<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- --- EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1994
OR
- --- TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
------------- ----------------
Commission File No. 0-9334
TURNER BROADCASTING SYSTEM, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Georgia 58-0950695
- ------------------------------- ---------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
One CNN Center
Atlanta, Georgia 30303
---------------------- ----------
(Address of principal (Zip Code)
executive offices)
(404) 827-1700
----------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days:
Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Outstanding at
Class June 30, 1993
- ------------------------- -----------------
Class A Common Stock, par
value $0.0625 68,330,388
Class B Common Stock, par
value $0.0625 137,306,567
<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
TURNER BROADCASTING SYSTEM, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
UNAUDITED
(IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1994 1993
---------- ----------
<S> <C> <C>
ASSETS
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . $ 124,469 $ 162,858
Accounts receivable, less allowance of
$26,860 and $23,083
Unaffiliated . . . . . . . . . . . . . . . . . . . . . . . . . . . . 468,949 378,228
Affiliated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63,606 94,011
Film costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 490,399 314,637
Installment contracts receivable, less
allowance of $12,359 and $11,915 . . . . . . . . . . . . . . . . . . . 41,219 56,563
Prepaid expense and other current assets . . . . . . . . . . . . . . . . . 75,420 68,196
---------- ----------
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . 1,264,062 1,074,493
Film costs, less current portion . . . . . . . . . . . . . . . . . . . . . 1,696,627 1,633,731
Property and equipment, less accumulated
depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 270,523 225,228
Installment contracts receivable, less
discount of $586 and $1,123 . . . . . . . . . . . . . . . . . . . . . 8,419 15,077
Goodwill and other intangible assets . . . . . . . . . . . . . . . . . . . 394,796 111,202
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 199,041 185,131
---------- ----------
TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3,833,468 $3,244,862
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Accounts payable and accrued expenses . . . . . . . . . . . . . . . . . . . $ 235,827 $ 168,975
Deferred income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113,825 106,496
Participants' share and royalties payable . . . . . . . . . . . . . . . . . 47,610 33,922
Interest payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46,912 32,128
Film contracts payable . . . . . . . . . . . . . . . . . . . . . . . . . . 27,861 28,096
Current portion of long-term debt . . . . . . . . . . . . . . . . . . . . . 1,965 2,051
Other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . 108,901 42,240
---------- ----------
Total current liabilities . . . . . . . . . . . . . . . . . . . . . 582,901 413,908
Long-term debt, less current portion . . . . . . . . . . . . . . . . . . . 2,357,160 2,294,557
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . 399,005 395,668
Other long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . 164,770 141,832
---------- ----------
TOTAL LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . 3,503,836 3,245,965
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) . . . . . . . . . . . . . . . . . 329,632 (1,103)
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT) . . . . . . . . . . . . . . . . . . . . . . . . . . $3,833,468 $3,244,862
========== ==========
</TABLE>
See accompanying Notes to Consolidated Condensed Financial Statements.
2
<PAGE> 3
TURNER BROADCASTING SYSTEM, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
UNAUDITED
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED ENDED
JUNE 30, JUNE 30,
------------------------ -----------------------
1994 1993 1994 1993
--------- -------- ---------- ---------
<S> <C> <C> <C> <C>
Revenue
Unaffiliated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 579,640 $387,955 $1,048,744 $ 696,864
Affiliated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98,007 98,906 196,207 188,421
--------- -------- ---------- ---------
677,647 486,861 1,244,951 885,285
--------- -------- ---------- ---------
Cost of operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 432,811 235,989 799,073 428,034
Selling, general and administrative . . . . . . . . . . . . . . . . . . . . . 175,815 139,339 331,446 258,372
Gain on sale of equity investment . . . . . . . . . . . . . . . . . . . . . . (21,746) - (21,746) -
Depreciation of property and equipment and
amortization of goodwill and other
intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,815 9,082 27,109 17,765
Interest expense, net of interest income . . . . . . . . . . . . . . . . . . 53,633 44,830 105,376 89,934
Equity in loss of unconsolidated entities . . . . . . . . . . . . . . . . . . 1,710 5,284 4,878 3,697
---------- -------- ---------- ---------
657,038 434,524 1,246,136 797,802
----------- -------- ---------- ---------
Income (loss) before provision for income
taxes and the cumulative effect of a change in
accounting for income taxes . . . . . . . . . . . . . . . . . . . . . . 20,609 52,337 (1,185) 87,483
Provision (benefit) for income taxes . . . . . . . . . . . . . . . . . . . . 7,690 21,266 (480) 36,277
----------- -------- ----------- ---------
Income (loss) before the cumulative effect of
a change in accounting for income taxes . . . . . . . . . . . . . . . . 12,919 31,071 (705) 51,206
Cumulative effect of a change in accounting for
income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - - - (306,000)
----------- -------- ---------- ---------
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 12,919 $ 31,071 $ (705) (254,794)
=========== ======== ========== =========
Earnings (loss) per common share and common stock
equivalents
Income before the cumulative effect of a
change in accounting for income taxes . . . . . . . . . . . . . . . . . . $ 0.05 $ 0.12 $ 0.00 $ 0.20
Cumulative effect of a change in accounting
for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . - - - (1.16)
----------- -------- ---------- ---------
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.05 $ 0.12 $ 0.00 $ (0.96)
=========== ======== ========== =========
Weighted average number of common shares
outstanding, including conversion of common
stock equivalents, when diluted . . . . . . . . . . . . . . . . . . . . 282,626 264,360 202,847 264,302
</TABLE>
See accompanying Notes to Consolidated Condensed Financial Statements.
3
<PAGE> 4
TURNER BROADCASTING SYSTEM, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
UNAUDITED
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
----------------------------
1994 1993
------------- ---------
<S> <C> <C>
Cash provided by operations before changes
in film costs and liabilities, net, interest
payments and debt issue costs . . . . . . . . . . . . . . . . . . . . . . . . $ 117,591 $ 236,491
Change in film costs and liabilities, net
Purchased program rights . . . . . . . . . . . . . . . . . . . . . . . . . 40,390 33,327
Produced programming . . . . . . . . . . . . . . . . . . . . . . . . . . . (36,412) (3,996)
Licensed program rights . . . . . . . . . . . . . . . . . . . . . . . . . . (366) (12,356)
Interest payments, net of interest received . . . . . . . . . . . . . . . . (80,389) (66,967)
Debt issue costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (6,675) (526)
---------- ----------
Net cash provided by operations . . . . . . . . . . . . . . . . . . . . . . . . . 34,139 185,973
Cash provided by (used for) investing activities
Sale of equity investment . . . . . . . . . . . . . . . . . . . . . . . . . 107,978 -
Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (144,882) (19,205)
Additions to property and equipment . . . . . . . . . . . . . . . . . . . . (55,578) (22,471)
---------- ----------
Net cash used for investing activities . . . . . . . . . . . . . . . . . . . . . (92,482) (41,676)
Cash provided by (used for) financing activities
Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 599,610 -
Payments of debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (575,623) (72,618)
Payments of cash dividends . . . . . . . . . . . . . . . . . . . . . . . . . (4,901) (9,193)
Proceeds from exercise of stock options . . . . . . . . . . . . . . . . . . 868 865
--------- ---------
Net cash provided by (used for) financing activities . . . . . . . . . . . . . . 19,954 (80,946)
Net increase (decrease) in cash and cash equivalents . . . . . . . . . . . . . . (38,389) 63,351
Cash and cash equivalents at beginning of period . . . . . . . . . . . . . . . . 162,858 126,256
--------- ---------
Cash and cash equivalents at end of period . . . . . . . . . . . . . . . . . . . $ 124,469 $ 189,607
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION AND NON-CASH INVESTING AND
FINANCING ACTIVITIES:
Cash paid for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 13,506 $ 9,152
Dividends declared but unpaid . . . . . . . . . . . . . . . . . . . . . . . . . . 4,901 -
The Company acquired New Line Cinema Corporation and assumed and incurred
liabilities as of January 28, 1994 (in thousands) as follows:
Fair value of assets acquired . . . . . . . . . . . . . . . . . . . . . . . . . . $ 667,600 -
Less: common stock issued or issuable . . . . . . . . . . . . . . . . . . . . . . 416,700 -
Less: cash paid for debt and other acquisition costs . . . . . . . . . . . . . . 139,600 -
---------
Liabilities assumed and incurred . . . . . . . . . . . . . . . . . . . . . . . . $ 111,300 -
=========
</TABLE>
See accompanying Notes to Consolidated Condensed Financial Statements.
4
<PAGE> 5
TURNER BROADCASTING SYSTEM, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
UNAUDITED
NOTE 1. PREPARATION OF INTERIM CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
The consolidated condensed financial statements included herein have
been prepared by Turner Broadcasting System, Inc. (the "Company" or "Turner")
pursuant to the rules and regulations of the Securities and Exchange
Commission. In the opinion of management, the accompanying consolidated
condensed financial statements contain all adjustments, which are of a normal
recurring nature, necessary for a fair presentation of such financial
statements. Although certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations, management believes that the disclosures are adequate to make the
information presented not misleading. For further information, reference is
made to the consolidated financial statements and the notes thereto in the
Company's Form 10-K for the year ended December 31, 1993.
Certain prior year amounts have been reclassified to conform to the
current year presentation.
NOTE 2. FILM COSTS
The following table sets forth the components of unamortized film
costs (in thousands):
<TABLE>
<CAPTION>
June 30, December 31,
1994 1993
----------------- -----------
<S> <C> <C>
Purchased program rights . . . . . . . . . . . . . . . . . . . . . . . $ 1,142,296 $ 1,172,921
Produced programming
Released . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 259,424 166,768
Completed and not released . . . . . . . . . . . . . . . . . . . . . 53,768 17,654
In process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 271,483 153,630
Episodic television . . . . . . . . . . . . . . . . . . . . . . . . 101,848 89,077
Licensed program and distribution rights . . . . . . . . . . . . . . . 241,039 231,385
Prepaid licensed program rights . . . . . . . . . . . . . . . . . . . 117,168 116,933
---------------- ------------
2,187,026 1,948,368
Less current portion . . . . . . . . . . . . . . . . . . . . . . . . . 490,399 314,637
---------------- ------------
$ 1,696,627 $ 1,633,731
================ ============
</TABLE>
Episodic television includes serial television episode program costs.
Prepaid licensed program rights represent licensed program rights for which
payments have been made but the films are not currently available for use. As
these programs become available for use they are reclassified to licensed
program rights.
On the basis of the Company's anticipated total gross revenue
estimates, over 82% of released and episodic television produced programming
costs at June 30, 1994 will be amortized within the three-year period ending
June 30, 1997.
Amortization of film costs included in Cost of Operations is composed
of the following (in thousands):
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
-------------------------- -----------------------
1994 1993 1994 1993
--------- --------- -------- --------
<S> <C> <C> <C> <C>
Purchased program rights . . . . . . . . . . . . . . . . $ 21,962 $ 18,942 $ 44,339 $ 37,859
Produced programming . . . . . . . . . . . . . . . . . . 210,739 68,565 377,515 124,403
Licensed program and distribution
rights . . . . . . . . . . . . . . . . . . . . . . . 19,468 17,313 39,181 34,696
Participants' share and royalties . . . . . . . . . . . . 8,060 7,049 23,399 15,011
--------- --------- -------- --------
$ 260,229 $ 111,869 $484,434 $211,969
========= ========= ======== ========
</TABLE>
5
<PAGE> 6
NOTE 3. EARNINGS (LOSS) PER COMMON SHARE AND COMMON STOCK EQUIVALENT
Net income (loss) per common share and common stock equivalent is
computed by dividing net income (loss) applicable to common stock by the
weighted average number of outstanding shares of common stock and common stock
equivalents, when dilutive, during the applicable periods in 1994 and 1993. In
1993 and for the three months ended June 30, 1994 common stock equivalents are
principally the incremental shares associated with the Class C Convertible
Preferred Stock (the "Class C Preferred Stock") and the outstanding stock
options. Fully-diluted income (loss) per share amounts are similarly computed,
but include the effect, when dilutive, of the Company's other potentially
dilutive securities. For the six-month period ended June 30, 1994, no common
stock equivalents are included in the calculation of primary earnings per
share, due to their anti-dilutive effect. The Company's zero coupon
subordinated convertible notes due 2007 and 2004 and the convertible
subordinated debentures of a wholly-owned subsidiary are excluded from the
fully-diluted calculations of net income (loss) per common share for the
three-month and six-month periods ended June 30, 1994 and 1993 (when
applicable) due to their anti-dilutive effect. The difference between the
primary and fully-diluted earnings per share is not significant.
NOTE 4. LONG-TERM DEBT
Long-term debt is summarized as follows (in thousands):
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1994 1993
-------------------- ---------------
<S> <C> <C>
Bank credit facilities . . . . . . . . . . . . . . . . . . . $ 800,000 $ 1,225,000
12% senior subordinated debentures . . . . . . . . . . . . . 536,886 536,732
8 3/8% Senior Notes . . . . . . . . . . . . . . . . . . . . . 297,352 297,325
Zero coupon subordinated convertible notes . . . . . . . . . 236,978 228,688
7.4% Senior Notes . . . . . . . . . . . . . . . . . . . . . . 249,624 -
8.4% Senior Debentures . . . . . . . . . . . . . . . . . . . 199,844 -
Convertible subordinated debentures of
a wholly-owned subsidiary . . . . . . . . . . . . . . . . . 29,125 -
Obligations under capital leases . . . . . . . . . . . . . . 7,260 6,353
Other long-term debt . . . . . . . . . . . . . . . . . . . . 2,056 2,510
---------------- -----------
2,359,125 2,296,608
Less current portion . . . . . . . . . . . . . . . . . . . . 1,965 2,051
---------------- -----------
$ 2,357,160 $ 2,294,557
================ ===========
</TABLE>
On May 6, 1993, the Company filed a shelf registration statement with the
Securities and Exchange Commission (the "Shelf Registration") to allow the
Company to offer, from time to time, for sale up to $1,100,000,000 of
unsecured senior debt or unsecured senior subordinated debt securities,
consisting of notes, debentures or other evidences of indebtedness.
On February 3, 1994, the Company sold $250,000,000 of 7.4% Senior Notes
due 2004 (the "Senior Notes") and $200,000,000 of 8.4% Senior Debentures due
2024 (the "Senior Debentures" and, together with the Senior Notes, the
"Securities") under the Shelf Registration. The net proceeds to the Company
were approximately $246,282,000 and $196,680,000, respectively, after market
and underwriting discounts. The Senior Notes and Senior Debentures bear
interest at the rate of 7.4% and 8.4% per annum, respectively, payable
semi-annually on February 1 and August 1 of each year, commencing on August 1,
1994. The Senior Notes are not redeemable at the option of the Company. The
Senior Debentures are redeemable, at the Company's option, at any time after
February 1, 2004, at a redemption price of 104.161% of the principal amount,
plus accrued and unpaid interest to the date of redemption, which redemption
price reduces over 10 years to a redemption price of 100% of the principal
amount in 2014 and thereafter. Each holder has the right to require the
Company to repurchase such holder's Securities in whole, but not in part, at a
redemption price, payable in cash, equal to 101% of the principal amount, plus
accrued and unpaid interest to the date fixed for redemption, upon the
occurrence of certain triggering events, including, a change in control,
certain restricted payments or certain consolidations, mergers, conveyances or
transfers of assets, each as defined in the indenture relating to the
Securities. The Company is not required to make
6
<PAGE> 7
mandatory redemption or sinking fund payments with respect to the Securities
prior to maturity.
The Company has received firm commitments from banks participating in
its unsecured revolving credit facility (the "1993 Credit Agreement") to
provide a new $500 million unsecured revolving credit facility. The terms and
convenants that govern the new facility are identical to those associated with
the 1993 Credit Agreement. The new facility will be finalized in the third
quarter of 1994.
NOTE 5. STOCKHOLDERS' EQUITY (DEFICIT)
Stockholders' equity (deficit) consists of the following components (in
thousands, except share data):
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1994 1993
--------------- --------------
<S> <C> <C>
Class C Convertible Preferred Stock, par
value $0.125; authorized 12,600,000 shares;
issued and outstanding 12,396,976 shares . . . . . . . . . . $ 260,438 $ 260,438
Class A Common Stock, par value $0.0625;
authorized 75,000,000 shares; issued and
outstanding 68,330,388 shares . . . . . . . . . . . . . . . . 4,271 4,271
Class B Common Stock, par value $0.0625;
authorized 300,000,000 shares; issued and
outstanding 137,306,567 and 120,887,672
shares . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,582 7,555
Capital in excess of par value . . . . . . . . . . . . . . . . 1,071,126 731,042
Accumulated deficit . . . . . . . . . . . . . . . . . . . . . . (1,014,785) (1,004,409)
--------------- --------------
Total stockholders' equity (deficit) . . . . . . . . . . . $ 329,632 $ (1,103)
=============== ==============
</TABLE>
See Note 6 of the Notes to Consolidated Condensed Financial Statements
for a discussion of the increase of approximately 16,000,000 shares of
outstanding Class B Common Stock in connection with the merger of New Line
Cinema Corporation with a wholly-owned subsidiary of the Company in the first
quarter of 1994, which increased Class B Common Stock and Capital in excess of
par value by approximately $1,000,000 and $340,000,000, respectively.
On March 15, 1994, and June 15, 1994, the Board of Directors declared a
cash dividend on the Company's outstanding shares of Class A Common Stock and
Class B Common Stock, payable at the rate of $0.0175 for each share held on the
record date. In addition, holders of the Company's outstanding Class C
Convertible Preferred Stock were entitled to an equivalent cash dividend of
$0.105 for each share held on the record date based on the number of shares of
Class B Common Stock which would be receivable upon conversion of each share of
Class C Convertible Preferred Stock. Cash dividends of $4,901,000 and
$4,901,000 were paid on April 15, 1994 and July 15, 1994 to shareholders of
record at the close of business on March 30, 1994 and June 30, 1994,
respectively.
The Company's ability to pay cash dividends to holders of shares of the
Class A and Class B common stock and the Class C Convertible Preferred Stock is
subject to certain covenants in the Company's outstanding debt instruments,
currently the most restrictive of which limits the maximum aggregate amount of
dividends permitted to be paid annually to such holders to $30,000,000.
NOTE 6. ACQUISITION
The Company and New Line Cinema Corporation ("New Line"), a motion
picture production company, completed a merger of New Line with a wholly-owned
subsidiary of the Company on January 28, 1994 (the "Merger"). As a result of
the Merger, each share of New Line Common Stock has been converted into the
right to receive 0.96386 of a share of the Company's Class B Common Stock. The
valuations used by New Line and the Company for purposes of arriving at the
exchange ratio were $20 per share of New Line Common Stock and $20.75 per share
of the Company's Class B Common Stock. The maximum number of shares of Class B
Common Stock issuable pursuant to the Merger is approximately 21,300,000 valued
at approximately $442,000,000. Cash will be distributed in lieu of any
fractional shares. At June 30, 1994
7
<PAGE> 8
approximately 16,200,000 shares of the Company's Class B Common Stock had been
issued in connection with the Merger. The remaining shares are issuable upon
the exercise of New Line stock options and warrants and the conversion of the
New Line convertible subordinated debentures discussed below. Additionally, the
Company assumed and incurred liabilities of approximately $111,000,000 and paid
debt and certain other acquisition costs of approximately $140,000,000 in
connection with the Merger. Liabilities assumed in the Merger included
$29,125,000 of convertible subordinated debentures (the "Convertible
Debentures") which bear interest at the rate of 6 1/2% per annum. The
Convertible Debentures are convertible at the option of the holders into a total
of approximately 1,700,000 shares of Class B Common Stock.
At the time of the Merger, New Line owned a 37.4% equity interest in
RHI Entertainment, Inc. ("RHI"). In April 1994, New Line entered into an
agreement to tender for cash its equity interest in RHI which totaled
approximately 3,000,000 shares, to an unaffiliated entity for $36 per share.
In June 1994, the Company received approximately $108,000,000 in cash in
connection with the transaction and recognized a pre-tax gain of
approximately $22,000,000.
The Merger was accounted for by the purchase method of accounting.
Goodwill and other intangible assets in the amount of approximately
$290,000,000 was recognized in the transaction, and is amortized using a
straight-line basis over 40 years. The Company has not yet received appraisals
or valuations from independent third parties of the assets or properties of New
Line. Therefore, goodwill and other intangible asset amounts may be adjusted
once complete information on the fair value of all of New Line's assets and
liabilities is developed and once a more thorough review of New Line's
operating and accounting policies and procedures has been completed.
The following unaudited pro forma condensed combined results of
operations for the three and six months ended June 30, 1993 are not intended to
reflect results of operations which would have actually resulted had the Merger
been effective on the date indicated. Moreover, this information is not
intended to be indicative of results of operations which may be obtained in the
future. The pro forma condensed combined results of operations for the three
and six months ended June 30, 1993 include the Merger and the December 1993
acquisitions of Castle Rock Entertainment ("Castle Rock") and the remaining 50%
interest in Hanna-Barbera Holding Co. ("Hanna-Barbera") assuming the Company
acquired all of the outstanding stock of New Line pursuant to the Merger and
completed the acquisitions at January 1, 1993. The pro forma effect of the
Merger for the three and six months ended June 30, 1994 is not considered
significant.
8
<PAGE> 9
The unaudited pro forma condensed combined results of operations for
the three and six months ended June 30, 1993 are as follows (in thousands):
<TABLE>
<CAPTION>
Three months Six months
ended ended
June 30, June 30,
1993 1993
---------------- --------------
<S> <C> <C>
Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 595,326 $ 1,137,609
================ ==============
Income before the cumulative effect of a change
in accounting for income taxes . . . . . . . . . . . . . . . . . . . $ 26,867 $ 37,100
Cumulative effect of a change in accounting
for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . - (306,000)
---------------- --------------
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . $ 26,867 $ (268,900)
================ ==============
Earnings (loss) per common share and common stock
equivalents
Income before the cumulative effect of a
change in accounting for income taxes . . . . . . . . . . . . . $ 0.09 $ 0.13
Cumulative effect of a change in
accounting for income taxes . . . . . . . . . . . . . . . . . . - (1.09)
---------------- --------------
Net income (loss) . . . . . . . . . . . . . . . . . . . . $ 0.09 $ (0.96)
================ ==============
</TABLE>
9
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
SOURCES AND USES OF CASH
Cash provided by operations for the six months ended June 30, 1994
aggregated $34 million, net of interest payments and debt issue costs of $87
million and a net change in film costs and liabilities of $4 million. Primary
sources of cash included proceeds of $108 million from the sale of an equity
investment, borrowings under the unsecured revolving credit facility of $150
million, and approximately $250 million and $200 million of gross proceeds from
the Senior Notes and Senior Debentures, respectively. Primary uses of cash
during the period were payments of indebtedness of $576 million, payments of
debt and certain other acquisition costs in connection with the Merger of $140
million and additions to property and equipment of $56 million.
See the Consolidated Condensed Statements of Cash Flows for additional
details regarding sources and uses of cash and Note 4 of Notes to Consolidated
Condensed Financial Statements for additional information about the Company's
indebtedness.
CREDIT FACILITIES AND FINANCING ACTIVITIES
The Company had approximately $2.4 billion of outstanding indebtedness
at June 30, 1994, of which $800 million was outstanding under an unsecured
revolving credit facility with banks. The Company has received firm
commitments from banks participating in its unsecured revolving credit facility
(the "1993 Credit Agreement") to provide a new $500 million unsecured revolving
credit facility. The terms and convenants that govern the new facility are
identical to those associated with the 1993 Credit Agreement. The new facility
will be finalized in the third quarter of 1994.
Approximately $800 million of the Company's indebtedness bears
interest on a floating basis tied to short-term market indices. The Company
has interest rate swap agreements having a total notional principal amount of
$530 million with commercial banks to mitigate possible rising interest rates.
A contract with a total notional principal amount of $250 million expired in
March 1994, and the remaining contracts have expiration dates ranging from
November 1994 to March 1995. These agreements are designated as hedges of
interest rates, and the differential to be paid or received on interest rate
swaps is accrued as an adjustment to interest expense as interest rates change.
On May 6, 1993, the Company filed a registration statement with the
Securities and Exchange Commission (the "Shelf Registration") to allow the
Company to offer, from time to time, for sale up to $1.1 billion of
unsecured senior debt or unsecured senior subordinated debt securities,
consisting of notes, debentures or other evidences of indebtedness.
