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PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. __)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-12
Citadel Communications Corporation
------------------------------------------------
(Name of Registrant as Specified In Its Charter)
-------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[X] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
Common stock, par value $.001 per share, of Citadel Communications
Corporation
2) Aggregate number of securities to which transaction applies:
(i) 37,006,138 shares of common stock, (ii) in-the-money options to
purchase 1,980,843 shares of common stock, and (iii) out-of-the-money
options to purchase 2,171,750 shares of common stock
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
Each share of common stock will be converted into the right to receive
$26.00 in cash, without interest or any other payment, as a result
of the merger described in this proxy statement. With consent of
the option holder, each in-the-money option will be cancelled and
converted into the right to receive the difference between $26.00 and
the exercise price of the option, multiplied by the number of shares
subject to such option, and out-of-the-money options will be cancelled
for nominal consideration of $10.00 in total per option holder. For the
purposes of calculating the filing fee, the consent of each option
holder is deemed to have been given for the cancellation and conversion
of all outstanding in-the-money options and the cancellation of all
outstanding out-of-the-money options.
The underlying value of the transaction is equal to $994,852,467.28,
determined by adding (i) $962,159,588 payable to holders of shares of
common stock, (ii) $32,690,439.28 payable to holders of in-the-money
options, and (iii) $2,440 payable to the holders of out-of-the-money
options. In accordance with Exchange Act Rule 0-11, the filing fee
equals one-fiftieth of one percent of the underlying value of the
transaction.
4) Proposed maximum aggregate value of transaction:
$994,852,467.28
5) Total fee paid:
$198,971
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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[Citadel logo] CITADEL COMMUNICATIONS CORPORATION
March , 2001
Dear Stockholders:
You are cordially invited to attend the 2001 Annual Meeting of Stockholders
of Citadel Communications Corporation that will be held on Thursday, April 26,
2001 at 10:00 a.m. (local time) at Citadel Communications' principal executive
offices at City Center West, Suite 400, 7201 West Lake Mead Boulevard, Las
Vegas, Nevada 89128.
At the annual meeting, we will ask you to consider and vote to approve an
Agreement and Plan of Merger that we entered into on January 15, 2001 with FLCC
Holdings, Inc. under which a wholly owned subsidiary of FLCC Holdings will be
merged into our company. In the merger, each outstanding share of our common
stock will be converted into the right to receive $26.00 in cash. At the annual
meeting, we will also ask you to vote for the election of six directors and the
ratification of our appointment of KPMG LLP as our independent public
accountants for 2001.
Our Board of Directors carefully considered and reviewed the terms and
conditions of the proposed merger prior to approving the Agreement and Plan of
Merger. Our Board of Directors believes that the proposed merger is in the best
interests of our company and recommends that you vote for approval of the
Agreement and Plan of Merger. Credit Suisse First Boston Corporation, an
investment banking firm, has advised us that, as of January 15, 2001, the $26.00
per share merger consideration was fair to our stockholders from a financial
point of view.
We cannot complete the merger unless we obtain the approval of our
stockholders owning at least a majority of our outstanding common stock. You are
entitled to vote at the annual meeting all shares of our common stock that you
held of record at the close of business on March 19, 2001.
Your vote is very important. Whether or not you plan to attend the annual
meeting, please take the time to vote by completing and mailing the enclosed
proxy card to us. We have provided you with a prepaid return envelope for this
purpose. If you date and mail your proxy card without indicating how you want to
vote on a particular proposal, your proxy will be counted as a vote "for" that
proposal. If you do not return your proxy card or instruct your broker how to
vote any shares held for you in your broker's name, the effect will be a vote
"against" the Agreement and Plan of Merger. Completing and returning the
enclosed proxy card will not prevent you from voting your shares in person if
you subsequently choose to attend the annual meeting so long as you revoke any
proxy given prior to the vote at the annual meeting.
The accompanying proxy statement provides detailed information concerning
the merger, as well as information about the other matters to be voted upon at
the annual meeting. Please give the accompanying proxy statement, including all
of the attached annexes, your careful attention.
Sincerely,
/s/ Lawrence R. Wilson
Lawrence R. Wilson
Chairman, Chief Executive Officer and
President
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CITADEL COMMUNICATIONS CORPORATION
CITY CENTER WEST
SUITE 400
7201 WEST LAKE MEAD BOULEVARD
LAS VEGAS, NV 89128
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 26, 2001
Dear Stockholders:
You are cordially invited to attend the 2001 Annual Meeting of Stockholders
of Citadel Communications Corporation that will be held on Thursday, April 26,
2001 at 10:00 a.m. (local time), at its principal executive offices at City
Center West, Suite 400, 7201 West Lake Mead Boulevard, Las Vegas, Nevada 89128,
for the following purposes, as set forth in the accompanying proxy statement:
1. To approve an Agreement and Plan of Merger under which a newly formed
subsidiary of FLCC Holdings, Inc. will merge with and into Citadel
Communications and each outstanding share of Citadel Communications'
common stock will be converted into the right to receive $26.00 in cash.
2. To elect six directors.
3. To ratify the Board of Directors' appointment of KPMG LLP as independent
public accountants for Citadel Communications for the year ending
December 31, 2001.
4. To transact such other business as may properly come before the meeting
and any adjournments or postponements thereof.
The Board of Directors has established the close of business on March 19,
2001, as the record date for the determination of stockholders entitled to
receive notice of and to vote at the annual meeting and any adjournment or
postponement thereof.
YOUR VOTE IS IMPORTANT REGARDLESS OF THE NUMBER OF SHARES YOU OWN. TO
ENSURE THAT YOUR SHARES ARE REPRESENTED AT THE ANNUAL MEETING, WE URGE YOU TO
REVIEW CAREFULLY THE ACCOMPANYING PROXY STATEMENT AND TO COMPLETE, SIGN, DATE
AND RETURN THE ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE WHETHER OR NOT YOU
PLAN TO ATTEND THE MEETING.
Your proxy may be revoked by you at any time before it has been voted. You
are cordially invited to attend the annual meeting in person if it is convenient
for you to do so.
By order of the Board of Directors,
/s/ Donna L. Heffner
Donna L. Heffner
Secretary
March , 2001
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CITADEL COMMUNICATIONS CORPORATION
PROXY STATEMENT
This proxy statement is provided to the stockholders of Citadel
Communications Corporation in connection with the solicitation by the Board of
Directors of Citadel Communications of proxies for use at the Annual Meeting of
Stockholders of Citadel Communications to be held on Thursday, April 26, 2001 at
10:00 a.m. (local time), at Citadel Communications' principal executive offices
at City Center West, Suite 400, 7201 West Lake Mead Boulevard, Las Vegas, Nevada
89128, and any adjournments or postponements thereof. Proxy materials are first
being mailed to stockholders on or about March , 2001. A form of proxy is
enclosed for use at the annual meeting. Proxies properly executed and returned
in a timely manner will be voted at the annual meeting in accordance with the
directions specified therein. If no direction is indicated, they will be voted
for the approval of the Agreement and Plan of Merger between Citadel
Communications and FLCC Holdings, Inc., for the election of the nominees named
herein as directors and for the proposal to ratify the appointment of KPMG LLP
as Citadel Communications' independent public accountants. The persons named to
act under the proxies were selected by the Board of Directors and are currently
members of the executive management of Citadel Communications.
Citadel Communications does not expect to ask you to vote on any other
matters at the annual meeting. However, if any other matters are properly
presented at the annual meeting for consideration, the persons acting under the
proxies will have discretion to vote on these matters in accordance with their
best judgment, which may include voting to adjourn the annual meeting in order
to solicit additional proxies.
Only stockholders of record at the close of business on March 19, 2001 are
entitled to vote at the annual meeting. The only voting stock of Citadel
Communications outstanding and entitled to vote at the annual meeting is its
common stock, $.001 par value per share, of which shares were
outstanding as of the close of business on March 19, 2001. Each share of common
stock issued and outstanding is entitled to one vote on matters properly
submitted at the annual meeting. Cumulative voting is not permitted under
Citadel Communications' Amended and Restated Certificate of Incorporation.
The Board of Directors recommends voting (1) FOR approval of the Agreement
and Plan of Merger between Citadel Communications and FLCC Holdings, (2) FOR the
election of the nominees named herein for director and (3) FOR ratification of
the appointment of KPMG LLP as Citadel Communications' independent public
accountants for 2001.
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TABLE OF CONTENTS
QUESTIONS AND ANSWERS ABOUT THE MERGER AND ANNUAL MEETING... 3
SUMMARY..................................................... 6
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS... 10
THE ANNUAL MEETING.......................................... 10
APPROVAL OF THE AGREEMENT AND PLAN OF MERGER................ 13
ELECTION OF DIRECTORS....................................... 42
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS........... 44
EXECUTIVE OFFICERS.......................................... 45
EXECUTIVE COMPENSATION...................................... 47
PERFORMANCE GRAPH........................................... 54
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT................................................ 54
CERTAIN TRANSACTIONS........................................ 57
PROPOSAL TO RATIFY THE APPOINTMENT OF INDEPENDENT PUBLIC
ACCOUNTANTS............................................... 57
OTHER INFORMATION........................................... 58
WHERE YOU CAN FIND MORE INFORMATION......................... 59
ANNEX A - AGREEMENT AND PLAN OF MERGER
ANNEX B - SIDE LETTER
ANNEX C - GUARANTEE
ANNEX D - OPINION OF FINANCIAL ADVISOR
ANNEX E - AUDIT COMMITTEE CHARTER
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QUESTIONS AND ANSWERS ABOUT THE MERGER AND ANNUAL MEETING
THE FOLLOWING QUESTIONS AND ANSWERS BRIEFLY ADDRESS SOME COMMONLY ASKED
QUESTIONS ABOUT THE MERGER. THEY MAY NOT INCLUDE ALL THE INFORMATION THAT IS
IMPORTANT TO YOU. WE URGE YOU TO CAREFULLY READ THIS ENTIRE PROXY STATEMENT,
INCLUDING THE ANNEXES AND THE OTHER DOCUMENTS REFERRED TO IN THIS PROXY
STATEMENT.
Q: WHAT AM I BEING ASKED TO VOTE UPON?
A: You are being asked to approve the Agreement and Plan of Merger between
Citadel Communications and FLCC Holdings that provides for FLCC Acquisition
Corp. to be merged into Citadel Communications. FLCC Acquisition is a newly
formed Nevada corporation and is a wholly owned subsidiary of FLCC Holdings.
We will be the surviving corporation of the merger and will become a wholly
owned subsidiary of FLCC Holdings. If the merger is completed, we will no
longer be a publicly held corporation, and you will no longer own shares of
Citadel Communications' common stock.
You are also being asked to elect six directors and to ratify the
appointment of KPMG LLP as our independent public accountants for 2001.
Q: WHO IS FLCC HOLDINGS?
A: FLCC Holdings is a corporation newly formed by Forstmann Little & Co. to
complete the merger. Forstmann Little is a private investment partnership
that through affiliates has acquired or made significant equity investments
in 28 companies.
Q: WHAT WILL I RECEIVE FOR MY SHARES OF CITADEL COMMUNICATIONS' COMMON STOCK IF
THE MERGER IS COMPLETED?
A: Upon surrender of your Citadel Communications' common stock certificates,
you will receive $26.00 in cash, without interest, for each share of Citadel
Communications' common stock that you own.
Q: WHAT DOES THE BOARD OF DIRECTORS RECOMMEND REGARDING THE AGREEMENT AND PLAN
OF MERGER?
A: Our Board of Directors recommends that you vote FOR the approval of the
Agreement and Plan of Merger.
Q: WHY DOES THE BOARD OF DIRECTORS RECOMMEND THAT I VOTE FOR THE APPROVAL OF
THE AGREEMENT AND PLAN OF MERGER?
A: Our Board of Directors believes that the merger is fair to and in the best
interests of Citadel Communications. Our Board of Directors received an
opinion from its financial advisor, Credit Suisse First Boston Corporation,
that, as of January 15, 2001, and based on and subject to the matters set
forth in the opinion, the $26.00 per share in cash to be received by holders
of Citadel Communications' common stock was fair to these stockholders from
a financial point of view.
Q: WHEN DOES CITADEL COMMUNICATIONS EXPECT THE MERGER TO BE COMPLETED?
A: We expect that the merger will be completed during the second half of 2001.
We are working toward completing the merger as quickly as possible. However,
the merger cannot be completed until a number of conditions are satisfied.
These conditions include approval of the merger agreement by our
stockholders at the annual meeting and consent of the Federal Communications
Commission to the transfer of control of our broadcast licenses to FLCC
Holdings. The merger is not conditioned on FLCC Holdings obtaining
financing.
Q: WHEN AND WHERE IS THE ANNUAL MEETING?
A: The annual meeting will be held on Thursday, April 26, 2001 at 10:00 a.m.
(local time), at our principal executive offices at City Center West, Suite
400, 7201 West Lake Mead Boulevard, Las Vegas, Nevada 89128.
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Q: WHO IS ENTITLED TO VOTE ON THE PROPOSAL REGARDING THE AGREEMENT AND PLAN OF
MERGER?
A: Holders of Citadel Communications' common stock at the close of business on
March 19, 2001, the record date relating to the annual meeting, are entitled
to vote in person or by proxy on the proposal regarding the Agreement and
Plan of Merger at the annual meeting. Each of our stockholders is entitled
to one vote for each share of Citadel Communications' common stock owned as
of the record date.
Q: WHAT VOTE IS REQUIRED TO APPROVE THE AGREEMENT AND PLAN OF MERGER?
A: For the Agreement and Plan of Merger to be approved, holders of a majority
of the shares of Citadel Communications' outstanding common stock entitled
to vote at the annual meeting must vote FOR approval of the Agreement and
Plan of Merger.
Q: WHAT DO I NEED TO DO NOW?
A: After carefully reading and considering the information contained in this
proxy statement, please mark your vote on the accompanying proxy card and
sign and mail it in the enclosed return envelope as soon as possible. This
will ensure that your shares will be represented at the annual meeting. If
you sign and send in the proxy card and do not indicate how you want to
vote, the proxy will be voted FOR the approval of the Agreement and Plan of
Merger, FOR the director nominees named in this proxy statement, and FOR
ratification of the appointment of KPMG LLP as our independent public
accountants for 2001. If you do not vote by either sending in a proxy card
or voting in person at the annual meeting, it will have the same effect as a
vote AGAINST the approval of the Agreement and Plan of Merger.
Q: IF MY SHARES ARE HELD FOR ME BY MY BROKER, WILL MY BROKER VOTE MY SHARES FOR
ME?
A: Your broker will vote your shares with respect to the Agreement and Plan of
Merger only if you provide written instructions to your broker as to how to
vote your shares. You should follow the directions provided by your broker
regarding how to instruct your broker to vote your shares. Without
instructions, your shares will not be voted by your broker with respect to
the merger and the failure to vote will have the same effect as a vote
AGAINST the approval of the Agreement and Plan of Merger. Without
instructions, however, your broker may in its discretion vote your shares
for the director nominees and for the ratification of the appointment of
KPMG LLP as our independent public accountants for 2001. If your shares are
held in your broker's name and you wish to vote in person at the annual
meeting, you must first obtain a legal proxy from your broker.
Q: CAN I CHANGE MY VOTE AFTER MAILING IN A SIGNED PROXY CARD?
A: Yes. You can change your vote at any time before your proxy is voted at the
annual meeting. You may revoke your proxy by notifying our corporate
Secretary in writing or by submitting a new proxy, in each case, dated after
the date of the proxy being revoked. Simply attending the annual meeting,
whether or not you vote at the meeting, will not revoke your proxy. If you
have instructed a broker to vote your shares, you must follow the
instructions received from your broker to change your vote.
Q: DO I NEED TO ATTEND THE ANNUAL MEETING IN PERSON?
A: No. It is not necessary for you to attend the annual meeting in order to
vote your shares of Citadel Communications' common stock.
Q: WILL I HAVE THE RIGHT TO HAVE MY CITADEL COMMUNICATIONS' SHARES APPRAISED IF
I DISSENT FROM THE MERGER?
A: No. Under Nevada law, you will not have any appraisal or dissenters' rights
with respect to the merger.
Q: SHOULD I SEND MY STOCK CERTIFICATES NOW?
A: No. After the merger is completed, you will receive written instructions for
exchanging your Citadel Communications' stock certificates for the $26.00
per share cash payment, including procedures for electronic delivery of
shares.
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Q: WILL I OWE ANY U.S. FEDERAL INCOME TAX AS A RESULT OF THE MERGER?
A: The merger will be a taxable transaction for U.S. federal income tax
purposes and also may be taxable under state, local and other laws. In
general, you will recognize a gain or loss equal to the difference between
the amount of cash you receive and your adjusted tax basis in the shares you
surrender. Your gain or loss will generally be a long-term capital gain or
loss, if, as of the date of the merger, you held your shares for more than
one year. Unless you comply with required reporting or certification
procedures, you may be subject to backup withholding with respect to any
cash payments you receive pursuant to the merger.
TAX MATTERS ARE VERY COMPLICATED AND THE TAX CONSEQUENCES OF THE MERGER TO YOU
WILL DEPEND ON THE FACTS OF YOUR OWN SITUATION. YOU SHOULD CONSULT YOUR TAX
ADVISOR FOR A FULL UNDERSTANDING OF THE TAX CONSEQUENCES OF THE MERGER TO YOU.
Q: WHO CAN HELP ANSWER MY QUESTIONS ABOUT THE MERGER?
A: The information provided in this "Question and Answer" format and the
summary below is for your convenience only and is merely a summary of the
information contained in this proxy statement. You should carefully read
this entire proxy statement, including the attached annexes and the
documents referred to in this proxy statement.
If you have any questions about the merger after reading this proxy
statement or need assistance in voting your shares, please contact our [proxy
solicitor] at the following address and telephone number:
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SUMMARY
This summary highlights selected information from this proxy statement. You
should carefully read this entire proxy statement and its annexes for a complete
description of the merger and the Agreement and Plan of Merger between Citadel
Communications and FLCC Holdings (which we refer to throughout this proxy
statement as the merger agreement) and the other matters to be voted upon at the
annual meeting.
THE PARTIES TO THE MERGER (PAGES )
Citadel Communications Corporation
City Center West
Suite 400
7201 West Lake Mead Boulevard
Las Vegas, NV 89128
(702) 804-5200
Through our subsidiary, Citadel Broadcasting Company, we are a radio
broadcaster in the United States that focuses primarily on acquiring, developing
and operating radio stations in mid-sized markets. Upon completion of currently
pending transactions, we will own or operate 143 FM and 66 AM radio stations in
43 markets, including clusters of four or more stations in 33 markets, and sell
advertising in the United States for one Canadian FM radio station.
FLCC Holdings, Inc. FLCC Acquisition Corp.
c/o Forstmann Little & Co. c/o Forstmann Little & Co.
767 Fifth Avenue 767 Fifth Avenue
New York, New York 10153 New York, New York 10153
(212) 355-5656 (212) 355-5656
FLCC Holdings is a Delaware corporation and FLCC Acquisition is a Nevada
corporation, each newly formed by Forstmann Little & Co. for the purpose of
effecting the merger. Forstmann Little is a private investment partnership that
through affiliates has acquired or made significant equity investments in 28
companies. FLCC Holdings and FLCC Acquisition do not anticipate that, prior to
completing the merger, they will have any significant assets or liabilities or
will engage in any activities other than those incident to the merger and the
financing of the merger.
STRUCTURE AND EFFECT OF THE MERGER (PAGES )
We will effect the merger by having FLCC Acquisition, a wholly owned
subsidiary of FLCC Holdings, merge into Citadel Communications. We will continue
as the surviving corporation after the merger and will become a wholly owned
subsidiary of FLCC Holdings. However, after the merger, public trading of
Citadel Communications' common stock will cease and Citadel Communications'
common stock will be delisted from the National Market System of The Nasdaq
Stock Market. You will no longer have any ownership interest in Citadel
Communications and will no longer participate in any future earnings and growth
we may experience.
MERGER RECOMMENDATION TO STOCKHOLDERS (PAGES )
Our Board of Directors recommends that you vote FOR the approval of the
merger agreement. In determining to recommend approval of the merger agreement
by the stockholders, our Board of Directors considered numerous factors
described on pages .
MERGER CONSIDERATION (PAGES )
Upon completion of the merger, you will be entitled to receive $26.00 in
cash, without interest or any other payment, for each share of Citadel
Communications' common stock that you own.
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FEDERAL INCOME TAX CONSEQUENCES (PAGES )
The merger will be a taxable transaction for U.S. federal income tax
purposes and also may be taxable under state, local and other laws. In general,
you will recognize a gain or loss equal to the difference between the amount of
cash you receive and your adjusted tax basis in the shares of Citadel
Communications' common stock that you surrender. The gain or loss will generally
be a long-term capital gain or loss, if as of the date of the merger, you held
your shares of Citadel Communications' common stock for more than one year.
Unless you comply with required reporting or certification procedures, you may
be subject to backup withholding with respect to any cash payments you receive
pursuant to the merger. You should consult your own tax advisor regarding the
federal income tax consequences of the merger, as well as any tax consequences
under state, local or non-U.S. law.
YOU WILL HAVE NO APPRAISAL RIGHTS (PAGES )
Under Nevada law, you will not have any appraisal or dissenters' rights or
other similar statutory rights in connection with the merger.
TREATMENT OF OUTSTANDING STOCK OPTIONS (PAGES )
Under the merger agreement, we agreed to use our reasonable best efforts
to:
- cancel each option to purchase shares of Citadel Communications' common
stock with an exercise price per share equal to or greater than $26.00 in
exchange for nominal consideration; and
- convert each option with an exercise price per share less than $26.00
into the right to receive a cash amount (less any applicable taxes) equal
to (a) the excess of $26.00 per share over the exercise price per share
of the option multiplied by (b) the number of shares of Citadel
Communications' common stock subject to the option immediately prior to
the merger.
We will pay any amounts due to option holders as soon as practicable after
the merger.
VOTE REQUIRED TO APPROVE THE MERGER (PAGES )
Approval of the merger agreement requires the affirmative vote of the
holders of a majority of the outstanding shares of Citadel Communications'
common stock entitled to vote at the annual meeting.
REASONS FOR THE MERGER (PAGES )
Our Board of Directors determined that the merger is fair to and in the
best interests of Citadel Communications. Important factors in our Board's
determination included:
- the premium that the $26.00 per share consideration represented over the
average closing price per share of Citadel Communications' common stock
over the twenty trading days prior to the public announcement of the
merger agreement;
- the difficulty we would have in obtaining capital for future growth under
current financial market conditions relative to our ability to obtain
capital as a private company controlled by Forstmann Little;
- the value of a cash payment to stockholders given the volatility of stock
prices of public companies in the radio broadcasting industry; and
- the opinion of Credit Suisse First Boston Corporation regarding the
fairness of the $26.00 per share consideration.
OPINION OF OUR FINANCIAL ADVISOR (PAGES )
We engaged the investment-banking firm of Credit Suisse First Boston
Corporation as our exclusive financial advisor in connection with the merger.
Credit Suisse First Boston delivered an oral presentation and written opinion to
our Board of Directors on January 15, 2001, to the effect that, as of that date
and subject
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to the matters described in its opinion, the $26.00 per share consideration to
be paid to the holders of Citadel Communications' common stock in the merger was
fair to these holders from a financial point of view. The opinion of Credit
Suisse First Boston is attached to this proxy statement as Annex D. You are
urged to read Credit Suisse First Boston's opinion carefully in its entirety for
a description of the procedures followed, assumptions made, matters considered
and limitations on the review undertaken by Credit Suisse First Boston in
providing its opinion. Credit Suisse First Boston's opinion is addressed to our
Board of Directors and does not constitute a recommendation to you with respect
to any matter relating to the proposed merger.
INTERESTS OF OUR OFFICERS AND DIRECTORS IN THE MERGER (PAGES )
In considering our Board of Directors' recommendation to vote FOR the
approval of the merger agreement, stockholders should be aware that some of our
directors and executive officers have interests that are different from, or in
addition to, the interests of other stockholders generally. These interests
generally relate to:
- provisions in the merger agreement regarding the cashout and/or
cancellation of options held by our officers and directors and the
continuation of employment of our current officers after completion of
the merger; and
- provisions in some of our officers' employment agreements regarding
severance payments.
EFFECT ON CITADEL BROADCASTING'S SUBORDINATED NOTES AND EXCHANGEABLE PREFERRED
STOCK (PAGES )
We agreed that following approval of the merger agreement by our
stockholders, upon the request and at the expense of FLCC Holdings, we would
cause Citadel Broadcasting to make an offer to purchase or redeem all of Citadel
Broadcasting's 9 1/4% Senior Subordinated Notes due 2007, 10 1/4% Senior
Subordinated Notes due 2008 and 13 1/4% Exchangeable Preferred Stock and to
solicit, from at least a majority of the holders of these securities, consents
to amend the indentures governing the subordinated notes and the terms of the
exchangeable preferred stock. FLCC Holdings will determine the terms of these
offers and solicitations, but Citadel Broadcasting will not be required to
complete any of these transactions until the merger has been completed or is
being completed simultaneously. The merger is not conditioned on the acceptance
of these offers and solicitations.
CONDITIONS TO COMPLETION OF THE MERGER (PAGES )
The merger cannot be completed until a number of conditions are satisfied.
These conditions include:
- approval by our stockholders of the merger agreement;
- approval of the Federal Communications Commission to the transfer of
control of our broadcast licenses to FLCC Holdings;
- performance in all material respects by the parties of their material
obligations under the merger agreement at or prior to closing;
- the accuracy, in all material respects, of representations and warranties
made by the parties in the merger agreement as of the closing;
- the absence of any law, injunction or order prohibiting or preventing the
completion of the merger;
- the absence of any events which materially adversely affect FLCC
Holdings' and FLCC Acquisition's ability to perform their obligations
under the merger agreement; and
- the absence of any events which are materially adverse to our business,
results of operations or financial condition or prospects, other than
general changes in the radio industry, the advertising markets, the
economy or the securities markets or changes resulting from the merger
agreement or its announcement, or which materially adversely affect our
ability to perform our obligations under the merger agreement.
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If all of these conditions are not satisfied or waived (to the extent
waivable), the merger will not be completed even if our stockholders vote to
approve the merger agreement.
TERMINATION OF THE MERGER AGREEMENT (PAGES )
We and FLCC Holdings may mutually agree to terminate the merger agreement
at any time before the merger becomes effective. In addition, we or FLCC
Holdings may terminate the merger agreement if:
- any law or ruling prohibiting the completion of the merger becomes final
and nonappealable;
- the merger is not completed by January 16, 2002;
- the merger agreement is not approved by our stockholders, for reasons
other than the failure of the party seeking termination to perform any
aspect of the merger agreement; or
- the other party breaches the merger agreement and does not cure the
breach within 30 days of being notified of the breach, so long as the
party seeking to terminate is also not in material breach of the merger
agreement.
FLCC Holdings can also terminate the merger agreement if:
- our Board of Directors adversely modifies or withdraws its recommendation
of the merger and merger agreement; or
- because of changes in FCC rules or policies adopted in connection with
the FCC proceeding captioned In the Matter of Definition of Radio
Markets, MM Docket No. 00-244, NOTICE OF PROPOSED RULEMAKING (Released
December 13, 2000) or any related proceeding, we divest, agree to divest
or are required to divest any of our radio stations licensed by the FCC
(other than divestitures which we have already notified FLCC Holdings are
being or may be made) that, in the aggregate, contributed $14 million or
more to our consolidated broadcast cash flow for the 12-month period
immediately before the divestitures were made.
FEES WE MAY BE REQUIRED TO PAY IF THE MERGER AGREEMENT IS TERMINATED
We must pay to Forstmann Little a termination fee of $20 million and up to
$10 million for its out-of-pocket expenses incurred in connection with the
merger if the merger agreement is terminated:
- by either us or FLCC Holdings because the merger was not approved by our
stockholders and
- before the stockholder's meeting, an offer to purchase Citadel
Communications was publicly announced by a third party; and
- within 12 months of termination, we are acquired by a third party;
- by FLCC Holdings because we willfully and materially breached the merger
agreement and within 12 months of termination, we are acquired by a third
party; and
- by FLCC Holdings because our Board of Directors adversely modified or
withdrew its recommendation of the merger agreement.
REGULATORY MATTERS (PAGES )
The merger cannot be completed until the Federal Communications Commission
approves the transfer of control of our broadcast licenses to FLCC Holdings in
accordance with the Communications Act of 1934, as amended. The parties have
filed applications with the FCC for the transfer of control of our broadcast
licenses and are awaiting the FCC's determination.
STOCKHOLDER LITIGATION (PAGE )
On January 17, 18 and 19, 2001, four lawsuits were filed against us in the
District Court of Clark County, Nevada. The four lawsuits name us and several of
our directors as defendants. One of the lawsuits
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also names Forstmann Little, FLCC Holdings and FLCC Acquisition as defendants.
Each lawsuit alleges that several of our directors have breached their fiduciary
duties to our stockholders and seeks various forms of relief, including
injunctive relief to prevent the closing of the merger. We, Forstmann Little and
the other defendants believe the allegations in these complaints are without
merit and intend to vigorously defend these lawsuits.
OTHER ANNUAL MEETING MATTERS (PAGES )
At the annual meeting, we will also be asking you to elect six directors
and to ratify the appointment of KPMG LLP as our independent public accountants
for the year ending December 31, 2001.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This proxy statement includes forward-looking statements within the meaning
of the Private Securities Litigation Reform Act of 1995, as amended. These
forward-looking statements are based largely on current expectations and
projections about future events affecting Citadel Communications' business. The
words "will," "expects," "believes," "anticipates," "seeks," "could" and
"should" and similar words are intended to identify forward-looking statements.
In addition, any statements that refer to expectations or other
characterizations of future events or circumstances are forward-looking
statements. Readers are cautioned that any forward-looking statements involve
known and unknown risks, uncertainties and other factors which may cause Citadel
Communications' actual results, performance or achievements to be materially
different from any future results, performance or achievements expressed or
implied by such forward-looking statements. The forward-looking statements in
this proxy statement are subject to risks, uncertainties and assumptions
including, among other things:
- general economic and business conditions, both nationally and in Citadel
Communications' radio markets;
- Citadel Communications' expectations and estimates concerning future
financial performance, financing plans and the impact of competition;
- the satisfaction of the conditions to closing of the merger described in
this proxy statement; and
- the impact of current or pending legislation and regulation.
In light of these risks and uncertainties, the forward-looking events and
circumstances discussed in this proxy statement might not transpire. Citadel
Communications undertakes no obligation to publicly update or revise any
forward-looking statements because of new information, future events or
otherwise.
THE ANNUAL MEETING
DATE, TIME, PLACE AND RECORD DATE OF THE ANNUAL MEETING
The Annual Meeting of Stockholders of Citadel Communications will be held
on Thursday, April 26, 2001, beginning at 10:00 a.m., at Citadel Communications'
principal executive offices at City Center West, Suite 400, 7201 West Lake Mead
Boulevard, Las Vegas, Nevada 89128. The accompanying proxy is being solicited by
Citadel Communications' Board of Directors and is to be voted at the annual
meeting or any adjournment(s) or postponement(s) thereof. The holders of record
of Citadel Communications' common stock as of the close of business on March 19,
2001 are entitled to receive notice of, and to vote at, the annual meeting. On
March 19, 2001, there were shares of Citadel Communications'
common stock outstanding. No other voting securities of Citadel Communications
are outstanding. This proxy statement, the accompanying proxy card and Citadel
Communications' Annual Report to Stockholders for the fiscal year ended December
31, 2000, are being mailed on or about March , 2001 to stockholders entitled
to vote at the annual meeting.
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PURPOSE
At the annual meeting, stockholders will be asked to consider and vote upon
the approval of the merger agreement, which provides for the merger of FLCC
Acquisition with and into Citadel Communications. In the merger, each issued and
outstanding share of Citadel Communications' common stock will be canceled and
converted automatically into the right to receive $26.00 in cash, without
interest or any other payment. Stockholders also will be asked to elect six
directors and to ratify the appointment of KPMG LLP as Citadel Communications'
independent public accountants for the year ending December 31, 2001.
Citadel Communications does not expect to ask the stockholders to vote on
any matters at the annual meeting other than those described in this proxy
statement. However, if any other matters are properly presented at the annual
meeting for consideration, the persons named to act under the proxies will have
discretion to vote on these matters in accordance with their best judgment,
which may include voting to adjourn the meeting to solicit additional proxies.
VOTING INFORMATION
Each share of common stock issued and outstanding is entitled to one vote
on matters properly submitted at the annual meeting. Cumulative voting is not
permitted under Citadel Communications' Amended and Restated Certificate of
Incorporation. The presence, in person or by proxy, of the holders of a majority
of the total issued and outstanding shares of common stock entitled to vote at
the annual meeting is necessary to constitute a quorum for the transaction of
business at the annual meeting.
Brokers who hold shares in "street name" for customers have the authority
to vote on "routine" proposals when they have not received instructions from
beneficial owners. However, absent specific instructions from the beneficial
owner of the shares, brokers are not allowed to exercise their voting discretion
with respect to the approval and adoption of non-routine matters such as the
merger. Abstentions and properly executed broker non-votes will be treated as
shares that are present and entitled to vote at the annual meeting for purposes
of determining whether a quorum exists. Abstentions will be counted in
tabulating votes cast on the proposals presented to stockholders, but broker
non-votes will not. Votes cast in person or by proxy at the annual meeting will
be tabulated by the election inspectors appointed for the meeting.
Approval of the merger agreement requires the affirmative vote of the
holders of a majority of the outstanding common stock entitled to vote at the
annual meeting. If a quorum is present, broker non-votes and abstentions will
have the effect of a vote AGAINST the merger agreement. Directors will be
elected by a plurality of the votes of the shares present or represented by
proxy at the meeting and entitled to vote on the election of directors. That is,
the six nominees receiving the greatest number of votes will be elected. If a
quorum is present, abstentions and broker non-votes will have no effect on the
voting for the election of directors. Approval of ratification of the
appointment of independent public accountants requires the affirmative vote of a
majority of the aggregate voting power of the common stock entitled to vote,
present or represented at the annual meeting. If a quorum is present, non-votes
will have no effect on the voting for ratification of the appointment of
independent public accountants. However, abstentions will have the effect of a
vote AGAINST ratification of the appointment.
Under Nevada law, stockholders will not have any appraisal or dissenters'
rights or other similar statutory rights in connection with the merger.
SOLICITATION AND REVOCATION OF PROXIES
Proxies are being solicited by and on behalf of Citadel Communications'
Board of Directors. Citadel Communications will pay the costs of soliciting
proxies from stockholders, as well as all mailing costs and Securities and
Exchange Commission filing fees incurred in connection with this proxy
statement. Citadel Communications has engaged the services of to
solicit proxies and to assist in the distribution of proxy materials. In
connection with its retention by Citadel Communications, agreed
to provide solicitation services with respect to banks, brokers, institutional
investors and individual stockholders. Citadel Communications has agreed to pay
a fee of $ and to reimburse its
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reasonable out-of-pocket expenses and to indemnify it against certain
liabilities and expenses, including liabilities and expenses under federal
securities laws. In addition to the solicitation of proxies by mail, some of
Citadel Communications' directors, officers and employees may solicit proxies by
telephone, facsimile and personal contact, without separate compensation for
those activities. Copies of solicitation materials will be furnished to
fiduciaries, custodians and brokerage houses for forwarding to beneficial owners
of common stock, and these persons will be reimbursed for their reasonable
out-of-pocket expenses.
The grant of a proxy on the enclosed form does not preclude a stockholder
from attending the annual meeting and voting in person. A stockholder may revoke
his or her proxy at any time before it is voted at the annual meeting. A
stockholder of record may revoke a proxy by:
- delivering to the Secretary of Citadel Communications, before the vote is
taken at the annual meeting, a written notice of revocation bearing a
later date than the proxy; or
- duly executing a later dated proxy relating to the same shares of common
stock and delivering it to the Secretary of Citadel Communications before
the vote is taken at the annual meeting.
Attendance at the annual meeting will not in and of itself constitute a
revocation of a proxy. If you desire to vote at the annual meeting, you must
revoke any proxy you have given prior to the vote at the annual meeting. Any
written notice of revocation or subsequent proxy should be sent to the Secretary
of Citadel Communications at City Center West, Suite 400, 7201 West Lake Mead
Boulevard, Las Vegas, Nevada 89128 or hand delivered to the Secretary of Citadel
Communications before the vote is taken at the annual meeting. Stockholders
whose shares are held in "street name" by a broker and who have instructed the
broker to vote the shares must follow the directions received from the broker as
to how to change their vote.
A stockholder may, with respect to the election of directors:
- vote "FOR" the election of all six nominees named herein;
- "WITHHOLD AUTHORITY" to vote for all such director nominees; or
- vote "FOR" the election of all such director nominees other than any
nominee or nominees with respect to whom the stockholder withholds
authority to vote by so indicating in the appropriate space on the proxy
card.
A stockholder may, with respect to each other matter specified in the
notice of the annual meeting:
- vote "FOR" the matter;
- vote "AGAINST" the matter; or
- "ABSTAIN" from voting on the matter.
All valid proxies will be voted at the annual meeting in accordance with
the instructions given. If no instructions are given, the shares represented by
the proxy will be voted at the annual meeting FOR approval of the merger
agreement, FOR the election of all nominees named in this proxy statement to the
Board of Directors or for a substitute nominee if any of the nominees named in
this proxy statement becomes unable or unwilling to serve, and FOR the proposal
to ratify the appointment of KPMG LLP as Citadel Communications' independent
public accountants. Stockholders whose shares are held in "street name" and who
wish to vote in person at the annual meeting must first obtain a legal proxy
from their broker.
PLEASE DO NOT SEND IN STOCK CERTIFICATES AT THIS TIME. IN THE EVENT THE
MERGER IS COMPLETED, STOCKHOLDERS WILL BE SENT INSTRUCTIONS REGARDING THE
PROCEDURES FOR EXCHANGING EXISTING STOCK CERTIFICATES FOR THE $26.00 PER SHARE
CASH PAYMENT.
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APPROVAL OF THE AGREEMENT AND PLAN OF MERGER
(PROPOSAL 1 ON THE ENCLOSED PROXY CARD)
The members of the Board of Directors of Citadel Communications have
approved the Agreement and Plan of Merger by and between Citadel Communications
and FLCC Holdings (hereinafter referred to as the merger agreement), a copy of
which is attached to this proxy statement as Annex A. The Board of Directors
recommends the approval of the merger agreement by the stockholders.
The members of the Board of Directors believe that the proposed merger is
fair to and in the best interests of Citadel Communications. Pursuant to the
merger, each issued and outstanding share of Citadel Communications' common
stock will be canceled and converted automatically into the right to receive
$26.00 in cash, without interest or any other payment. See the discussion below
under the heading "The Merger Agreement And Related Documents" and the
subheading "Payment for Shares of Citadel Communications' Common Stock."
All members of the Board of Directors and each of the executive officers of
Citadel Communications have indicated that they intend to vote all shares of
Citadel Communications' common stock that they have the power to vote in favor
of the proposal to approve the merger agreement.
PARTIES TO THE MERGER
CITADEL COMMUNICATIONS
Citadel Communications, through its subsidiary, Citadel Broadcasting, is a
radio broadcaster in the United States that focuses primarily on acquiring,
developing and operating radio stations in mid-sized markets. Upon completion of
currently pending transactions, Citadel Communications will own or operate 143
FM and 66 AM radio stations in 43 markets, including clusters of four or more
stations in 33 markets, and sell advertising in the United States for one
Canadian FM radio station. Citadel Communications' primary strategy is to secure
and maintain a leadership position in the markets it serves and to expand into
additional markets where management believes a leadership position can be
obtained. Upon entering a market, Citadel Communications seeks to acquire
stations which, when integrated with its existing operations, allow it to reach
a wider range of demographic groups that appeal to advertisers, increase revenue
and achieve substantial cost savings. Citadel Communications' portfolio of radio
stations is diversified in terms of format, target demographics and geographic
location. Because of the size of its portfolio and its individual radio station
groups, management believes Citadel Communications is not unduly reliant upon
the performance of any single station. Management also believes that the
diversity of Citadel Communications' portfolio of radio stations helps insulate
it from downturns in specific markets and changes in format preferences. The
mailing address, principal office and telephone number of Citadel Communications
is City Center West, Suite 400, 7201 West Lake Mead Boulevard, Las Vegas, Nevada
89128, (702) 804-5200.
FORSTMANN LITTLE, FLCC HOLDINGS, FLCC ACQUISITION AND AFFILIATES
FLC XXXI Partnership, L.P. is a New York limited partnership doing business
as Forstmann Little & Co. (hereinafter referred to as Forstmann Little).
Forstmann Little is a private investment partnership that through affiliates has
acquired or made significant equity investments in 28 companies. Forstmann
Little will acquire Citadel Communications through its affiliates, FLCC Holdings
and FLCC Acquisition, described below. The general partners of Forstmann Little
are FLC XXIX Partnership, L.P. and FLC XXXIII Partnership, L.P., both New York
limited partnerships. The general partners of FLC XXIX Partnership are Theodore
J. Forstmann, the estate of Nicholas C. Forstmann, Sandra J. Horbach, Tywana LLC
(a North Carolina limited liability company), Erskine B. Bowles, Thomas H.
