit or impair the Borrower's ability to comply with Section 2.8 hereof, and (iv) whether such LIBOR Advances are Revolver Advances or Working Advances. 35 41 (c) Offshore Advances. In the case of Offshore Advances, the Borrower, through an Authorized Signatory, shall give the Administrative Agent at least four Business Days' (or three Business Days' if such Offshore Advances is in Dollars) irrevocable written notice, or irrevocable telephonic notice followed immediately by written notice pursuant to a Notice of Borrowing (provided, however, that the Borrower's failure to confirm any telephonic notice in writing shall not invalidate any notice so given), of its intention to borrow or reborrow an Offshore Advance hereunder. Notice shall be given to the Administrative Agent prior to 10:00 a.m., Dallas, Texas time, in order for such Business Day to count toward the minimum number of Business Days required. Offshore Advances shall in all cases be subject to availability and to Article 9 hereof. For Offshore Advances, the Notice of Borrowing shall specify that such Borrowing is under the Revolving Credit Loan and (i) the requested funding date, which shall be a Business Day, (ii) whether such Offshore Advance is to be made in Dollars or in an Approved Offshore Currency and specifying such Approved Offshore Currency, (iii) the amount of the proposed aggregate Offshore Advances to be made by Lenders and (iv) the Interest Period selected by the Borrower, provided that no such Interest Period shall extend past the Maturity Date or prohibit or impair the Borrower's ability to comply with Section 2.8 hereof. (d) Swingline Advances. In the case of Swingline Advances, the Borrower, through an Authorized Signatory, shall give the Swingline Bank and the Administrative Agent (i) not later than 11:00 a.m., Dallas time, on the Business Day of the proposed Swingline Advance in the case of a Swingline Advance to be made as a Base Rate Advance in Dollars, and (ii) at least four Business Days (or three Business Days if such Offshore Advances is in Dollars) before the date of any proposed Swingline Advance not described in clause (i), irrevocable telephonic notice (provided, however, (A) the Borrower shall deliver written notice at least once a week confirming the telephonic notices given by the Borrower with respect to Swingline Advances during the immediately preceding week and (B) that the Borrower's failure to confirm any telephonic notice in writing shall not invalidate any notice so given), of its intention to borrow or reborrow a Swingline Advance. Such telephonic notice and the written confirming Notice of Borrowing shall specify (i) the requested funding date, which shall be a Business Day, (ii) the amount of the proposed Swingline Advance, (iii) if the Swingline Advance is not in Dollars, the Approved Offshore Currency for such Swingline Advance and (iv) the Interest Period for such Swingline Advance. No Swingline Advance may be continued or converted. (e) Continuation/Conversion. Subject to Sections 2.1 and 2.9 hereof, at the end of any applicable Interest Period, the Borrower shall have the option to continue any LIBOR Advance or Offshore Advance as LIBOR Advances or Offshore Advances, respectively, in accordance with the following terms, or to convert any Base Rate Advance into a LIBOR Advance or convert any LIBOR Advance into a Base Rate Advance in accordance with the following terms: (i) Conversion of Base Rate Advances to, or Continuation of, LIBOR Advances and Conversion from a LIBOR Advance into a Base Rate Advance. The Borrower shall have the option to convert to LIBOR Advances, or upon the expiration of any Interest Period applicable to a LIBOR Advance, to continue all or any portion of such LIBOR Advance 36 42 equal to $5,000,000 and integral multiples of $100,000, as a LIBOR Advance and the succeeding Interest Period of such continued LIBOR Advance shall commence on the last day of the Interest Period of the LIBOR Advance to be continued; provided that, (A) no succeeding Interest Period shall extend beyond (I) the Maturity Date with respect to continued or converted LIBOR Advances under the Revolving Credit Loan and (II) the Option Date of the Extension Final Maturity, as applicable, with respect to continued of converted LIBOR Advances under the Working Line Loan and (B) notwithstanding anything in this Agreement to the contrary, no outstanding Advance may be continued as, or converted into, a LIBOR Advance when any Default or Event of Default has occurred and is continuing. At least (x) three Business Days prior to a proposed conversion into a LIBOR Advance or continuation of a LIBOR Advance under the Revolving Credit Loan or Working Line Loan or (y) one Business Day prior to a proposed conversion into a Base Rate Advance under the Revolving Credit Loan or Working Line Loan, the Borrower, through an Authorized Signatory, shall give the Administrative Agent irrevocable written notice, or irrevocable telephonic notice followed immediately by written notice in substantially the form of Exhibit M hereto (a "Notice of Continuation/Conversion") (provided, however, that the Borrower's failure to confirm any telephonic notice in writing shall not invalidate any notice so given), stating (i) the proposed conversion/continuation date (which shall be a Business Day), (ii) the amount of the Advance to be converted/continued and whether it is a conversion into or continuation of a LIBOR Advance or a conversion into a Base Rate Advance, (iii) in the case of a conversion to, or a continuation of, a LIBOR Advance, the requested Interest Period and (iv) in the case of a conversion to, or a continuation of, a LIBOR Advance, that no Default or Event of Default has occurred and is continuing. If the Borrower, through an Authorized Signatory, shall fail to give any notice of continuation of a LIBOR Advance in accordance with this Section 2.2(e), the Borrower shall be deemed irrevocably to have requested that any such LIBOR Advance be converted to a Base Rate Advance in the same principal amount. Notice shall be given to the Administrative Agent prior to 11:00 a.m., Dallas, Texas time, in order for such Business Day to count toward the minimum number of Business Days required. (ii) Continuation of Offshore Advances. The Borrower shall have the option, upon expiration of any Interest Period applicable to an Offshore Advance, to continue all or any portion of such Offshore Advance as an Offshore Advance equal to $5,000,000 and integral multiples of $100,000 (or the Dollar Equivalent of each such amount) in excess of that amount as an Offshore Advance and the succeeding Interest Period(s) of such continued Offshore Advance shall commence on the last day of the Interest Period of the Offshore Advance to be continued; provided, however, (a) Offshore Advances may not be made as Base Rate Advances or LIBOR Advances, (b) Offshore Advances may only be continued in the same currency as the original Borrowing, (c) the Dollar Equivalent of any Offshore Advance that is continued shall be recalculated as of the date of the continuation and (d) notwithstanding anything in this Agreement to the contrary, no outstanding Offshore Advance may be continued as an Offshore Advance when any Default or Event of Default has occurred and is continuing. At least four Business Days (or three Business Days' if such Offshore Advance is in Dollars) prior to a proposed continuation date, the Borrower, through 37 43 an Authorized Signatory, shall give the Administrative Agent irrevocable written notice, or irrevocable telephonic notice followed immediately by a Notice of Continuation/Conversion (provided, however, that the Borrower's failure to confirm any telephonic notice in writing shall not invalidate any notice so given), stating (i) the proposed continuation date (which shall be a Business Day), (ii) the amount of the Offshore Advance and the Approved Offshore Currency of such Offshore Advance to be continued if the continued Offshore Advance was made in an Approved Offshore Currency, (iii) the requested Interest Period and (iv) that no Default or Event of Default has occurred and is continuing. Notice shall be given to the Administrative Agent prior to 11:00 a.m., Dallas, Texas time, in order for such Business Day to count toward the minimum number of Business Days required. If the Borrower, through an Authorized Signatory, shall fail to give any notice in accordance with this Section 2.2(e)(ii), the Borrower shall be deemed irrevocably to have requested (notwithstanding the failure of the Borrower at such time to satisfy each condition specified in Article 3) that such Offshore Advance be repaid by an automatic Mandatory Revolver Advance in an amount equal to the Dollar Equivalent of the amount of such Offshore Advance, and bearing interest at the Base Rate Basis. (f) Minimum Amounts. The aggregate amount of Base Rate Advances to be made by the Lenders on any day shall be in a principal amount which is at least $1,000,000 and which is an integral multiple of $100,000; provided, however, that such amount may equal the unused amount of the Revolving Credit Commitment or the Working Line Commitment, as applicable. The aggregate amount of LIBOR Advances to be made by the Lenders on any day shall be in a principal amount which is at least $5,000,000 and which is an integral multiple of $100,000; provided, however, that such amount may equal the unused amount of the Revolving Credit Commitment or the Working Line Commitment, as applicable. The aggregate amount of Offshore Advances having the same Interest Period and to be made by the Lenders on any day shall be in a Dollar Equivalent principal amount which is at least $5,000,000 and which is an integral multiple of $100,000 (or the Dollar Equivalent of each such amount on the date of such Advance). The aggregate amount of any Swingline Advances to be made by the Swingline Bank on any day shall be in a principal amount which is at least equal to the Dollar Equivalent of $100,000 and which is an integral multiple of the Dollar Equivalent of $100,000 or the Dollar equivalent thereof; provided, however, that such amount may equal the unused amount of the Swingline Commitment. (g) Notice and Disbursement. The Administrative Agent shall promptly notify the Lenders of each notice received from the Borrower pursuant to this Section. If such notice from the Borrower designated an Offshore Advance or a Swingline Advance in an Approved Offshore Currency, the Administrative Agent shall promptly notify the Borrower and the Revolving Credit Lenders or the Swingline Bank, as appropriate, of the Dollar Equivalent thereof. Failure of the Borrower to give any notice in accordance with Section 2.2(e) hereof shall result in a repayment of any existing Offshore Advance or LIBOR Advance on the applicable Payment Date by a Mandatory Revolver Advance which is a Base Rate Advance. Each Lender shall, not later than noon, Dallas, Texas time, on the date of any Revolver Advance, Working Advance and Offshore Advance that is not a Refinancing Advance, deliver to the Administrative Agent, at its address set forth herein, such Lender's Applicable Specified Percentage of such Advance in immediately available funds in 38 44 accordance with the Administrative Agent's instructions, except that if such Advance is an Offshore Advance denominated in an Approved Offshore Currency, each Revolving Credit Lender shall make available its funds at such office as the Administrative Agent has previously specified in a notice to each Lender, in such funds as are then customary for the settlement of international transactions in the applicable Approved Offshore Currency and as customary, and as specified by the Administrative Agent, in each case no later than such local time as is necessary for such funds to be received and transferred. Prior to 2:00 p.m. in the time zone of the capital city of the currency in which such Advance is issued, on the date of any Revolver Advance, Working Advance or Offshore Advance hereunder, the Administrative Agent shall, subject to satisfaction of the conditions set forth in Article 3, disburse the amounts made available to the Administrative Agent by the Lenders by (i) transferring such amounts by wire transfer pursuant to the Borrower's instructions, or (ii) in the absence of such instructions, crediting such amounts to the account of the Borrower maintained with the Administrative Agent. All Revolver Advances and Offshore Advances shall be made by each Lender according to its Revolving Credit Specified Percentage. All Working Advances shall be made by each Lender according to its Working Line Specified Percentage. No Lender shall be relieved of its obligation to fund its (i) Revolving Credit Specified Percentage of any Revolver Advance or Offshore Advance notwithstanding the fact that at any time the aggregate outstanding principal amount of all Bid Rate Advances - Revolving Credit made by such Lender plus its outstanding Revolver Advances and Offshore Advances exceed its Revolving Credit Specified Percentage of the Revolving Credit Commitment, or (ii) Working Line Specified Percentage of any Working Advance notwithstanding the fact that at any time the aggregate outstanding principal amount of all Bid Rate Advances - Working Line made by such Lender plus its outstanding Working Advances exceed its Working Line Specified Percentage of the Working Line Commitment. (h) Swingline Advances. After confirming with the Administrative Agent the availability of funds under the Revolving Credit Commitment, the Swingline Bank shall, not later than 2:00 p.m., Dallas, Texas time, on the date of any Swingline Advance, deliver to the Administrative Agent at its address set forth herein, the amount of such Swingline Advance in immediately available funds in accordance with the Administrative Agent's instructions. Prior to 2:30 p.m., Dallas, Texas time, on the date of any Swingline Advance, the Administrative Agent shall, subject to the conditions set forth in Articles 2 and 3 hereof, disburse the amount made available to the Administrative Agent by the Swingline Bank by (i) transferring such amounts by wire transfer pursuant to the Borrower's instruction or (ii) in the absence of such instructions, crediting such amounts to the account of the Borrower maintained with the Administrative Agent. Forthwith upon demand by the Swingline Bank at any time, including after a Default or Event of Default, and in any event upon the making of the direction specified by Section 8.2 to authorize the Administrative Agent to declare the Advances due and payable pursuant to the provisions of Section 8.2, each Revolving Credit Lender, including the Swingline Bank, notwithstanding the failure of the Borrower at such time to satisfy each condition specified in Articles 2 and 3, shall make, by 12:00 noon, Dallas, Texas time, on the first Business Day following receipt by such Lender of notice from the Swingline Bank, a Mandatory Revolver Advance which is a Base Rate Advance in an amount equal to the product of (i) the Revolving Credit Specified Percentage of such Lender times (ii) the aggregate outstanding principal amount of the Swingline Advances (to be made in the Dollar Equivalent of such Swingline Advance determined as of the date of receipt of such notice). 39 45 The proceeds of such Mandatory Revolver Advances shall be applied by the Administrative Agent to repay the outstanding Swingline Advances. If for any reason (including any Debtor Relief Law), Revolver Advances may not be made on the date otherwise required above, each Revolving Credit Lender hereby agrees that it shall forthwith purchase (as of the date on which such Revolver Advance would otherwise have occurred, but adjusted for any payments received from the Borrower on or after such date and prior to such purchase) from the Swingline Bank such participations in the outstanding Swingline Advances as shall be necessary to cause the Revolving Credit Lenders to share in such Swingline Advances ratably based upon their Revolving Credit Specified Percentages; provided that (i) all interest payable on the Swingline Advance shall be for the account of the Swingline Bank until the date as of which the respective participation is required to be purchased and, to the extent attributable to the purchased participation, shall be payable to the participating Revolving Credit Lender from and after such date and (ii) at the time any purchase of participations pursuant to this sentence is actually made, the purchasing Lender shall be required to pay the appropriate Swingline Bank interest on the principal amount of the participation purchased for each day from and including the day upon which such Revolver Advance would otherwise have occurred to but excluding the date of payment for such participation, at the overnight Federal Funds Rate for the first five days and at the Base Rate Basis for each day thereafter. (i) Bid Rate Advances (i) With respect to each Bid Rate Borrowing, the Borrower shall give the Administrative Agent prior to 10:00 a.m. (Dallas, Texas time), in the case of Offshore Bid Rate Advances, at least five Business Days prior to the proposed date of Bid Rate Borrowing, and in the case of Advances bearing interest at a Margin over the LIBOR Rate, at lease four Business Days prior to the proposed date of Bid Rate Borrowing, written notice of its intention to borrow Bid Rate Advances pursuant to a Bid Rate Advance Request. Such Bid Rate Advance Request shall specify (a) whether such Bid Rate Borrowing is to be made under the Working Line Loan or the Revolving Credit Loan, (b) the requested date of the Bid Rate Borrowing, which shall be a Business Day, (c) the aggregate amount of the proposed Bid Rate Borrowing (which shall be at least $5,000,000 and which is an integral multiple of $1,000,000 in excess thereof), (d) the Interest Period with respect thereto, provided that such Interest Period shall not extend past the Maturity Date, the Option Date or the Conversion Date, as applicable, and (e) if such Advance is a Bid Rate Advance - Revolving Credit, whether such Advance is to be made in Dollars in an Approved Offshore Currency and specifying such Approved Offshore Currency. Bid Rate Advance Requests that do not conform substantially to the form of Exhibit N hereto may be rejected by the Administrative Agent, and the Administrative Agent shall give prompt notice to the Borrower of such rejection. The Borrower shall pay a $500 non-refundable, administrative fee for the account of the Administrative Agent for each notice of proposed Bid Rate Borrowings. Such fee shall be paid to the Administrative Agent on the date of delivery of the Borrower's notice of intention to borrow Bid Rate Advances, and shall not be refunded, notwithstanding that the 40 46 proposed Bid Rate Borrowing is canceled by the Borrower or no Lender offers to make a Bid Rate Advance. (ii) Upon the receipt by the Administrative Agent of a Bid Rate Advance Request that conforms with the requirements herein, the Administrative Agent shall, by telecopy in the form of the Invitation to Bid, (A) with respect to Bid Rate Advances under the Revolving Credit Loan, invite each Revolving Credit Lender to bid, and (B) with respect to Bid Rate Advances under the Working Line Loan, invite each Working Line Lender to bid, in each case on the terms and conditions of this Agreement, to make Bid Rate Advances - Revolving Credit and Bid Rate Advances - Working Line, as applicable, pursuant to the Bid Rate Advance Request. (iii) Each Revolving Credit Lender shall, if, in its sole discretion, it elects to do so, irrevocably offer to make one or more Bid Rate Advances - Revolving Credit to the Borrower and each Working Line Lender shall, if, in its sole discretion, it elects to do so, irrevocably offer to make one or more Bid Rate Advances - Working Line, as applicable, to the Borrower as part of such proposed Bid Rate Borrowing, in each case at a Margin over the LIBOR Rate, or, if such Bid Rate Advance is made under the Revolving Credit Loan, at a Margin over the LIBOR Rate (if made such Advance is to be made domestically in Dollars)or the Offshore Dollar Rate or Approved Offshore Currency Rate, as applicable, specified by each such Lender in its sole discretion, by delivering a Confirmation of Bid to the Administrative Agent before 10:00 a.m. (Dallas, Texas time), four Business Days prior to the proposed date of any such Bid Rate Borrowing, in the case of a request for Bid Rate Advances - Revolving Credit that are Offshore Bid Rate Advances, and three Business Days prior to the proposed date of any such Bid Rate Borrowing, in the case of a request for Bid Rate Advances - Revolving Credit and Bid Rate Advances - Working Line that are domestic Bid Rate Advances to be made in Dollars based on a Margin over the LIBOR Rate (A) setting forth (1) the minimum amount (which shall be $1,000,000 or an integral multiple of $1,000,000 in excess thereof or the Dollar Equivalent thereof) and maximum amount of each Bid Rate Advance which such Lender would be willing to make as part of the proposed Bid Rate Borrowing (which amounts may exceed an amount equal to (x) such Lender's Revolving Credit Specified Percentage of the Revolving Credit Commitment or (y) such Lender's Working Line Specified Percentage of the Working Line Commitment, as applicable) (2) if such Bid Rate Advance is a Bid Rate Advance - Revolving Credit, whether such Bid Rate Advance is to be made as an Offshore Bid Rate Advance or a domestic Advance in Dollars (and the Approved Offshore Currency, if applicable), and (3) the Margin therefor, and (B) confirming the Interest Period therefor. Confirmation of bids that do not conform substantially to Exhibit O hereto may be rejected by the Administrative Agent, and the Administrative Agent shall notify the applicable Lender of such rejection as soon as practicable. If any Lender shall fail to respond to the Administrative Agent by such time, such Lender shall be deemed to have elected not to make an offer. Any Confirmation of Bid submitted by a Lender pursuant to this Section 2.2(i) is irrevocable. 41 47 (iv) The Administrative Agent shall promptly notify the Borrower of the number of Confirmations of Bid, the interest rate(s) and Interest Period(s) applicable thereto, the maximum principal amount bid at each interest rate for each Interest Period, and the identity of each Lender submitting a Confirmation of Bid. (v) Not later than 12:00 noon (Dallas, Texas time) four Business Days prior to the proposed date of Bid Rate Borrowing in the case of Offshore Bid Rate Advances, the Borrower shall, in turn, either (A) cancel such proposed Bid Rate Borrowing by giving the Administrative Agent notice to that effect; or (B) accept one or more of the offers made by any Lender or Lenders pursuant to clause (iii) above, in its sole discretion, by giving notice to the Administrative Agent of the amount of each Bid Rate Advance (which amount shall be equal to or greater than the minimum amount, and equal to or less than the maximum amount, for which notification was given to the Borrower by any Lender for such Bid Rate Advance pursuant to clause (iii) above) to be made by each Lender as part of such Bid Rate Borrowing, and reject any remaining offers made by Lenders pursuant to clause (iii) above by giving the Administrative Agent notice to that effect; provided, that if offers are made by two or more Lenders with the same Offshore Bid Rates for a greater aggregate principal amount than the amount for which such offers are accepted for the related term, the principal amount of Bid Rate Advances accepted shall be allocated by the Borrower among such Lenders as nearly as possible (in multiples not less than $1,000,000 or the Dollar Equivalent thereof) in proportion to the aggregate principal amount of such offers, and the aggregate principal amount of offers accepted by the Borrower shall not exceed the maximum amount contained in the related Bid Rate Advance Request. (vi) The Administrative Agent shall promptly give telephonic notice to each bidding Lender if any of its offers have been accepted (and if so, whether it was for a Bid Rate Advance - Revolving Credit or a Bid Rate Advance - Working Line, in what amount, at what interest rate and for what Interest Period), and each successful Lender will thereupon become bound, subject to the other applicable conditions hereof, to make each Bid Rate Advance for which its offer has been accepted. (vii) After completing the notifications referred to in clause (vi) above, the Administrative Agent shall notify each bidding Lender of (i) the aggregate amount of Bid Rate Advances - Revolving Credit and Bid Rate Advances - Working Line made in connection with such proposed Bid Rate Borrowing, (ii) the maturities thereof, and (iii) the lowest and highest interest rates at which Bid Rate Advances were made for each maturity. (viii) If the Administrative Agent shall at any time elect to submit a bid for a Bid Rate Advance in its capacity as a Lender, it shall submit such bid directly to the Borrower 42 48 one-half hour earlier than the latest time at which other Lenders are required to submit their bid to the Administrative Agent pursuant to Section 2.2(i)(iii) hereof. (ix) If the Borrower accepts one or more offers made by any Lender or Lenders pursuant to clause (v)(B) above, each such Lender shall, unless any applicable condition specified in Article 3 hereof has not been satisfied, not later than 12:00 noon (Dallas, Texas time) on the date of a Bid Rate Advance hereunder, make available to the Administrative Agent the principal amount of each Bid Rate Advance in immediately available funds, to be disbursed by the Administrative Agent by wire transfer pursuant to instructions of the Borrower. Section 2.3 Interest. Each Revolver Advance shall bear interest (at the election of the Borrower in accordance with Section 2.2 hereof) at the Base Rate Basis or the LIBOR Basis. (a) On Base Rate Advances. (i) The Borrower shall pay interest on the outstanding unpaid principal amount of each Base Rate Advance, from the date such Advance is made until it is due (whether at maturity, by reason of acceleration, by scheduled reduction, or otherwise) or repaid, at a simple interest rate per annum equal to the Base Rate Basis as in effect from time to time, provided that interest on Base Rate Advances shall not exceed the Maximum Amount. If at any time the Base Rate Basis would exceed the Highest Lawful Rate, interest payable on Base Rate Advances shall be limited to the Highest Lawful Rate, but the Base Rate Basis shall not thereafter be reduced below the Highest Lawful Rate until the total amount of interest accrued on such Advances equals the amount of interest that would have accrued if the Base Rate Basis had been in effect at all times. (ii) Interest on each Base Rate Advance shall be computed on the basis of a year of 365 or 366 days, as applicable, for the number of days actually elapsed, and shall be payable in arrears on each Quarterly Date and on (A) the Maturity Date, with respect to Base Rate Advances under the Revolving Credit Loan, or (B) the Option Date or the Extension Final Maturity, as applicable, with respect to Base Rate Advances under the Working Line Loan. (b) On LIBOR Advances. (i) The Borrower shall pay interest on the unpaid principal amount of each LIBOR Advance, from the date such Advance is made until it is due (whether at maturity, by reason of acceleration, by scheduled reduction, or otherwise) or repaid, at a rate per annum equal to the LIBOR Basis for such Advance. The Administrative Agent, whose determination shall be conclusive, shall determine the LIBOR Basis on the second Business Day prior to the applicable funding date and shall notify the Borrower and the Lenders of such LIBOR Basis. 43 49 (ii) Subject to Section 11.9 hereof, interest on each LIBOR Advance shall be computed on the basis of a 360-day year for the actual number of days elapsed, and shall be payable in arrears on the applicable Payment Date and on (A) the Maturity Date, with respect to LIBOR Advances under the Revolving Credit Loan, or (B) the Option Date or the Extension Final Maturity, as applicable, with respect to LIBOR Advances under the Working Line Loan; provided, however, that if the Interest Period for such Advance exceeds three months, interest shall also be due and payable in arrears on each Quarterly Date during such Interest Period. (c) On Offshore Advances. (i) The Borrower shall pay interest on the unpaid principal amount of each Offshore Advance, from the date such Advance is made until it is due (whether at maturity, by reason of acceleration, by scheduled reduction, or otherwise) or repaid, at a rate per annum equal to the Offshore Basis for such Advance. The Administrative Agent, whose determination shall be conclusive, shall determine the Offshore Basis on the second Business Day prior to the applicable funding date and shall notify the Borrower and the Lenders of such Offshore Basis. (ii) Subject to Section 11.9 hereof, interest on each Offshore Advance shall be computed on the basis of a 360-day year for the actual number of days elapsed, and shall be payable in arrears on the applicable Payment Date and on the Maturity Date; provided, however, that if the Interest Period for such Advance exceeds three months, interest shall also be due and payable in arrears on each Quarterly Date during such Interest Period. (d) On Swingline Advances. (i) The Borrower shall pay interest on the outstanding principal amount of each Swingline Advance, from the date such Swingline Advance is made until it is due (whether at maturity, by reason of acceleration or otherwise) and repaid, at an interest rate per annum equal to (A) (I) the Offshore Basis, if such Swingline Advance is made in an Approved Offshore Currency or (II) the Base Rate Basis, if such Swingline Advance is made in Dollars, in each case in effect from time to time, minus (B) the discount of such Offshore Basis or Swingline Basis necessary to allow the Borrower to recapture commitment fees that would be earned by such Swingline Lender during the term of such Swingline Advance pursuant to Section 2.4(a)(i) hereof, but in no event higher than the Highest Lawful Rate. (ii) Subject to Section 11.9 hereof, interest on Swingline Advances made in (A) an Approved Offshore Currency shall be computed on the basis of a 360-day year for the actual number of days elapsed, and (B) Dollars, shall be computed on the basis of a 365 or 366-day year, as applicable, for the actual number of days elapsed, and shall be payable in arrears on each Payment Date and on the Maturity Date. (e) On Bid Rate Advances. The Borrower shall pay interest on the outstanding unpaid principal amount of each Bid Rate Advance at a per annum rate equal to the interest rate agreed to 44 50 by the Borrower and the Lender making such Bid Rate Advance pursuant to Section 2.2(i) hereof. Interest on each Bid Rate Advance shall be computed and shall be payable at such times as agreed upon between the Borrower and the Lender making such Advance pursuant to Section 2.2(i) hereof. (f) Interest if No Notice of Selection of Continuation of an Offshore Advance or LIBOR Advance, or Interest Period. If the Borrower fails to give the Administrative Agent timely notice of its selection of the continuation of a LIBOR Advance or Offshore Advance, or if for any reason a determination of an Offshore Basis or LIBOR Rate for any Advance is not timely concluded due to the fault of the Borrower, such Offshore Advance shall be deemed to be a Mandatory Revolver Advance and such LIBOR Advance shall be deemed to be a Base Rate Advance, and the Base Rate Basis shall apply to each such Advance. If the Borrower fails to give the Administrative Agent timely notice of its selection of an Interest Period for an Offshore Advance or a LIBOR Advance, a one-month Interest Period shall apply to the applicable Advance. If the Borrower fails to give the Administrative Agent timely notice of its selection of an Interest Period for a Swingline Advance, a 30 day Interest Period shall apply to the applicable Swingline Advance. (g) Interest After an Event of Default. Notwithstanding the foregoing, (i) After an Event of Default (other than an Event of Default specified in Section 8.1(f) or (g) hereof) and during any continuance thereof, at the option of Determining Lenders, and (ii) after an Event of Default specified in Section 8.1(f) or (g) hereof and during any continuance thereof, automatically and without any action by the Administrative Agent or any Lender, the Obligations shall bear interest at a rate per annum equal to the Default Rate. Such interest shall be payable on the earlier of demand, the Maturity Date (if such interest is on the Revolving Credit Loan) or the Option Date, or the Extension Final Maturity, as applicable, with respect to the Working Line Loan, or upon the occurrence of an Event of Default specified in Section 8.1(f) or 8.1(g) hereof, immediately, and shall accrue until the earlier of (i) waiver or cure (to the satisfaction of the Determining Lenders) of the applicable Event of Default, (ii) agreement by the Lenders to rescind the charging of interest at the Default Rate, or (iii) payment in full of the Obligations. The Lenders shall not be required to accelerate the maturity of the Advances, to exercise any other rights or remedies under the Loan Papers, or to give notice to the Borrower of the decision to charge interest at the Default Rate. The Lenders will undertake to notify the Borrower, after the effective date, of the decision to charge interest at the Default Rate, but any failure to do so will not affect the application of such rate. Section 2.4 Fees. (a) Commitment Fees. Subject to Section 11.9 hereof, the Borrower agrees to pay as follows: (i) Revolving Credit Loan. From the Closing Date until the Maturity Date, with respect to the Revolving Credit Loan, the Borrower shall pay to the Administrative Agent, for the ratable account of the Lenders (based on each Lender's Revolving Credit Specified Percentage), a per annum commitment fee (the "Revolving Credit Commitment Fee") equal to the Applicable Commitment Fee Percentage for the Revolving Credit Loan on the daily average unborrowed balance of the Revolving Credit Commitment, minus all 45 51 Reimbursement Obligations. For purposes of calculating the Revolving Credit Commitment Fee hereunder only, (A) undrawn portions of Letters of Credit outstanding from time to time will reduce the unused portion of the Revolving Credit Commitment, and (B) outstanding Bid Rate Advances and Swingline Advances made under the Revolving Credit Loan shall not reduce the unused portion of the Revolving Credit Commitment. (ii) Working Line Loan. From the Closing Date until the earlier of the Conversion Date (if any) or the Maturity Date, with respect to the Working Line Loan, the Borrower shall pay to the Administrative Agent, for the ratable account of the Lenders (based on each Lender's Working Line Specified Percentage), a per annum commitment fee (the "Working Line Commitment