On February 3, 1994, the Company sold $250 million of Senior Notes and
$200 million of Senior Debentures under the Shelf Registration. The net
proceeds to the Company were approximately $246 million and $197 million,
respectively, after market and underwriting discounts. The Senior Notes and
Senior Debentures bear interest at the rate of 7.4% and 8.4% per annum,
respectively, payable semi-annually on February 1 and August 1 of each year,
commencing on August 1, 1994. The Senior Notes are not redeemable at the
option of the Company. The Senior Debentures are redeemable, at the Company's
option, at any time after February 1, 2004, at a redemption price of 104.161%
of the principal amount, plus accrued and unpaid interest to the date of
redemption, which redemption price reduces over 10 years to a redemption price
of 100% of the principal amount in 2014 and thereafter. Each holder has the
right to require the Company to repurchase such
10
<PAGE> 11
holder's Securities in whole, but not in part, at a redemption price,
payable in cash, equal to 101% of the principal amount, plus accrued and unpaid
interest to the date fixed for redemption, upon the occurrence of certain
triggering events, including a change in control, certain restricted payments
or certain consolidations, mergers, conveyances or transfers of assets, each as
defined in the indenture relating to the Securities. The Company is not
required to make mandatory or sinking fund payments with respect to the
Securities prior to maturity.
CAPITAL RESOURCES AND COMMITMENTS
During the next 12 months, the Company anticipates making cash
expenditures of approximately $260 million for sports programming, primarily
rights fees, approximately $730 million for original entertainment programming
(excluding promotional and advertising costs) and approximately $100 million
for licensed programming. Also, during the next 12 months, the Company expects
to make total expenditures of approximately $105 million for additional or
replacement property and equipment. Of the anticipated programming and capital
expenditures described above, firm commitments exist for approximately $530
million. Other capital resource commitments consist primarily of lease
obligations, some of which are contingent on revenues derived from usage.
Management expects to continue to lease satellite facilities, sports facilities
and office facilities not already owned by the Company.
Management expects to finance these commitments from working capital
provided by operations and financing arrangements with lessors, vendors, film
suppliers and additional borrowings.
OTHER
On July 28, 1994, members of the Major League Baseball Players
Association, which includes the Atlanta Braves players, announced that a strike
of major league baseball games would begin on August 12, 1994, unless players
and club owners resolve certain collective bargaining agreement issues. The
financial impact on the Company is difficult to predict due to the uncertainty
as to the length of the strike. However, in the event the strike lasts the
remainder of the 1994 season, it could adversely impact anticipated 1994
operating profit by as much as $14 million.
RESULTS OF OPERATIONS - THREE MONTHS ENDED JUNE 30, 1994 VS. THREE MONTHS ENDED
JUNE 30, 1993
ENTERTAINMENT SEGMENT
Entertainment Segment revenue increased $178 million to $459 million,
of which $132 million was contributed by New Line, Castle Rock and the
consolidated operations of Hanna-Barbera which were not owned as of June 30,
1993. Advertising revenue rose $24 million, or 15%, due primarily to increased
rates for Turner Network Television ("TNT") and TBS SuperStation, and an
increase in sports revenue associated with coverage of the National Basketball
Association (the "NBA") on TNT and the number of Atlanta Braves telecasts
aired on TBS SuperStation. The remaining $22 million increase was related to
higher subscription, home video and licensing and merchandising revenue.
Operating profit for the Entertainment Segment decreased $46 million,
principally due to lower than anticipated results from theatrical film releases
and $26 million in losses this quarter related to the 1994 Goodwill Games.
Total losses for the 1994 Goodwill Games, upon their completion, were $39
million, including amounts expensed in prior periods. In addition, increased
combined operating losses of $4 million during the quarter on new networks
were offset by operating profit increases in core businesses.
11
<PAGE> 12
NEWS SEGMENT
News Segment revenue increased $10 million, or 7%, primarily related
to increased subscription revenue from the home satellite market and increases
associated with CNN International, where advertising and broadcast licensing
fees contributed to a 20%, or $5 million, revenue increase for the service.
Domestic advertising revenue was essentially flat, due to lower viewership for
CNN and Headline News early in the quarter, offset by higher viewership late in
the quarter.
Revenue increases were offset by increases in operating expenses
related to higher newsgathering costs and the expansion of CNN International.
As a result, operating profit for the News Segment was unchanged compared to
the same period in 1993.
OTHER SEGMENT
Revenue increased $5 million, or 8%, primarily due to increased
home-game revenue for the Atlanta Braves. Operating losses increased
$3 million as a result of increased Braves' player salaries and planned
investment in the Company's information technology systems.
EQUITY IN INCOME (LOSS) OF UNCONSOLIDATED ENTITIES/OTHER CONSOLIDATED
INFORMATION
Operating losses decreased $4 million, primarily due to increased
playoff revenues and the expensing in the prior year of a guaranteed contract
for an injured player associated with the Atlanta Hawks.
In June 1994, the Company sold its 37.4% equity investment in RHI
Entertainment, Inc. for approximately $108 million in cash and recognized a
pre-tax gain of approximately $22 million on the transaction.
Consolidated depreciation and amortization increased approximately
$6 million primarily due to the inclusion of New Line and Castle Rock in 1994.
Consolidated interest expense increased approximately $9 million
primarily due to the increase in debt associated with the purchase of Castle
Rock and Hanna-Barbera as well as assumed debt associated with the New Line
acquisition. The increase was somewhat offset by a lower effective interest
rate resulting from new debt incurred in 1993 and 1994.
As a result of the information discussed above, the Company reported
net income of $13 million in the second quarter of 1994 ($0.05 net income per
common share and common share equivalent). This compares to net income of
$31 million in the second quarter of 1993 ($0.12 net income per common share
and common share equivalent).
RESULTS OF OPERATIONS - SIX MONTHS ENDED JUNE 30, 1994 VS. SIX MONTHS ENDED
JUNE 30, 1993
ENTERTAINMENT SEGMENT
Entertainment Segment revenue increased $337 million to $852 million,
of which $263 million was contributed by New Line, Castle Rock and the
consolidated operations of Hanna-Barbera which were not owned as of June 30,
1993. Advertising revenue rose $37 million, or 13%, due primarily to increased
rates for TNT and TBS SuperStation, and an increase in sports revenue
associated with the coverage of the NBA on TNT and in the number of Atlanta
Braves telecasts aired on TBS SuperStation. The remaining $37 million
increase was related to higher subscription, home video and licensing and
merchandising revenue.
Operating profit for the Entertainment Segment decreased $84 million,
principally due to lower than anticipated results from theatrical film
releases, $32 million related to TNT's telecast of the Winter Olympics in
February,
12
<PAGE> 13
$31 million in losses related to the 1994 Goodwill Games and increased combined
operating losses of $9 million on new networks.
NEWS SEGMENT
News Segment revenue increased $18 million, or 6%, primarily related to
increased subscription revenue from the home satellite market and increases
associated with CNN International, where advertising and broadcast licensing
fees contributed to a 16%, or $7 million, revenue increase for the service.
Domestic advertising revenue was essentially unchanged, due to lower viewership
for CNN and Headline News in the first quarter, offset by higher viewership
late in the second quarter.
Revenue increases were primarily offset by increases in operating
expenses related to higher newsgathering costs and the expansion of CNN
International. As a result, operating profit for the News Segment was
relatively unchanged compared to the same period in 1993.
OTHER SEGMENT
Revenue increased $7 million, or 8%, primarily due to increased
home-game revenue for the Atlanta Braves. Operating losses increased $7
million as a result of increased Braves' player salaries and planned investment
in the Company's information technology systems.
EQUITY IN INCOME (LOSS) OF UNCONSOLIDATED ENTITIES/OTHER CONSOLIDATED
INFORMATION
Operating losses remained flat at $4 million, primarily due to the
improved financial performance of the Atlanta Hawks, offset by the Company's
investment in a German news network which was acquired on March 31, 1993 and
the effect of moving Hanna-Barbera to the Entertainment Segment following
Turner's purchase of the remaining portion of the company at the end of 1993.
In June 1994, the Company sold its 37.4% equity investment in RHI
Entertainment, Inc. for approximately $108 million in cash and recognized a
pre-tax gain of approximately $22 million on the transaction.
Consolidated depreciation and amortization increased approximately
$9 million primarily due to the inclusion of New Line and Castle Rock in 1994.
Consolidated interest expense increased approximately $15 million
primarily due to the increase in debt associated with the purchase of Castle
Rock and Hanna-Barbera as well as assumed debt associated with the New Line
acquisition. The increase was somewhat offset by a lower effective interest
rate resulting from new debt incurred in 1993 and 1994.
As a result of the information discussed above, the Company reported a
net loss of $705 thousand in the first six months of 1994 ($0.00 net loss per
common share). This compares to a net loss of $255 million in the first six
months of 1993 ($0.96 net loss per common share and common share equivalent),
which included a non-recurring charge for the cumulative effect of adopting
Statement of Financial Accounting Standards No. 109 in the amount of $306
million ($1.16 per share).
13
<PAGE> 14
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Turner Broadcasting System, Inc. v. Federal Communications Commission and The
United States of America
As last updated in the Company's Form 10-Q for the quarter ended March
31, 1994, on October 5, 1992, the Company filed a lawsuit in the United
States District Court for the District of Columbia challenging the provisions
of the Cable Television Consumer Protection and Competition Act of 1992 (the
"1992 Act") that would require cable television operators to devote up to
one-third of their channel capacity to the carriage of local broadcast
stations and provide certain channel positioning rights to local broadcast
stations. The Company's complaint alleges that these provisions violate the
First Amendment of the United States Constitution. Under a provision of the
1992 Act, the case was heard by a three-judge court. On April 8, 1993, the
Court upheld the constitutionality of these provisions by a 2-1 vote. On May
3, 1993, the Company filed its Notice of Appeal of that decision to the
United States Supreme Court. On September 28, 1993, the United States
Supreme Court noted probable jurisdiction and heard oral argument on this
case on January 12, 1994. On June 27, 1994, the United States Supreme Court
vacated the District Court's ruling and remanded the case for further
proceedings. The Company intends to press its claims.
United States of America v. Cable News Network, Inc. and Turner Broadcasting
System, Inc.
As last updated in the Company's Form 10-Q for the quarter ended March
31, 1994, in October and November of 1990, CNN was involved in investigating
and reporting a story concerning the potential government audio taping of
telephone calls made by General Manuel Noriega from his cell in the Miami
Correctional Center, including the taping of conversations with his attorneys
and defense team. CNN obtained copies of some of the alleged tapings and
telecast segments thereof. Judge William M. Hoeveler, United States District
Court for the Southern District of Florida, entered orders on November
8, 1990 and November 9, 1990 which temporarily prohibited the telecast of
Noriega's privileged attorney-client conversations. Judge Hoeveler appointed
a special prosecutor, Robert F. Dunlap, to investigate whether CNN violated
his Orders in a telecast on November 9, 1990, and to prepare an application
for an Order to Show Cause "why those entities and individuals responsible
for" the telecast should not be held in contempt of the Court's Orders. On
January 15, 1993 CNN was advised by Special Prosecutor Dunlap that it was a
target of a grand jury investigation into these alleged contempts. CNN
responded to grand jury subpoenas issued at that time. On March 30, 1994 CNN
was charged with criminal contempt by Special Prosecutor Dunlap and pleaded
innocent at an arraignment before Judge Hoeveler. A non-jury trial has been
scheduled on the charge for September 12, 1994. Fines and/or penalties of an
undetermined amount could be imposed against CNN as a result of these
contempt proceedings. CNN denies it telecast any privileged conversations
and therefore denies that it violated or intended to violate the Court
Orders. CNN intends to vigorously defend the contempt proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At a special shareholders' meeting held June 14, 1994, the holders of
each class of the Company's outstanding stock, voting separately, approved an
increase in the voting power of the Company's Class A Common Stock from one
vote per share to two votes per share.
14
<PAGE> 15
ITEM 5. OTHER INFORMATION
REGULATION
On October 5, 1992, the 1992 Act became law. The Federal
Communications Commission (the "FCC" or the "Commission") is charged with
implementation of the 1992 Act.
RATE REGULATION
Section 623 of the Communications Act of 1934, as amended by the 1992
Act, establishes a two-tier rate structure applicable to systems not found to
be subject to "effective competition" as defined by the statute. Rates for a
required "basic service tier" are subject to regulation by practically every
community. Rates for cable programming services other than those carried on
the basic tier are subject to regulation if, upon complaint, the FCC finds
that such rates are "unreasonable." Programming offered by a cable operator
on a per-channel or per-program basis, however, is exempt from rate
regulation.
On April 1, 1993, the FCC adopted implementing regulations for Section
623. The text of its Report and Order was released on May 3, 1993. The FCC
has adopted a benchmark approach to rate regulation. Rates above the
benchmark would be presumed to be unreasonable. Once established, cable
operators could adjust their rates based on appropriate factors and could
pass through certain costs to customers, including increased programming
costs.
On February 22, 1994, the Commission adopted further regulations.
Among other things, the additional regulations will govern the offering of
bona fide "a la carte" channels that are exempted from rate regulation. The
Commission also adopted a methodology for determining rates when channels are
added to or deleted from regulated tiers. These regulations may adversely
affect the Company's ability to sell its existing or new networks to cable
customers and/or may adversely affect the prices the Company may charge for
its services, although at this time the Company cannot predict their full
effect on its operations.
On March 30, 1994, the Commission adopted further regulations and
solicited additional comments with respect to the methodology for determining
rates when channels are added to regulated tiers. The Company cannot predict
the outcome or effect of these proceedings.
On April 5, 1993, the FCC also froze rates for cable services subject
to regulation under the 1992 Act for 120 days. On June 11, 1993, the FCC
deferred the implementation of rate regulation from June 21, 1993 until
October 1, 1993, and extended the freeze on rates for cable services subject
to regulation from August 4, 1993 to November 15, 1993. On November 10,
1993, the Commission further extended the freeze until February 15, 1994, and
on February 8, 1994, extended the expiration date of the freeze until May 15,
1994. On July 27, 1993, the FCC moved the effective date of rate regulation
back to September 1, 1993. Additionally, among other things, the FCC
permitted cable operators to structure rates and service offerings up until
September 1, 1993, without prior notice to subscribers.
On July 16, 1993, the FCC issued a Notice of Proposed Rulemaking to
add the regulatory requirements to govern cost-of-service showings that
cable operators may submit under this provision to justify rates above the
benchmarks. On February 22, 1994, the Commission adopted interim rules to
govern the cost of service proceedings.
On March 30, 1994, the Commission released a Further Notice of
Proposed Rulemaking in connection with its cost of service regulations. In
that Notice, the Commission proposed to limit the price a cable operator may
recover in transactions with its affiliates. The proposal, if adopted, could
adversely affect the Company's transactions with certain cable operators,
including Tele-Communications, Inc. and Time Warner, Inc., which are
affiliates of the Company.
15
<PAGE> 16
On July 1, 1994, the Company filed comments opposing this proposal. The
Company cannot predict the ultimate outcome of the proceeding.
The constitutionality of these provisions has been challenged in
litigation filed in the United States District Court for the District of
Columbia. On September 27, 1993, the district court upheld the
constitutionality of these provisions. An appeal of that decision is pending
in the U.S. Court of Appeals for the District of Columbia. Appeals of the
Commission's implementing regulations have also been taken to the United
States Court of Appeals for the District of Columbia Circuit. The Company
cannot predict the ultimate outcome of the litigation.
MUST CARRY AND RETRANSMISSION CONSENT
The 1992 Act contains provisions that would require cable television
operators to devote up to one-third of their channel capacity to the carriage
of local broadcast stations and provide certain channel position rights to
local broadcast stations. The 1992 Act also includes provisions governing
retransmission of broadcast signals by cable systems, whereby retransmission
of broadcast signals would require the broadcaster's consent and provides
each local broadcaster the right to make an election between must carry or
retransmission consent. The retransmission consent provisions of the 1992
Act became effective on October 5, 1993.
On March 11, 1993, the FCC adopted a Report and Order implementing
these provisions. The provisions could affect the ability and willingness of
cable systems to carry cable programming services. The Company has filed
litigation challenging the provision as unconstitutional (see "Legal
Proceedings - Turner Broadcasting System, Inc. v. Federal Communications
Commission and The United States of America"). The case was remanded by the
United States Supreme Court for further proceedings. The Company cannot
predict the ultimate outcome of the litigation.
PROGRAM ACCESS
On April 1, 1993, the Commission issued regulations implementing a
provision that, among other things, makes it unlawful for a cable network, in
which a cable operator has an attributable interest, to engage in certain
unfair methods of competition or unfair or deceptive acts or practices, the
purpose and effect of which is to hinder significantly or prevent any
multichannel video programming distributor from providing satellite cable
programming or satellite broadcast programming to cable subscribers or
consumers. The provisions contain an exemption for any contract that grants
exclusive distribution rights to a person with respect to satellite cable
programming or that was entered into on or before June 1, 1990. While the
Company cannot predict the regulations' full effect on its operations, they
may affect the rates charged by the Company's cable programming services to
its customers and could affect the terms and conditions of contracts between
the Company and its customers.
The constitutionality of this provision has been challenged in
litigation filed in the United States District Court for the District of
Columbia. On September 27, 1993, the district court upheld this provision.
An appeal of that decision is pending in the United States Court of Appeals
for the District of Columbia Circuit. Appeals of the Commission's
implementing regulations have also been taken to the United States Court of
Appeals for the District of Columbia Circuit. The Company cannot predict the
ultimate outcome of the litigation.
REGULATION OF CARRIAGE AGREEMENTS
The 1992 Act contains a provision that requires the FCC to establish
regulations governing program carriage agreements and related practices
between cable operators and video programming vendors, including provisions
to prevent the cable operator from requiring a financial interest in a
program service as a condition of carriage and provisions designed to
prohibit a cable operator from coercing a video programming vendor to provide
exclusive rights as a condition of carriage. On October 22, 1993, the
Commission issued regulations implementing this provision. The Company
cannot at this time predict the effect of this provision on its operations.
16
<PAGE> 17
The constitutionality of this provision has been challenged in
litigation filed in the United States District Court for the District of
Columbia. On September 27, 1993, the district court upheld the
constitutionality of this provision. An appeal of that decision is pending
in the United States Court of Appeals for the District of Columbia Circuit.
The Company cannot predict the outcome of the litigation.
OWNERSHIP LIMITATIONS
Section 11 of the 1992 Act directed the Commission to prescribe rules
and regulations establishing limits on the number of cable subscribers a
person is authorized to reach through cable systems owned by such person and
the number of channels that can be occupied by video programmers in which a
cable operator has an attributable interest. The Commission must also
consider the necessity of imposing limitations on the degree to which
multichannel video programming distributors may engage in the creation or
production of video programming.
On December 28, 1992, the FCC issued a Notice of Proposed Rulemaking
and Notice of Inquiry with respect to these provisions. On October 22, 1993,
the FCC adopted a Second Report and Order that established a 40% limit on the
number of channels that may be occupied by programming services in which the
particular cable operator has an attributable interest. The Company is
subject to this provision. The FCC also established a national limit of 30%
on the number of homes passed that any one person can reach through cable
systems owned by such person, but stayed implementation of that provision
pending judicial review of its constitutionality. Petitions for
reconsideration are pending. The Company cannot at this time predict the
effect of this provision or of these proposals on its operations.
The constitutionality of these provisions has been challenged in
litigation filed in the United States District Court for the District of
Columbia. On September 27, 1993, the district court found the national limit
on homes passed unconstitutional, but upheld the constitutionality of the
channel capacity limits. An appeal of that decision is currently pending in
the United States Court of Appeals for the District of Columbia Circuit.
Appeals of the Commission's implementing regulations have also been taken to
the United States Court of Appeals for the District of Columbia Circuit. The
Company cannot predict the ultimate outcome of the litigation.
SPORTS MIGRATION
The 1992 Act directs the FCC to submit an interim report by July 1,
1993, and a final report by July 1, 1994, to Congress on the migration of
sports programming from broadcast networks to cable networks and cable
pay-per-view. The interim report was submitted on June 24, 1993. On June
30, 1994, the FCC issued its final report in which it recommended that no
action by Congress was necessary.
17
<PAGE> 18
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3.1 Restated Articles of Incorporation of the Company
10.38 Turner Broadcasting System, Inc. 1993 Stock Option and Equity-Based
Award Plan (replacing the 1993 Stock Option Plan filed as Exhibit
10.38 to the Company's Form 10-K for the fiscal year ended
December 31, 1993)
10.42 Amendment No. 1 to Turner Broadcasting System, Inc.
1988 Stock Option Plan*
10.43 Amendment No. 2 to Turner Broadcasting System, Inc.
1988 Stock Option Plan*
10.44 Turner Broadcasting System, Inc. Long-Term Incentive Plan*
11 Computation of Earnings per Common and Common Equivalent Share
*Management contract or compensatory plan or arrangement.
(b) Reports on Form 8-K
No reports have been filed on Form 8-K during the quarter for which
this report is filed.
18
<PAGE> 19
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TURNER BROADCASTING SYSTEM, INC.
By: /s/ William S. Ghegan
-------------------------------------
William S. Ghegan
Vice President, Controller and
Chief Accounting Officer
Date: August 12, 1994
19
<PAGE> 20
INDEX TO EXHIBITS
3.1 Restated Articles of Incorporation of the Company
10.38 Turner Broadcasting System, Inc. 1993 Stock Option and
Equity-Based Award Plan (replacing the 1993 Stock Option Plan
filed as Exhibit 10.38 to the Company's Form 10-K for the fiscal
year ended December 31, 1993)
10.42 Amendment No. 1 to Turner Broadcasting System, Inc. 1988 Stock
Option Plan.
10.43 Amendment No. 2 to Turner Broadcasting System, Inc. 1988 Stock
Option Plan.
10.44 Turner Broadcasting System, Inc. Long-Term Incentive Plan.
11 Computation of Earnings per Common and Common Equivalent Share
<PAGE> 1
EXHIBIT 3.1
ARTICLES OF RESTATEMENT
OF
TURNER BROADCASTING SYSTEM, INC.
The provisions hereof constitute the Articles of Restatement of Turner
Broadcasting System, Inc. (the "Corporation"). The Corporation was
incorporated on May 12, 1965 and its charter number is 8604728. The Restated
Articles of Incorporation of the Corporation shall be as follows:
ARTICLE 1.
Name. The name of the Corporation is TURNER BROADCASTING SYSTEM, INC.
ARTICLE 2.
Organization. The Corporation is organized pursuant to the provisions
of the Georgia Business Corporation Code.
ARTICLE 3.
Duration. The Corporation shall have perpetual existence.
ARTICLE 4.
Purpose. The purposes of the Corporation are:
(a) To engage in the business of outdoor and other
advertising;
(b) To engage in the ownership and operation of AM, FM
and/or television broadcasting facilities;
(c) To engage in the manufacture, development, purchase,
sale, and to generally deal in materials entirely or partially
composed of plastic;
(d) To initiate, acquire, develop, conduct and dispose of
undertakings, businesses, works and enterprises of any descriptions;
and
(e) To do all and everything incidental to the conduct of
such businesses.
ARTICLE 5.
Capital Stock. The total number of shares of capital stock
<PAGE> 2
which the Corporation shall have authority to issue is five hundred million,
seven hundred thousand (500,700,000) shares. Of said shares, seventy-five
million (75,000,000) shares shall be of a class designated as Class A Common
Stock with a par value of $.0625 per share; three hundred million (300,000,000)
shares shall be a class designated as Class B Common Stock with a par value of
$.0625 per share; five hundred thousand (500,000) shares shall be of a class
designated as Class A Serial Preferred Stock with a par value of $.10 per
share; twelve million, six hundred thousand (12,600,000) shares shall be of a
class designated as Class B Cumulative Preferred Stock with a par value of
$.125 per share; twelve million, six hundred thousand (12,600,000) shares shall
be of a class designated as Class C Convertible Preferred Stock with a par
value of $.125 per share; and one hundred million (100,000,000) shares shall be
of a class designated as Class D Serial Preferred Stock with a par value of
$.0625 per share. Except as may otherwise be provided by the Board of
Directors, no holder of any shares of stock of this Corporation shall have any
preemptive right to purchase, subscribe for, or otherwise acquire any shares of
stock of the Corporation of any class now or hereafter authorized, or any
securities exchangeable for or convertible into such shares, or any warrants or
other instruments evidencing rights or options to subscribe for, purchase, or
otherwise acquire such shares.
SECTION A
THE CLASS A SERIAL PREFERRED STOCK
The Class A Serial Preferred Stock shall consist of 500,000 shares,
par value $.10 per share (the "Class A Preferred Stock"). The shares of Class
A Preferred Stock shall be issued only as shares of the Series A Cumulative
Preferred Stock, par value $.10 per share, of the Corporation.
1. Certain Definitions. Unless the context otherwise requires,
the terms defined in this paragraph shall have, for all purposes hereof of, the
meanings herein specified.