Lister, Winston W. Hutchins and Jamie C. Nicholls. The general partners of FLC
XXXIII Partnership are Theodore J. Forstmann, the estate of Nicholas C.
Forstmann, Sandra J. Horbach, Tywana LLC, Erskine B. Bowles, Thomas H. Lister,
Winston W. Hutchins and Jamie C. Nicholls. The general manager of Tywana LLC is
Erskine B. Bowles.
Forstmann Little & Co. Equity Partnership-VI, L.P. and Forstmann Little &
Co. Equity Partnership-VII, L.P. (hereinafter referred to collectively as FL
Equity Partnerships) are both Delaware limited partnerships.
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The general partner of each is FLC XXXII Partnership, L.P., a New York limited
partnership. The general partners of FLC XXXII Partnership are Theodore J.
Forstmann, the estate of Nicholas C. Forstmann, Sandra J. Horbach, Tywana LLC,
Erskine B. Bowles, Thomas H. Lister, Winston W. Hutchins and Jamie C. Nicholls.
FLC XXXIII Partnership is the general partner of both Forstmann Little &
Co. Subordinated Debt and Equity Management Buyout Partnership-VII, L.P. and
Forstmann Little & Co. Subordinated Debt and Equity Management Buyout
Partnership-VIII, L.P. (hereinafter referred to collectively as FL MBO
Partnerships) which are both Delaware limited partnerships formed to provide the
subordinated debt financing and a portion of the equity financing required in
some transactions in which FL Equity Partnerships participate. FLCC Holdings,
FLCC Acquisition and all of the entities and individuals identified above are
collectively referred to herein as the FL Parties. The mailing address,
principal office and telephone number for each FL Party, other than Tywana LLC,
is c/o Forstmann Little & Co., 767 Fifth Avenue, New York, New York 10153, (212)
355-5656. The mailing address, principal office and telephone number for Tywana
LLC is 201 North Tryon Street, Suite 2450, Charlotte, N.C. 28202, (704)
372-2040.
FLCC Holdings is a Delaware corporation, and FLCC Acquisition is a Nevada
corporation, each newly formed by Forstmann Little for the purpose of effecting
the merger. The mailing address and telephone number for FLCC Holdings and FLCC
Acquisition is c/o Forstmann Little & Co., 767 Fifth Avenue, New York, New York
10153, (212) 355-5656. Upon the consummation of the merger, FL Equity
Partnerships and FL MBO Partnerships will hold all of the equity interests in
FLCC Holdings. FLCC Holdings owns all the outstanding capital stock of FLCC
Acquisition. It is not anticipated that, prior to the consummation of the
merger, FLCC Holdings or FLCC Acquisition will have any significant assets or
liabilities or will engage in any activities other than those relating to the
merger and the financing of the merger.
ALL INFORMATION CONTAINED IN THIS PROXY STATEMENT CONCERNING THE FL PARTIES
HAS BEEN SUPPLIED BY FORSTMANN LITTLE AND HAS NOT BEEN INDEPENDENTLY VERIFIED BY
CITADEL COMMUNICATIONS.
PRIOR TRANSACTIONS AMONG THE PARTIES
Except as set forth in this proxy statement:
- prior to the commencement of the discussions which led to the execution
of the merger agreement, there had been no negotiations, transactions or
material contacts between Citadel Communications or any of its affiliates
on the one hand and any of the FL Parties nor, to the best knowledge of
any of the foregoing, any of the directors, executive officers,
controlling persons or subsidiaries of any of the foregoing, on the other
hand; and
- there are no present or proposed material agreements, arrangements,
understandings or relationships between Citadel Communications, any of
its executive officers, directors, controlling persons, or subsidiaries
on the one hand and any of the FL Parties nor, to the best knowledge of
any of the foregoing, any of the executive officers, directors,
controlling persons or subsidiaries of any of the foregoing, on the other
hand.
BACKGROUND OF THE MERGER
In early October 2000, Forstmann Little initiated a broad review of
publicly available information concerning the radio industry, including a review
of publicly available information on Citadel Communications. During the course
of such review, representatives of Forstmann Little met with a representative of
Credit Suisse First Boston Corporation, Citadel Communications' regular
investment banker, to discuss the radio broadcasting business in general.
Subsequently, Forstmann Little expressed interest in Citadel Communications, and
a representative of Credit Suisse First Boston introduced Sandra Horbach, a
General Partner of Forstmann Little, to Lawrence Wilson, Citadel Communications'
Chief Executive Officer, Chairman and President, in an informal social setting
in New York on October 17, 2000. Following his introduction to Ms. Horbach, Mr.
Wilson learned from the representative of Credit Suisse First Boston that Ms.
Horbach was
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one of the principals of Forstmann Little and that Forstmann Little might be a
potential source of capital for Citadel Communications.
Several days later, Ms. Horbach and Mr. Wilson discussed via telephone a
range of potential capital alternatives related to Citadel Communications'
acquisition strategy. Ms. Horbach and Mr. Wilson agreed to continue exploring
these alternatives. On October 23, 2000, Forstmann Little entered into a
Confidentiality Agreement with Citadel Communications, and on October 26, 2000,
Citadel Communications furnished to Forstmann Little some non-public information
about Citadel Communications under the terms of the Confidentiality Agreement.
On November 1, 2000, Ms. Horbach, an additional partner and an associate of
Forstmann Little met in Las Vegas, Nevada with Mr. Wilson, Donna Heffner,
Executive Vice President, Chief Financial Officer and Secretary of Citadel
Communications, and D. Robert Proffitt, Executive Vice President of Citadel
Communications, along with a representative of Credit Suisse First Boston, to
discuss the business, strategies and prospects of Citadel Communications.
Shortly thereafter, Forstmann Little requested additional non-public information
concerning Citadel Communications. Citadel Communications supplied the
additional information in early December 2000, and Forstmann Little, Citadel
Communications and Credit Suisse First Boston thereafter conducted a series of
telephone conversations regarding the information provided as well as additional
information requested by Forstmann Little. Throughout the remainder of the month
of December, Forstmann Little held a number of discussions with Credit Suisse
First Boston regarding Citadel Communications and a potential transaction
between Forstmann Little and Citadel Communications.
In the evening of December 20, 2000, Theodore Forstmann, Senior Partner of
Forstmann Little, met Mr. Wilson in Las Vegas. Mr. Forstmann and Mr. Wilson
discussed the history, business, strategies and prospects of Citadel
Communications, as well as the history and attributes of Forstmann Little. On
December 21, 2000, Ms. Horbach and Mr. Wilson spoke via telephone and agreed
that Mr. Forstmann and other representatives of Forstmann Little would meet with
Citadel Communications' management on January 8, 2001, in order to conduct
business due diligence.
Prior to January 8, 2001, Forstmann Little submitted an information request
list which included proposed topics for business due diligence. From January 8
through the afternoon of January 9, 2001, representatives of Forstmann Little
met with Mr. Wilson, Mr. Proffitt, Ms. Heffner and Thomas Doyle, Citadel
Communications' Financial Analyst, along with representatives of Credit Suisse
First Boston, at Citadel Communications' offices in Las Vegas, and conducted an
in-depth review of Citadel Communications' business, strategies and prospects.
Mr. Forstmann advised Mr. Wilson that Forstmann Little was interested in
continuing to pursue its review of Citadel Communications and to investigate a
potential investment, but needed several days to determine its proposal.
On the morning of Friday, January 12, 2001, Mr. Forstmann and Mr. Wilson
met for breakfast in Los Angeles. Mr. Forstmann set forth a proposal to Mr.
Wilson pursuant to which Forstmann Little would agree to acquire Citadel
Communications at a price of $22.00 per share in cash, subject to the
satisfactory completion of due diligence and the negotiation of a definitive
agreement. After Mr. Wilson expressed his disappointment at this proposal, Mr.
Forstmann increased the proposed price to $23.00 per share. Mr. Wilson advised
Mr. Forstmann that he believed that price to be inadequate and stated that he
wanted to consider and discuss Citadel Communications' position with Citadel
Communications' Board of Directors. In a telephone conversation later that day,
Messrs. Wilson and Forstmann discussed their mutual concerns regarding leaks of
information about their negotiations. Mr. Forstmann noted that the financial
markets would be closed Monday, January 15, and stated that Forstmann Little was
prepared, even with the price term unsettled, immediately to commence legal and
accounting due diligence and preparation of merger documents toward the end that
the parties, if able to agree on price and other terms, could complete and
announce the transaction prior to the opening of the financial markets on
January 16.
In a telephonic meeting held in the late afternoon of January 12, the Board
of Directors of Citadel Communications discussed the background and status of
the Forstmann Little proposal. Following this meeting, Mr. Wilson confirmed to
Mr. Forstmann by telephone Citadel Communications' position that the $23.00 per
share price was inadequate, but that it was prepared to facilitate Forstmann
Little's due diligence
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activities while the price discussions continued. Shortly thereafter,
representatives of Forstmann Little, Citadel Communications, Forstmann Little's
outside legal advisor, Fried, Frank, Harris, Shriver & Jacobson, and Citadel
Communications' outside legal advisor, Eckert Seamans Cherin & Mellott, LLC,
participated in a telephonic conference call during which they discussed the
timing and arrangements for due diligence and the commencement of preparation of
definitive transaction documents.
On January 13, 2001, while Forstmann Little and its legal and financial
advisors undertook additional legal, accounting and business due diligence
regarding Citadel Communications in Washington, D.C., Las Vegas, Nevada, and
Pittsburgh, Pennsylvania, Mr. Wilson telephoned Mr. Forstmann and proposed a
price of $28.00 per share. Mr. Forstmann vigorously rejected Mr. Wilson's
proposal and counter-proposed a price of $25.00 per share. Mr. Wilson responded
that Citadel Communications was unwilling to proceed at a price less than $26.00
per share, and Mr. Forstmann stated that he needed at that point to consult with
his partners. Mr. Forstmann later called back and advised Mr. Wilson that
Forstmann Little was willing to propose a price of $26.00 per share, subject to
the completion of Forstmann Little's due diligence. Mr. Wilson agreed that, on
the basis of that proposal, Citadel Communications would continue to coordinate
due diligence activities and negotiation of definitive merger documents with
Forstmann Little's representatives, arrange a meeting of Citadel Communications'
Board of Directors for presentation of the proposal and request Credit Suisse
First Boston to undertake a study as to the fairness, from a financial point of
view, of the proposed merger consideration.
Subsequently, in a telephonic meeting of the Board of Directors of Citadel
Communications on January 13, 2001, Mr. Wilson updated the Board of Directors
regarding the negotiations, and the Board of Directors tentatively agreed to
convene in Las Vegas on January 15, 2001 for a presentation of the proposed
transaction.
In the early evening of January 13, 2001, Fried Frank delivered to Eckert
Seamans and Citadel Communications a draft merger agreement. The draft merger
agreement provided, among other things, that Citadel Communications pay, in the
event of certain circumstances following a termination of the agreement, a
break-up fee of approximately 4.5% of the aggregate merger consideration, as
well as all expenses incurred by Forstmann Little in connection with the merger
agreement and the transactions contemplated thereby.
On January 14, 2001, while Forstmann Little and its legal and financial
advisors continued to conduct legal, accounting and business due diligence,
Forstmann Little, Citadel Communications and their respective legal advisors
participated in several telephonic conference calls to negotiate the terms of
the merger agreement and related documentation. The parties held extensive
discussions with respect to the amount and terms of a break-up fee and
transaction expenses. During these discussions, Citadel Communications proposed
a break-up fee of 1% of the aggregate merger consideration and proposed that the
break-up fee be payable in circumstances more limited than those proposed by
Forstmann Little. Citadel Communications also proposed that it not pay any of
Forstmann Little's transaction expenses.
On the afternoon of January 14, 2001, Mr. Wilson and a representative of
Eckert Seamans participated in a telephonic conference with Ted L. Snider, Sr.,
a director of Citadel Communications, who was travelling abroad and who was
unable to participate in the telephonic meetings of the Board of Directors on
January 12 and 13. During the telephonic conference, Mr. Wilson discussed the
terms of the proposed merger with Mr. Snider, and Mr. Snider expressed his
belief that Citadel Communications should pursue the proposed transaction.
On January 15, 2001, Forstmann Little and its legal and financial advisors
completed their due diligence process. Simultaneously, Forstmann Little, Citadel
Communications and their respective legal advisors continued to negotiate the
terms of the merger agreement and related documentation. During these
discussions, Forstmann Little responded to Citadel Communications' proposals of
January 14, 2001 with a proposal that the break-up fee be set at 2.5% of the
aggregate merger consideration and that a cap of 1% of the aggregate merger
consideration be set on Forstmann Little's aggregate transaction expenses to be
reimbursed by Citadel Communications.
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Discussions on the terms of the merger agreement and related documentation
continued through the middle of the afternoon of January 15, 2001. During these
negotiations, the parties agreed that the break-up fee would be set at $20
million (or approximately 2% of the aggregate merger consideration) and that up
to $10 million (or approximately 1% of the merger consideration) of Forstmann
Little's transaction expenses would be payable by Citadel Communications under a
more limited set of circumstances than that originally proposed by Forstmann
Little. By the middle of the afternoon, the parties had finalized the principal
terms of the merger agreement and related agreements. Forstmann Little also
provided to representatives of Citadel Communications a commitment from J.P.
Morgan Chase & Co. to provide a portion of the financing for the proposed
transaction. See the discussion below under the heading "Financing of the
Merger."
In the late afternoon of January 15, 2001, the Board of Directors of
Citadel Communications held a special meeting to consider the proposed
transaction. All of the directors were present with the exception of Ted L.
Snider, Sr. At the meeting, Mr. Wilson and other members of Citadel
Communications' management reviewed the transaction with the Board of Directors,
including the principal financial and other terms of the proposed transaction. A
representative from Eckert Seamans outlined the directors' legal duties and
responsibilities in connection with considering the merger and discussed the
principal terms of the merger agreement and related documentation.
Representatives of Credit Suisse First Boston presented to the Board of
Directors its analysis of the financial aspects of the proposed merger. Credit
Suisse First Boston then delivered its opinion to the Board of Directors to the
effect that, as of that date and based upon and subject to the matters stated in
its written opinion, the $26.00 per share merger consideration was fair to
holders of Citadel Communications' common stock from a financial point of view.
See the discussion below under the heading "Opinion of Financial Advisor to
Citadel Communications."
After the presentation from Credit Suisse First Boston, and after
discussion of such matters as the members of the Board of Directors deemed
relevant, the members of the Board of Directors present at the meeting
unanimously:
- determined that the merger agreement and the transactions contemplated
thereby were fair to and in the best interests of Citadel Communications;
- approved the merger agreement and the transactions contemplated thereby;
- authorized the execution and delivery of the merger agreement;
- resolved to recommend the approval of the merger agreement to the
stockholders of Citadel Communications; and
- set April 26, 2001, as the date on which the annual meeting of Citadel
Communications' stockholders would be held to vote upon the merger
agreement, and March 19, 2001, as the record date for determination of
the stockholders entitled to vote at such stockholders' meeting.
After negotiation of the final terms of the merger agreement and related
agreements, representatives of Forstmann Little and representatives of Citadel
Communications signed the agreements in the early morning of January 16, 2001.
Later in the morning of January 16, 2001, and prior to the opening of the
U.S. financial markets, Forstmann Little and Citadel Communications issued a
joint press release announcing the execution of the merger agreement.
REASONS FOR THE MERGER; RECOMMENDATION OF CITADEL COMMUNICATIONS' BOARD OF
DIRECTORS
The Board of Directors of Citadel Communications believes that the merger
is fair to and in the best interests of Citadel Communications. On January 15,
2001, the Board of Directors approved the merger agreement and recommended the
approval of the merger agreement by the stockholders of Citadel Communications.
In reaching this decision, the Board of Directors consulted with Citadel
Communications' management and with Citadel Communications' outside financial
and legal advisors and considered a variety of factors, including the following
material factors:
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- the merger consideration of $26.00 in cash per share of Citadel
Communications' common stock represented a premium of approximately 49%
over the closing price per share of Citadel Communications' common stock
at the close of business on January 12, 2001, the last trading day prior
to the public disclosure that Citadel Communications and FLCC Holdings
had entered into the merger agreement; a premium of approximately 67%
over the average closing price per share of Citadel Communications'
common stock over the five preceding trading days ending on January 12,
2001; and a premium of approximately 101% over the average closing price
per share of Citadel Communications' common stock over the twenty
preceding trading days ending on January 12, 2001;
- the oral presentation by Credit Suisse First Boston, its financial
analysis and its opinion dated January 15, 2001 to the effect that, as of
the date of the opinion and based upon and subject to the matters stated
in its opinion, the $26.00 per share merger consideration was fair to the
holders of Citadel Communications' common stock from a financial point of
view;
- the $26.00 per share merger consideration to be received by holders of
Citadel Communications' common stock under the merger agreement compared
favorably to the consideration received by stockholders of other
companies in a number of comparable transactions based on the comparable
acquisition analysis reviewed with the Board of Directors by Credit
Suisse First Boston;
- Citadel Communications' stockholders will receive cash for their shares
of Citadel Communications' common stock under the terms of the merger
agreement, which provides certainty of value to Citadel Communications'
stockholders in a time period which has been characterized by a high
degree of volatility and adversity in the radio broadcasting industry and
in the prices of stock of public companies in the industry;
- historical information concerning Citadel Communications' financial
performance and condition, operations, and management;
- Citadel Communications' management's view of the financial condition,
competitive position in the radio broadcasting industry, prospects, and
results of operations of Citadel Communications before and after the
expected closing date of the merger;
- the historical trading prices and volumes of Citadel Communications'
common stock;
- the difficulty Citadel Communications would face in obtaining capital
necessary for future growth as an independent public company, given the
current financial market conditions, relative to its ability to secure
such capital following the merger as a private company controlled by
Forstmann Little;
- the likelihood that the merger would not result in significant
dislocation of employees of Citadel Communications;
- a review of the likelihood that continuing to operate Citadel
Communications as an independent company would not achieve a present
value greater than the consideration to be paid in the merger;
- the belief that the terms of the merger agreement were reasonable;
- the high likelihood that the merger will be consummated, particularly in
light of Forstmann Little's ability to finance the merger, the lack of
any financing condition in the merger agreement and the ability of FLCC
Holdings to terminate the merger agreement only in limited circumstances;
- the high likelihood that regulatory approval will be obtained,
particularly in light of the provisions of the merger agreement regarding
Forstmann Little's and Citadel Communications' obligations to pursue
necessary regulatory approvals;
- Citadel Communications' ability under the merger agreement, subject to
certain conditions, to negotiate with any third party who presents an
unsolicited superior proposal with respect to the acquisition of Citadel
Communications;
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- Citadel Communications' ability under the merger agreement, subject to
certain restrictions, to accept a superior proposal and terminate the
merger upon payment of a $20 million termination fee and up to $10
million for certain out-of-pocket expenses incurred by Forstmann Little;
and
- the Board of Directors' conclusion that the size of the termination fee,
and the circumstances when the fee is payable, were reasonable in light
of the benefits of the merger.
The Board of Directors of Citadel Communications also considered a variety
of risks, and possible negative factors, in deliberations considering the
merger. In particular, the Board of Directors considered the following factors
and risks:
- the $26.00 per share price was significantly below the 52-week market
high for Citadel Communications' common stock (the 52-week market high
was $56.125 on January 24, 2000);
- the Board of Directors did not actively solicit competing proposals with
respect to the acquisition of Citadel Communications based upon its
belief that it was unlikely that a proposal equal to or superior to the
transaction contemplated by the merger agreement would have been made and
the potential adverse impact of delaying the proposed transaction to
solicit competing proposals on the likelihood of consummating a
transaction on terms as favorable as those offered by Forstmann Little;
- the terms of the merger agreement prohibit Citadel Communications from
soliciting other proposals and require Citadel Communications to pay
Forstmann Little a termination fee of $20 million plus up to $10 million
for certain out-of-pocket expenses if Citadel Communications terminates
the merger agreement to accept a superior proposal, which may deter
others from proposing an alternative transaction that may be more
advantageous to Citadel Communications' stockholders;
- the risk that the merger might not be consummated; and
- the fact that an all cash transaction would be taxable to Citadel
Communications' stockholders for U.S. federal income tax purposes.
In addition, the Board of Directors of Citadel Communications considered
the interests of certain directors and executive officers that are different
from, or in addition to, the interest of Citadel Communications' stockholders
generally, as described under the heading "Interests of Certain Persons in the
Merger" below.
The above discussion concerning the information and factors considered by
the Board of Directors is not intended to be exhaustive, but includes the
material factors considered by the Board of Directors in making its
determination. Under Nevada Revised Statutes sec.78.138, in determining the
interests of the corporation, directors may consider, among other things, the
interests of employees, suppliers, creditors and customers of the corporation as
well as the long-term and short-term interests of the corporation and its
stockholders. As discussed above, the Board of Directors of Citadel
Communications considered the interests of stockholders in determining to
approve and recommend the merger agreement to Citadel Communications'
stockholders. In view of the variety of factors considered in connection with
its evaluation of the merger agreement and the proposed merger, the Board of
Directors did not quantify or otherwise attempt to assign relative weights to
the specific factors it considered in reaching its determination. In addition,
individual directors may have considered individual factors to have different
relative importance. The Board of Directors considered all of the factors as a
whole and considered the factors in their totality to be favorable and to
support the decision to approve the merger agreement and to recommend that
Citadel Communications' stockholders approve the merger agreement. The Board of
Directors relied on the experience and expertise of Credit Suisse First Boston,
its financial advisor, for quantitative analysis of the financial terms of the
merger.
OPINION OF FINANCIAL ADVISOR TO CITADEL COMMUNICATIONS
Credit Suisse First Boston has acted as exclusive financial advisor to
Citadel Communications in connection with the merger. Citadel Communications
selected Credit Suisse First Boston based on Credit Suisse First Boston's
experience, expertise, reputation and familiarity with Citadel Communications'
business. See the discussion below under the heading "Other Relationships."
Credit Suisse First Boston is an
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internationally recognized investment banking firm and is regularly engaged in
the valuation of businesses and securities in connection with mergers and
acquisitions, leveraged buyouts, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements
and valuations for corporate and other purposes.
In connection with Credit Suisse First Boston's engagement, Citadel
Communications requested that Credit Suisse First Boston evaluate the fairness,
from a financial point of view, to the holders of Citadel Communications' common
stock of the consideration to be received by such holders in the merger. On
January 15, 2001, at a meeting of the Board of Directors of Citadel
Communications held to evaluate the merger, Credit Suisse First Boston rendered
its written opinion, dated the date of the meeting, to the effect that, as of
that date and based on and subject to the matters described in its opinion, the
consideration to be received by the holders of common stock of Citadel
Communications in the merger was fair to such stockholders from a financial
point of view.
THE FULL TEXT OF CREDIT SUISSE FIRST BOSTON'S WRITTEN OPINION, DATED
JANUARY 15, 2001, TO CITADEL COMMUNICATIONS' BOARD OF DIRECTORS, WHICH SETS
FORTH THE PROCEDURES FOLLOWED, ASSUMPTION MADE, MATTERS CONSIDERED AND
LIMITATIONS ON THE REVIEW UNDERTAKEN, IS ATTACHED AS ANNEX D TO THIS PROXY
STATEMENT. HOLDERS OF CITADEL COMMUNICATIONS' COMMON STOCK ARE URGED TO READ
THIS OPINION CAREFULLY IN ITS ENTIRETY. CREDIT SUISSE FIRST BOSTON'S OPINION IS
ADDRESSED TO CITADEL COMMUNICATIONS' BOARD OF DIRECTORS AND RELATES ONLY TO THE
FAIRNESS OF THE CONSIDERATION FROM A FINANCIAL POINT OF VIEW, DOES NOT ADDRESS
ANY OTHER ASPECT OF THE PROPOSED MERGER OR ANY RELATED TRANSACTION AND DOES NOT
CONSTITUTE A RECOMMENDATION TO ANY STOCKHOLDER AS TO ANY MATTER RELATING TO THE
MERGER. THE SUMMARY OF CREDIT SUISSE FIRST BOSTON'S OPINION IN THIS DOCUMENT IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF THE OPINION.
Citadel Communications and Forstmann Little determined the consideration to
be received by the holders of Citadel Communications common stock in arm's
length negotiations between Citadel Communications and Forstmann Little, in
which Credit Suisse First Boston advised Citadel Communications.
In arriving at its opinion, Credit Suisse First Boston:
- reviewed the merger agreement;
- reviewed certain publicly available business and financial information
relating to Citadel Communications;
- reviewed certain other information relating to Citadel Communications,
including financial forecasts, that were provided to or discussed with
Credit Suisse First Boston by Citadel Communications and met with Citadel
Communications' management to discuss the business and prospects of
Citadel Communications;
- considered financial and stock market data of Citadel Communications and
compared that data with similar data for other publicly held companies in
businesses which it deemed similar to those of Citadel Communications;
- considered, to the extent publicly available, the financial terms of
certain other business combinations and other business transactions that
have recently been effected; and
- considered other information, financial studies, analyses and
investigations and financial, economic and market criteria that it deemed
relevant.
In connection with its review, Credit Suisse First Boston did not assume
any responsibility for independent verification of any of the foregoing
information and relied on that information being complete and accurate in all
material respects. With respect to financial forecasts, Credit Suisse First
Boston was advised and assumed, that the forecasts were reasonably prepared on
bases reflecting the best currently available estimates and judgments of Citadel
Communications' management as to the future financial performance of Citadel
Communications. In addition, Credit Suisse First Boston was not requested to
make, and did not make, an independent evaluation or appraisal of the assets or
liabilities (contingent or otherwise)
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of Citadel Communications, nor was Credit Suisse First Boston furnished with any
such evaluations or appraisals.
Credit Suisse First Boston's opinion is necessarily based upon financial,
economic, market and other conditions as they existed and could be evaluated on
the date of the opinion. Credit Suisse First Boston was not requested to, and
did not, solicit third party indications of interest in acquiring all or any
part of Citadel Communications. No other limitations were imposed on Credit
Suisse First Boston with respect to the investigations made or procedures
followed in rendering its opinion.
In preparing its opinion to Citadel Communications' Board of Directors,
Credit Suisse First Boston performed a variety of financial and comparative
analyses, including those described below. The summary of Credit Suisse First
Boston's analyses described below is not a complete description of the analyses
underlying Credit Suisse First Boston's opinion. The preparation of a fairness
opinion is a complex process involving various determinations as to the most
appropriate and relevant methods of financial analyses and the application of
those methods to the particular circumstances and, therefore, a fairness opinion
is not readily susceptible to partial analysis or summary description. In
arriving at its opinion, Credit Suisse First Boston made qualitative judgments
as to the significance and relevance of each analysis and factor that it
considered. Accordingly, Credit Suisse First Boston believes that its analyses
must be considered as a whole and that selecting portions of its analyses and
factors or focusing on information presented in tabular format, without
considering all analyses and factors or the narrative description of the
analyses, could create a misleading or incomplete view of the processes
underlying its analyses and opinion.
In its analyses, Credit Suisse First Boston considered industry
performance, regulatory, general business, economic, market and financial
conditions and other matters, many of which are beyond the control of Citadel
Communications. No company, transaction or business used in Credit Suisse First
Boston's analyses as a comparison is identical to Citadel Communications or the
proposed merger, and an evaluation of the results of those analyses is not
entirely mathematical. Rather, the analyses involve complex considerations and
judgments concerning financial and operating characteristics and other factors
that could affect the acquisition, public trading or other values of the
companies, business segments or transactions being analyzed. The estimates
contained in Credit Suisse First Boston's analyses and the ranges of valuations
resulting from any particular analysis are not necessarily indicative of actual
values or predictive of future results or values, which may be significantly
more or less favorable than those suggested by the analyses. In addition,
analyses relating to the value of businesses or securities do not purport to be
appraisals or to reflect the prices at which businesses or securities actually
may be sold. Accordingly, Credit Suisse First Boston's analyses and estimates
are inherently subject to substantial uncertainty.
Credit Suisse First Boston's opinion and financial analyses were only one
of many factors considered by Citadel Communications' Board of Directors in its
evaluation of the proposed merger and should not be viewed as determinative of
the views of Citadel Communications' Board of Directors or management with
respect to the merger or the consideration provided.
The following is a summary of the material analyses performed by Credit
Suisse First Boston in connection with the preparation of its opinion and
reviewed with Citadel Communications' Board of Directors on January 15, 2001.
The financial analyses summarized below include information presented in tabular
format. IN ORDER TO FULLY UNDERSTAND CREDIT SUISSE FIRST BOSTON'S FINANCIAL
ANALYSES, THE TABLES MUST BE READ TOGETHER WITH THE TEXT OF EACH SUMMARY. THE
TABLES ALONE DO NOT CONSTITUTE A COMPLETE DESCRIPTION OF THE FINANCIAL ANALYSES.
CONSIDERING THE DATA SET FORTH IN THE TABLES BELOW WITHOUT CONSIDERING THE FULL
NARRATIVE DESCRIPTION OF THE FINANCIAL ANALYSES, INCLUDING THE METHODOLOGIES AND
ASSUMPTIONS UNDERLYING THE ANALYSES, COULD CREATE A MISLEADING OR INCOMPLETE
VIEW OF CREDIT SUISSE FIRST BOSTON'S FINANCIAL ANALYSES.
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Comparable Companies Analysis. Credit Suisse First Boston compared
financial, operating and stock market data of Citadel Communications to
corresponding data of the following publicly traded radio broadcasting
companies:
- Emmis Communications Corporation
- Beasley Broadcasting Group Inc.
- Saga Communications Inc.
- Cumulus Media Inc.
- Clear Channel Communications Inc.
- Infinity Broadcasting Corporation
- Entercom Communications Corporation
- Cox Radio Inc.
- Hispanic Broadcasting Corporation
- Radio One Inc.
Credit Suisse First Boston focused primarily on Emmis Communications
Corporation, Beasley Broadcasting Group Inc., Saga Communications Inc. and
Cumulus Media Inc. because these companies exhibited some combination of the
following characteristics similar to Citadel Communications: a predominantly
middle market focus, leverage and slower recent net revenue and cash flow
growth.
Credit Suisse First Boston compared adjusted market value (enterprise
value), calculated as equity value (using January 12, 2001 stock prices) plus
net debt and preferred stock less cash as a multiple of calendar year 2000 and
2001 estimated broadcast cash flow ("BCF", defined as station operating income
excluding depreciation, amortization, corporate, general and administrative
expenses, nonrecurring items and other non-cash charges) and earnings before
interest, taxes, depreciation and amortization, commonly referred to as EBITDA.
Credit Suisse First Boston then applied a range of selected multiples derived
from the more comparable companies (as detailed above) of estimated BCF and
EBITDA for calendar years 2000 and 2001 to the corresponding data of Citadel
Communications. The estimated financial data for the comparable companies were
based on publicly available research analysts' estimates and the estimated
financial data for Citadel Communications were based on internal estimates of
Citadel Communications' management. This analysis indicated the following mean
and median implied multiples for the selected companies as compared to the
implied multiples for Citadel Communications.
The following chart depicts the trading multiples of Citadel Communications
and selected companies on the last trading day prior to the announcement of the
transaction:
ENTERPRISE VALUE TO:
----------------------------------------
2000 2001
2000 BCF 2001 BCF EBITDA EBITDA
-------- -------- ------ ------
Citadel Communications....................... 12.7x 11.1x 13.7x 12.0x
Selected Companies........................... Mean 12.0x 10.5x 14.4x 12.1x
Median 12.5 10.6 14.2 12.6
This analysis indicated an implied Citadel Communications per share value
going concern public market reference range of $13.53 to $19.11.
Comparable Acquisitions Analysis. Credit Suisse First Boston focused its
analysis on the transaction multiples paid in three merger and acquisition
transactions in the radio broadcasting industry (Capstar Broadcasting
Corporation's acquisition of SFX Broadcasting Inc.; Chancellor Media
Corporation's acquisition of Capstar Broadcasting Corporation; and Clear Channel
Communications Inc.'s acquisition of Jacor Communications Inc.) which Credit
Suisse First Boston considered to be most comparable because these acquisitions
had a predominantly middle market focus and involved public companies which had
a large portfolio of stations, had significant leverage and had aggressively
pursued consolidation.
In its analysis, Credit Suisse First Boston compared enterprise values in
the selected transaction as a multiple of estimated 2001 BCF and premiums paid
to prior stock price-one day, one week and one month
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prior to the date the transaction was announced. This analysis indicated an
implied valuation range of 13.0x to 14.5x Enterprise Value to estimated 2001 or
one year "forward" BCF. This analysis indicated an implied Citadel
Communications per share value reference range of $24.68 to $30.26.
Discounted Cash Flow Analysis. Credit Suisse First Boston considered the
present value of the stand-alone, unlevered, after-tax free broadcast cash flows
that Citadel Communications could produce over calendar years 2001 through 2005,
based on financial projections provided to Credit Suisse First Boston by the
management of Citadel Communications. Ranges of estimated terminal values were
calculated by multiplying 2006 BCF for Citadel Communications by one year
forward BCF multiples ranging from 10.5x to 11.5x. The unlevered BCFs and
terminal values were then discounted to present value using discount rates of
9.5% to 10.5%. This analysis indicated an implied Citadel Communications per
share value reference range of $25.15 to $31.19.
Other Factors. In the course of preparing its opinion, Credit Suisse First
Boston also reviewed and considered other information and data, including:
- the historical stock prices and trading characteristics of the Citadel
Communications' common stock; and
- selected research analysts' reports for Citadel Communications.
Miscellaneous. Citadel Communications has agreed to pay Credit Suisse First
Boston for its financial advisory services a transaction fee of 0.50% of the
total fair market value, at the time of the closing of the merger, of all
consideration, including cash, securities, property, all debt remaining on
Citadel Communications' financial statements at closing and other debt and
obligations assumed by FLCC Holdings and any other form of consideration to be
received by Citadel Communications or the stockholders of Citadel Communications
in the merger, subject to a minimum announcement fee of $1 million. The payment
of the transaction fee is contingent upon the consummation of the merger or any
other form of disposition that results in the effective sale of the principal
business and operations of Citadel Communications. Based upon financial
information of Citadel Communications and giving effect to the merger as
presently contemplated, Credit Suisse First Boston will be entitled to a total
fee of approximately $10 million. Citadel Communications also has agreed to
indemnify Credit Suisse First Boston and related parties against liabilities,
including liabilities under the federal securities laws, arising out of its
engagement.
Other Relationships. In the past, Credit Suisse First Boston and its
affiliates have provided financial services to Citadel Communications, Citadel
Broadcasting and certain affiliates of Forstmann Little, for which Credit Suisse
First Boston and its affiliates have received customary compensation.
Specifically, Credit Suisse First Boston is the lead arranger, administrative
agent and collateral agent under Citadel Broadcasting's current credit facility,
and, in June 1999 and February 2000, Credit Suisse First Boston acted as lead
underwriter of Citadel Communications' public offerings of common stock. In the
ordinary course of business, Credit Suisse First Boston and its affiliates may
actively trade the debt and equity securities of Citadel Communications and
certain affiliates of Forstmann Little for their own accounts and for the
accounts of their customers and, accordingly, may at any time hold a long or
short position in such securities.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of the Board of Directors to vote FOR the
approval of the merger agreement, Citadel Communications' stockholders should be
aware that certain of the officers and directors of Citadel Communications have
interests in the merger that may be different from, or in addition to, the
interests of other stockholders of Citadel Communications generally. These
interests may create conflicts of interest. These interests, summarized below,
generally relate to:
- provisions in the merger agreement regarding (a) the cashout and/or
cancellation of options held by Citadel Communications' officers and
directors and (b) the continuation of employment of Citadel
Communications' officers after completion of the merger; and
- provisions in some officers' employment agreements regarding severance
payments upon termination of employment following completion of the
merger.
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The Board of Directors was aware of these interests and considered them
among the other matters described above under the heading "Reasons for the
Merger; Recommendation of Citadel Communications' Board of Directors."
Stock Holdings. As of February 1, 2001, directors and executive officers of
Citadel Communications beneficially owned approximately 2,707,825 shares of
Citadel Communications' common stock in the aggregate, representing
approximately 7.3% of the total voting power of Citadel Communications' common
stock outstanding on that date. This calculation of beneficial ownership does
not include any shares subject to exercisable stock options held by the
directors and executive officers of Citadel Communications. See the discussion
in the Security Ownership of Certain Beneficial Owners and Management section of
this proxy statement. Upon completion of the merger, all stockholders of Citadel
Communications, including the directors and officers, will receive the $26.00
per share merger consideration for each share of Citadel Communications' common
stock that they own.
In connection with the closing of the merger, Lawrence R. Wilson, Citadel
Communications' Chairman, President and Chief Executive Officer, will receive
approximately $49.1 million for the shares of Citadel Communications' common
stock that he owns. This amount does not include any consideration that Mr.
Wilson may receive upon the closing of the merger for the shares of Citadel
Communications' common stock subject to his outstanding stock options as
discussed below under the heading "Stock Options." If Citadel Communications had
remained a stand-alone entity, Mr. Wilson would likely not have been able to
sell or transfer his entire holdings of Citadel Communications' common stock
either in the same time frame or in one transaction because of applicable sales
volume restrictions of Rule 144 under the Securities Act. The following chart
sets forth the amount of consideration that each executive officer, executive
officers as a group, each nonemployee director and executive officers and
directors as a group will receive upon completion of the merger for the shares
of Citadel Communications' common stock that they own, directly or indirectly.
SUMMARY OF MERGER CONSIDERATION TO BE RECEIVED BY
EXECUTIVE OFFICERS AND DIRECTORS FOR SHARES OWNED
CONSIDERATION
TO BE RECEIVED
NAME AND SHARES OWNED FOR SHARES OWNED
PRINCIPAL POSITION DIRECTLY OR INDIRECTLY DIRECTLY OR INDIRECTLY
------------------ ---------------------- ----------------------
Lawrence R. Wilson...................................... 1,887,546 $49,076,196
Chairman, Chief Executive Officer and President
Donna L. Heffner........................................ 125,051 $ 3,251,326
Executive Vice President, Chief Financial Officer and
Secretary
D. Robert Proffitt...................................... 156,734 $ 4,075,084
Executive Vice President
Stuart R. Stanek........................................ 84,454 $ 2,195,804
Executive Vice President
Peter J. Benedetti...................................... 3,827 $ 99,502
Executive Vice President
Kenneth M. Maness....................................... 40,800 $ 1,060,800
Executive Vice President
Wayne P. Leland......................................... 1,000 $ 26,000
Executive Vice President
Kenneth R. Benson....................................... -0- -0-
Executive Vice President
Randy L. Taylor......................................... -0- -0-
Vice President of Finance
All executive officers as a group....................... 2,299,412 $59,784,712
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CONSIDERATION
TO BE RECEIVED
NAME AND SHARES OWNED FOR SHARES OWNED
PRINCIPAL POSITION DIRECTLY OR INDIRECTLY DIRECTLY OR INDIRECTLY
------------------ ---------------------- ----------------------
Robert F. Fuller........................................ 65,000 $ 1,690,000
Director
Ike Kalangis............................................ 1,000 $ 26,000
Director
Robert G. Liggett, Jr................................... 68,000 $ 1,768,000
Director
Ted L. Snider, Sr....................................... 313,530 $ 8,151,780
Director
John E. von Schlegell................................... 41,166 $ 1,070,316
Director
All directors and executive officers as a group......... 2,788,108 $72,490,808
Stock Options. Prior to the completion of the merger, directors and
executive officers of Citadel Communications will receive cash consideration in
connection with the cash-out of certain outstanding stock options to purchase
shares of Citadel Communications' common stock. Pursuant to the merger
agreement, Citadel Communications has agreed to use its reasonable best efforts
to obtain the consent of each option holder to the conversion or cancellation of
his or her outstanding options as follows:
- immediately prior to the completion of the merger, each outstanding stock
option with an exercise price below the $26.00 per share merger
consideration will be deemed to be fully vested and converted into the
right to receive the difference between the merger consideration and the
applicable exercise price multiplied by the number of shares subject to
such option; and
- stock options that have an exercise price equal to or greater than the
$26.00 per share merger consideration will be canceled for the nominal
consideration of $10.00 in total per option holder prior to the
completion of the merger.
To date, the following executive officers of Citadel Communications have
consented to the conversion of their "in-the-money" stock options and the
cancellation of their "out-of-the-money" stock options: Lawrence R. Wilson,
Chairman, President and Chief Executive Officer; Donna L. Heffner, Vice
President, Chief Financial Officer and Secretary; D. Robert Proffitt, Executive
Vice President; Peter J. Benedetti, Executive Vice President; Stuart R. Stanek,
Executive Vice President; Kenneth H. Maness, Executive Vice President; and Wayne
P. Leland, Executive Vice President. Each non-employee director of Citadel
Communications and Randy L. Taylor, Vice President of Finance, has indicated
that he will provide such consent or consents prior to the completion of the
merger. See the discussion below under the heading "The Merger Agreement and
Related Documents" and the subheading "Treatment of Stock Options."