Fee") equal to the Applicable Commitment Fee Percentage for the Working Line Loan on the daily average unborrowed balance of the Working Line Commitment. For purposes of calculating the Working Line Commitment Fee hereunder only, outstanding Bid Rate Advances shall not reduce the unused portion of the Working Line Commitment. (iii) Commitment Fees, Generally. The Commitment Fees shall be subject to reduction or increase, as applicable in accordance with the terms of the definition of Applicable Commitment Fee Percentage. Commitment Fees shall be payable in arrears on each Quarterly Date and (A) with respect to the Revolving Credit Commitment Fee, on the Maturity Date, and (B) with respect to the Working Line Commitment Fee, on the earlier of the Conversion Date (if any) or the Maturity Date. All Commitment Fees shall be (I) fully earned when due, (II) subject to Section 11.9 hereof, nonrefundable when paid and (III) subject to Section 11.9 hereof, computed on the basis of a year of 365 or 366 days, as applicable, for the actual number of days elapsed. (b) Other Fees. Subject to Section 11.9 hereof, the Borrower agrees to pay to the Administrative Agent and the Syndication Agent for their accounts as specified therein, all fees set forth in the Fee Letters. Section 2.5 Prepayment. (a) Voluntary Prepayments. The principal amount of any Base Rate Advance may be prepaid in full or in part at any time, without penalty and, upon two Business Days' prior telephonic notice (to be promptly followed by written notice), and any LIBOR Advance or Offshore Advance may be prepaid, subject to the other terms of this Section, upon three Business Days' prior telephonic notice (to be promptly followed by written notice) by an Authorized Signatory to the Administrative Agent. LIBOR Advances and Offshore Advances may be voluntarily prepaid only so long as the Borrower concurrently reimburses the Lenders in accordance with Section 2.9 hereof. Any notice of prepayment shall be irrevocable. Notwithstanding anything herein to the contrary, no Bid Rate Advances may be prepaid without the prior consent of the Lender making such Bid Rate Advance. (b) Mandatory Prepayment. On or before the date of any reduction of any of the Commitments, the Borrower shall prepay applicable outstanding Advances made under the 46 52 Applicable Commitment (as determined in accordance with Section 2.10 hereof) in an amount necessary to reduce the sum of such outstanding Advances (and Reimbursement Obligations, if applicable) to an amount less than or equal to the Applicable Commitment as so reduced. To the extent that any prepayment requires that a LIBOR Advance or an Offshore Advance be repaid on a date other than the last day of its Interest Period, the Borrower shall reimburse each Lender in accordance with Section 2.9 hereof. Furthermore, if on any Reset Date, the Dollar Equivalent of all outstanding Advances under any Loan plus all Reimbursement Obligations exceeds the Applicable Commitment as a result of a change in Dollar Equivalents ("Dollar Equivalent Excess"), the Administrative Agent shall promptly notify the Borrower thereof, and within two Business Days after receipt of such notice, the Borrower shall prepay Advances under the Applicable Commitment in an amount equal to the Dollar Equivalent Excess. (c) Prepayments, Generally. Allocation of prepayments among the Revolving Credit Loan and the Working Line Loan, and the various subfacilities of the Loans described in this Agreement shall be determined in accordance with the terms of Section 2.10(d) hereof. Any voluntary partial prepayment of a Base Rate Advance shall be in a principal amount which is at least $1,000,000 and which is an integral multiple of $100,000. Any voluntary partial prepayment of a LIBOR Advance shall be in a principal amount which is at least $1,000,000 and which is an integral multiple of $100,000, and to the extent that any prepayment of a LIBOR Advance is made on a date other than the last day of its Interest Period, the Borrower shall reimburse each Lender in accordance with Section 2.9 hereof. Any voluntary partial prepayment of an Offshore Advance shall be in a principal amount which is at least $1,000,000 and which is an integral multiple of $100,000 (or in each case, the Dollar Equivalent thereof), and to the extent that any prepayment of an Offshore Advance is made on a date other than the last day of its Interest Period, the Borrower shall reimburse each Lender in accordance with Section 2.9 hereof. Section 2.6 Reduction and Change of Commitments. (a) Voluntary Reduction. The Borrower shall have the right, upon not less than 3 Business Days' notice (provided no notice shall be required for a termination in whole of the Commitments) by an Authorized Signatory to the Administrative Agent (if telephonic, to be confirmed by telex or in writing on or before the date of reduction or termination), which shall promptly notify the Lenders, to terminate or reduce the Revolving Credit Commitment or the Working Line Commitment, in whole or in part. Each partial termination shall be in an aggregate amount which is at least $5,000,000 and which is an integral multiple of $100,000, and no voluntary reduction in any Commitment shall cause any LIBOR Advance or Offshore Advance to be repaid prior to the last day of its Interest Period. Notwithstanding anything herein to the contrary, in no event shall the Borrower have the right to reduce the Revolving Credit Commitment to an amount less than the aggregate outstanding Reimbursement Obligations unless such Reimbursement Obligations are cash collateralized with funds adequate to pay all interest, expenses and fees to be earned throughout the remaining term of such Reimbursement Obligations. (b) Reduction and Termination of the Commitments. 47 53 (i) The Working Line Commitment shall be automatically and immediately reduced to zero (i) on the first Option Date, unless the Lenders have agreed to an Extension Option in accordance with the terms of Section 2.17 hereof, (ii) on the Conversion Date (if any) or (iii) on the Extension Final Maturity (as extended from time to time in accordance with the terms of Section 2.17 hereof). (ii) All of the Commitments shall be automatically and immediately reduced to zero and terminated on the Maturity Date. (c) General Requirements. Allocation of reductions in the Commitments among the Revolving Credit Loan and the Working Line Loan, and the various subfacilities of the Loans described in this Agreement shall be determined in accordance with the terms of Section 2.10(d) hereof. Upon any reduction of any Commitments pursuant to this Section 2.6, the Borrower shall immediately make a repayment of applicable Advances in accordance with Section 2.5 hereof. The Borrower shall reimburse each Lender for any loss or out-of-pocket expense incurred by each Lender in connection with any such payment, as set forth in Section 2.9 hereof. The Borrower shall not have any right to rescind any termination or reduction. Once reduced, neither the Revolving Credit Commitment nor the Working Line Commitment may be increased or reinstated. Section 2.7 Non-Receipt of Funds by the Administrative Agent. Unless the Administrative Agent shall have been notified by a Lender prior to the date of any proposed Advance (which notice shall be effective upon receipt) that such Lender does not intend to make the proceeds of such Advance available to the Administrative Agent, the Administrative Agent may assume that such Lender has made such proceeds available to the Administrative Agent on such date, and the Administrative Agent may in reliance upon such assumption (but shall not be required to) make available to the Borrower a corresponding amount. If such corresponding amount is not in fact made available to the Administrative Agent by such Lender, the Administrative Agent shall be entitled to recover such amount on demand from such Lender (or, if such Lender fails to pay such amount forthwith upon such demand, from the Borrower) together with interest thereon in respect of each day during the period commencing on the date such amount was available to the Borrower and ending on (but excluding) the date the Administrative Agent receives such amount from the Lender, with interest thereon if paid by such Lender, at a per annum rate equal to the Federal Funds Rate, and if paid by the Borrower, at the applicable Base Rate Basis. No Lender shall be liable for any other Lender's failure to fund an Advance hereunder. Section 2.8 Payment of Principal of Advances. The Borrower agrees to pay the principal amount of the Advances to the Administrative Agent for the account of the Lenders as follows: (a) End of Interest Period. The principal amount of each LIBOR Advance, Offshore Advance, Swingline Advance and Bid Rate Advance hereunder shall be due and payable on its Payment Date, which principal payment may be made by means of a Refinancing Advance. (b) Commitment Reduction. On the date of any reduction of the Commitments pursuant to Section 2.6 hereof, including the Maturity Date, the Option Date (if applicable), the Conversion Date (if any) and the Extension Final Maturity (if applicable), the aggregate amount of the Advances 48 54 outstanding on such date of reduction with respect to any Loan, in excess of the Applicable Commitment (as determined in accordance with the terms of Section 2.10(d) hereof) as reduced (minus all outstanding Reimbursement Obligations, if the Applicable Commitment is the Revolving Credit Commitment) shall be due and payable, which principal payment may not be made by means of Refinancing Advances. (c) Option Date or Extension Final Maturity Date. The principal amount of the Working Line Advances outstanding shall be due and payable (i) on the first Option Date, unless the Borrower has elected a Conversion Option or the Borrower and the Lenders have agreed to an Extension Option in accordance with the terms of Section 2.17 hereof, or (ii) on the Extension Final Maturity (as extended from time to time in accordance with the terms of Section 2.17 hereof), unless the Borrower has elected the Conversion Option. (d) Maturity Date. The principal amount of all of the Advances under the Revolving Credit Loan and the Working Line Loan (unless due pursuant to subsection (c) above), the Term Loan (if any), all accrued interest and fees thereon, and all other Obligations, shall be due and payable in full on the Maturity Date. Section 2.9 Reimbursement. Whenever any Lender shall sustain or incur any losses or reasonable out-of-pocket expenses in connection with (a) failure by the Borrower to borrow any LIBOR Advance, Offshore Advance (or Swingline Advance or Bid Rate Advance which is at a fixed rate) after having given notice of its intention to borrow in accordance with Section 2.2 hereof (whether by reason of the Borrower's election not to proceed or the non-fulfillment of any of the conditions set forth in Article 3 hereof), or (b) any prepayment for any reason of any LIBOR Advance or Offshore Advance in whole or in part (including a prepayment pursuant to Section 9.5(b) hereof), the Borrower agrees to pay to any such Lender, upon its demand, an amount sufficient to compensate such Lender for all such losses and out-of-pocket expenses. Such Lender's good faith determination of the amount of such losses or out-of-pocket expenses, calculated in its usual fashion, absent manifest error, shall be binding and conclusive. Such losses shall include, without limiting the generality of the foregoing, lost profits and reasonable expenses incurred by such Lender in connection with the re-employment of funds prepaid, repaid, converted or not borrowed, converted or paid, as the case may be. Upon request of the Borrower, such Lender shall provide a certificate setting forth the amount to be paid to it by the Borrower hereunder and calculations therefor. Section 2.10 Manner of Payment. (a) Each payment (including prepayments) by the Borrower of the principal of or interest on the Advances, fees, and any other amount owed under this Agreement or any other Loan Paper shall be made not later than 1:00 p.m. (Dallas, Texas time or, if the Approved Offshore Currency Payment Office is not in Dallas, such time as is otherwise designated by the Administrative Agent) on the date specified for payment under this Agreement to the Administrative Agent at the Administrative Agent's office (or the Approved Offshore Currency Payment Office, if payment is made in respect of an Offshore Advance, Offshore Bid Rate Advance or Swingline Advance in an 49 55 Approved Offshore Currency), in immediately available funds. Except as provided in Article 9 hereof, such payments shall be made in the Applicable Currency borrowed. (b) If any payment under this Agreement or any other Loan Paper shall be specified to be made upon a day which is not a Business Day, it shall be made on the next succeeding day which is a Business Day, unless such Business Day falls in another calendar month, in which case payment shall be made on the preceding Business Day. Any extension of time shall in such case be included in computing interest and fees, if any, in connection with such payment. (c) The Borrower agrees to pay principal, interest, fees and all other amounts due under the Loan Papers without deduction for set-off or counterclaim or any deduction whatsoever. (d) Notwithstanding anything to the contrary herein or in any Loan Paper, to the extent the Borrower makes any voluntary prepayment, or voluntary reduction of the Commitments under Sections 2.5 or 2.6 hereof, or any mandatory prepayment, or mandatory reduction of any Commitments under Sections 2.5 or 2.6 hereof, or any repayment, then such reduction of Commitments, or such repayment or prepayment shall be applied as follows: (i) So Long as there Exists No Payment Default or Event of Default. (A) Repayments and Prepayments. So long as there exists no Default under Section 8.1(b) hereof or any Event of Default, all voluntary and mandatory repayments and prepayments not resulting from a reduction in a Commitment shall be applied first to the Swingline Advances until all the outstandings under the Swingline Loan have been paid in full, then as directed by the Borrower, and, in the absence of direction by the Borrower, shall be deemed to repay and prepay, in accordance with each Lender's Applicable Specified Percentage (as applicable): (1) the Bid Rate Advances until all Bid Rate Advances have been paid in full, then (2) the Offshore Advances until all the outstanding Offshore Advances have been repaid in full, then (3) the other Revolving Credit Advances until all the outstandings under the Revolving Credit Loan have been repaid in full, then (4) (only if the date such payment is received is prior to the Conversion Date (if any)), the Working Line Loan until all the outstandings under the Working Line Loan have been repaid in full, then (5) (only if the date such payment is received is after the Conversion Date (if any)), the Working Line Loan, until all outstandings under the Working Line loan have been repaid in full, and then (6) all remaining outstanding and unpaid Obligations. The above described repayments and prepayments shall be applied among various rate tranches within each Loan set forth above as directed by the Borrower, and, in the absence of direction by the Borrower, shall be deemed to repay and prepay (within each Loan as it is repaid as set forth above) Base Rate Advances first, then LIBOR Advances, then Bid Rate Advances and finally Offshore Advances. (B) Reductions of the Commitments. So long as there exists no Default under Section 8.1(b) hereof or any Event of Default, all voluntary and mandatory 50 56 reductions in the Commitments shall be applied as directed by the Borrower, and in the absence of direction by the Borrower, shall be deemed to reduce, respectively, (1) the Revolving Credit Commitment until it has been reduced to zero, then (2) if prior to the Conversion Date (if any), the Working Line Commitment until the Working Line Commitment has been reduced to zero. Within each reduction set forth above, the Swingline Commitment and the Offshore Commitment shall be simultaneously reduced with the Revolving Credit Commitment until the Swingline Commitment and the Offshore Commitment have been reduced to zero. (ii) During the Existence of a Payment Default or Event of Default. (A) Repayments and Prepayments. So long as there exists a Default under Section 8.1(b) hereof or any Event of Default, all mandatory and voluntary prepayments and repayments shall be applied to first to expenses of the Administrative Agent incurred in connection with the Loans, then to Advances outstanding under the Swingline Loan, and then to Advances (including all Bid Rate Advances) outstanding under each of the Revolving Credit Loan and the Working Line Loan, pro rata to each Lender, until all the Advances outstanding under each of the Revolving Credit Loan and the Working Line Loan have been repaid in full, and then to all remaining outstanding Obligations. (B) Reductions in the Commitments. So long as there exists a Default under Section 8.1(b) hereof or any Event of Default, all mandatory and voluntary reductions in the Commitment shall be applied to the Revolving Credit Commitment and, if prior to the Conversion Date (if any), to the Working Line Commitment, pro rata. (C) Pro Rata. Pro rata to each Lender means based on the percentage that the outstanding Advances and Reimbursement Obligations owed to such Lender hereunder bears to the aggregate Advances and Reimbursement Obligations owed to all Lenders hereunder, after the payment of the Administrative Agent's expenses incurred in connection with the Loans. (e) At all times prior to the Lenders making a Mandatory Revolver Advance with respect to any Swingline Advance, the Administrative Agent shall distribute all payments in respect of the Swingline Advances to the Swingline Bank. At such time, if any, that the Lenders make a Mandatory Revolver Advance which repays a Swingline Advance, the Administrative Agent shall distribute all payments in respect of the Swingline Advances to the Lenders in accordance with their respective Revolving Credit Specified Percentages. (f) The Administrative Agent shall not be liable to any party to this Agreement in any way whatsoever for any delay, or the consequences of any delay, other than as a result of the gross negligence or willful misconduct of the Administrative Agent, in the crediting to any account of any amount denominated in an Approved Offshore Currency. 51 57 (g) Any Lender may request that portion of the Loans made by it be evidenced by a promissory note. In such event, the Borrower shall (at its expense) prepare, execute and deliver to such Lender a promissory note payable to the order of such Lender, in the form of Exhibit A, Exhibit B, Exhibit C, Exhibit D or Exhibit E, as applicable. Thereafter, the portion of the Loans evidenced by such promissory note, and interest thereon, shall at all times (including after assignment pursuant to Section 11.6. hereof) be represented by one or more promissory notes in such form payable to the order of the payee named therein. Section 2.11 Lending Offices. Each Lender's initial Lending Office for Base Rate Advances and LIBOR Advances, and its Offshore Lending Office, is set forth opposite its name on Schedule 1.2 hereto. Each Lender shall have the right at any time and from time to time to designate a different office of itself or of any Bank Affiliate as one of such Lender's Lending Offices, and to transfer any outstanding LIBOR Advance, Offshore Advance and other Advances to such Lending Office. No such designation or transfer shall result in any liability on the part of the Borrower for increased costs or expenses resulting solely from such designation or transfer (except any such transfer which is made by a Lender pursuant to Section 9.3 or 9.5 hereof, or otherwise for the purpose of complying with Applicable Law). Increased costs for expenses resulting from a change in law occurring subsequent to any such designation or transfer shall be deemed not to result solely from such designation or transfer. Section 2.12 Sharing of Payments. Any Lender obtaining a payment (whether voluntary or involuntary, due to the exercise of any right of set-off, or otherwise) on account of any of its Advances or Reimbursement Obligations in excess of its Applicable Specified Percentage of all payments made by the Borrower with respect to such Advances or Reimbursement Obligations shall purchase from each other Lender such participation in such Advances or Reimbursement Obligations made by such other Lender as shall be necessary to cause such purchasing Lender to share the excess payment pro rata according to their Applicable Specified Percentages with each other Lender which is not in default of its obligations hereunder with respect to such Advance or Reimbursement Obligations; provided, however, that if all or any portion of such excess payment is thereafter recovered from such purchasing Lender, the purchase shall be rescinded and the purchase price restored to the extent of such recovery, but without interest; and provided further, that after an Event of Default, such payments will be shared pro rata among all Lenders based on the total amount of all Advances or Reimbursement Obligations outstanding. The Borrower agrees that any Lender so purchasing a participation from another Lender pursuant to this Section, to the fullest extent permitted by law, may exercise all its rights of payment (including the right of set-off) with respect to such participation as fully as if such Lender were the direct creditor of the Borrower in the amount of such participation. Section 2.13 Calculation of LIBOR Rate, Offshore Dollar Rate and Approved Offshore Currency Rate. The provisions of this Agreement relating to calculation of the LIBOR Rate are included only for the purpose of determining the rate of interest or other amounts to be paid hereunder that are based upon such rate, it being understood that each Lender shall be entitled to fund and maintain its funding of all or any part of a LIBOR Advance as it sees fit. The provisions 52 58 of this Agreement relating to calculation of the Offshore Dollar Rate and Approved Offshore Currency Rate are included only for the purpose of determining the rate of interest or other amounts to be paid hereunder that are based upon such rate, it being understood that each Lender shall be entitled to fund and maintain its funding of all or any part of an Offshore Advance as such Lender determines in its sole discretion. Section 2.14 Booking Loans. Any Lender may make, carry or transfer Advances at, to or for the account of any of its branch offices or the office of any Bank Affiliate. Section 2.15 Taxes. (a) Any and all payments by the Borrower hereunder shall be made, in accordance with Section 2.10 hereof, free and clear of and without deduction for any and all present or future taxes, levies, imposts, deductions, charges and withholdings, and all liabilities with respect thereto, excluding, in the case of each Lender and the Administrative Agent, taxes imposed on its overall net income, gross receipts, and capital and franchise taxes imposed on it (including interest and penalties imposed thereon), by the jurisdiction under the laws of which such Lender or the Administrative Agent (as the case may be) is organized or any political subdivision thereof (all such non-excluded taxes, levies, imposts, deductions, charges, withholdings and liabilities being hereinafter referred to as "Taxes"). If the Borrower shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder to any Lender or the Administrative Agent, (x) the sum payable shall be increased as may be necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 2.15) such Lender or the Administrative Agent (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (y) the Borrower shall make such deductions and (z) the Borrower shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with Applicable Law. (b) In addition, the Borrower agrees to pay any and all stamp and documentary taxes and any and all other excise and property taxes, charges and similar levies that arise from any payment made hereunder or from the execution, delivery or registration of, or otherwise with respect to, this Agreement or any other Loan Paper (hereinafter referred to as "Other Taxes"). (c) The Borrower will indemnify each Lender and the Administrative Agent for the full amount of Taxes and Other Taxes (including, without limitation, any Taxes or Other Taxes imposed by any jurisdiction on amounts payable under this Section 2.15) paid by such Lender or the Administrative Agent (as the case may be) and all liabilities (including penalties, additions to tax, interest and reasonable expenses) arising therefrom or with respect thereto whether or not such Taxes or Other Taxes were correctly or legally asserted, other than penalties, additions to tax, interest and expenses arising as a result of gross negligence on the part of such Lender or the Administrative Agent; provided, however, that the Borrower shall have no obligation to indemnify such Lender or the Administrative Agent (i) unless notice has been given by such Lender or the Administrative Agent, as applicable, in a time sufficient to afford the Borrower, in good faith, a reasonable opportunity to contest such payment by such Lender or the Administrative Agent, provided that such 53 59 opportunity to contest exists under Applicable Law, and (ii) until such Lender or the Administrative Agent shall have delivered to the Borrower a certificate setting forth in reasonable detail the basis of the Borrower's obligation to indemnify such Lender or the Administrative Agent pursuant to this Section 2.15. This indemnification shall be made within 30 days from the date such Lender or the Administrative Agent (as the case may be) makes written demand therefor. (d) Within 30 days after the date of any payment of Taxes, the Borrower will furnish to the Administrative Agent the original or a certified copy of a receipt evidencing payment thereof. If no Taxes are payable in respect of any payment hereunder, the Borrower will furnish to the Administrative Agent a certificate from each appropriate taxing authority, or an opinion of counsel acceptable to the Administrative Agent, in either case stating that such payment is exempt from or not subject to Taxes, provided, however, that such certificate or opinion need only be given if: (i) the Borrower makes any payment from any account located outside the United States, or (ii) the payment is made by a payor that is not a United States Person. For purposes of this Section 2.15 the terms "United States" and "United States Person" shall have the meanings set forth in Section 7701 of the Code. (e) Each Lender which is not a United States Person hereby agrees that: (i) it shall, no later than the Closing Date (or, in the case of a Lender which becomes a party hereto pursuant to Section 11.6 after the Closing Date, the date upon which such Lender becomes a party hereto) deliver to the Borrower through the Administrative Agent, with a copy to the Administrative Agent: (A) if any lending office is located in the United States of America, two (2) accurate and complete signed originals of Internal Revenue Service Form 4224 or any successor thereto ("Form 4224"), (B) if any lending office is located outside the United States of America, two (2) accurate and complete signed originals of Internal Revenue Service Form 1001 or any successor thereto ("Form 1001"). in each case indicating that such Lender is on the date of delivery thereof entitled to receive payments of principal, interest and fees for the account of such lending office or lending offices under this Agreement free from withholding of United States Federal income tax; (ii) if at any time such Lender changes its lending office or lending offices or selects an additional lending office it shall, at the same time or reasonably promptly thereafter but only to the extent the forms previously delivered by it hereunder are no longer effective, deliver to the Borrower through the Administrative Agent, with a copy to the Administrative Agent, in replacement for the forms previously delivered by it hereunder: (A) if such changed or additional lending office is located in the United States of America, two (2) accurate and complete signed originals of Form 4224; or 54 60 (B) otherwise, two (2) accurate and complete signed originals of Form 1001, in each case indicating that such Lender is on the date of delivery thereof entitled to receive payments of principal, interest and fees for the account of such changed or additional lending office under this Agreement free from withholding of United States Federal income tax; (iii) it shall, before or promptly after the occurrence of any event (including the passing of time but excluding any event mentioned in clause (ii) above) requiring a change in the most recent Form 4224 or Form 1001 previously delivered by such Lender and if the delivery of the same be lawful, deliver to the Borrower through the Administrative Agent with a copy to the Administrative Agent, two (2) accurate and complete original signed copies of Form 4224 or Form 1001 in replacement for the forms previously delivered by such Lender; and (iv) it shall, promptly upon the request of the Borrower to that effect, deliver to the Borrower such other forms or similar documentation as may be required from time to time by any applicable law, treaty, rule or regulation in order to establish such Lender's tax status for withholding purposes. (f) Without prejudice to the survival of any other agreement of the Borrower hereunder, the agreements and obligations of the Borrower contained in this Section 2.15 shall survive the payment in full of principal and interest hereunder. (g) Any Lender claiming any additional amounts payable pursuant to this Section 2.15 shall use its reasonable best efforts (consistent with its internal policy and legal and regulatory restrictions) to change the jurisdiction of its lending office, if the making of such a change would avoid the need for, or reduce the amount of, any such additional amounts which may thereafter accrue and would not, in the sole judgment of such Lender, be otherwise disadvantageous to such Lender. (h) Each Lender (and the Administrative Agent with respect to payments to the Administrative Agent for its own account) agrees that (i) it will take all reasonable actions by all usual means to maintain all exemptions, if any, available to it from United States withholding taxes (whether available by treaty, existing administrative waiver, by virtue of the location of any Lender's lending office) and (ii) otherwise cooperate with the Borrower to minimize amounts payable by the Borrower under this Section 2.15; provided, however, the Lenders and the Administrative Agent shall not be obligated by reason of this Section 2.15(h) to contest the payment of any Taxes or Other Taxes or to disclose any information regarding its tax affairs or tax computations or reorder its tax or other affairs or tax or other planning. Section 2.16 Letters of Credit. 55 61 (a) The Letter of Credit Facility. The Borrower may request the Primary Issuing Bank, on the terms and conditions hereinafter set forth, to issue, and the Primary Issuing Bank shall, if so requested, issue stand-by letters of credit (each a "Primary Letter of Credit", which together with any Acquired Letters of Credit, are herein collectively referred to as the "Letters of Credit", or individually as a "Letter of Credit") for the account of the Borrower from time to time on any Business Day from the Closing Date until the Maturity Date in an aggregate maximum amount (assuming compliance with all conditions to issuance) not to exceed at any time outstanding the lesser of (i) the Dollar Equivalent of $300,000,000 and (ii) the difference of (A) the Revolving Credit Commitment minus (B) the Dollar Equivalent of the sum of aggregate principal amount of Revolving Credit Advances then outstanding plus the outstanding principal face amount of all Acquired Letters of Credit (the "Letter of Credit Facility"). Any Letter of Credit can be issued in a face amount denominated in either Dollars or an Approved Offshore Currency. No Secondary Issuing Bank may issue any Letter of Credit except Acquired Letters of Credit issued prior to the dates of the AMFM Acquisition and the SFX Acquisition, respectively. No Letter of Credit shall have an expiration date (including all rights of renewal) later than the earlier of (i) the Maturity Date or (ii) one year after the date of issuance thereof. Immediately upon the issuance of each Primary Letter of Credit, immediately upon the consummation of the SFX Acquisition, and immediately upon the consummation of the AMFM Acquisition (and the AMFM Entities and the SFX Entities becoming Subsidiaries of the Borrower), as applicable, the Primary Issuing Bank and the Secondary Issuing Banks shall be deemed to have sold and transferred to each Lender, and each Lender shall be deemed to have purchased and received from the Primary Issuing Bank and the Secondary Issuing Banks, in each case irrevocably and without any further action by any party, an undivided interest and participation in each such Primary Letter of Credit and/or Acquired Letter of Credit, each drawing thereunder and the obligations of the Borrower and/or its Subsidiaries under this Agreement and any Letter of Credit Agreement in respect thereof in an amount equal to the product of (i) such Lender's Revolving Credit Specified Percentage times (ii) the Dollar Equivalent of the maximum amount available to be drawn under such Letter of Credit (assuming compliance with all conditions to drawing). Within the limits of the Letter of Credit Facility, and subject to the limits referred to above, the Borrower may (A) request the issuance of Primary Letters of Credit under this Section 2.16(a), (B) repay any Advances resulting from drawings under Letters of Credit pursuant to Section 2.16(c) hereof, (C) request that any Primary Letter of Credit or Acquired Letter of Credit be extended, renewed, amended or replaced (which such action with respect to Acquired Letters of Credit shall be taken by the Secondary Issuing Banks and shall be permitted only so long as the principal face amount of each such Acquired Letter of Credit does not increase) and (D) request the issuance of additional Primary Letters of Credit under this Section 2.16(a). During the term of this Agreement, provided that no Default or Event of Default then exists and subject to the same conditions for the issuance of a Primary Letter of Credit set forth in Section 3.2 hereof, (I) the Primary Issuing Bank may at the Borrower's option, automatically renew any expiring Primary Letters of Credit for a period of time not to exceed the earlier of (x) five (5) days prior to the Maturity Date or (y) one year after the date of renewal thereof and (II) the Secondary Issuing Banks may at the Borrower's option, automatically renew any expiring Acquired Letters of Credit for a period of time not to exceed the earlier of (x) five (5) days prior to the Maturity Date or (y) one year after the date of renewal thereof. 