Accrual Date. The term "Accrual Date" shall mean, with respect to any
shares of Series A Preferred Stock, the first anniversary of the Issue Date,
except that (i) with respect to shares of Series A Preferred Stock issued
pursuant to subparagraph 2(c), the Accrual Date shall be the Dividend Payment
Date with respect to which such shares are deemed to have been issued, and (ii)
with respect to any shares of Series A Preferred Stock issued after June 1,
1987 other than pursuant to subparagraph 2(c), the Accrual Date shall be the
date as of which such shares of Series A Preferred Stock are actually issued if
such date is a Dividend Payment Date, and in all other cases, the Accrual Date
shall be the Dividend Payment Date immediately preceding the date as of which
such shares of Series A Preferred
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Stock are issued.
Board of Directors. The term "Board of Directors" shall mean the
Board of Directors of this corporation and, other than for purposes of
subparagraph 8(b), to the extent permitted by law, any committee of such Board
of Directors authorized to exercise the powers of such Board of Directors.
Capitalized lease Obligation. The term "Capitalized lease Obligation"
shall mean Indebtedness represented by obligations under a lease that is
required to be capitalized for financial accounting purposes in accordance with
generally accepted accounting principles.
Closing Price. The term "Closing Price," with respect to either the
Common Stock or the Series A Preferred Stock, for any day, shall mean the last
reported sale price, regular way, of the applicable security or, in case no
such reported sale takes place on such day, the average of the closing bid and
asked prices, regular way, for such day, in either case on the principal
national securities exchange on which the applicable security is listed or
admitted to trading, or, if it is not listed or admitted to trading on any
national securities exchange but is traded in the over-the-counter market, the
closing sale price of the applicable security or, in case no sale is publicly
reported, the average of the closing bid and asked quotations for the
applicable security, in either case as reported by the National Association of
Securities Dealers Automated Quotation System ("NASDAQ"), or any comparable
system or, if the applicable security is not quoted on NASDAQ or a comparable
system, the closing sales price, in either case as furnished by two members of
the National Association of Securities Dealers, Inc. selected from time to time
by this corporation for that purpose.
Common Stock. The term "Common Stock" shall mean the common stock,
par value $.125 per share, of this corporation and all shares hereafter
authorized of any class of common stock of this corporation, which terms shall
include, in the case of a reclassification or merger of this corporation with
or into another corporation, such consideration to which a holder of a share of
common stock would have been entitled upon the occurrence of such event.
Debt Instrument. The term "Debt Instrument" shall mean any bond,
debenture, note, indenture, guarantee or other instrument evidencing any
indebtedness of this corporation, whether existing at the Issue Date or
thereafter created, incurred, assumed or guaranteed.
Dividend Payment Date. The term "Dividend Payment Date," with respect
to the Series A Preferred Stock, shall have the meaning set forth in
subparagraph 2(a) below and with respect to
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<PAGE> 4
any other preferred stock, shall mean the date upon which, pursuant to the
terms of such preferred stock, dividends on such preferred stock would be
payable if declared.
Dividend Period. The term "Dividend Period" shall have the meaning
set forth in subparagraph 2(a) below.
Dividend Rate. The term "Dividend Rate" shall mean the annual amount
of $1.4459 per share of Series A Preferred Stock.
Election Rights. The term "Election Rights" shall mean, with respect
to any portion of the Board of Directors that the holders of Series A preferred
Stock, voting separately as a class, shall be entitled to and may elect, the
smallest number of directors sufficient to constitute, after consideration of
the number of directors which any other class or series of this corporation's
capital stock is then entitled to elect, not less than such portion of the
entire Board of Directors; it being understood that in the event the size of
the Board of Directors is changed, the number of directors that the holders of
Series A Preferred Stock, voting separately as a class, shall be entitled to
and may elect shall be appropriately adjusted, provided, however, that in no
event shall the number of directors that the holders of Series A Preferred
Stock be entitled to elect upon the happening and during the continuation of an
event giving rise to Election Rights be less than two (2).
Final Redemption Date. The term "Final Redemption Date" shall mean
the date, if any, after a default, if any, by this corporation in making
payment for shares of Series A Preferred Stock on any date fixed for
redemption, when this corporation makes the consideration for payment of the
appropriate redemption price for all shares of Series A Preferred Stock being
redeemed, together with accrued dividends to such date, whether or not
declared, available to the holders thereof.
Indebtedness. The term "Indebtedness" shall mean (i) any liability,
contingent or otherwise, of this corporation (a) for borrowed money (whether or
not the recourse of the lender is to the whole of the assets of this
corporation or only to a portion thereof), (b) evidenced by a note, debenture
or similar instrument (including a purchase money obligation) given other than
in connection with the acquisition of inventory or similar property in the
ordinary course of business, or (c) for the payment of money relating to a
Capitalized Lease Obligation; (ii) any liability of others described in the
preceding clause (i) which this corporation has guaranteed or which is
otherwise its legal liability; (iii) any obligations secured by a Lien to which
the property or assets of this corporation are subject, whether or not the
obligations secured thereby shall have been assumed by or shall otherwise be
this corporation's legal liability; and (iv) any amendment, renewal, extension
or refunding of any
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liability of the types referred to in clauses (i), (ii) and (iii) above.
Issue Date. The term "Issue Date" shall mean the date on which,
pursuant to the Amended and Reinstated Agreement and Plan of Merger, as
amended, among this corporation, TBS Acquisition Corporation ("Merger Sub"),
MGM/UA Entertainment Co. ("MGM/UA") and United Artists Corporation, articles of
merger shall have been filed with both the Secretary of Delaware and the
Secretary of State of Georgia to effectuate the merger of Merger Sub into
MGM/UA.
Junior Stock. The term "Junior Stock" shall mean Common Stock and any
other class or series of stock of this corporation authorized after the Issue
Date not entitled to receive any dividends in any Dividend Period unless all
dividends required to have been paid or declared and set apart for payment on
the Series A Preferred Stock and any Parity Stock shall have been so paid or
declared and set apart for payment and, for purposes of paragraph 7 below,
shall mean any class or series of stock of this corporation authorized after
the Issue Date not entitled to receive any assets upon liquidation, dissolution
or winding up of the affairs of this corporation until the Series A Preferred
Stock and any Parity Stock shall have received the entire amount to which such
stock is entitled upon such liquidation, dissolution or winding up.
Lien. The term "Lien" shall mean any mortgage, pledge, lien,
encumbrance, charge or adverse claim affecting title or resulting in an
encumbrance against any real or personal property, or a security interest of
any kind (including any conditional sale or other title retention agreement,
any lease in the nature thereof, any option or other agreement to sell and any
filing of or agreement to give any financing statement under the Uniform
Commercial Code (or equivalent statutes) of any jurisdiction).
Liquidation Price. The term "Liquidation Price" measured per share of
Series A Preferred Stock shall mean, for the indicated periods, the amount set
forth below:
<TABLE>
<CAPTION>
During the Period Liquidation Value
----------------- -----------------
<S> <C>
From the Issue Date through May 31, 1986.........$ 9.0000
From June 1, 1986 through August 31, 1986........$ 9.3150
From September 1, 1986 through November 30, 1986.$ 9.6410
From December 1, 1986 through February 28, 1987..$ 9.9785
On or after March 1, 1987........................$10.3277
</TABLE>
plus the sum of (i) in the case of a Missed Dividend, if any, the consideration
then remaining payable in respect of such Missed Dividend (including the
proceeds thereof) determined in
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accordance with subparagraph 2(b) below (including, to the extent provided
therein, accruals on unpaid dividends) and (ii) a per share amount measured by
the pro rata Dividend Rate based upon the number of days in the period
beginning on the first day of the Dividend Period during which the Liquidation
Price is made available and ending on the date during such Dividend Period that
payment of the Liquidation Price is made available (whether upon liquidation,
dissolution or winding up of this corporation, or, in the case of paragraph 3
hereof, redemption of the Series A Preferred Stock) to the holders of Series A
Preferred Stock, based on a 360-day year of twelve 30-day months.
Market Price. The term "Market Price", with respect to either
the Common Stock or the Series A Preferred Stock as of any Record Date, shall
mean the average of the Closing Price of such security for twenty (20)
consecutive trading days ending on the fifth trading day prior to such Record
Date; provided, however, that, if the shares of Common Stock shall have been
converted into two or more classes of capital stock, whether by merger,
consolidation, reclassification, recapitalization or otherwise, the "Market
Price" shall be determined by summing the products determined by multiplying
the market price of each share of each class or series of capital stock into
which such shares were converted by the number of shares or series of capital
stock into which such shares were converted.
Missed Dividend. The term "Missed Dividend" shall mean, with respect
to any Dividend Period, the failure of this corporation to pay in full
dividends for such Dividend Period determined in accordance with and as of the
times provided in Paragraph 2 hereof.
Parity Stock. The term "Parity Stock" shall mean any class or series
of stock of this corporation authorized after the Issue Date entitled to
receive payment of dividends on a parity with the Series A Preferred Stock or
entitled to receive assets upon liquidation, dissolution or winding up of the
affairs of this corporation on a parity with the Series A Preferred Stock.
Redemption Agent. The term "Redemption Agent" shall have the meaning
set forth in subparagraph 4(c) below.
Redemption Date. The term "Redemption Date" shall have the meaning
set forth in subparagraph 3(a) below.
Redemption Price. The term "Redemption Price" shall mean the
Liquidation Price in effect on the Redemption Date.
Senior Stock. The term "Senior Stock" shall mean any class or series
of stock of this corporation authorized after the Issue Date ranking senior to
the Series A Preferred Stock and any Parity Stock in respect of the right to
receive dividends or in
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respect of the right to participate in any distribution upon liquidation,
dissolution or winding up of the affairs of this corporation.
2. Dividends.
(a) Subject to the prior preferences and other rights of any
Senior Stock, each issued and outstanding share of Series A Preferred Stock
shall entitle the holder of record thereof as of the Record Date to receive,
when and as declared by the Board of Directors, out of any funds legally
available therefor, dividends at the Dividend Rate, which shall accrue from the
Accrual Date and shall be payable, in the manner set forth in subparagraph 2(b)
and 2(c) below quarterly on the first day of March, June, September and
December of each year commencing on June 1, 1987 ("Dividend Payment Dates").
The dividend payable on the first Dividend Payment Date with respect to any
share of Series A Preferred Stock shall be the pro rata amount of the Dividend
Rate based upon the number of days from and including the Accrual Date up to
and including such first Dividend Payment Date and a 360-year of twelve 30-day
months. The period from the Accrual Date to the first Dividend Payment Date
and each quarterly period between consecutive Dividend Payment Dates shall
hereinafter be referred to as a "Dividend Period." As used herein, the term
Record Date means, with respect to the dividend payable March 1, June 1,
September 1 and December 1 of each year, February 15, May 15, August 15 and
November 15, respectively, of such year, or if any such date is not a business
day for the transfer agent for the Series A Preferred Stock, then on the next
preceding or the next following business day, as and if designated by the Board
of Directors.
(b) Dividends shall be payable in cash; provided, however, that
if, pursuant to applicable law or the terms of any Debt instrument, this
corporation shall be prohibited or restricted from paying in cash the full
dividends to which holders of the Series A Preferred Stock and any Parity Stock
shall be entitled, the amount available pursuant to applicable law and which is
not restricted by the terms of any Debt instrument shall be distributed among
the holders of the Series A Preferred Stock and such Parity Stock ratably in
proportion to the full amounts to which they would otherwise be entitled. The
per share amounts to be distributed pursuant to the preceding sentence shall,
in each case, be adjusted by rounding down to the nearest whole cent and such
adjusted amount is hereinafter referred to as the "Cash Dividend Payment". If
the Cash Dividend Payment is insufficient to satisfy the full quarterly
dividend to which the holder of a share of the Series A Preferred Stock is
entitled, the difference between the full quarterly dividend to which the
holder of a share of the Series A Preferred Stock is entitled and the Cash
Dividend Payment (such difference being hereinafter referred to as the "Stock
Dividend Payment") shall, subject to the provisions
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<PAGE> 8
of subparagraph 2(c) below, be paid by delivering to such holder a number of
shares of Common Stock determined by dividing the Stock Dividend Payment by the
Market Price of the Common Stock on the Record Date for such dividend payment.
(c) Notwithstanding the provisions of subparagraph 2(b) above, if,
on the Record Date for any Dividend Payment Date prior to the third anniversary
of the Issue Date, the Market Price of the Common Stock is less than $15.00
(which amount shall be approximately adjusted to give effect to any stock
dividends on the Common Stock or any stock splits, reclassifications or
recombinations of the Common Stock), the holders of the Series A Preferred
Stock shall be entitled to receive, in respect of each share of Series A
Preferred Stock, if the Cash Dividend Payment is insufficient to satisfy the
full quarterly dividend to which the holder of a share of the Series A
Preferred Stock is entitled, the Cash Dividend Payment, a number of shares of
Common Stock determined by dividing the Stock Dividend Payment by $15.00 (which
amount shall be approximately adjusted to give effect to any stock dividends on
the Common Stock or any stock splits or reclassifications or recombinations of
the Common Stock), and a number of shares of Series A Preferred Stock
determined by dividing the difference between (i) the Stock Dividend Payment
and (ii) the product of (x) the number of shares of Common Stock distributed
pursuant to this subparagraph 2(c) and (y) the Market Price of the Common Stock
as of such Record Date, by the Market Price of the Series A Preferred Stock as
of such Record Date. For the purpose of calculating the number and type of
shares of stock, if any, together with any subsequent proceeds or distributions
with respect thereto, that a holder of Series A Preferred Stock is entitled to
receive with respect to any Missed Dividend, the payment of such Missed
Dividend, together with the issuance of any such shares as would have been
issuable pursuant to subparagraphs 2(b) or 2(c) in payment thereof on the
Dividend Payment Date for such Missed Dividend, shall be deemed to have been
made on such Dividend Payment Date.
(d) If for any Dividend Period holders of the Series A Preferred Stock
shall not receive the full dividends provided for in this paragraph 2, such
unpaid dividends for such Dividend Period shall be cumulative and shall accrue
and compound on a quarterly basis at the rate described in the last sentence of
this subparagraph (d), whether or not declared and whether or not there shall
be (at the time such dividend shall become payable or at any other time)
unreserved and unrestricted earned surplus, unreserved and unrestricted net
earnings or other assets of this corporation legally available for the payment
of dividends, from and after the date when payment thereof would have been due.
Dividends on the Series A Preferred Stock shall continue to accrue until the
date such dividends are paid or such shares are redeemed. Accruals on any
accrued unpaid dividends (whether or not declared) shall be at the rate of
fourteen percent (14%) per
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annum and shall be computed from the Dividend Payment Date at which such
accrued unpaid dividends first became payable to and including the date payment
of such dividend is made available to the holders of the Series A Preferred
Stock, based on a 360-day year of twelve 30-day months.
(e) So long as any shares of Series A Preferred Stock shall be
outstanding, this corporation shall not declare or pay on any Junior Stock any
dividend whatsoever, whether in cash, property or otherwise, nor shall this
corporation make any distribution on any Junior Stock, or set aside any assets
for any such purposes, not shall any Junior Stock be purchased, redeemed or
otherwise acquired by this corporation or any of its subsidiaries, nor shall
any monies be paid, set aside for payment or made available for a sinking fund
for the purchase or redemption of any Junior Stock, unless and until (i) all
dividends to which the holders of the Series A Preferred Stock and any Parity
Stock shall have been entitled for all current and all previous Dividend
Periods shall have been paid or declared and the consideration sufficient for
the payment thereof set apart so as to be available for the payment thereof and
for no other purpose and (ii) this corporation shall have made, in full, or set
apart the consideration sufficient for the payment thereof and for no other
purpose, all mandatory redemptions pursuant to subparagraph 3(b) hereof to the
extent then required; provided, however, that nothing contained in this
subparagraph (e) shall prevent the payment of dividends solely in Junior Stock
for the repurchase, redemption or other acquisition solely through the issuance
of Junior Stock.
(f) This corporation shall not be required to issue any fractional
shares of Common Stock or Series A Preferred Stock to which any holder may
become entitled pursuant to subparagraphs 2(b) or 2(c) above. Fractional
shares shall be settled in cash if and to the extent that this corporation has
funds available under applicable law, the payment of which is not restricted by
any Debt Instruments, after giving effect to the Cash Dividend Payments and any
dividends paid on any Parity Stock. Any such cash settlement shall be effected
pro rata among the holders of the Series A Preferred Stock based on the
proportion which the fractional share to which such holder is entitled bears to
the aggregate of the fractional shares to which all holders are entitled. If,
after giving effect to the cash settlement provided above any holder is
entitled to a fractional share, such holder must elect either to purchase an
additional fractional share required to make up a full share or to sell any
such fractional share to which such person is entitled. Such election shall be
made on the form of election provided by this corporation. If such election is
not made, the fractional share to which such person is entitled shall be sold.
Such purchase or sale shall be effected in the manner set forth in subsection
2(g) below by this corporation, or an agent appointed by this
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<PAGE> 10
corporation for such purpose, acting as agent for the person entitled to any
such fractional share.
(g) This corporation shall bill each person entitled to a
fractional share for the cost of any additional fractional share purchases by
it or such other agent for such person or shall remit to such person the
proceeds of the sale of any such fractional share sold by it or such other
agent as such agent. In the case of a purchase, this corporation or such other
agent may sell any fractional share to which such person is entitled if
payment therefor is not received by this corporation within 30 days after the
mailing of such bill and, after deducting the amount of such bill and other
transactional costs or other charges permitted hereunder, shall remit the
balance, if any, to such person. Fractional shares shall be non-transferable
except by or to this corporation or such other agent acting as herein
authorized. This corporation or such other agent may purchase or sell
fractional shares on the basis of market prices of the shares of Common Stock
or Series A Preferred Stock, as the case may be, as determined by this
corporation in its sole discretion and is expressly authorized to value
fractional shares without actual purchase or sale on the basis of the market
prices of the shares of Common Stock or Series A Preferred Stock, as the case
may be, as determined by it in its sole discretion. Purchases and sales of
fractional shares by this corporation may, in its sole discretion, be set off
one against the other on the basis of the market price of the Common Stock or
the Series A Preferred Stock, as the case may be, as determined by it in its
sole discretion.
(h) The provisions of subparagraphs 2(f) or 2(g) may be amended by
this corporation without the consent of any holder of Series A Preferred Stock
to the extent necessary to comply with any applicable law, statute, rule or
regulation.
3. Redemption.
(a) Subject to the rights of any Senior Stock and the provisions
of paragraph 5 hereof, the shares of Series A Preferred Stock may be redeemed,
at the option of this corporation, by action of the Board of Directors, in
whole or from time to time in part, at any time after the Issue Date, at a
redemption price per share equal to the Liquidation Price. The date fixed for
redemption pursuant to the provisions of this subparagraph or of subparagraph
3(b), below, shall be referred to herein as the "Redemption Date."
(b) Subject to the rights of any Senior Stock, this corporation
shall redeem, out of funds legally available therefor, and after payment or
provision for payment of all dividends for past full Dividend Periods on the
outstanding Series A Preferred Stock and any Parity Stock, on the Eleventh
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and Twelfth anniversaries of the Issue Date, five percent (5%) of the number of
shares of Series A Preferred Stock issued, and shall redeem on the Thirteenth
and Fourteenth anniversaries of the Issue Date, twenty percent (20%) of the
number of shares of Series A Preferred Stock issued, and shall redeem on the
Fifteenth anniversary of the Issue Date all of the shares of Series A Preferred
Stock remaining outstanding (each such date being referred to herein as a
"Redemption Date"), in each case at a price per share equal to the Liquidation
Price. This corporation may satisfy its obligation to make any such mandatory
redemption in whole or in part by the retirement, other than pursuant to the
mandatory redemption provisions hereof, of shares of Series A Preferred Stock
which have not previously been used to satisfy any such mandatory redemption
obligation.
(c) If this corporation shall default in making payment for shares
of Series A Preferred Stock on any Redemption Date, the Redemption Price shall
also include an amount measured by the pro rata Dividend Rate based upon the
number of days from and after the Redemption Date to and including the Final
Redemption Date and a 360-day year of twelve 30-day months.
4. Method of Redemption.
(a) Notice of every redemption shall be mailed, first class,
postage prepaid, not less than 15 days nor more than 60 days prior to the date
fixed for redemption to the holders of record of the shares of Series A
Preferred Stock to be redeemed, at their respective addresses as the same
appear upon the books of this corporation or supplied by them to this
corporation for the purpose of such notice; but no failure to mail such notice
to particular shareholders or any defect therein or in the mailing thereof
shall affect the validity of the proceedings for the redemption of any shares
of Series A Preferred Stock. In addition to any information required by law or
by the applicable rules of any national stock exchange upon which the Series A
Preferred Stock may be listed or admitted to trading, such notice shall state
whether such redemption is being made pursuant to the optional redemption
provisions of the mandatory redemption provisions hereof, state the Redemption
Date, the Redemption Price and the place at which the shares called for
redemption will, upon presentation and surrender of the certificates of stock
evidencing such shares, be redeemed, and state the name and address of any
Redemption Agent (as defined below) selected by this corporation in accordance
with subparagraph 4(c) and the name and address of this corporation's transfer
agent for the Series A Preferred Stock.
(b) In case of redemption of less than all of the Series A
Preferred Stock at the time outstanding, this corporation shall select shares
so to be redeemed pro rata or by lot.
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(c) If notice of any redemption by this corporation pursuant to
paragraph 3 hereof shall have been mailed as provided in subparagraph (a)
hereof, and if on or before the Redemption Date specified in such notice the
consideration necessary for such redemption shall have been set apart so as to
be available therefor and only therefor, then on and after the close of
business on the Redemption Date, the shares of Series A Preferred Stock called
for redemption, notwithstanding that any certificate therefor shall not have
been surrendered for cancellation, shall no longer be deemed outstanding, and
all rights with respect to such shares shall forthwith cease and terminate,
except the right of the holders thereof to receive upon surrender of their
certificates the consideration payable upon redemption thereof; provided,
however, that, if on or prior to the Redemption Date (but no earlier than 60
days prior to such Redemption Date) this corporation shall deposit, in a trust
fund, with any bank or trust company organized under the laws of the United
States of America or any state thereof having capital, undivided profits and
surplus aggregating at least $50,000,000 (the "Redemption Agent"), the
consideration sufficient to redeem on such Redemption Date the shares of Series
A Preferred Stock to be redeemed, with irrevocable instructions and authority
to the Redemption Agent, on behalf and at the expense of this corporation, to
mail the notice of redemption as soon as practicable after receipt of such
irrevocable instructions (or to complete such mailing previously commenced if
it has not already been completed) and to pay, on and after the Redemption Date
or prior thereto, the Redemption Price of the shares of Series A Preferred
Stock to be redeemed to their respective holders upon the surrender of their
share certificates, then, from and after the date of such deposit (although
prior to the Redemption Date) the shares of Series A Preferred Stock to be
redeemed shall be deemed to be redeemed and dividends on those shares shall
cease to accrue after such Redemption Date. The deposit shall be deemed to
constitute full payment for shares of Series A Preferred Stock to be redeemed
to their holders and from and after the date of such deposit the shares shall
be deemed to be no longer outstanding and the holders thereof shall cease to be
shareholders with respect to such shares and shall have no rights with respect
thereto, except the right to receive payment of the consideration sufficient to
pay the Redemption Price of the shares, including all accrued but unpaid
dividends through the Redemption Date, without interest, upon surrender of
their certificates therefor.
5. Restrictions on Redemption. If at any time this corporation
shall have failed to pay, or declare and set apart the consideration sufficient
to pay, all dividends accrued up to and including the immediately preceding
Dividend Payment Date on the Series A Preferred Stock and any Parity Stock,
and until all dividends accrued up to and including the immediately preceding
Dividend Payment Date on the Series A Preferred Stock and any
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Parity Stock shall have been paid or declared and set apart so as to be
available for the payment in full therefor and for no other purpose, this
corporation shall not redeem, pursuant to a sinking fund or otherwise, any
shares of Series A Preferred Stock, Parity Stock or Junior Stock, unless all
then outstanding shares of Series A Preferred Stock and any Parity Stock are
redeemed, and shall not purchase or otherwise acquire any shares of Series A
Preferred Stock, Parity Stock or Junior Stock.
6. Status of Redeemed Stock. All shares of Series A Preferred
Stock redeemed pursuant to paragraph 3 hereof shall be retired and shall be
restored to the status of authorized and unissued shares of preferred stock and
may not be reissued as Series A Preferred Stock.