The following chart sets forth the amount of consideration that each
executive officer, executive officers as a group, each non-employee director and
executive officers and directors as a group will receive prior to the completion
of the merger for conversion of their in-the-money stock options and the
cancellation of their out-of-the-money stock options:
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SUMMARY OF MERGER CONSIDERATION TO BE RECEIVED BY
EXECUTIVE OFFICERS AND DIRECTORS FOR OPTIONS
CONSIDERATION CONSIDERATION
NUMBER OF TO BE RECEIVED TO BE RECEIVED
SHARES SUBJECT UPON CONVERSION UPON CANCELLATION OF
NAME AND TO IN-THE-MONEY OF IN-THE-MONEY OUT-OF-THE-MONEY
PRINCIPAL POSITION OPTIONS OPTIONS OPTIONS
------------------ --------------- --------------- --------------------
Lawrence R. Wilson......................... 663,877 $13,442,363.28 $10
Chairman, Chief Executive Officer and
President
Donna L. Heffner........................... 124,662 $ 2,514,295.02 $10
Executive Vice President, Chief Financial
Officer and Secretary
D. Robert Proffitt......................... 89,221 $ 1,637,492.25 $10
Executive Vice President
Stuart R. Stanek........................... 179,434 $ 3,966,743.44 $10
Executive Vice President
Peter J. Benedetti......................... 45,005 $ 602,450.00 $10
Executive Vice President
Kenneth M. Maness.......................... 15,000 $ 248,400.00 $10
Executive Vice President
Wayne P. Leland............................ 15,000 $ 248,400.00 $10
Executive Vice President
Kenneth R. Benson.......................... 12,500 $ 195,750.00 N/A
Executive Vice President
Randy L. Taylor............................ 10,000 $ 150,600.00 $10
Vice President of Finance
All executive officers as a group.......... 1,154,699 $23,006,493.99 $80
Robert F. Fuller........................... 5,000 $ 82,800.00 N/A
Director
Ike Kalangis............................... 5,000 $ 82,800.00 N/A
Director
Robert G. Liggett, Jr...................... 5,000 $ 82,800.00 N/A
Director
Ted L. Snider, Sr.......................... 5,000 $ 82,800.00 N/A
Director
John E. von Schlegell...................... 5,000 $ 82,800.00 N/A
Director
All directors and executive officers as a
group.................................... 1,179,699 $23,420,493.99 $80
Employment Agreements. Citadel Communications and Citadel Broadcasting have
entered into employment agreements containing severance provisions which are
applicable to termination of employment following the completion of the merger.
On June 28, 1996, Citadel Communications entered into a five-year employment
agreement with Lawrence R. Wilson for his service as Chairman, President and
Chief Executive Officer of Citadel Communications and as President and Chief
Executive Officer of Citadel Broadcasting. At the end of the initial five-year
term, the agreement is automatically renewed for a term of one year. In
accordance with the provisions of his employment agreement, however, Mr.
Wilson's employment will be automatically terminated immediately upon the
completion of the merger. As severance, Mr. Wilson or his beneficiary will be
entitled to receive his current monthly base salary through the end of the month
in which the termination occurs. See the Executive Compensation section of this
proxy statement under the heading "Employment Agreement." The parties expect,
however, that Mr. Wilson will have a continuing role with
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Citadel Communications after the completion of the merger. See the discussion
below under the heading "Continuing Officers."
On November 1, 2000, Citadel Broadcasting entered into a two-year
employment agreement with Kenneth R. Benson for his service as Executive Vice
President of Programming for Citadel Communications and Citadel Broadcasting.
Under the terms of the employment agreement, if Citadel Broadcasting were to
terminate Mr. Benson's employment upon the completion of the merger without his
consent and without just cause, Mr. Benson would be entitled to receive 12
months' base salary at the rate in effect at the time of the termination, 50% of
the maximum remaining bonuses through the term of the agreement, and immediate
vesting of all unexercised stock options. Assuming that the merger is completed
prior to November 1, 2001, and that termination of Mr. Benson's employment
occurs at that time, the cash severance payment to Mr. Benson upon termination
would be approximately $237,500. Neither Citadel Communications nor FLCC
Holdings expects the severance provisions of Mr. Benson's employment agreement
to be triggered upon the completion of the merger.
Continuing Officers. The merger agreement provides that the officers of
Citadel Communications immediately prior to the completion of the merger will
continue as the officers of Citadel Communications, the surviving corporation of
the merger, on and after the completion of the merger until their respective
successors are elected or appointed in accordance with Nevada law or until an
officer's earlier death, resignation or removal. FLCC Holdings has not entered
into an employment agreement with any current officer of Citadel Communications,
nor has it requested that any current officer of Citadel Communications enter
into an employment agreement in connection with the merger.
Directors' and Officers' Indemnification and Insurance. The merger
agreement provides that for six years after the completion of the merger the
current and former directors and officers of Citadel Communications, and each
person who becomes a director or officer of Citadel Communications prior to the
completion of the merger, will be indemnified by Citadel Communications, the
surviving corporation of the merger, to the fullest extent permitted under
applicable law, in respect of acts and omissions occurring at or prior to the
completion of the merger. In addition, Citadel Communications, as the surviving
corporation, is required to maintain in effect, for a period of six years after
the completion of the merger, directors' and officers' liability insurance in
respect of acts and omissions occurring prior to the completion of the merger,
which is no less favorable than the Citadel Communications' policies in effect
on January 15, 2001. However, in no event will Citadel Communications, as the
surviving corporation, be required to pay aggregate annual premiums for such
insurance in excess of 300% of the annual premiums that Citadel Communications
paid as of January 15, 2001.
Welfare and Benefit Plans. Under the merger agreement, FLCC Holdings has
agreed to maintain the Citadel Broadcasting Company Welfare Benefit Plan, or a
plan providing substantially comparable benefits, for a period of 12 months
after the completion of the merger. The Citadel Broadcasting Company Welfare
Benefit Plan consists of several component plans and provides medical, dental,
vision, disability and life benefits to eligible employees and officers.
Participants in the Welfare Benefit Plan pay for their share of these benefits
on a pre-tax basis through a cafeteria plan. FLCC Holdings also has agreed to
maintain the Citadel Broadcasting Company 401(k) Retirement Savings Plan, or a
plan providing substantially comparable benefits, in the 12 months after the
completion of the merger. The Citadel Broadcasting Company 401(k) Retirement
Savings Plan allows employees and officers to contribute, on a pre-tax basis, a
portion of their annual compensation to their personal retirement savings
accounts. See the discussion in the Executive Compensation section of this proxy
statement under the heading "401(k) Plan."
CERTAIN UNAUDITED FINANCIAL PROJECTIONS
In the course of its discussions with Forstmann Little described above
under the heading "Background of the Merger," Citadel Communications provided
Forstmann Little with certain projections of future performance prepared by the
management of Citadel Communications for the fiscal years 2000 through 2005. The
projections of Citadel Communications do not take into account any of the
potential effects of the transactions contemplated by the merger. The projected
financial information was not prepared with a view to public disclosure or
toward compliance with published guidelines of the Securities and Exchange
Commission
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or the guidelines established by the American Institute of Certified Public
Accountants regarding projections or forecasts and is included herein only
because such information was provided to Forstmann Little in connection with its
evaluation of a merger. Citadel Communications' independent public accountants,
KPMG LLP, have not examined, compiled or applied any procedures with respect to
this projected financial information and express no opinion or any kind of
assurance thereon. Neither Citadel Communications nor its affiliates, advisors
or representatives assumes any responsibility for the validity, reasonableness,
accuracy or completeness of this projected financial information. In general,
Citadel Communications' internal financial forecasts, upon which the projected
financial information is in part based, are prepared for internal use and
capital budgeting and other management decisions and are subjective in many
respects and thus susceptible to interpretations and assumptions, all made by
management of Citadel Communications with respect to industry performance,
general business, economic, market and financial conditions and other matters.
Moreover, the projections and assumptions on which they are based are difficult
to predict and subject to significant uncertainties and contingencies, many of
which are beyond Citadel Communications' control. Consequently, the projections
and the underlying assumptions are necessarily speculative and inherently
imprecise. Accordingly, there can be no assurance that the assumptions made in
preparing any of the projected financial information will prove accurate or that
any of the projections will be realized. It is expected that there will be
differences between actual and projected results, and actual results may be
materially greater or less than those contained in any of the projections.
Neither Citadel Communications nor its affiliates, advisors or
representatives considered or consider any of the projected financial
information to be a reliable prediction of future events, and none of the
projected financial information should be relied upon as such. Neither Citadel
Communications nor any of its affiliates, advisors or representatives has made
or makes any representations to any person regarding the ultimate performance of
Citadel Communications compared to the information contained in any of the
projections, and none of them intends to update or otherwise revise any of the
projected financial information to reflect circumstances existing after the date
when made or to reflect the occurrence of future events even in the event that
any or all of the assumptions underlying any of the projected financial
information is shown to be in error. In a side letter to the merger agreement,
FLCC Holdings and Citadel Communications acknowledged Forstmann Little's
reliance on this projected financial information, but the parties further
acknowledged that Citadel Communications made no representations or warranties
with respect to this projected financial information. The side letter, dated
January 15, 2001, is attached to this proxy statement as Annex B. Citadel
Communications' stockholders are cautioned not to place undue reliance on the
projected financial information. See the discussion in the Cautionary Statement
Regarding Forward-Looking Statements section of this proxy statement.
Set forth below is a summary of the projected financial information
prepared by Citadel Communications in January 2001 and subsequently provided to
Forstmann Little.
2000 2001 2002 2003 2004 2005
------- ------- ------- ------- ------- -------
($ IN MILLIONS)
Net Revenue............... 338,803 355,743 380,682 407,330 435,843 466,352
Growth.................... 5.0% 7.0% 7.0% 7.0% 7.0%
------- ------- ------- ------- ------- -------
Broadcast Cash Flow....... 126,537 144,672 162,299 181,726 203,105 226,787
======= ======= ======= ======= ======= =======
BCF Margin................ 37.3% 40.7% 42.6% 44.6% 46.6% 48.6%
Growth.................... 14.3% 12.2% 12.0% 11.8% 11.7%
Corporate Overhead........ 10,000 11,600 12,000 12,500 13,000 13,500
EBITDA.................... 116,537 133,072 150,299 169,226 190,105 213,287
Capital Expenditures...... 10,000 10,000 10,000 10,000 10,000 10,000
The information in the table above gives effect to completion of the
pending acquisition of five radio stations serving Tucson, Arizona, the pending
disposition of four radio stations serving Monroe, Louisiana and the assumed
disposition of 26 radio stations serving various other markets, as if each of
such transactions had occurred on January 1, 2000.
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FINANCING OF THE MERGER
The total amount of funds required to purchase all of the shares of Citadel
Communications' common stock and to cancel all in-the-money options on Citadel
Communications' common stock pursuant to the merger is approximately $994.8
million, and the total amount of funds required to repurchase or refinance
Citadel Broadcasting's subordinated notes, exchangeable preferred stock and
existing credit facility is approximately $976.2 million. In addition, it is
expected that fees and expenses related to all of these transactions will be
approximately $89.0 million.
Forstmann Little has advised Citadel Communications that approximately
$1.035 billion of the funds will be obtained from the sale by FLCC Holdings of
its common stock to FL Equity Partnerships and FL MBO Partnerships and
approximately $500 million of the funds will be obtained from the sale by FLCC
Holdings of subordinated debentures to FL MBO Partnerships. The remaining $525
million will be obtained by Citadel Broadcasting following or concurrently with
the closing of the merger from the new bank facilities described below. The
merger is not conditioned on the obtaining of financing.
The table below identifies the expected sources and uses of funds necessary
to consummate the merger:
SOURCES AND USES OF FUNDS
SOURCES (IN MILLIONS) USES (IN MILLIONS)
--------------------- ------------------
Revolving Credit Facility........ $ 75.0 Purchase of Equity............... $ 994.8
Refinance Existing Debt and
Term Loan A...................... 250.0 Preferred Stock.................. 976.2
Term Loan B...................... 200.0 Other Fees and Expenses.......... 89.0
FL MBO Subordinated Debt......... 500.0
Equity........................... 1,035.0
-------- --------
Total Sources.................... $2,060.0 Total Uses....................... $2,060.0
======== ========
On , 2001, FLCC Holdings, FLCC Acquisition, The Chase Manhattan
Bank and certain other lenders entered into a credit agreement which provides
that, when the merger is completed, Citadel Communications and Citadel
Broadcasting will become parties to the credit agreement. Under the credit
agreement, the lenders have agreed to provide an aggregate principal amount of
$650 million in revolving loans and term loans to Citadel Broadcasting, and
Citadel Broadcasting may, at its option and subject to certain conditions
specified in the credit agreement (including obtaining commitments for the
incremental facility), borrow an additional $400 million in revolving loans and
term loans to fund future acquisitions and to use for general corporate
purposes.
Under the credit agreement, Citadel Broadcasting may elect that all or a
portion of the loans bear an annual interest rate equal to (a) the highest of
(i) the prime rate, (ii) the secondary market rate for three-month certificates
of deposit plus 1% and (iii) the federal funds rate plus 1/2 of 1%, or (b) the
eurodollar rate (grossed-up for reserve requirements), in each case plus a
margin which will vary between 1/2 of 1% and 3.25% per year depending on Citadel
Broadcasting's ratio of total senior debt to consolidated EBITDA.
Subject to some conditions, all or a portion of the outstanding loans may
be prepaid at any time and the unused portion of the revolving credit facility
may be terminated in whole or in part at Citadel Broadcasting's option.
Prepayments of term loans may not be reborrowed. The loans must be prepaid (and
letters of credit cash collateralized or replaced) with the net proceeds (in
excess of $30 million) of certain asset sales and issuances of debt obligations
(other than permitted indebtedness) of Citadel Communications or any of its
subsidiaries following the merger. The net proceeds will be applied, except to
the extent the lenders agree otherwise, first to prepay term loans and then to
prepay revolving credit loans (and cash collateralize or replace outstanding
letters of credit) and simultaneously reduce the revolving credit facility.
The loans will be unconditionally guaranteed by FLCC Holdings and Citadel
Communications. The loans and all guarantees will be secured by a perfected
first priority security interest in all of the capital stock of Citadel
Communications and substantially all capital stock owned by Citadel
Communications and Citadel
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Broadcasting. In addition, the credit agreement contains a negative pledge on
the assets of Citadel Communications and Citadel Broadcasting.
The loans under the credit agreement will be conditioned on certain
customary conditions and will contain certain customary representations and
warranties, covenants and events of default.
The subordinated debentures issued to FL MBO Partnerships by FLCC Holdings
will bear interest at a rate not in excess of 8% per annum and are expected to
mature in three equal annual installments commencing on the eleventh anniversary
of issuance. These subordinated debentures will contain agreements,
subordination provisions, events of default, indemnities and certain other
provisions which are usual in institutional financings of this type.
ACCOUNTING TREATMENT
The merger will be accounted for using the purchase method of accounting
for business combinations in accordance with U.S. generally accepted accounting
principles. Purchase accounting requires that the purchase price and costs of
the acquisition be allocated to all of the assets of the acquired and
liabilities assumed, based on their relative fair values.
FEDERAL INCOME TAX CONSEQUENCES TO CITADEL COMMUNICATIONS' STOCKHOLDERS
The following summarizes the material U.S. federal income tax consequences
of the merger to holders of Citadel Communications' common stock who are U.S.
persons and hold their shares as capital assets. This summary is based upon
currently existing provisions of the Internal Revenue Code, U.S. Treasury
Regulations, current administrative pronouncements of the Internal Revenue
Service, and court decisions, all of which are subject to change. Any such
change, which may or may not be retroactive, could alter the tax consequences to
stockholders of Citadel Communications as described herein. For purposes of this
summary, a U.S. person is:
- a U.S. citizen or resident alien individual;
- a corporation, partnership or other entity (other than an estate or
trust) created or organized in or under the laws of the United States or
any state or political subdivision thereof;
- an estate the income of which is subject to U.S. federal income tax
without regard to the source; and
- a trust if a court within the United States is able to exercise primary
supervision over its administration and one or more U.S. persons have
authority to control all substantial decisions relating to the trust.
The discussion set forth below is for general information only and, thus,
does not address all the U.S. federal income tax consequences of the merger that
may be relevant to the holders of Citadel Communications' common stock based
upon their particular circumstances. Moreover, this summary does not apply to
certain categories of holders of common stock that may be subject to special tax
rules, including, but not limited to, financial institutions, tax-exempt
organizations, insurance companies, regulated investment companies, non-U.S.
persons and holders who acquired such shares pursuant to the exercise of
employee stock options or otherwise as compensation. In addition, this
discussion does not address holders who hold Citadel Communications' common
stock as part of a hedging, "straddle," conversion or other integrated
transaction, or who received common stock upon conversion of securities or
exercise of warrants or other rights to acquire common stock. Nor does this
discussion address the state, local or foreign tax consequences of the merger.
EACH HOLDER OF CITADEL COMMUNICATIONS' COMMON STOCK IS URGED TO CONSULT
WITH HIS OR HER TAX ADVISOR WITH RESPECT TO THE FEDERAL, STATE, LOCAL AND
FOREIGN TAX CONSEQUENCES OF THE MERGER.
General Federal Income Tax Consequences of the Merger. The receipt of cash
in exchange for common stock pursuant to the merger will be a taxable
transaction for U.S. federal income tax purposes. Accordingly, a stockholder who
receives cash pursuant to the merger will generally recognize taxable gain or
loss equal to the difference between the amount of cash received and the
stockholder's adjusted tax basis in the shares surrendered. The gain or loss
must be determined separately for each block of shares (that is, shares of
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common stock acquired at the same cost in a single transaction) converted to
cash in the merger. The gain or loss will be a long-term capital gain or loss
if, as of the date of the sale, such stockholder's holding period for such
shares is more than one year. In general, long-term capital gains recognized by
an individual will be subject to a maximum U.S. federal income tax rate of 20%.
Deductibility of any capital loss may be subject to various limitations under
the Internal Revenue Code and Treasury Regulations.
Backup Withholding. Unless a Citadel Communications' stockholder complies
with certain reporting or certification procedures or an exemption applies under
applicable provisions of the Internal Revenue Code and Treasury Regulations,
such stockholder may be subject to a backup withholding tax of 31% with respect
to the cash payments received pursuant to the merger. Each Citadel
Communications' stockholder should complete and sign the substitute Form W-9
included as part of the letter of transmittal to be sent to each stockholder
after completion of the merger, so as to provide the information and
certification necessary to avoid backup withholding, unless it is demonstrated
in a manner satisfactory to the paying agent that an exemption applies. A
non-U.S. Citadel Communications' stockholder should generally complete and sign
a Form W-8BEN, a copy of which may be obtained from the paying agent, to avoid
backup withholding. However, a non-U.S. Citadel Communications' stockholder that
is not an individual or a corporation may be required to provide a Form W-8IMY
as well as a Form W-8BEN or W-9 with respect to its partners, members,
beneficiaries or owners and their beneficial owners to avoid backup withholding.
Any amounts withheld will be allowed as a credit against the holder's U.S.
federal income tax liability for that year.
REGULATORY MATTERS
Antitrust Matters. The merger is subject to U.S. antitrust laws. Under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules
and regulations promulgated thereunder by the Federal Trade Commission, the
merger may not be completed until the expiration or early termination of a
30-day waiting period following the filing of pre-merger notification and report
forms by Citadel Communications and FLCC Holdings with the Department of Justice
and the Federal Trade Commission. Citadel Communications and FLCC Holdings
completed their filings under the Hart-Scott-Rodino Act on January 30, 2001, and
Forstmann Little paid the required filing fee. [The waiting period under the
Hart-Scott-Rodino Act expired on , 2001.]
Notwithstanding the expiration of the Hart-Scott-Rodino Act waiting period,
at any time before or after completion of the merger, the Federal Trade
Commission or the Antitrust Division of the Department of Justice could take any
action under the laws as it deems necessary or desirable in the public interest,
including seeking to enjoin the completion of the merger or seeking divestiture
of substantial assets of Citadel Communications or FLCC Holdings. Private
parties, including individual states, may also bring legal actions under the
antitrust laws. Neither Citadel Communications nor FLCC Holdings believes that
the consummation of the merger will result in a violation of any applicable
antitrust laws. However, there can be no assurance that a challenge to the
merger on antitrust grounds will not be made, or if such a challenge is made,
what the result will be.
FCC Licenses. The completion of the merger is conditioned on and subject to
the Federal Communications Commission's approval of the transfer of control of
Citadel Communications' broadcast licenses to FLCC Holdings. The Communications
Act of 1934, as amended, prohibits the assignment of a broadcast license or the
transfer of control of a broadcast license without the prior approval of the
FCC. Without FCC approval for the transfer of control of its broadcast licenses,
Citadel Communications will be unable to operate its radio broadcast stations
after the completion of the merger. Pursuant to the merger agreement, Citadel
Communications and FLCC Holdings have agreed to use reasonable best efforts to
obtain FCC approval.
On January 24, 2001, Citadel Communications filed, together with FLCC
Holdings, applications with the FCC to approve the transfer of control of
Citadel Communications' broadcast licenses to FLCC Holdings. Forstmann Little
paid the filing fee for the applications. On , 2001,
the FCC published a notice assigning file numbers to the applications and
advising that the applications had been accepted for filing. Under the terms of
the merger agreement, Citadel Communications and FLCC Holdings cannot close the
merger until the FCC has unconditionally granted the applications and the FCC's
grant has
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become final. In general, the FCC's grant is final when it is no longer subject
to review, reconsideration or legal proceedings disputing its validity and all
time periods within which any party may contest the grant have expired. The
following summary describes the mandatory waiting periods to which Citadel
Communications' and FLCC Holdings' applications are now subject and during which
third parties may object to the applications.
Upon the publication of the FCC's notice of acceptance of an application, a
30-day statutory waiting period begins, which provides the opportunity for third
parties to file formal petitions to deny the transaction. Third parties have the
opportunity to file informal objections at any time prior to grant of an
application. Prior to the expiration of the first 30-day statutory waiting
period, the FCC staff may review the application and seek further information
and amendments to the application if it has questions. Once the 30-day public
notice period ends, the staff will complete its processing, assuming that no
petitions or informal objections were received and that the application is
otherwise consistent with FCC rules and policies. The staff often grants the
application by delegated authority approximately 10 to 20 days after the public
notice period ends. If there is a backlog of applications or if the FCC has
concerns about market revenue concentration or multiple ownership, the
processing period can extend indefinitely. Public notice that the FCC staff has
granted an application is usually issued about a week after the grant is
actually made. On the date of this public notice, another 30-day waiting period
begins during which interested parties can file petitions seeking either staff
reconsideration or full FCC review of the staff action. During this period, the
grant can still be modified, set aside or stayed, and is not a final order.
Also, within 40 days after the public notice of the grant, the full FCC can
review and reconsider the staff's grant on its own motion. Thus, during the
additional 10 days beyond the 30-day period available to third parties, the full
FCC may still reconsider the staff's grant of the application. In the event that
review by the full FCC is requested and the FCC subsequently affirms the staff's
grant of the application, interested parties have 30 days from publication of
the full FCC's determination to seek judicial review in the United States Court
of Appeals for the District of Columbia Circuit. In the event the Court affirms
the full FCC's determination, interested parties may seek further judicial
review by obtaining a rehearing en banc from the Court of Appeals or by
certiorari from the United States Supreme Court. If no timely request for
reconsideration, administrative review or judicial review is made following the
full FCC's determination to affirm the staff's grant, the grant of an
application becomes final by operation of law. Upon the occurrence of that
event, the FCC's grant is generally no longer subject to administrative or
judicial review, although such action can nevertheless be set aside in rare
circumstances, such as fraud on the agency by a party to the application.
The approval of an application can take longer because the FCC normally
will not issue an unconditional assignment grant if a broadcast license renewal
is pending. At present, Citadel Communications has no broadcast license renewal
pending before the FCC.
Citadel Communications and FLCC Holdings expect that their applications
will be granted and that the grant of the applications will become final during
the second half of 2001. However, there can be no assurance that the FCC review
process will not take much longer or that the FCC or third parties will not
object to the applications.
Corporate Matters. On or before the closing of the merger, Citadel
Communications and FLCC Acquisition must file articles of merger with the
Secretary of State of Nevada as required by Nevada Revised Statutes sec.
92A.200. The merger agreement provides that the merger will become effective at
the date and time of the filing of the articles of merger, or at a later time if
so specified in the articles of merger.
DELISTING AND DEREGISTRATION OF CITADEL COMMUNICATIONS' COMMON STOCK FOLLOWING
THE MERGER
Upon completion of the merger, the shares of Citadel Communications' common
stock will be delisted from the National Market System of The Nasdaq Stock
Market, and will be deregistered under the Securities Exchange Act of 1934, as
amended. After the merger, the current stockholders of Citadel Communications
will no longer have any ownership interest in Citadel Communications and will no
longer participate in any future earnings and growth of Citadel Communications.
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STOCKHOLDER LITIGATION
In January 2001, four lawsuits were filed against Citadel Communications in
the District Court of Clark County, Nevada. On January 17 and 19, 2001, two
purported class actions were filed, naming Citadel Communications, certain
members of the Board of Directors, and unidentified individuals and corporations
as defendants. Plaintiffs allege, among other things, that the defendant
directors have breached their fiduciary duties to the stockholders of Citadel
Communications and seek certification as class actions. The complaints demand
various forms of relief, including injunctive relief to prevent the closing of
the merger. Another purported class action was filed on January 17, 2001 naming
as defendants Citadel Communications, certain directors of Citadel
Communications, FLCC Holdings, FLCC Acquisition and Forstmann Little. This
complaint alleges, among other things, that the defendant directors have
breached their fiduciary duties to Citadel Communications' stockholders and that
the closing of the merger would irreparably harm plaintiff and members of the
purported class. The relief sought is similar to that requested in the two
complaints described above. On January 18, 2001, a fourth complaint was filed.
This purported class action names Citadel Communications and certain directors
as defendants and alleges defendants' breach of fiduciary duty to Citadel
Communications' stockholders. The various forms of relief demanded in this
complaint are comparable to the forms of relief sought in the other three
complaints described above. Citadel Communications, Forstmann Little and the
other defendants believe that the allegations in these complaints are without
merit and intend to defend themselves vigorously.
DISSENTERS' RIGHTS
Under Nevada law, Citadel Communications' stockholders who object to the
merger do not have appraisal or dissenters' rights in connection with the
merger. Nevada Revised Statutes sec. 92A.390 provides, in relevant part, that
stockholders of any class of stock included in the National Market System by the
National Association of Securities Dealers, Inc. (Nasdaq) have no right of
dissent if they are offered cash in exchange for their shares under a plan of
merger. This statute applies to Citadel Communications' stockholders in
connection with the merger because Citadel Communications' common stock is
currently included on the National Market System of The Nasdaq Stock Market and
because stockholders will receive cash consideration in exchange for their
shares of Citadel Communications' common stock under the merger agreement.
THE MERGER AGREEMENT AND RELATED DOCUMENTS
This section of the proxy statement describes material aspects of the
merger agreement. This summary does not purport to describe all of the terms of
the merger agreement. Stockholders of Citadel Communications should read the
entire merger agreement and the related documents carefully and in their
entirety for a more complete understanding of the merger and its terms. The
discussion in this proxy statement of the merger and the principal terms of the
merger agreement is subject to, and qualified in its entirety by reference to,
the merger agreement and the related side letter and guarantee, copies of which
are attached to this proxy statement as Annex A, B and C, respectively. Approval
of the merger agreement appears as Proposal 1 on the enclosed proxy card.
GENERAL
Pursuant to the merger agreement, FLCC Acquisition, a Nevada corporation
wholly owned by FLCC Holdings, will merge with and into Citadel Communications,
with Citadel Communications surviving as a subsidiary of FLCC Holdings after the
merger. The merger will become effective upon the filing of the articles of
merger with the Secretary of State of the State of Nevada or at a later time if
so specified in the articles of merger. The merger is expected to become
effective on the same day as the closing of the merger, which will take place
either as soon as practicable (but in no event later than five business days)
after the conditions described in the merger agreement have been satisfied or
waived or on another date agreed upon by Citadel Communications and FLCC
Holdings.
In the merger, each share of Citadel Communications' common stock
outstanding immediately before the merger, other than treasury shares and shares
of Citadel Communications' common stock owned by FLCC Holdings or its
subsidiaries, will be converted into the right to receive the merger
consideration of $26.00 in
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cash, without interest or any other payment. At that time, each holder of a
certificate representing any shares of Citadel Communications' common stock will
no longer have any rights with respect to those shares, except for the right to
receive the merger consideration. FLCC Holdings has represented that neither it
nor any of its affiliates beneficially own any shares of Citadel Communications'
common stock and has agreed that it will not, and will not allow any of its
affiliates, to beneficially acquire any shares of common stock prior to the
merger.
TREATMENT OF STOCK OPTIONS
Pursuant to the merger agreement, Citadel Communications agreed to use its
reasonable best efforts to cause each option to purchase shares of Citadel
Communications' common stock:
- with an exercise price per share equal to or greater than $26.00 to be
irrevocably cancelled in exchange for nominal consideration; and
- with an exercise price per share less than $26.00 to be fully vested and
converted immediately prior to the effective time of the merger into the
right to receive an amount of cash (less any applicable taxes withheld by
FLCC Holdings in accordance with federal, state, local or foreign tax
law), without interest, equal to (a) the excess of $26.00 per share over
the exercise price per share of the option multiplied by (b) the number
of shares of Citadel Communications' common stock subject to the option
immediately prior to the merger.
Citadel Communications must obtain the consent of each optionee for the
cancellation or conversion of his or her options. Citadel Communications agreed
to use reasonable best efforts to obtain these consents, but obtaining such
consents (with the exception of certain consents of management which have
previously been obtained) is not a condition to consummation of the merger. FLCC
Holdings agreed to cause Citadel Communications to pay any amounts due to
optionees under the merger agreement as promptly as practicable after the
merger.
PAYMENT FOR SHARES OF CITADEL COMMUNICATIONS' COMMON STOCK
Pursuant to the merger agreement, FLCC Holdings agreed to appoint an agent
reasonably acceptable to Citadel Communications to act as paying agent for the
payment of the merger consideration. Prior to or concurrently with the merger,
FLCC Holdings will deposit with the paying agent funds necessary to pay the
merger consideration. Two affiliates of FLCC Holdings, Forstmann Little & Co.
Subordinated Debt and Equity Management Buyout Partnership-VII, L.P. and
Forstmann Little & Co. Equity Partnership-VI, L.P., signed a guarantee on
January 15, 2001 in which they agreed to cause FLCC Holdings to perform its
obligations under the merger agreement, including FLCC Holdings' obligation to
provide funds to pay the merger consideration and amounts due to optionees under
the merger agreement. The guarantee terminates at the closing of the merger. The
guarantee is attached to this proxy statement as Annex C.
Promptly after the merger, each record holder of shares of Citadel
Communications' common stock at the time of the merger will be mailed a letter
of transmittal and instructions to exchange his or her stock certificates for
the merger consideration. After delivering to the paying agent certificates
formerly representing Citadel Communications' common stock together with a
properly completed letter of transmittal, holders of these surrendered
certificates will be entitled to receive a cash payment in an amount equal to
the number of shares formerly represented by the certificate(s) they surrendered
multiplied by $26.00 (less any applicable taxes withheld by FLCC Holdings in
accordance with federal, state, local or foreign tax law). No interest will
accrue or will be paid on the cash payable upon the surrender of any
certificate. In the event that any Citadel Communications' stockholder's
certificate has been lost, stolen or destroyed, the stockholder must execute an
affidavit of that fact and, if required by FLCC Holdings, post a bond in a
reasonable amount to indemnify FLCC Holdings against any claim that may be made
against it with respect to the lost, stolen or destroyed certificate before FLCC
Holdings will pay the merger consideration, or cause the merger consideration to
be paid, to the stockholder.
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REPRESENTATIONS AND WARRANTIES
The merger agreement contains a number of customary representations and
warranties made by Citadel Communications relating to, among other things:
- due organization, good standing and qualification to do business;
- capitalization;
- equity interests in any other companies or entities;
- corporate authority to enter into the transactions contemplated by the
merger agreement;
- the requisite actions of Citadel Communications' Board of Directors and
stockholders to consummate the merger and other transactions contemplated
under the merger agreement;
- the absence of a stockholder rights plan;
- governmental approvals required in connection with the merger;
- the absence of conflicts between the merger and other transactions
contemplated by the merger agreement and Citadel Communications'
corporate governance documents, material contracts of Citadel
Communications and applicable laws;
- the accuracy of Citadel Communications' and Citadel Broadcasting's
filings with the Securities and Exchange Commission;
- the absence of material litigation and liabilities;
- the accuracy of financial statements;
- the absence of certain changes or events since September 30, 2000;
- related party transactions;
- compliance with certain laws and permits;
- Citadel Communications' employment in connection with the merger of no
broker or finder or investment banker, other than Credit Suisse First
Boston;
- material contracts;
- employee benefit plans;
- taxes and tax returns;
- Citadel Communications' Board of Directors' receipt of a fairness
opinion;
- inapplicability of certain takeover statutes under Nevada law to the
merger and other transactions contemplated by the merger agreement;
- compliance with the terms of broadcast licenses issued by the FCC and the
operation of licensed facilities;
- intellectual property;
- environmental matters; and
- property owned by Citadel Communications.
The merger agreement also contains several customary representations and
warranties made by FLCC Holdings on its own behalf and on behalf of FLCC
Acquisition relating to, among other things:
- due organization, good standing and qualification to do business;
- corporate authority to enter into the transactions contemplated by the
merger agreement;
- governmental approvals required in connection with the merger;
- the absence of conflicts between the merger and other transactions
contemplated by the merger agreement and FLCC Holdings' and FLCC
Acquisition's corporate governance documents and applicable laws;
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- financing of the merger and other transactions contemplated by the merger
agreement;
- qualification under certain FCC laws, rules, regulations and policies;
and
- the absence of ownership of Citadel Communications' common stock.
None of the representations and warranties made by either party in the
merger agreement will survive after the closing of the merger.
CONDUCT OF BUSINESS PENDING THE MERGER
Until the merger becomes effective, Citadel Communications agreed to, and
to cause its subsidiary, Citadel Broadcasting, to:
- conduct its business in the ordinary course and consistent with past
practice;
- maintain the validity of its FCC licenses and comply in all material
respects with the requirements of its FCC licenses and applicable laws,
rules and regulations of the FCC; and
- use its reasonable best efforts to preserve intact its business
organizations, keep available the services of its respective officers,
agents and employees and maintain satisfactory relationships with all
persons with whom it does business.
Until the merger becomes effective, Citadel Communications also agreed that
neither it nor Citadel Broadcasting would take any of the following actions
without the prior written consent of FLCC Holdings, subject, in some cases, to
specified exceptions:
- amend its corporate governance documents;
- issue or otherwise dispose of capital stock or other securities or rights
to acquire capital stock or other securities of Citadel Communications or
any subsidiary, other than issuing Citadel Communications' common stock
upon the exercise of stock options outstanding as of January 15, 2001;
- split, combine or reclassify any shares of its capital stock or declare,
pay or set aside any dividend or other distribution in respect of its
capital stock;
- create, incur or assume any debt or become liable or responsible for the
obligations of any person, except refinancing of existing debt on market
terms;
- make any capital expenditures or any loans, advances or capital
contributions to, or investments in, any other person other than ordinary
course capital expenditures in accordance in all material respects with
Citadel Communications' current capital budget;
- acquire certain businesses or assets;
- sell or otherwise dispose of any assets or properties other than in the
ordinary course of business;
- increase in any material respect the compensation of any of its officers
or employees or enter into, establish, amend or terminate any employment
or other employee benefit agreement or plan other than in the ordinary
course of business;
- enter into or amend any material lease of real property other than in the
ordinary course of business;
- make or rescind any election relating to Citadel Communications' taxes;
- settle or compromise any material tax liability or agree to an extension
of a statute of limitations with respect to the assessment or
determination of taxes;
- file any amended tax return or any claim for refund of taxes paid;
- prepare, file, take any position on or make any election on any tax
return inconsistent with past practice;
- amend, terminate or fail to renew any, or waive, release or assign any,
material rights or claims under any material contract;
- make any material change to its accounting methods, principles or
practices;
- fail to maintain its material assets;
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- pay, discharge, or satisfy any material claim, liabilities, or
obligations, other than in the ordinary course of business consistent
with past practice, or fail to pay or satisfy any material accounts
payable, liabilities, or obligations when they are due;
- enter into any local marketing agreement, time brokerage agreement or
joint sale agreement or any non-compete agreement whereby Citadel
Communications or its subsidiary agrees not to compete;
- enter into material contracts other than in the ordinary course of
business;
- adopt a stockholder rights plan or any similar plan that would impair or
delay the merger;
- waive any of its rights under, or release any other party's obligations
under, or amend any provision of, any standstill agreement; or
- authorize, or commit or agree to take, any of the foregoing actions.
Citadel Communications further agreed, unless FLCC Holdings otherwise
consents in writing, to use reasonable best efforts to comply in all material
respects with all laws applicable to it or any of its properties, assets or
business and to maintain in full force and effect all permits necessary for its
business.
COVENANTS OF BOTH PARTIES
Each of Citadel Communications and FLCC Holdings agreed to:
- provide the other party with notification upon the occurrence of certain
events;
- use reasonable best efforts to take all actions necessary, proper or
advisable to consummate the merger;
- not make any public announcements with respect to the merger without the
consent of the other party;
- comply in all material respects with all applicable laws in consummating
the merger; and
- cooperate and promptly prepare, and Citadel Communications agreed to file
with the Securities and Exchange Commission as soon as practicable, a
proxy statement with respect to the meeting of stockholders for the
purpose of approving the merger agreement.
OTHER COVENANTS OF CITADEL COMMUNICATIONS
Citadel Communications further agreed to, and to cause its subsidiary
Citadel Broadcasting to:
- provide FLCC Holdings and its advisors with access to certain persons,
records and information;
- take necessary steps to duly call, give notice of, convene and hold a
meeting of Citadel Communications' stockholders for the purpose of
approving the merger agreement;
- not make any discretionary award or grant under any benefit plan;
- not take any action to accelerate the vesting of any warrants or options
previously granted pursuant to any benefit plan, except as required by
the terms thereof;
- not make any amendment to any benefit plan or any awards thereunder;
- provide FLCC Holdings with copies of all public reports and materials
when Citadel Communications sends the reports and materials to Citadel
Communications' stockholders, the Securities and Exchange Commission or
any state or foreign securities commission; and
- grant any approvals and take any other actions necessary to eliminate or
minimize the effects of any takeover statute on the merger.
In addition, Citadel Communications agreed to cause Citadel Broadcasting,
after Citadel Communications' stockholders have approved the merger agreement
and if required by FLCC Holdings, to make an offer to purchase all of Citadel
Broadcasting's outstanding subordinated notes and to solicit, from at least a
majority of the holders, consents to amend the indentures relating to the
subordinated notes. Citadel Communications further agreed to cause Citadel
Broadcasting, after Citadel Communications' stockholders have approved the
merger agreement and if required by FLCC Holdings, to make an offer to redeem
all of Citadel Broadcasting's outstanding exchangeable preferred stock and to
solicit, from at least a majority of the
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holders, consents to amend the terms of the exchangeable preferred stock. The
offers and solicitations will be on terms determined by FLCC Holdings and at
FLCC Holdings' expense. However, Citadel Broadcasting will not be required to
repurchase any subordinated notes or exchangeable preferred stock, and no such
amendment will be effective, in each case unless the merger is completed or is
simultaneously completed. Acceptance of the offers and approval of the
amendments are not conditions to the completion of the merger.
OTHER COVENANTS OF FLCC HOLDINGS
FLCC Holdings further agreed to:
- after the effectiveness of the merger, cause Citadel Communications to
indemnify, to the fullest extent permissible under applicable law, the
present and former officers and directors of Citadel Communications in
respect of acts or omissions by them in their capacities as such
occurring at or prior to the merger and, for a period of six years
following the merger, to maintain certain levels of directors' and
officers' liability insurance in respect of acts or omissions occurring
prior to the merger;
- form FLCC Acquisition and cause FLCC Acquisition to take all actions
required on its part to consummate the merger;
- not beneficially acquire, or allow any of its affiliates to beneficially
acquire, prior to the merger, any shares of Citadel Communications'
common stock; and
- for a period of 12 months after the merger, maintain the employee pension
and welfare benefit plans maintained by Citadel Broadcasting immediately
prior to the merger or substantially comparable plans.