56 62 (b) Request for Issuance. Each Primary Letter of Credit shall be issued upon notice, given not later than 11:00 a.m. (Dallas time) on the third Business Day prior to the date of the proposed issuance of such Primary Letter of Credit, by the Borrower to the Primary Issuing Bank, which shall give to the Administrative Agent and each Lender prompt notice thereof by telecopier. Each Primary Letter of Credit shall be issued upon notice given in accordance with the terms of any separate agreement between the Borrower and the Primary Issuing Bank in form and substance reasonably satisfactory to the Borrower and the Primary Issuing Bank providing for the issuance of Primary Letters of Credit pursuant to this Agreement and containing terms and conditions not inconsistent with this Agreement (together with all agreements referred to in the following sentence, "Letter of Credit Agreements"), provided that if any such terms and conditions are inconsistent with this Agreement, this Agreement shall control. Each Acquired Letter of Credit may be subject to any separate agreement between the Borrower and a Secondary Issuing Bank providing for the original issuance of, and renewals and extensions of, Acquired Letters of Credit, provided that if any such terms and conditions are inconsistent with this Agreement, this Agreement shall control. Each such notice of issuance of a Primary Letter of Credit (a "Notice of Issuance") shall be by telecopier, specifying therein, the requested (A) date of such issuance (which shall be a Business Day), (B) maximum amount and currency of such Primary Letter of Credit, (C) expiration date of such Primary Letter of Credit, (D) name and address of the beneficiary of such Primary Letter of Credit, (E) form of such Primary Letter of Credit and (F) such other information as shall be required pursuant to the relevant Letter of Credit Agreement. If the requested terms of such Primary Letter of Credit are acceptable to the Primary Issuing Bank in its reasonable discretion, the Primary Issuing Bank shall, subject to this Section 2.16(b), upon fulfillment of the applicable conditions set forth in Article 3 hereof, make such Primary Letter of Credit available to the Borrower at its office referred to in Section 11.1 or as otherwise agreed with the Borrower in connection with such issuance. (c) Drawing and Reimbursement. The payment by any of the Issuing Banks of a draft drawn under any Letter of Credit shall constitute for all purposes of this Agreement the making by such Issuing Bank of a Revolver Advance in Dollars in the principal amount equal to the Dollar Equivalent of the amount of such payment, which shall bear interest at the applicable Base Rate Basis, in the amount of such draft. For purposes of the preceding sentence, each determination of Dollar Equivalent shall be made as of the date of the respective Advance proceeds of which were used to pay a draft. The making of such Revolver Advance shall be automatic and without any requirement of compliance with the conditions of Articles 2 and 3 hereof (including, without limitation, any provision of Section 2.1(a)(i) hereof limiting a Lender's obligation to make Revolving Credit Advances in excess of its Revolving Credit Specified Percentage of the Revolving Credit Commitment). In the event that a drawing under any Letter of Credit is not reimbursed by the Borrower by 11:00 a.m. (Dallas time) on the first Business Day after such drawing, such Issuing Bank shall promptly notify Administrative Agent and each other Revolving Credit Lender. Each such Revolving Credit Lender shall, on the first Business Day following such notification, make a Revolver Advance, which shall bear interest at the applicable Base Rate Basis, and shall be used to repay the applicable portion of such Issuing Bank's Revolver Advance with respect to such Letter of Credit, in an amount equal to the amount of its participation in such drawing for application to reimburse such Issuing Bank (but without any requirement for compliance with the applicable conditions set forth in Article 3 hereof) and shall make available to the Administrative Agent for the 57 63 account of such Issuing Bank, by deposit at the Administrative Agent's office, in same day funds, the amount of such Revolver Advance. In the event that any Lender fails to make available to the Administrative Agent for the account of such Issuing Bank the amount of such Revolver Advance, such Issuing Bank shall be entitled to recover such amount on demand from such Lender together with interest thereon at a rate per annum equal to the lesser of (i) the Highest Lawful Rate or (ii) the Federal Funds Rate. (d) Increased Costs. If any change in any law or regulation or in the interpretation thereof by any court or administrative or governmental authority charged with the administration thereof shall either (i) impose, modify or deem applicable any reserve, special deposit or similar requirement against letters of credit or guarantees issued by, or assets held by, or deposits in or for the account of, any of the Issuing Banks or any Lender or (ii) impose on any of the Issuing Banks or any Lender any other condition regarding this Agreement or such Lender or any Letter of Credit, and the result of any event referred to in the preceding clause (i) or (ii) shall be, in the reasonable opinion of any of the Issuing Banks or any Lender, to increase the cost to any of the Issuing Banks of issuing or maintaining any Letter of Credit or to any Lender of purchasing any participation therein or making any Advance pursuant to Section 2.16(c) ("Increased Letter of Credit Costs"), then, upon demand by such Issuing Bank(s) or such Lender, the Borrower shall, subject to Section 11.9 hereof, pay to such Issuing Bank(s) or such Lender, from time to time as specified by such Issuing Bank(s) or such Lender, additional amounts that shall be sufficient to compensate such Issuing Bank(s) or such Lender for such Increased Letter of Credit Costs. Notwithstanding the foregoing, any demand for Increased Letter of Credit Costs shall not include any Letter of Credit costs with respect to any period more than 180 days prior to the date that any such Issuing Bank or any Lender gives notice to the Borrower of such Increased Letter of Credit Costs unless the effective date of the condition which results in the right to received Increased Letter of Credit Costs is retroactive (the "Increased Letter of Credit Costs Retroactive Effective Date"). If any Increased Letter of Credit Costs has an Increased Costs Letter of Credit Retroactive Effective Date and any such Issuing Bank or any Lender demands compensation within 180 days after the date setting the Increased Letter of Credit Costs Effective Date (the "Increased Letter of Credit Costs Set Date"), such Issuing Bank or such Lender, as appropriate, shall have the right to receive such Increased Letter of Credit Costs from the Increased Letter of Credit Retroactive Effective Date. If such Issuing Bank or a Lender does not demand such Increased Letter of Credit Costs within 180 days after the Increased Letter of Credit Costs Set Date, such Issuing Bank or such Lender, as appropriate, may not receive payment of Increased Letter of Credit Costs with respect to any period more than 180 days prior to such demand. A certificate as to the amount of such increased cost, submitted to the Borrower by such Issuing Bank or such Lender, shall include in reasonable detail the basis for the demand for additional compensation and shall be conclusive and binding for all purposes, absent demonstrable error. The obligations of the Borrower under this Section 2.16(d) shall survive termination of this Agreement. Any Issuing Bank or any Lender claiming any additional compensation under this Section 2.16(d) shall use reasonable efforts (consistent with legal and regulatory restrictions) to reduce or eliminate any such additional compensation which may thereafter accrue and which efforts would not, in the sole discretion of such Issuing Bank or such Lender, be otherwise disadvantageous. 58 64 (e) Obligations Absolute. The obligations of the Borrower under this Agreement with respect to any Letter of Credit, any Letter of Credit Agreement and any other agreement or instrument relating to any Letter of Credit or any Advance pursuant to Section 2.16(c) shall be unconditional and irrevocable, and shall be paid strictly in accordance with the terms of this Agreement, such Letter of Credit Agreement and such other agreement or instrument under all circumstances, including, without limitation, the following circumstances: (i) any lack of validity or enforceability of this Agreement, any other Loan Paper, any Letter of Credit Agreement, any Letter of Credit or any other agreement or instrument relating thereto (collectively, the "L/C Related Documents"); (ii) any change in the time, manner or place of payment of, or in any other term of, all or any of the Obligations of the Borrower in respect of the Letters of Credit or any Revolving Credit Advance pursuant to Section 2.16(c) or any other amendment or waiver of or any consent to departure from all or any of the L/C Related Documents; (iii) the existence of any claim, set-off, defense or other right that the Borrower may have at any time against any beneficiary or any transferee of a Letter of Credit (or any Persons for whom any such beneficiary or any such transferee may be acting), any Issuing Bank, any Lender or any other Person, whether in connection with this Agreement, the transactions contemplated hereby or by the L/C Related Documents or any unrelated transaction; (iv) any statement or any other document presented under a Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect, except to the extent that any payment by any Issuing Bank against any such statement or other document shall be as a result of such Issuing Bank's gross negligence or willful misconduct; (v) payment by any Issuing Bank under a Letter of Credit against presentation of a draft or certificate that does not comply with the terms of the Letter of Credit, except for any payment made upon such Issuing Bank's gross negligence or willful misconduct; (vi) any exchange, release or non-perfection of any Collateral, or any release or amendment or waiver of or consent to departure from any Guaranty, for all or any of the Obligations of the Borrower in respect of the Letters of Credit or any Revolving Credit Advance pursuant to Section 2.16(c) hereof; or (vii) any other circumstance or happening whatsoever, whether or not similar to any of the foregoing, including, without limitation, any other circumstance that might otherwise constitute a defense available to, or a discharge of, the Borrower or a guarantor, other than the Issuing's Bank gross negligence or wilful misconduct. (f) Compensation for Letters of Credit. 59 65 (i) Credit Fees. Subject to Section 11.9 hereof, the Borrower shall pay to the Administrative Agent for the account of each Lender a credit fee (which shall be payable quarterly in arrears on each Quarterly Date and on the Maturity Date) on the average daily amount available for drawing under all outstanding Letters of Credit (computed, subject to Section 11.9 hereof, on the basis of a 365-day year for the actual number of days elapsed) at a per annum rate equal to the Applicable Margin for LIBOR Advances determined as set forth in subsection (ii) below. (ii) Adjustment of Credit Fee. The credit fee payable in respect of the Letters of Credit shall be subject to reduction or increase, as applicable and as set forth in the table in the definition of "Applicable Margin". Any such increase or reduction in such fee shall be effective as specified in the definition of "Applicable Margin". (iii) Issuance Fee. Subject to Section 11.9 hereof, the Borrower shall pay to (A) the Administrative Agent, for the sole account of the Primary Issuing Bank, an issuance fee of $500 on the date of issuance, amendment, renewal or extension of each Primary Letter of Credit and (B) the Secondary Issuing Bank taking such action, for the sole account of the Secondary Issuing Bank taking such action, a renewal fee of $500 on the date of any amendment, renewal or extension of any Acquired Letter of Credit (so long as in each case the principal amount of such Acquired Letter of Credit does not increase). (g) L/C Cash Collateral Account. (i) Upon the occurrence of an Event of Default and demand by the Administrative Agent pursuant to Section 8.2(c) hereof, other than an Event of Default pursuant to Section 8.1(f) or 8.1(g) hereof upon which event the referenced sums will become immediately due and payable without further action by the Administrative Agent, the Borrower will promptly pay to the Administrative Agent in immediately available funds an amount equal to 100% of the Dollar Equivalent of the maximum amount then available to be drawn under the Letters of Credit then outstanding. Any amounts so received by the Administrative Agent shall be deposited by the Administrative Agent in a deposit account maintained by the Primary Issuing Bank (the "L/C Cash Collateral Account"). (ii) As security for the payment of all Reimbursement Obligations and for any other Obligations, the Borrower hereby grants, conveys, assigns, pledges, sets over and transfers to the Administrative Agent and Administrative Agent accepts (for the benefit of the Issuing Banks and Lenders), and creates in the Administrative Agent's favor (for the benefit of the Issuing Banks and Lenders) a Lien in, all money, instruments and securities at any time held in or acquired in connection with the L/C Cash Collateral Account, together with all proceeds thereof. The L/C Cash Collateral Account shall be under the sole dominion and control of the Administrative Agent and the Borrower shall have no right to withdraw or to cause the Administrative Agent to withdraw any funds deposited in the L/C Cash Collateral Account except as otherwise provided in Section 2.16(g)(iii) below. At any time 60 66 and from time to time, upon the Administrative Agent's request, the Borrower promptly shall execute and deliver any and all such further instruments and documents, including UCC financing statements, as may be necessary, appropriate or desirable in the Administrative Agent's judgment to obtain the full benefits (including perfection and priority) of the security interest created or intended to be created by this paragraph (ii) and of the rights and powers herein granted. The Borrower shall not create or suffer to exist any Lien on any amounts or investments held in the L/C Cash Collateral Account other than the Lien granted under this paragraph (ii) and Liens arising by operation of Law and not by contract which secure amounts not yet due and payable. (iii) The Administrative Agent shall (A) apply any funds in the L/C Cash Collateral Account on account of Reimbursement Obligations when the same become due and payable if and to the extent that the Borrower shall fail directly to pay such Reimbursement Obligations, (B) after the Maturity Date, apply any proceeds remaining in the L/C Cash Collateral Account first to pay any unpaid Obligations then outstanding hereunder and then to refund any remaining amount to the Borrower, and (C) provided no Default or Event of Default shall be in existence, return any funds in the L/C Cash Collateral Account to the Borrower. (iv) The Borrower, no more than once in any calendar month, may direct the Administrative Agent to invest the funds held in the L/C Cash Collateral Account (so long as the aggregate amount of such funds exceeds any relevant minimum investment requirement) in (A) direct obligations of the United States or any agency thereof, or obligations guaranteed by the United States or any agency thereof and (B) one or more other types of investments permitted by the Facility Determining Lenders, in each case with such maturities as the Borrower, with the consent of the Facility Determining Lenders, may specify, pending application of such funds on account of Reimbursement Obligations or on account of other Obligations, as the case may be. In the absence of any such direction from the Borrower, the Administrative Agent shall invest the funds held in the L/C Cash Collateral Account (so long as the aggregate amount of such funds exceeds any relevant minimum investment requirement) in one or more types of investments with the consent of the Facility Determining Lenders with such maturities as the Borrower, with the consent of the Facility Determining Lenders, may specify, pending application of such funds on account of Reimbursement Obligations or on account of other Obligations, as the case may be. All such investments shall be made in the Administrative Agent's name for the account of the Lenders. The Borrower recognizes that any losses or taxes with respect to such investments shall be borne solely by the Borrower, and the Borrower agrees to hold the Administrative Agent and the Lenders harmless from any and all such losses and taxes. Administrative Agent may liquidate any investment held in the L/C Cash Collateral Account in order to apply the proceeds of such investment on account of the Reimbursement Obligations (or on account of any other Obligation then due and payable, as the case may be) without regard to whether such investment has matured and without liability for any penalty or other fee incurred (with respect to which the Borrower hereby agrees to reimburse the Administrative Agent) as a result of such application. 61 67 (v) The Borrower shall pay to the Administrative Agent the fees customarily charged by the Primary Issuing Bank with respect to the maintenance of accounts similar to the L/C Cash Collateral Account in an amount not to exceed $1,000 in aggregate per calendar year. (h) Acquired Letters of Credit. The Borrower, the Administrative Agent, the Syndication Agent and each Lender specifically acknowledge and agree that, immediately upon consummation of the AMFM Acquisition and/or the SFX Acquisition, each applicable Acquired Letter of Credit shall become part of, and subject to, this Agreement and the Loan Papers, and each of the Secondary Issuing Banks shall be entitled to the rights, benefits and protections set forth herein and in the Loan Papers, all without any further action by the Borrower, the Administrative Agent, any Lender or any Issuing Bank. Notwithstanding any document or agreement to the contrary, the Borrower specifically agrees and assumes all liability related to each of the Acquired Letters of Credit, regardless of the original obligor with respect to each such Acquired Letter of Credit. Each Lender agrees, notwithstanding any document or agreement to the contrary, that each such Acquired Letter of Credit shall be subject to the terms and conditions of this Agreement, and each Issuing Bank shall be entitled to the rights and benefits available under this Agreement and the Loan Papers. Each Secondary Issuing Bank agrees to provide the Administrative Agent with a monthly certificate setting forth in detail all activity related to each Acquired Letter of Credit issued by such Secondary Issuing Bank, in form reasonably agreed to by the Administrative Agent and each Secondary Issuing Bank, such certificate to be delivered to the Administrative Agent within 10 Business Days after the beginning of each month during the term of this Agreement so long as any Acquired Letter of Credit is outstanding. Section 2.17. Extension Option and Conversion Option Relating to the Working Line Loan. (a) Extension Option. On each Option Date (so long as the Borrower has not elected the Conversion Option), the Borrower, with the prior written consent of the Facility Determining Lenders and so long as there exists no Default, may elect to extend the maturity of the Working Line Loan for an additional 364 day period until the Extension Final Maturity. Such election must be made no sooner than 60 days prior to the applicable Option Date and no later than 30 days (or such lesser period as agreed to by the Administrative Agent and the Lenders agreeing to extend) prior to the applicable Option Date by written notice in accordance with the terms of Section 11.1 hereof to each Lender selected by the Borrower and the Administrative Agent, of its request to extend the final maturity of the Working Line Loan. Each Working Line Lender shall, no later 10 Business Days after receipt of such notice (or such lesser time period agreed to by the Borrower and the Administrative Agent); provided that in no case shall such response occur more than 45 calendar days prior to the applicable Option Date, give written notice to the Borrower and the Administrative Agent of its approval or disapproval of such extension. Any Lender failing to give such notice shall be deemed to have rejected such extension; and, upon the Option Date, its Working Line Specified Percentage shall be zero and such Lender shall not be participating in the Working Line Loan thereafter. Notwithstanding anything herein to 62 68 the contrary, no Lender shall be obligated to consent to such extension. If the Borrower fails to receive the consent of Working Line Lenders having Working Line Specified Percentages totaling 100%, then, if Facility Determining Lenders have consented to such extension (i) only those consenting Working Line Lenders will have Working Line Specified Percentages in excess of zero, (ii) the Working Line Commitment shall be reduced by a dollar amount equal to the product of the non-consenting Lenders' Working Line Specified Percentages times the Working Line Commitment in effect on the day before the Option Date or the Borrower and the Administrative Agent may agree to add new lenders or consenting Lenders acceptable to the Administrative Agent to purchase from each non-extending Lender its rights, duties and obligations under this Agreement and the Loan Papers in accordance with Section 11.6 hereof, (iii) the Administrative Agent will notify each (A) Working Line Lender of its reallocated Working Line Specified Percentage and the new Working Line Commitment and (B) each Lender of the reallocated Total Specified Percentages (if any), (iv) the Borrower will pay all costs incurred as a result of any such reallocation of Working Line Specified Percentages in accordance with the terms of Section 2.9 hereof, (v) the Borrower shall repay in full all portions of the Obligations representing such non-consenting Lenders' Working Line Specified Percentages of all outstanding Working Line Advances to such nonconsenting Lenders, (vi) the Borrower shall, at the request of each Working Line Lender or new Working Line Lender in accordance with the terms of Section 2.10(g) hereof, execute and deliver new promissory notes to each extending Working Line Lender or new Working Line Lender in the form required by the Administrative Agent and (vii) subject to satisfaction of each of the foregoing requirements, the Working Line Loan final maturity shall be automatically extended on the Option Date to the Extension Final Maturity. If the Borrower receives the consent of Working Line Lenders having Working Line Specified Percentages totaling 100%, then the Working Line Loan final maturity shall be automatically extended on the Option Date to the Extension Final Maturity, and each Working Line Lender will retain its Working Line Specified Percentage and the Working Line Commitment shall remain the same. (b) Conversion Option. On the Option Date, or, if the Borrower and the Lenders have agreed to extend the Working Line Loan until the Extension Final Maturity, then on the Extension Final Maturity, the Borrower, so long as there exists no Default or Event of Default on such date of conversion, shall have the option (which shall not require the consent of any Lender) to convert the Working Line Loan to a term loan (the "Term Loan"). Such election must be made no sooner than 60 days prior to the Option Date or Extension Final Maturity, as applicable, and no later than 30 days prior to the Option Date or Extension Final Maturity, as applicable, (or such shorter period as agreed to by the Administrative Agent), by written notice in accordance with the terms of Section 11.01 hereof to the Administrative Agent of the election of such conversion. Prior to the Conversion Date, to the extent requested by each Working Line Lender in accordance with the terms of Section 2.10(g) hereof, the Borrower shall execute and deliver new promissory notes to each Working Line Lender in the form required by the Administrative Agent. Upon such notice (and receipt by the Working Line Lenders of the new promissory notes (if any)), the Working Line Loan 63 69 shall automatically convert to a Term Loan on the Option Date or the Extension Final Maturity, as applicable. Section 2.18. Uncommitted Increase of the Revolving Credit Commitment. At any time, and subject to the terms set forth below, from time to time, upon request by the Borrower to Administrative Agent and any other existing Lender selected by the Borrower and the Administrative Agent, the Revolving Credit Commitment shall increase by up to $2,000,000,000 (to a maximum of $3,500,000,000) in the manner set forth in (a) below, so long as the conditions set forth in (b) and (c) below have been satisfied: (a) (i) Each increase in the Revolving Credit Commitment may be effected by the Administrative Agent and the Lenders and other lenders agreeing to participate in such increase (the "Participating Lenders"), provided that, the Borrower shall not be entitled to increase the Revolving Credit Commitment more than two times during the term of this Agreement, (ii) Each potential Participating Lender specified by the Borrower shall have received not less than ten Business Days' prior written notice from the Borrower requesting such increase in the Revolving Credit Commitment. Each Participating Lender shall commit to an amount not less than $5,000,000 but shall accept any allocation amount designated by the Borrower and the Administrative Agent that is equal to or less than its proposed portion of the increase in the Revolving Credit Commitment, (iii) The Administrative Agent shall have received from the Borrower (A) a certificate from the Borrower certifying to the Administrative Agent and the Participating Lenders that (1) no other approvals or consents from any Person are required by any such Person except to the extent they have been received, and (2) the matters set forth in Section 2.18(b) are true and correct both before and after giving effect to any proposed increase in the Revolving Credit Commitment and (B) financial projections in form and substance reasonably acceptable to the Participating Lenders and demonstrating compliance with Sections 7.1, 7.3, 7.6, 7.9, and 7.10 hereof throughout the term of this Agreement, (iv) Each Participating Lender (including any new Lenders party hereto) shall have received (if they request) a promissory note reflecting such Participating Lender's new Commitment amount, and the Borrower and each existing (regardless of whether such existing Lender is participating in any increase) and new Participating Lender agree to execute any and all such documents reasonably deemed necessary by the Administrative Agent in order to effectuate this Section 2.18, (v) On or prior to the date of increase, each new lender being added as a Lender shall deliver to the Borrower and the Administrative Agent documentation evidencing such new Lender's acceptance of this Agreement and all the other Loan 64 70 Papers in form and substance reasonably acceptable to the Administrative Agent and the Borrower (and making such Lender a party to this Agreement and the other Loan Papers), and (vi) On or after the date of increase, the Administrative Agent shall deliver to each Lender notice of the new Revolving Credit Specified Percentages and new Total Specified Percentages (if any), in each case adjusted to give effect to the increase in the Revolving Credit Commitment. (b) Each increase of the Revolving Credit Commitment shall be subject to the following conditions: (i) On any date of proposed increase of the Revolving Credit Commitment, the representations and warranties contained in Article 4 hereof shall be true and correct at such time in all material respects, both before and after giving effect to the increase of the Revolving Credit Commitment, except those representations and warranties that specifically speak as of a particular date, (ii) No event shall have occurred that has had, or would reasonably be expected to cause, a Material Adverse Effect, (iii) There shall not exist a Default or an Event of Default hereunder and none shall exist as a result of (A) any such increase in the Revolving Credit Commitment or (B) the making of any Advance under such increase on the effective date of such increase, and (iv) Promptly upon notice thereof, provided that such notice is delivered to the Borrower within 180 days of the incurrence thereof, payment by the Borrower of any consequential losses (breakage) that are incurred by any Lender in connection with any such increase in the Revolving Credit Commitment and the necessary reallocation among the existing Lenders and/or new creditors. (c) Notwithstanding anything herein or in any other Loan Paper to the contrary, (i) the Borrower is not obligated to request participation from, or allocate to, any existing Lender any portion of the proposed increase of the Revolving Credit Commitment. Each existing Lender agrees and acknowledges that new lenders may be allocated all or any portion of the proposed increase upon the determination of the Borrower and the Administrative Agent, (ii) lenders participating in any increase to the Revolving Credit Commitment will become "Lenders" and be entitled to the same rights as each existing Lender, including without limitation, comparable terms regarding pro rata 65 71 prepayment, repayment and commitment reduction, and the benefit of the other Loan Papers, (iii) No Lender shall be obligated to increase the dollar amount of its Specified Percentage of the Revolving Credit Commitment without its written consent in its sole discretion, and (iv) All increases effected in accordance with the terms of this Section 2.18 in the aggregate shall not exceed $2,000,000,000. ARTICLE 3 Conditions Precedent Section 3.1 Conditions Precedent to Closing and the Initial Advance and the Letters of Credit. The obligation of each Lender to sign this Agreement and to make the initial Advance and the obligation of the Primary Issuing Bank to issue the initial Letter of Credit (and the Acquired Letters of Credit to become subject to this Agreement) is subject to receipt by the Administrative Agent of each of the following, in form and substance satisfactory to the Administrative Agent, with a copy (except for any promissory notes) for each Lender: (a) a loan certificate of the Borrower certifying as to the accuracy of its representations and warranties in the Loan Papers, certifying that no Default or Material Adverse Effect, except as listed in Schedule 4.1(k) hereto, has occurred since the last financial statements delivered to the Lenders prior to the Closing Date with respect to the Borrower and its Subsidiaries on a consolidated basis, certifying the Borrower is in compliance with all covenants in the Agreement, and including a certificate of incumbency with respect to each Authorized Signatory, and including (i) a copy of the Articles of Incorporation of the Borrower, certified to be true, complete and correct by the secretary of state of its state of incorporation, (ii) a copy of the By-Laws of the Borrower, as in effect on the Closing Date, (iii) a copy of the resolutions of the Borrower authorizing it to execute, deliver and perform this Agreement and the other Loan Papers to which it is a party, as applicable and (iv) a copy of a certificate of good standing and a certificate of existence for its state of incorporation and each state in which it is or should be qualified to do business; (b) a loan certificate of the Borrower certifying as to (and including) (i) a copy of the Articles of Incorporation or other organizational documents of each Material Subsidiary, certified to be true, complete and correct by the secretary of state of its state of incorporation or organization (if applicable), (ii) a copy of the By-Laws or other administrative and organizational documentation of each Material Subsidiary as in effect on the Closing Date, (iii) a copy of the resolutions of each Material Subsidiary authorizing it to execute, deliver and perform the Loan Papers to which it is a party, as applicable and (iv) a copy of a certificate of good standing and a certificate of existence for its state of incorporation or organization (if applicable); provided, that with respect to More Group PLC and Dauphin OTA, such deliveries shall be required within 4 weeks after the Closing Date; 66 72 (c) executed copies for each Lender of this Agreement and each other Loan Paper executed by the appropriate Person, in each case above delivered to the Administrative Agent on behalf of such Lenders; (d) an opinion of counsel and of FCC counsel to the Borrower and its Restricted Subsidiaries addressed to the Lenders and in form and substance satisfactory to Special Counsel and the Lenders, dated the Closing Date; (e) payment of all fees then due under all Fee Letters, and reimbursement for Administrative Agent for Special Counsel's reasonable fees and expenses rendered through the date hereof; (f) evidence that all corporate or organizational proceedings of the Borrower and its Restricted Subsidiaries taken in connection with the transactions contemplated by this Agreement and the other Loan Papers shall be reasonably satisfactory in form and substance to the Lenders and Special Counsel; and the Lenders shall have received copies of all documents or other evidence which the Administrative Agent, Special Counsel or any Lender may reasonably request in connection with such transactions; (g) copies of the following consolidated and consolidating financial statements for the Borrower and its Subsidiaries, as of and for the year ended December 31, 1999 (audited) and the fiscal quarter ending March 31, 2000: (i) consolidated and consolidating balance sheets as of the end of such period, and (ii) consolidated and consolidating statements of income and changes in cash for such period; which financial statements shall set forth in comparative form figures for the corresponding periods in the previous fiscal year, all in reasonable detail and certified by an Authorized Signatory to the best of his knowledge to be complete and correct and prepared in accordance with GAAP (other than footnotes thereto), with the quarter ended March 31, 2000 financials subject to year-end adjustment; (h) in form and substance satisfactory to the Lenders and Special Counsel, such other documents, instruments and certificates