7. Distributions upon Liquidation, Dissolution or Winding Up.
Subject to the prior payment in full of the preferential amounts to which any
Senior Stock is entitled, in the event of any liquidation, dissolution or
winding up of this corporation, the amount required to be paid to the holders
of Series A Preferred Stock, before any payment shall be made to the holders of
any Junior Stock is an amount in cash or property at its fair market value, as
determined by the Board of Directors in good faith, or a combination thereof,
per share equal to the Liquidation Price. The holders of Series A Preferred
Stock shall be entitled to no further participation in any remaining assets of
this corporation after receiving the Liquidation Price per share. If upon
distribution of this corporation's assets in liquidation, dissolution, winding
up or other similar event, the assets of this corporation to be distributed
among the holders of Series A Preferred Stock and to all holders of any Parity
Stock shall be insufficient to permit payment in full to such holders of the
preferential amounts to which they are entitled then the entire assets of this
corporation to be distributed to holders of Series A Preferred Stock and such
Parity Stock shall be distributed pro rata to the holders of Series A Preferred
Stock and such Parity Stock based upon the aggregate of the full preferential
amounts to which the shares of Series A Preferred Stock and such Parity Stock
would otherwise respectively be entitled. Neither the consolidation or merger
of this corporation with or into any other corporation or corporations nor the
sale, transfer or lease of all or substantially all the assets of this
corporation shall itself be deemed to be a liquidation, dissolution or winding
up of this corporation within the meaning of any of the provisions of this
paragraph 7.
8. Voting Rights.
(a) The holders of Series A Preferred Stock shall have no right to
vote for any purpose, except as specifically required by the Georgia Business
Corporation Code and except as described below.
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(b) If at any time there has occurred a Missed Dividend for any
quarterly Dividend Period, which Missed Dividend has not been cured, then the
holders of the Series A Preferred Stock shall have Election Rights with respect
to one-sixth (1/6) of the Board of Directors. If at any time there have
occurred two (2) Missed Dividends (whether or not consecutive), both of which
have not been cured, then the holders of the Series A Preferred Stock shall
have Election Rights with respect to one-third (1/3) of the Board of Directors.
If at any time there have occurred three (3) or more Missed Dividends (whether
or not consecutive), all of which have not been cured, then the holder of the
Series A Preferred Stock shall have Election Rights with respect to a majority
of the Board of Directors. The foregoing Election Rights shall not be
cumulative. If at any time this corporation shall not have made, in full, or
set apart the consideration sufficient for the payment thereof and for no other
purpose, two (2) or more mandatory redemptions pursuant to subparagraph 3(b)
hereof, the holders of Series A Preferred Stock shall have Election Rights for
one-sixth (1/6) of the Board of Directors; provided, that such Election Rights
will not be cumulative with any other Election Rights under this paragraph. A
person otherwise qualified for election as a director of this corporation
pursuant to the By-laws of this corporation shall not be so qualified and shall
not be so elected if his or her election to the Board of Directors of this
corporation would result in a violation of the Communications Act of 1934, as
amended, provided that this corporation shall use its reasonable best efforts
to obtain, to the extent required and appropriate in order to avoid the
violation, such approvals and consents as will enable the election of an
otherwise nominated person or persons to the Board of Directors pursuant to an
Election Right to not result in such a violation. A director elected pursuant
to an Election Right shall use his or her best efforts, consistent with his or
her fiduciary obligations to the shareholders of this corporation, to cause
this corporation to cure as promptly as possible any event which has given rise
to an Election Right. Directors elected as a result of an Election Right shall
thereupon become additional directors of this corporation and the authorized
number of directors of this corporation shall thereupon be automatically
increased by such number of directors. In the event such holders, voting as a
class, elect such number of directors, the remaining directors shall be elected
by the holders of the other shares of capital stock of this corporation then
entitled to vote for the election of directors without right in the holders of
Series A Preferred Stock to participate in the election of such remaining
directors. Such special voting rights of the holders of Series A Preferred
Stock shall continue only until all dividends for such Dividend Periods have
been paid or declared and the consideration sufficient set apart for the
payment thereof and for no other purpose and until all mandatory redemption
payments which have become payable have been made or a sum sufficient set apart
for the payment thereof and for no other
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purpose, at which time the terms of said directors theretofore elected by the
holders of the Series A Preferred Stock shall expire and the number of
directors constituting the entire Board of Directors shall thereupon return to
the number of authorized directors otherwise in effect (subject always to the
same provisions for the vesting of such special voting rights in the case of
any such future dividend default or defaults or redemption default or
defaults). The fact that dividends have been paid or declared and set apart or
mandatory redemption payments have been made or the consideration sufficient
therefor have been set apart, as required by the preceding sentence, shall be
evidenced by a certificate executed by the President and by the chief financial
officer of this corporation and delivered to the Board of Directors. The
directors to be elected (or if such directors have been previously elected and
any vacancy shall exist, such vacancy to be filled) by the holders of Series A
Preferred Stock (voting as a class) shall be elected (or filled) at (i) annual
meetings of the shareholders of this corporation, or (ii) a special meeting of
the holders of Series A Preferred Stock for the purpose of electing such
directors (or filling any such vacancy), to be called by the Secretary of this
corporation upon the written request of the holders of record of 5% or more of
the number of shares of Series A Preferred Stock then outstanding; provided,
however, that if the Secretary of this corporation shall fail to call any such
meeting within 10 days after any such request, such meeting may be called by
any holder or holders of 5% or more of the number of shares of Series A
Preferred Stock then outstanding. Notwithstanding the foregoing, the Secretary
shall not be required, and the holders of Series A Preferred Stock shall not be
entitled, to call such meeting in the case of any such request received by this
corporation less than 45 days before the date fixed for any annual meeting of
shareholders, and if in such case such special meeting is not called, the
holders of Series A Preferred Stock shall be entitled to vote (voting as a
class) at such annual meeting to elect such directors (or to fill any such
vacancy). Except as hereinbefore provided, the directors elected by the
holders of Series A Preferred Stock shall serve until the next annual meeting
of the shareholders and until their successors shall have been elected and
qualified and may be otherwise removed only by the holders of at least a
majority of the then outstanding shares of Series A Preferred Stock at the time
of such removal.
(c) Without the consent of the holders of at least 66 2/3% of the
number of shares of the Series A Preferred Stock at the time outstanding,
either in writing or by vote at a meeting called for that purpose at which the
holders of the Series A Preferred Stock shall vote as a class, neither the
Articles of Incorporation of this corporation nor any resolution of the Board
of Directors establishing and designating a series of preferred stock and
determining the relative rights and preferences thereof shall be changed so as
to alter in an adverse manner the
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designations, preferences, limitations and rights of the holders of the Series
A Preferred Stock.
9. Exclusion of Other Rights. A director of this corporation
shall use his or her best efforts, consistent with his or her fiduciary
obligations to the shareholders of this corporation, to cause this corporation
to pay dividends on the Series A Preferred Stock as provided by paragraph 2
hereof. Except as may otherwise be required by law and for the equitable
rights and remedies which may otherwise be available to holders of Series A
Preferred Stock, the shares of Series A Preferred Stock shall not have any
designations, preferences, limitations or relative rights, other than those
specifically set forth in this resolution (as such resolution may be amended
from time to time) and in the Articles of Incorporation of this corporation.
The shares of Series A Preferred Stock shall have no preemptive or subscription
rights.
10. Headings of Subdivisions. The headings of the various
subdivisions hereof are for convenience of reference only and shall not affect
the interpretation of any of the provisions hereof.
11. Severability of Provisions. If any right, preference or
limitation of the Series A Preferred Stock set forth in this resolution (as
such resolution may be amended from time to time) is invalid, unlawful or
incapable of being enforced by reason of any rule of law or public policy, all
other rights, preferences and limitations set forth in this resolution (as so
amended) which can be given effect without the invalid, unlawful or
unenforceable right, preference or limitation shall, nevertheless, remain in
full force and effect, and no right, preference or limitation herein set forth
shall be deemed dependent upon any other such right, preference or limitation
unless so expressed herein.
SECTION B
THE CLASS B CUMULATIVE PREFERRED STOCK
The Class B Cumulative Preferred Stock shall have the following
preferences, limitations and relative rights:
1. Certain Definitions. Unless the context otherwise requires,
the terms defined in this paragraph 1 shall have, for all purposes of this
Section B, the meanings herein specified:
"Board of Directors" shall mean the Board of Directors of the
Corporation and, other than for purposes of paragraph 5(c) of this Section, to
the extent permitted by law, any committee of the Board of Directors authorized
to exercise the powers of the
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<PAGE> 17
Board of Directors.
"Capitalized Lease Obligation" shall mean indebtedness represented by
obligations under a lease that is required to be capitalized for financial
accounting purposes in accordance with generally accepted accounting
principles.
"Class B Common Stock" shall mean the three hundred million
(300,000,000) shares of the Class B Common Stock, par value $.0625 per share,
of the Corporation, which term shall include, where appropriate, in the case of
a reclassification, recapitalization or other changes in such Class B Common
Stock, or in the case of a consolidation or merger of the Corporation with or
into another corporation affecting the Class B Common Stock, such consideration
to which a holder of Class B Common Stock would have been entitled upon the
occurrence of such event.
"Class B Preferred Stock" shall mean the twelve million, six hundred
thousand (12,600,000) authorized shares of the Class B Cumulative Preferred
Stock, par value $.125 per share, of the Corporation.
"Closing Price" with respect to a share of the Class B Common Stock,
for any day, shall mean the last reported sale price, regular way, of the Class
B Common Stock, or, in case no such reported sale takes place on such day, the
average of the closing bid and asked prices, regular way, for such day, in
either case on the principal national securities exchange on which the Class B
Common Stock is listed or admitted to trading, or, if it is not listed or
admitted to trading on any national securities exchange but is traded in the
over-the-counter market, the closing sale price of the Class B Common Stock or,
in case no sale is publicly reported, the average of the closing bid and asked
quotations for the Class B Common Stock, in either case as reported by the
National Association of Securities Dealers Automated Quotations System
("NASDAQ"), or any comparable system or, if the Class B Common Stock is not
quoted on NASDAQ or a comparable system, the closing sale price of the Class B
Common Stock as furnished by two members of the National Association of
Securities Dealers, Inc. selected from time to time by the Corporation for that
purpose.
"Common Stock" shall mean the seventy-five million (75,000,000) shares
of the Class A Common Stock, par value $.0625 per share, of the Corporation,
the three hundred million (300,000,000) shares of the Class B Common Stock, par
value $.0625 per share, of the Corporation and all shares hereafter authorized
of any class of common stock of the Corporation, which term shall include,
where appropriate, in the case of a reclassification, recapitalization or other
changes in such Common Stock, or in the case of a consolidation or merger of
the Corporation with or into another corporation affecting the Common
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<PAGE> 18
Stock, such consideration to which a holder of Common Stock would have been
entitled upon the occurrence of such event.
"Debt Instrument" shall mean any bond, debenture, note, indenture,
guarantee or other instrument or agreement evidencing any Indebtedness of the
Corporation whether existing at the Issue Date or thereafter created, incurred,
assumed or guaranteed.
"Dividend Payment Date" shall have the meaning set forth in paragraph
2(a) of this Section.
"Dividend Period" shall mean the period from the Issue Date to the
first Dividend Payment Date and each twelve-month period between consecutive
Dividend Payment Dates.
"Event of Noncompliance" shall mean the occurrence of any of the
following events:
(i) The Corporation fails to pay within 180 days of the first
Dividend Payment Date, on any of the second or third Dividend Payment
Dates, or within 90 days of any Dividend Payment Date thereafter, as
the case may be, the full amount of dividends then accrued on the
Class B Preferred Stock;
(ii) The Corporation shall not have made, in full, or set
apart the consideration sufficient for the payment thereof and no
other purpose, any redemption payment with respect to the Class B
Preferred Stock which it is obligated to make, whether or not such
payment is legally permissible, within 30 days of the date specified
for such redemption;
(iii) The Corporation fails to perform its obligations
under paragraph 2(e) or 5(b) of this Section; or
(iv) An event of default as defined in any one or more
Debt Instruments occurs and (x) the effect of such event of default is
to cause (without action or any requirement of action on the part of
the holder or holders thereof) an amount exceeding $10,000,000 in the
aggregate to become due prior to its stated maturity, or (y) any
holder or holders of Debt Instruments or any trustee for such holders,
as a result of such event of default, have taken such action as to
cause an amount exceeding $10,000,000 in the aggregate to become due
prior to its stated maturity without further action or passage of time
and such action of such holder or holders or trustee has not been
rescinded within 30 days thereafter.
"Indebtedness" shall mean (i) any liability, contingent or otherwise,
of the Corporation, (x) for borrowed money (whether or not the recourse of the
lender is to the whole of the assets of
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<PAGE> 19
the Corporation or only to a portion thereof), (y) evidenced by a note,
debenture or similar instrument (including a purchase money obligation) given
other than in connection with the acquisition of inventory or similar property
in the ordinary course of business, or (z) for the payment of money relating to
a Capitalized Lease Obligation; (ii) any liability of others described in the
preceding clause (i) which the Corporation has guaranteed or which is otherwise
its legal liability; (iii) any obligations secured by a Lien to which the
property or assets of the Corporation are subject whether or not the
obligations secured thereby shall have been assumed by or shall otherwise be
the Corporation's legal liability; and (iv) any amendment, renewal, extension
or refunding of any liability of the types referred to in clauses (i), (ii) and
(iii) above.
"Issue Date" shall mean the date on which shares of the Class B
Preferred Stock are first issued.
"Junior Stock" shall mean Common Stock, the Class C Convertible
Preferred Stock of the Corporation and any other class or series of stock of
the Corporation authorized after the Issue Date not entitled to receive any
dividends unless all dividends required to have been paid or declared and set
apart for payment on the Class B Preferred Stock and any Parity Stock shall
have been so paid or declared and set apart for payment and, for purposes of
paragraph 3 of this Section, shall mean any class or series of stock of the
Corporation authorized after the Issue Date not entitled to receive any assets
upon liquidation, dissolution or winding up of the affairs of the Corporation
until the Class B Preferred Stock and any Parity Stock shall have received the
entire amount to which such stock is entitled upon such liquidation,
dissolution or winding up.
"Lien" shall mean any mortgage, pledge, lien, encumbrance, charge or
adverse claim affecting title or resulting in an encumbrance against any real
or personal property, or a security interest of any kind (including any
conditional sale or other title retention agreement, any lease in the nature
thereof, any option or other agreement to sell and any filing of or agreement
to give any financing statement under the Uniform Commercial Code (or
equivalent statutes) of any jurisdiction).
"Liquidation Price" measured per share of the Class B Preferred Stock
as of any particular date shall mean the sum of (i) $30.8333, plus (ii) all
dividends accrued on such share through the Dividend Payment Date immediately
preceding the date on which the Liquidation Price is being determined to the
extent not paid in full on or before such Dividend Payment Date, plus (iii) (A)
for purposes of determining amounts payable pursuant to paragraphs 3 and 4 of
this Section all unpaid dividends accrued on the sum of the amounts specified
in clauses (i) and (ii) above to the date as of which the Liquidation Price is
being paid, and
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(B) for purposes of determining the amount of dividends to be paid on a date
other than a Dividend Payment Date as contemplated by paragraph 2(c) of this
Section, all unpaid dividends accrued on the amounts specified in clause (ii)
above to the date as of which such dividends are being paid.
"Market Price" with respect to a share of the Class B Common Stock, as
of any date, shall mean the average of the Closing Price of such share of the
Class B Common Stock for twenty (20) consecutive trading days ending on the
fifth day prior to such date; provided, however, that, if the shares of Class B
Common Stock shall have been converted into two or more classes or series of
capital stock, whether by merger, consolidation, reclassification,
recapitalization or otherwise, the "Market Price" shall be determined by
summing the individual market prices of each of the shares of each class or
series of capital stock into which each of such shares of Class B Common Stock
were so converted.
"Parity Stock" shall mean any class or series of stock of the
Corporation authorized after the Issue Date entitled to receive payment of
dividends on a parity with the Class B Preferred Stock or entitled to receive
assets upon liquidation, dissolution or winding up of the affairs of the
Corporation on a parity with the Class B Preferred Stock.
"Record Date" for the dividends payable on any Dividend Payment Date
means the April 15 next preceding such Dividend Payment Date.
"Redemption Agent" shall have the meaning set forth in paragraph 4(d)
of this Section.
"Redemption Date" as to any share of Class B Preferred Stock shall
mean the date fixed for redemption of such share pursuant to paragraph 4(a) or
4(b) of this Section, provided that no such date will be a Redemption Date
unless the applicable Redemption Price is actually paid in full on such date or
the consideration sufficient for the payment thereof, and for no other purpose,
has been set apart, and if the Redemption Price is not so paid in full or the
consideration sufficient therefor so set apart, then the Redemption Date will
be the date on which such Redemption Price is fully paid or the consideration
sufficient for the payment thereof, and for no other purpose, has been set
apart.
"Redemption Price" as to any share of Class B Preferred Stock which is
to be redeemed on any Redemption Date shall mean the Liquidation Price thereof
as in effect on such Redemption Date.
"Senior Stock" shall mean the Series A Preferred Stock of the
Corporation and any class or series of stock of the
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Corporation authorized after the Issue Date ranking senior to the Class B
Preferred Stock and any Parity Stock in respect of the right to receive
dividends or in respect of the right to participate in any distribution upon
liquidation, dissolution or winding up of the affairs of the Corporation.
"Series A Preferred Stock" shall mean the 500,000 shares of that
series of the Class A Serial Preferred Stock of the Corporation designated as
"Series A Cumulative Preferred Stock."
2. Dividends.
(a) Subject to the prior preferences and other rights of any Senior
Stock, the holders of the Class B Preferred Stock shall be entitled to receive,
when and as declared by the Board of Directors, out of funds legally available
therefor, preferential dividends which shall accrue as provided herein.
Dividends on each share of Class B Preferred Stock will accrue cumulatively on
a daily basis at the rate of ten (10%) percent per annum of the Liquidation
Price of such share from and including the Issue Date to and including the
fourth Dividend Payment Date, and thereafter at the rate of twelve (12%)
percent per annum of the Liquidation Price to and including the date on which
the Redemption Price of such share is paid, whether or not such dividends have
been declared and whether or not there are any funds of the Corporation legally
available for the payment of dividends. Accrued dividends on the Class B
Preferred Stock shall be payable annually on April 30 of each year, commencing
on April 30, 1988, or the immediately preceding business day if any such date
is a Saturday, Sunday or legal holiday in the State of Georgia (each such
payment date being hereinafter referred to as a "Dividend Payment Date"), to
the holders of record of the Class B Preferred Stock as of the close of
business on the Record Date. For purposes of determining the amount of
dividends "accrued" as of the first Dividend Payment Date and as of any date
which is not a Dividend Payment Date, such amount shall be calculated on the
basis of the applicable of the foregoing rates per annum for actual days
elapsed from and including the Issue Date (in the case of the first Dividend
Payment Date) or the last preceding Dividend Payment Date (in the case of any
other date) to and including the date as of which such determination is to be
made, based on a 360-day year.
(b) Dividends shall be payable in cash; provided, however, that if on
any Dividend Payment Date, the Corporation, pursuant to applicable law or the
terms of any Debt Instrument, shall be prohibited or restricted from paying in
cash the full dividends to which holders of the Class B Preferred Stock and any
Parity Stock shall be entitled, the amount of cash available pursuant to
applicable law and which is not restricted by the terms of any Debt Instrument
shall be distributed among the holders of the Class B Preferred Stock and such
Parity Stock ratably in
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proportion to the full amounts to which they would otherwise be entitled. The
per share amounts to be distributed pursuant to the preceding sentence shall,
in each case, be adjusted by rounding down to the nearest whole cent and such
adjusted amount is hereinafter referred to as the "Cash Dividend Payment." If,
at any time from and including the first Dividend Payment Date to and including
the third Dividend Payment Date, the Cash Dividend Payment is insufficient to
satisfy the full annual dividend to which the holder of a share of the Class B
Preferred Stock is entitled, the difference between the full annual dividend to
which the holder of a share of the Class B Preferred Stock is entitled and the
Cash Dividend Payment (such difference being hereinafter referred to as the
"Stock Dividend Payment") shall be paid and satisfied by delivering to such
holder a number of shares of Class B Common Stock determined by dividing the
Stock Dividend Payment by the higher of (i) the Market Price of the Class B
Common Stock as of the Record Date for such dividend payment or (ii) $15.00
(which amount shall be appropriately adjusted to give effect to any stock
dividends on the Class B Common Stock or any stock splits, reclassifications or
combinations of the Class B Common Stock).
(c) To the extent not paid in full on each Dividend Payment Date in
the manner provided in this paragraph 2, all dividends which have accrued on
each share of Class B Preferred Stock during the Dividend Period ending on such
Dividend Payment Date will be added to the Liquidation Price of such share and
will remain a part thereof until such dividends, together with all dividends
which have accrued to the date of such payment with respect to that portion of
the Liquidation Price which consists of such accrued unpaid dividends, are paid
in full. Such accrued unpaid dividends, together with all dividends accrued
thereon, may be declared and paid at any time, without reference to any regular
Dividend Payment Date, to holders of record as of the close of business on such
date, not more than 50 days nor less than 10 days preceding the payment date
thereof, as may be fixed by the Board of Directors (the "Special Record Date").
If declared, such accrued unpaid dividends, together with all dividends accrued
thereon, shall be paid in cash subject to the concurrent satisfaction of any
cash dividend arrearages then existing with respect to any Parity Stock, or, at
any time during the period ending immediately prior to the expiration of the
180-day period following the first Dividend Payment Date, in shares of Class B
Common Stock. To the extent that such accrued unpaid dividends are paid in
shares of the Class B Common Stock, such shares shall be valued at the higher
of (i) the Market Price of the Class B Common Stock as of the Record Date for
such dividend payment or (ii) $15.00 (which amount shall be appropriately
adjusted to give effect to any stock dividends on the Class B Common Stock or
any stock splits, reclassifications or combinations of the Class B Common
Stock).
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(d) Notice of each Special Record Date shall be mailed, in the manner
provided in paragraph 4(c) of this Section, to the holders of record of the
Class B Preferred Stock not less than 15 days prior thereto.
(e) So long as any shares of Class B Preferred Stock shall be
outstanding, the Corporation shall not declare or pay on any Junior Stock any
dividend whatsoever, whether in cash, property or otherwise, nor shall the
Corporation make any distribution on any Junior Stock, or set aside any assets
for any such purposes, nor shall any Junior Stock be purchased, redeemed or
otherwise acquired by the Corporation or any of its subsidiaries, nor shall any
monies be paid, set aside for payment or made available for a sinking fund for
the purchase or redemption of any Junior Stock, unless and until (i) all
dividends to which the holders of the Class B Preferred Stock and any Parity
Stock shall have been entitled for all current and all previous Dividend
Periods shall have been paid or declared and the consideration sufficient for
the payment thereof in full in the manner described in paragraph 2(b) or
paragraph 2(c) of this Section, as applicable, set apart so as to be available
for the payment thereof and for no other purpose (whether or not such payment
is then legally permissible) and (ii) the Corporation shall have made, in full,
or set apart the consideration sufficient for the payment thereof, and for no
other purpose, all redemption payments with respect to the Class B Preferred
Stock which it is then obligated to make (whether or not such payment is then
legally permissible); provided, however, that nothing contained in this
paragraph 2(e) shall prevent the payment of dividends solely in Junior Stock or
the repurchase, redemption or other acquisition of Junior Stock solely through
the issuance of Junior Stock (together with a cash adjustment for fractional
shares, if any).
(f) The Corporation shall not be required to issue any fractional
shares of Class B Common Stock to which any holder may become entitled pursuant
to paragraph 2(b) or paragraph 2(c) of this Section. The Board of Directors
may elect to settle any final fraction of a share of Class B Common Stock which
a holder of one or more shares of Class B Preferred Stock would otherwise be
entitled to receive pursuant to paragraph 2(b) or paragraph 2(c) of this
Section by having the Corporation pay to such holder, in lieu of issuing a
fractional share thereto, a cash adjustment in respect of such final fraction
in an amount equal to the product determined by multiplying such fraction times
the higher of (i) the Market Value of a full share of Class B Common Stock as
of that Record Date or Special Record Date, as the case may be, with respect to
which such distribution of shares of Class B Common Stock is being made or (ii)
$15.00 (which amount shall be appropriately adjusted to give effect to any
stock dividends on the Class B Common Stock or any stock splits,
reclassifications or combinations of the Class B Common Stock). Such election,
if made, shall be made as to all holders of Class
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B Preferred Stock who would otherwise be entitled to receive a fractional share
of Class B Common Stock. If the Board of Directors does not make the foregoing
election, then in determining the number of whole shares of Class B Common
Stock which a holder of Class B Preferred Stock would be entitled to receive
pursuant to paragraph 2(b) or paragraph 2(c) of this Section, any final
fraction of a share shall be rounded upward to the next higher integer.