NO SOLICITATION
Upon signing the merger agreement, Citadel Communications agreed that it,
Citadel Broadcasting and their respective officers, directors, employees,
agents, affiliates, accountants, counsel, investment bankers, financial advisors
or other representatives would immediately terminate any existing discussions
and negotiations involving any inquiry, proposal or offer from any person
involving:
- any direct or indirect acquisition of a business that constitutes 50% or
more of the net revenues, net income or assets of Citadel Communications
and Citadel Broadcasting, or 50% or more of the common stock or voting
power of Citadel Communications or Citadel Broadcasting;
- any tender offer or exchange offer that if consummated would result in
any person beneficially owning 50% or more of the common stock or voting
power of Citadel Communications or Citadel Broadcasting; or
- any merger, recapitalization, liquidation or similar transaction
involving Citadel Communications or Citadel Broadcasting that constitutes
50% or more of the net revenues, net income or assets of Citadel
Communications and Citadel Broadcasting.
Under the merger agreement, such an inquiry, proposal or offer is referred
to as a "takeover proposal," and a transaction in connection with such a
takeover proposal is referred to as an "acquisition transaction."
Citadel Communications also agreed that it, Citadel Broadcasting and their
respective officers, directors, employees, agents, affiliates, accountants,
counsel, investment bankers, financial advisors or other representatives, will
not:
- directly or indirectly, initiate, solicit or encourage, or take any
action to facilitate the making of, any takeover proposal; or
- directly or indirectly, engage in any discussions or negotiations with,
or provide any information or data to, or afford any access to the
properties, books or records of Citadel Communications or Citadel
Broadcasting to, or otherwise assist, facilitate or encourage, any person
relating to any takeover proposal.
However, at any time prior to the annual meeting of stockholders, Citadel
Communications may, under certain circumstances, take steps to respond to an
unsolicited "superior proposal." As defined in the merger agreement, a "superior
proposal" is any written proposal made by a third party to acquire, for cash
and/or securities, more than 50% of the combined voting power of Citadel
Communications' common stock then
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outstanding or more than 50% of the assets of Citadel Communications and Citadel
Broadcasting, with respect to which:
- Citadel Communications' Board of Directors determines, in its good faith
judgment, based on the advice of a financial advisor and other matters
deemed relevant by the Board of Directors, which must include the
likelihood of consummation, taking into account the advice of FCC
counsel, and the trading market and liquidity of any securities offered
in connection with the superior proposal, that the terms of the proposal
are more favorable to Citadel Communications' stockholders from a
financial point of view than the terms of the merger; and
- if the proposal (1) is subject to a financing condition or (2) involves
consideration that is not entirely cash or does not permit stockholders
to receive the payment of the offered consideration in respect of all
shares at the same time, the Board of Directors has been furnished with a
written opinion of a financial advisor to the effect that, in the case of
clause (1), the proposal is readily financeable and, in the case of
clause (2), the proposal provides a higher value per share than the
consideration per share pursuant to the merger.
Specifically, Citadel Communications may, in response to an unsolicited
superior proposal, and subject to providing prior written notice to FLCC
Holdings, furnish pursuant to a customary confidentiality agreement information
regarding Citadel Communications or Citadel Broadcasting to any person making a
superior proposal, and participate in discussions and negotiations regarding the
superior proposal, but in each case only if Citadel Communications' Board of
Directors determines, after consulting with its outside counsel, that not
furnishing the information or participating in the discussions or negotiations
would be inconsistent with its fiduciary duties to stockholders. [However, the
time period during which Citadel Communications may accept a superior proposal
and terminate the merger agreement expired on March 17, 2001.]
Citadel Communications also has agreed to promptly advise FLCC Holdings of
any takeover proposal and keep FLCC Holdings fully informed of the status and
material terms of any takeover proposal.
Citadel Communications further agreed that its Board of Directors will not:
- withdraw or modify or propose to withdraw or modify, in a manner adverse
to FLCC Holdings, its approval or recommendation of the merger or the
merger agreement;
- approve any letter of intent, agreement in principle, acquisition
agreement or similar agreement relating to a takeover proposal; or
- approve or recommend, or propose to approve or recommend, any takeover
proposal.
[However, prior to March 17, 2001, in response to an unsolicited superior
proposal, Citadel Communications' Board of Directors had the right to terminate
the merger agreement and enter into an acquisition agreement with respect to a
superior proposal, but only if:
- the Board of Directors determined, after consultation with its outside
counsel, that failure to terminate the merger agreement and accept the
superior proposal would be inconsistent with its fiduciary duties to
stockholders; and
- the Board of Directors delivered to FLCC Holdings, prior to March 17,
2001, (1) written notice of its intent to terminate the merger agreement
and accept the superior proposal, (2) a copy of the related acquisition
agreement and (3) a description of any terms of the proposal not
contained in the acquisition agreement.]
[If the Board of Directors had exercised this right, it could not have
terminated the merger agreement and entered into another acquisition agreement
until the fifth business day after it delivered such written notice to FLCC
Holdings. If during the five business days FLCC Holdings had informed Citadel
Communications that it would make an alternative proposal, the Board of
Directors would have been required to establish a bidding procedure where FLCC
Holdings and the person making the superior proposal would have an opportunity
to make their respective bids to the Board of Directors. Pursuant to the merger
agreement, Citadel Communications would have been required to accept FLCC
Holding's offer unless the Board of Directors determined that the competing bid
was more favorable to Citadel Communications' stockholders than the merger from
a financial point of view, taking into account the likelihood of
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consummation of the transaction, the advice of FCC counsel, and the trading
market and liquidity of any securities offered in connection with the superior
proposal.]
[Citadel Communications would have been required to pay a termination fee
of $20 million and up to $10 million for certain out-of-pocket expenses of
Forstmann Little and its affiliates incurred in connection with the merger if
the Board of Directors, as required by its fiduciary duties, had terminated the
merger agreement and subsequently caused Citadel Communications to enter into an
acquisition agreement.]
CONDITIONS TO THE MERGER
Conditions to Each Party's Obligations. Citadel Communications and FLCC
Holdings are required to complete the merger only if the following conditions
are satisfied:
- Citadel Communications' stockholders approve the merger agreement;
- no law, order, judgment or injunction has been enacted, entered or
enforced which prohibits or prevents the merger;
- the FCC has consented to the transfer of control of Citadel
Communications' broadcast licenses without imposing any conditions or
limitations other than those which would not have a material adverse
effect on Citadel Communications, and the FCC's consent has become a
final order; and
- all other necessary consents, approvals, notices and filings with
governmental authorities have been obtained or made other than those, the
failure of which to obtain or make, would not have a material adverse
effect on Citadel Communications.
Conditions to Citadel Communications' Obligations. Citadel Communications
is required to complete the merger only if the following conditions are
satisfied:
- the representations and warranties of FLCC Holdings are materially true
and correct;
- FLCC Holdings materially complies with all material covenants and
agreements required by the merger agreement;
- no event has occurred which materially adversely affects the ability of
FLCC Holdings or FLCC Acquisition to perform their obligations under the
merger agreement or timely consummate the merger; and
- Citadel Communications receives a certificate from the chief executive
officer of FLCC Holdings stating that the aforementioned conditions have
been satisfied.
Conditions to FLCC Holdings' Obligations. FLCC Holdings is required to
complete the merger only if the following conditions are satisfied:
- the representations and warranties of Citadel Communications are
materially true and correct;
- Citadel Communications has materially complied with all material
covenants and agreements required by the merger agreement;
- no event has occurred which constitutes a "material adverse effect" on
Citadel Communications;
- FLCC Holdings has received a certificate from the chief executive officer
of Citadel Communications stating that the aforementioned conditions have
been satisfied; and
- FLCC Holdings has received an opinion from Citadel Communications' FCC
counsel in substantially the form attached to the merger agreement.
A "material adverse effect" on Citadel Communications means any change,
effect, circumstance or event that is or is reasonably likely to:
- be materially adverse to the business, results of operations, financial
condition or prospects of Citadel Communications and Citadel Broadcasting
taken as a whole, other than any change, effect, circumstance or event
relating to or resulting from (1) general changes in the radio industry
or the advertising markets, (2) changes in general economic conditions or
securities markets in general or (3) the merger agreement or its
announcement; or
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- materially adversely affect the ability of Citadel Communications to
perform its obligations under the merger agreement or timely complete the
transactions contemplated by the merger agreement.
With respect to Citadel Communications' prospects, FLCC Holdings
acknowledged in a side letter to the merger agreement that, in evaluating
whether to enter into the merger agreement, it relied only upon Citadel
Communications' base case projections. While acknowledging FLCC Holdings'
reliance on the base case projections, the parties also acknowledged that
Citadel Communications did not make any representations or warranties with
respect to such projections. See the discussion above under the heading "Certain
Unaudited Financial Statements." The side letter, dated January 15, 2001, is
attached to this proxy statement as Annex B.
TERMINATION AND THE EFFECTS OF TERMINATION
Termination by Either Party. Citadel Communications and FLCC Holdings may
terminate the merger agreement at any time:
- by mutual consent of Citadel Communications and FLCC Holdings;
- by either Citadel Communications or FLCC Holdings if there is any final
and nonappealable ruling or other action by any court, arbitrator or
governmental authority preventing or prohibiting completion of the
merger, so long as the party seeking termination has used its reasonable
best efforts to have the merger approved;
- by either Citadel Communications or FLCC Holdings if the merger is not
completed by January 16, 2002, so long as the party seeking termination
has not failed to perform and observe its covenants and agreements in all
material respects; or
- by either Citadel Communications or FLCC Holdings if the merger was not
approved by Citadel Communications' stockholders, so long as the party
seeking termination has not failed to fulfill any of its obligations and
thereby prevented or impeded such approval.
Termination by Citadel Communications. Citadel Communications may terminate
the merger agreement at any time if FLCC Holdings breaches the merger agreement
and does not cure the breach within 30 days of Citadel Communications notifying
FLCC Holdings of the breach, so long as Citadel Communications is also not in
material breach of the merger agreement. Citadel Communications could have
terminated the merger agreement if, prior to March 17, 2001, it had accepted a
superior proposal in accordance with the merger agreement as discussed above
under the heading "No Solicitation."
Termination by FLCC Holdings. FLCC Holdings may terminate the merger
agreement at any time:
- if Citadel Communications breaches the merger agreement and does not cure
the breach within 30 days of FLCC Holdings notifying Citadel
Communications of the breach, so long as FLCC Holdings is also not in
material breach of the merger agreement;
- if Citadel Communications' Board of Directors modifies or withdraws its
recommendation of the merger and merger agreement in a manner adverse to
FLCC Holdings or FLCC Acquisition; or
- if, as discussed in the January 15, 2001 side letter attached to this
proxy statement as Annex B, in connection with any changes in FCC rules
or policies adopted in connection with the FCC proceeding captioned In
the Matter of Definition of Radio Markets, MM Docket No. 00-244, NOTICE
OF PROPOSED RULE MAKING (Released December 13, 2000) or any related
proceeding, Citadel Communications and Citadel Broadcasting divest, agree
to divest or are required to divest any of their radio stations licensed
by the FCC, (other than divestitures which Citadel Communications has
already notified FLCC Holdings are being or may be made), that, in the
aggregate, contributed $14 million or more to the consolidated broadcast
cash flow of Citadel Communications for the 12-month period immediately
preceding the divestitures.
Termination Fee Payable by Citadel Communications. At the times specified
in the merger agreement, Citadel Communications will pay to Forstmann Little and
its affiliates $20 million plus up to $10 million for out-of-pocket expenses
incurred in connection with the merger and merger agreement, in each case if the
merger agreement is terminated in one of the following ways:
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- by Citadel Communications or FLCC Holdings because the merger was not
approved by Citadel Communications' stockholders and (a) before the
meeting of Citadel Communications' stockholders, a takeover proposal was
publicly announced, and (b) within 12 months of termination, Citadel
Communications enters into an acquisition transaction;
- by FLCC Holdings in connection with a willful and material breach by
Citadel Communications of its representations, warranties, covenants or
agreements and, within 12 months of termination, Citadel Communications
enters into an acquisition transaction; or
- by FLCC Holdings because Citadel Communications' Board of Directors
modified or withdrew its recommendation of the merger and merger
agreement in a manner adverse to FLCC Holdings.
[In addition, if prior to March 17, 2001, Citadel Communications had
terminated the merger in connection with its acceptance of a superior proposal
as discussed above under the heading "No Solicitation," Citadel Communications
would have been required to pay the same termination fee and expenses to
Forstmann Little and its affiliates.]
EXPENSES
Except as described above or elsewhere in this proxy statement, all costs
and expenses related to the merger will be paid by the party incurring the
expense.
AMENDMENT AND WAIVER
Citadel Communications, FLCC Holdings and FLCC Acquisition may amend or
otherwise modify the merger agreement by written agreement prior to completion
of the merger, but, after Citadel Communications' stockholders have approved the
merger agreement, no amendment may be made, which by law requires further
stockholder approval, without stockholder approval being obtained.
Any provision of the merger agreement may be waived prior to the merger
being completed, but only if the waiver is in writing and signed by the party
against whom the waiver is to be effective.
ELECTION OF DIRECTORS
(PROPOSAL 2 ON THE ENCLOSED PROXY CARD)
The Board of Directors of Citadel Communications currently consists of six
members, five of whom are non-employee directors. The Chairman, President and
Chief Executive Officer of Citadel Communications, Lawrence R. Wilson, is a
member of the Board. All directors are elected for a one-year term and hold
office until the next annual meeting of stockholders following election and
until their successors are duly elected and qualified. All officers serve at the
discretion of the Board and are elected by the Board each year. There are no
family relationships among Citadel Communications' directors and executive
officers.
Pursuant to the merger agreement, upon completion of the merger, the
directors of Citadel Communications will be automatically removed and replaced
by the directors of FLCC Acquisition.
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The persons named below have been designated by the Board of Directors as
nominees for election as directors, for terms expiring at the 2002 Annual
Meeting of Stockholders or until completion of the merger, if earlier. All
nominees currently serve as directors of Citadel Communications.
NAME AGE BACKGROUND INFORMATION
---- --- ----------------------
Lawrence R. Wilson............. 55 Co-founded and was a general partner of Citadel
Communications' predecessor, Citadel Associates Limited
Partnership and Citadel Associates Montana Limited
Partnership, from 1984 to July 1992 and has been the Chief
Executive Officer, President and Chairman of Citadel
Communications since it was incorporated in 1993 and Chief
Executive Officer and Chairman of Citadel Broadcasting
Company, the operating subsidiary of Citadel Communications,
since it was incorporated in 1991. Mr. Wilson also served as
President of Citadel Broadcasting from 1991 to October 1998.
From 1974 to 1979, Mr. Wilson was Executive Vice President
and General Counsel of Combined Communications Corporation,
a national media company, where he handled all acquisitions
and mergers and oversaw the broadcast, newspaper and outdoor
billboard divisions as a part of a five person management
committee. From 1979 to 1986, he was engaged in the private
practice of law
Robert F. Fuller............... 60 Became a director of Citadel Communications and Citadel
Broadcasting in November 1999. From 1975 to 1999, he was the
President and majority owner of Fuller-Jeffrey Broadcasting
Companies, Inc., a ten station radio group purchased by
Citadel Broadcasting in August 1999. Mr. Fuller brings over
43 years of radio broadcast experience to Citadel
Communications, ranging from on-air and management positions
to ownership of over 30 radio stations
Ike Kalangis................... 63 Became a director of Citadel Communications and Citadel
Broadcasting in May 1999. Mr. Kalangis has over 30 years'
experience in the banking industry, most recently, from 1989
until his retirement in 1997, as Chairman, President and
Chief Executive Officer of Boatman's Sunwest, Inc., a bank
holding company with community banks in New Mexico and
Texas, which is now a part of Bank of America
Robert G. Liggett, Jr.......... 58 Became a director of Citadel Communications and Citadel
Broadcasting in August 2000 following Citadel Broadcasting's
August 2000 acquisition of substantially all of the assets
of Liggett Broadcasting, Inc. and related entities. Mr.
Liggett founded Liggett Broadcasting in 1970 and was its
sole stockholder. Liggett Broadcasting and related entities
owned seven FM radio stations and two AM radio stations and
operated an additional AM radio station under a time
brokerage agreement
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NAME AGE BACKGROUND INFORMATION
---- --- ----------------------
Ted L. Snider, Sr.............. 72 Became a director of Citadel Communications and Citadel
Broadcasting in November 1997 following Citadel
Broadcasting's October 1997 acquisition of Snider
Corporation. Mr. Snider had been Chairman of Snider
Corporation since its incorporation in 1971. Snider
Corporation owned two FM and two AM radio stations, the
right to construct an additional FM radio station and the
Arkansas Radio Network
John E. von Schlegell.......... 46 Has served as a member of the Board of Directors of Citadel
Communications and Citadel Broadcasting since January 1997.
He co-founded and, since 1991, has managed, The Endeavour
Capital Fund Limited Partnership, a firm that invests equity
capital in privately held businesses throughout the
northwest. Prior to 1991, Mr. von Schlegell was a general
partner at Golder, Thomas & Cressey, a private equity firm
based in Chicago
Three of the six persons presently constituting the Board of Directors of
Citadel Communications were elected under the terms of a Fourth Amended and
Restated Voting Agreement dated as of October 15, 1997, by and among Citadel
Communications, the voting trustee under an Amended and Restated Voting Trust
Agreement dated October 15, 1997 and certain other stockholders of Citadel
Communications. In connection with Citadel Communications' initial public
offering in July 1998, the Fourth Amended and Restated Voting Agreement and a
related stockholders agreement among Citadel Communications and certain of its
stockholders were terminated. The Amended and Restated Voting Trust Agreement
was terminated during 2000. Robert G. Liggett, Jr. was originally appointed as a
director of Citadel Communications and Citadel Broadcasting in August 2000 in
accordance with the terms of the Asset Purchase Agreement pursuant to which
Citadel Broadcasting purchased various radio stations and related assets from
Liggett Broadcast, Inc. and certain related entities.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
THE ELECTION OF THE ABOVE NAMED NOMINEES
If you do not wish your shares to be voted for particular nominees, you may
so indicate on the proxy card. If, for any reason, any of the nominees shall
become unavailable for election, the individuals named in the enclosed proxy
card may exercise their discretion to vote for any substitutes proposed by the
Board of Directors, unless the Board of Directors should decide to reduce the
number of directors to be elected at the annual meeting. At this time, the Board
of Directors knows of no reason why any nominee might be unavailable to serve.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The business affairs of Citadel Communications are managed under the
direction of the Board of Directors. During 2000, Citadel Communications' Board
of Directors held seven meetings and took action by unanimous written consent in
lieu of meetings ten times.
The Board of Directors has established two committees, the Audit Committee
and the Compensation Committee. The Board has no standing nominating committee.
The Audit Committee provides oversight of the financial reporting process
and management's responsibility for the integrity, accuracy and objectivity of
financial reports and accounting and financial reporting and practices. The
Audit Committee has the power to recommend the retention of the independent
public accountants for Citadel Communications and to consult with such
independent accountants concerning the plan of audit, their report of audit and
the adequacy of internal controls. See the discussion below under the heading
"Report of the Audit Committee." The Audit Committee is currently composed of
four independent, non-employee directors, Ted L. Snider, Sr. (Chairman), Ike
Kalangis, Robert G. Liggett, Jr. and John E. von Schlegell. The Audit Committee
met six times during 2000.
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The Compensation Committee reviews and makes recommendations to the Board
of Directors concerning the compensation and benefit policies and practices of
Citadel Communications. The Compensation Committee is currently composed of five
non-employee directors, John E. von Schlegell (Chairman), Robert F. Fuller, Ike
Kalangis, Robert G. Liggett, Jr. and Ted L. Snider, Sr. Although the
Compensation Committee did not formally meet during 2000, the members
participated in informal discussions during regular meetings of the Board of
Directors and at other times.
REPORT OF THE AUDIT COMMITTEE
The Audit Committee of the Board of Directors is composed of four directors
who are independent directors as defined under the applicable rules of The
Nasdaq Stock Market. The Audit Committee operates under a written charter, a
copy of which is included as Annex E to this proxy statement.
[The remainder of the Report of the Audit Committee will be provided in
revised preliminary proxy materials filed with the Securities and Exchange
Commission following conclusion of the audit with respect to the fiscal year
ended December 31, 2000.]
EXECUTIVE OFFICERS
Information concerning Mr. Wilson, Citadel Communications' Chairman,
President and Chief Executive Officer, is included above in the biographic
summaries of the nominees for director. Information with regard to the remaining
executive officers of Citadel Communications who are not also directors follows.
Donna L. Heffner, age 41, joined Citadel Associates Limited Partnership and
Citadel Associates Montana Limited Partnership in 1988 as Controller. Ms.
Heffner has served as Secretary of Citadel Communications since it was
incorporated in 1993 and of Citadel Broadcasting since it was incorporated in
1991. She has served as Chief Financial Officer of Citadel Communications and
Citadel Broadcasting since 1993 and 1992, respectively. In January 1997, Ms.
Heffner became Vice President of Citadel Communications and Citadel Broadcasting
and in November 2000, she became Executive Vice President of Citadel
Communications and Citadel Broadcasting. Ms. Heffner also served as Treasurer of
Citadel Communications from 1993 to 1999 and as a director of Citadel
Communications for several months in 1993. She served as Treasurer of Citadel
Broadcasting from 1991 to 1999 and as a director of Citadel Broadcasting from
1992 to 1993. From 1982 to 1985 and in 1987, she was employed by Price
Waterhouse, and in 1986, she was employed by Lowrimore, Warwick & Company as an
accountant.
D. Robert Proffitt, age 48, joined Citadel Associates Limited Partnership
and Citadel Associates Montana Limited Partnership in 1988 as Vice President -
General Manager of KKFM-FM in Colorado Springs, Colorado. In 1991, he was
appointed Vice President of Citadel Broadcasting, and in 1993, he was appointed
Vice President of Citadel Communications. Mr. Proffitt took over as General
Manager of Citadel Communications' Albuquerque, New Mexico operations in 1994.
Mr. Proffitt served as President of the Central Region for Citadel Broadcasting
from June 1997 to October 1998. He became President and Chief Operating Officer
of Citadel Broadcasting in October 1998 and Executive Vice President of Citadel
Communications in November 2000.
Stuart R. Stanek, age 45, joined Citadel Associates Limited Partnership and
Citadel Associates Montana Limited Partnership in 1986 as a General Manager of
KKFM-FM in Colorado Springs, Colorado. In 1988, he became General Manager of
KBEE-AM/KUBL-FM in Salt Lake City, Utah. In 1991, he was appointed Vice
President of Citadel Broadcasting, in 1992 he was elected to the Board of
Directors of Citadel Broadcasting and in 1993, he was appointed Vice President
and elected to the Board of Directors of Citadel Communications. He served as a
Director of Citadel Communications and Citadel Broadcasting until August 1996.
Mr. Stanek became President of the East Region for Citadel Broadcasting in June
1997 and Executive Vice President of Citadel Communications and Citadel
Broadcasting in November 2000.
Peter J. Benedetti, age 37, joined Citadel Communications in April 1995 as
Sales Manager for KMGA-FM in Albuquerque, New Mexico and also became Sales
Manager for KHFM-FM in Albuquerque upon Citadel Communications' acquisition of
that station in June 1996. From January 1997 to July 1997, Mr. Benedetti was
Director of Sales of Citadel Communications' Salt Lake City radio station group,
and from July 1997 to October 1998, he served as Vice President and General
Manager of that radio station group. In
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October 1998, Mr. Benedetti became Vice President of Citadel Communications and
Citadel Broadcasting and from October 1998 to July 1999, he served as President
of the Central Region for Citadel Broadcasting. In July 1999, Mr. Benedetti
became President of the West Region for Citadel Broadcasting when operations
were consolidated into East and West regions. In November 2000, he became
Executive Vice President of Citadel Communications and Citadel Broadcasting.
Prior to joining Citadel Communications, he served as an account executive for
Jacor Communications in Denver, Colorado.
Kenneth H. Maness, age 52, joined Citadel Communications in June 2000 and
became Vice President of Citadel Communications and Vice President and President
of the Southeast Region for Citadel Broadcasting in July 2000. In November 2000,
he became Executive Vice President of each of Citadel Communications and Citadel
Broadcasting. Prior to joining Citadel Communications, Mr. Maness was employed
by Bloomington Broadcasting Holdings, Inc. and its affiliates in various
capacities since 1981, most recently as Chief Executive Officer and President
from 1995 until Citadel Broadcasting acquired Bloomington Broadcasting in June
2000. Mr. Maness served as the President of Tri-Cities Radio Corp., a subsidiary
of Bloomington Broadcasting, and the General Manager for its four radio stations
in Tri-Cities, Tennessee from 1981 to 1995. Mr. Maness also serves as a director
of Bank of Tennessee.
Wayne P. Leland, age 36, joined Citadel Communications in April 2000 and
became Vice President of Citadel Communications and Vice President and President
of the Northeast Region for Citadel Broadcasting in July 2000. In November 2000,
he became Executive Vice President of each of Citadel Communications and Citadel
Broadcasting. Prior to joining Citadel Communications, Mr. Leland was the Chief
Operating Officer for Spring Broadcasting, LLC, a subsidiary of Broadcast
Partners Holdings, L.P., from 1997 to 2000. He also served as the cluster
manager for Capstar Broadcasting Corporation from 1995 to 1997 and as General
Sales Manager for Berkshire Broadcasting in Danbury, Connecticut from 1986 to
1995.
Kenneth R. Benson, age 36, joined Citadel Communications in November 2000
as Executive Vice President of Programming of each of Citadel Communications and
Citadel Broadcasting. From 1998 to 2000, Mr. Benson served as Senior Vice
President of Programming for AMFM, Inc., where he was responsible for the
strategic planning and programming of 42 radio stations. For a portion of 1998,
he served as Vice President of Music Programming for MTV Networks, a division of
Viacom, Inc. From 1992 to 1997, he served as Program Director for station
KKRZ-FM in Portland, Oregon. Prior to such time, Mr. Benson held various
programming and promotions positions for various radio stations.
Randy L. Taylor, age 38, joined Citadel Communications in April 1999 as
Controller of Citadel Communications and Citadel Broadcasting. In January 2001,
he became Vice President of Finance of Citadel Communications and Citadel
Broadcasting. Prior to joining Citadel Communications, Mr. Taylor served as
Controller of Aladdin Gaming, LLC from July 1998 to April 1999. From October
1994 to June 1998, he was employed by Showboat Operating Company in various
capacities including Vice President of Taxation. At Showboat, Mr. Taylor had
oversight responsibility for tax matters and company reporting to the Securities
and Exchange Commission. From 1984 to 1994, Mr. Taylor was employed in various
capacities with KPMG LLP, most recently as Senior Tax Manager.
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EXECUTIVE COMPENSATION
The following table sets forth information with respect to the compensation
paid to Citadel Communications' Chief Executive Officer and each of the other
four most highly compensated executive officers of Citadel Communications during
2000. Unless the context otherwise requires, references to Citadel
Communications in this Executive Compensation section include Citadel
Communications' subsidiary, Citadel Broadcasting.
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION -----------------------------
--------------------------------------------- SECURITIES
NAME AND OTHER ANNUAL UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1) OPTIONS COMPENSATION(2)
------------------ ---- -------- -------- --------------- ---------- ---------------
Lawrence R. Wilson....... 2000 $438,319 $ -0- $ -0- 40,000 $8,904
Chairman, Chief 1999 438,319 -0- -0- 875,000 3,413
Executive 1998 358,319 214,370(3) -0- 60,000 3,046
Officer and President
Donna L. Heffner......... 2000 $230,000 $ -0- $ -0- 30,000 $4,566
Executive Vice 1999 230,000 -0- -0- 250,000 3,489
President, 1998 175,000 80,000(3) -0- 12,000 4,537
Chief Financial Officer
and Secretary
D. Robert Proffitt....... 2000 $250,000 $ -0- $ -0- 30,000 $5,090
Executive Vice 1999 250,000 -0- -0- 250,000 3,849
President 1998 200,000 40,000(3) -0- 12,000 3,161
Stuart R. Stanek......... 2000 $230,000 $ -0- $25,776 15,000 $2,685
Executive Vice 1999 230,000 -0- 26,216 250,000 2,598
President 1998 210,000 50,000(3) -0- 12,000 2,635
Peter J. Benedetti....... 2000 $200,000 $ -0- $ -0- 15,000 $2,154
Executive Vice 1999 200,000 -0- 69,402 125,000 2,202
President 1998 160,000(4) $ 65,000(3) -0- 21,005 2,093
- ---------------
(1) In accordance with applicable regulations, the amounts set forth in this
column do not include perquisites and other personal benefits received by
the executive officers unless the aggregate value of such perquisites and
other benefits exceeded the lesser of $50,000 or 10% of the total salary and
bonus reported for the executive officer. The amount shown for Mr. Stanek in
2000 represents $19,685 for mortgage payments made on behalf of Mr. Stanek
and $6,091 for personal motor vehicle use and an auto allowance paid to Mr.
Stanek. The amount shown for Mr. Stanek in 1999 represents $25,309 for
mortgage payments made on behalf of Mr. Stanek and $907 for personal motor
vehicle use. The amount shown for Mr. Benedetti in 1999 represents $58,568
for closing cost payments made on behalf of Mr. Benedetti and reimbursement
of the loss on the sale of a home, $7,825 for temporary living expenses and
$3,009 for personal motor vehicle use.
(2) Included for 2000 are Citadel Communications' contributions to the Citadel
Broadcasting Company 401(k) Retirement Savings Plan (Mr. Wilson -- $8,766,
Ms. Heffner -- $4,506, Mr. Proffitt -- $5,000, Mr. Stanek -- $2,625 and Mr.
Benedetti -- $2,100), which contributions vest over five years, and the
payment of premiums for term life insurance (Mr. Wilson -- $130, Ms.
Heffner -- $60, Mr. Proffitt -- $90, Mr. Stanek -- $60 and Mr.
Benedetti -- $54).
(3) Bonuses were earned in 1998 and paid in 1998 and 1999. Does not reflect
bonuses earned in 1997 but paid in 1998.
(4) Includes payments of $10,000 made in 1999 following a salary increase made
retroactive to November 1998.
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The following table summarizes individual grants of options to purchase
shares of common stock of Citadel Communications to the executive officers
listed in the Summary Compensation Table during the year ended December 31,
2000.
OPTIONS GRANTED IN FISCAL 2000
POTENTIAL REALIZABLE
PERCENT OF VALUE AT ASSUMED RATES
NUMBER OF TOTAL OF STOCK PRICE
SECURITIES OPTIONS EXERCISE APPRECIATION FOR
UNDERLYING GRANTED TO OR BASE OPTION TERM(1)
OPTIONS EMPLOYEES PRICE EXPIRATION -----------------------
NAME GRANTED IN 2000 ($/SH) DATE 5%($) 10%($)
---- ---------- ---------- -------- ---------- ---------- ----------
Lawrence R. Wilson(2)......... 40,000 4.48% $9.44 12-6-2010 $237,471 $601,797
Donna L. Heffner(2)........... 30,000 3.36 9.44 12-6-2010 178,103 451,348
D. Robert Proffitt(2)......... 30,000 3.36 9.44 12-6-2010 178,103 451,348
Stuart R. Stanek(2)........... 15,000 1.68 9.44 12-6-2010 89,051 225,674
Peter J. Benedetti(2)......... 15,000 1.68 9.44 12-6-2010 89,051 225,674
- ---------------
(1) The potential realizable value is based on the term of the option at the
time of grant, which is ten years for each of the options set forth in the
table. An assumed stock price appreciation of 5% and 10% is used pursuant to
rules promulgated by the Securities and Exchange Commission. The potential
realizable value is calculated by assuming that the market price on the date
of grant appreciates at the indicated rate, compounded annually, for the
entire term of the option and that the option is exercised and sold on the
last day of its term at this appreciated stock price. The potential
realizable value is not intended to forecast the future appreciation of the
common stock.
(2) Each option vests 20% each year on the first through fifth anniversaries of
the date of the grant. Vesting accelerates in the event of a change in
control of Citadel Communications, as provided for in the option award
agreements. Each option will fully vest prior to consummation of the merger.
The following table shows the number of shares of common stock acquired and
the value realized upon exercise in 2000 of options to purchase shares of common
stock of Citadel Communications by the executive officers listed in the Summary
Compensation Table, as well as the number of all unexercised options and the
value of unexercised in-the-money options (rounded to the nearest whole share)
held by such persons as of December 31, 2000.
AGGREGATED OPTION EXERCISES IN 2000 AND
FISCAL YEAR END OPTION VALUES
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
SHARES OPTIONS AT FISCAL YEAR END OPTIONS AT FISCAL YEAR END(1)
ACQUIRED ON VALUE # $
EXERCISE # REALIZED $ EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
----------- ---------- -------------------------- -----------------------------
Lawrence R. Wilson(2).... -0- -0- 653,254/885,623 $3,817,053/$571,032
Donna L. Heffner......... -0- -0- 114,262/260,400 652,331/159,696
D. Robert Proffitt....... -0- -0- 76,421/262,800 257,502/178,896
Stuart R. Stanek......... 20,000 $220,600 182,834/246,600 1,371,771/130,896
Peter J. Benedetti....... -0- -0- 33,802/136,203 10,800/45,600
- ---------------
(1) These values have been calculated on the basis of the December 31, 2000
closing price per share of $12.00, less the applicable exercise price.
(2) Includes options held by Rio Bravo Enterprise Associates, L.P. Mr. Wilson
owns all of the capital stock of Rio Bravo, Inc., the sole general partner
of Rio Bravo Enterprise Associates, L.P.
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EMPLOYMENT AGREEMENT
In June 1996, Citadel Communications entered into an employment agreement
with Lawrence R. Wilson which has an initial term ending in June 2001, which
term will be automatically renewed for one year. The agreement provides for
annual base salary compensation, annual increases to base salary and an annual
bonus calculated as a percentage of base salary in effect at the end of the year
and based on Citadel Communications' annual performance criteria. The annual
performance criteria were not achieved for the year ended December 31, 2000 and,
therefore, no bonus was earned for 2000. For 1999 and 2000, the Compensation
Committee of Citadel Communications' Board of Directors approved a base salary
for Mr. Wilson in an amount greater than that provided for in the agreement,
following the Committee's review of compensation levels at comparable public
companies.
Mr. Wilson's employment will terminate upon Mr. Wilson's becoming
permanently disabled or upon a liquidation or dissolution of Citadel
Communications, a sale, transfer or other disposition of all of the assets of
Citadel Broadcasting on a consolidated basis, or any transaction or series of
transactions whereby any person or entity other than ABRY Broadcast Partners II,
L.P. (a former significant stockholder of Citadel Communications) or its
affiliates or affiliates of Citadel Communications, becomes the direct or
indirect beneficial owner of securities of Citadel Communications or Citadel
Broadcasting representing 50% or more of the combined voting power of Citadel
Communications' or Citadel Broadcasting's then outstanding securities.
Consummation of the merger will result in such a termination event. In such
event, Mr. Wilson or his beneficiary will be entitled to receive Mr. Wilson's
then base salary through the end of the month in which the termination occurs.
In addition, upon the affirmative vote or written consent of not less than 66
2/3% of the members of the Citadel Communications Board of Directors, Mr.
Wilson's employment may be terminated with or without cause. If any such
termination is without cause, Mr. Wilson will be entitled to receive his then
current base salary through the end of the then current term of the employment
agreement.
1996 EQUITY INCENTIVE PLAN
Citadel Communications adopted the 1996 Equity Incentive Plan under which
employees, officers, directors, consultants, independent contractors and
advisors of Citadel Communications and its subsidiaries are eligible to receive
awards in the form of incentive stock options and options that are not incentive
stock options to purchase common stock of Citadel Communications. Awards may
also be in the form of stock appreciation rights, restricted securities and
other stock-based awards as determined by the Board of Directors of Citadel
Communications, none of which has been granted to date. The Equity Incentive
Plan is administered by the Compensation Committee of the Board of Directors and
in certain cases Citadel Communications' Board. The Compensation Committee or
the Board has authority under the Equity Incentive Plan to designate
participants, determine the terms and conditions of awards to be granted to each
participant and decide all matters relating to any award. At December 31, 2000,
the total number of shares of common stock of Citadel Communications that
remained reserved and available for issuance under the Equity Incentive Plan, or
which may be used to provide a basis of measurement for an award, was 1,986,298
shares, including shares underlying outstanding grants.
Shares subject to any expired, terminated or lapsed awards are available
for subsequent grants under the Equity Incentive Plan. The exercise price of
incentive stock options granted under the plan may not be less than the fair
market value of the common stock as of the date of grant, and 110% of the fair
market value of the common stock in the case of an incentive stock option
granted to an individual who at the time of the grant owns more than 10% of the
combined voting power of Citadel Communications' capital stock. The Board may
provide that an optionee may pay for shares upon exercise of an option in cash
or by check or through cashless exercise procedures or by such other medium or
by any combination of media as authorized by the Board. The grant of an option
may be accompanied by a reload option, which gives an optionee who pays the
exercise price of an option with shares of common stock an additional option to
acquire the same number of shares that was used to pay for the original option
at an exercise price of not less than the fair market value of common stock as
of the reload option grant date. In the event a participant's employment with
Citadel Communications is terminated due to disability, retirement or any other
reason, a participant may exercise an option only to the extent it was
exercisable on the termination date of the participant's employment. An
incentive stock option must be exercised prior to the earlier of the expiration
of three
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months (six months in the case of disability after the termination date) or the
expiration date of the options set forth in the award agreement. A non-incentive
stock option must be exercised within the applicable time period for exercise
set forth in the award agreement. In the event of the death of the participant
before an option lapses, an option may be exercised only to the extent it was
exercisable on the date of death. However, such exercise must be made prior to
the earlier of the first anniversary of the participant's death or the
expiration date of the option.
1999 LONG-TERM INCENTIVE PLAN
Citadel Communications adopted the 1999 Long-Term Incentive Plan, which is
intended to be the primary long-term incentive plan for senior management. The
Long-Term Incentive Plan provides opportunities for participants to earn the
right to purchase shares of Citadel Communications' common stock if performance
goals, measured solely by the increase in the price of the common stock, and
continued employment requirements are met. Participants under the Long-Term
Incentive Plan receive an option grant based on the Citadel Communications'
Compensation Committee's evaluation of the participant's ability to contribute
to Citadel Communications' overall performance. If the option is not fully
earned during the specific five-year performance period, any portion not earned
is forfeited, and the shares become available for issuance upon exercise of
other options granted under the plan. For the full option to be earned, the
average stock price (calculated over 20 consecutive trading days) over the
exercise price must double during the performance period. If any shares become
available for additional grants under this plan, the exercise price will be the
average of the bid and asked prices of the common stock on the date of the
grant. The option is earned in one-fifth increments for each increase in average
stock price (calculated over 20 consecutive trading days) equal to one-fifth of
the difference between the doubled exercise price and the exercise price. When
an increment of the option is earned, the earned portion generally vests over a
five-year period. A total of 1,750,000 shares of common stock are reserved and
available for issuance under the Long-Term Incentive Plan.
At the time that Citadel Communications' Board of Directors adopted the
Long-Term Incentive Plan, the following option grants were made to be effective
as of the closing of Citadel Communications' common stock offering in June 1999,
subject to stockholder approval of the Long-Term Incentive Plan, which was
obtained in July 1999: Lawrence R. Wilson -- 875,000 shares; Donna L. Heffner --
250,000 shares; D. Robert Proffitt -- 250,000 shares; Stuart R. Stanek --
250,000 shares; and Peter J. Benedetti -- 125,000 shares. The exercise price for
the options granted is $29.25 per share, the price to the public in Citadel
Communications' June 1999 common stock offering. Four-fifths of each of these
options have been earned.
401(k) PLAN
Effective in 1993, Citadel Broadcasting adopted a 401(k) Retirement Savings
Plan for the purpose of providing, at the option of the employee, retirement
benefits to full-time employees who have been employed for a period of one year
or longer and who meet certain other requirements of the 401(k) plan.
Contributions to the 401(k) plan are made by the employee and, on a voluntary
basis, by Citadel Communications. Citadel Communications currently matches 100%
of that part of the employee's elective deferrals up to 2% of the employee's
salary.
A contribution to the 401(k) plan of approximately $908,000 was made by
Citadel Communications during the year ended December 31, 2000.
DIRECTOR COMPENSATION
Currently, all non-employee directors are entitled to receive an annual fee
of $20,000 for their services as directors. Directors who are also employees of
Citadel Communications do not receive additional consideration for serving as
directors, except that all directors are entitled to reimbursement for travel
and out-of-pocket expenses in connection with their attendance at Board and
committee meetings.
Additionally, for their services as directors, each non-employee director
was granted an option on December 6, 2000 to purchase 5,000 shares of Citadel
Communications' common stock at an exercise price of $9.44 per share.
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COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 2000, John E. von Schlegell, Robert F. Fuller, Ike Kalangis, Robert
G. Liggett, Jr. and Ted L. Snider, Sr. were members of the Compensation
Committee of the Citadel Communications Board of Directors, which determines
compensation matters for Citadel Communications and Citadel Broadcasting.
Registration Rights Agreement. Citadel Communications is a party to a
Registration Rights Agreement, dated June 28, 1996, as amended, with Lawrence R.