as the Administrative Agent or any Lender may reasonably require in connection with the transactions contemplated hereby, including without limitation the status, organization or authority of the Borrower or any Restricted Subsidiary, and the enforceability of and security for the Obligation; (i) repayment in full and termination of that certain $1,000,000,000 364-day credit facility evidenced by that certain Credit Agreement, among the Borrower, certain lenders, Bank of America, N.A. as administrative agent, BankBoston, N.A. as documentation agent, Bank of Montreal, as co-syndication agent and The Chase Manhattan Bank, as co-syndication agent, dated as of August 11, 1999, as amended; (j) there shall be no Default or Event of Default under any of the Loan Papers (except as waived or cured hereby), both before and after giving effect to the initial Advance under this Agreement; 67 73 (k) there shall not have occurred a material adverse change since December 31, 1999 in the business, assets, liabilities (actual or contingent), operations, condition (financial or otherwise) of the Borrower and its Subsidiaries taken as a whole; and (l) the AMFM Acquisition shall have been consummated (or are concurrently being consummated) substantially in accordance with the terms of the AMFM Acquisition Documentation (or on other terms reasonably acceptable to the Administrative Agent and the Syndication Agent), and all bank or institutional lending facilities to all AMFM Entities shall have been repaid in full and terminated (or is concurrently being repaid in full and terminated), excluding repayment of the indebtedness described in Schedule 7.1 attached hereto, under the heading "Existing Indebtedness." Section 3.2 Conditions Precedent to All Advances and Letters of Credit. The obligation of each Lender to make each Advance (including the initial Advance but excluding all Mandatory Revolver Advances) and the obligation of the Primary Issuing Bank to issue each Primary Letter of Credit (including the initial Letter of Credit) hereunder is subject to fulfillment of the following conditions immediately prior to or contemporaneously with each such Advance or issuance: (a) With respect to Advances (other than Refinancing Advances) and each issuance of a Letter of Credit, all of the representations and warranties of the Borrower under this Agreement, which, pursuant to Section 4.2 hereof, are made at and as of the time of such Advance or issuance, shall be true and correct at such time in all material respects, both before and after giving effect to the application of the proceeds of the Advance or issuance; (b) The incumbency of the Authorized Signatories shall be as stated in the certificate of incumbency delivered in the Borrower's loan certificate pursuant to Section 3.1(a) or as subsequently modified and reflected in a certificate of incumbency delivered to the Administrative Agent. The Lenders may, without waiving this condition, consider it fulfilled and a representation by the Borrower made to such effect if no written notice to the contrary, dated on or before the date of such Advance or issuance, is received by the Administrative Agent from the Borrower prior to the making of such Advance or issuance; (c) There shall not exist a Default hereunder, with respect to Advances (other than Refinancing Advances) and with respect to issuance of each Letter of Credit, or an Event of Default, with respect to any Refinancing Advance, and, with respect to each Advance (other than a Refinancing Advance) and with respect to issuance of each Letter of Credit, the Administrative Agent shall have received written or telephonic certification thereof by an Authorized Signatory (which certification, if telephonic, shall be followed promptly by written certification); (d) The aggregate Advances and amount available for draws under Letters of Credit, after giving effect to such proposed Advance or Letter of Credit, shall not exceed the maximum principal amount then permitted to be outstanding under the Revolving Credit Loan; 68 74 (e) The Administrative Agent shall have received all such other certificates, reports, statements or other documents as the Administrative Agent or any Lender may reasonably request; and (f) there shall be no Default or Event of Default under any of the Loan Papers both before and after giving effect to any Advance. Each request by the Borrower to the Administrative Agent or the Primary Issuing Bank, as appropriate, for an Advance or the issuance of a Primary Letter of Credit shall constitute a representation and warranty by the Borrower as of the date of the making of such Advance or the issuance of such Letter of Credit that all the conditions contained in this Section 3.2 have been satisfied. ARTICLE 4 Representations and Warranties Section 4.1 Representations and Warranties. The Borrower hereby represents and warrants to each Lender as follows: (a) Organization; Power; Qualification. As of the Closing Date, (i) the respective jurisdictions of incorporation or organization, as applicable, and percentage ownership by the Borrower or another Subsidiary of the Subsidiaries listed on Schedule 4.1(a) hereto are true and correct and (ii) all Subsidiaries other than Radio Data Group, Inc., are Restricted Subsidiaries except as otherwise allowed pursuant to Section 5.12 hereof. Each of the Borrower and its Restricted Subsidiaries is a corporation, partnership, limited liability company or other entity duly organized, validly existing and in good standing under the laws of its state of organization. Each of the Borrower and its Restricted Subsidiaries has the corporate or organizational power and authority to own its properties and to carry on its business as now being and hereafter proposed to be conducted. Each of the Borrower and its Restricted Subsidiaries is duly qualified, in good standing and authorized to do business in each jurisdiction in which the character of its properties or the nature of its business requires such qualification or authorization. (b) Authorization. The Borrower has corporate power and has taken all necessary corporate action to authorize it to borrow hereunder. Each of the Borrower and its Restricted Subsidiaries has corporate or organizational power and authority and has taken all necessary corporate or organizational action, as the case may be, to execute, deliver and perform the Loan Papers to which it is party in accordance with the terms thereof, and to consummate the transactions contemplated thereby. Each Loan Paper has been duly executed and delivered by the Borrower or the Restricted Subsidiary executing it. Each of the Loan Papers to which the Borrower and its Restricted Subsidiaries are party is a legal, valid and binding respective obligation of the Borrower or the Restricted Subsidiary, as applicable, enforceable in accordance with its terms, subject, to enforcement of remedies, to the following qualifications: (i) equitable principles generally, and 69 75 (ii) Debtor Relief Laws (insofar as any such law relates to the bankruptcy, insolvency or similar event of the Borrower or any Restricted Subsidiary). (c) Compliance with Other Loan Papers and Contemplated Transactions. The execution, delivery and performance by the Borrower and its Restricted Subsidiaries of the other Loan Papers to which they are respectively a party, and the consummation of the transactions contemplated thereby, do not and will not (i) require any consent or approval not already obtained, (ii) violate any Applicable Law, (iii) conflict with, result in a breach of, or constitute a default under the articles of incorporation or by-laws of the Borrower or any Restricted Subsidiary, or under any Necessary Authorization, indenture, agreement or other instrument, to which the Borrower or any Restricted Subsidiary is a party or by which they or their respective properties may be bound, or (iv) result in or require the creation or imposition of any Lien upon or with respect to any property now owned or hereafter acquired by the Borrower or any Restricted Subsidiary, except Permitted Liens. (d) Business. The Borrower and its Restricted Subsidiaries are engaged solely in the communications and media broadcasting business, entertainment, internet and activities related thereto (including, without limitation, radio and television broadcasting, print, productions, billboards, power transmission rentals and sales and real property rentals and sales, but only to the extent that such real property rentals and sales arise from the lease or sale of properties previously used by the Borrower or its Restricted Subsidiaries in the communications and media broadcasting business). (e) Licenses, etc. On the Closing Date, all Necessary Authorizations have been duly authorized and obtained, and are in full force and effect, and the Borrower and its Restricted Subsidiaries are in compliance in all material respects with all provisions thereof. On the Closing Date, no Necessary Authorization is the subject of any pending or, to the best of the Borrower's knowledge, threatened challenge or revocation. After the Closing Date, all Necessary Authorizations have been duly authorized and obtained, and are in full force and effect, and the Borrower and its Restricted Subsidiaries are in compliance with all provisions of such Necessary Authorizations, unless any such failure could not reasonably be expected to have a Material Adverse Effect. After the Closing Date, no Necessary Authorization is the subject of any pending or, to the best of the Borrower's knowledge, threatened challenge or revocation, unless such action could not reasonably be expected to have a Material Adverse Effect. (f) Compliance with Law. The Borrower and its Restricted Subsidiaries are in compliance with all Applicable Laws, the violation of which could reasonably be expected to have a Material Adverse Effect. On the Closing Date, the Borrower and its Restricted Subsidiaries have duly filed all reports, statements and filings that are required to be filed by any of them under the Communications Act, and are in compliance in all material respects therewith, including without limitation the rules and regulations of the FCC relating to the operation of television and radio stations. After the Closing Date, the Borrower and its Restricted Subsidiaries have duly and timely filed all reports, statements and filings that are required to be filed by any of them under the Communications Act, and are in compliance therewith, including without limitation the rules and regulations of the FCC relating to the operation of television and radio stations, except to the extent 70 76 that any failure to file or failure to comply could not reasonably be expected to have a Material Adverse Effect. On the Closing Date, the Borrower and its Restricted Subsidiaries have obtained all appropriate approvals and consents of, and have made all filings with, the FCC in connection with the acquisition and ownership of each of their television and radio stations, and no Person has filed or submitted any document or instrument to the FCC challenging or contesting the FCC order approving any assignment of a FCC license to the Borrower or any of its Restricted Subsidiaries other than with respect to the Auburn, New York station. After the Closing Date, the Borrower and its Restricted Subsidiaries have obtained all appropriate approvals and consents of, and have made all filings with, the FCC in connection with the acquisition and ownership of each of their television and radio stations, and no Person has filed or submitted any document or instrument to the FCC challenging or contesting the FCC order approving any assignment of a FCC license to the Borrower or any of its Restricted Subsidiaries, except to the extent that any such action could not reasonably be expected to have a Material Adverse Effect. (g) Title to Properties. On the Closing Date, the Borrower and its Restricted Subsidiaries have good and indefeasible title to, or a valid leasehold interest in, all of their material assets, and none of their assets are subject to any Liens, except Permitted Liens. After the Closing Date, the Borrower and its Restricted Subsidiaries have good and indefeasible title to, or a valid leasehold interest in, all of their material assets, and none of their assets are subject to any Liens, except Permitted Liens, except to the extent that any such circumstance could not reasonably be expected to have a Material Adverse Effect. On the Closing Date, no financing statement or other Lien filing (except relating to Permitted Liens and Liens securing Debt for Borrowed Money being repaid in full on the Closing Date) is on file in any state or jurisdiction that names the Borrower or any of its Restricted Subsidiaries as debtor or covers (or purports to cover) any assets of the Borrower or any of its Restricted Subsidiaries. After the Closing Date, no financing statement or other Lien filing (except relating to Permitted Liens) is on file in any state or jurisdiction that names the Borrower or any of its Restricted Subsidiaries as debtor or covers (or purports to cover) any assets of the Borrower or any of its Restricted Subsidiaries, except to the extent that any such filing could not reasonably be expected to have a Material Adverse Effect. The Borrower and its Restricted Subsidiaries have not signed any such financing statement or filing, nor any security agreement authorizing any Person to file any such financing statement or filing. (h) Litigation. Except as reflected on Schedule 4.1(h) hereto, there is no action, suit, investigation or proceeding pending against, or, to the best of the Borrower's knowledge, threatened against the Borrower or any of its Restricted Subsidiaries, or in any other manner relating directly and materially adversely to the Borrower, any of its Restricted Subsidiaries, or any of their material properties, including, but not limited to any litigation with respect to these Loan Papers, in any court or before any arbitrator of any kind or before or by any governmental body the result of which could reasonably be expected to require the payment of money by the Borrower or any Restricted Subsidiary in an amount of $5,000,000 or more in any one such action, suit or proceeding or $25,000,000 or more in the aggregate for all such actions, suits or proceedings. (i) Taxes. All federal, state and other tax returns of the Borrower and its Restricted Subsidiaries required by law to be filed have been duly filed and all federal, state and other taxes, 71 77 assessments and other governmental charges or levies upon the Borrower, its Restricted Subsidiaries or any of their properties, income, profits and assets, which are due and payable, have been paid prior to delinquency, unless the same are being diligently contested in good faith by appropriate proceedings, with adequate reserves established therefor, and no Lien (other than a Permitted Lien) has attached and no foreclosure, distraint, sale or similar proceedings have been commenced. The charges, accruals and reserves on the books of the Borrower and its Restricted Subsidiaries in respect of their taxes are, in the judgment of the Borrower, adequate. (j) Financial Statements; Material Liabilities. The Borrower has furnished or caused to be furnished to the Lenders copies of its December 31, 1999, financial statements, which are prepared in good faith and complete in all material respects and present fairly in accordance with GAAP the financial position of the Borrower and its Restricted Subsidiaries as at such dates and the results of operations for the periods then ended, subject to normal year-end adjustments. On the Closing Date, the Borrower and its Restricted Subsidiaries have no material liabilities, contingent or otherwise, nor material losses, except as disclosed in writing to the Lenders prior to the Closing Date. After the Closing Date, the Borrower and its Restricted Subsidiaries have no material liabilities, contingent or otherwise, nor material losses, except to the extent that such material liabilities or material losses could not reasonably be expected to have a Material Adverse Effect. The Borrower and its Restricted Subsidiaries are Solvent. (k) No Adverse Change. Since December 31, 1999, no event or circumstances has occurred or arisen that could reasonably be expected to have a Material Adverse Effect except as listed on Schedule 4.1(k) hereto. (l) ERISA. None of the Borrower or its Controlled Group maintains or contributes to any Plan other than those disclosed to the Administrative Agent in writing from time to time. On the Closing Date, each such Plan is in compliance in all material respects with the applicable provisions of ERISA, the Code, and any other applicable Federal or state law, rule or regulation. After the Closing Date, each such Plan is in compliance with the applicable provisions of ERISA, the Code, and any other applicable Federal or state law, rule or regulation, except to the extent any such noncompliance could not reasonably be expected to have a Material Adverse Effect. With respect to each Plan of the Borrower and each member of its Controlled Group (other than a Multiemployer Plan), all reports required under ERISA or any other Applicable Law to be filed with any governmental authority, the failure of which to file could reasonably result in liability of the Borrower or any member of its Controlled Group in excess of $100,000, have been duly filed. All such reports are true and correct in all material respects as of the date given. On the Closing Date, no such Plan of the Borrower or any member of its Controlled Group has been terminated nor has any accumulated funding deficiency (as defined in Section 412(a) of the Code) been incurred (without regard to any waiver granted under Section 412 of the Code), nor has any funding waiver from the 72 78 Internal Revenue Service been received or requested. After the Closing Date, no such Plan of the Borrower or any member of its Controlled Group has been terminated nor has any accumulated funding deficiency (as defined in Section 412(a) of the Code) been incurred (without regard to any waiver granted under Section 412 of the Code), nor has any funding waiver from the Internal Revenue Service been received or requested, except to the extent it could not reasonably be expected to have a Material Adverse Effect. On the Closing Date, none of the Borrower or any member of its Controlled Group has failed to make any contribution or pay any amount due or owing as required by Section 412 of the Code or Section 302 of ERISA or the terms of any such Plan prior to the due date under Section 412 of the Code and Section 302 of ERISA. After the Closing Date, none of the Borrower or any member of its Controlled Group has failed to make any contribution or pay any amount due or owing as required by Section 412 of the Code or Section 302 of ERISA or the terms of any such Plan prior to the due date under Section 412 of the Code and Section 302 of ERISA, except to the extent it could not reasonably be expected to have a Material Adverse Effect. On the Closing Date, there has been no ERISA Event or any event requiring disclosure under Section 4041(c)(3)(C), 4068(f), 4063(a) or 4043(b) of ERISA with respect to any Plan or trust of the Borrower or any member of its Controlled Group since the effective date of ERISA. After the Closing Date, there has been no ERISA Event or any event requiring disclosure under Section 4041(c)(3)(C), 4068(f), 4063(a) or 4043(b) of ERISA with respect to any Plan or trust of the Borrower or any member of its Controlled Group since the effective date of ERISA, except to the extent that any such event could not reasonably be expected to have a Material Adverse Effect. The value of the assets of each Plan (other than a Multiemployer Plan) of the Borrower and each member of its Controlled Group equaled or exceeded the present value of the benefit liabilities, as defined in Title IV of ERISA, of each such Plan as of the most recent valuation date using Plan actuarial assumptions at such date. On the Closing Date, there are no pending or, to the best of the Borrower's knowledge, threatened claims, lawsuits or actions (other than routine claims for benefits in the ordinary course) asserted or instituted against, and neither the Borrower nor any member of its Controlled Group has knowledge of any threatened litigation or claims against, (i) the assets of any Plan or trust or against any fiduciary of a Plan with respect to the operation of such Plan, or (ii) the assets of any employee welfare benefit plan within the meaning of Section 3(1) or ERISA, or against any fiduciary thereof with respect to the operation of any such plan. After the Closing Date, there are no pending or, to the best of the Borrower's knowledge, threatened claims, lawsuits or actions (other than routine claims for benefits in the ordinary course) asserted or instituted against, and neither the Borrower nor any member of its Controlled Group has knowledge of any threatened litigation or claims against, (i) the assets of any Plan or trust or against any fiduciary of a Plan with respect to the operation of such Plan, or (ii) the assets of any employee welfare benefit plan within the meaning of Section 3(1) or ERISA, or against any fiduciary thereof with respect to the operation of any such plan, except to the extent such claim, lawsuit or action could not reasonably be expected to have a Material Adverse Effect. On the Closing Date, none of the Borrower or any member of its Controlled Group has engaged in any prohibited 73 79 transactions, within the meaning of Section 406 of ERISA or Section 4975 of the Code, in connection with any Plan, and none of the Borrower or any member of its Controlled Group has withdrawn from any Multiemployer Plan, nor has incurred or reasonably expects to incur (A) any liability under Title IV of ERISA (other than premiums due under Section 4007 of ERISA to the PBGC), (B) any withdrawal liability (and no event has occurred which with the giving of notice under Section 4219 of ERISA would result in such liability) under Section 4201 of ERISA as a result of a complete or partial withdrawal (within the meaning of Section 4203 or 4205 of ERISA) from a Multiemployer Plan, or (C) any liability under Section 4062 of ERISA to the PBGC or to a trustee appointed under Section 4042 of ERISA. After the Closing Date, none of the Borrower or any member of its Controlled Group has engaged in any prohibited transactions, within the meaning of Section 406 of ERISA or Section 4975 of the Code, in connection with any Plan, and none of the Borrower or any member of its Controlled Group has withdrawn from any Multiemployer Plan, nor has incurred or reasonably expects to incur (A) any liability under Title IV of ERISA (other than premiums due under Section 4007 of ERISA to the PBGC), (B) any withdrawal liability (and no event has occurred which with the giving of notice under Section 4219 of ERISA would result in such liability) under Section 4201 of ERISA as a result of a complete or partial withdrawal (within the meaning of Section 4203 or 4205 of ERISA) from a Multiemployer Plan, or (C) any liability under Section 4062 of ERISA to the PBGC or to a trustee appointed under Section 4042 of ERISA, except to the extent it could not reasonably be expected to have a Material Adverse Effect. On the Closing Date, none of the Borrower, any member of its Controlled Group, or any organization to which the Borrower or any member of its Controlled Group is a successor or parent corporation within the meaning of ERISA Section 4069(b), has engaged in a transaction within the meaning of ERISA Section 4069 and none of the Borrower or any member of its Controlled Group maintains or has established any welfare benefit plan within the meaning of Section 3(1) of ERISA which provides for continuing benefits or coverage for any participant or any beneficiary of any participant after such participant's termination of employment except as may be required by the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA") and the regulations thereunder, and at the expense of the participant or the beneficiary of the participant, or retiree medical liabilities. After the Closing Date, none of the Borrower, any member of its Controlled Group, or any organization to which the Borrower or any member of its Controlled Group is a successor or parent corporation within the meaning of ERISA Section 4069(b), has engaged in a transaction within the meaning of ERISA Section 4069 and none of the Borrower or any member of its Controlled Group maintains or has established any welfare benefit plan within the meaning of Section 3(1) of ERISA which provides for continuing benefits or coverage for any participant or any beneficiary of any participant after such participant's termination of employment except as may be required by the COBRA and the regulations thereunder, and at the expense of the participant or the beneficiary of the participant, or retiree medical liabilities, except to the extent it could not reasonably be expected to have a Material Adverse Effect. On the Closing Date, each of the Borrower and its Controlled Group which maintains a welfare benefit plan within the meaning of Section 3(1) of ERISA has complied in all material respects with any applicable notice and continuation requirements of COBRA and the regulations thereunder. After the Closing Date, each of the Borrower and its Controlled Group which maintains a welfare benefit plan within the meaning of Section 3(1) of ERISA has complied with any applicable notice and continuation requirements of COBRA and the regulations thereunder, except to the extent that such failure could not reasonably be expected to have a Material Adverse Effect. (m) Compliance with Regulations T, U and X. The Borrower is not engaged principally or as one of its important activities in the business of extending credit for the purpose of purchasing or carrying any margin stock within the meaning of Regulations T, U and X of the Board of Governors of the Federal Reserve System, and no part of the proceeds of the Loans or the Letters of Credit will be used to purchase or carry any margin stock or to extend credit to others for the purpose of purchasing or carrying any margin stock. No assets of the Borrower and its Restricted Subsidiaries are margin stock. None of the Borrower and its Restricted Subsidiaries, nor any agent acting on their behalf, have taken or will knowingly take any action which might cause this 74 80 Agreement or any Loan Papers to violate any regulation of the Board of Governors of the Federal Reserve System or to violate the Securities Exchange Act of 1934, in each case as in effect now or as the same may hereafter be in effect. (n) Absence of Default. The Borrower and its Restricted Subsidiaries are in compliance in all material respects with all of the provisions of their articles of incorporation and by-laws, and no event has occurred or failed to occur, which has not been remedied or waived, the occurrence or non-occurrence of which constitutes, or which with the passage of time or giving of notice or both would constitute, (i) an Event of Default or (ii) a default by the Borrower or any of its Restricted Subsidiaries under any material indenture, agreement or other instrument, or any judgment, decree or order to which the Borrower or any of its Restricted Subsidiaries is a party or by which they or any of their material properties is bound. (o) Investment Company Act. The Borrower is not required to register under the provisions of the Investment Company Act of 1940, as amended. Neither the entering into or performance by the Borrower of this Agreement nor the issuance of the notes violates any provision of such act or requires any consent, approval, or authorization of, or registration with, the Securities and Exchange Commission or any other governmental or public body or authority pursuant to any provisions of such act. (p) Environmental Matters. On the Closing Date, neither the Borrower nor any Subsidiary has any actual knowledge or reason to believe that any substance deemed hazardous by any Applicable Environmental Law, has been installed on any real property now owned by the Borrower or any of its Subsidiaries. After the Closing Date, neither the Borrower nor any Subsidiary has any actual knowledge or reason to believe that any substance deemed hazardous by any Applicable Environmental Law, has been installed on any real property now owned by the Borrower or any of its Subsidiaries, except to the extent the existence of such substances could not reasonably be expected to have a Material Adverse Effect. On the Closing Date, the Borrower and its Subsidiaries are not in violation of or subject to any existing, pending or, to the best of the Borrower's knowledge, threatened investigation or inquiry by any governmental authority or to any material remedial obligations under any Applicable Environmental Laws, and this representation and warranty would continue to be true and correct following disclosure to the applicable governmental authorities of all relevant facts, conditions and circumstances, if any, pertaining to any real property of the Borrower and its Subsidiaries. After the Closing Date, the Borrower and its Subsidiaries are not in violation of or subject to any existing, pending or, to the best of the Borrower's knowledge, threatened investigation or inquiry by any governmental authority or to any remedial obligations under any Applicable Environmental Laws, and this representation and warranty would continue to be true and correct following disclosure to the applicable governmental authorities of all relevant facts, conditions and circumstances, if any, pertaining to any real property of the Borrower and its Subsidiaries, except to the extent that such violation, investigation or inquiry could not reasonably be expected to have a Material Adverse Effect. On the Closing Date, the Borrower and its Subsidiaries undertook, at the time of acquisition of any real property, reasonable inquiry into the previous ownership and uses of such real property consistent with good commercial or customary practice, and the 75 81 Borrower and its Subsidiaries have taken all reasonable steps to determine, and the Borrower and its Subsidiaries have no actual knowledge or reason to believe, after reasonable investigation, that any hazardous substances or solid wastes have been disposed of or otherwise released on or to the real property of the Borrower or any of its Subsidiaries in any manner or quantities which would be deemed a violation of the Applicable Environmental Laws. After the Closing Date, the Borrower and its Subsidiaries undertook, at the time of acquisition of any real property, reasonable inquiry into the previous ownership and uses of such real property consistent with good commercial or customary practice, and the Borrower and its Subsidiaries have taken all reasonable steps to determine, and the Borrower and its Subsidiaries have no actual knowledge or reason to believe, after reasonable investigation, that any hazardous substances or solid wastes have been disposed of or otherwise released on or to the real property of the Borrower or any of its Subsidiaries in any manner or quantities which would be deemed a violation of the Applicable Environmental Laws, except to the extent such hazardous substances or solid wastes could not reasonably be expected to have a Material Adverse Effect. (q) Valid Issuance of Securities. All Capital Stock of the Borrower and its Subsidiaries has been duly authorized and validly issued, and is fully paid and nonassessable. The Capital Stock of the Borrower and its Subsidiaries, when issued or sold, was either (i) registered or qualified under applicable federal or state securities laws, or (ii) exempt therefrom. (r) Certain Fees. No broker's, finder's or other fee or commission will be payable by the Borrower (other than to the Lenders hereunder) with respect to the making of any of the Commitments or the Loans hereunder or the issuance of any Letters of Credit. The Borrower agrees to indemnify and hold harmless the Administrative Agent and each Lender from and against any claims, demand, liability, proceedings, costs or expenses asserted with respect to or arising in connection with any such fees or commissions. (s) Compliance. No event has occurred which permits (or with the passage of time would permit) the revocation or termination of any license, consents, permits and authorizations, or which could result in the imposition of any restriction thereon, in each case except any that could not reasonably be expected to have a Material Adverse Effect. (t) Patents, Etc. The Borrower and its Restricted Subsidiaries have obtained all patents, trademarks, service-marks, trade names, copyrights, licenses and other rights, free from burdensome restrictions, that are necessary for the operation of their business as presently conducted and as proposed to be conducted, the loss of which could reasonably be expected to have a Material Adverse Effect. Nothing has come to the attention of the Borrower or any of its Restricted Subsidiaries to the effect that (i) any process, method, part or other material presently contemplated to be employed by the Borrower or any Restricted Subsidiary may infringe any patent, trademark, service-mark, trade name, copyright, license or other right owned by any other Person, or (ii) there is pending or overtly threatened any claim or litigation against or affecting the Borrower or any Restricted Subsidiary contesting its right to sell or use any such process, method, part or other material, except such circumstances that could not reasonably be expected to have a Material Adverse Effect. 