3. Distributions Upon Liquidation, Dissolution or Winding Up.
Subject to the prior payment in full of the preferential amounts to which any
Senior Stock is entitled, in the event of any liquidation, dissolution or
winding up of the Corporation, whether voluntary or involuntary, the holders of
shares of the Class B Preferred Stock shall be entitled to receive from the
assets of the Corporation available for distribution to the shareholders an
amount in cash or property at its fair market value, as determined by the Board
of Directors in good faith, or a combination thereof, per share equal to the
Liquidation Price, before any payment or distribution shall be made to the
holders of any Junior Stock of the Corporation, which payment shall be made
pari passu to any such payment made to the holders, if any, of any Parity
Stock. The holders of the Class B Preferred Stock shall be entitled to no
other or further distribution of or participation in any remaining assets of
the Corporation after receiving the Liquidation Price per share. If, upon
distribution of the Corporation's assets in liquidation, dissolution or winding
up, the assets of the Corporation to be distributed among the holders of the
Class B Preferred Stock and to all holders of any Parity Stock shall be
insufficient to permit payment in full to such holders of the preferential
amounts to which they are entitled, then the entire assets of the Corporation
to be distributed to holders of the Class B Preferred Stock and such Parity
Stock shall be distributed pro rata to such holders based upon the aggregate of
the full preferential amounts to which the shares of Class B Preferred Stock
and such Parity Stock would otherwise respectively be entitled. Neither the
consolidation or merger of the Corporation with or into any other corporation
or corporations nor the sale, transfer, or lease of all or substantially all
the assets of the Corporation shall itself be deemed to be a liquidation,
dissolution or winding up of the Corporation within the meaning of this
paragraph 3. Notice of the liquidation, dissolution or winding up of the
Corporation shall be mailed, in the manner provided in paragraph 4(c) of this
Section, to the holders of the Class B Preferred Stock not less than 20 days
prior to the date on which such liquidation, dissolution or winding up is
expected to take place or become effective.
4. Redemption.
(a) Subject to the rights of any Senior Stock and the
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provisions of paragraph 4(g) of this Section, the shares of Class B Preferred
Stock may be redeemed, at the option of the Corporation by action of the Board
of Directors, in whole or from time to time in part, at any time after the
second Dividend Payment Date, at the Redemption Price per share. If less than
all outstanding shares of Class B Preferred Stock are to be redeemed, the
shares of Class B Preferred Stock to be redeemed shall be chosen by lot or pro
rata in such manner as the Board of Directors may determine.
(b) Subject to the rights of any Senior Stock and the provisions of
paragraph 4(g) of this Section, the Corporation shall redeem, out of funds
legally available therefor, on the fourteenth Dividend Payment Date, all of the
shares of the Class B Preferred Stock remaining outstanding at the Redemption
Price per share; provided, however, that such redemption shall be made on the
twelfth Dividend Payment Date if all of the Corporation's 14% Senior
Subordinated Debentures outstanding on the Issue Date have been repurchased or
redeemed prior to the twelfth Dividend Payment Date. If the funds of the
Corporation legally available for redemption of shares of the Class B Preferred
Stock are insufficient to redeem the total number of such shares remaining
outstanding, those funds which are legally available will be used to redeem the
maximum possible number of shares of Class B Preferred Stock ratably among the
holders thereof. At any time thereafter when additional funds of the
Corporation are legally available for such purpose, such funds will immediately
be used to redeem the balance of the shares of Class B Preferred Stock
outstanding.
(c) Notice of redemption shall be mailed, first class, postage
prepaid, not less than 15 days nor more than 60 days prior to the Redemption
Date, to the holders of record of the shares of Class B Preferred Stock to be
redeemed, at their respective addresses as the same appear upon the books of
the Corporation or supplied by them in writing to the Corporation for the
purpose of such notice; but no failure to mail such notice or any defect
therein or in the mailing thereof shall affect the validity of the proceedings
for the redemption of any shares of the Class B Preferred Stock. In addition
to any information required by law or by the applicable rules of any national
stock exchange on which the Class B Preferred Stock may be listed or admitted
to trading, such notice shall set forth the Redemption Price, the Redemption
Date, the number of shares to be redeemed and the place at which the shares
called for redemption will, upon presentation and surrender of the stock
certificates evidencing such shares, be redeemed, and shall state the name and
address of any Redemption Agent selected by the Corporation in accordance with
paragraph 4(d) of this Section. In case fewer than the total number of shares
of Class B Preferred Stock represented by any certificate are redeemed, a new
certificate representing the number of unredeemed shares will be issued to
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the holder thereof without cost to such holder.
(d) If notice of any redemption by the Corporation pursuant to this
paragraph 4 shall have been mailed as provided in paragraph 4(c) of this
Section, and if on or before the Redemption Date specified in such notice the
consideration necessary for such redemption shall have been set apart so as to
be available therefor and only therefor, then on and after the close of
business on the Redemption Date, the shares of Class B Preferred Stock called
for redemption, notwithstanding that any certificate therefor shall not have
been surrendered for cancellation, shall no longer be deemed outstanding, and
all rights with respect to such shares shall forthwith cease and terminate,
except the right of the holders thereof to receive upon surrender of their
certificates the consideration payable upon redemption thereof. If on or prior
to the Redemption Date (but no earlier than 60 days prior to such Redemption
Date) the Corporation shall deposit, in a trust fund, with any bank or trust
company organized under the laws of the United States of America or any state
thereof having capital, undivided profits and surplus aggregating at least
$50,000,000 (the "Redemption Agent"), the consideration sufficient to redeem on
such Redemption Date the shares of Class B Preferred Stock to be redeemed, with
irrevocable instructions and authority to the Redemption Agent, on behalf and
at the expense of the Corporation, to mail the notice of redemption as soon as
practicable after receipt of such irrevocable instructions (or to complete such
mailing previously commenced, if it has not already been completed) and to pay,
on and after the Redemption Date or prior thereto, the Redemption Price of the
shares of Class B Preferred Stock to be redeemed to their respective holders
upon the surrender of their share certificates, then, from and after the date
of such deposit (although prior to the Redemption Date) the shares of Class B
Preferred Stock to be redeemed shall be deemed to be redeemed and dividends on
those shares shall cease to accrue after the Redemption Date. The deposit
shall be deemed to constitute full payment for shares of Class B Preferred
Stock to be redeemed to their holders and from and after the date of such
deposit the shares shall be deemed to be no longer outstanding and the holders
thereof shall cease to be shareholders with respect to such shares and shall
have no rights with respect thereto, except the right to receive payment of the
consideration sufficient to pay the Redemption Price of the shares, calculated
through the Redemption Date, upon surrender of their certificates therefor.
(e) Any funds so deposited by the Corporation and unclaimed for one
year from the Redemption Date shall be paid to the Corporation, after which
repayment the holders of shares of Class B Preferred Stock so called for
redemption shall look to the Corporation for the payment thereof, without
interest, unless an applicable abandoned property law designates another
person.
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(f) All shares of Class B Preferred Stock redeemed, retired, purchased
or otherwise acquired by the Corporation shall be retired and shall not be
reissued. The Corporation will not redeem any shares of Class B Preferred
Stock, except as expressly authorized herein.
(g) If at any time the Corporation shall have failed to pay, or
declare and set apart the consideration sufficient to pay, all dividends
accrued up to and including the immediately preceding Dividend Payment Date on
the Class B Preferred Stock and any Parity Stock, and until all dividends
accrued up to and including the immediately preceding Dividend Payment Date on
the Class B Preferred Stock and any Parity Stock shall have been paid or
declared and set apart so as to be available for the payment in full therefor
and for no other purpose, the Corporation shall not redeem, pursuant to a
sinking fund or otherwise, any shares of Class B Preferred Stock, Parity Stock
or Junior Stock, unless all then outstanding shares of Class B Preferred Stock
and Parity Stock are redeemed, and shall not purchase or otherwise acquire any
shares of Class B Preferred Stock, Parity Stock or Junior Stock.
5. Voting Rights.
(a) The holders of Class B Preferred Stock shall have no right to vote
for any purpose, except as specifically required by the Georgia Business
Corporation Code and except as described below.
(b) Without the consent of the holders of at least 66 2/3% of the
number of shares of Class B Preferred Stock at the time outstanding, the
Corporation may not (i) effect any change in the rights, privileges or
preferences of the Class B Preferred Stock, (ii) create or designate any
additional class or series of Senior Stock or issue any additional shares of
the Series A Preferred Stock (except for such issuances as are necessary or
required in connection with the exercise of options, warrants or similar rights
outstanding on the Issue Date with respect to the Series A Preferred Stock), or
(iii) enter into any agreement which, in the absence of default under such
agreement, would by its terms prevent the Corporation from paying on any
Dividend Payment Date the full dividends to which holders of the Class B
Preferred Stock are then entitled or from otherwise fully performing its
obligations pursuant to this Section. Without the consent of the holders of at
least a majority of the number of shares of Class B Preferred Stock at the time
outstanding, the Corporation may not create any class of Parity Stock. Such
consents shall either be given in writing or by vote at a meeting called for
that purpose at which the holders of the Class B Preferred Stock shall vote as
a class.
(c) The Corporation shall promptly notify the holders of
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the Class B Preferred Stock, in the manner provided in paragraph 4(c) of this
Section, of the occurrence of an Event of Noncompliance. Upon the occurrence
and during the continuation of an Event of Noncompliance, the holders of shares
of the Class B Preferred Stock, voting separately as a class, shall have the
exclusive right to elect two directors to the Board of Directors. Directors so
elected shall thereupon become additional directors of the Corporation and the
authorized directors of the Corporation shall thereupon be automatically
increased by such number. The Corporation will not take away any action which
would impair its ability, in conformity with these Articles of Incorporation
and the By-Laws of the Corporation, to increase automatically the number of its
directors as provided herein. During such times that the holders of the Class
B Preferred Stock, voting as a class, shall be entitled to elect such
additional directors, the remaining directors shall be elected by the holders
of the other shares of capital stock of the Corporation entitled to vote for
the election of directors, without right in the holders of Class B Preferred
Stock to participate in the election of such remaining directors.
Such right of the holders of shares of the Class B Preferred stock, as
such holders, to elect such directors shall continue only until all then
existing Events of Noncompliance have been cured in full, at which time the
terms of office of the directors elected as such by the holders of shares of
the Class B Preferred Stock shall forthwith terminate and the number of
directors constituting the entire Board of Directors of the Corporation shall
be reduced correspondingly (subject always to the same provisions for the
vesting of such voting rights on the occurrence of any other or future Event of
Noncompliance). The fact that an Event of Noncompliance has been cured and
that no other Events of Noncompliance have occurred and are continuing shall be
evidence by a certificate executed by the chief executive officer and chief
financial officer of the Corporation and delivered to the Board of Directors.
At any time after such voting rights shall so have vested in the
holders of shares of the Class B Preferred Stock, the Secretary of the
Corporation may, and upon the written request of the holders of record of not
less than 5% of the Class B Preferred Stock, addressed to him at the principal
office of the Corporation, shall within 10 days after delivery of such request,
call a special meeting of the holders of shares of the Class B Preferred Stock
for the purpose of electing the directors to be elected by them, such meeting
to be held within 15 days after such call at the place and upon the notice
provided by the By-Laws of the Corporation for the holding of meetings of
shareholders; provided, however, that if the Secretary of the Corporation shall
fail to call any such meeting within 10 days after delivery of any such
request, such meeting may be called by any holder or holders of record of 5% or
more of the Class B
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Preferred Stock. Notwithstanding the foregoing, the Secretary of the
Corporation shall not be required, and the holders of Class B Preferred Stock
shall not be entitled, to call such a special meeting if the request for such
call is received less than 45 days prior to the date fixed for the next annual
meeting of shareholders, and if in such case such special meeting is not
called, the holders of Class B Preferred Stock shall be entitled to vote (as a
class) at such annual meeting to elect such directors. Any vacancy in the
office of a director elected by the holders of the Class B Preferred Stock
shall be filled by a vote of such holders as a separate class or by the
remaining director elected by such holders. Except as hereinbefore provided,
the directors elected by the holders of the Class B Preferred Stock shall serve
until the next annual meeting of the shareholders and until their successors
shall have been elected and qualified and may be otherwise removed only by the
holders of at least a majority of the then outstanding shares of Class B
Preferred Stock at the time of such removal.
At any meeting having as a purpose the election of directors by
holders of the Class B Preferred Stock, the presence, in person or by proxy, of
the holders of a majority of the shares of Class B Preferred Stock then
outstanding shall be required and be sufficient to constitute a quorum of such
class for the election of any director by such holders. At any such meeting or
adjournment thereof, (i) the absence of a quorum of such holders of the Class B
Preferred Stock shall not prevent the election of the directors to be elected
by the holders of shares other than the Class B Preferred Stock, and the
absence of a quorum of holders of shares other than the Class B Preferred Stock
shall not prevent the election of the directors to be elected by the holders of
the Class B Preferred Stock and (ii) in the absence of such quorum, either of
holders of the Class B Preferred Stock or of shares other than the Class B
Preferred Stock, or both, a majority of the holders, present in person or by
proxy, of the class or classes of stock which lack a quorum shall have power to
adjourn the meeting for the election of directors which they are entitled to
elect, from time to time, without notice other than announcement at the
meeting, until a quorum shall be present.
A person otherwise qualified for election as a director of the
Corporation pursuant to the By-laws of the Corporation shall not be so
qualified and shall not be so elected if his or her election to the Board of
Directors of the Corporation would result in a violation of the Communications
Act of 1934, as amended, or the rules or published policies of the Federal
Communications Commission ("FCC"), provided that the Corporation shall use its
reasonable best efforts to obtain, to the extent required and appropriate in
order to avoid the violation, such approvals and consents of the FCC as will
enable the election of an otherwise nominated person or persons to the Board of
Directors pursuant to the voting rights granted by this paragraph
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5(c) to not result in such a violation.
6. Preemptive Rights. The holders of the Class B Preferred Stock
will not have any preemptive right to subscribe for or purchase any shares of
stock or any other securities which may be issued by the Corporation.
7. Exclusion of Other Rights. Except as may otherwise be required by
law and for the equitable rights and remedies which may otherwise be available
to holders of Class B Preferred Stock, the shares of Class B Preferred Stock
shall not have any designations, preferences, limitations or relative rights,
other than those specifically set forth in these Articles of Incorporation.
8. Headings of Subdivisions. The headings of the various
subdivisions of this Section are for convenience of reference only and shall
not affect the interpretation of any of the provisions of this Section.
SECTION C
THE CLASS C CONVERTIBLE PREFERRED STOCK
The Class C Convertible Preferred Stock shall have the following
preferences, limitations and relative rights.
1. Certain Definitions.
Unless the context otherwise requires, the terms defined in this
paragraph 1 shall have, for all purposes of this Section C, the meanings herein
specified:
"Board of Directors" shall mean the Board of Directors of the
Corporation and, to the extent permitted by law, any committee of the Board of
Directors authorized to exercise the powers of the Board of Directors.
"Class C Preferred Stock" shall mean the twelve million, six hundred
thousand (12,600,000) authorized shares of the Class C Convertible Preferred
Stock, par value $.125 per share, of the Corporation.
"Class B Common Stock" shall mean the three hundred million
(300,000,000) authorized shares of the Class B Common Stock, par value $.0625
per share, of the Corporation, which term shall include, where appropriate, in
the case of a reclassification, recapitalization or other changes in such Class
B Common Stock, or in the case of a consolidation or merger of the Corporation
with or into another corporation affecting the Class B Common Stock, such
consideration to which a holder of Class B Common
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Stock would have been entitled upon the occurrence of such event.
"Common Stock" shall mean the Class B Common Stock, the seventy-five
million (75,000,000) authorized shares of the Class A Common Stock, par value
$.0625 per share, of the Corporation and all shares hereafter authorized of any
class of common stock of the Corporation.
"Common Stock Equivalent" shall mean the number of shares of Class B
Common Stock which a holder of a share of the Class C Preferred Stock would be
entitled to receive at any given time upon application of the Conversion Rate
then in effect.
"Conversion Rate" shall have the meaning set forth in paragraph 6(b)
of this Section.
"Distribution on Common Stock" shall have the meaning set forth in
paragraph 2 of this Section.
"Issue Date" shall mean the date on which shares of the Class C
Preferred Stock are first issued.
"Junior Stock" shall mean Common Stock and any other class or series
of stock of the Corporation authorized after the Issue Date not entitled to
receive any assets upon liquidation, dissolution or winding up of the affairs
of the Corporation until the Class C Preferred Stock and any Parity Stock shall
have received the entire amount to which such stock is entitled upon such
liquidation, dissolution or winding up.
"Liquidation Preference" shall have the meaning set forth in paragraph
3 of this Section.
"Parity Stock" shall mean any class or series of stock of the
Corporation authorized after the Issue Date entitled to receive assets upon
liquidation, dissolution or winding up of the affairs of the Corporation on a
parity with the Liquidation Preference of the Class C Preferred Stock.
"Preferred Stock" shall mean the authorized Class A Serial Preferred
Stock, Class B Cumulative Preferred Stock, Class C Preferred Stock and Class D
Serial Preferred Stock of the Corporation.
"Senior Stock" shall mean the Series A Preferred Stock of the
Corporation, the Class B Cumulative Preferred Stock of the Corporation, the
Class D Serial Preferred Stock of the Corporation and any class or series of
stock of the Corporation authorized after the Issue Date ranking senior to the
Class C Preferred Stock and any Parity Stock in respect of the right to
participate in any distribution upon liquidation, dissolution or winding up of
the affairs of the Corporation.
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"Series A Preferred Stock" shall mean the 500,000 shares of that
series of the Class A Serial Preferred Stock of the Corporation designated as
"Series A Cumulative Preferred Stock."
2. Dividends and other Distributions.
Subject to the prior preferences and other rights of any Senior Stock,
the holders of the Class C Preferred Stock shall be entitled to receive all
such dividends and other distributions in cash, securities (other than shares
of Class B Common Stock) or other property of or owned by the Corporation as
may be declared by the Board of Directors on the Class B Common Stock from time
to time out of assets or funds of the Corporation legally available therefor,
each such dividend and/or distribution to be made pro rata to the holders of
the outstanding Class C Preferred Stock and the outstanding Class B Common
Stock based on the number of shares of Class B Common Stock that would have
been outstanding on the record date for such dividend or distribution if the
holders of the Class C Preferred Stock had converted such shares immediately
prior to such record date. Without limiting the generality of the foregoing,
in case the Corporation shall issue to holders of shares of its outstanding
Class B Common Stock generally any rights, options or warrants entitling them
to subscribe for or purchase (i) shares of its Class B Common Stock, (ii) any
assets of the Corporation, (iii) any securities of the Corporation (other than
its Class B Common Stock) or of any corporation other than the Corporation or
(iv) any rights, options or warrants entitling them to subscribe for or to
purchase any of the foregoing securities, whether or not such rights, options
or warrants are immediately exercisable (hereinafter collectively called
"Distributions on Common Stock"), the Corporation shall issue to the holders of
outstanding shares of Class C Preferred Stock the Distribution on Common Stock
to which they would have been entitled if they had converted the shares of
Class C Preferred Stock held by them into Class B Common Stock immediately
prior to the record date for the purpose of determining shareholders entitled
to receive such Distribution on Common Stock.
3. Distributions Upon Liquidation, Dissolution or Winding Up.
Subject to the prior payment in full of the preferential amounts to
which any Senior Stock is entitled, in the event of any liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary,
the holders of shares of the Class C Preferred Stock shall be entitled to
receive from the assets of the Corporation available for distribution to the
shareholders an amount in cash or property at its fair market value, as
determined by the Board of Directors in good faith, or a combination thereof,
per share equal to $.125 (the "Liquidation Preference"), before any payment or
distribution shall be made to the holders of any Junior Stock of the
Corporation, which payment
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shall be made to the holders of any Junior Stock of the Corporation, which
payment shall be made pari passu to any such payment made to the holders, if
any, of any Parity Stock. After payment of all amounts due to holders of stock
of the Corporation having a liquidation preference senior to the Common Stock,
the remaining assets of the Corporation shall be distributed to the holders of
the outstanding Class C Preferred Stock and the outstanding Common Stock pro
rata based on the number of Common Stock Equivalents to which the holders of
the Class C Preferred Stock would then be entitled upon conversion of their
shares. If, upon distribution of the Corporation's assets in liquidation,
dissolution or winding up, the assets of the Corporation to be distributed
among the holders of the Class C Preferred Stock and to all holders of any
Parity Stock shall be insufficient to permit payment in full to such holders of
the preferential amounts to which they are entitled, then the entire assets of
the Corporation to be distributed to holders of the Class C Preferred Stock and
such Parity Stock shall be distributed pro rata to such holders based upon the
aggregate of the full preferential amounts to which the shares of Class C
Preferred Stock and such Parity Stock would otherwise respectively be entitled.
Neither the consolidation or merger of the Corporation with or into any other
corporation or corporations nor the sale, transfer, or lease of all or
substantially all the assets of the Corporation shall itself be deemed to be a
liquidation, dissolution or winding up of the Corporation within the meaning of
this paragraph 3.
4. Voting.
(a) Except as may be otherwise required by law or by the provisions of
this paragraph 4, the holders of the Class C Preferred Stock shall vote
together with the holders of the Common Stock as a single class on every matter
coming before any meeting of the shareholders or otherwise to be acted upon by
the shareholders, subject to any voting rights which may be granted to holders
of any other class or series of Preferred Stock. At every meeting of the
shareholders of the Corporation, every holder of Class C Preferred Stock shall
be entitled, for each such share standing in its name on the transfer books of
the Corporation, to a number of votes equal to the number of votes which could
be cast by such holder if it held the Common Stock Equivalent of such share of
Class C Preferred Stock on the record date for the vote.
(b) So long as any shares of the Class C Preferred Stock are
outstanding, and except as otherwise provided by paragraph 4(c) of this
Section, the Board of Directors of the Corporation shall consist of fifteen
members, except that such number is subject to automatic adjustment under those
circumstances and during those time periods that holders of any other class or
series of the Corporation's outstanding Preferred Stock have rights to elect
members of the Board of Directors, as set forth
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in these Articles of Incorporation or, in the case of any series of the Class A
Serial Preferred Stock or the Class D Serial Preferred Stock of the
Corporation, in the resolution of the Board of Directors establishing and
designating such series and fixing and determining the relative rights and
preferences thereof. Holders of the Common Stock shall be entitled to vote as
a separate class for the election of eight (8) of such fifteen (15) directors
of the Corporation, and holders of the Class C Preferred Stock, as such
holders, shall be entitled to vote as a separate class for the election of
seven (7) of such fifteen (15) directors of the Corporation.
(c) At such time that the number of outstanding shares of Class C
Preferred Stock is less than 4 million shares (as adjusted from time to time to
give effect to stock splits or stock combinations, if any, with respect to the
Class C Preferred Stock occurring after the Issue Date), the rights of the
holders of Class C Preferred Stock, as such holders, to vote as a separate
class for the election of seven (7) directors shall automatically cease. In
such event, and subject to the above-described rights of holders of any other
class or series of the Corporation's outstanding Preferred Stock to elect
directors, the entire Board of Directors shall thereafter be elected by holders
of the Common Stock and Class C Preferred Stock voting as a single class and
shall consist of such number of directors as shall be determined in accordance
with the provisions of the By-laws of the Corporation.
(d) Holders of the Class C Preferred Stock shall have the voting
rights described above with respect to the election of directors commencing
with the first annual meeting of shareholders of the Corporation occurring
after the Issue Date. For purposes of that meeting, the Class C directors will
be nominated by the members of the then existing Board of Directors unless
Class C directors have previously been appointed to the Board pursuant to the
provisions of paragraph 4(e) of this Section. If Class C directors have not
been so appointed, then for purposes of such meeting, and in any event for
purposes of all subsequent annual meetings during which holders of the Class C
Preferred Stock have the special voting rights provided by paragraph 4(b) of
this Section, the Class C directors nominated by the Board of Directors will be
so nominated by a majority vote of the then existing Class C directors, and the
remaining directors nominated by the Board of Directors will be so nominated by
a majority of the then existing Common Stock directors.
At any meeting having as a purpose the election of directors by
holders of the Class C Preferred Stock, the presence, in person or by proxy, of
the holders of a majority of the shares of Class C Preferred Stock then
outstanding shall be required and be sufficient to constitute a quorum of such
class for the election
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of any director by such holders. Class C directors shall be elected by the
vote of the holders of a majority of the outstanding shares of Class C
Preferred Stock or by written consent of the holders of Class C Preferred Stock
given in accordance with the provisions of paragraph 4(h) of this section. At
any such meeting or adjournment thereof, (i) the absence of a quorum of such
holders of Class C Preferred Stock shall not prevent the election of the
directors to be elected by the holders of shares other than the Class C
Preferred Stock, and the absence of a quorum of holders of shares other than
the Class C Preferred Stock shall not prevent the election of the directors to
be elected by the holders of the Class C Preferred Stock and (ii) in the
absence of such quorum, either of holders of the Class C Preferred Stock or of
shares other than the Class C Preferred Stock, or both, a majority of the
holders, present in person or by proxy, of the class or classes of stock which
lack a quorum shall have power to adjourn the meeting for the election of
directors which they are entitled to elect, from time to time, without notice
other than announcement at the meeting, until a quorum shall be present.