Wilson, Rio Bravo Enterprise Associates, L.P., ABRY Broadcast Partners II, L.P.,
The Endeavour Capital Fund Limited Partnership, Ted L. Snider, Sr. and others,
which requires Citadel Communications to register their shares of its common
stock under the Securities Act of 1933, as amended, for offer and sale to the
public (including by way of an underwritten public offering), upon a demand by
such stockholders, and which entitles such parties to join in any registration
of equity securities of Citadel Communications. Various stockholders have
exercised their rights under this agreement and have participated in Citadel
Communications' common stock offerings, including The Endeavour Capital Fund
Limited Partnership and its general partner and Ted L. Snider, Sr. Mr. von
Schlegell is President and a shareholder of the general partner of The Endeavour
Capital Fund Limited Partnership. Mr. Wilson owns all of the capital stock of
Rio Bravo, Inc., the sole general partner of Rio Bravo Enterprise Associates,
L.P. In addition to those parties having registration rights under the
Registration Rights Agreement, each of Rio Bravo Enterprise Associates, L.P.,
Donna L. Heffner, D. Robert Proffitt, Stuart R. Stanek and Peter J. Benedetti
participated as selling stockholders in Citadel Communications' common stock
offering in 2000.
Transactions with Connect Communications. Connect Communications
Corporation provided telephone service to Citadel Broadcasting during 2000. The
amount paid by Citadel Broadcasting in 2000 for such services was approximately
$560,000. In addition, Connect Communications paid Citadel Broadcasting
approximately $75,000 for the reimbursement of third party telephone charges and
rent for space on one of Citadel Broadcasting's towers in Little Rock, Arkansas.
Ted Snider, Jr., the son of Ted L. Snider, Sr., a director of Citadel
Communications and Citadel Broadcasting, is a director and shareholder of
Connect Communications Corporation. Citadel Communications believes that the
terms of its transactions with Connect Communications Corporation are at least
as favorable to Citadel Communications as those that could be obtained generally
from unaffiliated parties.
Consulting Agreement. On August 31, 1999, Citadel Broadcasting entered into
a seven-year Consulting Agreement with Robert F. Fuller which provides for
compensation to Mr. Fuller of $250,000 each year. In 2000, Citadel Broadcasting
paid Mr. Fuller $250,000 under this Consulting Agreement. Citadel Broadcasting
originally entered into this Consulting Agreement in connection with its
acquisition of all of the issued and outstanding shares of capital stock of
Fuller-Jeffrey Broadcasting Companies, Inc. from Mr. Fuller and Joseph N.
Jeffrey, Jr., the two former stockholders of Fuller-Jeffrey Broadcasting. Mr.
Fuller became a director of each of Citadel Communications and Citadel
Broadcasting in November 1999. Citadel Communications believes that the terms of
the Consulting Agreement with Mr. Fuller are at least as favorable to it as
those that could be obtained generally from unaffiliated parties.
Acquisition of Assets from Liggett Broadcast, Inc. In August 2000, Citadel
Broadcasting completed its acquisition from Liggett Broadcast, Inc., Rainbow
Radio, LLC, New Tower, Inc. and LLJ Realty, LLC of various radio stations and
related assets for the aggregate purchase price of approximately $120.9 million
in cash. Following the acquisition, Robert G. Liggett, Jr., who together with
his immediate family members or trusts for the benefit of his immediate family
members directly or indirectly owned at the time of the acquisition all or a
majority of the equity interests of each selling entity, was appointed as a
director of each of Citadel Communications and Citadel Broadcasting.
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors approves the
compensation programs for Citadel Communications' executive officers and certain
other members of senior management. During 2000, the Committee consisted of from
four to five non-employee directors.
The Committee intends for Citadel Communications' compensation programs to
provide strong incentives to senior management to pursue actions that will
directly benefit Citadel Communications and its
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stockholders. The principles underlying Citadel Communications' executive
compensation program continue to be:
(1) Citadel Communications must offer competitive salaries to be able to
attract and retain highly qualified and experienced executives and other
management personnel;
(2) Executive cash compensation in excess of base salaries should be tied
to the performance of Citadel Communications and the individual executive; and
(3) The financial interests of the executives should be aligned with the
financial interests of the stockholders.
In developing compensation programs during prior years, the Committee
utilized the services of an outside consultant who specializes in executive
compensation matters. The consultant advised the Committee about comparable
publicly traded radio broadcasting companies' compensation programs. However,
during 2000, the Committee did not engage any consultants to advise it on such
matters.
The Committee intends that a major portion of total compensation for senior
management be based on attainment of performance objectives. Depending on the
situation, such objectives will measure performance across Citadel
Communications' business or as to an identifiable portion of the operations over
which the individual has managerial responsibility. Another, smaller portion of
compensation is based on the individual's attainment of specific personal
performance objectives. In addition to these formal procedures, at any time the
Committee may and has rewarded a particularly outstanding performance
achievement by an individual member of management.
In 2000, the two primary forms of compensation paid or awarded to Citadel
Communications' executive officers were salary and stock options.
Base salaries for the Chief Executive Officer and other executive officers
are established at levels appropriate for the duties and scope of
responsibilities of each officer's position and are intended to be competitive
with comparable radio broadcasting companies. The base salaries for 2000 for the
Chief Executive Officer and the executive officers who were also employed by
Citadel Communications in 1999 remained unchanged from their base salaries for
1999. Base salaries for executive officers hired in 2000 were determined at the
time such persons joined Citadel Communications. Salaries for all executives are
reviewed periodically and adjusted as warranted to reflect sustained individual
officer performance.
No additional cash compensation was paid to the Chief Executive Officer or
any other executive officer for 2000. The opportunity for the executive officers
to earn bonuses in respect of 2000 was dependent on Citadel Communications'
achieving certain performance criteria, with a portion of any bonus based on
individual achievement criteria developed by the Committee through consultation
with the Chief Executive Officer. However, the award of any individual
achievement bonus was contingent on the achievement of the overall performance
criteria. As the overall performance criteria established for 2000 were not
realized, no bonus was awarded to any executive officer for 2000.
Stock ownership remains a fundamental principle underlying Citadel
Communications' executive compensation policies. The Committee believes that
management's having an equity interest in Citadel Communications more closely
aligns the interests of stockholders and management.
During 2000, the price of Citadel Communications' common stock declined
from 1999 levels, which, by the fourth quarter of 2000, resulted in options
granted in 1999 and early 2000 having per share exercise prices significantly
higher than the then prevailing stock price. After considering alternatives, the
Committee determined to recommend the grant of new options to executive officers
and key employees. An option to purchase 40,000 shares of common stock under the
1996 Equity Incentive Plan was granted to the Chief Executive Officer on
December 6, 2000. Each other current executive officer and various other key
employees also received a grant under this plan on either November 29, 2000 or
December 6, 2000. Three new executive officers were also granted options under
the 1996 Equity Incentive Plan earlier in the year when they joined Citadel
Communications.
The exercise price for each option granted to senior management in 2000 is
the fair market value of the common stock on the date of the grant. With the
exception of one option granted to an executive officer
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pursuant to the terms of his employment agreement with Citadel Communications,
the stock options granted to executive officers in 2000 vest over five years.
This approach is designed to increase stockholder value over a long term since
the full benefit of the compensation package cannot be realized unless stock
price appreciation occurs over a number of years.
The Internal Revenue Code contains a provision that limits the tax
deductibility of certain compensation paid to certain executive officers and
disallows the deductibility of certain compensation in excess of $1,000,000 per
year unless it is considered performance-based compensation under the Internal
Revenue Code. Citadel Communications' policies and practices generally ensure
the maximum deduction possible under Section 162(m) of the Internal Revenue
Code. However, Citadel Communications reserves the right to forego any or all of
the tax deduction if believed to be in the best interest of Citadel
Communications and its stockholders.
Members of the Compensation Committee
John E. von Schlegell
Robert F. Fuller
Ike Kalangis
Robert G. Liggett, Jr.
Ted L. Snider, Sr.
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PERFORMANCE GRAPH
The following graph compares the cumulative total return on Citadel
Communications' common stock, The Nasdaq Stock Market (U.S.) Index and a peer
group of radio broadcasting companies (Clear Channel Communications Inc., Cox
Radio Inc. and Emmis Communications Corp) for the period from July 1, 1998, the
first day of trading of Citadel Communications' common stock, through December
31, 2000.
CITADEL
COMMUNICATIONS NASDAQ STOCK
CORPORATION MARKET (U.S.) INDEX PEER GROUP (1)
------------ ------------------- --------------
7/1/98 100.00 100.00 100.00
12/31/98 161.72 116.03 97.78
12/31/99 405.47 215.62 162.58
12/31/00 75.00 129.74 88.94
CUMULATIVE TOTAL RETURN
------------------------------------------
7/1/98 12/31/98 12/31/99 12/31/00
------ -------- -------- --------
Citadel Communications Corporation..................... $100 $161.72 $405.47 $75.00
Nasdaq Stock Market (U.S.) Index....................... 100 116.03 215.62 129.74
Peer Group(1).......................................... 100 97.78 162.58 88.94
- ---------------
(1) The peer group presented in Citadel Communications' comparative performance
data in its proxy statement for its 2000 Annual Meeting of Stockholders
included AMFM, Inc., an entity which was acquired by Clear Channel
Communications Inc. in August 2000. As AMFM cannot independently be included
in the peer group comparative data for the period following its acquisition,
its separate results have been deleted from the graph and chart for the
period prior to its acquisition.
The graph and chart assume that $100 was invested on July 1, 1998 with
dividends, if any, reinvested. Peer returns are weighted by market
capitalization. The total stockholder returns are not necessarily indicative of
future returns.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information with respect to the beneficial
ownership of Citadel Communications' common stock as of February 6, 2001 by (1)
each person, entity or group known to Citadel
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58
Communications to beneficially own more than five percent of the common stock,
(2) each of Citadel Communications' directors, (3) each of Citadel
Communications' executive officers listed in the Summary Compensation Table
under the heading "Executive Compensation" and (4) all of Citadel
Communications' directors and executive officers as a group.
Except as indicated below, the persons named have sole voting and
investment power with respect to the shares shown as beneficially owned by them.
The percentages are rounded to the nearest tenth of a percent. Holders of common
stock are entitled to one vote per share on all matters submitted to a vote of
stockholders generally.
The number of shares and percentages are calculated in accordance with Rule
13d-3 under the Securities Exchange Act of 1934, as amended, on a stockholder by
stockholder basis, assuming that each stockholder converted all securities owned
by such stockholder that are convertible into common stock at the option of the
holder within 60 days of February 6, 2001, and that no other stockholder so
converts. The numbers and percentages of shares owned assume that these
outstanding options have been exercised by such respective stockholders as
follows:
- Lawrence R. Wilson -- 653,254 shares (including options to purchase
470,033 shares held by Rio Bravo Enterprise Associates, L.P.);
- Donna L. Heffner -- 114,262 shares;
- D. Robert Proffitt -- 78,821 shares;
- Stuart R. Stanek -- 184,034 shares;
- Peter J. Benedetti -- 33,802 shares;
- each of Robert F. Fuller, Ike Kalangis, Robert G. Liggett, Jr., Ted L.
Snider, Sr. and John E. von Schlegell -- 5,000 shares; and
- all directors and executive officers as a group -- 1,092,673 shares.
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SHARES OF
COMMON STOCK
BENEFICIALLY OWNED
-----------------------
PERCENT OF
COMMON
BENEFICIAL OWNER NUMBER STOCK
---------------- --------- ----------
FIVE PERCENT STOCKHOLDERS:
Putnam Investments, Inc.(1)................................. 4,071,267 11.0%
One Post Office Square
Boston, MA 02109
T. Rowe Price Associates, Inc.(2)........................... 1,854,200 5.0%
100 E. Pratt Street
Baltimore, MD 21202
DIRECTORS AND EXECUTIVE OFFICERS:
Lawrence R. Wilson(3)....................................... 2,547,800 6.8%
City Center West
Suite 400
7201 West Lake Mead Boulevard
Las Vegas, NV 89128
Donna L. Heffner(4)......................................... 235,813 *
D. Robert Proffitt(5)....................................... 232,055 *
Stuart R. Stanek(6)......................................... 266,707 *
Peter J. Benedetti(7)....................................... 37,629 *
Robert F. Fuller............................................ 70,000 *
Ike Kalangis................................................ 6,000 *
Robert G. Liggett, Jr.(8)................................... 73,000 *
Ted L. Snider, Sr.(9)....................................... 196,817 *
John E. von Schlegell(10)................................... 89,377 *
All directors and........................................... 3,800,498 10.0%
executive officers as
a group (14 persons)(11)
- ---------------
* Less than 1%
(1) As reported on Schedule 13G filed with the Securities and Exchange
Commission on February 17, 2000 (dated February 7, 2000) by Putnam
Investments, Inc. on behalf of itself and Marsh & McLennan Companies, Inc.,
Putnam Investment Management, Inc. and The Putnam Advisory Company, Inc.,
301,000 of the shares indicated are under shared voting power among Putnam
Investments, Inc. and The Putnam Advisory Company, Inc. Of the shares
indicated, 3,598,967 shares are under shared dispositive power between
Putnam Investments, Inc. and Putnam Investment Management, Inc., and
472,300 shares are under shared dispositive power between Putnam
Investments, Inc. and The Putnam Advisory Company, Inc. Putnam Investment
Management, Inc. and The Putnam Advisory Company, Inc. are subsidiaries of
Putnam Investments, Inc. and Putnam Investments, Inc. is a subsidiary of
Marsh & McLennan Companies, Inc. The number of shares shown assumes that
there has been no change in the number of shares beneficially owned from
the number of shares reported as being beneficially owned in the Schedule
13G. Pursuant to Rule 13d-4 under the Securities Exchange Act, Marsh &
McLennan Companies, Inc. and Putnam Investments, Inc. declared that their
filing of the Schedule 13G shall not be deemed to be an admission of
beneficial ownership of the shares reported.
(2) As reported on Schedule 13G filed with the Securities and Exchange
Commission on February 6, 2001 by T. Rowe Price Associates, Inc., T. Rowe
Price Associates has sole voting power with respect to 619,800 of the
shares indicated and sole investment power with respect to all of the
shares indicated.
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The number of shares shown assumes that there has been no change in the
number of shares beneficially owned from the number of shares reported as
being beneficially owned in the Schedule 13G.
(3) The number of shares includes 1,822,883 shares held by Rio Bravo Enterprise
Associates, L.P. and 14,000 shares held by Molly and Associates, LLC. The
number of shares also includes 470,033 shares of common stock which may be
acquired upon exercise of options held by Rio Bravo Enterprise Associates.
Rio Bravo Enterprise Associates therefore beneficially owns 2,292,916
shares or 6.1% of the common stock. Mr. Wilson, a director and executive
officer, owns all of the capital stock of Rio Bravo, Inc., the sole general
partner of Rio Bravo Enterprise Associates. Mr. Wilson is the managing
member of Molly and Associates, and Rio Bravo Enterprise Associates owns
50% of the equity interests of Molly and Associates. The remaining shares
are jointly owned by Mr. Wilson and his spouse, Claire Wilson, or may be
acquired upon exercise of options held by Mr. Wilson.
(4) Ms. Heffner's shares are jointly owned by Ms. Heffner and her spouse,
Timothy Heffner. The number of shares shown does not include 3,500 shares
held by Molly and Associates, which are allocated to Ms. Heffner's
ownership interest in Molly and Associates. Beneficial ownership of these
shares is attributed to Lawrence R. Wilson as discussed in Note 3.
(5) Mr. Proffitt's shares are jointly owned by Mr. Proffitt and his spouse,
Lynette Proffitt. The number of shares shown does not include 3,500 shares
held by Molly and Associates, which are allocated to Mr. Proffitt's
ownership interest in Molly and Associates. Beneficial ownership of these
shares is attributed to Lawrence R. Wilson as discussed in Note 3.
(6) Mr. Stanek's shares are jointly owned by Mr. Stanek and his spouse, Kim
Stanek. The number of shares shown does not include 1,781 shares owned by
Kim Stanek.
(7) Mr. Benedetti's shares are jointly owned by Mr. Benedetti and his spouse,
Krista Benedetti.
(8) The number of shares includes 68,000 shares held by Liggett Ventures, LLC.
Mr. Liggett is the managing member of Liggett Ventures, and he and his
spouse own all of the equity interests in Liggett Ventures.
(9) The number of shares shown does not include 121,713 shares owned by Mr.
Snider's spouse.
(10) The number of shares includes 2,554 shares held by The Endeavour Capital
Fund Limited Partnership and 81,823 shares held by DVS Management, Inc. Mr.
von Schlegell is the Managing Partner of The Endeavour Capital Fund and the
President and a shareholder of DVS Management, the general partner of The
Endeavour Capital Fund.
(11) Includes shares discussed in footnotes (3), (8) and (10).
CERTAIN TRANSACTIONS
In June 2000, Citadel Broadcasting completed its acquisition of all of the
capital stock of Bloomington Broadcasting Holdings, Inc. for the aggregate
purchase price of approximately $175.9 million in cash. Following the
acquisition, Kenneth H. Maness, who was a shareholder, executive officer and the
sole director of Bloomington Broadcasting and who received approximately $4.8
million in transaction consideration, became an executive officer of Citadel
Communications and Citadel Broadcasting.
See the discussion in the Executive Compensation section of this proxy
statement, under the heading "Compensation Committee Interlocks and Insider
Participation" for a description of various other transactions involving Citadel
Communications' directors and executive officers and significant stockholders.
PROPOSAL TO RATIFY THE APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
(PROPOSAL 3 ON THE ENCLOSED PROXY CARD)
The Board of Directors of Citadel Communications has selected KPMG LLP to
serve as the independent public accountants to examine the financial statements
of Citadel Communications and its subsidiary for the year ending December 31,
2001. KPMG LLP has been employed to perform this function for Citadel
Communications since its formation in 1993. A representative of KPMG LLP is
expected to be present at the annual meeting for the purpose of making a
statement, should he or she so desire, and to respond to appropriate questions.
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If the stockholders should not ratify the appointment, the Audit Committee
of the Board will investigate the reasons for rejection by the stockholders and
the Board of Directors will reconsider the appointment.
AUDIT FEES
The aggregate fees billed for professional services rendered by KPMG LLP
for the audit of Citadel Communications' annual financial statements for the
year ended December 31, 2000 and the reviews of the financial statements
included in Citadel Communications' Quarterly Reports on Form 10-Q filed with
the Securities and Exchange Commission during 2000 were $ .
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
KPMG LLP performed no services and therefore billed no fees relating to
operating or supervising the operation of Citadel Communications' information
systems or local area network or for designing or implementing Citadel
Communications' financial information management systems during 2000.
ALL OTHER FEES
The aggregate fees billed for other services rendered to Citadel
Communications by KPMG LLP in 2000 were $ , including internal audit
evaluation, procedures related to Securities and Exchange Commission filings and
other professional services.
AUDITOR INDEPENDENCE
The Audit Committee of the Board of Directors believes that the non-audit
services provided by KPMG LLP are compatible with maintaining auditor's
independence. None of the time devoted by KPMG LLP on its engagement to audit
Citadel Communications' financial statements for the year ended December 31,
2000 is attributable to work performed by persons other than KPMG LLP employees.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
THE PROPOSAL TO RATIFY THE APPOINTMENT OF KPMG LLP AS CITADEL COMMUNICATIONS'
INDEPENDENT ACCOUNTANTS FOR THE YEAR ENDING DECEMBER 31, 2001
OTHER INFORMATION
STOCKHOLDER PROPOSALS FOR THE 2002 ANNUAL MEETING
Citadel Communications does not expect to hold a 2002 Annual Meeting of
Stockholders, because, following the merger, Citadel Communications will not be
a publicly held company. However, if the merger is not consummated for any
reason, any proposals of stockholders intended to be presented at the 2002
Annual Meeting of Stockholders must be received by Citadel Communications, City
Center West, Suite 400, 7201 West Lake Mead Boulevard, Las Vegas, Nevada, 89128,
no later than November , 2001 in order to be included in the proxy materials
for such meeting. It is suggested that a proponent submit any proposal by
Certified Mail -- Return Receipt Requested to the Secretary of Citadel
Communications at Citadel Communications' principal executive offices. Such
proposals must meet the requirements set forth in the rules and regulations of
the Securities and Exchange Commission in order to be eligible for inclusion in
Citadel Communications' 2002 proxy materials.
All other stockholder proposals to be presented at the 2002 Annual Meeting
of Stockholders must be submitted in writing to the Secretary of Citadel
Communications at Citadel Communications' principal executive offices no later
than January 26, 2002, and the notice must provide information as required by
Citadel Communications' Bylaws. A copy of these Bylaw requirements will be
provided upon request in writing to the Secretary at the principal executive
offices of Citadel Communications.
If there should be any change in the foregoing submission deadlines,
Citadel Communications intends to publicly disseminate information concerning
the change.
DIRECTOR NOMINEES
Any stockholder entitled to vote for the election of directors may nominate
persons for election to the Board of Directors. Generally such nominations with
respect to an election to be held at an annual meeting
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must be submitted in writing to the Secretary of Citadel Communications at
Citadel Communications' principal executive offices at least 90 days before the
anniversary date of the preceding annual meeting, and the notice must provide
information as required by Citadel Communications' Bylaws. A copy of these Bylaw
requirements will be provided upon request in writing to the Secretary at the
principal executive offices of Citadel Communications. This requirement does not
affect the deadline for submitting stockholder proposals for inclusion in the
proxy statement, nor does it apply to questions a stockholder may wish to ask at
the meeting.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
that Citadel Communications' directors and executive officers, and any persons
who own more than ten percent of Citadel Communications' common stock, file with
the Securities and Exchange Commission initial reports of ownership and reports
of changes in ownership of the common stock and other equity securities of
Citadel Communications. Such persons are required by Securities and Exchange
Commission regulations to furnish Citadel Communications with copies of all
Section 16(a) forms they file.
To Citadel Communications' knowledge, based solely on the review of the
copies of such reports and written representations that no other reports were
required during or with respect to the year ended December 31, 2000, all such
section 16(a) filing requirements were met.
ANNUAL REPORT
Citadel Communications has enclosed its Annual Report for the year ended
December 31, 2000 with this proxy statement, which includes Citadel
Communications' 2000 Annual Report to the Securities and Exchange Commission on
Form 10-K, without exhibits. Stockholders are referred to the report for
financial and other information about Citadel Communications, but such report is
not incorporated in this proxy statement and is not a part of the proxy
soliciting material.
WHERE YOU CAN FIND MORE INFORMATION
Citadel Communications files annual, quarterly and special reports, proxy
statements and other information with the Securities and Exchange Commission.
Stockholders may read and copy any reports, statements or other information
Citadel Communications files with the SEC at its public reference rooms at 450
Fifth Street, N.W., Washington, DC 20549, 7 World Trade Center, Suite 1300, New
York, New York 10048 and 500 West Madison Street, Suite 1400, Chicago, Illinois
60661. Stockholders should call the SEC at 1-800-SEC-0330 for further
information on the public reference rooms. Citadel Communications' filings are
also available to the public on the internet, through a database maintained by
the SEC at http://www.sec.gov. In addition, stockholders can inspect and copy
Citadel Communications' reports, proxy statements and other information at the
offices of The Nasdaq Stock Market, 1735 K Street, Washington, DC 20006-1500.
By order of the Board of Directors
/s/ Donna L. Heffner
Donna L. Heffner
Secretary
March , 2001
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63
ANNEX A
AGREEMENT AND PLAN OF MERGER
by and between
CITADEL COMMUNICATIONS CORPORATION
and
FLCC HOLDINGS, INC.
dated as of January 15, 2001
64
TABLE OF CONTENTS
PAGE
----
ARTICLE I
THE MERGER; CLOSING
1.1. The Merger.................................................. 1
1.2. Directors and Officers...................................... 1
1.3. Articles of Incorporation and Bylaws........................ 2
ARTICLE II
EFFECT OF THE MERGER ON SECURITIES OF THE COMPANY
AND MERGER SUB
2.1. Conversion of Merger Sub Stock.............................. 2
2.2. Conversion of Company Common Stock.......................... 2
2.3. Surrender and Payment....................................... 2
2.4. Options..................................................... 3
2.5. Withholding Rights.......................................... 3
2.6. Lost, Stolen or Destroyed Certificates...................... 3
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
3.1. Organization and Good Standing; Organizational Documents.... 4
3.2. Capitalization.............................................. 4
3.3. Subsidiaries................................................ 5
3.4. Authorization; Binding Agreement............................ 5
3.5. Governmental Approvals...................................... 5
3.6. No Violations............................................... 6
3.7. Securities Filings.......................................... 6
3.8. Litigation; Liabilities..................................... 7
3.9. Financial Statements........................................ 7
3.10. Absence of Certain Changes.................................. 7
3.11. Related Party Transactions.................................. 8
3.12. Compliance with Laws; Permits............................... 8
3.13. Finders and Investment Bankers.............................. 8
3.14. Material Contracts.......................................... 8
3.15. Employee Benefit Plans...................................... 9
3.16. Taxes and Returns........................................... 10
3.17. Fairness Opinion............................................ 11
3.18. Takeover Statutes........................................... 11
Company FCC Licenses; Operations of Company Licensed
3.19. Facilities.................................................. 11
3.20. Intellectual Property....................................... 12
3.21. Environmental Matters....................................... 13
3.22. Property.................................................... 14
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT
4.1. Organization and Good Standing.............................. 14
4.2. Authorization; Binding Agreement............................ 15
4.3. Governmental Approvals...................................... 15
4.4. No Violations............................................... 15
4.5. Financing................................................... 15
4.6. Qualification............................................... 15
4.7. Ownership of Company Common Stock........................... 15
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PAGE
----
ARTICLE V
ADDITIONAL COVENANTS OF THE COMPANY
Conduct of Business of the Company and the Company
5.1. Subsidiaries................................................ 15
5.2. Notification of Certain Matters............................. 18
5.3. Access and Information...................................... 18
5.4. Stockholder Approval........................................ 19
5.5. Reasonable Best Efforts..................................... 19
5.6. Public Announcements........................................ 19
5.7. Compliance.................................................. 19
5.8. Company Benefit Plans....................................... 19
5.9. No Solicitation............................................. 20
5.10. SEC and Stockholder Filings................................. 21
5.11. Takeover Statutes........................................... 21
5.12. Debenture and Preferred Stock Offers........................ 22
ARTICLE VI
ADDITIONAL COVENANTS OF PARENT
6.1. Notification of Certain Matters............................. 22
6.2. Reasonable Best Efforts..................................... 22
6.3. Public Announcements........................................ 23
6.4. Compliance.................................................. 23
6.5. Director and Officer Liability.............................. 23
6.6. Formation and Actions of Merger Sub......................... 23
6.7. No Purchase of Company Common Stock......................... 24
ARTICLE VII
ADDITIONAL COVENANTS OF THE COMPANY AND PARENT
7.1. Proxy Statement............................................. 24
ARTICLE VIII
CONDITIONS
8.1. Conditions to Each Party's Obligations...................... 25
8.2. Conditions to Obligations of the Company.................... 25
8.3. Conditions to Obligations of Parent......................... 26
ARTICLE IX
TERMINATION AND ABANDONMENT
9.1. Termination................................................. 26
9.2. Effect of Termination....................................... 27
ARTICLE X
MISCELLANEOUS
10.1. Confidentiality............................................. 28
10.2. Amendment and Modification.................................. 28
10.3. Waiver of Compliance; Consents.............................. 29
10.4. Survival of Representations and Warranties.................. 29
10.5. Notices..................................................... 29
10.6. Binding Effect; Assignment.................................. 30
10.7. Expenses.................................................... 30
10.8. Governing Law............................................... 30
10.9. Counterparts................................................ 30
10.10. Interpretation.............................................. 30
10.11. Entire Agreement............................................ 30
10.12. Specific Performance........................................ 30
10.13. Third Parties............................................... 31
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INDEX OF DEFINED TERMS
PAGE
----
Acquisition Agreement....................................... 31
Acquisition Transaction..................................... 32
Affiliate................................................... 46
Agreement................................................... 1
Articles of Merger.......................................... 2
Benefit Plans............................................... 14
CBC......................................................... 10
Certificate of Incorporation................................ 6
Certificates................................................ 3
Closing..................................................... 2
Closing Date................................................ 2
Code........................................................ 14
Company..................................................... 1
Company Common Stock........................................ 3
Company ERISA Affiliate..................................... 14
Company FCC Licenses........................................ 17
Company Group............................................... 15
Company Licensed Facilities................................. 17
Company Licenses Facility................................... 17
Company LMA Facilities...................................... 17
Company LMA Facility........................................ 17
Company Options............................................. 4
Company Permits............................................. 12
Company Preferred Stock..................................... 6
Company Proposal............................................ 28
Company Stockholders Meeting................................ 28
Company Subsidiaries........................................ 5
Consent..................................................... 8
Debenture Offer............................................. 33
Debentures.................................................. 33
Effective Time.............................................. 2
End Date.................................................... 40
Event....................................................... 11
Exchange Act................................................ 7
Exchange Fund............................................... 3
FCC......................................................... 9
Financial Advisor........................................... 32
GAAP........................................................ 11
Governmental Authority...................................... 8
HSR Act..................................................... 9
Indemnified Losses.......................................... 35
Indemnified Person.......................................... 35
Intellectual Property....................................... 18
Law......................................................... 9
Letter of Transmittal....................................... 3
Liens....................................................... 7
iii
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PAGE
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Litigation.................................................. 10
LMA Facility FCC License.................................... 17
LMA Facility FCC Licenses................................... 17
Material Contract........................................... 12
Merger...................................................... 1
Merger Consideration........................................ 3
Merger Sub.................................................. 1
multi-employer plan......................................... 14
NASD........................................................ 9
Nevada Code................................................. 1
Notice...................................................... 30
Parent...................................................... 1
Parent Subsidiaries......................................... 3
Paying Agent................................................ 3
person...................................................... 46
Preferred Stock............................................. 33
Preferred Stock Offer....................................... 33
Preferred Stock Solicitation................................ 33
Proxy Statement............................................. 36
Representatives............................................. 30
Requisite Consents.......................................... 33
Requisite Preferred Stock Consents.......................... 33
SEC......................................................... 9
Securities Act.............................................. 7
Significant Contracts....................................... 13
Significant Transaction..................................... 13
Solicitation................................................ 33
Station Acquisition Contract................................ 25
subsidiary.................................................. 46
Superior Proposal........................................... 32
Surviving Corporation....................................... 1
Takeover Proposal........................................... 31
Takeover Statute............................................ 17
Tax or Taxes................................................ 16
Termination Fee............................................. 41
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AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (this "Agreement") is made and entered
into as of January 15, 2001, by and between FLCC Holdings, Inc., a Delaware
corporation ("Parent") and Citadel Communications Corporation, a Nevada
corporation (the "Company").
RECITALS
A. The Board of Directors of the Company has approved and adopted and deems
it advisable and in the best interests of the Company to consummate the merger
provided for herein (the "Merger"), pursuant to which Parent will acquire all of
the common stock of the Company through the merger of FLCC Acquisition Corp., a
to-be-formed wholly owned subsidiary of Parent incorporated in the state of
Nevada ("Merger Sub"), with and into the Company upon the terms and subject to
the conditions set forth in this Agreement. The Board of Directors of Parent has
approved and adopted and deems it advisable and in the best interests of Parent
and its stockholders to consummate the Merger upon the terms and subject to the
conditions set forth herein.
B. The parties hereto desire to make certain representations, warranties,
covenants and agreements in connection with the Merger.
NOW, THEREFORE, in consideration of the foregoing, and of the
representations, warranties, covenants and agreements contained herein, the
parties hereto agree as follows:
ARTICLE I
THE MERGER; CLOSING
1.1. The Merger. Upon the terms and subject to the conditions set forth in
this Agreement:
(a) At the Effective Time, Merger Sub shall be merged with and into
the Company in accordance with the applicable provisions of Chapters 78 and
92A of the Nevada Revised Statutes (the "Nevada Code"). The Company shall
be the surviving corporation in the Merger (the "Surviving Corporation")
and shall continue its existence as a corporation under the laws of the
State of Nevada. As a result of the Merger, the Company shall become a
direct, wholly owned subsidiary of Parent. After the Effective Time, the
separate corporate existence of Merger Sub shall cease. The Merger shall
have the effects set forth in Section 92A.250 of the Nevada Code.
(b) The closing of the Merger (the "Closing") shall take place (a) at
the offices of Fried, Frank, Harris, Shriver & Jacobson, One New York
Plaza, New York, NY 10004, as soon as practicable (but not later than 5
business days) after the last to be fulfilled or waived of the conditions
set forth in Article VIII (excluding conditions that, by their terms,
cannot be satisfied until the Closing Date, but subject to the fulfillment
or waiver of such conditions) shall be fulfilled or waived in accordance
herewith, or (b) at such other time, date or place as Parent and the
Company may agree. The date on which the Closing occurs is hereinafter
referred to as the "Closing Date."
(c) On or before the Closing Date, the parties shall (i) file articles
of merger with respect to the Merger (the "Articles of Merger") in such
form as is required by and executed in accordance with the Nevada Code and
(ii) make all other filings or recordings required under the laws of
Nevada. The Merger shall become effective at the date and time of the
filing of the Articles of Merger (or such other date and time as may be
agreed to by Parent and the Company and specified in the Articles of Merger
as may be permitted by the Nevada Code). The time at which the Merger
becomes effective is referred to in this Agreement as the "Effective Time."
1.2. Directors and Officers. The directors of Merger Sub immediately prior
to the Effective Time shall be the directors of the Surviving Corporation, as of
and after the Effective Time and until their successors are duly appointed or
elected in accordance with the laws of Nevada or until their earlier death,
resignation or removal. The officers of the Company immediately prior to the
Effective Time shall continue as the officers of the Surviving Corporation as of
and after the Effective Time until such time as their successors shall be
69
duly elected or appointed in accordance with the laws of Nevada or until their
earlier death, resignation or removal.
1.3. Articles of Incorporation and Bylaws. The articles of incorporation
and bylaws of Merger Sub immediately prior to the Effective Time shall be
adopted as the articles of incorporation and bylaws of the Surviving Corporation
as of the Effective Time. Such bylaws shall include a provision that the Nevada
Control Share Act, Sections 78.378 to 78.3793 of the Nevada Code, inclusive,
does not apply to any holders of capital stock of the Surviving Corporation or
any successor entity as a result of such holders' acquisition of shares of such
capital stock.
ARTICLE II
EFFECT OF THE MERGER ON SECURITIES OF THE COMPANY
AND MERGER SUB
2.1. Conversion of Merger Sub Stock. At the Effective Time, by virtue of
the Merger and without any action on the part of any of the parties, each share
of the common stock of Merger Sub outstanding immediately prior to the Effective
Time shall be converted into and shall become one fully paid and nonassessable
share of common stock of the Surviving Corporation.
2.2. Conversion of Company Common Stock. (a) Subject to the provisions of
this Agreement, at the Effective Time each issued and outstanding share of
common stock, par value $.001 per share, of the Company ("Company Common
Stock"), shall be converted into the right to receive in cash, without interest,
an amount equal to $26.00 (the "Merger Consideration").
(b) As a result of the Merger and without any action on the part of
any holder thereof, at the Effective Time all shares of Company Common
Stock shall cease to be outstanding and shall be canceled and retired and
shall cease to exist, and each holder of shares of Company Common Stock
shall thereafter cease to have any rights with respect to such shares of
Company Common Stock, except the right to receive, without interest, the
Merger Consideration upon the surrender of a certificate representing such
shares of Company Common Stock, together with a duly completed Letter of
Transmittal (as defined below), or a Letter of Transmittal with respect to
shares of Company Common Stock held in book-entry form (the
"Certificates").
(c) Notwithstanding anything contained in this Section 2.2 to the
contrary, each share of Company Common Stock issued and held in the
Company's treasury or by any of the Company's subsidiaries immediately
prior to the Effective Time shall, by virtue of the Merger, cease to be
outstanding and shall be canceled and retired without payment of any
consideration therefor.
(d) Notwithstanding the foregoing, each share of Company Common Stock
owned by Parent or any of its subsidiaries ("Parent Subsidiaries") at the
Effective Time shall, by virtue of the Merger, be canceled and retired
without payment of any consideration therefor.
(e) The Merger Consideration shall be subject to appropriate
adjustment in the event of a stock split, stock dividend or
recapitalization after the date of this Agreement and prior to the Closing
applicable to Company Common Stock.
2.3. Surrender and Payment. (a) Prior to the Effective Time, Parent shall
appoint an agent reasonably acceptable to the Company (the "Paying Agent") for
the purpose of exchanging the Certificates for the Merger Consideration. Prior
to or concurrently with the Effective Time, Parent shall deposit with or make
available to the Paying Agent the Merger Consideration to be paid in respect of
the shares of Company Common Stock (the "Exchange Fund"). Promptly after the
Effective Time, Parent will send, or will cause the Paying Agent to send, to
each record holder of shares of Company Common Stock, at the Effective Time, a
letter of transmittal and instructions (which shall specify that the delivery
shall be effected, and risk of loss and title shall pass, only upon proper
delivery of the Certificates to the Paying Agent) for use in such exchange (a
"Letter of Transmittal").
(b) Upon surrender to the Paying Agent of his Certificate together
with a properly completed Letter of Transmittal, each holder of shares of
Company Common Stock will be entitled to receive promptly
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the Merger Consideration in respect of the shares of Company Common Stock
represented by his Certificate. Until so surrendered, each such Certificate
shall represent after the Effective Time, for all purposes, only the right
to receive the Merger Consideration.
(c) If any portion of the Merger Consideration is to be paid to a
person other than the person in whose name the Certificate so surrendered
is registered, it shall be a condition to such payment that such
Certificate shall be properly endorsed or otherwise be in proper form for
transfer and that the person requesting such payment shall pay to the
Paying Agent any transfer or other taxes required as a result of such
payment to a person other than the registered holder of such Certificate,
or establish to the satisfaction of the Paying Agent that such tax has been
paid or is not payable.
(d) Any portion of the Exchange Fund made available to or deposited
with the Paying Agent pursuant to this Section 2.3 that remains unclaimed
by the holders of Company Common Stock six months after the Effective Time
shall be returned to Parent, upon demand, and any such holder who has not
exchanged his shares for the Merger Consideration in accordance with this
Section 2.3 prior to that time shall thereafter look only to Parent for
payment of such consideration without any interest thereon. Notwithstanding
the foregoing, Parent shall not be liable to any holder of Company Common
Stock for any amounts paid to a public official pursuant to applicable
abandoned property, escheat or similar laws. Any amounts remaining
unclaimed by the holders of Company Common Stock five years after the
Effective Time (or such earlier date, immediately prior to such time when
the amounts would otherwise escheat to or become property of any
Governmental Authority) shall become, to the extent permitted by applicable
law, the property of Parent free and clear of any claims or interest of any
person previously entitled thereto.
2.4. Options. The Company shall use its reasonable best efforts to cause:
(i) each option granted by the Company to purchase shares of Company Common
Stock (the "Company Options") with an exercise price per share equal to or
greater than the Merger Consideration to be irrevocably cancelled with only
nominal consideration therefor; and (ii) each Company Option outstanding after
application of clause (i) to be fully vested and converted immediately prior to
the Effective Time into the right to receive an amount of cash, without
interest, equal to (x) the excess of the Merger Consideration over such exercise
price per share of Company Common Stock subject to such Company Option
multiplied by (y) the number of shares of Company Common Stock subject to such
option immediately prior to the Effective Time. The Company shall take all
action necessary to give effect to this Section 2.4 in full (including, without
limitation, obtaining consents from the holders of Company Options to the
cancellation or conversion thereof, as applicable, in accordance with this
Section 2.4). The Parent shall cause the Surviving Corporation to pay any
amounts required to be paid under this Section 2.4 as promptly as practicable
following the Effective Time.
2.5. Withholding Rights. Parent shall be entitled to deduct and withhold
from the consideration otherwise payable to any holder of Company Common Stock
or Company Options pursuant to this Article II such amounts as it is required to
deduct and withhold with respect to the making of such payment under any
provision of federal, state, local or foreign tax law. If Parent so withholds
amounts and remits such amounts to the appropriate authorities, such amounts
shall be treated for all purposes as having been paid to the holder of Company
Common Stock or Company Options, as the case may be, in respect of which Parent
made such deduction and withholding.