76 82 (u) Disclosure. Neither this Agreement nor any other document, certificate or statement which has been furnished to any Lender by or on behalf of the Borrower or any Restricted Subsidiary in connection herewith contained any untrue statement of a material fact or omitted to state a material fact necessary in order to make the statement contained herein and therein not misleading at the time it was furnished. There is no fact known to the Borrower and not known to the public generally that could reasonably be expected to materially adversely affect the assets or business of the Borrower and its Restricted Subsidiaries, or in the future could reasonably be expected (so far as the Borrower can now foresee) to have a Material Adverse Effect, which has not been set forth in this Agreement or in the documents, certificates and statements furnished to the Lenders by or on behalf of the Borrower prior to the date hereof in connection with the transaction contemplated hereby. (v) Year 2000 Compliance. The Year 2000 Problem has not had, and the Borrower reasonably believes that the Year 2000 Problem will not have, a Material Adverse Effect. (w) Qualified Commercial Loan Representations. (i) The Borrower has been advised by the Administrative Agent and the Lenders to seek the advice of an attorney and accountant of the Borrower's choice in connection with this Agreement and the Loan Papers. (ii) The Borrower has had the opportunity to seek the advice of an attorney and an accountant of the Borrower's choice in connection with this Agreement and the Loan Papers. (iii) This Agreement and the Loan Papers have not been nor will be made for the purpose of financing a business licensed by the Motor Vehicle Board of the Texas Department of Transportation under Section 4.01(a), Texas Motor Vehicle Commission Code (Article 4413(36), Texas Civil Statutes). (iv) This Agreement and the Loan Papers evidence a "qualified commercial loan" as that term is defined in Section 306.001 of the Texas Finance Code, as amended. Section 4.2 Survival of Representations and Warranties, etc. All representations and warranties made under this Agreement and the other Loan Papers shall be deemed to be made at and as of the Closing Date and at and as of the date of each Loan and each Letter of Credit (except with respect to Refinancing Advances and Mandatory Revolver Advances), and each shall be true and correct when made, except to the extent (a) previously fulfilled in accordance with the terms hereof, (b) applicable to a specific date or otherwise subsequently inapplicable, or (c) previously waived in writing by the Determining Lenders with respect to any particular factual circumstance. All such representations and warranties shall survive, and not be waived by, the execution hereof by any Lender, any investigation or inquiry by any Lender, or by the making of any Advance under this Agreement. 77 83 ARTICLE 5 General Covenants So long as any of the Obligations are outstanding and unpaid or any of the Commitments is outstanding (whether or not the conditions to borrowing have been or can be fulfilled): Section 5.1 Preservation of Existence and Similar Matters. Except as provided in Section 7.5, the Borrower shall, and shall cause each Restricted Subsidiary to: (a) preserve and maintain, or timely obtain and thereafter preserve and maintain, its existence, rights, franchises, licenses, authorizations, consents, privileges and all other Necessary Authorizations from federal, state and local governmental bodies and any tribunal (regulatory or otherwise), the loss of which could have a Material Adverse Effect; and (b) qualify and remain qualified and authorized to do business in each jurisdiction in which the character of its properties or the nature of its business requires such qualification or authorization, unless the failure to do so could not have a Material Adverse Effect. Section 5.2 Business; Compliance with Applicable Law. The Borrower and its Restricted Subsidiaries shall (a) engage substantially in the media and communication related business and activities related thereto and the entertainment and internet businesses and activities related thereto, and (b) comply in all material respects with the requirements of all Applicable Law, the failure of which could reasonably be expected to have a Material Adverse Effect. Section 5.3 Maintenance of Properties. The Borrower shall, and shall cause each Restricted Subsidiary to, maintain or cause to be maintained all its properties (whether owned or held under lease) in reasonably good repair, working order and condition, taken as a whole, and from time to time make or cause to be made all appropriate repairs, renewals, replacements, additions, betterments and improvements thereto. Section 5.4 Accounting Methods and Financial Records. The Borrower shall, and shall cause each Restricted Subsidiary to, maintain a system of accounting established and administered in accordance with GAAP, keep adequate records and books of account in which complete entries will be made and all transactions reflected in accordance with GAAP, and keep accurate and complete records of its respective assets. The Borrower and each of its Restricted Subsidiaries shall maintain a fiscal year ending on December 31. Section 5.5 Insurance. The Borrower shall, and shall cause each Restricted Subsidiary or its direct parent to, maintain insurance from responsible companies in such amounts and against such risks as shall be customary and usual in the industry for companies of similar size and capability, but in no event less than the amount and types insured as of the Closing Date. Each insurance policy shall provide for at least 30 days' prior notice to the Administrative Agent of any 78 84 proposed termination or cancellation of such policy, whether on account of default or otherwise, the loss of which could, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. Section 5.6 Payment of Taxes and Claims. The Borrower shall, and shall cause each Restricted Subsidiary to, pay and discharge all taxes, assessments and governmental charges or levies imposed upon it or its income or properties prior to the date on which penalties attach thereto, and all lawful material claims for labor, materials and supplies which, if unpaid, might become a Lien upon any of its properties; except that no such tax, assessment, charge, levy or claim need be paid which is being diligently contested in good faith by appropriate proceedings and for which adequate reserves shall have been set aside on the appropriate books, but only so long as no Lien (other than a Permitted Lien) shall attach with respect thereto and no foreclosure, distraint, sale or similar proceedings shall have been commenced. The Borrower shall, and shall cause each Restricted Subsidiary to, timely file all information returns required by federal, state or local tax authorities. Section 5.7 Visits and Inspections. The Borrower shall, and shall cause each Restricted Subsidiary to, promptly permit representatives of the Administrative Agent or any Lender from time to time to (a) visit and inspect the properties of the Borrower and Restricted Subsidiary as often as the Administrative Agent or any Lender shall deem advisable, (b) inspect and make extracts from and copies of the Borrower's and each Restricted Subsidiary's books and records, and (c) discuss with the Borrower's and each Restricted Subsidiary's directors, officers, employees and auditors its business, assets, liabilities, financial positions, results of operations and business prospects. Section 5.8 Payment of Debt for Borrowed Money. Subject to Section 5.6 hereof, the Borrower shall, and shall cause each Restricted Subsidiary to, pay its Debt for Borrowed Money when and as the same becomes due, other than amounts (other than the Obligations) duly and diligently disputed in good faith. Section 5.9 Use of Proceeds. The Borrower shall use the proceeds of the Loans and Letters of Credit to make acquisitions permitted under Section 7.5 hereof, to make Capital Expenditures, to make Investments (including advances to Subsidiaries) and Acquisitions permitted hereunder, for working capital and for other general corporate purposes. SECTION 5.10 INDEMNITY. (a) THE BORROWER AGREES TO DEFEND, PROTECT, INDEMNIFY AND HOLD HARMLESS THE ADMINISTRATIVE AGENT, THE ISSUING BANKS, EACH LENDER, EACH OF THEIR RESPECTIVE BANK AFFILIATES, AND EACH OF THEIR RESPECTIVE (INCLUDING SUCH BANK AFFILIATES') OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, ATTORNEYS, SHAREHOLDERS AND CONSULTANTS (INCLUDING, WITHOUT LIMITATION, THOSE RETAINED IN CONNECTION WITH THE SATISFACTION OR ATTEMPTED SATISFACTION OF ANY OF THE CONDITIONS SET FORTH HEREIN) OF EACH OF THE FOREGOING (COLLECTIVELY, "INDEMNITEES") FROM AND AGAINST ANY AND ALL LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, CLAIMS, COSTS, EXPENSES AND DISBURSEMENTS OF ANY KIND OR NATURE WHATSOEVER (INCLUDING, WITHOUT LIMITATION, 79 85 THE REASONABLE FEES AND DISBURSEMENTS OF A SINGLE COUNSEL AND ANY LOCAL OR REGULATORY COUNSEL FOR SUCH INDEMNITEES (OR MORE THAN A SINGLE COUNSEL IF THERE IS A CONFLICT BETWEEN INDEMNITEES THAT WOULD MAKE SUCH SEPARATE REPRESENTATION ADVISABLE) IN CONNECTION WITH ANY INVESTIGATIVE, ADMINISTRATIVE OR JUDICIAL PROCEEDING, WHETHER OR NOT SUCH INDEMNITEES SHALL BE DESIGNATED A PARTY THERETO), IMPOSED ON, INCURRED BY, OR ASSERTED AGAINST SUCH INDEMNITEES (WHETHER DIRECT, INDIRECT OR CONSEQUENTIAL AND WHETHER BASED ON ANY FEDERAL, STATE, OR LOCAL LAWS AND REGULATIONS, UNDER COMMON LAW OR AT EQUITABLE CAUSE, OR ON CONTRACT, TORT OR OTHERWISE, ARISING FROM OR CONNECTED WITH THE PAST, PRESENT OR FUTURE OPERATIONS OF THE BORROWER OR ANY OF ITS SUBSIDIARIES OR THEIR RESPECTIVE PREDECESSORS IN INTEREST, OR THE PAST, PRESENT OR FUTURE ENVIRONMENTAL CONDITION OF PROPERTY OF THE BORROWER OR ANY OF ITS SUBSIDIARIES), IN ANY MANNER RELATING TO OR ARISING OUT OF THIS AGREEMENT, THE LOAN PAPERS, OR ANY ACT, EVENT OR TRANSACTION OR ALLEGED ACT, EVENT OR TRANSACTION RELATING OR ATTENDANT THERETO, THE MAKING OF OR ANY PARTICIPATIONS IN THE ADVANCES, LOANS OR THE LETTERS OF CREDIT AND THE MANAGEMENT OF THE ADVANCES, LOANS AND THE LETTERS OF CREDIT, INCLUDING IN CONNECTION WITH, OR AS A RESULT, IN WHOLE OR IN PART, OF ANY ORDINARY OR MERE NEGLIGENCE OF ADMINISTRATIVE AGENT, THE ISSUING BANKS OR ANY LENDER (OTHER THAN THOSE MATTERS RAISED EXCLUSIVELY BY A PARTICIPANT AGAINST THE ADMINISTRATIVE AGENT, THE ISSUING BANKS OR ANY LENDER AND NOT THE BORROWER), OR THE USE OR INTENDED USE OF THE PROCEEDS OF THE ADVANCES, LOANS AND THE LETTERS OF CREDIT HEREUNDER, OR IN CONNECTION WITH ANY INVESTIGATION OF ANY POTENTIAL MATTER COVERED HEREBY, BUT EXCLUDING (i) ANY CLAIM OR LIABILITY THAT ARISES AS THE RESULT OF THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF ANY INDEMNITEE, AS FINALLY JUDICIALLY DETERMINED BY A COURT OF COMPETENT JURISDICTION, (ii) MATTERS RAISED BY ONE LENDER AGAINST ANOTHER LENDER OR BY ANY SHAREHOLDERS OF A LENDER AGAINST A LENDER OR ITS MANAGEMENT AND (iii) CLAIMS FOR PUNITIVE OR CONSEQUENTIAL DAMAGES (COLLECTIVELY, "INDEMNIFIED MATTERS"); PROVIDED HOWEVER, THAT SO LONG AS NO EVENT OF DEFAULT SHALL HAVE OCCURRED AND BE CONTINUING, THERE SHALL BE NO SETTLEMENT BY THE INDEMNITEES OR ANY OF THEM WITH RESPECT TO ANY INDEMNIFIED MATTER WITHOUT PRIOR CONSULTATION WITH THE BORROWER. (b) IN ADDITION, THE BORROWER SHALL PERIODICALLY, UPON REQUEST, REIMBURSE EACH INDEMNITEE FOR ITS REASONABLE LEGAL AND OTHER ACTUAL EXPENSES (INCLUDING THE COST OF ANY INVESTIGATION AND PREPARATION) INCURRED IN CONNECTION WITH ANY INDEMNIFIED MATTER. IF FOR ANY REASON THE FOREGOING INDEMNIFICATION IS UNAVAILABLE TO ANY INDEMNITEE OR INSUFFICIENT TO HOLD ANY INDEMNITEE HARMLESS WITH RESPECT TO INDEMNIFIED MATTERS, THEN THE BORROWER SHALL CONTRIBUTE TO THE AMOUNT PAID OR PAYABLE BY SUCH INDEMNITEE AS A RESULT OF SUCH LOSS, CLAIM, DAMAGE OR LIABILITY IN SUCH PROPORTION AS IS APPROPRIATE TO REFLECT NOT ONLY THE RELATIVE BENEFITS RECEIVED BY THE BORROWER AND THE BORROWER'S STOCKHOLDERS ON THE ONE HAND AND SUCH INDEMNITEE ON THE OTHER HAND BUT ALSO THE RELATIVE FAULT OF THE BORROWER AND SUCH INDEMNITEE, AS WELL AS ANY OTHER RELEVANT EQUITABLE CONSIDERATIONS. THE REIMBURSEMENT, INDEMNITY AND CONTRIBUTION OBLIGATIONS UNDER THIS SECTION SHALL BE IN ADDITION TO ANY LIABILITY WHICH THE BORROWER MAY OTHERWISE HAVE, SHALL EXTEND UPON THE SAME TERMS AND CONDITIONS TO EACH INDEMNITEE, AND SHALL BE BINDING UPON AND INURE TO THE BENEFIT OF ANY SUCCESSORS, ASSIGNS, HEIRS AND PERSONAL REPRESENTATIVES OF THE BORROWER, THE ADMINISTRATIVE AGENT, THE ISSUING BANKS, THE LENDERS AND ALL OTHER INDEMNITEES. THIS SECTION SHALL SURVIVE ANY TERMINATION OF THIS AGREEMENT AND PAYMENT OF THE OBLIGATIONS. 80 86 Section 5.11 Environmental Law Compliance. The use which the Borrower or any Subsidiary intends to make of any real property owned by it will not result in the disposal or other release of any hazardous substance or solid waste on or to such real property in any manner or quantities which would be deemed a violation of the Applicable Environmental Laws. The Borrower further agrees to exercise reasonable due diligence in the acquisition of real property in connection with compliance with Applicable Environmental Laws. As used herein, the terms "hazardous substance" and "release" as used in this Section shall have the meanings specified in CERCLA (as defined in the definition of Applicable Environmental Laws), and the terms "solid waste" and "disposal" shall have the meanings specified in RCRA (as defined in the definition of Applicable Environmental Laws); provided, however, that if CERCLA or RCRA is amended so as to broaden the meaning of any term defined thereby, such broader meaning shall apply subsequent to the effective date of such amendment; and provided further, to the extent that any other law applicable to the Borrower, any Subsidiary or any of their properties establishes a meaning for "hazardous substance," "release," "solid waste," or "disposal" which is broader than that specified in either CERCLA or RCRA, such broader meaning shall apply. THE BORROWER AGREES TO INDEMNIFY AND HOLD THE ADMINISTRATIVE AGENT, THE ISSUING BANKS AND EACH LENDER HARMLESS FROM AND AGAINST, AND TO REIMBURSE THEM WITH RESPECT TO, ANY AND ALL CLAIMS, DEMANDS, CAUSES OF ACTION, LOSS, DAMAGE, LIABILITIES, COSTS AND EXPENSES (INCLUDING ATTORNEYS' FEES AND COURTS COSTS) OF ANY KIND OR CHARACTER, KNOWN OR UNKNOWN, FIXED OR CONTINGENT, ASSERTED AGAINST OR INCURRED BY ANY OF THEM AT ANY TIME AND FROM TIME TO TIME BY REASON OF OR ARISING OUT OF (a) THE FAILURE OF THE BORROWER OR ANY SUBSIDIARY TO PERFORM ANY OBLIGATION HEREUNDER REGARDING ASBESTOS OR APPLICABLE ENVIRONMENTAL LAWS, (b) ANY VIOLATION ON OR BEFORE THE RELEASE DATE OF ANY APPLICABLE ENVIRONMENTAL LAW IN EFFECT ON OR BEFORE THE RELEASE DATE, AND (c) ANY ACT, OMISSION, EVENT OR CIRCUMSTANCE EXISTING OR OCCURRING ON OR PRIOR TO THE RELEASE DATE (INCLUDING WITHOUT LIMITATION THE PRESENCE ON SUCH REAL PROPERTY OR RELEASE FROM SUCH REAL PROPERTY OF HAZARDOUS SUBSTANCES OR SOLID WASTES DISPOSED OF OR OTHERWISE RELEASED ON OR PRIOR TO THE RELEASE DATE), RESULTING FROM OR IN CONNECTION WITH THE OWNERSHIP OF THE REAL PROPERTY, REGARDLESS OF WHETHER THE ACT, OMISSION, EVENT OR CIRCUMSTANCE CONSTITUTED A VIOLATION OF ANY APPLICABLE ENVIRONMENTAL LAW AT THE TIME OF ITS EXISTENCE OR OCCURRENCE, OR WHETHER THE ACT, OMISSION, EVENT OR CIRCUMSTANCE IS CAUSED BY OR RELATES TO THE NEGLIGENCE OF ANY INDEMNIFIED PERSON; PROVIDED THAT, THE BORROWER SHALL NOT BE UNDER ANY OBLIGATION TO INDEMNIFY THE ADMINISTRATIVE AGENT, THE ISSUING BANKS OR ANY LENDER TO THE EXTENT THAT ANY SUCH LIABILITY ARISES AS THE RESULT OF THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF SUCH PERSON, AS FINALLY JUDICIALLY DETERMINED BY A COURT OF COMPETENT JURISDICTION. THE PROVISIONS OF THIS PARAGRAPH SHALL SURVIVE THE RELEASE DATE AND SHALL CONTINUE THEREAFTER IN FULL FORCE AND EFFECT. Section 5.12 Conversion of Unrestricted Subsidiaries. (a) Provided there shall exist no Default or Event of Default both prior to and after giving effect to the conversion of any Restricted Subsidiary to an Unrestricted Subsidiary, the Borrower may, in the Borrower's sole discretion and upon 30 days' written notice to the Lenders, cause any Restricted Subsidiary to become an Unrestricted Subsidiary. 81 87 (b) Provided there shall exist no Default or Event of Default both prior to and after giving effect to the conversion of any Unrestricted Subsidiary to a Restricted Subsidiary, Borrower may, in the Borrower's sole discretion and upon 30 days' written notice to the Lenders, cause any Unrestricted Subsidiary to become a Restricted Subsidiary; provided, that such Subsidiaries otherwise meet the requirements contained in this Agreement for such designation including but not limited to the definition of Subsidiary. Section 5.13 Year 2000 Compliance. The Borrower will promptly notify the Administrative Agent in the event the Borrower discovers or determines that any computer application (including those of its suppliers and vendors) that is material to its or any of its Subsidiaries' business and operations will not be Year 2000 Compliant on a timely basis, except to the extent that such failure could not be reasonably expected to have a Material Adverse Effect. Section 5.14 AMFM Entities and SFX Entities. After the acquisition of AMFM and SFX by the Borrower, respectively, and until their respective Collateral Release Date, no Investment may be made by the Borrower or any Restricted Subsidiary (other than (i) Investments made with Capital Stock of the Borrower and (ii) any Investments made by any AMFM Entity or SFX Entity) in any AMFM Entity or any SFX Entity, except Investments from time to time in an AMFM/SFX Obligor made pursuant to Intercompany Notes executed by such AMFM/SFX Obligors. The Borrower agrees to, and shall cause each Restricted Subsidiary to, until the respective Collateral Release Dates, pledge such Intercompany Notes to the Administrative Agent on behalf of the Lenders to secure the Obligations pursuant to documentation substantially in the form of Exhibit J hereto, and deliver each such Intercompany Note endorsed by Borrower or such Restricted Subsidiary and payable to the Administrative Agent on behalf of itself and the Lenders, but in no event shall the Borrower or any Restricted Subsidiary be obligated to pledge Intercompany Notes evidencing outstanding amounts in the aggregate in excess of the Maximum Pledged Intercompany Note Amount (as such Maximum Pledged Intercompany Note Amount changes quarterly). The Borrower covenants and agrees that promptly upon any change in the Maximum Pledged Intercompany Note Amount that increases such amount, the Borrower will, and will cause its Restricted Subsidiaries to, immediately pledge an additional amount of Intercompany Notes (up to the Maximum Pledged Intercompany Note Amount) to the Administrative Agent on behalf of the Lenders, and deliver each such Intercompany Note endorsed by the Borrower or such Restricted Subsidiary to be payable to the Administrative Agent. Upon any change in the Maximum Pledged Intercompany Note Amount that decreases such amount, if the Borrower has Pledged Intercompany Notes in an aggregate principal face amount in excess of the Maximum Pledged Intercompany Note Amount, the Lenders agree to release the pledge and Lien on the amount of such Pledged Intercompany Notes in excess of the Maximum Pledged Intercompany Note Amount. The Lenders hereby authorize Administrative Agent to take all such action to release such Pledged Intercompany Notes, including, without limitation, releasing Pledged Intercompany Notes in excess of such amount and receiving new Pledged Intercompany Notes in different amounts. The Borrower further agrees, and shall cause each AMFM/SFX Obligor receiving any Investment from the Borrower or any other Restricted Subsidiary (other than any AMFM Entity or SFX Entity) after the AMFM Acquisition and the SFX Acquisition, respectively, and until their 82 88 respective Collateral Release Dates, to, execute a Limited Subsidiary Guaranty of the Obligations pursuant to documentation substantially in the form of Exhibit F hereto, but in no event shall the Borrower or any Restricted Subsidiary be obligated to guaranty an amount in excess of the Limited Subsidiary Guaranty Amount. Upon such date that (i) is after January 1, 2001 and (ii) all Intercompany Notes are pledged and delivered to the Administrative Agent on behalf of the Lenders to secure the Obligations, the Administrative Agent shall, on behalf of the Lenders, release, cancel and terminate each Limited Subsidiary Guaranty. On each Collateral Release Date, the Administrative Agent shall, on behalf of the Lenders, execute all documentation reasonably necessary to release, cancel and terminate each Lien on and pledge of each Intercompany Note executed by any AMFM Entity or any SFX Entity, as applicable, and return each such Intercompany Note to the Borrower, and release, cancel and terminate each Limited Subsidiary Guaranty executed by any AMFM Entity or any SFX Entity, as applicable. Each Lender specifically acknowledges that all Pledged Intercompany Notes may be released, canceled and terminated (and the Administrative Agent is hereby authorized to take any action reasonably necessary to effectuate such release, cancellation and termination) at the earlier of (a) consent thereto by the Determining Lenders and (b) (i) with respect to Pledged Intercompany Notes executed by any AMFM Entity, the Collateral Release Date for the AMFM Entities, and (ii) with respect to Pledged Intercompany Notes executed by any SFX Entity, the Collateral Release Date for the SFX Entities. Each Lender additionally specifically acknowledges that each Limited Subsidiary Guaranty may be released, canceled and terminated (and the Administrative Agent is hereby authorized to take any action reasonably necessary to effectuate such release, cancellation and termination) at the earlier of (a) consent thereto by the Determining Lenders, (b) (i) with respect to Limited Subsidiary Guaranties executed by any AMFM Entity, the Collateral Release Date for the AMFM Entities, and (ii) with respect to Limited Subsidiary Guaranties executed by any SFX Entity, the Collateral Release Date for the SFX Entities and (c) such date as all Intercompany Notes executed by any AMFM Entity and any SFX Entity are pledged and delivered to the Administrative Agent on behalf of Lenders to secure the Obligations. Section 5.15 Collateral Sharing and Intercreditor Arrangement. Each Lender specifically acknowledges that each Limited Subsidiary Guaranty and the Pledged Intercompany Notes will also secure and guaranty on a pari passu basis the Original Credit Facility. "Pari passu" basis for the purpose of this Section 5.15 means based on relative outstanding amounts under this Agreement and the Loan Papers and the Original Credit Facility, on the earlier of the date of demand (if any) against the Borrower under the Original Credit Facility or the guarantors under the Limited Subsidiary Guaranties. Notwithstanding the foregoing, the Borrower also acknowledges and agrees that the collateral and guaranty sharing among the Lenders and the lenders under the Original Credit Facility is an issue among those parties only and the Pledged Intercompany Notes and the Limited Subsidiary Guaranties in their respective amounts may be exercised in full by the Administrative Agent on behalf of the Lenders and/or on behalf of the lenders under the Original Credit Facility, but in each case shall be subject to an intercreditor agreement among such lenders as to the division of the proceeds. Each Lender specifically authorizes the Administrative Agent to enter into an intercreditor agreement with the lenders or their agent under the Original Credit Facility to share such Pledged Intercompany Notes and Limited Subsidiary Guaranties, such intercreditor 83 89 agreement to be on a pari passu basis and pursuant to other terms acceptable to the Administrative Agent. The Borrower and each Lender further acknowledges that any changes to any term or provision to such intercreditor agreement (including the pari passu basis of division or any termination or release of such intercreditor agreement) may be executed by the Administrative Agent and become effective upon the written consent of the Determining Lenders, and shall not require the consent of the Borrower. The Borrower and each Lender further authorize the Administrative Agent to take any action reasonably necessary to effectuate the intent of this Section 5.15. ARTICLE 6 Information Covenants So long as any of the Obligations are outstanding and unpaid or any of the Commitments is outstanding (whether or not the conditions to borrowing have been or can be fulfilled), the Borrower shall furnish or cause to be furnished to the Administrative Agent: Section 6.1 Quarterly Financial Statements and Information. Within 45 days after the end of each fiscal quarter, consolidated and consolidating balance sheets of the Borrower and its Subsidiaries as at the end of such quarter and the related consolidated and consolidating statements of income and consolidated statements of changes in cash flow for such quarter and for the elapsed portion of the year ended with the last day of such quarter, all of which shall be certified by the president or chief financial officer of the Borrower, to be, in his or her opinion, complete in all material respects and to present fairly, in accordance with GAAP, the financial position and results of operations of the Borrower and its Subsidiaries as at the end of and for such period, and for the elapsed portion of the year ended with the last day of such period, subject only to normal year-end adjustments. Section 6.2 Annual Financial Statements and Information; Certificate of No Default. (a) Within 90 days after the end of each fiscal year, a copy of (i) the consolidated balance sheet of the Borrower and its Subsidiaries, as of the end of the current and prior fiscal years and (ii) consolidated statements of earnings, statements of changes in shareholders' equity, and statements of changes in cash flow as of and through the end of such fiscal year, all of which are prepared in accordance with GAAP, and certified by independent certified public accountants acceptable to the Lenders, whose opinion shall be in scope and substance in accordance with generally accepted auditing standards and shall be unqualified. (b) Simultaneously with the delivery of the statements required by this Section 6.2, a letter from the Borrower's public accountants certifying that no Default was detected during the examination of the Borrower and its Restricted Subsidiaries, and authorizing the Borrower to deliver such financial statements and opinion thereon to the Administrative Agent and Lenders pursuant to this Agreement. Section 6.3 Compliance Certificates. At the time financial statements are furnished pursuant to Sections 6.1 and 6.2 hereof, a certificate of an Authorized Signatory: 84 90 (a) setting forth at the end of such period, a calculation of the Leverage Ratio, as well as certifications and arithmetical calculations required to establish whether the Borrower and its Restricted Subsidiaries were in compliance with the requirements of Sections 7.1(b), (c), (d) and (e), 7.9 and 7.10 hereof, which shall be substantially in the form of Exhibit G hereto; (b) setting forth the aggregate amount of outstanding Advances under each of the Loans and Reimbursement Obligations and certifying as to compliance herewith; and (c) stating that, to the best of his or her knowledge after due inquiry, no Default has occurred as at the end of such period, or if a Default has occurred, disclosing each such Default and its nature, when it occurred, whether it is continuing and the steps being taken with respect to such Default. Section 6.4 Copies of Other Reports and Notices. (a) Promptly upon their becoming available, a copy of (i) all material reports or letters submitted to the Borrower or any Restricted Subsidiary by accountants in connection with any annual, interim or special audit, including without limitation any report prepared in connection with the annual audit referred to in Section 6.2 hereof, and any other comment letter submitted to management in connection with any such audit, (ii) each financial statement, report, notice or proxy statement sent by the Borrower or any Restricted Subsidiary to stockholders generally, (iii) each regular or periodic report and any registration statement (other than statements on Form S-8) or prospectus (or material written communication in respect of any thereof) filed by the Borrower or any subsidiary with any securities exchange, with the Securities and Exchange Commission or any successor agency, and (iv) all press releases concerning material financial aspects of the Borrower or any Restricted Subsidiary; (b) Promptly upon becoming aware that (i) the holder(s) of any note(s) or other evidence of Debt for Borrowed Money or other security of the Borrower or any Restricted Subsidiary in excess of $10,000,000 in the aggregate has given notice or taken any action with respect to a breach, failure to perform, claimed default or event of default thereunder, (ii) any party to any Capitalized Lease Obligations or any Local Marketing Agreement has given notice or taken any action with respect to a breach, failure to perform, claimed default or event of default thereunder, (iii) any occurrence or non-occurrence of any event which constitutes or which with the passage of time or giving of notice or both could constitute a material breach by the Borrower or any Restricted Subsidiary under any material agreement or instrument which could reasonably be expected to result in a liability in excess of $10,000,000, other than this Agreement to which the Borrower or any Restricted Subsidiary is a party or by which any of their properties may be bound, or (iv) any event, circumstance or condition which could reasonably be expected to have a Material Adverse Effect, a written notice specifying the details thereof (or the nature of any claimed default or event of default) and what action is being taken or is proposed to be taken with respect thereto; provided, however, no notice shall be required to be delivered hereunder with respect to any event, circumstance or condition set forth in clause (i), (ii) or (iii) immediately preceding if, in the opinion 85 91 of counsel to the Borrower or such Restricted Subsidiary, there is no reasonable possibility of an adverse determination with respect to such event, circumstance or condition; (c) Promptly upon receipt thereof, information with respect to and copies of any notices received from the FCC or any other federal, state or local regulatory agencies or any tribunal relating to any order, ruling, law, information or policy that relates to a breach of or noncompliance with the Communications Act, which in each case could reasonably be expected to result in the payment of money by the Borrower or any Restricted Subsidiary in an amount of $10,000,000 or more in the aggregate, or otherwise have a Material Adverse Effect, or result in the loss or suspension of any Necessary Authorization; provided, however, no information shall be required to be delivered hereunder if, in the opinion of counsel to the Borrower or such Restricted Subsidiary, there is no reasonable possibility of an adverse determination with respect to such notice; (d) Promptly upon receipt from any governmental agency, or any government, political subdivision or other entity, any material notice, correspondence, hearing, proceeding or order regarding or affecting the Borrower, any Subsidiary, or any of their properties or businesses; (e) From time to time and promptly upon each request, such data, certificates, reports, statements, opinions of counsel, documents or further information regarding the assets, business, liabilities, financial position, projections, results of operations or business prospects of the Borrower and its Subsidiaries, as the Administrative Agent or any Lender may reasonably request; and (f) As soon as available, but in any event within three Business Days following any change in the Senior Unsecured Debt Rating, a Notice of Change of Senior Unsecured Debt Rating. Section 6.5 Notice of Litigation, Default and Other Matters. Prompt notice of the following events after the Borrower has knowledge or notice thereof: (a) The commencement of all proceedings and investigations by or before the FCC or any other governmental body, and all actions and proceedings in any court or before any arbitrator involving claims for damages, fines or penalties (including punitive damages) in excess of $5,000,000 per claim and $25,000,000 in the aggregate (after deducting the amount with respect to the Borrower or any Restricted Subsidiary such Person is insured, provided such claim has not been denied), against or in any other way relating directly to the Borrower, any Restricted Subsidiary, or any of their properties or businesses; provided, however, no notice shall be required to be delivered hereunder if, in the opinion of counsel to the Borrower or such Restricted Subsidiary, there is no reasonable possibility of an adverse determination in such action or proceeding; (b) Promptly upon the happening of any condition or event which constitutes a Default, a written notice specifying the nature and period of existence thereof and what action is being taken or is proposed to be taken with respect thereto; and (c) Any material adverse change with respect to the business, assets, liabilities, financial position, results of operations or prospective business of the Borrower or any Subsidiary, other than 86 92 changes in the ordinary course of business which have not had and are not likely to have a Material Adverse Effect. Section 6.6 ERISA Reporting Requirements. (a) Promptly and in any event (i) within 30 days after the Borrower or any member of its Controlled Group knows or has reason to know that any ERISA Event described in clause (a) of the definition of ERISA Event or any event described in Section 4063(a) of ERISA with respect to any Plan of the Borrower or any member of its Controlled Group has occurred, and (ii) within 10 days after the Borrower or any member of its Controlled Group knows or has reason to know that any other ERISA Event with respect to any Plan of the Borrower or any member of its Controlled Group has occurred or a request for a minimum funding waiver under Section 412 of the Code with respect to any Plan of the Borrower or any member of its Controlled Group, a written notice describing such event and describing what action is being taken or is proposed to be taken with respect thereto, together with a copy of any notice of event that is given to the PBGC; (b) Promptly and in any event within two Business Days after receipt thereof by the Borrower or any member of its Controlled Group from the PBGC, copies of each notice received by the Borrower or any member of its Controlled Group of the PBGC's intention to terminate any Plan or to have a trustee appointed to administer any Plan; (c) Promptly and in any event within 30 days after the filing thereof by the Borrower or any member of its Controlled Group with the United States Department of Labor, the Internal Revenue Service or the PBGC, copies of each annual and other report (including Schedule B thereto) with respect to each Plan; (d) Promptly and in any event within 30 days after receipt thereof, a copy of any notice, determination letter, ruling or opinion the Borrower or any member of its Controlled Group receives from the PBGC, the United States Department of Labor or the Internal Revenue Service with respect to any Plan; (e) Promptly, and in any event within 10 Business Days after receipt thereof, a copy of any correspondence the Borrower or any member of its Controlled Group receives from the Plan Sponsor (as defined by Section 4001(a)(10) of ERISA) of any Plan concerning potential withdrawal liability pursuant to Section 4219 or 4202 of ERISA, and a statement from the chief financial officer of the Borrower or such member of its Controlled Group setting forth details as to the events giving rise to such potential withdrawal liability and the action which the Borrower or such member of its