A person otherwise qualified for election as a director of the
Corporation pursuant to the By-laws of the Corporation shall not be so
qualified and shall not be so elected if his or her election to the Board of
Directors of the Corporation would result in a violation of the Communications
Act of 1934, as amended, or the rules or published policies of the Federal
Communications Commission ("FCC"), provided that the Corporation shall use its
reasonable best efforts to obtain, to the extent required and appropriate in
order to avoid the violation, such approvals and consents of the FCC as will
enable the election of an otherwise nominated person or persons to the Board of
Directors pursuant to the voting rights granted by paragraph 4(b) of this
Section to not result in such a violation.
(e) In the event of any vacancy or vacancies of the Board of Directors
occurring prior to the first annual meeting of shareholders following the
issuance of the Class C Preferred Stock, directors appointed to fill the first
seven of such vacancies shall be designated as Class C directors. Any vacancy
in the office of a Class C director occurring thereafter during the
effectiveness of the provisions of paragraph 4(b) of this Section may be filled
by the remaining Class C directors, unless such vacancy occurred by reason of
the removal (with or without cause) of a Class C director, in which event such
vacancy shall be filled by the affirmative vote of the holders of a majority of
the outstanding Class C Preferred Stock, such vote to be taken at the same
meeting at which the removal of the Class C director was voted upon, or by
written consent of the holders of the Class C Preferred Stock given in
accordance with the provisions of paragraph 4(h) of this Section. Any or all
of the Class C directors may be removed, with or without cause, by the vote of
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the holders of a majority of the outstanding shares of Class C Preferred Stock
or by written consent of the holders of Class C Preferred Stock given in
accordance with the provisions of paragraph 4(h) of this Section and not
otherwise. Any director elected to fill a vacancy shall serve the same
remaining term as that of his or her predecessor and until his or her successor
has been chosen and has qualified.
(f) Without the affirmative vote of the holders of at least 66 2/3% of
the number of shares of the Class C Preferred Stock at the time outstanding or
the written consent of the holders of the Class C Preferred Stock given in
accordance with the provisions of paragraph 4(h) of this Section, the
Corporation may not effect any change in the rights, privileges or preferences
of the Class C Preferred Stock. Such consents shall either be given in writing
or by vote at a meeting called for that purpose at which the holders of the
Class C Preferred Stock shall vote as a class.
(g) So long as holders of the Class C Preferred Stock have the voting
rights described in paragraph 4(b) of this Section, none of the following may
be effected by the Corporation without the affirmative vote of the holders of a
majority of the outstanding shares of Class C Preferred Stock or the written
consent of the holders of the Class C Preferred Stock given in accordance with
the provisions of paragraph 4(h) of this Section:
(i) the disposition, directly or indirectly, by the Corporation
(or any subsidiary thereof) by sale, merger, new issuances to a person
other than the Corporation or a wholly-owned subsidiary thereof, or
otherwise of shares of the capital stock of any Significant Subsidiary
of the Corporation (as defined by Rule 1-02(v) of Regulation S-X
promulgated by the Securities and Exchange Commission and as in effect
on the Issue Date, but excluding Atlanta National League Baseball
Club, Inc. and Atlanta Hawks, Inc.) ("Significant Subsidiary") or, in
a transaction or series of transactions not in the ordinary course of
the business of the Corporation or any Significant Subsidiary of the
Corporation, of a substantial portion of the assets of the Corporation
or any such Significant Subsidiary, except for pledges, grants of
security interests, security deeds, mortgages or similar encumbrances
securing bona fide indebtedness;
(ii) the merger or consolidation of the Corporation or any
of its Significant Subsidiaries with or into any person (except a
merger between wholly-owned subsidiaries of the Corporation or a
merger between a wholly-owned subsidiary and the Corporation where the
Corporation is the surviving entity of such merger and where there is
no change in any class or series of outstanding capital stock of the
Corporation) or the dissolution or liquidation of the
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Corporation or any Significant Subsidiary (except dissolutions or
liquidations into the Corporation or any wholly-owned subsidiary or
subsidiaries of the Corporation);
(iii) the issuance by the Corporation of shares of any
class of capital stock which, together with all shares of any class of
capital stock (other than Common Stock issued pursuant to any options,
warrants or convertible securities (including the Class C Preferred
Stock), or stock option or stock purchase plans or agreements, in each
case in existence or outstanding on the Issue Date) issued after the
Issue Date, would have the effect of increasing the aggregate voting
power of all classes of capital stock of the Corporation entitled to
vote generally in the election of directors of the Corporation by more
than 18% over the aggregate voting power of all classes of capital
stock (including without limitation the Class C Preferred Stock)
outstanding on the Issue Date; and
(iv) the approval of any amendments to the Articles of
Incorporation or By-laws of the Corporation which (x) modifies in any
way the voting rights of any class of the Common Stock or modifies in
any manner the terms of any class of Common Stock into which the Class
C Preferred Stock is then convertible or (y) has the effect of
limiting the voting or other rights of any class of the Common Stock
or the Class C Preferred Stock, including, without limitation, any
such amendment that would require a greater than majority vote of any
class of capital stock to approve any matter or would require a vote
of any class or series of capital stock separate from the vote of any
other class or series of capital stock to approve any matter on which
shareholders generally are required or entitled to vote; provided,
however, that this provision shall not be applicable to (A) any
amendment to the Articles of Incorporation for the purpose of
establishing or designating a class or series of preferred stock with
voting rights only with respect to the election of a certain number of
directors (to constitute, together with the directors which may be
elected by all similar series or classes of preferred stock (other
than the Class C Preferred Stock) less than half (counting all
directors which may be elected by the holders of such preferred stock)
the members of the Corporation's Board of Directors), following a
default in dividend payments thereon or financial covenants with
respect thereto and a class or series vote on designations of senior
or parity stock and on other matters (including without limitation any
merger involving the Corporation in which the Corporation is not the
surviving entity) which affect a change in the rights, privileges or
preferences of the holders of such preferred stock, or (B) voting
rights provided for by statute.
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(h) With respect to actions by the holders of the Class C Preferred
Stock upon those matters on which such holders are entitled to vote as a
separate class, such actions may be taken without a shareholders meeting by the
written consent of holders of the Class C Preferred Stock who would be entitled
to vote at a meeting those shares having voting power to cast not less than the
minimum number of votes that would be necessary to authorize or take such
action at a meeting at which all shares of Class C Preferred Stock entitled to
vote were present and voted. Notice shall be given in accordance with the
applicable provisions of the Georgia Business Corporation Code of the taking of
corporate action without a meeting by less than unanimous written consent to
those holders of Class C Preferred Stock on the record date whose shares were
not represented on the written consent.
5. Transfer.
(a) No person holding shares of Class C Preferred Stock of record
(hereinafter called a "Class C Holder") may transfer, and the Corporation shall
not register the transfer of, such shares of Class C Preferred Stock, whether
by sale, assignment, gift, bequest or otherwise, except to a Permitted
Transferee and any attempted transfer of shares not permitted hereunder shall
be deemed to constitute a request by the Class C Holder for conversion of such
shares and shall result in such shares being converted into Class B Common
Stock as provided by paragraph 5(d) of this Section.
(i) In the case of a Class C Holder acquiring record and
beneficial ownership of the shares of Class C Preferred Stock in
question upon initial issuance by the Corporation (an "Original
Holder"), a "Permitted Transferee" shall mean:
(w) any Affiliate (as defined in paragraph 5(b) of this
Section) of such Original Holder, or
(x) any other Original Holder (or any Affiliate of any
such other Original Holder).
(ii) In the case of a Class C Holder which is a Permitted
Transferee of an Original Holder, a "Permitted Transferee" shall mean:
(y) any Original Holder, or
(z) any Permitted Transferee of an Original Holder.
(b) For purposes of this paragraph 5, the term "Affiliate" shall mean
(i) any corporation that owns beneficially and of record at least a majority of
the outstanding securities representing the right, other than as affected by
events of default, to vote for the election of directors ("voting
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securities") of an Original Holder or (ii) any corporation at least a majority
of the voting securities of which are owned beneficially and of record by an
Original Holder, where in the case of both (i) and (ii), voting securities will
be deemed "owned" by a corporation if either owned directly or if owned
indirectly through one or more intermediary corporations at least a majority of
the voting securities of which are owned beneficially and of record by that
corporation or by an intermediary corporation in such a majority or more chain
of ownership.
(c) With respect to a Class C Holder which holds shares by virtue of
its status as an Affiliate, the subsequent loss of Affiliate status shall,
unless within 30 days thereafter all shares of Class C Preferred Stock held by
such Class C Holder are transferred to an Original Holder or a Permitted
Transferee of an Original Holder, be deemed to constitute a request by such
Class C Holder for conversion of its shares of Class C Preferred Stock, and all
shares of Class C Preferred Stock then held by such Class C Holder shall
thereupon be converted into shares of Class B Common Stock, and stock
certificates formerly representing such shares of Class C Preferred Stock shall
thereupon and thereafter be deemed to represent shares of Class B Common Stock
as provided by paragraph 6 of this Section.
(d) Any transfer of shares of Class C Preferred Stock not permitted
hereunder shall result in the conversion of the transferee's shares of Class C
Preferred Stock into shares of Class B Common Stock as provided by paragraph 6
of this Section, effective as of the date on which certificates representing
such shares are presented for transfer on the books of the Corporation or on
such earlier date that the Corporation receives notice of such attempted
transfer. The Corporation may, in connection with preparing a list of
stockholders entitled to vote at any meeting of stockholders, or as a condition
to the transfer or the registration of shares of Class C Preferred Stock on the
Corporation's books, require the furnishing of such affidavits or other proof
as it deems necessary to establish that any person is the beneficial owner of
shares of Class C Preferred Stock or is a Permitted Transferee.
(e) Shares of Class C Preferred Stock shall be registered in the names
of the beneficial owners thereof and not in "street" or "nominee" name. For
this purpose, a "beneficial owner" of any shares of Class C Preferred Stock
shall mean a person who, or an entity which, possesses the powers, either
singly or jointly, to direct the voting or disposition of such shares.
Certificates for shares of Class C Preferred Stock shall bear a legend
referencing the restrictions on transfer imposed by this paragraph 5.
6. Conversion.
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(a) Conversion Right. Unless previously redeemed as provided in
paragraph 7 hereof, the Class C Preferred Stock may be converted prior to
redemption thereof at such time, in such manner and upon such terms and
conditions as hereinafter provided in this paragraph 6 into fully paid and
non-assessable full shares of Class B Common Stock. In the event the
Corporation shall call for redemption the shares of Class C Preferred Stock
pursuant to paragraph 7 hereof, the conversion right provided by this paragraph
6 shall terminate at the close of business on the date fixed for redemption.
In case cash, securities or property other than Class B Common Stock shall be
payable, deliverable or issuable upon conversion as provided herein, then all
references to Class B Common Stock in this paragraph 6 shall be deemed to
apply, so far as appropriate and as nearly as may be, to such cash, property or
other securities.
(b) Conversion Rate. Subject to the provisions for adjustment
hereinafter set forth in this paragraph 6, the Class C Preferred Stock may be
converted into Class B Common Stock at the initial conversion rate of two fully
paid and non-assessable shares of Class B Common Stock for one share of the
Class C Preferred Stock. (This conversion rate as from time to time adjusted
cumulatively pursuant to the provisions of paragraph 6(d) of this Section is
hereinafter referred to as the "Conversion Rate.")
(c) Conversion Date. Unless previously redeemed as provided in
paragraph 7 hereof, the Class C Preferred Stock shall be convertible at any
time and from time to time at the option of the holder(s) thereof.
(d) Adjustments.
(i) Stock Dividends, Subdivisions, Combinations. In case the
Corporation shall (A) pay a dividend or make a distribution on its
outstanding shares of Class B Common Stock in shares of its Class B
Common Stock, (B) subdivide the then outstanding shares of its Class B
Common Stock into a greater number of shares of Class B Common Stock,
(C) combine the then outstanding shares of its Class B Common Stock
into a smaller number of shares of Class B Common Stock, or (D) issue
by reclassification of its shares of Class B Common Stock any shares
of capital stock of the Corporation (including any such
reclassification in connection with a consolidation or merger in which
the Corporation is the continuing corporation), then the Conversion
Rate in effect immediately prior to the opening of business on the
record date for such dividend or distribution or the effective date of
such subdivision, combination or reclassification shall be adjusted so
that the holder of each share of the Class C Preferred Stock
thereafter surrendered for conversion shall be entitled to
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<PAGE> 41
receive the number and kind of shares of capital stock of the
Corporation which it would have owned or been entitled to receive
immediately following such action had such shares of Class C Preferred
Stock been converted immediately prior to such time. An adjustment
made pursuant to this paragraph 6(d)(i) for a dividend or distribution
shall become effective immediately after the record date for the
dividend or distribution and an adjustment made pursuant to this
paragraph 6(d)(i) for subdivision, combination or reclassification
shall become effective immediately after the effective date of the
subdivision, combination or reclassification. Such adjustment shall
be made successively whenever any action listed above shall be taken.
In any case in which this paragraph 6(d)(i) shall require that an
adjustment shall become effective immediately after a record date for
an event, the Corporation may defer until the occurrence of such event
(x) issuing to the holder of any shares of Class C Preferred Stock
converted after such record date and before the occurrence of such
event the additional shares of Class B Common Stock issuable upon such
conversion by reason of the adjustment required by such event over and
above the shares of Class B Common Stock issuable upon such conversion
before giving effect to such adjustment and (y) paying to such holder
cash in lieu of any fractional interest to which such holder is
entitled pursuant to paragraph 6(i) of this Section; provided,
however, that the Corporation shall deliver to such holder a due bill
or other appropriate instrument evidencing such holder's right to
receive such additional shares of Class B Common Stock, and such cash,
upon the occurrence of the event requiring such adjustment.
(ii) Reclassification, Consolidation or Merger. In case
of any reclassification or change of outstanding Class B Common Stock
(other than those referred to in paragraph 6(d)(i) of this Section and
other than a change in par value), or in case of any consolidation of
the Corporation with any other corporation or any merger of the
Corporation into another corporation or of another corporation into
the Corporation (other than a consolidation or merger in which the
Corporation is the continuing corporation and which does not result in
any reclassification of, or change (other than a change in par value,
or as a result of a subdivision or combination to which paragraph
6(d)(i) hereof is applicable) in, the outstanding Class B Common
Stock), or in case of any sale or transfer to another corporation or
entity (other than by mortgage or pledge) of all or substantially all
of the properties and assets of the Corporation, the Corporation (or
its successor in such consolidation or merger) or the purchaser of
such properties and assets shall make appropriate provision so that
the holder of each share of Class C Preferred Stock then outstanding
shall have the
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right thereafter to convert such share into the kind and amount of
shares of stock and other securities and property receivable upon such
reclassification, change, consolidation, merger, sale or transfer by a
holder of the number of shares of Class B Common Stock into which such
Class C Preferred Stock might have been converted immediately prior to
such reclassification, change, consolidation, merger, sale or
transfer, and the holders of the Class C Preferred Stock shall have no
other conversion rights under these provisions; provided, that
effective provision shall be made, in the Articles or Certificate of
Incorporation of the resulting or surviving corporation or otherwise
or in any contracts of sale or transfer, so that the provisions set
forth herein for the protection of the conversion rights of Class C
Preferred Stock shall thereafter be made applicable, as nearly as
reasonably may be, to any such other shares of stock and other
securities and property deliverable upon conversion of the Class C
Preferred Stock remaining outstanding or other convertible preferred
stock or other securities received by the holders of Class C Preferred
Stock in place thereof; and provided, further, that any such resulting
or surviving corporation or purchaser shall expressly assume the
obligation to deliver, upon the exercise of the conversion privilege,
such shares, securities or property as the holders of the Class C
Preferred Stock remaining outstanding, or other convertible preferred
stock or other securities received by the holders in place thereof,
shall be entitled to receive pursuant to the provisions hereof, and to
make provisions for the protection of the conversion rights as above
provided.
(iii) Notice of Adjustment. Whenever the Conversion Rate shall
be adjusted as provided in this paragraph 6(d), the corporation shall
promptly (A) file with the transfer agent for the Class C Preferred
Stock a statement signed by the President or one of the Vice
Presidents of the Corporation and by its Treasurer or Assistant
Treasurer, disclosing the nature of such event, the Conversion Rate in
effect immediately thereafter and the kind and amount of stock or
other securities or property into which Class C Preferred Stock shall
be convertible after such event, and (B) cause a notice containing a
summary of the information set forth in said statement to be mailed to
the holders of record of Class C Preferred Stock. Where appropriate,
such notice may be given in advance and included as a part of a notice
required to be mailed under the provisions of paragraph 6(e) of this
Section.
(iv) De Minimus Adjustment. The Corporation may, but
shall not be required to, make any adjustment of theConversion Rate if
such adjustment would require an increase or decrease of less than 1%
in such Conversion Rate;
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provided, however, that any adjustments which by reason of this
paragraph 6(d)(iv) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment.
(e) Advance Notice of Certain Events. In case at any time:
(i) the Corporation shall take any action which would require an
adjustment in the Conversion Rate pursuant to paragraph 6(d)(i) of
this Section;
(ii) the Corporation shall authorize the granting to the
holders of its Class B Common Stock of any Distributions on Common
Stock or shall have declared any other dividend or distribution on its
Class B Common Stock and notice thereof shall be given to holders of
Class B Common Stock;
(iii) there shall be any capital reorganization or
reclassification of the Class B Common Stock (other than a change in
par value), or any consolidation or merger to which the Corporation is
a party and for which approval of any shareholders of the Corporation
is required, or any sale or transfer of all or substantially all of
the properties and assets of the Corporation, or a tender offer for at
least a majority of the Class B Common Stock which has been
recommended by the Board of Directors as being in the best interests
of the holders of the Common Stock; or
(iv) there shall be a voluntary or involuntary
dissolution, liquidation or winding up of the Corporation;
then, in any such event, the Corporation shall give written notice, in the
manner provided in paragraph 7(b) of this Section, to the holders of the Class
C Preferred Stock at their respective addresses as the same appear upon the
books of the Corporation, at least twenty days (or ten days in the case of a
recommended tender offer as specified in clause (iii) above) prior to any
record date or other date set for definitive action if there shall be no record
date, of the date on which such action, dividend, distribution, reorganization,
reclassification, consolidation, merger, sale, transfer, tender offer,
dissolution, liquidation or winding up is expected to take place or become
effective, and the date as of which it is expected that holders of Class B
Common Stock of record shall be entitled to exchange their shares of Class B
Common Stock for securities or other property, if any, deliverable upon such
reorganization, reclassification, consolidation, merger, sale, transfer, tender
offer, dissolution, liquidation or winding up; provided, however, that any
notice required by clause (ii) above shall be given in the manner and at the
time that such notice is given to the holders of Class B Common Stock. Without
limiting the obligation
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<PAGE> 44
of the Corporation to provide notice of corporate actions hereunder, the
failure to give the notice required by this paragraph 6(e) or any defect
therein shall not affect the legality or validity of any such corporate action
of the Corporation or the vote upon such action.
(f) Method of Conversion. Before any holder of Class C Preferred
Stock shall be entitled to convert the same into Class B Common Stock, it shall
surrender the certificate or certificates for such Class C Preferred Stock at
the office of the Corporation or at the office of the transfer agent for the
Class C Preferred Stock, which certificate or certificates, if the Corporation
shall so request, shall be duly endorsed to the Corporation or in blank or
accompanied by proper instruments of transfer to the Corporation or in blank
(such endorsements or instruments of transfer to be in form satisfactory to the
Corporation), and shall give written notice to the Corporation at said office
that it elects to convert all or a part of the shares of Class C Preferred
Stock represented by said certificate or certificates in accordance with the
terms of this paragraph 6, and shall state in writing therein the name or names
in which it wishes the certificate or certificates for Common Stock to be
issued. Every such notice of election to convert shall constitute a contract
between the holder of such Class C Preferred Stock and the Corporation, whereby
the holder of such Class C Preferred Stock shall be deemed to subscribe for the
amount of Class B Common Stock which it shall be entitled to receive upon
conversion of the number of shares of Class C Preferred Stock to be converted,
and, in satisfaction of such subscription, to deposit the shares of Class C
Preferred Stock to be converted, and thereby the Corporation shall be deemed to
agree that the surrender of the shares of Class C Preferred Stock to be
converted shall constitute full payment of such subscription for Class B Common
Stock to be issued upon such conversion. The Corporation will as soon as
practicable after such deposit of a certificate or certificates for Class C
Preferred Stock, accompanied by the written notice and the statement above
prescribed, issue and deliver at the office of the Corporation or of said
transfer agent to the person for whose account such Class C Preferred Stock was
so surrendered, or to its nominee(s) or, subject to compliance with applicable
law, transferee(s), a certificate or certificates for the number of full shares
of Class B Common Stock to which it shall be entitled, together with cash in
lieu of any fraction of a share as hereinafter provided. If surrendered
certificates for Class C Preferred Stock are converted only in part, the
Corporation will issue and deliver to the holder, or to its nominee(s), without
charge therefor, a new certificate or certificates representing the aggregate
of the unconverted shares of Class C Preferred Stock. Such conversion shall be
deemed to have been made as of the date of such surrender of the Class C
Preferred Stock to be converted; and the person or persons entitled to receive
the
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Class B Common Stock issuable upon conversion of such Class C Preferred Stock
shall be treated for all purposes as the record holder or holders of such Class
B Common Stock on such date.
The issuance of certificates for shares of Class B Common Stock upon
conversion of shares of Class C Preferred Stock shall be made without charge
for any issue, stamp or other similar tax in respect of such issuance;
provided, however, if any such certificate is to be issued in a name other than
that of the holder of the share or shares of Class C Preferred Stock converted,
the person or persons requesting the issuance thereof shall pay to the
Corporation the amount of any tax which may be payable in respect of any
transfer involved in such issuance or shall establish to the satisfaction of
the Corporation that such tax has been paid.
The Corporation shall not be required to convert Class C Preferred
Stock, and no surrender of Class C Preferred Stock shall be effective for that
purpose, while the stock transfer books of the Corporation are closed for any
purpose; but the surrender of Class C Preferred Stock for conversion during any
period while such books are so closed shall become effective for conversion
immediately upon the reopening of such books, as if the conversion had been
made on the date such Class C Preferred Stock was surrendered.
(g) Shares Reserved for Conversion. The Corporation shall all times
reserve and keep available, solely for the purpose of issuance upon conversion
of the outstanding shares of Class C Preferred Stock, such number of shares of
Class B Common Stock as shall be issuable upon the conversion of all such
outstanding shares, provided that nothing contained herein shall be construed
to preclude the Corporation from satisfying the obligations in respect of the
conversion of the outstanding shares of Class C Preferred Stock by delivery of
shares of Class B Common Stock which are held in the treasury of the
Corporation. The Corporation shall take all such corporate and other actions
as from time to time may be necessary to insure that all shares of Class B
Common Stock issuable upon conversion of shares of Class C Preferred Stock at
the Conversion Rate in effect from time to time will, upon issue, be duly and
validly authorized and issued, fully paid and nonassessable and free of any
preemptive or similar rights. In order that the Corporation may issue shares
of Class B Common Stock upon conversion of the Class C Preferred Stock, the
Corporation will endeavor to comply with all applicable Federal and state
securities laws and will endeavor to list such shares to be issued upon
conversion on such securities exchange on which the Common Stock is listed.
(h) Status of Shares Converted. All shares of Class C Preferred Stock
received by the Corporation upon conversion
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<PAGE> 46
thereof into Class B Common Stock shall be retired and shall not be reissued.
(i) Fractions upon Conversion. The Corporation shall not be required
to issue fractional shares of Class B Common Stock or script upon conversion of
the Class C Preferred Stock. As to any final fraction of a share of Class B
Common Stock which a holder of one or more shares of Class C Preferred Stock
would otherwise be entitled to receive upon conversion of such shares in the
same transaction, the Corporation shall pay a cash adjustment in respect of
such final fraction in an amount equal to the same fraction of the market value
of a full share of the Class B Common Stock. For purpose of this paragraph
6(i), the market value of a share of the Class B Common Stock shall be the last
reported sale price regular way on the business day immediately preceding the
date of conversion, or, in case no such reported sale takes place on such day,
the average of the reported closing bid and asked prices regular way on such
day, in either case on the composite tape, or if the shares of Class B Common
Stock are not quoted on the composite tape, on the principal United States
securities exchange registered under the Securities Exchange Act of 1934, as
amended, on which the shares of Class B Common Stock are listed or admitted to
trading, or if the shares of Class B Common Stock are not listed or admitted to
trading on any such exchange, the closing sale price (or the average of the
quoted closing bid and asked prices if there were no reported sales) as
reported by the National Association of Securities Dealers Automated Quotation
System ("NASDAQ") or any comparable system, or if the Class B Common Stock is
not quoted on NASDAQ or any comparable system, the average of the closing bid
and asked prices as furnished by any member of the National Association of
Securities Dealers, Inc. selected from time to time by the Corporation for that
purpose or, in the absence of such quotations, such other method of determining
market value as the Board of Directors shall from time to time deem to be fair.