2.6. Lost, Stolen or Destroyed Certificates. In the event that any
Certificate has been lost, stolen or destroyed, upon the making of an affidavit
of that fact by the person claiming such Certificate to be lost, stolen or
destroyed and, if required by Parent, the posting by such person of a bond in
such reasonable amount as Parent may direct as indemnity against any claim that
may be made against it with respect to such certificate, Parent will, in
exchange for such lost, stolen or destroyed Certificate, pay or cause to be paid
the amounts deliverable in respect thereof pursuant to Section 2.3.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as disclosed in the Securities Filings or in a separate disclosure
schedule, which has been delivered by the Company to Parent prior to the
execution of this Agreement (the "Company Disclosure Schedule") (each section of
which qualifies the correspondingly numbered representation and warranty or
covenant to the extent specified therein and such other representations and
warranties or covenants to the extent a matter in such section is disclosed in
such a way as to make its relevance to the information called for by such other
representation and warranty or covenant readily apparent), the Company hereby
represents and warrants as of the date hereof to Parent as follows:
3.1. Organization and Good Standing; Organizational Documents. (a) The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of Nevada. Each of the Company's direct and indirect
subsidiaries (the "Company Subsidiaries") is a corporation or other business
entity duly organized, validly existing and in good standing under the laws of
the jurisdiction of its incorporation or organization. Each of the Company and
the Company Subsidiaries is qualified or licensed to do business as a foreign
corporation or other business entity, as applicable, and is in good standing, in
each jurisdiction where the character of its properties owned, operated or
leased or the nature of its activities makes such qualification necessary,
except where the failure to be so qualified or licensed would not, individually
or in the aggregate, constitute a Company Material Adverse Effect. The term
"Company Material Adverse Effect" means any change, effect, circumstance or
event that is or is reasonably likely to (i) be materially adverse to the
business, results of operations or financial condition or prospects of the
Company and its subsidiaries taken as a whole, other than any change, effect,
circumstance or event relating to or resulting from (A) general changes in the
radio industry or the advertising markets, (B) changes in general economic
conditions or securities markets in general or (C) this Agreement or the
transactions contemplated hereby or the announcement thereof or (ii) materially
adversely effect the ability of the Company to perform its obligations under
this Agreement or timely consummate the transactions contemplated by this
Agreement. The Company and the Company Subsidiaries have all requisite corporate
or similar organizational power and all governmental licenses, authorizations,
consents and approvals required to carry on their respective businesses as they
are now being conducted and necessary to own, operate and lease their properties
and assets, except those licenses, authorizations, consents and approvals, the
failure of which to possess does not, individually, or in the aggregate,
constitute a Company Material Adverse Effect.
(b) The Company has furnished or otherwise made available to Parent a
complete and correct copy of the Company's Amended and Restated Certificate
of Incorporation and all amendments thereto, as currently in effect
("Articles of Incorporation"), and Bylaws. Such Articles of Incorporation
and Bylaws and all similar organizational documents of the Company
Subsidiaries are in full force and effect. The Company is not in violation
of its Articles of Incorporation or Bylaws and, except as does not,
individually or in the aggregate, constitute a Company Material Adverse
Effect, none of the Company Subsidiaries is in violation of any similar
organizational documents of such Company Subsidiary.
3.2. Capitalization. As of the date hereof, the authorized capital stock of
the Company consists of 200,000,000 shares of Company Common Stock, 19,033,122
shares of preferred stock, par value $.001 per share (the "Company Preferred
Stock") and 20,000,000 shares of undesignated preferred stock. Of such
authorized shares, as of the date hereof, there are issued and outstanding
37,006,138 shares of Company Common Stock, no shares of Company Common Stock are
issued and held in the treasury of Company, no shares of the Company Preferred
Stock or undesignated preferred stock are outstanding, and no other capital
stock of the Company is issued or outstanding. All issued and outstanding shares
of Company Common Stock are duly authorized, validly issued and outstanding,
fully paid and nonassessable and were issued free of preemptive rights in
compliance with applicable corporate and securities Laws. There are no
outstanding rights, including stock appreciation rights, subscriptions,
warrants, puts, calls, unsatisfied preemptive rights, options or other
agreements of any kind relating to, or the value of which is tied to the value
of, any of the outstanding, authorized but not issued, unauthorized or treasury
shares of the capital stock or any other security of the Company, and there is
no authorized or outstanding security of any kind convertible into or
exchangeable for any such capital stock or other security. There are no
restrictions imposed by the Company
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upon the transfer of or otherwise pertaining to the securities (including, but
not limited to, the ability to pay dividends thereon) or retained earnings of
the Company and the Company Subsidiaries or the ownership thereof other than
those imposed by the Securities Act of 1933, as amended, and the rules and
regulations thereunder (the "Securities Act"), the Securities Exchange Act of
1934, as amended, and the rules and regulations thereunder (the "Exchange Act"),
the Communications Act, applicable state securities Laws, applicable corporate
law or the Company's Articles of Incorporation.
3.3. Subsidiaries. The Company does not own, directly or indirectly, any
capital stock or other proprietary interest in any company, association, trust,
partnership, joint venture or other entity. Each Company Subsidiary is, directly
or indirectly, wholly owned by the Company and all of the capital stock and
other interests of the Company Subsidiaries so held by the Company are owned by
it, free and clear of any Lien. All of the outstanding shares of capital stock
in each of the Company Subsidiaries are duly authorized, validly issued and
outstanding, fully paid and nonassessable, and were issued free of preemptive
rights in compliance with applicable corporate and securities Laws. There are no
irrevocable proxies or similar obligations with respect to such capital stock of
the Company Subsidiaries held by the Company and no equity securities or other
interests of any of the Company Subsidiaries are or may become required to be
issued or purchased by reason of any options, warrants, rights to subscribe to,
puts, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into or exchangeable for, shares of any capital
stock of any Company Subsidiary, and there are no contracts, commitments,
understandings or arrangements by which any Company Subsidiary is bound to issue
additional shares of its capital stock, or options, warrants or rights to
purchase or acquire any additional shares of its capital stock or securities
convertible into or exchangeable for such shares. The term "Liens" means, with
respect to any asset, any mortgage, lien, pledge, charge, security interest or
encumbrance of any kind in respect of such asset.
3.4. Authorization; Binding Agreement. (a) The Company has all requisite
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. This Agreement, the execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby, including, but not limited to, the Merger, have been duly
and validly authorized by the Company's Board of Directors, and no other
corporate proceedings on the part of the Company or any Company Subsidiary are
necessary to authorize the execution and delivery of this Agreement or to
consummate the transactions contemplated hereby (other than the approval and
adoption of this Agreement and the transactions contemplated hereby by the
stockholders of the Company in accordance with the Nevada Code and the Articles
of Incorporation and Bylaws of the Company) and the filing and recordation of
appropriate merger documents as required by the Nevada Code. This Agreement has
been duly and validly executed and delivered by the Company and, assuming the
due authorization, execution and delivery of the Agreement by Parent,
constitutes the legal, valid and binding agreement of the Company, enforceable
against the Company in accordance with its terms.
(b) The affirmative vote of the holders of a majority of the Company
Common Stock entitled to vote at a duly called meeting of stockholders at
which a quorum is present is the only vote of the holders of any class or
series of capital stock of the Company or any of the Company Subsidiaries
required to approve the Merger and this Agreement. No other vote of the
stockholders or directors of the Company or any of the Company Subsidiaries
is required by law, the articles of incorporation or bylaws of the Company
or any of the Company Subsidiaries or otherwise in order for the Company to
consummate the Merger and the transactions contemplated hereby.
(c) As of the date hereof, the Board of Directors of the Company, at a
meeting duly called and held, has (i) determined that this Agreement and
the transactions contemplated hereby are advisable and are fair to and in
the best interests of the Company and has approved the same and (ii)
resolved to recommend that the Company's stockholders approve this
Agreement and the transactions contemplated herein.
(d) The Company has not adopted a shareholder rights plan or any
similar plan or instrument.
3.5. Governmental Approvals. No consent, approval, waiver or authorization
of, notice to or declaration or filing with ("Consent") any nation or
government, any state or other political subdivision thereof, any person,
authority or body exercising executive, legislative, judicial, regulatory or
administrative functions of or
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pertaining to government including, without limitation, any governmental or
regulatory authority, agency, department, board, commission or instrumentality,
any court, tribunal or arbitrator and any self-regulatory organization
("Governmental Authority") on the part of the Company or any of the Company
Subsidiaries is required in connection with the execution or delivery by the
Company of this Agreement or the consummation by the Company of the transactions
contemplated hereby other than (i) the filing of the Articles of Merger with the
Secretary of State of the State of Nevada in accordance with the Nevada Code,
(ii) filings with the Securities and Exchange Commission (the "SEC"), the
National Association of Securities Dealers (the "NASD") and the Nasdaq National
Market, (iii) Consents from or with Governmental Authorities set forth in
Schedule 3.5 of the Company Disclosure Schedule, (iv) Consents required under
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the
rules and regulations promulgated thereunder (the "HSR Act"), (v) any filings
required or approvals necessary pursuant to any state securities or "blue sky"
laws, (vi) any filings with and approvals and authorizations of the Federal
Communications Commission or any successor entity (the "FCC") as may be required
under the Communications Act of 1934, as amended, and the rules, regulations and
policies of the FCC thereunder (collectively, the "Communications Act"),
including, without limitation, filings and approvals in connection with the
transfer of control of the Company FCC Licenses, and (vii) those Consents that,
if they were not obtained or made, would not, individually or in the aggregate,
constitute a Company Material Adverse Effect.
3.6. No Violations. The execution and delivery of this Agreement, the
consummation by the Company of the transactions contemplated hereby and
compliance by the Company with any of the provisions hereof will not (i)
conflict with or result in any breach of any provision of the articles of
incorporation or bylaws or other organizational documents of the Company or any
of the Company Subsidiaries, (ii) require any Consent under or result in a
violation or breach of, or constitute (with or without due notice or lapse of
time or both) a default (or give rise to any right of termination, cancellation
or acceleration of the performance required) under any of the terms, conditions
or provisions of any Material Contract or other material obligation to which the
Company or any Company Subsidiary is a party or by which any of them or any of
their properties or assets may be bound, (iii) result in the creation or
imposition of any Lien upon any of the assets of the Company or any Company
Subsidiary, or (iv) subject to obtaining the Consents from Governmental
Authorities referred to in Section 3.5 above and the expiration of the HSR
waiting period, conflict with or violate any applicable provision of any
constitution, treaty, statute, law, code, rule, regulation, ordinance, policy or
order of any Governmental Authority or other matters having the force of law
including, but not limited to, any orders, decisions, injunctions, judgments,
awards and decrees of or agreements with any court or other Governmental
Authority ("Law") currently in effect to which the Company or any Company
Subsidiary or its or any of their respective assets or properties are subject,
except in the case of clauses (ii), (iii) and (iv) above, for any deviations
from the foregoing which do not, individually or in the aggregate, constitute a
Company Material Adverse Effect.
3.7. Securities Filings. As of their respective dates, or as of the date of
the last amendment thereof, if amended after filing, none of the Securities
Filings (including all schedules thereto and disclosure documents incorporated
by reference therein), contained or, as to Securities Filings subsequent to the
date hereof, will contain, any untrue statement of a material fact or omitted
or, as to Securities Filings subsequent to the date hereof, will omit, to state
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. Each of the Securities Filings was filed in a timely manner and
at the time of filing or as of the date of the last amendment thereof, if
amended after filing, complied or, as to Securities Filings subsequent to the
date hereof, will comply with the Exchange Act, the Securities Act, the
Communications Act or other applicable Law except those failures to timely file
or comply which do not or will not, individually or in the aggregate, constitute
a Company Material Adverse Effect. The term "Security Filings" means (i) the
Company's and Citadel Broadcasting Company's ("CBC") Annual Reports on Form
10-K, as amended, for the years ended December 31, 1998 and 1999, as filed with
the SEC, (ii) the Company's proxy statements relating to all of the meetings of
stockholders (whether annual or special) of the Company since January 1, 1998,
as filed with the SEC and (iii) all other reports, statements and registration
statements and amendments thereto (including, without limitation, Quarterly
Reports on Form 10-Q and Current Reports on Form 8-K, as amended) filed by the
Company or CBC, as applicable, with the SEC since January 1, 1998, together with
those reports or other
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documents of the type described in clauses (i) though (iii) above, subsequently
provided or required to be provided pursuant to this Agreement.
3.8. Litigation; Liabilities. (a) As of the date hereof, there is no
action, cause of action, claim, demand, suit, proceeding, citation, summons,
subpoena, inquiry or investigation of any nature, civil, criminal, regulatory or
otherwise, in law or in equity, by or before any court, tribunal, arbitrator,
the FCC or other Governmental Authority ("Litigation") pending or, to the
knowledge of the Company, threatened against the Company or any Company
Subsidiaries, any officer, director, employee or agent thereof, in his or her
capacity as such, or as a fiduciary with respect to any Benefit Plan of the
Company or any Company Subsidiaries or otherwise relating to the Company or any
Company Subsidiaries or the securities of any of them, or any properties or
rights of the Company or any Company Subsidiaries or any Benefit Plan of the
Company or any Company Subsidiaries, except as does not, individually or in the
aggregate, constitute a Company Material Adverse Effect.
(b) Neither the Company nor any of the Company Subsidiaries has or is
subject to any liabilities (absolute, accrued, contingent or otherwise),
except liabilities or obligations which do not, individually or in the
aggregate, constitute a Company Material Adverse Effect.
3.9. Financial Statements. (a) Each of the consolidated balance sheets of
the Company and the Company Subsidiaries (including all related notes) included
in the financial statements contained in the Securities Filings (or incorporated
therein by reference) present fairly, in all material respects, the consolidated
financial position of the Company and the Company Subsidiaries as of the
respective dates indicated, and each of the statements of consolidated
operations, statements of consolidated cash flows and statements of consolidated
common stock and other stockholders' equity of the Company and the Company
Subsidiaries (including all related notes) contained in such financial
statements present fairly, in all material respects, the consolidated results of
operations and cash flows of the Company and the Company Subsidiaries for the
respective periods indicated, in each case in conformity with U.S. generally
accepted accounting principles ("GAAP") applied on a consistent basis throughout
the periods involved (except for changes in accounting principles disclosed in
the notes thereto) and the rules and regulations of the SEC, except that
unaudited interim financial statements are subject to normal and recurring
year-end adjustments and any other adjustments described therein and do not
include certain notes and other information which may be required by GAAP but
which are not required under the Exchange Act. The financial statements included
in the Securities Filings are in all material respects in accordance with the
books and records of the Company and the Company Subsidiaries.
(b) Each of the consolidated balance sheets of CBC and it subsidiaries
(including all related notes) included in the financial statements
contained in the Securities Filings (or incorporated therein by reference)
present fairly, in all material respects, the consolidated financial
position of CBC and it subsidiaries as of the respective dates indicated,
and each of the statements of consolidated operations, statements of
consolidated cash flows and statements of consolidated common stock and
other stockholders' equity of CBC and it subsidiaries (including all
related notes) contained in such financial statements present fairly, in
all material respects, the consolidated results of operations and cash
flows of CBC and it subsidiaries for the respective periods indicated, in
each case in conformity with GAAP applied on a consistent basis throughout
the periods involved (except for changes in accounting principles disclosed
in the notes thereto) and the rules and regulations of the SEC, except that
unaudited interim financial statements are subject to normal and recurring
year-end adjustments and any other adjustments described therein and do not
include certain notes and other information which may be required by GAAP
but which are not required under the Exchange Act. The financial statements
included in the Securities Filings are in all material respects in
accordance with the books and records of CBC and its subsidiaries.
3.10. Absence of Certain Changes. Since September 30, 2000, there has not
been: (i) any event, occurrence, fact, condition, change, development or effect
("Event") that, individually or in the aggregate, constitutes a Company Material
Adverse Effect; (ii) any declaration, payment or setting aside for payment of
any dividend (except to the Company or any Company Subsidiary wholly owned by
the Company) or other distribution or any redemption, purchase or other
acquisition of any shares of capital stock or securities of the
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Company or any Company Subsidiary; (iii) any return of any capital or other
distribution of assets to stockholders of the Company or any Company Subsidiary
(except to the Company or any Company Subsidiary wholly owned by the Company);
(iv) any acquisition (by merger, consolidation, acquisition of stock or assets
or otherwise) of any person or business; or (v) any material change by the
Company to its accounting policies, practices, or methods, except, in the case
of each of the foregoing clauses (i) through (v), as expressly contemplated by
this Agreement.
3.11. Related Party Transactions. Since September 30, 2000, the Company has
not entered into any relationship or transaction of a sort that would be
required to be disclosed by the Company pursuant to Item 404 of Regulation S-K
of the Securities Act.
3.12. Compliance with Laws; Permits. (a)Neither the Company nor any of the
Company Subsidiaries is in conflict with, or in default or violation of any Law
in any jurisdiction, foreign or domestic, applicable to the Company or any of
the Company Subsidiaries or by which its or any of their respective assets or
properties is bound or affected, except for such conflicts, defaults or
violations which do not, individually or in the aggregate, constitute a Company
Material Adverse Effect.
(b) The Company and the Company Subsidiaries hold all permits,
licenses, easements, rights-of-way, variances, exemptions, consents,
certificates, orders and approvals which are material to the operation of
the businesses of the Company and the Company Subsidiaries (collectively,
the "Company Permits"), except where the failure to hold such Company
Permits does not, individually or in the aggregate, constitute a Company
Material Adverse Effect. The Company and the Company Subsidiaries are in
compliance with the terms of the Company Permits except where the failure
to so comply, individually or in the aggregate, does not constitute a
Company Material Adverse Effect.
(c) None of the Company, any Company Subsidiary or, to the knowledge
of the Company, any director, officer, agent, employee or other person
acting on behalf of any of the foregoing has used any corporate funds for
unlawful contributions, payments, gifts or entertainment or for the payment
of other unlawful expenses relating to political activity, or made any
direct or indirect unlawful payments to governmental or regulatory
officials or others, which constitutes, individually or in the aggregate, a
Company Material Adverse Effect.
3.13. Finders and Investment Bankers. Neither the Company and the Company
Subsidiaries nor any of their respective officers or directors has employed any
broker or finder or incurred any liability for any brokerage fees, commissions
or finders' fees in connection with the transactions contemplated hereby other
than pursuant to the agreements with Credit Suisse First Boston Corporation,
accurate and complete copies of which have been provided to Parent.
3.14. Material Contracts. (a) Neither the Company nor any Company
Subsidiary is a party or is subject to any note, bond, mortgage, indenture,
contract, lease, license, agreement, understanding, instrument, bid or proposal
that is required to be described in or filed as an exhibit to any Securities
Filing ("Material Contract") that is not so described in or filed as required by
the Securities Act or the Exchange Act, as the case may be.
(b) The Company Disclosure Schedule sets forth a true and complete
list of the following, true and complete copies of which have been provided
or made available to Parent:
(i) all contracts, agreements or other instruments related to any
Significant Transaction pursuant to which the Company or any Company
Subsidiary has any obligations (whether absolute, accrued, asserted,
unasserted or contingent or otherwise, and whether pursuant to any
earn-out or post-closing adjustment) to issue any shares of capital
stock or other securities of the Company or any securities of any
Company Subsidiary or deliver any other consideration as part of any
such Significant Transaction. For purposes of this Agreement,
"Significant Transaction" shall mean any acquisition or disposition of
(A) any business, limited liability company, association or other
business organization or division thereof or any material partnership
interest or material joint venture interest, (B) any material assets or
properties other than in the ordinary course of business or (C) any
radio broadcast station; and
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(ii) each employment contract, agreement or other instrument to
which the Company or any Company Subsidiary is a party or by which the
Company or any Company Subsidiary otherwise is bound with any senior
management employee of the Company or any Company Subsidiary.
(c) (i) Each contract or agreement disclosed or required to be
disclosed in Schedule 3.14 of the Company Disclosure Schedule and each
Material Contract (collectively, the "Significant Contracts") is in full
force and effect and constitutes a legal, valid, binding and enforceable
obligation of the Company and each Company Subsidiary to the extent any
such entity is a party thereto and, to the knowledge of the Company, each
other party thereto.
(ii) No Consent of any person is needed in order that each such
Significant Contract shall continue in full force and effect in
accordance with its terms without penalty, acceleration or rights of
early termination by reason of the consummation of the transactions
contemplated herein, except for Consents the absence of which do not,
individually or in the aggregate, constitute a Company Material Adverse
Effect.
(iii) Neither the Company nor any Company Subsidiary is in
violation or breach of or default under (nor does there exist any
condition which upon the passage of time or the giving of notice would
cause such violation or default under) any such Significant Contract;
nor to the Company's knowledge is any other party to any such
Significant Contract in violation or breach of or default under (nor
does there exist any condition which upon the passage of time or the
giving of notice would cause such violation or default under) any such
Significant Contract in each case where such violation or breach,
individually or in the aggregate, constitutes a Company Material Adverse
Effect.
3.15. Employee Benefit Plans. (a) Section 3.15 of the Company Disclosure
Schedule sets forth a complete list of all material "employee benefit plans" (as
defined in Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA")), bonus, pension, profit sharing, deferred compensation,
incentive compensation, excess benefit, stock, stock option, severance,
termination pay, change in control or other material employee benefit plans,
programs, arrangements or agreements currently maintained, or contributed to, or
required to be maintained or contributed to, by the Company or any Company
Subsidiary for the benefit of any current or former employees, officers,
directors or independent contractors of the Company or any Company Subsidiary
and with respect to which the Company or any Company Subsidiary has any
liability (collectively, the "Benefit Plans"). The Company has delivered or made
available to Parent true, complete and correct copies of each Benefit Plan.
(b) Each Benefit Plan has been administered in accordance with its
terms and in compliance with the applicable provisions of ERISA (including,
without limitation, the making of all contributions and payments), the
Internal Revenue Code of 1986, as amended (the "Code"), and other
applicable law, except where the failure to so administer or comply does
not, individually or in the aggregate, constitute a Company Material
Adverse Effect. All Benefit Plans intended to be qualified under Section
401(a) of the Code are so qualified and have been the subject of favorable
determination letters from the Internal Revenue Service, and, to the
knowledge of the Company, no circumstances exist that could result in the
loss of such qualified status.
(c) Neither the Company nor any Company Subsidiary, nor any current or
former "Company ERISA Affiliate," has incurred any material liability under
Title IV of ERISA or Section 412 of the Code that constitutes, individually
or in the aggregate, a Company Material Adverse Effect. For purposes of
this Agreement, a "Company ERISA Affiliate" is a person or entity that is
considered one employer with the Company under Section 4001(a)(15) of ERISA
or Section 414 of the Code. No Benefit Plan is subject to Title IV of ERISA
or Section 412 of the Code, and no Benefit Plan is a "multi-employer plan"
(as defined in Section 3(37) of ERISA).
(d) With respect to any Benefit Plan that is an employee welfare
benefit plan (as defined in Section 3(l) of ERISA), (i) no such Benefit
Plan provides benefits, including without limitation, death or medical
benefits, beyond termination of employment or retirement other than (A)
coverage mandated by statute or (B) death or retirement benefits under a
Benefit Plan qualified under Section 401(a) of the Code, and (ii) each such
Benefit Plan (including any such Plan covering retirees or other former
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employees) may be amended or terminated without liability that would,
individually or in the aggregate, constitute a Company Material Adverse
Effect.
(e) There is no pending or, to the Company's knowledge, threatened
litigation relating to employment, termination of employment, compensation
or employee benefits involving the Company or any Company Subsidiary which,
if determined adversely to the Company or any Company Subsidiary, would,
individually or in the aggregate, constitute a Company Material Adverse
Effect.
(f) In the event that any individual is classified by the Company or
any Company Subsidiary as a non-employee (such as an independent
contractor, leased employee, consultant or special consultant) and is later
reclassified as an employee upon governmental or judicial review,
notwithstanding such reclassification, no such individual shall be eligible
to participate in any Benefit Plan, except where such eligibility would,
individually or in the aggregate, constitute a Company Material Adverse
Effect.
(g) The execution of, and performance of the transactions contemplated
in, this Agreement will not (either alone or upon the occurrence of any
additional or subsequent events) (i) constitute an event under any Benefit
Plan that will or may result in any payment (whether of severance pay or
otherwise), acceleration, forgiveness of indebtedness, vesting,
distribution, increase in benefits or obligation to fund benefits with
respect to any employee of the Company or any Company Subsidiary, or (ii)
result in the triggering or imposition of any restrictions or limitations
on the right of the Company or Parent to cause any such Benefit Plan to be
amended or terminated (or which would result in any materially adverse
consequence for so doing). No payment or benefit that will or may be made
by the Company, Parent, or any of their respective subsidiaries or
affiliates with respect to any employee of the Company or any Company
Subsidiary under any Benefit Plan in connection with the transactions
contemplated by this Agreement will be characterized as an "excess
parachute payment," within the meaning of Section 280G(b)(1) of the Code.
(h) Neither the Company nor any Company Subsidiary is a party to any
collective bargaining agreement covering any current or former employees of
either of them. There are no union organizational efforts pending or, to
the Company's knowledge, threatened involving any employees of the Company
or any Company Subsidiary.
3.16. Taxes and Returns. (a) (i) All Tax Returns required to be filed by or
on behalf of the Company, each of the Company Subsidiaries, and each affiliated,
combined, consolidated or unitary group of which the Company or any of the
Company Subsidiaries is or has been a member (a "Company Group") have been
timely filed in the manner prescribed by law, and all such Tax Returns are true,
complete and accurate except to the extent any failures to file or failures to
be true, correct or accurate would not, individually or in the aggregate,
constitute a Company Material Adverse Effect; (ii) all Taxes due and owing by
the Company, any Company Subsidiary or any Company Group have been timely paid,
or adequately reserved for in accordance with GAAP, except to the extent any
failure to pay or reserve does not, individually or in the aggregate, constitute
a Company Material Adverse Effect; (iii) there are no claims or assessments
presently pending against the Company, any Company Subsidiary or any Company
Group, for any alleged Tax deficiency, and the Company does not know of any
threatened claims or assessments against the Company, any Company Subsidiary or
any Company Group for any alleged Tax deficiency, which in either case if upheld
would, individually or in the aggregate, constitute a Company Material Adverse
Effect; (iv) to the knowledge of the Company, no issues have been raised in any
audit or tax examination of the Company, any of the Company Subsidiaries or any
Company Group which, if determined adversely, would, individually or in the
aggregate, constitute a Company Material Adverse Effect; (v) there are no Liens
for Taxes on any asset of the Company or any Company Subsidiary, except for
Liens for Taxes not yet due and payable and Liens for Taxes that could not,
individually or in the aggregate, reasonably be expected to have a Company
Material Adverse Effect; and (vi) the Company and each of the Company
Subsidiaries has complied in all respects with all rules and regulations
relating to the withholding of Taxes (including, without limitation,
employee-related Taxes), except for failures to comply that would not,
individually or in the aggregate, constitute a Company Material Adverse Effect.
(b) Except as set forth on Schedule 3.16(c) of the Company Disclosure
Schedule, (i) to the Company's knowledge, no taxing authority in any
jurisdiction where the Company or any Company
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Subsidiary does not file Tax Returns has made a claim, assertion or threat
that the Company or Company Subsidiary is or may be subject to Tax in such
jurisdiction and (ii) neither the Company nor any Company Subsidiary has
agreed to any adjustment under Section 481(a) of the Code (or analogous
provisions of state, local or foreign law), as a result of a change of
accounting method or otherwise, or has disposed of any assets under the
installment method pursuant to Section 453 of the Code, in each case under
this clause (ii) which would require the inclusion of a material amount in
income after the Effective Date.
(c) The statutes of limitations for the federal income Tax Returns of
the Company and the Company Subsidiaries (including, without limitation,
any Company Group) have expired or otherwise have been closed for all
taxable periods ending on or before December 31, 1996.
(d) For purposes of this Agreement, (i) "Tax" or "Taxes" means all
taxes, levies or other like assessments, charges or fees (including
estimated taxes, charges and fees), including, without limitation, income,
corporation, advance corporation, gross receipts, transfer, excise,
property, sales, use, value-added, license, payroll, withholding, social
security and franchise or other governmental taxes or charges, imposed by
the United States or any state, county, local or foreign government or
subdivision or agency thereof, any liability for taxes, levies or other
like assessments, charges or fees of another person pursuant to Treasury
Regulation Section 1.1502-6 or any similar or analogous provision of
applicable law or otherwise (including, without limitation, under a tax
sharing or other agreement) and such term shall include any interest,
penalties or additions to tax attributable to such taxes, levies or other
like assessments, charges or fees and (ii) "Tax Return" means any report,
return, statement, declaration or other written information required to be
supplied to a taxing or other Governmental Authority in connection with
Taxes.
3.17. Fairness Opinion. The Company's Board of Directors received from
Credit Suisse First Boston Corporation an opinion to the effect that the Merger
Consideration is fair to the holders of the shares of Company Common Stock from
a financial point of view.
3.18. Takeover Statutes. No "business combination," "fair price,"
"moratorium," "control share acquisition" or other similar antitakeover statute
or regulation enacted under state or federal laws in the United States,
including, without limitation, Sections 78.378 to 78.3793, inclusive, and 78.411
to 78.444, inclusive, of the Nevada Code (each a "Takeover Statute") applicable
to the Company or any of the Company Subsidiaries is applicable to the Merger,
this Agreement or the other transactions contemplated hereby.
3.19. Company FCC Licenses; Operations of Company Licensed Facilities. The
Company and the Company Subsidiaries have operated the radio stations for which
the Company and any of the Company Subsidiaries are the authorized legal holders
of licenses from the FCC, in each case which are owned or operated by the
Company and the Company Subsidiaries (each a "Company Licensed Facility" and
collectively the "Company Licensed Facilities"), in material compliance with the
terms of the licenses issued by the FCC to the Company and the Company
Subsidiaries (the "Company FCC Licenses"), and in material compliance with the
Communications Act, except where the failure to do so would not, individually or
in the aggregate, constitute a Company Material Adverse Effect. The Company FCC
Licenses constitute all of the licenses, permits and authorizations from the FCC
that are necessary, required for and/or used in the business and operations of
the Company Licensed Facilities as presently conducted. The Company Subsidiaries
which are FCC licensees are financially qualified, and are otherwise qualified,
to be FCC licensees. The Company's activities in connection with each broadcast
radio station for which the Company or any of the Company Subsidiaries provides
programming and advertising services pursuant to a local marketing agreement
(each a "Company LMA Facility" and collectively the "Company LMA Facilities")
have been in compliance with the Communications Act and the rules, regulations
and policies of the FCC, except where the failure to do so would not,
individually or in the aggregate, constitute a Company Material Adverse Effect.
The Company has, and each of the Company Subsidiaries has, timely filed or made
all applications, reports and other disclosures required by the FCC to be made
with respect to Company Licensed Facilities and has timely paid all FCC
regulatory fees with respect thereto, except where the failure to do so would
not, individually or in the aggregate, constitute a Company Material Adverse
Effect. The Company and each of the Company
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Subsidiaries have, and are the authorized legal holders of, all Company FCC
Licenses necessary, required or used in the operation of the businesses of
Company Licensed Facilities as presently operated. To the knowledge of the
Company, the third parties with which the Company or the Company Subsidiaries
have entered into local marketing agreements with respect to Company LMA
Facilities have, and are the authorized legal holders of, the FCC licenses
necessary or used in the operation of the business of the respective Company LMA
Facility (each an "LMA Facility FCC License" and collectively the "LMA Facility
FCC Licenses") to which such local marketing agreement relates. All Company FCC
Licenses and, to the knowledge of the Company, LMA Facility FCC Licenses are
validly held and are in full force and effect, unimpaired by any act or omission
of the Company, any of the Company Subsidiaries (or, to the Company's knowledge,
their respective predecessors) or their respective officers, employees or
agents, except where such impairments would not, individually or in the
aggregate, constitute a Company Material Adverse Effect. No application, action
or proceeding is pending for the renewal of any Company FCC License or, to the
knowledge of the Company, LMA Facility FCC License as to which any petition to
deny has been filed and, to the Company's knowledge, there is not pending before
the FCC any material complaint, investigation, proceeding, notice of violation
or order of forfeiture relating to any Company Licensed Facility or Company LMA
Facility that, if adversely determined, would, individually or in the aggregate,
constitute a Company Material Adverse Effect, and the Company has no knowledge
of any facts, events or conditions that could reasonably be expected to cause
the FCC (i) not to renew or to revoke, rescind, suspend or adversely modify any
of Company FCC Licenses or the LMA Facility FCC Licenses (other than proceedings
to amend FCC rules or the Communications Act of general applicability to the
radio broadcasting industry) or (ii) impose any fines, forfeitures or
administrative sanctions which would, individually or in the aggregate,
constitute a Company Material Adverse Effect. There is not pending and, to
Company's knowledge, there is not threatened, any action by or before the FCC to
revoke, suspend, cancel, rescind or modify in any material respect any of
Company FCC Licenses or, to the knowledge of the Company, any of the LMA
Facility FCC Licenses that, if adversely determined, would, individually or in
the aggregate, constitute a Company Material Adverse Effect (other than
proceedings to amend FCC rules or the Communications Act of general
applicability to the radio broadcast industry). There are no facts, conditions
or events relating to the Company or the Company Subsidiaries or any of the
Company Licensed Facilities Stations that could reasonably be expected to cause
the FCC to deny the transfer of control of any of the Company FCC Licenses to
Parent (assuming Parent is qualified to hold the Company FCC Licenses) or the
imposition of any materially adverse condition by the FCC in connection with
approval of the transfer of control of the Company FCC Licenses to Parent (other
than proceedings to amend FCC rules or the Communications Act of general
applicability to the radio broadcast industry).
3.20. Intellectual Property. Except to the extent that the inaccuracy of
any of the following, individually or in the aggregate, would not individually
or in the aggregate constitute a Company Material Adverse Effect: (a) in each
jurisdiction in which the Company has conducted, conducts or proposes to conduct
its business, the Company and each of the Company Subsidiaries either (1) is the
sole and exclusive owner of, with all right, title and interest in and to, each
item of Company Intellectual Property free and clear of any Liens, or (2) has a
valid and enforceable license to use each item of Company Intellectual Property
free and clear of any Liens (and, for each of (a)(1) or (a)(2), the consummation
of the transactions contemplated hereby will not alter or impair any such
rights); (b) the use of any Company Intellectual Property does not infringe on,
interfere with, misappropriate or otherwise violate or come into conflict with
the rights of any Person and is in accordance with, and does not breach, any
applicable license pursuant to which the Company or any Company Subsidiary
acquired the right to use any Company Intellectual Property, and the Company or
any Company Subsidiary has not received any Notice so alleging (including any
claim that the Company or any of the Company Subsidiaries must license or
refrain from using any Intellectual Property of any other Person); (c) to the
knowledge of the Company, no Person is challenging, infringing on, interfering
with, misappropriating or otherwise violating or coming into conflict with any
right of the Company or any of the Company Subsidiaries with respect to any
Company Intellectual Property; (d) the Company and the Company Subsidiaries have
taken all reasonable action to maintain and protect the Company Intellectual
Property and, to the knowledge of the Company, no Company Intellectual Property
is being used or enforced in a manner that would result in the abandonment,
cancellation or unenforceability of such Intellectual Property; (e) the
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Company Intellectual Property is all the Intellectual Property that is necessary
for the conduct of the business of the Company and the Company Subsidiaries as
it has been, is, and is presently proposed to be conducted; and (f) all
employees, agents and contractors who have contributed to or participated in the
conception and development of the Company Intellectual Property on behalf of the
Company or any of the Company Subsidiaries have (1) executed nondisclosure
agreements, and (2) been a party to enforceable and appropriate instruments of
assignment (including work for hire agreements with respect to any copyrights)
in favor of the Company or one of the Company Subsidiaries in accordance with
applicable Law, that have conveyed to the Company or one of the Company
Subsidiaries full, effective, exclusive and original ownership in and to all
Company Intellectual Property arising from the efforts of such personnel.
For purposes of this Agreement, "Intellectual Property" shall mean all (i)
trademarks, service marks, brand names, trade dress, trade names, domain names,
and other indications of origin, all goodwill associated with the foregoing and
registrations and applications in connection with the foregoing in any
jurisdiction, including any extension, modification or renewal of any such
registration or application; (ii) inventions, discoveries and ideas, whether
patentable or not, in any jurisdiction; (iii) patents, applications for patents
(including, without limitation, divisions, continuations, continuations-in-part,
and renewal applications), and any renewals, extensions, revisions,
reexaminations or reissues thereof, in any jurisdiction; (iv) nonpublic
information, trade secrets and confidential information and rights in any
jurisdiction to limit the use or disclosure thereof by any Person; (v) writings
and other works, whether copyrightable or not, in any jurisdiction; (vi)
copyrights and copyrightable works, and all registrations, applications and any
renewals thereof; (vii) any similar intellectual property or proprietary rights;
(viii) all computer software (including data and related documentation); (ix)
all licenses, sublicenses, agreements, or permissions related to any of the
foregoing categories of intellectual property; and (x) any claims or causes of
action arising out of or relating to any infringement or misappropriation of any
of the foregoing. For the purposes of this Agreement, "Company Intellectual
Property" shall mean all Intellectual Property which is used or has been used in
connection with the business of the Company or any of the Company Subsidiaries.
3.21. Environmental Matters. Except with respect to clauses (i) through (v)
as would not, individually or in the aggregate, constitute a Company Material
Adverse Effect:
(i) The Company and the Company Subsidiaries (a) are in compliance
with all applicable Environmental Laws, and (b) have obtained, and are in
compliance with, all permits, licenses, authorizations, registrations and
other governmental consents required by applicable Environmental Laws
("Environmental Permits"), and have made all appropriate filings for
issuance or renewal of such Environmental Permits.
(ii) There is no contamination of, and there have been no releases or
threatened releases of Hazardous Materials at the Facilities (or, to the
knowledge of the Company, any real property formerly owned, leased or
operated by the Company or any of the Company Subsidiaries (or any
predecessor of the Company or any of the Company Subsidiaries)).
(iii) There are no claims, notices (including, without limitation,
notices that the Company or any of the Company Subsidiaries (or, to the
Company's knowledge, any predecessor of the Company or any of the Company
Subsidiaries or any person whose liability has been retained or assumed
contractually by the Company or any of the Company Subsidiaries) is or may
be a potentially responsible person or otherwise liable in connection with
any site or other location containing Hazardous Materials or used for the
storage, handling, treatment, processing, disposal, generation or
transportation of Hazardous Materials), civil, criminal or administrative
actions, suits, hearings, investigations, inquiries or proceedings pending
or, to the knowledge of the Company, threatened that are based on or
related to any Environmental Matters relating to the business of the
Company or any of the Company Subsidiaries.
(iv) To the Company's knowledge, there are no past or present
conditions, events, circumstances, facts, activities, practices, incidents,
actions, omissions or plans that may (a) interfere with or prevent
continued compliance by the Company or any of the Company Subsidiaries with
Environmental Laws and the requirements of Environmental Permits or (b)
give rise to any liability or other obligation under any Environmental
Laws.
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(v) Neither the Facilities, nor (to the knowledge of the Company) any
property formerly owned, leased, or operated by the Company or any of the
Company Subsidiaries, nor (to the knowledge of the Company) any site at or
to which the Company or any of the Company Subsidiaries has disposed of,
transported, or arranged for the transportation of, any Hazardous
Materials, has been listed on, or proposed for listing on, the National
Priorities List, the Comprehensive Environmental Response, Compensation and
Liability Information System ("CERCLIS") list, or any comparable state list
of properties to be investigated and/or remediated.
(vi) For the purposes of this Section, the following terms shall have
the meanings indicated:
"Environmental Laws" means any foreign, federal, state or local law,
statute, ordinance, rule or regulation governing Environmental Matters, as the
same have been or may be amended from time to time, including any common law
cause of action providing any right or remedy relating to Environmental Matters,
all indemnity agreements and other contractual obligations (including leases,
asset purchase and merger agreements) relating to Environmental Matters, and all
applicable judicial and administrative decisions, orders, and decrees relating
to Environmental Matters.
"Environmental Matter" means any matter arising out of, relating to, or
resulting from pollution, contamination, protection of the environment, human
health or safety, health or safety of employees, sanitation, and any matters
relating to emissions, discharges, disseminations, releases or threatened
releases, of Hazardous Materials into the air (indoor and outdoor), surface
water, groundwater, soil, land surface or subsurface, buildings, facilities,
real or personal property or fixtures or otherwise arising out of, relating to,
or resulting from the manufacture, processing, distribution, use, treatment,
storage, disposal, transport, handling, release or threatened release of
Hazardous Materials.
"Facilities" means all real property owned, leased, or operated by the
Company or any of its Subsidiaries and any buildings, facilities, machinery,
equipment, furniture, leasehold and other improvements, fixtures, vehicles,
structures, any related capital items and other tangible property located on,
in, under, or above the real property of the Company or any of its Subsidiaries.
"Hazardous Materials" means any pollutants, contaminants, toxic or
hazardous or extremely hazardous substances, materials, wastes, constituents,
compounds, chemicals, natural or man-made elements or forces (including, without
limitation, petroleum or any by-products or fractions thereof, any form of
natural gas, lead, asbestos and asbestos-containing materials ("ACM"), building
construction materials and debris, polychlorinated biphenyls ("PCBs") and
PCB-containing equipment, radon and other radioactive elements, ionizing
radiation, electromagnetic field radiation and other non-ionizing radiation,
sonic forces and other natural forces, infectious, carcinogenic, mutagenic, or
etiologic agents, pesticides, defoliants, explosives, flammables, corrosives and
urea formaldehyde foam insulation) that are regulated by, or may now or in the
future form the basis of liability under, any Environmental Laws.