Controlled Group is taking or proposes to take with respect thereto; (f) Notification within 30 days of any material increases in the benefits of any existing Plan which is not a Multiemployer Plan, or the establishment of any new Plans, or the commencement of contributions to any Plan to which the Borrower or any member of its Controlled Group was not previously contributing; 87 93 (g) Notification within three Business Days after the Borrower or any member of its Controlled Group knows or has reason to know that the Borrower or any such member of its Controlled Group has or intends to file a notice of intent to terminate any Plan under a distress termination within the meaning of Section 4041(c) of ERISA and a copy of such notice; and (h) Promptly after receipt of written notice of commencement thereof, notice of all actions, suits and proceedings before any court or governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, affecting the Borrower or any member of its Controlled Group with respect to any Plan, except those which, in the aggregate, if adversely determined could not have a Material Adverse Effect. ARTICLE 7 Negative Covenants So long as any of the Obligations are outstanding and unpaid or any of the Commitments is outstanding (whether or not the conditions to borrowing have been or can be fulfilled): Section 7.1 Debt for Borrowed Money. The Borrower shall not create, assume, incur or otherwise become or remain obligated in respect of, any Debt for Borrowed Money, unless at the time such Debt for Borrowed Money is incurred by the Borrower (a) there exists no Default and (b) no event has occurred and no circumstance exists, which has had, or will have, a Material Adverse Effect. The Borrower shall not permit any Restricted Subsidiary to, create, assume, incur or otherwise become or remain obligated in respect of, or permit to be outstanding, or suffer to exist any Debt for Borrowed Money, except: (a) (i) Debt for Borrowed Money existing on the date hereof described on Schedule 7.1 hereto, (ii) acquired Debt for Borrowed Money owed by any SFX Entity or any AMFM Entity, provided that (A) such Debt for Borrowed Money existed prior to the date of the AMFM Acquisition and the SFX Acquisition (as applicable) and (B) was not incurred by such AMFM Entity or SFX Entity in anticipation of such Acquisition, (iii) Debt for Borrowed Money under the Loan Papers, and refinancings thereof and (iv) Debt for Borrowed Money consisting of Guaranties of certain indebtedness of the Original Credit Facility by the AMFM/SFX Obligors (so long as the Obligations hereunder are guaranteed by identical Guaranties); (b) so long as (i) there exists no Default and (ii) no event has occurred and no circumstance exists, which has had, or will have, a Material Adverse Effect on the date of incurrence thereof, for the Restricted Subsidiaries, Capitalized Lease Obligations and Debt for Borrowed Money incurred to purchase property, not to exceed, when added to all Debt for Borrowed Money incurred or acquired as permitted by 7.1(e) below, the greater of (A) 10% of Operating Cash Flow for the four most recently completed fiscal quarters of the Borrower and (B) $200,000,000, in the aggregate outstanding principal amount at any time 88 94 for all Restricted Subsidiaries (only $50,000,000 of which in the aggregate for subsections 7.1(b) and (e) may be secured); (c) (i) Debt for Borrowed Money among the Borrower and its Restricted Subsidiaries (except until the respective Collateral Release Dates, this subsection (i) shall not permit Debt for Borrowed Money owed by any AMFM Entity or SFX Entity to the Borrower or any Restricted Subsidiary that is not an AMFM Entity or SFX Entity, respectively), and (ii) Debt for Borrowed Money owed by the AMFM/SFX Obligors to the Borrower or any Restricted Subsidiary evidenced by the Intercompany Notes. For the avoidance of doubt, until their respective Collateral Release Dates, the AMFM Entities and the SFX Entities can only incur intercompany Debt for Borrowed Money under this subsection (c) pursuant to Intercompany Notes; however, on and after their respective Collateral Release Dates, the AMFM Entities and the SFX Entities will be treated the same as all other Restricted Subsidiaries; (d) With respect to Restricted Subsidiaries, and so long as (i) there exists no Default and (ii) no event has occurred and no circumstance exists, which has had, or will have, a Material Adverse Effect on the date of incurrence thereof, Debt for Borrowed Money not to exceed 200 million British pounds pursuant to the More Group Credit Facility; and (e) acquired Debt for Borrowed Money owed by any newly acquired Restricted Subsidiary (which such Restricted Subsidiary was acquired in accordance with the terms of Section 7.5 hereof), provided that (i) such Debt for Borrowed Money existed prior to the date of Acquisition, (ii) was not incurred by such Restricted Subsidiary in anticipation of such Acquisition and (iii) all such acquired Debt for Borrowed Money of Restricted Subsidiaries does not exceed, when added to all Debt for Borrowed Money incurred or acquired as permitted by 7.1(b) above, the greater of (A) 10% of Operating Cash Flow for the four most recently completed fiscal quarters of the Borrower and (B) $200,000,000, in the aggregate outstanding principal amount at any time for all Restricted Subsidiaries (only $50,000,000 of which in the aggregate for subsections 7.1(b) and (e) may be secured). Section 7.2 Liens. The Borrower shall not, and shall not permit any Restricted Subsidiary to, create, assume, incur, permit or suffer to exist, directly or indirectly, any Lien on any of its assets, whether now owned or hereafter acquired, except Permitted Liens and Liens on Intercompany Notes securing obligations under the Original Credit Facility (so long as the Obligations hereunder are secured by identical Liens). The Borrower shall not, and shall not permit any Restricted Subsidiary to, agree with any other Person that it shall not create, assume, incur, permit or suffer to exist or to be created, assumed, incurred or permitted to exist, directly or indirectly, any Lien on any of its assets. Section 7.3 Investments. The Borrower shall not, and shall not permit any Subsidiary to, make or acquire any Investment, except (a) existing Investments described on Schedule 7.3 hereto or valued at less than $500,000 in the aggregate on the Closing Date, (b) Investments in cash equivalents, (c) Investments in the form of Intercompany Notes in accordance with the terms of Section 5.14 hereof and (d) Investments in the Borrower and its Restricted Subsidiaries (except (i) all AMFM Entities, until their 89 95 respective Collateral Release Date and (ii) all SFX Entities, until their respective Collateral Release Date) or Investments by any AMFM Entity or SFX Entity in any other AMFM Entity or SFX Entity, respectively, provided that, notwithstanding the foregoing, so long as (A) there exists no Default and (B) no event has occurred and no circumstance exists, which has had, or will have, a Material Adverse Effect on the date such Investment is made, the Borrower or such Subsidiary may make Investments in any business (Capital Stock or assets) described in Section 5.2(a) hereof (except (i) all AMFM Entities, until their respective Collateral Release Date and (ii) all SFX Entities, until their respective Collateral Release Date). Section 7.4 Amendment and Waiver. Other than as provided in Section 7.5 herein, the Borrower shall not, and shall not permit any Restricted Subsidiary to, enter into any amendment of any material term or material provision of its articles of incorporation or by-laws. Section 7.5 Liquidation, Disposition or Acquisition of Assets, Merger, New Subsidiaries. The Borrower shall not, and shall not permit any Restricted Subsidiary to, at any time: (a) liquidate or dissolve itself (or suffer any liquidation or dissolution) or otherwise wind up; or sell, lease, abandon, transfer or otherwise dispose of all or any part of its assets, properties or business, other than immaterial assets sold in the ordinary course of business, or dispositions; (b) make any Acquisition, provided, however, so long as (i) there shall exist no Default prior to and after giving effect to a proposed transaction and (ii) no event has occurred and no circumstance exists, which has had, or will have, a Material Adverse Effect on the date of such transaction, the Borrower or any Restricted Subsidiary may, consummate an Acquisition of another Person, so long as in each case: (A) such assets, property or business shall be in or relate to the communications or media related business, or the entertainment and internet businesses or related businesses, (B) the Administrative Agent shall have received copies of all documents, instruments, opinions and other information relating to the seller and assets to be acquired as it may reasonably request; and (C) immediately after giving effect to any such Acquisition, (I) all such acquired Debt for Borrowed Money of the Restricted Subsidiaries shall comply with Section 7.1(e) hereof, and (II) the Borrower shall be in compliance with Section 7.5(c) below. (c) enter into any merger or consolidation, provided, however, that, so long as there shall exist no Default prior to or after giving effect to a proposed transaction, (i)(A) a Restricted Subsidiary may merge or consolidate with another Restricted Subsidiary; (B) an Unrestricted Subsidiary may merge or consolidate with another Unrestricted Subsidiary or a Restricted Subsidiary; and (C) an Unrestricted Subsidiary or a Restricted Subsidiary may merge or consolidate 90 96 with the Borrower provided, that the Borrower or such Restricted Subsidiary shall be the surviving entity of any transaction governed by this Section 7.5(c)(i); and (ii) the Borrower or any Restricted Subsidiary may merge or consolidate with another Person, so long as (A) the Borrower or a Restricted Subsidiary shall be the surviving entity, (B) no event has occurred and no circumstance exists, which has had, or will have, a Material Adverse Effect on the date of such transaction and (C) the Administrative Agent shall have received copies of all information related thereto as it may reasonably request. Section 7.6 Dividends. The Borrower shall not, and shall not permit any Subsidiary to, directly or indirectly declare or pay any Dividend; provided, however, (a) any Subsidiary may declare and pay Dividends to the Borrower or any Restricted Subsidiary (and to any minority holders of its capital stock so long as the Borrower or a Restricted Subsidiary receives Dividends that are at least on a pro rata basis) and (b) the Borrower may declare and pay Dividends (including amounts which become Dividends as a result of the proviso in the definition of Dividends) on any date; provided, however, notwithstanding clause (b) immediately preceding to the contrary, the Borrower shall pay no such Dividends unless there shall exist no Default prior to or after giving effect to any such proposed Dividend. Section 7.7 Affiliate Transactions. The Borrower shall not, and shall not permit any Subsidiary to, at any time engage in any transaction with an Affiliate (other than any of the Borrower and its Restricted Subsidiaries), nor make an assignment or other transfer of any of its assets or properties to any Affiliate, on terms materially less advantageous to the Borrower or Subsidiary than would be the case if such transaction had been effected with a non-Affiliate (other than advances to employees in the ordinary course of business). The Borrower shall not, and shall not permit any Subsidiary to, in any event incur or suffer to exist any Debt for Borrowed Money or Guaranty in favor of any Affiliate, unless such Affiliate shall subordinate the payment and performance thereof on terms satisfactory to the Lenders in their sole discretion, and otherwise upon terms, conditions and documentation, and in a manner satisfactory to Determining Lenders. Notwithstanding the foregoing, the Borrower may loan the proceeds of Advances under the Loans to Subsidiaries that are Restricted Subsidiaries, so long as there shall exist no Default prior to or after giving effect to such proposed loan. Section 7.8 Compliance with ERISA. The Borrower shall not, and shall not permit any Subsidiary to, directly or indirectly, or permit any member of its Controlled Group to directly or indirectly, (a) terminate any Plan so as to result in any material (in the opinion of the Determining Lenders) liability to the Borrower or any member of its Controlled Group, (b) permit to exist any ERISA Event, or any other event or condition which presents the risk of a material (in the opinion of the Determining Lenders) liability of the Borrower or any member of its Controlled Group, (c) make a complete or partial withdrawal (within the meaning of Section 4201 of ERISA) from any Multiemployer Plan so as to result in any material (in the opinion of the Determining Lenders) liability to the Borrower or any member of its Controlled Group, (d) enter into any new Plan or modify any existing Plan so as to increase its obligations thereunder except in the ordinary course of business consistent with past practice which could result in any material (in the opinion of the Determining Lenders) liability to the Borrower or any member of its Controlled Group, or (e) permit 91 97 the present value of all benefit liabilities, as defined in Title IV of ERISA, under each Plan of the Borrower or any member of its Controlled Group (using the actuarial assumptions utilized by the PBGC upon termination of a plan) to materially (in the opinion of the Determining Lenders) exceed the fair market value of Plan assets allocable to such benefits all determined as of the most recent valuation date for each such Plan. Section 7.9 Leverage Ratio. At the end of each fiscal quarter occurring during the periods indicated below, the Borrower shall not permit the Leverage Ratio to be greater than:
Period Ratio ------ ----- From date hereof through June 29, 2001 6.00 to 1 June 30, 2001 through June 29, 2003 5.50 to 1 June 30, 2003 and thereafter 5.00 to 1
Section 7.10 Interest Coverage Ratio. At the end of each fiscal quarter, the Borrower shall not permit the ratio of (a) Operating Cash Flow for the four consecutive fiscal quarters then ending to (b) Interest Expense of the Borrower and its Subsidiaries for such quarters, to be less than 2.00 to 1.00. Section 7.11 Sale and Leaseback. The Borrower shall not, and shall not permit any Restricted Subsidiary to, enter into any arrangement whereby it sells or transfers any of its assets, and thereafter rents or leases such assets. Section 7.12 Sale or Discount of Receivables. The Borrower shall not, and shall not permit any Restricted Subsidiary to, directly or indirectly sell, with or without recourse, for discount or otherwise, any notes or accounts receivable. Section 7.13 Business of Clear Channel Television Licenses, Inc. and Clear Channel Broadcasting Licenses, Inc. Notwithstanding anything in this Agreement to the contrary, the Borrower shall not permit Clear Channel Television Licenses, Inc. and Clear Channel Broadcasting Licenses, Inc. to engage in any business other than the ownership of (i) FCC licenses and Necessary Authorizations for the operation of Clear Channel Television, Inc. and Clear Channel Broadcasting, Inc., respectively, and (ii) at least 95% of the Capital Stock of Clear Channel Television, Inc. and 100% of the Capital Stock of Clear Channel Broadcasting, Inc., respectively. Section 7.14 Other Restrictive Agreements. The Borrower shall not, and shall not permit any Restricted Subsidiary to, enter into any agreement pursuant to which the ability of the Borrower or any Restricted Subsidiary to (a) accept any waiver or consent with respect to any provision of this Agreement or any Loan Paper, or (b) enter into any amendment, amendment and restatement, replacement or other substitution of this Agreement or any Loan Paper, is prohibited or limited in any manner, or causes an event material and adverse to the Borrower. 92 98 ARTICLE 8 Default Section 8.1 Events of Default. Each of the following shall constitute an Event of Default, whatever the reason for such event, and whether voluntary, involuntary, or effected by operation of law or pursuant to any judgment or order of any court or any order, rule or regulation of any governmental or non-governmental body: (a) Any representation or warranty made under any Loan Paper shall prove to have been incorrect or misleading in any material respect when made; (b) The Borrower shall default in the payment of (i) any interest or any fees payable hereunder or any other costs, fees, expenses or other amounts payable hereunder or under the Loan Papers, when due, which Default is not cured within three Business Days from the date such payment became due by payment of such late amount, or (ii) any principal when due; (c) The Borrower or any Restricted Subsidiary shall default in the performance or observance of any agreement or covenant contained in Article 7 hereof; (d) The Borrower or any Restricted Subsidiary shall default in the performance or observance of any other agreement or covenant contained in this Agreement not specifically referred to elsewhere in this Section 8.1, and such default shall not be cured within a period of 30 days after the earlier of (i) written notice from the Administrative Agent thereof and (ii) actual notice thereof by any member of senior management of the Borrower; (e) There shall occur any default or breach in the performance or observance of any agreement or covenant (after the expiration of any applicable grace period) or breach of any representation or warranty contained in any of the Loan Papers (other than this Agreement); (f) There shall be entered a decree or order by a court having jurisdiction in the premises constituting an order for relief in respect of the Borrower or any Subsidiary under Title 11 of the United States Code, as now constituted or hereafter amended, or under any Debtor Relief Law or any other applicable Federal or state bankruptcy law or other similar law, or appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator or similar official of the Borrower or any Subsidiary, or of any substantial part of their respective properties, or ordering the winding-up or liquidation of the affairs of the Borrower or any Subsidiary, and any such decree or order shall continue unstayed and in effect for a period of 60 consecutive days; provided, that the affected assets alone or in the aggregate total in excess of $25,000,000; (g) The Borrower or any Subsidiary shall file a petition, answer or consent seeking relief under Title 11 of the United States Code, as now constituted or hereafter amended, or under any 93 99 Debtor Relief Law or any other applicable Federal or state bankruptcy law or other similar law, or the Borrower or any Subsidiary shall consent to the institution of proceedings thereunder or to the filing of any such petition or to the appointment or taking of possession of a receiver, liquidator, assignee, trustee, custodian, sequestrator or other similar official of the Borrower or any Subsidiary or of any substantial part of their respective properties, or the Borrower or any Subsidiary shall fail generally to pay its debts as they become due, or the Borrower or any Subsidiary shall take any action in furtherance of any such action; provided, that the affected assets alone or in the aggregate total in excess of $25,000,000; (h) A final judgment or judgments shall be entered by any court against the Borrower or any Subsidiary for the payment of money which exceeds $25,000,000 in the aggregate, or a warrant of attachment or execution or similar process shall be issued or levied against property of the Borrower or any Subsidiary which, together with all other such property of the Borrower and its Subsidiaries subject to other such process, exceeds in value $25,000,000 in the aggregate, and if such judgment or award is not insured or, within 30 days after the entry, issue or levy thereof, such judgment, warrant or process shall not have been paid or discharged or stayed pending appeal, or if, after the expiration of any such stay, such judgment, warrant or process shall not have been paid or discharged; (i) With respect to any Plan of the Borrower or any member of its Controlled Group: (i) the Borrower, any such member, or any other party-in-interest or disqualified person shall engage in transactions which in the aggregate would reasonably result in a direct or indirect liability to the Borrower or any member of its Controlled Group in excess of $25,000,000 under Section 409 or 502 of ERISA or Section 4975 of the Code; (ii) the Borrower or any member of its Controlled Group shall incur any accumulated funding deficiency, as defined in Section 412 of the Code, in the aggregate in excess of $25,000,000, or request a funding waiver from the Internal Revenue Service for contributions in the aggregate in excess of $25,000,000; (iii) the Borrower or any member of its Controlled Group shall incur any withdrawal liability in the aggregate in excess of $25,000,000 as a result of a complete or partial withdrawal within the meaning of Section 4203 or 4205 of ERISA; (iv) the Borrower or any member of its Controlled Group shall fail to make a required contribution by the due date under Section 412 of the Code or Section 302 of ERISA which would result in the imposition of a lien under Section 412 of the Code or Section 302 of ERISA; (v) the Borrower, any member of its Controlled Group or any Plan sponsor shall notify the PBGC of an intent to terminate, or the PBGC shall institute proceedings to terminate, or the PBGC shall institute proceedings to terminate, any Plan; (vi) a Reportable Event shall occur with respect to a Plan, and within 15 days after the reporting of such Reportable Event to the Administrative Agent, the Administrative Agent shall have notified the Borrower in writing that the Determining Lenders have made a determination that, on the basis of such Reportable Event, there are reasonable grounds for the termination of such Plan by the PBGC or for the appointment by the appropriate United States District Court of a trustee to administer such Plan and as a result thereof an Event of Default shall have occurred hereunder; (vii) a trustee shall be appointed by a court of competent jurisdiction to administer any Plan or the assets thereof; (viii) the benefits of any Plan shall be increased, or the Borrower or any member of its Controlled Group shall begin to maintain, or begin to contribute to, any Plan, without the prior written consent of the Determining Lenders; or (ix) any ERISA Event with respect to a Plan shall 94 100 have occurred, and 30 days thereafter (A) such ERISA Event, other than such event described in clause (vi) of the definition of ERISA Event herein, (if correctable) shall not have been corrected and (B) the then present value of such Plan's benefit liabilities, as defined in Title IV of ERISA, shall exceed the then current value of assets accumulated in such Plan; provided, however, that the events listed in subsections (v) through (ix) shall constitute Events of Default only if, as of the date thereof or any subsequent date, the maximum amount of liability that the Borrower or any member of its Controlled Group could incur in the aggregate under Section 4062, 4063, 4064, 4219 or 4023 of ERISA or any other provision of law with respect to all such Plans, computed by the actuary of the Plan taking into account any applicable rules and regulations of the PBGC at such time, and based on the actuarial assumptions used by the Plan, resulting from or otherwise associated with such event exceeds $25,000,000; (j) All or any material portion of the Loan Papers shall be the subject of any proceeding instituted by any Person other than a Lender (except in connection with any Lender's exercise of any remedies under the Loan Papers), or there shall exist any litigation or threatened litigation with respect to all or any material portion of the Collateral or the Loan Papers, or any of the Borrower, its Subsidiaries or any of their Affiliates shall challenge in any manner whatsoever the validity or enforceability of all or any portion of the Loan Papers; provided, however, that during any such time any such circumstance shall be bonded or stayed in accordance with Applicable Law and to the satisfaction of the Determining Lenders, such circumstance shall not be an Event of Default; (k) The Borrower or any Restricted Subsidiary shall default in the payment of any Debt for Borrowed Money in an aggregate amount of $25,000,000 or more beyond any grace period provided with respect thereto, or shall default in the performance of any agreement or instrument under which such Debt for Borrowed Money is created or evidenced beyond any applicable grace period or an event shall occur with respect to such Debt for Borrowed Money, if the effect of such default or event is to permit or cause the holder of such Debt for Borrowed Money (or a trustee on behalf of any such holder) to cause such Debt for Borrowed Money to become due prior to its date of maturity or cause such Debt for Borrowed Money to be prepaid, repurchased or redeemed; (l) The Borrower or any Subsidiary shall fail to comply with the Communications Act, or any rule or regulation promulgated by the FCC, and such failure could reasonably be expected to have a Material Adverse Effect; (m) Any material provision of any Loan Paper shall for any reason cease to be valid and binding on or enforceable against any party to it (other than the Administrative Agent or any Lender) in all material respects, or any such party shall so state in writing; (n) Any civil action, suit or proceeding shall be commenced against the Borrower, or any Subsidiary of the Borrower under any federal or state racketeering statute (including, without limitation, the Racketeer Influenced and Corrupt Organization Act of 1970) ("RICO") and such suit shall be adversely determined by a court of applicable jurisdiction, and which is either non-appealable or which the Borrower or such Subsidiary has elected not to appeal; or any criminal 95 101 action or proceeding shall be commenced against the Borrower, any Subsidiary of the Borrower under any federal or state racketeering statute (including, without limitation, RICO); or (o) There shall have occurred a Change in Control. Section 8.2 Remedies. If an Event of Default shall have occurred and shall be continuing: (a) With the exception of an Event of Default specified in Section 8.1(f) or (g) hereof, the Administrative Agent shall, upon the direction of the Determining Lenders, terminate any or all of the Commitments and/or declare the principal of and interest on the Advances under the Loans and all Obligations and other amounts owed under the Loan Papers to be forthwith due and payable without presentment, demand, protest or notice of any kind, all of which are hereby expressly waived, anything in the Loan Papers to the contrary notwithstanding. (b) Upon the occurrence of an Event of Default specified in Section 8.1(f) or (g) hereof, such principal, interest and other amounts shall thereupon and concurrently therewith become due and payable and all of the Commitments shall forthwith terminate, all without any action by the Administrative Agent, any Lender or any holders of any portion of the Obligation and without presentment, demand, protest or other notice of any kind, all of which are expressly waived, anything in the Loan Papers to the contrary notwithstanding. (c) If any Letter of Credit shall be then outstanding, the Administrative Agent may (or, upon the direction of the Facility Determining Lenders, shall) demand upon the Borrower to, and forthwith upon such demand, the Borrower shall, pay to the Administrative Agent in same day funds at the office of the Administrative Agent on such demand for deposit in the L/C Cash Collateral Account, an amount equal to the maximum amount available to be drawn under the Letters of Credit then outstanding; provided, however, that upon the occurrence of an Event of Default pursuant to Section 8.1(f) or 8.1(g) hereof, such amount shall become immediately due and payable without the requirement of any action on the part of Administrative Agent. (d) The Administrative Agent, and the Lenders may exercise all of the post-default rights granted to them under the Loan Papers or under Applicable Law. (e) The rights and remedies of the Administrative Agent and the Lenders hereunder shall be cumulative, and not exclusive. ARTICLE 9 Changes in Circumstances 96 102 Section 9.1 LIBOR Basis Determination Inadequate. If with respect to any proposed LIBOR Advance for any Interest Period, any Lender determines that (i) deposits in dollars (in the applicable amount) are not being offered to that Lender in the relevant market for such Interest Period or (ii) the LIBOR Basis for such proposed LIBOR Advance does not adequately cover the cost to such Lender of making and maintaining such proposed LIBOR Advance for such Interest Period, such Lender shall forthwith give notice thereof to the Borrower, whereupon until such Lender notifies the Borrower that the circumstances giving rise to such situation no longer exist, the obligation of such Lender to make LIBOR Advances shall be suspended. Section 9.2 Offshore Basis Determination Inadequate. If with respect to any proposed Offshore Advance for any Interest Period, (i) any Revolving Credit Lender determines that deposits in Dollars or an Approved Offshore Currency (in the applicable amount) are not being offered to that Lender in the relevant market for such Interest Period or (ii) the Facility Determining Lenders determine that the Offshore Dollar Rate or Approved Offshore Currency Rate, as appropriate, for such proposed Offshore Advance does not adequately cover the cost to such Lender of making and maintaining such proposed Offshore Advance for such Interest Period or the conversion into Dollars of any Approved Offshore Currency is commercially impracticable, such Lender shall forthwith give notice thereof to the Borrower, whereupon until such Lender notifies the Borrower that the circumstances giving rise to such situation no longer exist, the obligation of such Lender to make new Offshore Advances in the applicable Approved Offshore Currency shall be suspended. Section 9.3 Illegality. If any applicable law, rule or regulation, or any change therein or adoption thereof, or interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Lender (or its applicable Lending Office) with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency, shall make it unlawful or impossible for such Lender (or any of its Lending Offices) to make, maintain or fund its LIBOR Advances or any type of Offshore Advances, or shall limit the convertibility into Dollars of any Approved Offshore Currency (or make such conversion commercially impracticable), such Lender shall so notify the Borrower and the Administrative Agent. Before giving any notice to the Borrower pursuant to this Section, the notifying Lender shall designate a different Lending Office or other lending office if such designation will avoid the need for giving such notice and will not, in the sole judgment of the Lender, be materially disadvantageous to the Lender. Upon receipt of such notice, notwithstanding anything contained in Article 2 hereof, the Borrower shall repay in full the then outstanding principal amount of each affected LIBOR Advance and/or Offshore Advance, as applicable, owing to the notifying Lender, together with accrued interest thereon, on either (a) the last day of the Interest Period applicable to such Advance, if the Lender may lawfully continue to maintain and fund such Advance to such day, or (b) immediately, if the Lender may not lawfully continue to fund and maintain such Advance to such day. Concurrently with repaying each affected LIBOR Advance and/or Offshore Advance owing to such Lender, notwithstanding anything contained in Article 2 hereof, the Borrower shall borrow a Base Rate Advance from such Lender, and such Lender shall make such Base Rate Advance, in an amount such that the outstanding principal amount of the Advances owing to such Lender shall equal the outstanding principal amount of the Advances owing immediately prior to such repayment. 