7. Redemption.
(a) The shares of Class C Preferred Stock outstanding upon the
termination in accordance with paragraph 4(c) of this Section of the special
class voting rights of the Class C Preferred Stock may be redeemed, at the
option of the Corporation by action of the Board of Directors, at any time and
from time to time thereafter and prior to the conversion thereof, at a
redemption price per share equal to and payable in the form of the Common Stock
Equivalent as of the redemption date for each share of Class C Preferred Stock
redeemed. The Corporation shall take all such corporate and other actions as
from time to time may be necessary to insure that all shares of Class B Common
Stock issuable upon redemption of shares of Class C Preferred Stock will, upon
issue, be duly and validly authorized and issued, fully paid and nonassessable
and free of any preemptive or
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similar rights. If less than all outstanding shares of Class C Preferred Stock
are to be redeemed, the shares of Class C Preferred Stock to be redeemed shall
be chosen by lot or pro rata in such manner as the Board of Directors may
determine.
(b) Notice of redemption shall be mailed, first class, postage
prepaid, not less than 15 days nor more than 30 days prior to the redemption
date, to the holders of record of the Class C Preferred Stock to be redeemed,
at their respective addresses as the same appear upon the books of the
Corporation or supplied by them in writing to the Corporation for the purpose
of such notice; but no failure to mail such notice or any defect therein or in
the mailing thereof shall affect the validity of the proceedings for the
redemption of any shares of the Class C Preferred Stock. In addition to any
information required by law, such notice shall set forth the redemption price,
the redemption date, the number of shares to be redeemed and the place at which
the shares called for redemption will, upon presentation and surrender of the
stock certificates evidencing such shares, be redeemed. In case fewer than the
total number of shares of Class C Preferred Stock represented by any
certificate are redeemed, a new certificate representing the number of
unredeemed shares will be issued to the holder thereof without cost to such
holder.
(c) If notice of any redemption by the Corporation pursuant to this
paragraph 7 shall have been mailed as provided in paragraph 7(b) of this
Section, and if on or before the redemption date specified in such notice the
consideration necessary for such redemption shall have been set apart so as to
be available therefor and only therefor, then on and after the close of
business on the redemption date, the shares of Class C Preferred Stock called
for redemption, notwithstanding that any certificate therefor shall not have
been surrendered for cancellation, shall no longer be deemed outstanding, and
all rights with respect to such shares shall forthwith cease and terminate,
except the right of the holder thereof to receive upon surrender of its
certificates the consideration payable upon redemption thereof, together with
any dividends or distributions which theretofore became payable with respect to
the shares of Class B Common Stock and/or other securities constituting a part
of such consideration (the issuance date of such Class B Common Stock or other
securities being the redemption date).
(d) All shares of Class C Preferred Stock redeemed, retired, purchased
or otherwise acquired by the Corporation shall be retired and shall not be
reissued. The Corporation will not redeem any shares of Class C Preferred
Stock, except as expressly authorized herein.
8. Preemptive Rights. The holders of the Class C Preferred Stock
will not have any preemptive right to subscribe for or purchase any shares of
stock or any other securities which
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may be issued by the Corporation.
9. Exclusion of Other Rights. Except as may otherwise be required by
law and for the equitable rights and remedies which may otherwise be available
to holders of Class C Preferred Stock, the shares of Class C Preferred Stock
shall not have any designations, preferences, limitations or relative rights,
other than those specifically set forth in these Articles of Incorporation.
10. Headings of Subdivisions. The headings of the various
subdivisions of this Section are for convenience of reference only and shall
not affect the interpretation of any of the provisions of this Section.
SECTION D
THE CLASS D SERIAL PREFERRED STOCK
The Class D Preferred Stock shall consist of 100,000,000 shares, par
value $.0625 per share (the "Class D Preferred Stock"). The shares of Class D
Preferred Stock may be divided and issued in one or more series from time to
time as determined by resolution of the Board of Directors, subject to any
shareholder vote as required by these Articles of Incorporation. Each series
shall be so designated as to distinguish the shares thereof from the shares of
all other series and classes. Any or all of the series of the Class D
Preferred Stock and the variations in the relative rights and preferences as
between different series may be fixed and determined by the Board of Directors,
subject to any shareholder vote as required by these Articles of Incorporation:
but all shares of the Class D Preferred Stock shall be identical except as to
the following relative rights and preferences, as to which there may be
variations between different series:
(1) The rate of dividend, the times of payment, and the date from
which dividends shall be accumulated, if dividends are to be
cumulative;
(2) Whether shares can be redeemed and, if so, the redemption
price and the terms and conditions of redemption;
(3) The amount payable upon shares in the event of voluntary and
involuntary liquidation;
(4) Purchase, retirement or sinking fund provisions, if any, for
the redemption or purchase of shares;
(5) The terms and conditions, if any, on which shares may be
converted; and
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(6) Whether or not shares have voting rights and the extent of
such voting rights, if any.
The Board of Directors is authorized to exercise its authority
with respect to fixing and designating various series of the Class D Preferred
Stock and determining the relative rights and preferences thereof to the full
extent permitted by applicable law, subject to any shareholder vote as required
by these Articles of Incorporation. The Board of Directors is authorized at
any time and from time to time to increase or decrease the number of shares
contained in any series of the Class D Preferred Stock, but not below the
number of shares thereof then issued.
Shares of any series of the Class D Preferred Stock designated by the
Board of Directors shall be on a parity with shares of the Class B Preferred
Stock as to payment of dividends and distributions of assets upon liquidation,
dissolution or winding up of the affairs of the Corporation, and the Class D
Preferred Stock and any series thereof shall be deemed to be included within
the definition of "Parity Stock" set forth in paragraph 1 of Section B of this
Article 5.
SECTION E
THE CLASS A COMMON STOCK AND THE
CLASS B COMMON STOCK
The Class A Common Stock shall consist of 75,000,000 shares, par value
$.0625 per share (the "Class A Common Stock"), and the Class B Common Stock
shall consist of 300,000,000 shares, par value $.0625 per share (the "Class B
Common Stock"). Except as otherwise provided in this Section E, each share of
Class A Common Stock and each share of Class B Common Stock (collectively, the
"Common Stock") shall be identical in all respects and shall have equal rights
and privileges.
1. Dividends. Subject to the rights of holders of stock of the
Corporation senior to the Common Stock with respect to the declaration and
payment of dividends, holders of Class A Common Stock and holders of Class B
Common Stock shall be entitled to receive such dividends and other
distributions in cash, stock or property of the Corporation as may be declared
thereon by the Board of Directors from time to time out of assets or funds of
the Corporation legally available therefor. Each share of Class A Common Stock
and each share of Class B Common Stock shall have the same rights as to the
dividends and distributions of the Corporation; provided, that in the case of
dividends or other distributions payable in Common Stock of the Corporation,
the declaration and payment thereof shall be made as follows:
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If a dividend is to be declared and paid in either Class A Common
Stock or Class B Common Stock (but not both), such dividend shall be
declared and paid equally on a per share basis to all holders of
Common Stock without regard to the class held; but if a dividend is
to be declared and paid in both Class A Common Stock and Class B
Common Stock, it may either be declared and paid equally on a per
share basis to all holders of Common Stock without regard to the class
held or it may be declared and paid such that holders of Class A
Common Stock are paid only Class A Common Stock and holders of Class B
Common Stock are paid only Class B Common Stock, provided that each
holder of either class of Common Stock, as such, is paid the same
number of shares on a per share basis as each holder of the other
class of Common Stock is paid as such holder.
In the case of any subdivision or combination of either class of Common Stock,
a proportionate subdivision or combination of the other class of Common Stock
shall be made.
2. Voting. At every meeting of the shareholders of the Corporation,
every holder of Class A Common Stock shall be entitled to two (2) votes in
person or by proxy for each share of Class A Common Stock standing in his name
on the transfer books of the Corporation, and every holder of Class B Common
Stock shall be entitled to one-fifth (1/5) vote in person or by proxy for each
share of Class B Common Stock standing in his name on the transfer books of the
Corporation.
Holders of Class A Common Stock and Class B Common Stock shall vote
together as a single class on every matter submitted to a vote of the
shareholders of the Corporation except as to those matters on which separate
class voting is required by applicable law or by these Articles of
Incorporation.
ARTICLE 6.
Management. Responsibility for the management of the business and the
conduct of the affairs of the Corporation shall be in the Board of Directors.
In furtherance and not in limitation of the powers conferred by the laws of the
State of Georgia, the Board of Directors is expressly authorized:
(a) To make, alter, amend, and repeal the by-laws, subject to the
power of the shareholders to alter or repeal the by-laws; and
(b) To adopt a Corporate Seal.
ARTICLE 7.
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Capital Surplus. The Corporation may, upon adoption of a resolution
by its Board of Directors, purchase its own shares to the extent of unreserved
and unrestricted capital surplus available therefor.
The Board of Directors of the Corporation may, from time to time, in
its discretion and without the prior approval by the shareholders of the
Corporation, distribute a portion of its assets to the shareholders out of
capital surplus of the Corporation.
ARTICLE 8.
Alien Ownership. At no time shall more than one-fourth (25%) of the
issued and outstanding shares of the capital stock of the Corporation, or of
any class thereof, be owned of record or voted by aliens or their
representatives or by a foreign government or representative thereof or by any
corporation organized under the laws of a foreign country (hereinafter
collectively referred to as "aliens"); provided, however, that at any time the
Corporation shall directly hold or shall apply to directly hold a broadcast
license granted by the Federal Communications Commission under the
Communications Act of 1934, as amended (the "Communications Act"), no more than
one-fifth (20%) of the issued and outstanding shares of the capital stock of
the Corporation, or of any class thereof, shall be owned of record or voted by
aliens, and the Corporation shall not be controlled directly or indirectly by
any other corporation of which any officer or more than one-fourth (25%) of the
directors are aliens, or of which more than one-fourth (25%) of the capital
stock is owned of record or voted by aliens. The By-laws of the Corporation may
contain provisions to implement the provisions of this paragraph and to avoid
the prohibitions of Section 310(b) of the Communications Act, as now in effect
or as it may hereafter from time to time be amended, including, without
limitation, provisions modifying, restricting or eliminating voting, dividend,
transfer, or other rights otherwise applicable to any shares of the
Corporation's capital stock.
ARTICLE 9.
A director of the Corporation shall not be personally liable to the
Corporation or its shareholders for monetary damages for breach of duty of care
or other duty as a director, except for liability (i) for any appropriation, in
violation of his duties, of any business opportunity of the Corporation; (ii)
for acts of omissions not in good faith or which involve intentional misconduct
or a knowing violation of law; (iii) for the types of liability set forth in
Section 14-2-154 of the Georgia Business Corporation Code or any successor
provision; or (iv) for any transaction from which the director derived an
improper personal benefit; provided, however, that if further elimination or
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limitation of the liability of directors is provided for or permitted by the
Georgia Business Corporation Code or other applicable law at any time, then the
liability of a director of the Corporation shall be eliminated or limited to
the fullest extent then so provided for or permitted by the Georgia Business
Corporation Code or other applicable law, and this Article 9 shall be deemed to
include and have incorporated herein provision for such further elimination or
limitation of liability of a director effective upon the enabling provision
therefor in the Georgia Business Corporation Code or other applicable law
becoming effective.
Any repeal or modification of the foregoing paragraph by the
shareholders of the Corporation shall not adversely affect any right or
protection of a director of the Corporation existing at the time of such repeal
or modification.
IN WITNESS WHEREOF, the Corporation has caused these Articles of
Restatement to be executed by its duly authorized officer this 11th day of
August, 1994.
Turner Broadcasting System, Inc.
By: /s/ Steven W. Korn
-----------------------------------
Vice President and General Counsel
ATTEST:
/s/ Louise S. Sams
- ----------------------
Louise S. Sams
Assistant Secretary
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EXHIBIT 10.38
TURNER BROADCASTING SYSTEM, INC.
1993 STOCK OPTION AND EQUITY-BASED AWARD PLAN
SECTION 1. PURPOSE
The purpose of the Plan is to promote the interests of the Company and its
shareholders by providing a means for selected Key Employees to acquire a
proprietary interest in the Company, thereby strengthening the Company's ability
to attract capable management personnel and providing an inducement for Key
Employees to remain in the employ of the Company or its Subsidiaries and to
perform at their maximum levels.
SECTION 2. DEFINITIONS
Unless the context clearly indicates otherwise, the following terms, when
used in the Plan, shall have the meanings set forth below:
(a) "Award" shall mean, individually and collectively, any Option,
Restricted Stock, Stock Appreciation Right, or Other Equity-Based Award
granted under the Plan.
(b) "Base Value" shall mean the Fair Market Value of a Stock
Appreciation Right on the date of its grant.
(c) "Board" shall mean the Board of Directors of the Company.
(d) "Code" shall mean the Internal Revenue Code of 1986, as it may be
amended from time to time.
(e) "Committee" shall mean the Stock Option and Compensation Committee
of the Board, appointed by the Board to administer the Plan and perform the
functions set forth in Section 3 of the Plan.
(f) "Common Stock" shall mean the Class B Common Stock, par value
$.0625 per share, of the Company, and any other stock or securities
resulting from the adjustment thereof or substitution therefor as described
in Section 15 of the plan.
(g) "Company" shall mean Turner Broadcasting System, Inc., a Georgia
corporation.
(h) "Fair Market Value" with respect to the Common Stock as of any
date shall mean (i) in the event the Common Stock is listed on a national
securities exchange, the closing price as reported for composite
transactions on that date, or, if no sales occurred on that date, then the
closing price on the next preceding date on which such sales of Common
Stock occurred; (ii) in the event the Common Stock is not listed on a
national securities exchange, the mean between the high bid and low asked
prices reported for shares of Common Stock traded over-the-counter on that
date, or, if no bid and asked prices were reported on that date, then the
mean between the high bid and low asked prices on the next preceding date
on which such prices were reported; or (iii) in the event there are no
over-the-counter prices for the Common Stock and it is not listed on a
national securities exchange, the fair market value as determined by the
Committee in its discretion.
(i) "Incentive Stock Option" shall mean an Option granted under the
Plan and designated as such by the Committee which meets the requirements
of Section 422 of the Code.
(j) "Key Employee" shall mean a regular employee, whether or not a
director, of the Company or a Subsidiary who is an officer or holds a
managerial or other key position, as determined by the Committee, and who,
in the judgment of the Committee, has demonstrated a capacity for making a
substantial contribution to the success of the business of the Company or a
Subsidiary.
(k) "Non-Tandem Stock Appreciation Right" shall mean a Stock
Appreciation Right that is granted without reference to an Option pursuant
to Section 8(c).
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(l) "Nonqualified Stock Option" shall mean an Option granted under the
Plan other than an Incentive Stock Option.
(m) "Option" shall mean, unless otherwise specifically limited under
any provision of the Plan, both an Incentive Stock Option and a
Nonqualified Stock Option granted pursuant to the Plan.
(n) "Option Price" shall mean the price at which Common Stock may be
purchased under an Option, as provided in Section 7(d) of the Plan.
(o) "Other Equity-Based Award" shall mean an Award under Section 10 of
the Plan that is valued in whole or in part by reference to, or is payable
in or otherwise based on, Common Stock.
(p) "Participant" shall mean a Key Employee granted an Award under the
Plan.
(q) "Parent" shall mean any corporation which qualifies as a parent
corporation of the Company within the meaning of Section 424(e) of the
Code.
(r) "Plan" shall mean the Turner Broadcasting System, Inc. 1993 Stock
Option and Equity-Based Award Plan.
(s) "Restricted Stock" shall mean an Award granted pursuant to Section
9.
(t) "Stock Appreciation Right" or "SAR" shall mean a right to any
appreciation in shares of Common Stock granted pursuant to Section 8.
(u) "Stock Option Agreement" or "Award Agreement" shall mean the
written agreement between a Participant and the Company evidencing the
grant of an Award and setting forth the terms and conditions of the grant.
(v) "Subsidiary" shall mean any corporation which qualifies as a
subsidiary corporation of the Company within the meaning of Section 424(f)
of the Code.
(w) "Tandem Stock Appreciation Right" shall mean a Stock Appreciation
Right granted in conjunction with an Option pursuant to Section 8(b).
(x) "Ten Percent Shareholder" shall mean a Participant who, at the
time an Incentive Stock Option is to be granted to him, owns stock
possessing more than ten percent (10%) of the total combined voting power
of all classes of stock of the Company or of its Parent (if any) or
Subsidiaries (as such ownership is defined in Section 424(d) of the Code).
SECTION 3. ADMINISTRATION OF THE PLAN
(a) Committee. The Plan shall be administered by the Committee, which
shall consist of two or more directors of the Company appointed by the
Board. The members of the Committee shall be "outside directors" within the
meaning of Section 162(m)(4)(c)(i) of the Code who shall not be eligible to
receive, and during the twelve months prior to serving on the Committee
shall not have received, Awards under the Plan or any other plan of the
Company or its Subsidiaries and shall be "disinterested persons" as defined
in Rule 16b-3(c)(2)(i) promulgated under the Securities Exchange Act of
1934, as amended (the "1934 Act"). The members of the Committee shall serve
at the pleasure of the Board, which shall have the power, at any time and
from time to time, to remove members from the Committee or to add members
thereto. Vacancies on the Committee shall be filled by action of the Board.
(b) Duties and Powers of the Committee. The Committee shall have the
full power and authority, in its sole and absolute discretion, but subject
to and not inconsistent with the express provisions of the Plan, to
administer the Plan and to exercise all the powers and authorities either
specifically granted to it under the Plan or necessary or advisable in the
administration of the Plan, including, without limitation, the authority
(i) to grant Awards which have received any requisite approval of the
Board, including the ability to determine which Options shall constitute
Incentive Stock Options and which Options shall constitute Nonqualified
Stock Options; (ii) to determine the employees to whom, and the time or
times at which, Awards shall be granted; (iii) to determine the number of
shares of Common Stock to be
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covered by each Option or other Award; (iv) to determine which Options (if
any) shall be accompanied by SAR's; (v) to determine the Option Price of
Common Stock subject to an Option; (vi) to determine the duration of the
exercise period of Awards and the time or times at which Awards may be
exercised and the extent of exercisability of Awards; (vii) to determine
the terms and provisions of Stock Option Agreements or Award Agreements
(which need not be identical) entered into in connection with Awards
granted under the Plan, including such terms and provisions as shall in the
judgment of the Committee be necessary or advisable in order to conform to
any applicable laws or regulations, as the same may be amended from time to
time; and (viii) to make all other determinations necessary or advisable
for the administration of the Plan. Subject to the express provisions of
the Plan, the Committee may correct any defect or supply any omission or
reconcile any inconsistency in the Plan or in any Stock Option Agreement or
Award Agreement in such manner and to the extent it shall determine
necessary or appropriate in order to carry out the purposes of the Plan.
The Committee shall have full power and authority to construe and
interpret the Plan and the respective Stock Option or Award Agreements and
to establish, amend or rescind such rules, regulations and procedures as
the Committee deems necessary or appropriate for the proper administration
of the Plan.
The determinations of the Committee on the foregoing matters and any
other matters arising in connection with the construction, administration,
interpretation and effect of the Plan and of the Committee's rules and
regulations thereunder shall (except as otherwise specifically provided in
the Plan) be final, binding and conclusive.
(c) Committee Meetings and Actions. The Committee may select one of
its members as Chairman. The Committee shall hold its meetings at such
times and places as it shall determine. All decisions and determinations of
the Committee shall be made by not less than the affirmative vote of a
majority of its members. Actions may be taken by the Committee at a duly
convened meeting (including a meeting by telephone conference call) or by
unanimous written consent.
SECTION 4. ELIGIBILITY
Awards under the Plan may be granted only to Key Employees of the Company
and its Subsidiaries. A director of the Company or of a Subsidiary who is not
also a Key Employee shall not be eligible to receive an Award under the Plan.
More than one Award may be granted to the same Participant and be outstanding
concurrently hereunder; provided, however, that the aggregate number of shares
of Common Stock for which Awards may be granted to any individual during any
calendar year may not, subject to adjustment as provided in Section 15 hereof,
exceed 2,500,000 shares of Common Stock reserved for the purposes of the Plan in
accordance with the provisions of Section 5 hereof.
SECTION 5. SHARES SUBJECT TO THE PLAN
(a) Aggregate Number of Shares Available. Subject to the adjustments
provided for in Section 15 of the Plan, the aggregate number of shares of Common
Stock for which Awards may be granted under the Plan shall be 5,000,000 shares.
Shares delivered by the Company pursuant to exercises of Awards may be
authorized but unissued shares of Common Stock, issued shares of Common Stock
which have been reacquired by the Company, or a combination thereof, as the
Board or the Committee shall from time to time determine.
(b) Reduction in Available Shares. The total number of shares available
under Section 5(a) shall be reduced from time to time in the manner specified:
(1) Incentive Stock Options and Nonqualified Stock Options -- The
grant of an Incentive Stock Option or a Nonqualified Stock Option shall
reduce the available shares by the number of shares subject to such Option.
(2) Stock Appreciation Rights -- The grant of Stock Appreciation
Rights shall reduce the available shares by the number of SAR's granted;
provided, however, that if SAR's are granted in connection with
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an Option and the exercise of such Option would cancel the SAR's and vice
versa, then the grant of the SAR's will only reduce the amount of shares
available by the excess, if any, of the number of SAR's granted over the
number of shares subject to the related Option.
(3) Restricted Stock -- The grant of Restricted Stock shall reduce the
available shares by the number of shares of Restricted Stock granted.
(4) Other Equity-Based Award -- The grant of any Other Equity-Based
Award shall reduce the available shares by the number of shares of the
Other Equity-Based Award granted.
(c) The total number of shares available under Section 5(a) shall be
increased from time to time in the manner specified:
(1) Incentive Stock Options and Nonqualified Stock Options -- The
lapse or cancellation of an Incentive Stock Option or a Nonqualified Stock
Option shall increase the available shares by the number of shares released
from such Option; provided, however, that in the event the cancellation of
an Option is due to the exercise of SAR's related to such Option, the
cancellation of such Option shall only increase the amount of shares
available by the excess, if any, of the number of shares released from such
Option over the number of SAR's exercised.
(2) Stock Appreciation Rights -- The lapse or cancellation of Stock
Appreciation Rights shall increase the available shares by the number of
SAR's which lapse or are cancelled; provided, however, that in the event
the cancellation of such SAR's is due to the exercise of an Option related
to such SAR's, the cancellation of such SAR's shall only increase the
available shares by the excess, if any, of the number of SAR's cancelled
over the number of shares delivered on the exercise of such Option.
(3) Restricted Stock -- The reversion of Restricted Stock to the
Company due to the breach or occurrence of a restriction or condition
resulting in forfeiture of such shares shall increase the available shares
by the number of shares of Restricted Stock reverted.
(4) Other Equity-Based Award -- The lapse or cancellation of any Other
Equity-Based Stock Award shall increase the available shares by the number
of shares of the Other Equity-Based Award so lapsed or cancelled.
SECTION 6. STOCK OPTION OR AWARD AGREEMENTS
Each Award shall be evidenced by a written Stock Option Agreement or Award
Agreement, as applicable, which shall be executed by the Company and the
Participant, containing such terms and conditions, not inconsistent with the
Plan, as shall be determined by the Committee. Stock Option Agreements
evidencing Incentive Stock Options shall contain such terms and conditions,
among others, as may be necessary in the opinion of the Committee to qualify
them as incentive stock options under the Code.
SECTION 7. OPTIONS
Each Option granted under the Plan shall comply with and be subject to the
following terms and conditions, as well as such other terms and conditions as
may be determined by the Committee and specified in the related Stock Option
Agreement:
(a) Number of Shares. The number of shares of Common Stock to which
an Option relates shall be determined by the Committee and specified in the
related Stock Option Agreement.
(b) Type of Option. Each Stock Option Agreement shall specify whether
the Option granted and evidenced thereby is an Incentive Stock Option or a
Nonqualified Stock Option.
(c) Date of Grant; Exercise Period. The date of grant of any Option
shall be the date on which the Committee shall award the Option (or the
earlier date, if applicable, that the Board specifically approves such
grant) if an immediate grant of such Option is contemplated, or the date
contemplated as the date of grant if the Committee imposes a condition on
the granting of such Option. Options granted under the Plan shall be for
such periods as may be determined by the Committee and set forth in the
related Stock
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Option Agreements, subject to the provisions of Section 11 hereof regarding
early termination upon the occurrence of certain events and subject to the
further provisions of this paragraph (c). The exercise period of an
Incentive Stock Option shall not exceed ten (10) years from the date of
grant of such Option; provided, however, that in the case of an Incentive
Stock Option granted to a Ten Percent Shareholder, such period shall not
exceed five (5) years from the date of grant.