3.22. Property. As of the date hereof, the Company and the Company
Subsidiaries have good and marketable title to all real properties owned by them
except where the failure to have such title, individually or in the aggregate,
would not constitute a Company Material Adverse Effect.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT
The Parent hereby represents and warrants as of the date hereof, with
respect to Parent, and as of the Closing Date with respect to Merger Sub, to the
Company as follows:
4.1. Organization and Good Standing. Parent and Merger Sub are corporations
duly organized, validly existing and in good standing under the laws of the
States of Delaware and Nevada, respectively. Each of Parent and Merger Sub is
qualified to do business as a foreign corporation in each jurisdiction in which
the failure to be so qualified would, individually or in the aggregate,
constitute a Parent Material Adverse Effect. The term "Parent Material Adverse
Effect" means any change, effect, circumstance or event that is or is reasonably
likely to materially adversely effect the ability of Parent and Merger Sub to
perform their obligations set forth in this Agreement or timely consummate the
transactions contemplated by this Agreement.
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4.2. Authorization; Binding Agreement. Parent and Merger Sub each have all
requisite corporate power and authority to execute and deliver this Agreement
and to consummate the transactions contemplated hereby. This Agreement, the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by each
of Parent's and Merger Sub's Board of Directors and by Parent in its capacity as
sole stockholder of Merger Sub, and no other corporate proceedings on the part
of Parent or Merger Sub are necessary to authorize the execution and delivery of
this Agreement or to consummate the transactions contemplated hereby other than
the filing and recordation of appropriate merger documents as required by the
Nevada Code. This Agreement has been duly and validly executed and delivered by
each of Parent and Merger Sub and, assuming the due authorization, execution and
delivery of this Agreement by the Company, constitutes the legal, valid and
binding agreements of both Parent and Merger Sub, enforceable against Parent and
Merger Sub in accordance with its terms.
4.3. Governmental Approvals. No Consent from or with any Governmental
Authority on the part of Parent or Merger Sub is required in connection with the
execution or delivery by each of Parent and Merger Sub of this Agreement or the
consummation by each of Parent and Merger Sub of the transactions contemplated
hereby other than (i) the filing of the Articles of Merger with the Secretary of
State of the State of Nevada in accordance with the Nevada Code, (ii) filings
with the SEC and state securities laws administrators, (iii) Consents under the
HSR Act, (iv) any filings with and approvals and authorizations of the FCC as
may be required under the Communications Act, including, without limitation,
filings and approvals in connection with the transfer of control of the Company
FCC Licenses and (v) those Consents that, if they were not obtained or made,
would not constitute a Parent Material Adverse Effect.
4.4. No Violations. The execution and delivery of this Agreement, the
consummation of the transactions contemplated hereby and compliance by each of
Parent and Merger Sub with any of the provisions hereof will not (i) conflict
with or result in any breach of any provision of the articles of incorporation
or bylaws or other governing instruments of Parent or Merger Sub, (ii) require
any Consent under or result in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default (or give rise to any
right of termination, cancellation or acceleration or augment the performance
required) under any of the terms, conditions or provisions of any material
obligation to which Parent or Merger Sub is a party or by which any of them or
any of their properties or assets may be bound, (iii) result in the creation or
imposition of any Lien upon any of the assets of Parent or any Merger Sub, or
(iv) subject to obtaining the Consents from Governmental Authorities referred to
in Section 4.3 above and the expiration of the HSR waiting period, conflict with
or violate any applicable provision of any Law currently in effect to which
Parent or Merger Sub or its or any of their respective assets or properties are
subject, except in the case of clauses (ii), (iii) and (iv) above, for any
deviations from the foregoing which would not, individually or in the aggregate,
constitute a Parent Material Adverse Effect.
4.5. Financing. Parent and/or Merger Sub will have available funds
sufficient to consummate the Merger and all of the other transactions
contemplated hereby.
4.6. Qualification. To the Parent's knowledge, Parent is qualified under
the Communications Act and the existing rules, regulations and policies of the
FCC to control the Company FCC Licenses.
4.7. Ownership of Company Common Stock. Neither Parent nor Merger Sub nor
any of their affiliates or associates (each as defined in Chapter 78 of the
Nevada Code) beneficially owns any shares of Company Common Stock.
ARTICLE V
ADDITIONAL COVENANTS OF THE COMPANY
The Company covenants and agrees as follows:
5.1. Conduct of Business of the Company and the Company
Subsidiaries. Except as expressly contemplated by this Agreement or as set forth
in the Company Disclosure Schedule, during the period from the date of this
Agreement to the Effective Time, the Company shall conduct, and it shall cause
the Company Subsidiaries to conduct, its or their respective businesses in the
ordinary course and consistent with past practice, subject to the limitations
contained in this Agreement, to maintain the validity of the Company FCC
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Licenses and comply in all material respects with all requirements of the
Company FCC Licenses, the Communications Act and the rules and regulations of
the FCC, and the Company shall, and it shall cause the Company Subsidiaries to,
use its or their respective reasonable best efforts to preserve intact its or
their respective business organizations, to keep available the services of its
or their respective officers, agents and employees and to maintain satisfactory
relationships with all persons with whom any of them does business. Without
limiting the generality of the foregoing, and except as otherwise expressly
provided in this Agreement or disclosed in the Company Disclosure Schedule,
after the date of this Agreement and prior to the Effective Time, neither the
Company nor any Company Subsidiary will, without the prior written consent of
Parent (which will not be unreasonably withheld or delayed):
(i) amend or propose to amend its articles of incorporation,
certificates of designation or bylaws (or comparable governing
instruments);
(ii) authorize for issuance, issue, grant, sell, pledge, dispose of or
propose to issue, grant, sell, pledge or dispose of any shares of, or any
options, warrants, commitments, subscriptions or rights of any kind to
acquire or sell any shares of, the capital stock or other securities of the
Company or any Company Subsidiary including, but not limited to, any
securities convertible into or exchangeable for shares of capital stock of
any class of the Company or any Company Subsidiary, except for the issuance
of shares of Company Common Stock pursuant to the exercise of the Company
Options outstanding on the date of this Agreement and described in Schedule
5.1(ii) of the Company Disclosure Schedule in accordance with their present
terms;
(iii) split, combine or reclassify any shares of its capital stock or
declare, pay or set aside any dividend or other distribution (whether in
cash, stock or property or any combination thereof) in respect of its
capital stock, other than dividends or distributions to the Company or a
Company Subsidiary wholly owned by the Company, or redeem, purchase or
otherwise acquire or offer to acquire any shares of its capital stock or
other securities;
(iv) (a) create, incur, assume or suffer to exist any Indebtedness,
except refinancings of existing Indebtedness on terms and conditions
prevailing in the market; (b) assume, guarantee, endorse or otherwise
become liable or responsible (whether directly, indirectly, contingently or
otherwise) for the obligations of any person; (c) make any capital
expenditures or make any loans, advances or capital contributions to, or
investments in, any other person (other than to a Company Subsidiary and
customary travel, relocation or business advances or loans to employees
made in the ordinary course of business consistent with past practice);
provided that, the Company and Company Subsidiaries may make capital
expenditures that are in the ordinary course of business consistent with
past practice and in accordance in all material respects with the current
capital budget for the Company previously furnished to Parent; (d) acquire
or agree to acquire by merging or consolidating with, or by purchasing a
substantial portion of the assets of, or by any other manner, (i) any
business or any corporation, limited liability company, partnership, joint
venture, association or other business organization or division thereof,
(ii) any assets that individually or in the aggregate are material to the
Company and the Company Subsidiaries taken as a whole or (iii) any
broadcast radio stations (except pursuant to a contract specified in
Schedule 5.1(iv)(iii) of the Company Disclosure Schedule (a "Station
Acquisition Contract")) unless the sole consideration paid by the Company
or any Company Subsidiaries for all such acquisitions is cash not exceeding
$5 million in the aggregate; or (e) or sell, transfer, mortgage, pledge or
otherwise dispose of, or encumber, or agree to sell, transfer, mortgage,
pledge or otherwise dispose of or encumber, any assets or properties other
than to secure debt permitted under (a) of this clause (iv) and other than
transfers in the ordinary course of business consistent with past practice.
The term "Indebtedness" means, with respect to any person, without
duplication, (A) all obligations of such person for borrowed money, or with
respect to deposits or advances of any kind to such person, (B) all
obligations of such person evidenced by bonds, debentures, notes or similar
instruments, (C) all obligations of such person under conditional sale or
other title retention agreements relating to property purchased by such
person, (D) all obligations of such person issued or assumed as the
deferred purchase price of property or services (excluding obligations of
such person to creditors for raw materials, inventory, services and
supplies incurred in the ordinary course of such person's business), (E)
all capitalized lease obligations of such
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person, (F) all obligations of such person under interest rate or currency
hedging or swap transactions (valued at the termination value thereof), (G)
all performance bonds or letters of credit issued for the account of such
person and (H) all guarantees and arrangements having the economic effect
of a guarantee of such person of any Indebtedness of any other person.
(v) increase in any material respect the compensation of any of its
officers or employees or enter into, establish, amend or terminate any
employment, consulting, retention, management continuity, change in
control, collective bargaining, bonus or other incentive compensation,
profit sharing, health or other welfare, stock option or other equity,
pension, retirement, vacation, severance, deferred compensation or other
compensation or benefit plan, policy, agreement, trust, fund or arrangement
with, for or in respect of, any stockholder, officer, director, other
employee, agent, consultant or affiliate other than (a) as required
pursuant to the terms of agreements in effect on the date of this
Agreement, or (b) in the ordinary course of business consistent with past
practice;
(vi) enter into any material lease or amend any material lease of real
property other than in the ordinary course of business consistent with past
practice;
(vii) make or rescind any express or deemed election relating to Taxes
of the Company, unless required to do so by applicable Law;
(viii) settle or compromise any material Tax liability of the Company
or agree to an extension of a statute of limitations with respect to the
assessment or determination of Taxes;
(ix) file or cause to be filed any amended Tax Return with respect to
the Company or any Company Subsidiaries or file or cause to be filed any
claim for refund of Taxes paid by or on behalf of the Company or any
Company Subsidiaries;
(x) prepare or file any Tax Return of the Company inconsistent with
past practice in preparing or filing similar Tax Returns in prior periods
or, on any such Tax Return, take any position, make any election, or adopt
any method that is inconsistent with positions taken, elections made or
methods used in preparing or filing similar Tax Returns in prior periods,
in each case except to the extent required by Law;
(xi) except in the ordinary course of business and as would not
constitute a Company Material Adverse Effect, modify, amend, terminate or
fail to renew (to the extent such contract or agreement can be unilaterally
renewed by the Company or any Company Subsidiary) any contract or agreement
to which the Company or any Company Subsidiary is a party, or waive,
release or assign any material rights or claims thereunder; provided that
neither the Company nor any Company Subsidiary shall amend in any material
respect any Station Acquisition Contract or waive, release or assign any
material rights or claims thereunder without the prior written consent of
Parent;
(xii) make any material change to its accounting methods, principles
or practices, except as may be required by GAAP;
(xiii) fail to use commercially reasonable efforts to maintain the
material assets of the Company and each of the Company Subsidiaries in
their current physical condition, except for ordinary wear and tear and
damage;
(xiv) pay, discharge, or satisfy any material (on a consolidated basis
for the Company and the Company Subsidiaries taken as a whole) claim,
liabilities, or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than in the ordinary course of business
consistent with past practice, or fail to pay or otherwise satisfy (except
if being contested in good faith) any material (on a consolidated basis for
the Company and the Company Subsidiaries taken as a whole) accounts
payable, liabilities, or obligations when due and payable;
(xv) enter into any LMA, time brokerage agreement or JSA other than in
the ordinary course of and involving amounts not in excess of $2 million in
the aggregate or any non-compete agreement whereby the Company or any
Company Subsidiary agrees not to compete;
(xvi) enter into any Significant Contract, other than in the ordinary
course and involving amounts not in excess of $2 million in the aggregate;
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(xvii) adopt a shareholder rights plan or any similar plan or
instrument which would have the effect of impairing or delaying the
consummation of the Merger;
(xviii) waive any of its rights under, or release any other party from
such other party's obligations under, or amend any provision of, any
standstill agreement; or
(xix) authorize, or commit or agree to take, any of the foregoing
actions.
Furthermore, the Company covenants that from and after the date of this
Agreement, unless Parent shall otherwise expressly consent in writing, the
Company shall, and the Company shall cause each of the Company Subsidiaries to,
use its or their reasonable best efforts to comply in all material respects with
all Laws applicable to it or any of its properties, assets or business and
maintain in full force and effect all Permits necessary for, or otherwise
material to, such business.
5.2. Notification of Certain Matters. The Company shall give prompt notice
to Parent if any of the following occurs after the date of this Agreement: (i)
any notice of, or other communication relating to, a material default or Event
which, with notice or lapse of time or both, would become a material default
under any Material Contract; (ii) receipt of any notice or other communication
in writing from any person alleging that the Consent of such person is or may be
required in connection with the transactions contemplated by this Agreement,
other than a Consent disclosed pursuant to Section 3.5, 3.6 or 3.14(d)(ii) above
or not required to be disclosed pursuant to the terms thereof; (iii) receipt of
any material notice or other communication from any Governmental Authority
(including, but not limited to, the NASD, any securities exchange or the FCC) in
connection with the transactions contemplated by this Agreement; (iv) the
occurrence of any Event or Events which individually or in the aggregate, is
reasonably likely to have a Company Material Adverse Effect; (v) the
commencement or threat of any Litigation involving or affecting the Company or
any Company Subsidiary, or any of their respective properties or assets, or, to
its knowledge, any employee, agent, director or officer of the Company or any
Company Subsidiary, in his or her capacity as such or as a fiduciary under a
Benefit Plan of the Company, which, if pending on the date hereof, would have
been required to have been disclosed in or pursuant to this Agreement or which
relates to the consummation of the Merger, or any material development in
connection with any Litigation disclosed by the Company in or pursuant to this
Agreement or the Securities Filings; (vi) the occurrence of any Event that
causes or is reasonably likely to cause a breach by the Company of any provision
of this Agreement, and (vii) the occurrence of any Event that, had it occurred
prior to the date of this Agreement without any additional disclosure hereunder,
would have constituted a Company Material Adverse Effect. If the Company
receives an administrative or other order or notification relating to any
violation or claimed violation of the rules and regulations of the FCC, or of
any other Governmental Entity, that could affect Parent's, Merger Sub's or the
Company's ability to consummate the transactions contemplated hereby, or should
the Company become aware of any fact (including any change in law or regulations
(or any interpretation thereof) by the FCC) that is reasonably likely to cause
the FCC to withhold its consent to the transfer of control of the Company FCC
Licenses contemplated hereunder, the Company shall promptly notify the Parent
and the Company shall use reasonable best efforts to take such steps as may be
necessary, to remove any such impediment of the Company to consummate the
transactions contemplated by this Agreement.
5.3. Access and Information. Between the date of this Agreement and the
Effective Time, the Company shall give, and shall cause each of the Company
Subsidiaries to give, and shall direct its financial advisors, accountants and
legal counsel to give, upon reasonable notice, Parent, its lenders, financial
advisors, accountants and legal counsel and their respective authorized
representatives at all reasonable times access to all offices and other
facilities and to all contracts, agreements, commitments, Tax Returns (and
supporting schedules), books and records of or pertaining to the Company and the
Company Subsidiaries, shall permit the foregoing to make such reasonable
inspections as they may require and will cause its officers promptly to furnish
Parent with (a) such financial and operating data and other information with
respect to the business and properties of the Company and the Company
Subsidiaries as Parent may from time to time reasonably request and (b) a copy
of each material report, schedule and other document filed or received by the
Company or any of the Company Subsidiaries pursuant to the requirements of
applicable securities laws or the NASD. The foregoing access will be subject to
restrictions contained in confidentiality agreements to
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which the Company is subject; provided that the Company shall use its reasonable
best efforts to obtain waivers of such restrictions.
5.4. Stockholder Approval. As soon as practicable, the Company will take
all steps necessary to duly call, give notice of, convene and hold a meeting of
its stockholders (the "Company Stockholders Meeting") for the purpose of
approving this Agreement and the Merger and the transactions contemplated hereby
and for such other purposes as may be consented to by Parent (whose consent
shall not be unreasonably withheld) and the Company in connection with
effectuating the transactions contemplated hereby (the "Company Proposal").
Except as otherwise contemplated by this Agreement and subject to the exercise
of the fiduciary duties of the Company's directors, the Board of Directors of
the Company (i) shall recommend to the stockholders of the Company that they
approve the Company Proposal, and (ii) shall use its reasonable best efforts to
obtain any necessary approval by the Company's stockholders of the Company
Proposal.
5.5. Reasonable Best Efforts. Subject to the terms and conditions herein
provided, the Company agrees to use its reasonable best efforts to take, or
cause to be taken, all actions, and to do, or cause to be done, all things
necessary, proper or advisable to consummate and make effective as promptly as
practicable the Merger and the other transactions contemplated by this Agreement
including, but not limited to (i) obtaining any third party Consent (excluding
any Consents the failure of which to obtain would have a de minimis effect)
required in connection with the execution and delivery by the Company of this
Agreement or the consummation by the Company of the transactions contemplated
hereby, (ii) the defending of any Litigation against the Company or any Company
Subsidiary challenging this Agreement or the consummation of the transactions
contemplated hereby (such as in connection with the transfer of control of the
FCC Licenses), including seeking to have any stay or temporary restraining order
entered by any court or Governmental Authority vacated or reversed, (iii)
obtaining all Consents from Governmental Authorities required for the
consummation of the Merger and the transactions contemplated hereby, (iv)
promptly making all necessary filings under the HSR Act, the Communications Act
and any other applicable Law, including any filing required to be made with the
SEC pursuant to the Securities Act or the Exchange Act and (v) providing all
necessary cooperation in connection with the arrangement by Parent and Merger
Sub of financing of the transaction, including without limitation, the executing
and delivering of any commitment letters, underwriting or placement agreements,
pledge and security documents, other definitive financing documents, or other
requested certificates or documents, in each case, which will not be effective
until the Effective Time. Upon the terms and subject to the conditions hereof,
the Company agrees to use its reasonable best efforts to take, or cause to be
taken, all actions and to do, or cause to be done, all things necessary to
satisfy the conditions of the Closing set forth herein. The Company will consult
with counsel for Parent as to, and will permit such counsel to participate in,
at Parent's expense, any Litigation referred to in clause (ii) above brought
against or involving the Company or any Company Subsidiary. The Company further
covenants that from and after the date hereof until the Effective Time, without
the prior written consent of Parent, the Company shall not, and shall cause each
Company Subsidiary to not, take any action that is reasonably likely to (x)
impair or delay in any material respect obtaining the FCC Consent or complying
with or satisfying the terms thereof or (y) result in imposition of materially
adverse conditions in the FCC Consent.
5.6. Public Announcements. So long as this Agreement is in effect, the
Company shall not, and shall cause its affiliates not to, issue or cause the
publication of any press release or any other announcement with respect to the
Merger, the Company Proposal or the transactions contemplated by this Agreement
without the consent of Parent which shall not be unreasonably withheld or
delayed, except when such release or announcement is required by applicable Law
or any applicable listing agreement with, or rules or regulations of, the NASD
or any securities exchange, in which case the Company, to the extent
practicable, prior to making such announcement, shall consult with Parent
regarding the same.
5.7. Compliance. In consummating the Merger and the transactions
contemplated hereby, the Company shall comply, and cause the Company
Subsidiaries to comply or to be in compliance, in all material respects, with
all applicable Laws.
5.8. Company Benefit Plans. From the date of this Agreement through the
Effective Time, no discretionary award or grant under any Benefit Plan shall be
made without the consent of Parent (not to be unreasonably withheld or delayed);
nor shall the Company or a Company Subsidiary take any action or
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permit any action to be taken to accelerate the vesting of any warrants or
options previously granted pursuant to any such Benefit Plan except as
specifically required pursuant to the terms thereof as in effect on the date of
this Agreement. Neither the Company nor any Company Subsidiary shall make any
amendment to any Benefit Plan or any awards thereunder which is not required by
Law without the consent of Parent (not to be unreasonably withheld or delayed).
The Company shall promptly notify Parent upon making any such amendment which is
required to be made by Law.
5.9. No Solicitation. (a) Neither the Company nor any Company Subsidiary,
nor any of their respective officers, directors, employees, agents, affiliates,
accountants, counsel, investment bankers, financial advisors or other
representatives (collectively, "Representatives") shall, (i) directly or
indirectly, initiate, solicit or encourage, or take any action to facilitate the
making of, any Takeover Proposal, or (ii) directly or indirectly engage in any
discussions or negotiations with, or provide any information or data to, or
afford any access to the properties, books or records of the Company or any
Company Subsidiary to, or otherwise assist, facilitate or encourage, any person
(other than Parent or any affiliate or associate thereof) relating to any
Takeover Proposal; provided, however, that at any time prior to the Company
Stockholders Meeting, the Company may, in response to a Superior Proposal (as
defined below) which was not solicited by it and which did not otherwise result
from a breach of this Section 5.9(a), and subject to providing prior written
notice of its decision to take such action to Parent (the "Notice") and
compliance with Section 5.9(c), following delivery of the Notice (x) furnish
information with respect to the Company, or the Company Subsidiaries to any
person making a Superior Proposal pursuant to a customary confidentiality
agreement and (y) participate in discussions and negotiations regarding such
Superior Proposal but, in each case, only if the Company's Board of Directors
determines, after consultation with its outside counsel, that failure to furnish
such information or to participate in such discussions or negotiations would be
inconsistent with the compliance by the Company's Board of Directors with its
fiduciary duties to stockholders imposed by Law. The Company shall keep Parent
apprised of any such discussions and negotiations promptly after they occur.
(b) Except as set forth below, neither the Board of Directors of the
Company, nor any committee thereof, shall (x) withdraw or modify, or
propose to withdraw or modify, in a manner adverse to Parent, the Board of
Directors' approval or recommendation of the Merger or this Agreement, (y)
approve any letter of intent, agreement in principle, acquisition agreement
or similar agreement (other than a confidentiality agreement in connection
with a Superior Proposal which is entered into by the Company in accordance
with Section 5.9(a)) relating to any Takeover Proposal (each, an
"Acquisition Agreement"), or (z) approve or recommend, or propose to
approve or recommend, any Takeover Proposal. Notwithstanding the foregoing,
in response to a Superior Proposal which was not solicited by the Company,
and which did not otherwise result from a breach of Section 5.9(a), the
Board of Directors of the Company may, subject to the immediately following
sentence, terminate this Agreement pursuant to and subject to the terms of
Section 9.1(f) and, concurrently with such termination, cause the Company,
to enter into an Acquisition Agreement with respect to a Superior Proposal,
but only if the Company's Board of Directors determines, after consultation
with its outside counsel, that failure to terminate this Merger Agreement
and accept the Superior Proposal would be inconsistent with the compliance
by the Company's Board of Directors with its fiduciary duties to
stockholders imposed by Law. Such actions may be taken by the Company's
Board of Directors only if it has delivered to Parent prior to or on the
60th day following the date of this Merger Agreement written notice of the
intent of the Company's Board of Directors to take such actions, together
with a copy of the related Acquisition Agreement and a description of any
terms of the Takeover Proposal not contained therein. The Board of
Directors shall not take such actions until the fifth business day
following such notice. If during such five business day period Parent
informs the Company that it may make an alternative proposal, the Company's
Board of Directors shall establish a bidding procedure pursuant to which
Parent and the person making the Superior Proposal shall have the
opportunity to make their respective bids to the Company's Board of
Directors. The Company shall accept Parent's offer unless the Company's
Board of Directors shall have determined that the competing bid is more
favorable to the Company's stockholders from a financial point of view as
compared to Parent's bid, taking into account the factors discussed in the
definition of a Superior Proposal.
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(c) The Company promptly shall advise the Parent orally and in writing
of any Takeover Proposal with respect to or that could reasonably be
expected to lead to any Takeover Proposal, the identity of the person
making any such Takeover Proposal and the material terms of any such
Takeover Proposal. The Company shall keep the Parent fully informed of the
status and material terms of any such Takeover Proposal.
(d) The Company and each Company Subsidiary and each of their
Representatives shall immediately cease and cause to be terminated all
existing discussions and negotiations, if any, with any other persons
conducted heretofore with respect to any Takeover Proposal.
For purposes of this Agreement, a "Takeover Proposal" means any inquiry,
proposal or offer from any person relating to (i) any direct or indirect
acquisition or purchase of a business that constitutes 50% or more of the net
revenues, net income or assets of the Company and the Company Subsidiaries,
taken as a whole, or 50% or more of the common stock or voting power (or of
securities or rights convertible into or exercisable for such common stock or
voting power) of the Company or CBC, (ii) any tender offer or exchange offer
that if consummated would result in any person beneficially owning 50% or more
of the common stock or voting power (or of securities or rights convertible into
or exercisable for such common stock or voting power) of the Company or CBC, or
(iii) any merger, consolidation, business combination, recapitalization,
liquidation, dissolution or similar transaction involving the Company, or any of
its Subsidiaries that constitutes 50% or more of the net revenues, net income or
assets of the Company, and its Subsidiaries taken as a whole, in each case other
than the transactions contemplated by this Agreement. Each of the transactions
referred to in clauses (i) -- (iii) of the foregoing definition of Takeover
Proposal, other than the Merger proposed by this Agreement, is referred to
herein as an "Acquisition Transaction."
For purposes of this Agreement, a "Superior Proposal" means any written
proposal made by a third party to acquire, directly or indirectly, including
pursuant to a tender offer, exchange offer, merger, consolidation, business
combination, recapitalization, liquidation, dissolution or similar transaction,
for consideration consisting of cash and/or securities, more than 50% of the
combined voting power of the shares of Company Common Stock then outstanding or
more than 50% of the assets of the Company and its Subsidiaries, taken together,
with respect to which (x) the Board of Directors of the Company determines in
its good faith judgment (based on the advice of a financial advisor of
nationally recognized reputation (the "Financial Advisor") and such other
matters as the Board of Directors of the Company deems relevant, which shall
include without limitation the likelihood of consummation, taking into account
the advice of FCC counsel, and the trading market and liquidity of any
securities offered in connection with the Superior Proposal) that the terms of
the proposal are more favorable to the Company's stockholders from a financial
point of view as compared to the Merger, and (y) if the proposal (1) is subject
to a financing condition or (2) involves consideration that is not entirely cash
or does not permit stockholders to receive the payment of the offered
consideration in respect of all shares at the same time, the Company's Board of
Directors has been furnished with a written opinion of the Financial Advisor to
the effect that (in the case of clause (1)) the proposal is readily financeable
and (in the case of clause (2)) that such proposal provides a higher value per
share than the consideration per share pursuant to the Merger.
(e) Nothing contained in this Agreement shall prohibit the Company's
Board of Directors from taking and disclosing to its stockholders a
position contemplated by Rule 14d-9 and Rule 14e-2 promulgated under the
Exchange Act.
5.10. SEC and Stockholder Filings. The Company shall send to Parent a copy
of all public reports and materials as and when it sends the same to its
stockholders, the SEC or any state or foreign securities commission.
5.11. Takeover Statutes. If any Takeover Statute is or may become
applicable to the Merger or the transactions contemplated hereby, the Company
and the members of its Board of Directors will grant such approvals and will
take such other actions as are necessary so that the Merger and the other
transactions contemplated by this Agreement may be consummated as promptly as
practicable on the terms contemplated hereby and will otherwise act to eliminate
or minimize the effects of any Takeover Statute on the Merger and any of the
transactions contemplated hereby.
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5.12. Debenture and Preferred Stock Offers. (a) Following the approval by
the Company's stockholders of the Company Proposal pursuant to Section 5.4, upon
the written request of Parent, the Company shall cause CBC, at Parent's expense,
to commence (i) an offer (the "Debenture Offer") to purchase all of the
outstanding 10.25% guaranteed senior subordinated notes due 2007 and 9.25%
guaranteed senior subordinated notes due 2008 issued by it (collectively, the
"Debentures"), and (ii) a solicitation as part of the Debenture Offer (the
"Solicitation") of consents to amendments to the indentures relating to the
Debentures from the holders of not less than a majority in aggregate principal
amount of the Debentures outstanding (the consents from such holders, the
"Requisite Consents"). The Debenture Offer and Solicitation (including the
amendments) shall be on terms determined by Parent, provided that CBC shall not
be required to purchase the Debentures pursuant to the Debenture Offer, and the
proposed amendments, if approved, shall not become effective, unless the Merger
is consummated or being consummated simultaneously therewith. The Company agrees
that promptly following the date the Requisite Consents are obtained CBC will
execute supplemental indentures containing the proposed amendments that by their
terms shall become operative only upon consummation of the Debenture Offer.
(b) Following the approval by the Company's stockholders of the
Company Proposal pursuant to Section 5.4, upon the written request of
Parent, the Company shall cause CBC, at Parent's expense, to commence (i)
an offer (the "Preferred Stock Offer") to redeem all of the outstanding
shares of 13.25% Exchangeable Preferred Stock issued by it (the "Preferred
Stock") and (ii) a solicitation as part of the Preferred Stock Offer (the
"Preferred Stock Solicitation") of consents to amendments to the terms of
each series of the Preferred Stock from the holders of not less than a
majority of the outstanding shares of each series of Preferred Stock (the
consents from such holders, the "Requisite Preferred Stock Consents"). The
Offer and Preferred Stock Solicitation (including the amendments) shall be
on terms determined by Parent, provided that the Company shall not be
required to purchase the Preferred Stock pursuant to the Preferred Stock
Offer, and the proposed amendments, if approved, shall not become
effective, unless the Merger is consummated or being consummated
simultaneously therewith.
ARTICLE VI
ADDITIONAL COVENANTS OF PARENT
Parent covenants and agrees as follows:
6.1. Notification of Certain Matters. Parent shall give prompt notice to
the Company if any of the following occurs after the date of this Agreement: (i)
receipt of any notice or other communication in writing from any person alleging
that the Consent of such person is or may be required in connection with the
transactions contemplated by this Agreement, other than a Consent disclosed
pursuant to Section 4.3 or 4.4 above or not required to be disclosed pursuant to
the terms thereof; (ii) receipt of any material notice or other communication
from any Governmental Authority (including, but not limited to, the NASD, any
other securities exchange or the FCC) in connection with the transactions
contemplated by this Agreement; (iii) the occurrence of any Event or Events
which, individually or in the aggregate, is reasonably likely to have a Parent
Material Adverse Effect; (iv) the commencement or threat of any Litigation
involving or affecting Parent or Merger Sub, or any of their respective
properties or assets, or, to its knowledge, any employee, agent, director or
officer of Parent or Merger Sub, in his or her capacity as such or as a
fiduciary under a Benefit Plan of Parent, which relates to the consummation of
the Merger; and (v) the occurrence of any Event that is reasonably likely to
cause a breach by Parent of any provision of this Agreement.
6.2. Reasonable Best Efforts. Subject to the terms and conditions herein
provided, Parent agrees to use its reasonable best efforts to take, or cause to
be taken, all actions, and to do, or cause to be done, all things necessary,
proper or advisable to consummate and make effective as promptly as practicable
the Merger and the other transactions contemplated by this Agreement including,
but not limited to (i) obtaining any third party Consent (excluding any Consents
the failure of which to obtain would have a de minimis effect) required in
connection with the execution and delivery by Parent and Merger Sub of this
Agreement or the consummation by Parent and Merger Sub of the transactions
contemplated hereby, (ii) the defending of any Litigation against Parent or
Merger Sub challenging this Agreement or the consummation of the transactions
contemplated hereby (such as in connection with the transfer of control of the
Company FCC Licenses),
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including seeking to have any stay or temporary restraining order entered by any
court or Governmental Authority vacated or reversed, (iii) obtaining all
Consents from Governmental Authorities required for the consummation of the
Merger and the transactions contemplated hereby, and (iv) promptly making all
necessary filings under the HSR Act, the Communications Act and any other
applicable Law, including any filing required to be made with the SEC pursuant
to the Securities Act or the Exchange Act. Upon the terms and subject to the
conditions hereof, Parent agrees to use its reasonable best efforts to take, or
cause to be taken, all actions and to do, or cause to be done, all things
necessary to satisfy the other conditions of the Closing set forth herein.
6.3. Public Announcements. So long as this Agreement is in effect, Parent
shall not, and shall cause its affiliates not to, issue or cause the publication
of any press release or any other announcement with respect to the Merger, or
the transactions contemplated by this Agreement without the consent of the
Company which shall not be unreasonably withheld or delayed, except when such
release or announcement is required by applicable Law or any applicable listing
agreement with, or rules or regulations of, the NASD or any securities exchange,
in which case Parent, to the extent practicable, prior to making such
announcement, shall consult with the Company regarding the same.
6.4. Compliance. In consummating the Merger and the transactions
contemplated hereby, Parent shall comply, and cause the Merger Sub to comply or
to be in compliance, in all material respects, with all applicable Laws.
6.5. Director and Officer Liability. (a) The Surviving Corporation shall
indemnify and hold harmless and advance expenses to the present and former
officers and directors of the Company, and each person who prior to the
Effective Time becomes an officer or director of the Company (each an
"Indemnified Person"), in respect of acts or omissions by them in their
capacities as such occurring at or prior to the Effective Time (including,
without limitation, for acts or omissions occurring in connection with this
Agreement and the consummation of the Merger) to the fullest extent permissible
under applicable law (collectively, the "Indemnified Losses"). The Surviving
Corporation shall periodically advance or reimburse each Indemnified Person for
all reasonable fees and expenses of counsel constituting Indemnified Losses as
such fees and expenses are incurred; provided that such Indemnified Person shall
agree in writing to promptly repay to the Surviving Corporation the amount of
any such reimbursement if it shall be judicially determined by judgment or order
not subject to further appeal or discretionary review that such Indemnified
Person is not entitled to be indemnified by the Surviving Corporation in
connection with such matter.
(b) For the six years following the Effective Time, the Surviving
Corporation shall provide officers' and directors' liability insurance in
respect of acts or omissions occurring prior to the Effective Time
(including, without limitation, for acts or omissions occurring in
connection with this Agreement and the consummation of the Merger) covering
each Indemnified Person currently covered by the Company's officers' and
directors' liability insurance policy on terms with respect to coverage and
amount (including with respect to the payment of attorney's fees) no less
favorable than those of such policy in effect on the date hereof (which
policies have been made available by the Company to Parent); provided that
if the aggregate annual premiums for such insurance during such period
shall exceed 300% of the per annum rate of premium paid by the Company as
of the date hereof for such insurance, then the Surviving Corporation shall
provide a policy with the best coverage as shall then be available at 300%
of such rate.
(c) The rights of each Indemnified Person and his or her heirs and
legal representatives under this Section 6.5 shall be in addition to any
rights such Indemnified Person may have under the Articles of Incorporation
or Bylaws of the Company, any agreement providing for indemnification, or
under the laws of the State of Nevada or any other applicable Laws. These
rights shall survive consummation of the Merger and are intended to
benefit, and shall be enforceable by, each Indemnified Person.
6.6. Formation and Actions of Merger Sub. Parent shall take all necessary
actions in connection with the formation and qualification of Merger Sub, and
shall cause Merger Sub to take all actions required on its part for the
consummation of the Merger and the consummation of the transactions contemplated
hereby.
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6.7. No Purchase of Company Common Stock. Except as otherwise provided for
in this Agreement, neither Parent, nor any of its subsidiaries, affiliates or
associates (each as defined in Chapter 78 of the Nevada Code), shall, prior to
the Effective Time, (i) beneficially acquire any shares of Company Common Stock
or (ii) enter into any agreement, arrangement or understanding, whether or not
in writing, with any person who beneficially owns, or whose affiliates or
associates beneficially own, directly or indirectly, any Company Common Stock,
for the purpose of acquiring, holding, voting or disposing of any Company Common
Stock.
6.8. Maintenance of Benefit Plans. For a period beginning at the Effective
Time and continuing for 12 months thereafter, Parent shall maintain or cause to
be maintained the employee pension and welfare benefit plans (as defined in
Section 3(3) of ERISA) maintained by the Company Subsidiaries immediately prior
to the Effective Time or shall maintain employee pension and welfare benefit
plans providing benefit levels substantially comparable in the aggregate to
those maintained by the Company immediately prior to the Effective Time. Parent
shall grant transferred employees credit for all service recognized by the
Company or a Company Subsidiary immediately prior to the Effective Time other
than for purposes of benefit accrual.
ARTICLE VII
ADDITIONAL COVENANTS OF THE COMPANY AND PARENT
7.1. Proxy Statement. Parent and the Company shall cooperate and promptly
prepare and the Company shall file with the SEC as soon as practicable a proxy
statement with respect to the Company Stockholders Meeting (the "Proxy
Statement"). The Company will cause the Proxy Statement to comply as to form in
all material respects with the applicable provisions of the Exchange Act and the
rules and regulations thereunder. The Company shall use all reasonable efforts,
and Parent will cooperate with the Company, to have the Proxy Statement cleared
by the SEC as promptly as practicable. The Company shall, as promptly as
practicable, provide copies of any written comments (other than de minimis
comments) received from the SEC with respect to the Proxy Statement to Parent
and advise Parent of any verbal comments with respect to the Proxy Statement
received from the SEC. The Company agrees that the Proxy Statement and each
amendment or supplement thereto at the time of mailing thereof and at the time
of the Company Stockholders Meeting will not include an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading; provided, however, that the foregoing
shall not apply to the extent that any such untrue statement of a material fact
or omission to state a material fact was made by the Company in reliance upon
and in conformity with written information concerning Parent furnished to the
Company by Parent specifically for use in the Proxy Statement. Parent agrees
that the written information provided by it for inclusion in the Proxy Statement
and each amendment or supplement thereto, at the time of mailing thereof and at
the time of the Company Stockholders Meeting, will not include an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. No amendment or
supplement to the Proxy Statement will be made by the Company without the
approval of Parent (not to be unreasonably withheld or delayed). The Company
will advise Parent promptly of any request by the SEC for amendment of the Proxy
Statement or comments thereon and responses thereto or requests by the SEC for
additional information. Whenever any event or condition affecting the Company or
Parent occurs that is required to be set forth in an amendment or supplement to
the Proxy Statement, such party will promptly inform the other of such
occurrence and cooperate in filing with the SEC or its staff or any other
government officials, and in mailing to stockholders of the Company, such
amendment or supplement.
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ARTICLE VIII
CONDITIONS
8.1. Conditions to Each Party's Obligations. The respective obligations of
each party to effect the Merger shall be subject to the fulfillment or waiver on
or prior to the Closing Date of the following conditions:
8.1.1. Company Stockholder Approval. The Merger shall have been
approved at or prior to the Effective Time by the requisite vote of the
stockholders of the Company in accordance with the Nevada Code and the
Company's Articles of Incorporation.
8.1.2. No Injunction or Action. No order, statute, rule, regulation,
executive order, stay, decree, judgment or injunction shall have been
enacted, entered, promulgated or enforced by any court or other
Governmental Authority, which prohibits or prevents the consummation of the
Merger and which has not been vacated, dismissed or withdrawn by the
Effective Time. Parent and the Company shall use their reasonable best
efforts to have any of the foregoing vacated, dismissed or withdrawn on or
prior to the Effective Time.
8.1.3. FCC Consent. The FCC shall have granted its consent (the "FCC
Consent") approving the transfers of control pursuant to the Merger of the
Company FCC Licenses for the operation of the Licensed Facilities without
the imposition of any conditions or restrictions that, individually or in
the aggregate, constitute a Company Material Adverse Effect, and which FCC
Consent has not been reversed, stayed, enjoined, set aside or suspended and
with respect to which no timely request for stay, petition for
reconsideration or appeal has been filed and as to which the time period
for filing of any such appeal or request for reconsideration or for any sua
sponte action by the FCC with respect to the FCC Consent has expired, or,
in the event that such a filing or review sua sponte has occurred, as to
which such filing or review shall have been disposed of favorably to the
grant of the FCC Consent and the time period for seeking further relief
with respect thereto shall have expired without any request for such
further relief having been filed or review initiated.
8.1.4. Governmental Approvals. All waivers, consents, approvals,
orders and authorizations of, and notices, reports and filings with,
Governmental Authorities necessary for the consummation of the transactions
contemplated hereby (other than those matters addressed in Sections 8.1.3
and 8.1.5) shall have been obtained or made and shall be in full force and
effect without the imposition of any terms, conditions, restrictions or
limitations, except for the imposition of any terms, conditions,
restrictions and limitations in respect of, and failures to have obtained
or made, or failures to be in full force and effect of, such waivers,
consents, approvals, orders, authorizations, notices, reports or filings
which, individually or in the aggregate, do not constitute a Company
Material Adverse Effect.
8.1.5. HSR Act. The waiting period (or any extension thereof)
applicable to the Merger under the HSR Act shall have expired or been
terminated.
8.2. Conditions to Obligations of the Company. The obligation of the
Company to effect the Merger shall be subject to the fulfillment on or prior to
the Closing Date of the following additional conditions, any one or more of
which may be waived by the Company:
8.2.1. Parent Representation and Warranties. The representations and
warranties of Parent contained in this Agreement shall be true and correct
when made, and as of the Closing Date as if made on and as of such date
(provided that such representations and warranties which are expressly made
as of a specific date need be true and correct only as of such specific
date), except to the extent that any failures of such representations and
warranties to be so true and correct, do not, individually or in the
aggregate, constitute a Parent Material Adverse Effect (disregarding for
these purposes any materiality, Parent Material Adverse Effect or corollary
qualifications contained therein).