97 103 Section 9.4 EMU Changes. (a) If, as a result of the implementation of EMU, (i) any currency available for borrowing under this Agreement (a "national currency") ceases to be lawful currency of the state issuing the same and is replaced by the Euro or (ii) any national currency and the Euro are at the same time both recognized by the central bank or comparable governmental authority of the state issuing such currency as lawful currency of such state and the Administrative Agent or the Facility Determining Lenders shall so request in a notice delivered to the Borrower, then any amount payable hereunder by any party hereto in such national currency (including, without limitation, any Advance to be made under this Agreement) shall instead be payable in the Euro and the amount so payable shall be determined by redenominating or converting such amount into the Euro at the exchange rate officially fixed by the European Central Bank for the purpose of implementing the EMU, provided, that to the extent any EMU Legislation provides that an amount denominated either in the Euro or in the applicable national currency can be paid either in Euros or in the applicable national currency, each party to this Agreement shall be entitled to pay or repay such amount in Euros or in the applicable national currency. Prior to the occurrence of the event or events described in clause (i) or (ii) of the preceding sentence, each amount payable hereunder in any such national currency will, except as otherwise provided herein, continue to be payable only in that national currency. (b) The Borrower shall from time to time, at the request of the Administrative Agent pay to the Administrative Agent for the account of each Lender the amount of any cost or increased cost incurred by, or of any reduction in any amount payable to or in the effective return on its capital to, or of interest or other return foregone by, such Lender or any holding company of such Lender as a result of the introduction of, changeover to or operation of the Euro in any applicable jurisdiction. (c) In addition, this Agreement (including, without limitation, the definition of Approved Offshore Currency Rate) will be amended to the extent determined by the Administrative Agent (acting reasonably and in consultation with the Borrower) to be necessary to reflect such implementation of EMU and replacement of any national currency by the Euro and to put the Lenders and the Borrower in the same position, so far as possible, that they would have been in if such implementation and change in currency had not occurred. Except as provided in the foregoing provisions of this Section, no such implementation or replacement of any national currency by the Euro nor any economic consequences resulting therefrom shall (i) give rise to any right to terminate prematurely, contest, cancel, rescind, alter, modify or renegotiate the provisions of this Agreement or (ii) discharge, excuse or otherwise affect the performance of any obligations of any parties to this Agreement or other Loan Papers. Section 9.5 Increased Costs. (a) If any applicable law, rule or regulation, or any change in or adoption of any law, rule or regulation, or any interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof or compliance 98 104 by any Lender (or any of its Lending Offices) with any request or directive (whether or not having the force of law) of any such authority, central bank or compatible agency: (i) shall subject a Lender (or its applicable Lending Office) to any tax, duty or other charge (net of any tax benefit engendered thereby) with respect to its LIBOR Advances and/or any type of Offshore Advances, or its obligation to make such Advances, or shall change the basis of taxation of payments to a Lender (or its applicable Lending Office) of the principal of or interest on its LIBOR Advances and/or such Offshore Advances or in respect of any other amounts due under this Agreement, as the case may be, or its obligation to make such Advances (except for changes in the rate of tax on the overall net income of the Lender or any of its Lending Offices and franchise taxes imposed upon such Lender); or (ii) shall impose, modify or deem applicable any reserve (including, without limitation, any imposed by the Board of Governors of the Federal Reserve System), special deposit or similar requirement against assets of, deposits with or for the account of, or credit extended by, Lender's applicable Lending Office, or shall impose on any Lender (or its applicable Lending Office) or on the United States market for LIBOR Advances, or on the London interbank market, or any other condition affecting its LIBOR Advances and/or its Offshore Advances, or its obligation to make such Advances; and the result of any of the foregoing is to increase the cost to a Lender (or any of its Lending Offices) of making or maintaining any LIBOR Advances and/or Offshore Advances, or to reduce the amount of any sum received or receivable by a Lender (or its applicable Lending Office) with respect thereto, by an amount deemed by a Lender to be material, then, within 15 days after demand by a Lender, the Borrower agrees to pay to such Lender such additional amount as will compensate such Lender for such increased costs or reduced amounts. The affected Lender will as soon as practicable notify the Borrower of any event of which it has knowledge, occurring after the date hereof, which will entitle such Lender to compensation pursuant to this Section and will designate a different Lending Office or other lending office if such designation will avoid the need for, or reduce the amount of, such compensation and will not, in the sole judgment of the affected Lender made in good faith, be disadvantageous to such Lender. (b) A certificate of any Lender claiming compensation under this Section and setting forth the additional amounts to be paid to it hereunder and calculations therefor shall be conclusive in the absence of manifest error. In determining such amount, a Lender may use any reasonable averaging and attribution methods. If a Lender demands compensation under this Section, the Borrower may at any time, upon at least five Business Days' prior notice to the Lender, after reimbursement to the Lender by the Borrower in accordance with this Section of all costs incurred, prepay in full the then outstanding LIBOR Advances and/or Offshore Advances of the Lender, together with accrued interest thereon to the date of prepayment, along with any reimbursement required under Section 2.9 hereof. Concurrently with prepaying any such affected LIBOR Advances and/or Offshore Advances, and notwithstanding any provision in Article 2 hereof, the Borrower shall borrow a Base Rate Advance from the Lender, and the Lender shall make such Base Rate Advance, in an amount such that the outstanding principal amount of the Advances owing to such Lender shall 99 105 equal the outstanding principal amount of the Advances owing immediately prior to such prepayment. Section 9.6 Effect On Base Rate Advances. If notice has been given pursuant to Section 9.1, 9.3, 9.4 or 9.5 hereof suspending the obligation of a Lender to make LIBOR Advances or requiring LIBOR Advances of a Lender to be repaid or prepaid, then, unless and until the Lender notifies the Borrower that the circumstances giving rise to such repayment no longer apply, all Advances which would otherwise be made by such Lender as LIBOR Advances shall be made instead as Base Rate Advances. Section 9.7 Mandatory Revolver Advance. If notice has been given pursuant to Section 9.3 hereof suspending the obligations of a majority of Revolving Credit Lenders to make certain types of or all Offshore Advances or requiring certain types of or all Offshore Advances of a majority of Revolving Credit Lenders to be repaid or prepaid, then, unless and until the Administrative Agent notifies the Borrower that the circumstances giving rise to such repayment no longer apply, all Offshore Advances which would otherwise be made by all Revolving Credit Lenders shall be made instead as a Mandatory Revolver Advance as Base Rate Advances under the Revolving Credit Loan. Section 9.8 Capital Adequacy. If either (a) the introduction of or any change in or in the interpretation of any law, rule or regulation or (b) compliance by a Lender with any law, rule or regulation or any guideline or request from any central bank or other governmental authority (whether or not having the force of law) affects or would affect the amount of capital required or expected to be maintained by a Lender or any corporation controlling such Lender (any event or occurrence in clauses (a) or (b) above being a "Regulatory Modification"), and such Lender reasonably determines that the amount of such capital is increased by or based upon the existence of such Lender's commitment or Advances hereunder and other commitments or advances of such Lender of this type, then, upon demand by such Lender, subject to Section 11.9, the Borrower shall immediately pay to such Lender, from time to time as specified by such Lender, additional amounts sufficient to compensate such Lender with respect to such circumstances (collectively, "Additional Costs"), to the extent that such Lender reasonably determines in good faith such increase in capital to be allocable to the existence of such Lender's commitment hereunder. Notwithstanding the foregoing, any Lender's demand for Additional Costs shall not include any Additional Costs with respect to any period more than 180 days prior to the date that such Lender gives notice to the Borrower of such Additional Costs unless the effective date of the Regulatory Modification which results in the right to receive Additional Costs is retroactive (the "Regulatory Modification Retroactive Effective Date"). If any Regulatory Modification has a Regulatory Modification Retroactive Effective Date and any Lender demands compensation within 180 days after the date setting the Regulatory Modification Retroactive Effective Date (the "Regulatory Modification Set Date"), such Lender shall have the right to receive such Additional Costs from the Regulatory Modification Retroactive Effective Date. If a Lender does not demand such Additional Costs within 180 days after the Regulatory Modification Set Date, such lender may not receive payment of Additional Costs with respect to any period more than 180 days prior to such demand. A certificate 100 106 as to such amounts submitted to the Borrower by a Lender hereunder, shall, in the absence of demonstrable error, be conclusive and binding for all purposes. Section 9.9 Rights of a Borrower in Respect of Consequential Losses. (a) Duty to Mitigate. If (i) any Lender shall request compensation under Article 9 hereof or (ii) any Lender delivers a notice described in Article 9 hereof, then such Lender shall use reasonable efforts (which shall not require such Lender to suffer any disadvantage or burden reasonably deemed by it (in good faith) to be significant, including without limitation, to incur an unreimbursed loss or unreimbursed cost or expense or otherwise take any action inconsistent with its internal policies or legal or regulatory restrictions), promptly thereafter, (x) to file any certificate or document reasonably requested in writing by the Borrower or (y) to assign its rights and delegate and transfer its obligations hereunder to another of its offices, branches or affiliates, if such filing or assignment would reduce its claims for compensation under Article 9 hereof or enable it to withdraw its notice pursuant to Article 9 hereof, as the case may be, in the future. The Borrower hereby agrees to pay all reasonable costs and expenses incurred by any Lender in connection with any such filing or assignment, delegation and transfer. (b) Replacement of a Lender Upon Request for Compensation. If any Lender has requested compensation or reimbursement in accordance with the terms of Article 9 hereof and (i) such request is not the result of any uniform changes in the statutes or regulations for capital adequacy, and (ii) the Borrower and such Lender are unable to reach a written agreement regarding such request within 30 days following written notice by such Lender to the Borrower and the Administrative Agent of such request, then after the expiration of 30 days following the delivery of the notice under Article 9 hereof, the Borrower may replace such Lender in whole with another Lender acceptable to the Administrative Agent pursuant to an Assignment Agreement and in accordance with Section 11.6(d) hereof, provided that, such Lender is replaced at par value of all Obligations owing such Lender plus all accrued interest and fees, and payments in accordance with Section 2.9 hereof, if any, provided further, that Borrower pays the assignment and acceptance fee set forth in Section 11.6(d) hereof for such replacement. Until such time as any Lender is replaced by the Borrower, the Borrower shall reimburse or compensate such Lender in accordance with the terms of Article 9 hereof. ARTICLE 10 Agreement Among Lenders Section 10.1 Agreement Among Lenders. The Lenders agree among themselves that: (a) Administrative Agent. Each Lender hereby appoints the Administrative Agent as its nominee in its name and on its behalf, to receive all documents and items to be furnished hereunder; to act as nominee for and on behalf of all Lenders under the Loan Papers; to take such action as may be requested by Determining Lenders or Facility Determining Lenders, as appropriate, provided that, 101 107 unless and until the Administrative Agent shall have received such requests, the Administrative Agent may take such administrative action, or refrain from taking such administrative action, as it may deem advisable and in the best interests of the Lenders; to arrange the means whereby the proceeds of the Advances of the Lenders are to be made available to the Borrower; to distribute promptly to each Lender information, requests and documents received from the Borrower, and each payment (in like funds received) with respect to any of such Lender's Advances, fee or other amount; and to deliver to the Borrower requests, demands, approvals and consents received from the Lenders. Administrative Agent agrees to promptly distribute to each Lender, at such Lender's address set forth below information, requests, documents and payments received from the Borrower. (b) Replacement of Administrative Agent. Should the Administrative Agent or any successor Administrative Agent ever cease to be a Lender hereunder, or should the Administrative Agent or any successor Administrative Agent ever resign as Administrative Agent, or should the Administrative Agent or any successor Administrative Agent ever be removed with or without cause by the Determining Lenders, then the Lender appointed by the other Lenders shall forthwith become the Administrative Agent, and the Borrower and the Lenders shall execute such documents as any Lender may reasonably request to reflect such change. If the Administrative Agent also then serves in the capacity of Swingline Bank, such resignation or removal shall constitute resignation or removal of the Swingline Bank and the successor Administrative Agent shall serve in the capacity of such Swingline Bank. Any resignation or removal of the Administrative Agent or any successor Administrative Agent shall become effective upon the appointment by the Lenders of a successor Administrative Agent; provided, however, that if the Lenders fail for any reason to appoint a successor within 60 days after such removal or resignation, the Administrative Agent or any successor Administrative Agent (as the case may be) shall thereafter have no obligation to act as Administrative Agent hereunder. (c) Expenses. Each Lender shall pay its pro rata share, based on its Total Specified Percentage, of any reasonable expenses paid by the Administrative Agent directly and solely in connection with any of the Loan Papers if Administrative Agent does not receive reimbursement therefor from other sources within 60 days after the date incurred, unless payment of such fees is being diligently disputed by such Lender or the Borrower in good faith. Any amount so paid by the Lenders to the Administrative Agent shall be returned by the Administrative Agent pro rata to each paying Lender to the extent later paid by the Borrower or any other Person on the Borrower's behalf to the Administrative Agent. (d) Delegation of Duties. The Administrative Agent may execute any of its duties hereunder by or through officers, directors, employees, attorneys or agents, and shall be entitled to (and shall be protected in relying upon) advice of counsel concerning all matters pertaining to its duties hereunder. (e) Reliance by Administrative Agent. The Administrative Agent and its officers, directors, employees, attorneys and agents shall be entitled to rely and shall be fully protected in relying on any writing, resolution, notice, consent, certificate, affidavit, letter, cablegram, telegram, telex or teletype message, statement, order, or other document or conversation reasonably believed 102 108 by it or them in good faith to be genuine and correct and to have been signed or made by the proper Person and, with respect to legal matters, upon opinions of counsel selected by the Administrative Agent. The Administrative Agent may, in its reasonable judgment, deem and treat the payee of any note as the owner thereof for all purposes hereof. (f) Limitation of Administrative Agent's Liability. Neither the Administrative Agent nor any of its officers, directors, employees, attorneys or agents shall be liable for any action taken or omitted to be taken by it or them hereunder in good faith and believed by it or them to be within the discretion or power conferred to it or them by the Loan Papers or be responsible for the consequences of any error of judgment, except for its or their own gross negligence or wilful misconduct. Except as aforesaid, the Administrative Agent shall be under no duty to enforce any rights with respect to any of the Advances, or any security therefor. The Administrative Agent shall not be compelled to do any act hereunder or to take any action towards the execution or enforcement of the powers hereby created or to prosecute or defend any suit in respect hereof, unless indemnified to its satisfaction against loss, cost, liability and expense. The Administrative Agent shall not be responsible in any manner to any Lender for the effectiveness, enforceability, genuineness, validity or due execution of any of the Loan Papers, or for any representation, warranty, document, certificate, report or statement made herein or furnished in connection with any Loan Papers, or be under any obligation to any Lender to ascertain or to inquire as to the performance or observation of any of the terms, covenants or conditions of any Loan Papers on the part of the Borrower. To the extent not reimbursed by the Borrower, each Lender hereby severally, but not jointly, indemnifies and holds harmless the Administrative Agent, pro rata according to its Total Specified Percentage, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses and/or disbursements of any kind or nature whatsoever which may be imposed on, asserted against, or incurred by the Administrative Agent in any way with respect to any Loan Papers or any action taken or omitted by the Administrative Agent under the Loan Papers (including any negligent action of the Administrative Agent), except to the extent the same result from gross negligence or wilful misconduct by the Administrative Agent. (g) Liability Among Lenders. No Lender shall incur any liability (other than the sharing of expenses and other matters specifically set forth herein and in the other Loan Papers) to any other Lender, except for acts or omissions in bad faith. (h) Rights as Lender. With respect to its commitment hereunder, the Advances made by it and any note issued to it, the Administrative Agent shall have the same rights as a Lender and may exercise the same as though it were not the Administrative Agent, and the term "Lender" or "Lenders" shall, unless the context otherwise indicates, include the Administrative Agent in its individual capacity. The Administrative Agent or any Lender may accept deposits from, act as trustee under indentures of, and generally engage in any kind of business with, the Borrower and any of its Affiliates, and any Person who may do business with or own securities of the Borrower or any of its Affiliates, all as if the Administrative Agent were not the Administrative Agent hereunder and without any duty to account therefor to the Lenders. 103 109 Section 10.2 Lender Credit Decision. Each Lender acknowledges that it has, independently and without reliance upon the Administrative Agent or any other Lender and based upon the financial statements referred to in Sections 4.1(j), 6.1 and 6.2 hereof, and such other documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance upon the Administrative Agent or any other Lender and based upon such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement and the other Loan Papers. Section 10.3 Benefits of Article. None of the provisions of this Article shall inure to the benefit of any Person other than Lenders or the Borrower, as applicable; consequently, no Person other than Lenders or the Borrower shall be entitled to rely upon, or to raise as a defense, in any manner whatsoever, the failure of the Administrative Agent or any Lender to comply with such provisions. ARTICLE 11 Miscellaneous Section 11.1 Notices. (a) All notices and other communications under this Agreement shall be in writing and shall be deemed to have been given on the date personally delivered or sent by telecopy (answerback received), or three days after deposit in the mail, designated as registered mail, return receipt requested, postage-prepaid, or one day after being entrusted to a reputable commercial overnight delivery service, or one day after being delivered to the telegraph office or sent out by telex addressed to the party to which such notice is directed at its address determined as provided in this Section. All notices and other communications under this Agreement shall be given to the parties hereto at the following addresses: (i) If to the Borrower, at: Clear Channel Communications, Inc. 200 East Basse Road San Antonio, Texas 78209 Attn: Randall T. Mays, Executive Vice President/CFO (ii) If to the Administrative Agent, at: Bank of America, N.A. 901 Main Street, 64th Floor Dallas, Texas 75202 Attn: Thomas E. Carter, Senior Vice President 104 110 (iii) If to a Lender, at its address shown below its name on the signature pages hereof, or if applicable, set forth in its Assignment Agreement. (b) Any party hereto may change the address to which notices shall be directed by giving 10 days' written notice of such change to the other parties. Section 11.2 Expenses. The Borrower shall promptly pay: (a) all reasonable out-of-pocket expenses of the Administrative Agent, Syndication Agent and the Issuing Banks in connection with the preparation, negotiation, execution and delivery of this Agreement and the other Loan Papers, the transactions contemplated hereunder and thereunder, and the making of Advances and the issuance of Letters of Credit hereunder, including without limitation the reasonable fees and disbursements of Special Counsel; (b) all reasonable out-of-pocket expenses of the Administrative Agent, Syndication Agent and the Issuing Banks in connection with the administration of the transactions contemplated in this Agreement and the other Loan Papers, the preparation, negotiation, execution and delivery of any waiver, amendment or consent by the Lenders relating to this Agreement or the other Loan Papers; and (c) all reasonable costs, out-of-pocket expenses and attorneys' fees of the Administrative Agent, Syndication Agent and each Lender incurred for enforcement, collection, restructuring, refinancing and "work-out", or otherwise incurred in obtaining performance under the Loan Papers, and all reasonable costs and out-of-pocket expenses of collection if default is made in the payment of any of the Obligations, which in each case shall include without limitation reasonable fees and expenses of consultants, counsel for the Administrative Agent, Syndication Agent and any Lender, and administrative fees for the Administrative Agent and Syndication Agent. Section 11.3 Waivers. The rights and remedies of the Lenders under this Agreement and the other Loan Papers shall be cumulative and not exclusive of any rights or remedies which they would otherwise have. No failure or delay by the Administrative Agent or any Lender in exercising any right shall operate as a waiver of such right. The Lenders expressly reserve the right to require strict compliance with the terms of this Agreement in connection with any funding of a request for an Advance and each Issuing Bank expressly reserves the right to require strict compliance with the terms of this Agreement in connection with any issuance, extension or amendment of a Letter of Credit. In the event that any Lender decides to fund an Advance or any Issuing Bank decides to issue, continue or extend any Letter of Credit at a time when the Borrower is not in strict compliance with the terms of this Agreement, such decision by such Lender shall not be deemed to constitute an undertaking by the Lender to fund any further requests for Advances or by any Issuing Bank to issue any additional Letter of Credit or preclude the Lenders from exercising any rights available under the Loan Papers or at law or equity. Any waiver or indulgence granted by the Lenders shall not constitute a modification of this Agreement, except to the extent expressly provided in such waiver or indulgence, or constitute a course of dealing by the Lenders at variance with the terms of the Agreement such as to require further notice by the Lenders of the Lenders' intent to require strict 105 111 adherence to the terms of this Agreement in the future. Any such actions shall not in any way affect the ability of the Administrative Agent or the Lenders, in their discretion, to exercise any rights available to them under this Agreement or under any other agreement, whether or not the Administrative Agent or any of the Lenders are a party thereto, relating to the Borrower. Section 11.4 Determination by the Lenders Conclusive and Binding. Any material determination required or expressly permitted to be made by the Administrative Agent or any Lender under this Agreement shall be made in its reasonable judgment and in good faith, and shall when made, absent manifest error, be conclusive and binding on all parties. Section 11.5 Set-Off. In addition to any rights now or hereafter granted under Applicable Law and not by way of limitation of any such rights, upon the occurrence of an Event of Default, each Lender and any subsequent holder of any portion of the Obligations, and any assignee or participant of any portion of the Obligations is hereby authorized by the Borrower at any time or from time to time, without notice to the Borrower or any other Person, any such notice being hereby expressly waived, to set-off, appropriate and apply any deposits (general or special (except trust and escrow accounts), time or demand, including without limitation indebtedness evidenced by certificates of deposit, in each case whether matured or unmatured) and any other indebtedness at any time held or owing by such Lender or holder to or for the credit or the account of the Borrower, against and on account of the Obligations and other liabilities of the Borrower to such Lender or holder, irrespective of whether or not (a) the Lender or holder shall have made any demand hereunder, or (b) the Lender or holder shall have declared the principal of and interest on the Advances and other amounts due hereunder to be due and payable as permitted by Section 8.2 and although such obligations and liabilities, or any of them, shall be contingent or unmatured. Any sums obtained by any Lender or by any assignee, participant or subsequent holder of any portion of the Obligations shall be subject to pro rata treatment of all Obligations and other liabilities hereunder. Section 11.6 Assignment. (a) The Borrower may not assign or transfer any of its rights or obligations hereunder or under the other Loan Papers without the prior written consent of the Lenders. (b) No Lender shall be entitled to assign its interest in this Agreement, its notes (if any) or its Advances, except as hereinafter set forth. (c) A Lender may at any time sell participations in all or any part of its Advances (collectively, "Participations") to any bank, other financial institution or fund ("Participants") provided that such Participation shall not confer on any Person (other than the parties hereto) any right to vote on, approve or sign amendments or waivers, or any other independent benefit or any legal or equitable right, remedy or other claim under this Agreement or any other Loan Papers, other than the right to vote on, approve, or sign amendments or waivers or consents with respect to items that would result in (i) any increase in the commitment of such Participant; or (ii)(A) the extension of the date of maturity of any amount owed such Participant, or (B) the extension of the due date for 106 112 any payment of principal, interest or fees respecting, such Participant, or (C) the reduction of the amount of any installment of principal or interest on amounts owed such Participant (specifically excluding mandatory prepayments and/or commitment reductions), or (D) a reduction of the rate of interest on, the Advances, the Letters of Credit, or the Reimbursement Obligations, or decrease in Applicable Margin owed such Participant; or (iii) the reduction of any fees owed such Participant. Notwithstanding the foregoing, the Borrower agrees that the Participants shall be entitled to the benefits of Article 9 and Section 11.5 hereof as though they were Lenders (but not to a greater extent than the Lender from which a Participant received such benefits), the Lenders may provide copies of all financial information received from the Borrower to such Participants provided that such Participants comply with Section 11.19 hereof. To the fullest extent it may effectively do so under Applicable Law, the Borrower agrees that any Participant may exercise any and all rights of banker's lien, set-off and counterclaim with respect to this Participation as fully as if such Participant were the holder of the Advances in the amount of its Participation. (d) Each Lender may assign to one or more Eligible Assignees its rights and obligations under this Agreement and the other Loan Papers all or any portion of its Applicable Specified Percentage of the corresponding Applicable Commitment; provided, however, that (i) prior to each such assignment, the assigning Lender shall provide Administrative Agent and the Borrower with notice of such assignment, (ii) each such assignment shall be of a constant, and not a varying, percentage of the Lender's rights and obligations under this Agreement (provided that a Lender's Applicable Specified Percentage does not have to be the same with respect to any or all Commitments and a Lender may, subject to the other provisions of this Section 11.6, assign or retain all or a portion of its Applicable Specified Percentage in any or all of the Commitments, provided further, that each Revolving Credit Lender assigning any portion of its rights and obligations under the Revolving Credit Commitment must assign all or a portion of its Revolving Credit Loans and Revolving Credit Commitment pro rata among all the subfacilities thereof), (iii) the amount of the Revolving Credit Commitment or the Working Line Commitment, and Advances and Reimbursement Obligations being assigned pursuant to each such assignment (determined as of the date of the assignment with respect to such assignment) shall in each case in no event be less than $5,000,000 (unless all of such Commitment is assigned) and which is an integral multiple of $1,000,000, (iv) the applicable Lender, Administrative Agent and applicable Eligible Assignee shall execute and deliver to the Administrative Agent an Assignment and Acceptance Agreement (an "Assignment Agreement") in substantially the form of Exhibit H hereto, together with the notes (if any) subject to such assignment, (v) the Eligible Assignee or the Lender executing the Assignment Agreement as the case may be, shall deliver to the Administrative Agent a processing fee of $3,500 and (vi) such assignor shall have received the prior written consent of the Borrower and the Administrative Agent, which consent shall not be unreasonably withheld or delayed (provided that without the consent of the Borrower or the Administrative Agent, any Lender may make assignments to its Bank Affiliates or another Lender). Upon such execution, delivery and acceptance from and after the effective date specified in each Assignment Agreement, which effective date shall be at least three Business Days after the execution thereof, (A) the Eligible Assignee thereunder shall be party hereto and, to the extent that rights and obligations hereunder have been assigned to it pursuant to such Assignment Agreement, have the rights and obligations of a Lender hereunder and (B) the assigning Lender shall, to the extent that rights and obligations hereunder have been assigned by it 107 113 pursuant to such Assignment Agreement, relinquish such rights and be released from such obligations under this Agreement. The Borrower shall not be liable for any fees or expenses of the Administrative Agent, any Lender, or any Eligible Assignee, incurred in connection with such an Assignment Agreement. (e) Notwithstanding anything in clause (d) above to the contrary, any Lender may assign and pledge all or any portion of its Loans or Advances and note (if any) to any Federal Reserve Bank as collateral security pursuant to Regulation A of F.R.S. Board and any Operating Circular issued by such Federal Reserve Bank; provided, however, that no such assignment under this clause (e) shall release the assignor Lender from its obligations hereunder. (f) Upon its receipt of an Assignment Agreement executed by a Lender and an Eligible Assignee, and any note or notes (if any) subject to such assignment, the Borrower shall, within three Business Days after its receipt of such Assignment Agreement and at the request of a Lender under Section 2.10(g) hereof, at its own expense, execute and deliver to the Administrative Agent in exchange for any surrendered notes, new notes to the order of such Eligible Assignee in an amount equal to the portion of the Advances, Reimbursement Obligations and Applicable Commitment assigned to it pursuant to such Assignment Agreement and new notes to the order of the assigning Lender in an amount equal to the portion of the Advances and Applicable Commitment retained by it hereunder. Such new notes (if any) shall be in an aggregate principal amount equal to the aggregate principal amount of such surrendered notes (if any), shall be dated the effective date of such Assignment Agreement and shall otherwise be in substantially the form of Exhibit A, Exhibit B, Exhibit C, Exhibit D or Exhibit E hereto, as applicable. (g) No Lender may, without the prior consent of the Borrower, which shall not be unreasonably withheld or delayed, in connection with any assignment or Participation or proposed assignment or Participation pursuant to this Section 11.6, disclose to the Eligible Assignee or Participant or proposed Eligible Assignee or Participant, any information (which is not otherwise publicly available) relating to the Borrower furnished to such Lender by or on behalf of the Borrower, unless such proposed assignee or participant agrees to keep such information confidential and signs a confidentiality agreement in a form substantially similar to the confidentiality agreement signed by the Administrative Agent and the Syndication Agent. The Borrower may not prohibit any Participation by withholding its consent pursuant to this Section 11.6(g). (h) Except as specifically set forth in this Section 11.6, nothing in this Agreement or any other Loan Papers, expressed or implied, is intended to or shall confer on any Person other than the respective parties hereto and thereto and their successors (which shall include in the case of the Lenders, any entity resulting from a merger or consolidation) and assignees permitted hereunder and thereunder any benefit or any legal or equitable right, remedy or other claim under this Agreement or any other Loan Papers. Section 11.7 Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, but all such separate counterparts shall together constitute but one and the same instrument. 