8.2.2. Performance by Parent. Parent shall have performed and complied
in all material respects with all of the material covenants and agreements
required by this Agreement to be performed or complied with by Parent on or
prior to the Closing Date.
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8.2.3. No Material Adverse Change. There shall not have occurred after
the date hereof any Event or Events that, individually or the aggregate,
constitute a Parent Material Adverse Effect.
8.2.4. Certificates and other Deliveries. Parent shall have delivered
to the Company a certificate executed on its behalf by its Chief Executive
Officer to the effect that the conditions set forth in Subsections 8.2.1,
8.2.2 and 8.2.3, above, have been satisfied.
8.3. Conditions to Obligations of Parent. The obligations of Parent to
effect the Merger shall be subject to the fulfillment on or prior to the Closing
Date of the following additional conditions, any one or more of which may be
waived by Parent:
8.3.1. Company Representations and Warranties. The representations and
warranties of the Company contained in this Agreement shall be true and
correct when made and as of the Closing Date as if made on and as of such
date (provided that such representations and warranties which are by their
express provisions made as of a specific date need be true and correct only
as of such specific date), except to the extent that any failures of such
representations and warranties to be so true and correct, do not,
individually or the aggregate, constitute a Company Material Adverse Effect
(disregarding for these purposes any materiality, Company Material Adverse
Effect or corollary qualifications contained therein).
8.3.2. Performance by the Company. The Company shall have performed
and complied in all material respects with all the material covenants and
agreements required by this Agreement to be performed or complied with by
the Company on or prior to the Closing Date.
8.3.3. No Material Adverse Change. There shall have not occurred after
the date hereof any Event or Events that, individually or in the aggregate,
constitute a Company Material Adverse Effect.
8.3.4. Certificates and Other Deliveries. The Company shall have
delivered, or caused to be delivered, to Parent (i) a certificate executed
on its behalf by its Chief Executive Officer to the effect that the
conditions set forth in Subsections 8.3.1, 8.3.2 and 8.3.3, above, have
been satisfied; (ii) a certificate of good standing from the Secretary of
State of the State of Nevada stating that the Company is a validly existing
corporation in good standing; (iii) duly adopted resolutions of the Board
of Directors of the Company approving the execution, delivery and
performance of this Agreement and the instruments contemplated hereby and
of the stockholders of the Company approving the Company Proposal,
certified by the Secretary or an Assistant Secretary of the Company; and
(iv) a true and complete copy of the Articles of Incorporation of the
Company certified by the Secretary of State of the State of Nevada, and a
true and complete copy of the Bylaws of the Company certified by the
Secretary or an Assistant Secretary of the Company.
8.3.5. Opinion of FCC Counsel. Parent shall have received an opinion,
addressed to it and dated as of the Closing Date, from Wiley, Rein &
Fielding, FCC counsel to the Company, in the form attached hereto as
Exhibit I provided that such opinions may be made subject to a Company
Material Adverse Effect qualification.
ARTICLE IX
TERMINATION AND ABANDONMENT
9.1. Termination. This Agreement may be terminated at any time prior to the
Effective Time, whether before or after approval of this Agreement and the
Merger by the stockholders of the Company:
(a) by mutual consent of the Company and Parent;
(b) (1) by the Company (provided that the Company is not then in
material breach of any representation, warranty, covenant or other
agreement contained herein), if there has been a breach by Parent of any of
its representations, warranties, covenants or agreements contained in this
Agreement that would cause the condition set forth in Section 8.2.1 or
Section 8.2.2 not to be satisfied and, in either such case, such breach or
condition is not curable or, if curable, has not been promptly cured within
30 days following receipt by Parent of written notice of such breach; (2)
by Parent (provided that Parent is not then in material breach of any
representation, warranty, covenant or other agreement contained herein), if
there has been a breach by the Company of any of its representations,
warranties, covenants or
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agreements contained in this Agreement, that would cause the condition set
forth in Section 8.3.1 or Section 8.3.2 not to be satisfied and such breach
or condition is not curable or, or if curable, has not been promptly cured
within 30 days following receipt by the Company of written notice of such
breach;
(c) by either Parent or the Company if any decree, permanent
injunction, judgment, order or other action by any court of competent
jurisdiction, any arbitrator or any Governmental Authority preventing or
prohibiting consummation of the Merger shall have become final and
nonappealable (so long as the party seeking termination is not in breach of
Section 5.5 or Section 6.2 hereof);
(d) by either Parent or the Company if the Merger shall not have been
consummated before the "End Date", which shall be January 16, 2002;
provided that a party shall not be permitted to terminate this Agreement
pursuant to this paragraph (d) if the failure of the Effective Time to
occur by the End Date shall be due to the failure of such party to perform
or observe in all material respects the covenants and agreements of such
party set forth herein;
(e) by either Parent or the Company if the transactions contemplated
by this Agreement shall fail to receive the requisite vote for approval and
adoption by the stockholders of the Company at the Company Stockholders
Meeting or any adjournment or postponement thereof; provided that the right
to terminate this Agreement under this Section 9.1(e) shall not be
available to any party whose failure to fulfill any obligation under this
Agreement has been the cause of, or resulted in, the failure of such
approval to have been obtained;
(f) by the Company, in accordance with Section 5.9(b), provided,
however, in order for the termination of this Agreement pursuant to this
Section 9.1(f) to be deemed effective, the Company shall have complied with
all provisions contained in Sections 5.9(a), (b) and (c), including the
notice provisions therein, and with the applicable requirements of Section
9.2, including the payment of the Termination Fee and Expenses; or
(g) by Parent, if the Board of Directors of the Company shall have
withdrawn, or modified or changed, in a manner adverse to Parent or Merger
Sub, its approval or recommendation of the Merger and/or the Company
Proposal.
9.2. Effect of Termination. (a) In the event of the termination of this
Agreement by either the Company or Parent pursuant to Section 9.1, this
Agreement shall forthwith become void, there shall be no liability under this
Agreement on the part of Parent or the Company, other than the provisions of
this Section 9.2, Section 10.1 and Section 10.7, and except to the extent that
such termination results from the material breach by a party of any of its
representations, warranties, covenants or agreements set forth in this
Agreement.
(b) The Company and Parent agree that in order to compensate Parent
and its affiliates, including Forstmann Little & Co. and its affiliates,
for incurring the costs and expenses related to the transactions
contemplated hereby and the foregoing by Forstmann Little & Co. or its
affiliates of the opportunity with respect to the Company in connection
herewith, the Company shall pay to Forstmann Little & Co. and its
affiliates, in such manner as is designated by Forstmann Little & Co., an
aggregate amount equal to the Expenses (as defined in Section 9.2(d)
below), not to exceed $10 million, plus $20 million (the "Termination
Fee"), as follows: (1) if the Company or Parent shall terminate this
Agreement pursuant to Section 9.1(e), at any time after the date of this
Agreement and prior to the date of the Company Stockholders Meeting an
Acquisition Proposal shall have been publicly announced, and within 12
months of the termination of this Agreement the Company enters into a
definite agreement with respect to an Acquisition Transaction, (2) if
Parent shall terminate this Agreement pursuant to Section 9.1(b)(2) in
connection with a willful and material breach by the Company of any of its
representatives, warranties, covenants or agreements set forth in this
Agreement and within 12 months of the termination of this Agreement the
Company enters into a definitive agreement with respect to an Acquisition
Proposal, (3) if the Company shall terminate this Agreement pursuant to
Section 9.1(f), or (4) if Parent shall terminate this Agreement pursuant to
Section 9.1(g).
(c) The Termination Fee and Expenses required to be paid pursuant to
clauses (1) or (2) of Section 9.2(b) shall be paid not later than five
business days after the Company enters into a definitive agreement with
respect to an Acquisition Proposal. The Termination Fee and Expenses to be
paid
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pursuant to clauses (3) or (4) of Section 9.2(b) shall be paid concurrently
with notice of termination of this Agreement by the Company.
(d) The term "Expenses" shall mean all out-of-pocket expenses incurred
by Parent and its affiliates in connection with this Agreement and the
transactions contemplated hereby, including, without limitation, fees and
expenses of accountants, attorneys and financial advisors, all costs of
Parent and its affiliates relating to the financing of the Merger
(including, without limitation, advisory and commitment fees and reasonable
fees and expenses of counsel to potential lenders), costs and expenses
otherwise borne by Parent and its affiliates pursuant to Section 10.7 and
costs incurred in connection with the Preferred Stock Offer and Debenture
Offer.
(e) All payments under this Section 9.2 shall be made by wire transfer
of immediately available funds to an account designated by the recipient of
such funds.
(f) The Company acknowledges that the agreements contained in this
Section 9.2 are an integral part of the transactions contemplated by this
Agreement, and that, without these agreements, the Parent would not enter
into this Agreement. Accordingly, if the Company fails to promptly pay any
amounts owing pursuant to this Section 9.2 when due, the Company shall in
addition thereto pay to the Parent and its affiliates all costs and
expenses (including fees and disbursements of counsel) incurred in
collecting such amounts, together with interest on such amounts (or any
unpaid portion thereof) from the date such payment was required to be made
until the date such payment is received by the Parent and its affiliates at
the prime rate of Chase Manhattan as in effect from time to time during
such period.
ARTICLE X
MISCELLANEOUS
10.1. Confidentiality. Unless (i) otherwise expressly provided in this
Agreement, (ii) required by applicable Law, (iii) necessary to secure any
required Consents as to which the other party has been advised, or (iv)
consented to in writing by Parent and the Company, this Agreement and any
information or documents furnished in connection herewith shall be kept strictly
confidential by the Company and the Company Subsidiaries, Parent and the Parent
Subsidiaries, and their respective officers, directors, employees and agents.
Prior to any disclosure pursuant to the preceding sentence, the party intending
to make such disclosure shall consult with the other party to the extent
practicable regarding the nature and extent of the disclosure. Subject to the
preceding sentence, nothing contained herein shall preclude disclosures to the
extent necessary to comply with accounting, SEC and other disclosure obligations
imposed by applicable Law. To the extent required by such disclosure
obligations, Parent or the Company, after consultation with the other party to
the extent practicable, may file with the SEC any written communications
relating to the Merger and the transactions contemplated hereby pursuant to
Regulation 14A promulgated under the Securities Act. Parent and the Company
shall cooperate with the other and provide such information and documents as may
be required in connection with any such filings. In the event the Merger is not
consummated, Parent and the Company shall return to the other all documents
furnished by the other and all copies thereof made by such party and will hold
in absolute confidence all information obtained from the other party except to
the extent (i) such party is required to disclose such information by Law or
such disclosure is necessary in connection with the pursuit or defense of a
claim, (ii) such information was known by such party prior to such disclosure or
was thereafter developed or obtained by such party independent of such
disclosure, (iii) such party received such information on a non-confidential
basis from a source, other than the other party, which is not known by such
party to be bound by a confidentiality obligation with respect thereto or (iv)
such information becomes generally available to the public or is otherwise no
longer confidential. Prior to any disclosure of information pursuant to the
exception in clause (i) of the preceding sentence, the party intending to
disclose the same shall so notify the party which provided the same to the
extent practicable in order that such party may seek a protective order or other
appropriate remedy should it choose to do so.
10.2. Amendment and Modification. To the extent permitted by applicable
Law, this Agreement may be amended, modified or supplemented only by a written
agreement among the Company, Parent and Merger Sub, whether before or after
approval of this Agreement and the Merger by the stockholders of the Company,
except that following approval by the stockholders of the Company, there shall
be no amendment or change
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to the provisions hereof with respect to the Merger Consideration without
further approval by the stockholders of the Company, and no other amendment
shall be made which by law requires further approval by such stockholders
without such further approval.
10.3. Waiver of Compliance; Consents. Any failure of the Company on the one
hand, or Parent or Merger Sub on the other hand, to comply with any obligation,
covenant, agreement or condition herein may be waived by Parent on the one hand,
or the Company on the other hand, only by a written instrument signed by the
party granting such waiver, but such waiver or failure to insist upon strict
compliance with such obligation, covenant, agreement or condition shall not
operate as a waiver of, or estoppel with respect to, any subsequent or other
failure. Whenever this Agreement requires or permits consent by or on behalf of
any party hereto, such consent shall be given in writing in a manner consistent
with the requirements for a waiver of compliance as set forth in this Section
10.3.
10.4. Survival of Representations and Warranties. The respective
representations and warranties of the Company and Parent contained herein or in
any certificates or other documents delivered prior to or at the Closing shall
survive the execution and delivery of this Agreement, notwithstanding any
investigation made or information obtained by the other party, but shall
terminate at the Effective Time.
10.5. Notices. All notices and other communications hereunder shall be in
writing and shall be deemed to have been duly given when delivered in person, by
facsimile, receipt confirmed, or on the next business day when sent by overnight
courier or on the second succeeding business day when sent by registered or
certified mail (postage prepaid, return receipt requested) to the respective
parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
(i) if to Company, to:
Citadel Communications Corporation
City Center West, Suite 400
7201 West Lake Blvd.
Las Vegas, NV 89128
Attention: Larry Wilson
Fax: (702) 804-5936
with a copy to:
Eckert Seamans Cherin & Mellott, LLC
600 Grant Street, 44th Floor
Pittsburgh, PA 15219
Attention: Bryan D. Rosenberger, Esq.
Fax: (412) 566-6099
and
(ii) (a) if to Parent, to:
FLCC Holdings, Inc.
c/o Forstmann Little & Co.
767 Fifth Avenue, 44th Floor
New York, New York 10153
Attention: Sandra J. Horbach
Fax : (212) 759-9059
(b) if to Merger Sub, to:
FLCC Acquisition Corp.
c/o Forstmann Little & Co.
767 Fifth Avenue, 44th Floor
New York, New York 10153
Attention: Sandra J. Horbach
Fax : (212) 759-9059
In each case, with a copy to:
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Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, New York 10004
Attention: Stephen Fraidin, Esq.
Telecopy: (212) 859-4000
10.6. Binding Effect; Assignment. This Agreement and all of the provisions
hereof shall be binding upon and inure to the benefit of the parties hereto and
their respective successors and permitted assigns. Neither this Agreement nor
any of the rights, interests or obligations hereunder shall be assigned by any
of the parties hereto prior to the Effective Time without the prior written
consent of the other parties hereto; provided, that any and all rights of Parent
and Merger Sub may be assigned to any person newly formed and directly or
indirectly wholly owned by Parent for the purpose of effectuating the
transactions contemplated hereby; provided, however, that no such assignment
shall be permitted if the effect thereof would be to require an additional
consent of the Company's stockholders.
10.7. Expenses. All costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such costs or expenses.
10.8. Governing Law. This Agreement shall be deemed to be made in, and in
all respects shall be interpreted, construed and governed by and in accordance
with the internal laws of, the State of New York, except that Nevada law
(including, without limitation, any Law related to any fiduciary duty, duty of
loyalty, or other duty or obligation of the Company's Board of Directors with
respect to the Merger or this Agreement) shall apply to the Merger; and the
parties hereto consent to the jurisdiction of the courts of or in the State of
New York in connection with any dispute or controversy relating to or arising
out of this Agreement and the transactions contemplated hereby.
10.9. Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
10.10. Interpretation. The article and section headings contained in this
Agreement are solely for the purpose of reference, are not part of the agreement
of the parties and shall not in any way affect the meaning or interpretation of
this Agreement. No rule of construction shall apply to this Agreement which
construes ambiguous language in favor of or against any party by reason of that
party's role in drafting this Agreement. As used in this Agreement, (i) the term
"person" shall mean and include an individual, a partnership, a joint venture, a
corporation, a limited liability company, a trust, an association, an
unincorporated organization, a Governmental Authority and any other entity; (ii)
the term "affiliate," with respect to any person, shall mean and include any
person controlling, controlled by or under common control with such person; and
(iii) the term "subsidiary" of any specified person shall mean any corporation
50 percent or more of the outstanding voting power of which, or any partnership,
joint venture, limited liability company or other entity 50 percent or more of
the total equity interest of which, is directly or indirectly owned by such
specified person.
10.11. Entire Agreement. This Agreement and the other agreements, documents
or instruments referred to herein or executed in connection herewith including,
but not limited to, the Side Letter between the parties hereto dated as of the
date hereof and the Company Disclosure Schedule, which schedule is incorporated
herein by reference, embody the entire agreement and understanding of the
parties hereto in respect of the subject matter contained herein. There are no
restrictions, promises, representations, warranties, covenants, or undertakings,
other than those expressly set forth or referred to herein. This Agreement
supersedes all prior agreements and the understandings between the parties with
respect to such subject matter.
10.12. Specific Performance. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions in this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. Accordingly, the parties further agree that each party shall be
entitled to an injunction or restraining order to prevent breaches hereof or
thereof and to enforce specifically the terms and provisions hereof or thereof
in any court of the United States or any state having jurisdiction, this being
in addition to any other right or remedy to which such party may be entitled
under this Agreement, at law or in equity.
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10.13. Third Parties. Nothing contained in this Agreement or in any
instrument or document executed by any party in connection with the transactions
contemplated hereby shall create any rights in, or be deemed to have been
executed for the benefit of, any person that is not a party hereto or thereto,
or, a successor or permitted assign of such a party; provided, however, that the
parties hereto specifically acknowledge that the provisions of Section 6.5 above
are intended to be for the benefit of, and shall enforceable by, the officers
and directors of the Company and/or the Company Subsidiaries affected thereby
and their heirs and representatives; and provided further, that the parties
hereto specifically acknowledge that the provisions of Section 9.2 above are
intended to be for the benefit of, and shall be enforceable by, Forstmann Little
& Co. and its affiliates.
[Remainder of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, Parent and the Company have caused this Agreement to be
signed and delivered by their respective duly authorized officers as of the date
first above written.
CITADEL COMMUNICATIONS CORPORATION
By: /s/ LAWRENCE R. WILSON
------------------------------------
Name: Lawrence R. Wilson
Title: Chairman, Chief Executive
Officer and President
FLCC HOLDINGS, INC.
By: /s/ SANDRA J. HORBACH
------------------------------------
Name: Sandra J. Horbach
Title: President
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EXHIBIT I
[FORM OF FCC OPINION]
[DATE]
[ADDRESSEE]
Ladies and Gentlemen:
We have acted as communications counsel to Citadel Communications
Corporation (the "Company"). We have been asked by the Company to render this
opinion pursuant to the Agreement and Plan of Merger (the "Merger Agreement")
dated January , 2001 among the Company, [the Merger Sub] and [the Parent].
We have examined a copy of the Merger Agreement. We have also examined the
Federal Communications Commission ("FCC") public files for the radio stations
listed on Exhibit A attached hereto (the "Stations") that were made available to
us by the FCC on various dates between [date] and [date] (and on various dates
during such time period we also received oral information from the staff of the
Enforcement Division, Complaints/Political Programming Branch of the FCC's Mass
Media Bureau in response to our request that they inform us of such matters). We
have examined such FCC files with respect to the Stations' main station FCC
licenses (the "FCC Licenses") only, and have not examined any FCC records
related to any other licenses, permits or authorizations which may be used in
connection with the Stations. In such examinations and in rendering the opinions
set forth herein, we have assumed the genuineness of all signatures, the
authenticity of all documents, and the completeness of the FCC public files made
available to us.
With respect to factual matters, we have relied solely upon the FCC file
review described above, information communicated to us orally by the FCC staff
in response to the request described above, and the representations and
warranties set forth in the Merger Agreement. We have undertaken no independent
review thereof and no other investigation or inquiry. All references herein to
our "knowledge" mean the actual present knowledge of the attorneys in our firm
working on matters with respect to the Company without any investigation or
inquiry except as expressly described herein. No inference as to our knowledge
of the existence or absence of any facts should be drawn from our serving as
communications counsel to the Company.
The opinions rendered herein are limited to matters arising under the
Communications Act of 1934, as amended, and the published rules, regulations and
policies promulgated by the FCC thereunder (collectively, the "Communications
Laws"). We express no opinion concerning any other laws.
Based on the foregoing, and subject to the assumptions, qualifications and
exceptions contained herein, it is our opinion that:
1. The execution, delivery and performance in accordance with its
terms of the Merger Agreement by the Company, does not constitute a
violation by the Company of the Act or Rules, but we wish to note that (I)
the FCC prohibits the grant of a security interest in or lien upon any FCC
license, permit or authorizations; and (ii) prior FCC consent is required
before the assignment or transfer of control of an FCC license, permit or
authorization (including without limitation prior to the exercise of
certain rights or remedies under the Agreement which constitute or cause
such an assignment or transfer of control under the Act and Rules).
2. The FCC Licenses listed on Exhibit A attached hereto are held by
Citadel Broadcasting Company (the "Licensee"). Such FCC Licenses are in
full force and effect. To our knowledge, except for those affecting the
radio broadcasting industry generally, there are no proceedings pending or
threatened in writing under the Communications Laws against the Company,
the Licensee or the Stations by or before the FCC or before any court
having jurisdiction of matters under the Communications Laws which seek the
revocation, non-renewal, or material adverse modification of any of the FCC
Licenses. To our knowledge, the FCC Licenses are not subject to any
conditions imposed by the FCC outside the
101
ordinary course. Without limiting the other qualifications set forth
herein, we point out to you that we have not searched the docket of any
court.
3. On [date], the FCC granted its consent to the transfer of control
of the Licensee to [transferee] (the "FCC Consent"). The time provided by
the Act and the Rules within which a party in interest other than the FCC
may seek administrative reconsideration or review of the FCC Consent has
expired, and to our knowledge no such petition was filed within such time
with the FCC. The time provided by the Act and the Rules within which the
FCC may review the FCC Consent on its own motion has expired, and to our
knowledge the FCC did not give public notice of such review within such
time.
As used herein, the term "full force and effect" means that to our
knowledge: (a) the orders issuing the FCC Licenses have become effective; (b) no
stay of effectiveness of such orders has been issued by the FCC; and (c) the FCC
Licenses have not been invalidated by any subsequent published FCC action.
This letter is solely for your information in connection with the Merger
Agreement and may not be relied upon for any other purpose. This letter may not
be relied upon by any other person or entity, quoted in whole or in part,
otherwise referred to in any document, or, except as required by applicable law,
filed with any government agency or other entity or person. This letter is
limited to the matters set forth herein, and no opinion may be inferred or
implied beyond the matters expressly stated herein. This letter is limited to
matters as of the date hereof and we specifically disclaim all responsibility to
advise you of matters that hereafter come to our attention or otherwise arise
that affect the opinions set forth herein.
Very truly yours,
WILEY, REIN & FIELDING
102
ANNEX B
January 15, 2001
Citadel Communications Corporation
City Center West, Suite 400
7201 West Lake Mead Blvd.
Las Vegas, Nevada 89128
Attn: Lawrence R. Wilson
Ladies & Gentlemen:
Reference is made to that certain Agreement and Plan of Merger, dated as of
January 15, 2001, by and between Citadel Communications Corporation and FLCC
Holdings, Inc. (the "Agreement"). Any capitalized terms used herein but not
defined herein shall have the meanings assigned to such terms in the Agreement.
The parties hereto agree as follows:
1. Notwithstanding anything in the Merger Agreement to the contrary, if in
connection with any changes in FCC rules or policies adopted in
connection with the FCC proceeding captioned In the Matter of Definition
of Radio Markets, MM Docket No. 00-244, NOTICE OF PROPOSED RULE MAKING
(Released December 13, 2000) or any related proceeding (collectively,
the "Definition Proceedings"), including the application of the changed
rules or policies to the FCC Consent, the Merger, the operation of the
business of the Company or otherwise, the Company and its subsidiaries
divest, agree to divest or are required to divest Company Licensed
Facilities (other than Company Licensed Facilities that the Company has
indicated to Parent in writing prior to the date hereof it intends to
divest) that, in the aggregate, contributed $14 million or more to the
consolidated broadcast cash flow of the Company for the 12 month period
immediately preceding any such divestitures, then Parent shall have the
right to terminate the Agreement. In the event of such a termination,
the Agreement shall forthwith become void, and there shall be no
liability under the Agreement on the part of Parent or the Company.
2. Parent, in evaluating whether to enter into the Agreement, has not
relied on any forward looking financial information provided by the
Company other than the information contained in the written projections
entitled "Base Case: Includes Tuscon (excl. Spin markets)" ("Base Case
Projections"). While acknowledging Parent's reliance on the forward
looking information presented in the Base Case Projections, the parties
also acknowledge that the Company makes no representation or warranty in
this letter agreement or in the Agreement with respect to the Base Case
Projections. The parties acknowledge that the Parent does not relinquish
any rights to make a claim that a material failure to meet the forecasts
contained in the Base Case Projections constitutes a Company Material
Adverse Effect.
If you are in agreement with the aforementioned terms, please indicate your
acceptance by signing where indicated below.
Very truly yours,
FLCC HOLDINGS, INC.
By: /s/ SANDRA J. HORBACH
------------------------------------
Name: Sandra J. Horbach
Title: President
Agreed to and Accepted as
of the date above written:
CITADEL COMMUNICATIONS CORPORATION
By: /s/ LAWRENCE R. WILSON
-----------------------------------------------------
Name: Lawrence R. Wilson
Title: Chairman, Chief Executive Officer
and President
B-1
103
ANNEX C
GUARANTEE
Each of Forstmann Little & Co. Subordinated Debt and Equity Management
Buyout Partnership-VII, L.P.("MBO-VII") and Forstmann Little & Co. Equity
Partnership-VI, L.P. ("EP-VI") agrees to cause FLCC Holdings, Inc. (including
any assignee of FLCC Holdings, Inc.) to fully perform and observe its covenants
and other obligations under the foregoing Agreement and Plan of Merger and shall
be entitled to enforce directly any benefit of the Agreement and Plan of Merger
accruing to FLCC Holdings, Inc. The foregoing agreement of each of MBO-VII and
EP-VI shall terminate at the Closing.
Dated: January 15, 2001
FORSTMANN LITTLE & CO. SUBORDINATED DEBT
AND EQUITY MANAGEMENT BUYOUT
PARTNERSHIP-VII, L.P.
By: FLC XXIII Partnership,
its general partner
By: /s/ SANDRA J. HORBACH
---------------------------------
Sandra J. Horbach,
a general partner
FORSTMANN LITTLE & CO. EQUITY
PARTNERSHIP-VI, L.P.
By: FLC XXII Partnership, L.P.,
its general partner
By: /s/ SANDRA J. HORBACH
---------------------------------
Sandra J. Horbach,
a general partner
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ANNEX D
[Logo] CREDIT SUISSE FIRST BOSTON CORPORATION
The Board of Directors
Citadel Communications Corporation
7201 West Lake Mead Blvd.
Suite 400
Las Vegas, NV 89128
January 15, 2001
Dear Sirs:
You have asked us to advise you with respect to the fairness to the holders of
Common Stock (as defined below) of Citadel Communications Corporation (the
"Company") from a financial point of view of the Consideration (as defined
below) to be received by such holders pursuant to the terms of the Agreement and
Plan of Merger, dated as of January 15, 2001 (the "Merger Agreement"), between
FLCC Holdings, Inc. (the "Acquiror") and the Company. The Merger Agreement
provides for the merger (the "Merger") of the Company with a wholly owned
subsidiary of the Acquiror to be incorporated under the laws of the State of
Nevada pursuant to which the Company will become a wholly owned subsidiary of
the Acquiror and each outstanding share of common stock, par value $0.001 per
share ("Common Stock"), of the Company will be converted into the right to
receive $26.00 in cash (the "Consideration").
In arriving at our opinion, we have reviewed certain publicly available business
and financial information relating to the Company, as well as the Merger
Agreement. We have also reviewed certain other information, including financial
forecasts, provided to or discussed with us by the Company and have met with the
Company's management to discuss the business and prospects of the Company. We
have also considered certain financial and stock market data of the Company, and
we have compared those data with similar data for other publicly held companies
in businesses similar to the Company and we have considered the financial terms
of certain other business combinations and other transactions which have
recently been effected. We also considered such other information, financial
studies, analyses and investigations and financial, economic and market criteria
which we deemed relevant.
In connection with our review, we have not assumed any responsibility for
independent verification of any of the foregoing information and have relied on
its being complete and accurate in all material respects. With respect to the
financial forecasts, we have assumed that they have been reasonably prepared on
bases reflecting the best currently available estimates and judgments of the
Company's management as to the future financial performance of the Company. In
addition, we have not been requested to make, and have not made, an independent
evaluation or appraisal of the assets or liabilities (contingent or otherwise)
of the Company, nor have we been furnished with any such evaluations or
appraisals. Our opinion is necessarily based upon financial, economic, market
and other conditions as they exist and can be evaluated on the date hereof. We
were not requested to, and did not, solicit third party indications of interest
in acquiring all or any part of the Company. We have not been requested to opine
as to, and our opinion does not in any manner address, the Company's underlying
business decision to effect the Merger.
We have acted as financial advisor to the Company in connection with the Merger
and will receive a fee for our services, a significant portion of which is
contingent upon the consummation of the Merger.
In the past we have provided certain investment banking and financial services
to the Company and affiliates of the Acquiror and have received compensation for
such services. In the ordinary course of our business, we and our affiliates may
actively trade the debt and equity securities of the Company and affiliates of
the
D-1
105
Acquiror for our and such affiliates' own accounts and for the accounts of
customers and, accordingly, may at any time hold a long or short position in
such securities.
It is understood that this letter is for the information of the Board of
Directors in connection with its consideration of the Merger, and does not
constitute a recommendation to any stockholder of the Company as to how such
stockholder should vote or act on any matter relating to the proposed Merger.
Based upon and subject to the foregoing, it is our opinion that, as of the date
hereof, the Consideration to be received by the holders of Common Stock of the
Company in the Merger is fair to such stockholders from a financial point of
view.
Very truly yours,
CREDIT SUISSE FIRST BOSTON CORPORATION
By: /s/ KRISTIN M. ALLEN
----------------------------------
Kristin M. Allen
D-2
106
ANNEX E
CITADEL COMMUNICATIONS CORPORATION
AUDIT COMMITTEE CHARTER
The role and responsibilities of the Audit Committee of the Board of
Directors (the "Committee") of Citadel Communications Corporation (the
"Company") are as follows:
ROLE
The Committee's role is to act on behalf of the Company's Board of
Directors (the "Board") and oversee all aspects of the Company's control,
reporting, and audit functions, except those specifically related to the
responsibilities of another standing committee of the Board. The Committee's
role includes a particular focus on the qualitative aspects of financial
reporting to shareholders and on Company processes for the management of
business/financial risk and for compliance with significant applicable legal,
ethical, and regulatory requirements.
The role also includes coordination with other Board committees and
maintenance of strong, positive working relationships with management, external
and internal auditors, counsel, and other Committee advisors.
MEMBERSHIP
Committee membership shall consist of at least three independent,
non-executive Board members. Committee members shall have (1) knowledge of the
primary industries in which the Company operates; (2) the ability to read and
understand fundamental financial statements, including a balance sheet, income
statement, statement of cash flow, and key performance indicators; and (3) the
ability to understand key business and financial controls and related controls
and control processes. One member, preferably the chairperson, should have
knowledge of financial reporting, including applicable regulatory requirements,
and accounting or related financial management expertise. The Committee shall
have access to its own counsel and other advisors at the Committee's sole
discretion.
Committee appointments shall be nominated and approved annually by the full
Board. The Committee chairperson shall be selected by the Committee members.
OPERATING PRINCIPLES
The Committee shall fulfill its specific responsibilities within the
context of the following overriding principles:
- Communication - The chairperson shall have regular and meaningful
contact throughout the year with senior management, other Committee
chairpersons and other key Committee advisors, external and internal
auditors, etc., as applicable, to strengthen the Committee's
knowledge of relevant current and prospective business issues.
- Committee Education/Orientation - The Committee, with management,
shall develop and participate in a process for systematic and
continuous review of important financial and operating topics that
present potential significant risk to the Company. Additionally,
individual Committee members have a responsibility to participate in
relevant and appropriate self-study education to assure a strong
understanding of the business and environment in which the Company
operates.
- Annual Meeting Plan - The Committee, with input from management, and
other key Committee advisors, shall develop an annual plan
responsive to the "responsibilities" detailed herein. The annual
plan shall be reviewed and approved by the full board.
- Meeting Agenda - Committee meeting agendas shall be the
responsibility of the Committee chairperson with input from
Committee members. It is expected that the chairperson would also
ask for management and key Committee advisors, and perhaps others,
to participate in this process.
E-1
107
- Committee Expectations and Information Needs - The Committee shall
communicate Committee expectations and the specific nature, timing,
and extent of Committee information needs to management, internal
audit, and other external parties, including external auditors.
Pre-read materials, including key performance indicators and
measures related to key business and financial risks, shall be
distributed at least one week in advance of the meeting dates.
Meeting conduct will assume Board Members have reviewed materials in
sufficient depth to actively participate in Committee/Board
dialogue.
- Resources - The Committee shall be authorized to access internal and
external resources, as the Committee requires, to carry out its
defined responsibilities.
- Committee Meeting Attendees - The Committee shall request members of
management, counsel, internal audit, and external auditors, as
applicable, to participate in Committee meetings, as necessary, to
carry out the defined Committee responsibilities. Periodically and
at least annually, the Committee shall meet in private session with
only the Committee members. It shall be understood that either
internal and external auditors, or counsel, may, at any time,
request a meeting with the Committee or Committee chairperson with
or without management in attendance. In any case, the Committee
shall meet in executive session separately with internal and
external auditors, at least annually.
- Reporting to the Board of Directors - The Committee, through the
Committee chairperson, shall report periodically, as deemed
necessary, but at least semi-annually, to the full Board. In
addition, summarized minutes from Committee meetings, separately
identifying monitoring activities from approvals, shall be
distributed to each Board member at least one week prior to the
subsequent Board meeting.
- Committee Self-Assessment - The Committee shall, at least
bi-annually, review, discuss and assess its own performance as well
as the Committee role and responsibilities, seeking input from
senior management, the full Board and others. Changes in role and/or
responsibilities, if any, shall be recommended to the full Board for
approval.
- Committee Charter Review - Periodically, as deemed necessary, but at
least annually, the Committee shall review and assess the adequacy
of this Audit Committee Charter. Changes, if any, shall be
recommended to the full Board of Directors for approval.
- Independence - Independent Board members are nonexecutive members
who have no relationship to the Company that may interfere with the
exercise of their independence from management and the Company.
MEETING FREQUENCY
The Committee shall meet at least quarterly. Additional meetings shall be
scheduled as considered necessary by the Committee or chairperson.
REPORTING TO SHAREHOLDERS
The Committee shall report annually in the Company's annual report or proxy
materials on the scope and results of their activities and responsiveness to the
Committee's charter and on such matters as may be required by the rules and
regulations of the Securities and Exchange Commission.
COMMITTEE'S RELATIONSHIP WITH EXTERNAL AND INTERNAL AUDITORS
- The external auditors, in their capacity as independent public
accountants, shall be responsible to the Board and the Committee as
representatives of the shareholders. These shareholder
representatives have ultimate authority and responsibility to
select, evaluate and where appropriate, replace the external
auditors (or to nominate the outside auditor to be proposed for
shareholder approval in any proxy or information statement).
E-2
108
- The external auditors shall be viewed as the Committee's
representatives in executing the Committee's oversight of periodic,
annual, and other financial reporting to the shareholders. They
shall report all relevant issues to the Committee responsive to
agreed-on Committee expectations. The Committee should review the
work of external auditors in executing their role of oversight.
- The Committee shall annually review the performance (effectiveness,
objectivity, and independence) of the external auditors. In this
respect, the Committee shall ensure receipt of a formal written
statement from the external auditors delineating all relationships
between the auditor and the Company consistent with Independence
Standards Board Standard No. 1, "Independence Discussions with Audit
Committees." Additionally, the Committee shall be responsible for
active dialogue with the auditor with respect to disclosed
relationships or services that may impact auditor objectivity or
independence and shall take or recommend to the full Board
appropriate action to ensure the independence of the external
auditor.
- The internal audit function shall be responsible to senior
management, but have a direct reporting responsibility to the Board
through the Committee.
- If either the internal or external auditor identify significant
issues relative to the overall Board responsibility that, in their
judgment, have been communicated to management, but have not been
adequately addressed, they should be communicated to the Committee
chairperson.
- Changes in the senior management of internal audit shall be subject
to Committee approval.
PRIMARY COMMITTEE RESPONSIBILITIES
MONITOR FINANCIAL REPORTING AND RISK CONTROL RELATED MATTERS
The Committee should review and assess:
- Risk Management - The Company's business risk management process,
including the adequacy of the Company's overall control environment
and controls in selected areas representing significant financial
and business risk.
- Annual and Interim Reports and Other Regulatory Filings - All
financial reports in advance of filings or distribution.
The Committee shall review with management and the external auditors,
management and/or Committee reports, if any, on the fairness of financial
statements and/or the adequacy of the Company controls over financial reporting
and their compliance with laws and regulations.
- Fraud and Regulatory Noncompliance - The internal/external auditors'
responsibility for detecting accounting and reporting financial
errors, fraud and defalcations, illegal acts, and noncompliance with
the corporate code of conduct and regulatory requirements.
- Internal Audit Responsibilities - The annual audit plan and the
process used to develop the plan; status of activities, significant
findings, recommendations, and management's response.
- Regulatory Examinations - SEC inquiries and the results of
examinations by other regulatory authorities in terms of important
findings, recommendations, and other management's response.
- External Audit Responsibilities - The overall scope and focus of the
annual/interim audit, auditor independence, including the scope and
level of involvement with unaudited quarterly or other
interim-period information.
- Financial Reporting and Controls - Key financial statement issues
and risks, their impact or potential impact on reported financial
information, the processes used by management to address such
matters, related auditor view, and the basis for audit conclusions.
Important conclusions on interim and/or year-end audit work in
advance of the public release of financials.
E-3
109
- Auditor Recommendations - Important internal and external auditor
recommendations on financial reporting, controls, other matters and
management's response. The views of management and auditors on the
overall quality of annual and interim financial reporting.
- Conduct of Audit - The Committee shall discuss with the external
auditors the matters to be discussed by Statement on Auditing
Standards No. 61 relating to the conduct of the audit.
The Committee should review, assess, and approve:
- The code of ethical conduct.
- The internal auditor charter.
- Changes in important accounting principles and the application
thereof in both interim and annual financial reports.
- Significant conflicts of interest and related-party transactions.
- External auditor independence.
- External auditor performance and changes in external audit firm
(subject to ratification by the full Board).
- Changes in internal audit leadership and/or key financial
management.
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110
DETACH HERE
PROXY
CITADEL COMMUNICATIONS CORPORATION
THIS PROXY IS SOLICITED BY AND ON BEHALF OF
THE BOARD OF DIRECTORS
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 26, 2001
The undersigned hereby appoints Lawrence R. Wilson and Donna L.
Heffner, or either of them, as proxies with full power of substitution, to
represent the undersigned at the Annual Meeting of Stockholders of Citadel
Communications Corporation to be held at City Center West, Suite 400, 7201 West
Lake Mead Boulevard, Las Vegas, Nevada 89128, on Thursday, April 26, 2001, at
10:00 a.m., local time, and at any adjournments or postponements thereof, and
to vote all shares of Common Stock of Citadel Communications Corporation which
the undersigned would be entitled to vote if personally present, on all the
matters set forth on the reverse side.
The undersigned acknowledges receipt of the Notice of Annual Meeting
and the Proxy Statement together with this Proxy.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF ALL
NOMINEES AND FOR PROPOSALS 1 AND 3.
SEE REVERSE SEE REVERSE
SIDE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SIDE
111
DETACH HERE
PLEASE MARK
/X/ VOTES AS IN
THIS EXAMPLE.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE
VOTED FOR THE ELECTION OF ALL NOMINEES AND FOR PROPOSALS 1 AND 3.
FOR AGAINST ABSTAIN
1. Approval of the Agreement and Plan of Merger 3. Ratification of the appointment of
between Citadel Communications Corporation and KPMG LLP as independent public / / / / / /
FLCC Holdings, Inc. accountants for the year ending
December 31, 2001.
FOR AGAINST ABSTAIN
/ / / / / / 4. In their discretion, the proxies are authorized to vote upon
such other business as may properly come before the meeting,
2. Election of six directors for a one-year term including adjournments to solicit additional proxies,
until the next annual meeting. or at any postponements or adjournments thereof.
NOMINEES: Lawrence R. Wilson, Robert F. Fuller,
Ike Kalangis, Robert G. Liggett, Jr., Ted L. MARK HERE FOR MARK HERE IF YOU
Snider, Sr. and John E. von Schlegell. ADDRESS CHANGE / / PLAN TO ATTEND / /
AND NOTE AT LEFT THE MEETING
FOR WITHHELD
ALL / / / / FROM ALL
NOMINEES NOMINEES PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING
THE ENCLOSED ENVELOPE.
_________________________________________
For all nominees except as noted above Please sign exactly as your name(s) appear(s) hereon. All holders
must sign. When signing in a fiduciary capacity, please indicate
full title as such. If a corporation or partnership, please sign
in full corporate or partnership name by authorized person.
Signature: __________________________________ Date: _______________
Signature: __________________________________ Date: _______________