108 114 Section 11.8 Severability. Any provision of this Agreement which is for any reason prohibited or found or held invalid or unenforceable by any court or governmental agency shall be ineffective to the extent of such prohibition or invalidity or unenforceability without invalidating the remaining provisions hereof in such jurisdiction or affecting the validity or enforceability of such provision in any other jurisdiction. Section 11.9 Interest and Charges. It is not the intention of any parties to this Agreement to make an agreement in violation of the laws of any applicable jurisdiction relating to usury. Regardless of any provision in any Loan Papers, no Lender shall ever be entitled to receive, collect or apply, as interest on the Obligations, any amount in excess of the Maximum Amount. If any Lender or participant ever receives, collects or applies, as interest, any such excess, such amount which would be excessive interest shall be deemed a partial repayment of principal and treated hereunder as such; and if principal is paid in full, any remaining excess shall be paid to the Borrower. In determining whether or not the interest paid or payable, under any specific contingency, exceeds the Maximum Amount, the Borrower and the Lenders shall, to the maximum extent permitted under Applicable Law, (a) characterize any nonprincipal payment as an expense, fee or premium rather than as interest, (b) exclude voluntary prepayments and the effect thereof, and (c) amortize, prorate, allocate and spread in equal parts, the total amount of interest throughout the entire term of the Obligations so that the interest rate is uniform throughout the entire term of the Obligations; provided, however, that if the Obligations are paid and performed in full prior to the end of the full contemplated term thereof, and if the interest received for the actual period of existence thereof exceeds the Maximum Amount, the Lenders shall refund to the Borrower the amount of such excess or credit the amount of such excess against the total principal amount of the Obligations owing, and, in such event, the Lenders shall not be subject to any penalties provided by any laws for contracting for, charging or receiving interest in excess of the Maximum Amount. This Section shall control every other provision of all agreements pertaining to the transactions contemplated by or contained in the Loan Papers. Section 11.10 Headings. Headings used in this Agreement are for convenience only and shall not be used in connection with the interpretation of any provision hereof. Section 11.11 Amendment and Waiver. This Agreement may not be amended, modified or waived except by the written agreement of (a) the Borrower and the appropriate Facility Determining Lenders if such amendment, modification or waiver solely affects terms and provisions applicable to the Revolving Credit Lenders or the Working Line Lenders, as applicable, or (b) the Borrower and the Determining Lenders if any effect of such amendment, modification or waiver is other than as described in clause (a) above; provided, however, that no such amendment, modification or waiver shall be made (1) without the consent of each affected Lender, if it would (A) increase the Applicable Specified Percentage or Applicable Commitment of such Lender, except in accordance with the terms of Section 2.18 hereof, (B) extend or postpone any scheduled reduction in any of the Commitments applicable to such Lender, (C) extend or postpone the date of (x) any scheduled payment or scheduled maturity of or (y) the scheduled due date for any payment of principal or interest on, any Advance due to such Lender, (D) reduce (x) the scheduled amount of any 109 115 installment of principal or interest on, or (y) the rate of interest on, any Advance applicable to such Lender, (E) reduce the Reimbursement Obligations applicable to such Lender, (F) reduce fees or other amounts owing under any Loan Papers applicable to such Lender, (G) change any provision of Section 2.18(c) hereof, except to correct any technical errors or make conforming changes, or (H) revise this Section 11.11 in a manner material and adverse to such Lender, provided that, in the case of (B), (C) and (D) set forth above, such provisions specifically do NOT include any mandatory or voluntary prepayment or commitment reduction which is contingent upon the happening of any event, which may be waived, consented to or amended by the appropriate Facility Determining Lenders, or (2) without the consent of all Lenders if it would amend the definition of Determining Lenders, Facility Determining Lenders or Total Specified Percentage (except in accordance with the terms of Section 2.18 hereof), or (3) without the consent of the Administrative Agent and/or the Swingline Bank and/or any Issuing Bank, if it would alter the rights, duties or obligations of the Administrative Agent and/or the Swingline Bank and/or any such Issuing Bank, as applicable. Notwithstanding anything in this Section 11.11, this Agreement or in any Loan Paper to the contrary, any provision of (i) Section 2.18(b) hereof will require the consent of the Administrative Agent and the Determining Lenders to amend, waive or consent to departure from any provision thereof, and (ii) Section 2.18(a) hereof may be amended, waived or any departure therefrom consented to in writing from time to time by (A) the Borrower, the Administrative Agent and the Participating Lenders on the date of amendment, consent or waiver collectively constituting 51% or more of the amount of such increase in the Revolving Credit Loan, and (B) the Borrower, the Administrative Agent and any Participating Lender, to the extent any such Participating Lender is taking such action with respect to any provision individually affecting such Participating Lender. Neither this Agreement nor any term hereof may be amended orally, nor may any provision hereof be waived orally but only by an instrument in writing signed by the Administrative Agent and, in the case of an amendment, by the Borrower and the appropriate Lenders, Swingline Bank and/or Issuing Banks, as set forth above. Section 11.12 Exception to Covenants. Neither the Borrower nor any Restricted Subsidiary shall be deemed to be permitted to take any action or fail to take any action which is permitted as an exception to any of the covenants contained herein or which is within the permissible limits of any of the covenants contained herein if such action or omission would result in the breach of any other covenant contained herein. Section 11.13 No Liability of any Issuing Bank. The Borrower assumes all risks of the acts or omissions of any beneficiary or transferee of any Letter of Credit with respect to its use of such Letter of Credit. None of the Issuing Banks nor any Lender nor any of their respective officers or directors shall be liable or responsible for: (a) the use that may be made of any Letter of Credit or any acts or omissions of any beneficiary or transferee in connection therewith; (b) the validity, sufficiency or genuineness of documents, or of any endorsement thereon, even if such documents should prove to be in any or all respects invalid, insufficient, fraudulent or forged; (c) payment by any Issuing Bank against presentation of documents that do not comply with the terms of a Letter of Credit, including failure of any documents to bear any reference or adequate reference to the Letter of Credit, except for any payment made upon such Issuing Bank's gross negligence or willful misconduct; or (d) any other circumstances whatsoever in making or failing to make payment under 110 116 any Letter of Credit, except that the Borrower shall have a claim against such Issuing Bank, and such Issuing Bank shall be liable to the Borrower, to the extent of any direct, but not consequential, damages suffered by the Borrower that the Borrower proves were caused by (i) such Issuing Bank's willful misconduct or gross negligence in determining whether documents presented under any Letter of Credit comply with the terms of the Letter of Credit or (ii) such Issuing Bank's willful failure to make lawful payment under a Letter of Credit after the presentation to it of a draft and certificates strictly complying with the terms and conditions of the Letter of Credit other than pursuant to the Uniform Commercial Code Section 5-114. In furtherance and not in limitation of the foregoing, such Issuing Bank may accept documents that appear on their face to be in order, without responsibility for further investigation, regardless of any notice or information to the contrary. Section 11.14. Conversion of Currencies. If, for the purpose of obtaining judgment in any court, it is necessary to convert a sum owing hereunder in one currency into another currency, each party hereto agrees, to the fullest extent that it may effectively do so, that the rate of exchange used shall be that at which in accordance with normal banking procedures in the relevant jurisdiction the first currency could be purchased with such other currency on the Business Day immediately preceding the date on which final judgment is given. The obligations of the Borrower in respect of any sum due to any Lender (the "Applicable Lender") shall, notwithstanding any judgment in a currency (the "Judgment Currency") other than the currency in which such sum is stated to be due hereunder (the "Agreement Currency"), be discharged only to the extent that on the Business Day following receipt by the Applicable Lender of any sum adjudged to be so due in the Judgment Currency, the Applicable Lender may in accordance with normal banking procedures in the relevant jurisdiction purchase the Agreement Currency with the Judgment Currency; if the amount of the Agreement Currency so purchased is less than the sum originally due to the Applicable Lender in the Agreement Currency, the Borrower agrees, as a separate obligation and notwithstanding any such judgment, to indemnify the Applicable Lender against such loss. The obligations of the Borrower contained in this Section 11.14 shall survive the termination of this Agreement and the payment of all other amounts owing hereunder. Section 11.15 Credit Agreement Governs. In the event of any conflict between the terms of this Agreement and any terms of any other Loan Paper, the terms of this Agreement shall control. SECTION 11.16 GOVERNING LAW. THIS AGREEMENT AND THE OTHER LOAN PAPERS SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF TEXAS AND THE FEDERAL LAWS OF THE UNITED STATES; PROVIDED, HOWEVER, THAT CHAPTER 346 OF THE TEXAS FINANCE CODE SHALL NOT APPLY TO THE LOANS OR ADVANCES, THIS AGREEMENT AND THE OTHER LOAN PAPERS. WITHOUT EXCLUDING ANY OTHER JURISDICTION, THE BORROWER AGREES THAT THE STATE AND FEDERAL COURTS OF TEXAS LOCATED IN DALLAS, TEXAS SHALL HAVE JURISDICTION OVER PROCEEDINGS IN CONNECTION WITH THIS AGREEMENT AND THE OTHER LOAN PAPERS. 111 117 SECTION 11.17 WAIVER OF JURY TRIAL. EACH OF THE BORROWER, THE ADMINISTRATIVE AGENT AND THE LENDERS HEREBY KNOWINGLY VOLUNTARILY, IRREVOCABLY AND INTENTIONALLY WAIVE, TO THE MAXIMUM EXTENT PERMITTED BY LAW, ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR CLAIM ARISING OUT OF OR RELATED TO ANY OF THE LOAN PAPERS OR THE TRANSACTIONS CONTEMPLATED THEREBY. THIS PROVISION IS A MATERIAL INDUCEMENT TO EACH LENDER ENTERING INTO THIS AGREEMENT AND MAKING ANY ADVANCES HEREUNDER. SECTION 11.18 ENTIRE AGREEMENT. THIS WRITTEN AGREEMENT, TOGETHER WITH THE OTHER LOAN PAPERS, REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES HERETO. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. Section 11.19 Confidentiality. The Administrative Agent and each Lender shall hold all non-public, proprietary or confidential information (which has been identified and marked as such by the Borrower) obtained pursuant to the terms of this Agreement confidential in accordance with their customary procedures for handling confidential information of this nature and in accordance with safe and sound banking and investment practices, however, the Administrative Agent and each Lender may make disclosure of any such information to (a) their examiners, affiliates, internal and outside counsel, auditors, consultants, appraisers and other professional advisors, or to any governmental authority or representative thereof, or in connection with the enforcement of this Agreement or any related agreement, or pursuant to legal process or with respect to any litigation, and (b) to any participant, transferee or assignee, or proposed assignee, transferee or participant, so long as in the case of (b) foregoing, such participant, transferee or assignee, or proposed assignee, transferee or participant agrees to keep such information confidential in accordance with the terms of this provision (which such agreement is not required to be in writing). In addition, the Administrative Agent and each Lender may make disclosure of such information to any direct or indirect contractual counterparty in swap agreements (or to such contractual party's professional advisors). In no event shall the Administrative Agent or any Lender be obligated to return any materials furnished to it by the Borrower. The foregoing provisions shall not apply to the Administrative Agent or any Lender with respect to any information that (i) is or becomes generally available to the public (other than through a breach by any of the Administrative Agent or any Lender of this provision), (ii) is already in the possession of the Administrative Agent or any Lender on a nonconfidential basis, or (iii) comes into the possession of or is independently developed by the Administrative Agent or any Lender in a manner not known to such entity to involve a breach of a duty of confidentiality owing to the Borrower. Section 11.20 Qualified Commercial Loan. This Agreement evidences a "qualified commercial loan" as that term is defined in Section 306.001 of the Texas Finance Code, as amended. 112 118 REMAINDER OF PAGE LEFT INTENTIONALLY BLANK 113 119 IN WITNESS WHEREOF, this Credit Agreement is executed as of the date first set forth above. BORROWER: CLEAR CHANNEL COMMUNICATIONS, INC. By: ------------------------------------- Name: ----------------------------------- Title: ---------------------------------- 114 120 LENDERS: BANK OF AMERICA, N.A., as a Lender, Primary Issuing Bank, Swingline Bank and as Administrative Agent By: ------------------------------------- Name: ----------------------------------- Title: ---------------------------------- 901 Main Street, 64th Floor Dallas, Texas 75202 Attn: Derrick Bell Title: Vice President Revolving Credit Specified Percentage: 11.083333317% Working Line Specified Percentage: 11.083333317% Total Specified Percentage 11.083333317% 115 121 THE CHASE MANHATTAN BANK, as a Lender and as Syndication Agent By: ------------------------------------- Name: ----------------------------------- Title: ---------------------------------- 270 Park Avenue, 36th Floor New York, New York 10017 Attn: Tracey Ewing Title: Vice President Revolving Credit Specified Percentage: 11.083333317% Working Line Specified Percentage: 11.083333317% Total Specified Percentage 11.083333317% 116 122 CITIBANK N.A. By: ------------------------------------- Name: ----------------------------------- Title: ---------------------------------- 399 Park Avenue 8th Floor, Zone 5 New York, New York 10043 Attn: Julio Ojea-Quintana Title: Vice President Revolving Credit Specified Percentage: 8.722222233% Working Line Specified Percentage: 8.722222233% Total Specified Percentage 8.722222233% 117 123 BANKERS TRUST COMPANY, as a Lender and as a Secondary Issuing Bank By: ------------------------------------- Name: ----------------------------------- Title: ---------------------------------- Address: 130 Liberty Street Plaza, 27th Floor New York, New York 10006 Attn: Gregory P. Shefrin Title: Principal Revolving Credit Specified Percentage: 8.722222233% Working Line Specified Percentage: 8.722222233% Total Specified Percentage 8.722222233% 118 124 FLEET NATIONAL BANK By: ------------------------------------- Name: ----------------------------------- Title: ---------------------------------- 1 Federal Street - Mail Code 10303H Boston, Massachusetts 02110 Attn: Lisa Pellow Title: Director Revolving Credit Specified Percentage: 8.722222233% Working Line Specified Percentage: 8.722222233% Total Specified Percentage 8.722222233% 119 125 CREDIT SUISSE FIRST BOSTON By: ------------------------------------- Name: ----------------------------------- Title: ---------------------------------- By: ------------------------------------- Name: ----------------------------------- Title: ---------------------------------- Eleven Madison Avenue 10th Floor New York, New York 10010-3629 Attn: David L. Sawyer Title: Vice President Revolving Credit Specified Percentage: 8.333333333% Working Line Specified Percentage: 8.333333333% Total Specified Percentage 8.333333333% 120 126 THE BANK OF NEW YORK, as a Lender and as a Secondary Issuing Bank By: ------------------------------------- Name: ----------------------------------- Title: ---------------------------------- One Wall Street 16th Floor South New York, New York 10286 Attn: John Ciulla Title: Vice President Revolving Credit Specified Percentage: 5.000000000% Working Line Specified Percentage: 5.000000000% Total Specified Percentage 5.000000000% 121 127 BARCLAYS BANK PLC By: ------------------------------------- Name: ----------------------------------- Title: ---------------------------------- 388 Market Street, Suite 1700 San Francisco, California 94111 Attn: Timothy C. Harrington Title: Director Revolving Credit Specified Percentage: 5.000000000% Working Line Specified Percentage: 5.000000000% Total Specified Percentage 5.000000000% 122 128 THE DAI-ICHI KANGYO BANK, LTD. By: ------------------------------------- Name: ----------------------------------- Title: ---------------------------------- One World Trade Center, Suite 4911 New York, New York 10048 Attn: Dan Guevara Title: Account Officer Revolving Credit Specified Percentage: 5.000000000% Working Line Specified Percentage: 5.000000000% Total Specified Percentage 5.000000000% 123 129 FIRST UNION NATIONAL BANK By: ------------------------------------- Name: ----------------------------------- Title: ---------------------------------- One First Union Center 301 South College Street, 5th Floor Charlotte, North Carolina 28288-0735 Attn: Jeffrey M. Graci Title: Director Revolving Credit Specified Percentage: 5.000000000% Working Line Specified Percentage: 5.000000000% Total Specified Percentage 5.000000000% 124 130 SUNTRUST BANK By: ------------------------------------- Name: ----------------------------------- Title: ---------------------------------- 200 South Orange Avenue Orlando, Florida 32801 Attn: Kimberly Evans Title: Revolving Credit Specified Percentage: 5.000000000% Working Line Specified Percentage: 5.000000000% Total Specified Percentage 5.000000000% 125 131 WESTDEUTSCHE LANDESBANK GIROZENTRALE, NEW YORK BRANCH By: ------------------------------------- Name: ----------------------------------- Title: ---------------------------------- By: ------------------------------------- Name: ----------------------------------- Title: ---------------------------------- 1211 Avenue of the Americas, 25th Floor New York, New York 10036 Attn: Cynthia Niesen Title: Managing Director Revolving Credit Specified Percentage: 5.000000000% Working Line Specified Percentage: 5.000000000% Total Specified Percentage 5.000000000% 126 132 ABN AMRO BANK N.V. By: ------------------------------------- Name: ----------------------------------- Title: ---------------------------------- By: ------------------------------------- Name: ----------------------------------- Title: ---------------------------------- Three Riverway, Suite 1700 Houston, Texas 77056 Attn: Laurie Tuzo Title: Senior Vice President Revolving Credit Specified Percentage: 4.166666667% Working Line Specified Percentage: 4.166666667% Total Specified Percentage 4.166666667% 127 133 THE ROYAL BANK OF SCOTLAND PLC By: ------------------------------------- Name: ----------------------------------- Title: ---------------------------------- 88 Pine Street, 26th Floor Wall Street Plaza New York, New York 10005 Attn: Karen Stefancic Title: Senior Vice President Revolving Credit Specified Percentage: 3.333333333% Working Line Specified Percentage: 3.333333333% Total Specified Percentage 3.333333333% 128 134 WELLS FARGO BANK TEXAS, NATIONAL ASSOCIATION By: ------------------------------------- Name: ----------------------------------- Title: ---------------------------------- 111 Congress, Suite 300 Austin, Texas 78701 Attn: Susan Coulter Title: Vice President Revolving Credit Specified Percentage: 1.666666667% Working Line Specified Percentage: 1.666666667% Total Specified Percentage 1.666666667% 129 135 THE MITSUBISHI TRUST AND BANKING CORPORATION By: ------------------------------------- Name: ----------------------------------- Title: ---------------------------------- 520 Madison Avenue, 26th Floor New York, New York 10022 Attn: Paul Arzouian Title: Vice President Revolving Credit Specified Percentage: 1.666666667% Working Line Specified Percentage: 1.666666667% Total Specified Percentage 1.666666667% 130 136 THE FROST NATIONAL BANK By: ------------------------------------- Name: ----------------------------------- Title: ---------------------------------- 100 W. Houston T-3 San Antonio, Texas 78205 Attn: Suzanne Peterson Title: Senior Vice President Revolving Credit Specified Percentage: 0.833333333% Working Line Specified Percentage: 0.833333333% Total Specified Percentage 0.833333333% 131 137 SUMMIT BANK By: ------------------------------------- Name: ----------------------------------- Title: ---------------------------------- 301 Carnegie Center Princeton, New Jersey 08543 Attn: Mike Cerullo Title: Revolving Credit Specified Percentage: 0.833333333% Working Line Specified Percentage: 0.833333333% Total Specified Percentage 0.833333333% 132 138 THE SUMITOMO BANK, LIMITED, NEW YORK BRANCH By: ------------------------------------- Name: ----------------------------------- Title: ---------------------------------- 277 Park Avenue, 6th Floor New York, New York 10172 Attn: Leo Pagarigan Title: Vice President Revolving Credit Specified Percentage: 0.833333333% Working Line Specified Percentage: 0.833333333% Total Specified Percentage 0.833333333% 133 EX-11 3 h85063ex11.txt STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE 1 EXHIBIT 11 - Computation of Per Share Earnings (In thousands, except per share data)
2000 1999 1998 ---- ---- ---- NUMERATOR: Net income before extraordinary item $ 248,808 $ 85,655 $ 54,031 Extraordinary item -- (13,185) -- ----------- ----------- ----------- Net income 248,808 72,470 54,031 Effect of dilutive securities: Eller put/call option agreement -- (2,300) (4,299) Convertible debt - 2.625% issued in 1998 9,811 * 9,811 * 7,358 Convertible debt - 1.5% issued in 1999 9,750 * 964 * -- LYONs - 1996 issue -- (311) -- LYONs - 1998 issue 4,595 * 2,944 * -- Less: Anti-dilutive items (24,156) (13,719) -- ----------- ----------- ----------- -- (2,611) 3,059 Numerator for net income per common share - diluted $ 248,808 $ 69,859 $ 57,090 =========== =========== =========== DENOMINATOR: Weighted average common shares 423,969 312,610 236,060 Effect of dilutive securities: Stock options and common stock warrants 10,872 8,395 4,098 Eller put/call option agreement -- 847 1,972 Convertible debt - 2.625% issued in 1998 9,282 * 9,282 * 6,993 Convertible debt - 1.5% issued in 1999 9,454 * 927 * -- LYONs - 1996 issue 3,870 2,556 -- LYONs - 1998 issue 3,085 * 2,034 * -- Less: Anti-dilutive items (21,821) (12,243) -- ----------- ----------- ----------- 14,742 11,798 13,063 Denominator for net income per common share - diluted 438,711 324,408 249,123 =========== =========== =========== Net income per common share: Basic: Net income before extraordinary item .59 $ .27 $ .23 Extraordinary item -- (.04) -- ----------- ----------- ----------- Net income $ .59 $ .23 $ .23 =========== =========== =========== Diluted: Net income before extraordinary item .57 $ .26 $ .22 Extraordinary item -- (.04) -- ----------- ----------- ----------- Net income $ .57 $ .22 $ .22 =========== =========== ===========
* Denotes items that are anti-dilutive to the calculation of earnings per share. EX-12 4 h85063ex12.txt STATEMENT RE: COMPUTATION OF RATIOS 1 EXHIBIT 12 - COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (In thousands, except ratio)
Year Ended ---------------------------------------------------------------- 2000 1999 1998 1997 1996 ---- ---- ---- ---- ---- Income before income taxes, equity in earnings of non- consolidated affiliates and extraordinary item 688,384 220,213 117,922 104,077 71,240 Dividends and other received from nonconsolidated affiliates 4,934 7,079 9,168 4,624 10,430 ----------- --------- -------- -------- --------- Total 693,318 227,292 127,090 108,701 81,670 Fixed Charges Interest expense 413,425 192,321 135,766 75,076 30,080 Amortization of loan fees 12,401 1,970 2,220 1,451 506 Interest portion of rentals 150,317 24,511 16,044 6,120 424 ----------- --------- -------- -------- --------- Total fixed charges 576,143 218,802 154,030 82,647 31,010 Preferred stock dividends Tax effect of preferred dividends -- -- -- -- -- After tax preferred dividends -- -- -- -- -- ----------- --------- -------- -------- --------- Total fixed charges and preferred dividends 576,143 218,802 154,030 82,647 31,010 Total earnings available for payment of fixed charges 1,269,461 446,094 281,120 191,348 112,680 =========== ========= ======== ======== ========= Ratio of earnings to fixed charges 2.20 2.04 1.83 2.32 3.63 =========== ========= ======== ======== ========= Rental fees and charges 429,476 306,393 200,550 76,500 5,299 Interest rate 35% 8% 8% 8% 8%
EX-21 5 h85063ex21.txt SUBSIDIARIES OF THE REGISTRANT 1 EXHIBIT 21 - Subsidiaries of Registrant, Clear Channel Communications, Inc.
Name State of Incorporation Clear Channel Communications, Inc. Texas Clear Channel Broadcasting, Inc. Nevada Clear Channel Broadcasting Licenses, Inc. Nevada Clear Channel Holdings, Inc. Nevada Eller Media Corporation Delaware Eller Media Company (1) Delaware Universal Other Holdings, Inc. Delaware Clear Channel International, Ltd. United Kingdom Jacor Communications Company (2) Delaware AMFM Inc. (3) Delaware Katz Media Corporation Delaware SFX Entertainment, Inc. (4) Delaware
(1) List omits 43 domestic consolidated wholly-owned subsidiaries carrying on the same line of business. (2) List omits 66 domestic and 5 foreign consolidated wholly-owned subsidiaries carrying on the same line of business. (3) List omits 50 domestic consolidated wholly-owned subsidiaries carrying on the same line of business. (4) List omits 281 domestic and 391 foreign consolidated wholly-owned subsidiaries carrying on the same line of business. EX-23.1 6 h85063ex23-1.txt CONSENT OF ERNST & YOUNG LLP 1 EXHIBIT 23.1 - CONSENT OF INDEPENDENT AUDITORS - ERNST & YOUNG LLP We consent to the incorporation by reference in the Registration Statement (Form S-3 No. 333-42028) and the Registration Statement (Form S-4 No. 333-57987) of Clear Channel Communications, Inc., and in the related prospectuses of our reports dated February 23, 2001 with respect to the consolidated financial statements and schedule of Clear Channel Communications, Inc. included in this Annual Report (Form 10-K) for the year ended December 31, 2000. We also consent to the incorporation by reference in the Registration Statements (Forms S-8) pertaining to the 1984 Incentive Stock Option Plan of Clear Channel Communications, Inc. (No. 33-14193); the Clear Channel Communications, Inc. Nonqualified Stock Option Plan (No. 33-59772); the Clear Channel Communications, Inc. 1994 Incentive Stock Option Plan, the Clear Channel Communications, Inc. 1994 Nonqualified Stock Option Plan, the Clear Channel Communications, Inc. Directors' Nonqualified Stock Option Plan; the Option Agreement for Officer (No. 33-64463); the Non-Qualified Option Grant to Karl Eller dated April 10, 1997, the Non-Qualified Option Grant to Paul J. Meyer dated April 10, 1997, the Non-Qualified Option Grant to Timothy J. Donmoyer dated April 10, 1997, the Eller Media Company Senior Management Incentive Plan of Clear Channel Communications, Inc. (No. 333-29717); the Clear Channel Communications, Inc. 1998 Stock Incentive Plan (No. 333-61883); the Clear Channel Communications, Inc. Employee Stock Purchase Plan (No. 333-30784); various other non-qualified stock option agreements and warrants assumed by Clear Channel Communications, Inc. in connection with the merger with AMFM Inc. (No. 333-45126); the Eller Media Company 401(k) Plan (No. 333-49702); the Universal Outdoor, Inc. Salary Reduction Profit Sharing Plan (No. 333-49704); and the Clear Channel Communications, Inc. 401(k) Savings Plan (No. 333-49698) of our reports dated February 23, 2001 with respect to the consolidated financial statements and schedule of Clear Channel Communications, Inc. included in this Annual Report (Form 10-K) for the year ended December 31, 2000. We also consent to the incorporation by reference in the post-effective amendments to the Registration Statements (Forms S-4) on Form S-8 pertaining to various stock plans, stock option plans, and non-qualified stock option agreements assumed by Clear Channel Communications, Inc. in connection with the merger with Jacor Communications, Inc. (No. 333-72839); non-qualified stock option agreements and stock option agreements pursuant to a stock award plan, a long-term incentive plan, and stock option plans assumed by Clear Channel Communications, Inc. in connection with the merger with AMFM Inc. (No. 333-32532); and various agreements, including option agreements, employment agreements and stock option agreements pursuant to stock option plans, stock option and restricted stock plans, and a deferred stock ownership plan assumed by Clear Channel Communications, Inc. in connection with the merger with SFX Entertainment, Inc. (No. 333-38582) of our reports dated February 23, 2001 with respect to the consolidated financial statements and schedule of Clear Channel Communications, Inc. included in this Annual Report (Form 10-K) for the year ended December 31, 2000. We also consent to the incorporation by reference in the Post-effective Amendment No. 2 to the Registration Statement (Form S-4) on Form S-3 pertaining to the Jacor Liquid Yield Option Notes (TM) and common stock purchase warrants (No. 333-72839) of Clear Channel Communications, Inc. and related prospectus of our reports dated February 23, 2001 with respect to the consolidated financial statements and schedule of Clear Channel Communications, Inc. included in this Annual Report (Form 10-K) for the year ended December 31, 2000. ERNST & YOUNG LLP /s/ ERNST & YOUNG LLP San Antonio, Texas March 15, 2001 EX-23.2 7 h85063ex23-2.txt CONSENT OF KPMG LLP 1 EXHIBIT 23.2 - CONSENT OF INDEPENDENT AUDITORS - KPMG LLP The Board of Directors Clear Channel Communications, Inc.: We consent to the incorporation by reference in the Registration Statements of Clear Channel Communications, Inc. on Form S-3 (No. 333-42028) and Form S-4 (No. 333-57987) of our report dated February 10, 2000 on the consolidated balance sheet of Hispanic Broadcasting Corporation and subsidiaries as of December 31, 1999, and the related consolidated statements of operations, stockholders' equity and cash flows for each of the years in the two-year period ended December 31, 1999, which report is included in the 2000 Annual Report on Form 10-K of Clear Channel Communications, Inc. We also consent to the incorporation by reference of the aforementioned report in the Registration Statements on Form S-8 of the 1984 Incentive Stock Option Plan of Clear Channel Communications, Inc. (No. 33-14193); the Clear Channel Communications, Inc. Nonqualified Stock Option Plan (No. 33-59772); the Clear Channel Communications, Inc. 1994 Incentive Stock Option Plan, the Clear Channel Communications, Inc. 1994 Nonqualified Stock Option Plan, the Clear Channel Communications, Inc. Directors' Nonqualified Stock Option Plan, the Option Agreement for Officer (No. 33-64463); the Non-Qualified Option Grant to Karl Eller dated April 10, 1997, the Non-Qualified Option Grant to Paul J. Meyer dated April 10, 1997, the Non-Qualified Option Grant to Timothy J. Donmoyer dated April 10, 1997, and the Eller Media Company Senior Management Incentive Plan of Clear Channel Communications, Inc. (No. 333-29717), the Clear Channel Communications, Inc. 1998 Stock Incentive Plan (No. 333-61883), the Clear Channel Communications, Inc. Employee Stock Purchase Plan (No. 333-30784), various other non-qualified stock option agreements and warrants (No. 333-45126), the Eller Media Company 401(k) Plan (No. 333-49702), the Universal Outdoor, Inc. Salary Reduction Profit Sharing Plan (No. 333-49704), and the Clear Channel Communications, Inc. 401(k) Savings Plan (No. 333-49698). We also consent to the incorporation by reference of the aforementioned report in the post-effective amendments to the Registration Statements (Forms S-4) on Form S-8 pertaining to various stock plans, stock option plans, and non-qualified stock option agreements assumed by Clear Channel Communications, Inc. in connection with the merger with Jacor Communications, Inc. (No. 333-72839), non-qualified stock option agreements and stock option agreements pursuant to a stock award plan, a long-term incentive plan, and stock option plans assumed by Clear Channel Communications, Inc. in connection with the merger with AMFM Inc. (No. 333-32532), various agreements, including option agreements, employment agreements and stock option agreements pursuant to stock option plans, stock option and restricted stock plans, and a deferred stock ownership plan assumed by Clear Channel Communications, Inc. in connection with the merger with SFX Entertainment, Inc. (No. 333-38582). We also consent to the incorporation by reference of the aforementioned report in the Post-effective Amendment No. 2 to the Registration Statement (Form S-4) on Form S-3 pertaining to the Jacor Liquid Yield Option Notes (TM) and common stock purchase warrants (No. 333-72839). KPMG LLP /s/ KPMG LLP Dallas, Texas March 16, 2001 EX-99.1 8 h85063ex99-1.txt REPORT OF INDEPENDENT AUDITORS - ERNST & YOUNG LLP 1 EXHIBIT 99.1 - REPORT OF INDEPENDENT AUDITORS ON FINANCIAL STATEMENT SCHEDULES We have audited the consolidated financial statements of Clear Channel Communications, Inc. and subsidiaries, as of December 31, 2000 and 1999, and for each of the three years in the period ended December 31, 2000, and have issued our report thereon dated February 23, 2001. Our audits also included the financial statement schedule listed in the Index at Item 14(a). These schedule are the responsibility of the Company's management. Our responsibility is to express an opinion based on our audits. In our opinion, the financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. /s/Ernst & Young LLP February 23, 2001 San Antonio, Texas EX-99.2 9 h85063ex99-2.txt REPORT OF INDEPENDENT AUDITORS - KPMG LLP 1 EXHIBIT 99.2 -- REPORT OF INDEPENDENT AUDITORS - KPMG LLP The Board of Directors Hispanic Broadcasting Corporation We have audited the consolidated balance sheet of Hispanic Broadcasting Corporations and subsidiaries as of December 31, 1999, and the related statements of operations, stockholders' equity and cash flows for each of the years in the two-year period ended December 31, 1999 (not presented separately herein). These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Hispanic Broadcasting Corporation and subsidiaries as of December 31, 1999, and the results of their operations and their cash flows for each of the years in the two-year period ended December 31, 1999 in conformity with accounting principles generally accepted in the United States of America. KPMG LLP Dallas, Texas February 10, 2000 -----END PRIVACY-ENHANCED MESSAGE-----