Subject to the further provisions of this paragraph (c) regarding
Incentive Stock Options, the Committee shall have authority to prescribe in
any Stock Option Agreement that the Option evidenced thereby may be
exercised in full or in part as to any number of shares subject thereto at
any time or from time to time during the term of the Option, or in such
installments at such times during said term as the Committee may prescribe;
provided however, that in any event no Option granted under the Plan may be
exercisable in whole or as to any part thereof within six (6) months from
the date of grant. The aggregate Fair Market Value (determined at the time
an Incentive Stock Option is granted) of the Common Stock with respect to
which Incentive Stock Options are exercisable for the first time by a
Participant during any calendar year (under the Plan and all other plans of
the Company and its Parent (if any) and Subsidiaries) shall not exceed
$100,000.
Except as otherwise provided in Section 11 of the Plan, an Option may
not be exercised in whole or in part unless the Participant is, at the time
of such exercise, an employee of the Company or a Subsidiary.
(d) Option Price. The Option Price per share of the Common Stock
subject to an Option granted under the Plan shall be determined by the
Committee at the time the Option is granted, and shall be subject to the
following conditions:
(1) Nonqualified Stock Options -- The Option Price per share of
Common Stock subject to a Nonqualified Stock Option may be less than the
Fair Market Value per share of the Common Stock on the date of grant,
but shall not be less than the par value per share of Common Stock.
(2) Incentive Stock Options -- The Option Price per share of Common
Stock subject to an Incentive Stock Option shall not be less than the
greater of (a) 100% of the Fair Market Value per share of the Common
Stock on the date of grant, or (b) the par value per share of the Common
Stock; provided, however, that in the case of an Incentive Stock Option
granted to a Ten Percent Shareholder, the Option Price per share shall
not be less than the greater of (x) 110% of the Fair Market Value per
share of Common Stock on the date of grant, or (y) the par value per
share of the Common Stock.
(e) Method of Exercise. An Option may be exercised as to any or all
full shares of Common Stock as to which the Option has become exercisable
in accordance with the terms of the related Stock Option Agreement and the
provisions of the Plan by delivering to the Company written notice of such
exercise in the manner hereinafter specified in Section 20; provided,
however, that an Option may not be exercised at any one time as to less
than 1,000 shares (or such number of shares as to which the Option is then
exercisable if such number of shares is less than 1,000 shares). Such
written notice shall specify the number of shares of Common Stock with
respect to which the Option is being exercised and shall be accompanied by
payment in full of the Option Price for such shares. The date of exercise
of an Option or portion thereof shall be the date of receipt by the Company
of such written notice as determined in accordance with the provisions of
Section 20 of the Plan.
(f) Payment of Option Price. Payment for shares purchased upon
exercise of an Option may be made
(1) in cash (including a certified check, bank draft or money
order), or
(2) with the approval of the Committee, by delivering to the
Company shares of Common Stock already owned by the Participant and held
for a period of at least six (6) months ("Previously Held Shares")
having a Fair Market Value (determined as of the day preceding the date
on which
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the Option is exercised) equal to the cash Option Price of the shares
of Common Stock as to which the Option is being exercised, or
(3) with the approval of the Committee, by a combination of the
methods described in (1) and (2) above, or
(4) with the approval of the Committee, by any other method or in
any other form authorized by the Committee and reflected in the related
Stock Option Agreement or in any written notice relative thereto as may
be from time to time delivered by the Committee to the Participant.
SECTION 8. STOCK APPRECIATION RIGHTS
(a) Value of Stock Appreciation Rights. Stock Appreciation Rights are
rights, that upon exercise, entitle the Participant to receive the excess of (i)
Fair Market Value of Common Stock on the date of exercise over (ii) its Base
Value, multiplied by (iii) the number of SAR's exercised.
(b) Grant of Tandem Stock Appreciation Rights. Tandem Stock Appreciation
Rights may be granted in conjunction with all or a portion of any Option
("Reference Option"). In the case of a Nonqualified Stock Option, Tandem Stock
Appreciation Rights may be granted either at or after the time of the grant of
the Reference Option. In the case of an Incentive Stock Option, such rights may
be granted only at the time of the grant of such Reference Incentive Stock
Option.
(1) Terms and Conditions of Tandem Stock Appreciation Rights. Tandem
Stock Appreciation Rights shall be subject to such terms and conditions,
not inconsistent with the terms of the Plan, as shall be determined from
time to time by the Committee, including the following:
(A) Term. A Tandem Stock Appreciation Right or applicable portion
thereof granted with respect to a Reference Option shall terminate and
no longer be exercisable upon the termination or exercise of the
Reference Option, except that, unless otherwise determined by the
Committee, in its sole discretion, at the time of the grant, a Tandem
Stock Appreciation Right granted with respect to less than the full
number of shares covered by the Reference Option shall not be reduced
until and then only to the extent the exercise or termination of the
Reference Option causes the number of shares covered by the Tandem Stock
Appreciation Right to exceed the number of shares remaining available
and unexercised under the Reference Option.
(B) Exercisability. Tandem Stock Appreciation Rights shall be
exercisable only at such time or times and to the extent that the
Reference Option to which they relate shall be exercisable in accordance
with the provisions of Section 7; provided, however, that any Tandem
Stock Appreciation Rights granted subsequent to the grant of a Reference
Option shall not be exercisable during the first six (6) months of its
term, except that this special limitation shall not apply in the event
of death, or disability of the Participant prior to the expiration of
the six (6) month period.
(C) Method of Exercise. A Tandem Stock Appreciation Right may be
exercised by a Participant by surrendering the applicable portion of the
Reference Option. Reference Options which have been so surrendered, in
whole or in part, shall no longer be exercisable to the extent the
related Tandem Stock Appreciation Rights have been exercised.
(D) Payment. Upon the exercise of a Tandem Stock Appreciation
Right, a Participant shall be entitled to receive up to, but no more
than, an amount in cash and/or shares of Common Stock calculated in
accordance with the provisions of Section 8(a) above, with the Committee
having the sole right to determine the form of payment.
(E) Deemed Exercise of Reference Option. Upon the exercise of a
Tandem Stock Appreciation Right, the Reference Option or part thereof to
which such Tandem Stock Appreciation Right is related shall be deemed to
have been exercised for the purpose of the limitation set forth in
Section 5 on the number of shares of Common Stock to be issued under the
Plan.
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(c) Grant of Non-Tandem Stock Appreciation Rights. Non-Tandem Stock
Appreciation Rights may also be granted under the Plan without reference to any
Option.
(1) Terms and Conditions of Non-Tandem Stock Appreciation
Rights. Non-Tandem Stock Appreciation Rights shall be subject to such
terms and conditions, not inconsistent with the provisions of the Plan, as
shall be determined from time to time by the Committee, including the
following:
(A) Term. The term of each Non-Tandem Stock Appreciation Right
shall be fixed by the Committee, but shall not be greater than ten (10)
years after the date the Non-Tandem Stock Appreciation Right is granted.
(B) Exercisability. Non-Tandem Stock Appreciation Rights shall be
exercisable at such time or times and subject to such terms and
conditions as shall be determined by the Committee at grant; provided,
however, that any Non-Tandem Stock Appreciation Right shall not be
exercisable during the first six (6) months of its term, except that
this special limitation shall not apply in the event of the death or
disability of the Participant prior to expiration of the six (6) month
period. If the Committee provides, in its discretion, that any such
Non-Tandem Stock Appreciation Right is exercisable only in installments,
the Committee may waive such installment exercise provisions at any time
at or after grant in whole or in part, based on such factors, if any, as
the Committee shall determine in its sole discretion.
(C) Method of Exercise. Subject to whatever installment exercise
and waiting period provisions apply under subsection (B) above,
Non-Tandem Stock Appreciation Rights may be exercised in whole or in
part at any time during the option term, by giving written notice of
exercise to the Committee specifying the number of Non-Tandem Stock
Appreciation Rights to be exercised.
(D) Payment. Upon the exercise of a Non-Tandem Stock Appreciation
Right, a Participant shall be entitled to receive up to, but no more
than, an amount in cash and/or shares of Common Stock calculated in
accordance with the provisions of Section 8(a) above, with the Committee
having the sole right to determine the form of payment.
(d) Cash Settlements of Tandem and Non-Tandem Stock Appreciation
Rights. Notwithstanding any of the foregoing, a Participant who is required to
file reports under Section 16(a) of the Securities Exchange Act of 1934 with
respect to securities of the Company may receive cash in complete or partial
settlement of a Tandem or Non-Tandem Stock Appreciation Right only if any
election by such Participant to receive cash in full or partial settlement of
the Stock Appreciation Right, as well as any exercise by him of his Stock
Appreciation Right for such cash, is made (i) during the period beginning on the
third business day following the date of release for publication of the
quarterly or annual summary statements of sales and earnings of the Company and
ending on the twelfth business day following such date; or (ii) during any other
period in which an election or exercise may be made under the provisions of Rule
16b-3 promulgated pursuant to the Act.
SECTION 9. RESTRICTED STOCK
(a) Awards of Restricted Stock. Shares of Restricted Stock may be issued
either alone or in addition to other Awards granted under the Plan. The
Committee shall determine the eligible persons to whom, and the time or times at
which, grants of Restricted Stock will be made, the number of shares to be
awarded, the price (if any) to be paid by the recipient (subject to Section
9(b)(1) below), the time or times within which such Awards may be subject to
forfeiture, the vesting schedule and rights to acceleration thereof, and all
other terms and conditions of a Restricted Stock Award.
(b) Awards and Certificates. A Participant selected to receive a
Restricted Stock Award shall not have any rights with respect to such an Award,
unless and until such Participant has delivered a fully executed copy
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of the Agreement evidencing such Award to the Company and has otherwise complied
with the applicable terms and conditions of such Award. Further, such Award
shall be subject to the following conditions:
(1) Purchase Price. The purchase price for shares of Restricted Stock
may be less than their par value and may be zero; provided, however, if
authorized but previously unissued shares of Common Stock are issued under
the Plan, such shares shall be issued for a consideration which shall not
be less than par value.
(2) Acceptance. Awards of Restricted Stock must be accepted within a
period of sixty (60) days (or such shorter period as the Committee may
specify at the time of grant) after the Award date, by executing a
Restricted Stock Award Agreement and by paying whatever price (if any) the
Committee has designated thereunder.
(3) Legend. Each Participant receiving a Restricted Stock Award shall
be issued a stock certificate in respect of such shares. Such certificate
shall be registered in the name of the Participant and shall bear an
appropriate legend referring to the terms, conditions and restrictions
applicable to such Award.
(4) Custody. The Committee shall require that the stock certificates
evidencing such shares be held in custody by the Company until the
restrictions thereon shall have lapsed, and that, as a condition of any
Restricted Stock Award, the Participant shall have delivered a duly signed
stock power, endorsed in blank, relating to the Common Stock covered by
such Award.
(c) Restrictions and Conditions. The shares of Restricted Stock awarded
pursuant to the Plan shall be subject to the following restrictions and
conditions:
(1) Restriction Period. At the time of making a Restricted Stock
Award, the Committee shall, in its sole discretion, establish the
applicable restriction period, which, in any event, shall not be less than
six (6) months from the date of grant. During the restriction period, the
Participant shall not be permitted to transfer shares of Restricted Stock
awarded under the Plan. Within these limits, the Committee may, in its sole
discretion, provide for the lapse of such restrictions in installments and
may accelerate or waive such restrictions in whole, or in part, based on
service, performance and/or such other factors or criteria as the Committee
may determine in its sole discretion.
(2) Participant's Rights as a Shareholder. The Participant shall
have, with respect to the shares of Restricted Stock awarded hereunder, all
of the rights of a holder of shares of Common Stock of the Company
including the right to receive any dividends. The Committee, in its sole
discretion, may permit or require the payment of dividends to be deferred.
(3) Lapse of Restrictions. If and when the restriction period expires
without a forfeiture of the Restricted Stock, the certificates for such
shares shall be delivered to the Participant. All legends shall be removed
from said certificates at the time of delivery to the Participant.
SECTION 10. OTHER EQUITY-BASED AWARDS
(a) Other Equity-Based Awards. Other Equity-Based Awards of Common Stock
and other Awards that are valued in whole or in part by reference to, or are
payable in or otherwise based on, Common Stock may be granted either alone or in
tandem with Options, Stock Appreciation Rights, or Restricted Stock. The
Committee shall have authority to determine the persons to whom and the time or
times at which such Awards shall be made, the number of shares of Common Stock
to be awarded pursuant to such Awards and all other conditions of the Awards.
(b) Dividends. Unless otherwise determined by the Committee at the time of
the Award, subject to the provisions of the Award Agreement and the Plan, a
Participant holding an Other Equity-Based Award shall be entitled to receive,
currently or on a deferred basis, dividends or dividend equivalents with respect
to the number of shares of Common Stock covered by the Other Equity-Based Award.
8
<PAGE> 9
(c) Vesting. An Other Equity-Based Award shall vest and be forfeited to
the extent provided in the Award Agreement, as determined by the Committee in
its sole discretion.
(d) Price. An Other Equity-Based Award may be, but is not required to be,
issued for no cash consideration.
SECTION 11. DEATH, DISABILITY OR OTHER TERMINATION OF EMPLOYMENT
(a) Death. In the event a Participant dies (i) while in the employ of the
Company or a Subsidiary or (ii) within three (3) months of the termination of
such employment (other than termination for cause or voluntary termination
without the consent of the Company or the Subsidiary, as the case may be), his
Award may be exercised, solely to the extent that the Participant was entitled
to exercise the Award at the date of his death or, if earlier, the date of his
termination, by his beneficiary as designated in writing by the Participant
pursuant to Section 16 of the Plan, or, if no such designation has been made, by
the person or persons to whom the Participant's rights under the Award shall
pass by will or the laws of descent and distribution, at any time or from time
to time within one (1) year after the date of the Participant's death or prior
to the expiration of the period for which the Award was granted, whichever is
the shorter period.
(b) Disability. In the event a Participant's employment by the Company or
a Subsidiary is terminated because of the Participant's permanent disability,
the Participant may exercise his Award, solely to the extent that he was
entitled to do so at the date of termination of his employment, at any time or
from time to time within one (1) year after the date of such termination of
employment or prior to the expiration of the period for which the Award was
granted, whichever is the shorter period.
(c) Other Termination of Employment. In the event a Participant's
employment by the Company or a Subsidiary is terminated other than by death or
permanent disability as provided by paragraphs (a) and (b), respectively, of
this Section 11 and other than for cause or by the voluntary action of the
Participant without the consent of the Company or Subsidiary employing the
Participant, the Participant may exercise his Award, solely to the extent that
he was entitled to do so at the date of termination of his employment, at any
time or from time to time within ninety (90) days after the date of such
termination of employment or prior to the expiration of the period for which the
Award was granted, whichever is the shorter period. In the event the
Participant's employment by the Company or a Subsidiary is terminated for cause
or by the voluntary action of the Participant without the consent of the Company
or Subsidiary employing the Participant, his Award shall terminate at the date
of termination of his employment.
(d) Committee Discretion. Notwithstanding the provisions of paragraphs
(a), (b) or (c) of this Section 11, the Committee, in its sole and absolute
discretion, may, at the date an Award is granted or thereafter, establish
different terms and conditions pertaining to the effect on that Award of the
death, disability or other termination of employment of the Participant, to the
extent permitted by applicable federal and state law.
(e) Failure to Exercise. To the extent an Award or any portion thereof is
not exercised within the limited period provided in paragraphs (a), (b), (c) or
(d) of this Section 11, whichever is applicable, all rights pursuant to such
Award will cease and terminate at the expiration of such period.
(f) Matters Relating to Termination of Employment. The Committee in its
absolute discretion shall determine the effect of all matters and questions
relating to the termination of employment of a Participant, including, but not
limited to, questions as to whether a termination of employment resulted from
permanent disability or was voluntary or involuntary on the part of the
Participant and questions of whether particular leaves of absence constitute
terminations of employment.
SECTION 12. MODIFICATION, EXTENSION AND RENEWAL OF AWARDS
Subject to the terms and conditions and within the limitations of the Plan,
the Committee in its discretion may modify, extend, or renew outstanding Awards
granted under the Plan, or accept the surrender of outstanding Awards (to the
extent not theretofore exercised) and authorize the granting of new Awards
hereunder in substitution therefor. No modification (other than adjustments as
provided by Section 15 hereof)
9
<PAGE> 10
of an Award shall, without the consent of the Participant, alter or impair any
rights or obligations under any Award theretofore granted to such Participant.
SECTION 13. WITHHOLDING TAXES
The Company shall be entitled to require, as a condition to its delivery of
shares of Common Stock upon the exercise of an Award, that the Participant pay
to the Company an amount sufficient to satisfy all present or estimated future
federal, state and local withholding tax requirements related thereto.
Subject to the further provisions of this Section 13 and to the disapproval
of the Committee, a Participant may elect to satisfy applicable withholding tax
liabilities by (i) paying the amount of such tax liabilities to the Company in
cash or by check payable to the Company, (ii) having the Company withhold from
the shares of Common Stock otherwise issuable to the Participant upon his
exercise of an Award that number of shares of Common Stock having a Fair Market
Value on the day preceding the date of such exercise sufficient to satisfy the
amount of such tax liabilities, or (iii) delivering to the Company that number
of Previously Held Shares having a Fair Market Value on the day preceding the
date of such exercise sufficient to satisfy the amount of such tax liabilities.
Any such election will be irrevocable and must be made prior to the date the
Award exercise becomes taxable. Notwithstanding the above, if the Participant is
a director or an officer of the Company within the meaning of Section 16(b) of
the 1934 Act, such Participant shall only be entitled to have the Company reduce
the amount of Common Stock to be delivered to such Participant pursuant to
subclause (ii) above.
The Company intends that this Section 13 shall comply with the requirements
of Rule 16b-3 under the 1934 Act, as the same may be interpreted or amended from
time to time during the term of the Plan. Should any provision of this Section
13 not be necessary to comply with the requirements of the Rule or should any
additional provisions be necessary for this Section 13 to so comply, the
Committee may amend the Plan to add to or modify the provisions of the Plan
accordingly.
SECTION 14. INVESTMENT REPRESENTATION
Each Stock Option Agreement or Award Agreement shall provide that the
Committee may require the Participant (or any person exercising the
Participant's rights pursuant to Section 11(a) of the Plan) to furnish to the
Company, as a condition precedent to any exercise of the Award, a written
agreement in such form as the Committee shall prescribe in which the Participant
or such other person represents and agrees that any and all shares of Common
Stock to be acquired upon such exercise are being acquired for investment and
not with a view to the resale or distribution thereof and makes such further
representations as may in the judgment of the Committee be necessary or
appropriate to ensure compliance with applicable federal or state securities
laws. Certificates for shares of Common Stock to be delivered to a Participant
upon his exercise of an Award may, when issued, bear such legends or statements
referring to the foregoing representations and agreements as the Committee, in
its discretion, shall deem necessary or appropriate.
SECTION 15. ADJUSTMENT UPON CHANGES IN CAPITALIZATION
The total number and character of shares available for Awards under the
Plan, the number and character of shares subject to outstanding Awards and the
Award price shall be appropriately adjusted by the Committee in the event of any
change in the number or character of outstanding shares of Common Stock
resulting from a stock dividend, subdivision or combination of shares, or
reclassification. In the event of a merger or consolidation of the Company or a
tender offer for shares of Common Stock, the Committee may make such adjustments
with respect to Options under the Plan and take such other action as it deems
necessary or appropriate to reflect, or in anticipation of, such merger,
consolidation or tender offer, including without limitation the substitution of
new Awards, the adjustment of outstanding Awards, the acceleration of Awards, or
the removal of limitations or restrictions on outstanding Awards.
10
<PAGE> 11
SECTION 16. NONTRANSFERABILITY
No Award granted under the Plan shall be transferable by a Participant
otherwise than by will or by the laws of descent and distribution, and an Award
may be exercised, during the lifetime of the Participant, only by the
Participant. A Participant may during his lifetime designate in writing a
beneficiary to receive his Award in the event of the Participant's death prior
to exercise of the Award.
SECTION 17. NO RIGHT TO CONTINUED EMPLOYMENT
Nothing in the Plan or in any Award granted hereunder shall confer upon a
Participant any right to continue in the employ of the Company or a Subsidiary
nor interfere or affect in any way the right of the Company or a Subsidiary to
terminate a Participant's employment at any time for any reason.
SECTION 18. RIGHTS AS A SHAREHOLDER
Except as otherwise provided herein, a Participant shall have no rights as
a shareholder with respect to any shares of Common Stock subject to his Award
until the date of issuance to him of a stock certificate or certificates for
such shares. No adjustment shall be made for dividends (ordinary or
extraordinary, whether in cash, securities or other property) or distributions
or other rights for which the record date is prior to the date such stock
certificate is issued, except as provided in Section 15 hereof.
SECTION 19. COMPLIANCE WITH LAW AND OTHER CONDITIONS
The obligation of the Company to issue or deliver shares of Common Stock
upon the exercise of Awards shall be subject to all applicable laws,
regulations, rules and approvals of applicable governmental and regulatory
authorities. Notwithstanding any other provisions of the Plan, any Stock Option
Agreements or any other Award Agreement, the Company shall not be required to
issue or deliver any certificate or certificates for shares of Common Stock
purchased upon the exercise of an Award prior to the fulfillment of the
following conditions:
(a) The listing, or approval for listing upon notice of issuance, of
such shares on the American Stock Exchange, Inc. or such other securities
exchange on which the Common Stock is then listed;
(b) The registration or other qualification of such shares under any
state or federal securities law or regulation which the Committee shall, in
its absolute discretion upon the advice of counsel, deem necessary or
advisable; and
(c) The obtaining of any other consent, approval, permit or other
clearance from any state or federal governmental or regulatory agency which
the Committee shall, in its absolute discretion upon the advice of counsel,
determine to be necessary or advisable.
With respect to Awards granted to any Participant who is an officer of the
Company or is otherwise subject to Section 16 of the 1934 Act, the Committee
may, in its absolute discretion at the time of the granting of an Award or the
exercise thereof, make such provisions as may be necessary to assure compliance
with Rule 16b-3 under the 1934 Act.
SECTION 20. NOTICES
Whenever any notice is required or permitted to be given under the Plan or
any Stock Option or Award Agreement, such notice must be in writing and
personally delivered or sent by courier or by mail. Any such notice shall be
deemed effectively given or delivered upon personal delivery or twenty-four
hours after delivery to a courier service which guarantees overnight delivery or
five (5) days after deposit with the U.S. Post Office, by registered or
certified mail, return receipt requested, postage prepaid, addressed to the
person who is to receive such notice at the address which such person has
theretofore specified by written notice delivered in accordance herewith. The
Company or a Participant may change, at any time and from time to time, by
written notice to the other, the address which it or he had theretofore
specified for receiving notices. Until changed in accordance herewith, the
Company and each Participant shall specify as its or his address for
11
<PAGE> 12
receiving notices the address set forth in the Stock Option or Award Agreement
pertaining to the shares of Common Stock to which such notice relates.
SECTION 21. AMENDMENT, SUSPENSION OR TERMINATION OF THE PLAN
The Plan may be wholly or partially amended or otherwise modified,
suspended or terminated at any time or from time to time by the Board or by the
Committee with the approval of the Board; provided, however, that, without the
approval of the shareholders of the Company entitled to vote thereon, no
amendment may be made which would, absent such shareholder approval, disqualify
the Plan for coverage under Rule 16b-3, as promulgated by the Securities and
Exchange Commission under the 1934 Act, as that Rule may be amended from time to
time, including an amendment which would (i) materially increase the benefits
accruing to Participants under the Plan, (ii) materially increase the aggregate
number of shares as to which Awards may be granted under the Plan (except by
operation of Section 15 hereof); or (iii) materially modify the requirements as
to eligibility for participation in the Plan.
Further, no such amendment, suspension or termination, other than
adjustments for changes in capitalization as provided in Section 15 hereof,
shall adversely affect or impair any outstanding Award without the written
consent of the Participant affected thereby.
SECTION 22. EFFECTIVE DATE; DURATION
(a) Effective Date. The Plan shall become effective upon the date of its
adoption by the Board.
(b) Duration. Unless earlier terminated by the Board or the Committee
pursuant to the provisions of the Plan, the Plan shall terminate on the tenth
anniversary of its effective date as hereinbefore specified. No Awards shall be
granted under the Plan after such termination date.
SECTION 23. GOVERNING LAW
The plan and all rights hereunder shall be construed and interpreted in
accordance with the laws of the State of Georgia, to the extent not superseded
by the laws of the United States.
IN WITNESS WHEREOF, the Company has caused the Turner Broadcasting System,
Inc. 1993 Stock Option and Equity-Based Award Plan to be executed by its duly
authorized officers pursuant to resolutions of the Board of Directors this 15th
day of April, 1994, to be effective as of the date of adoption by the Board of
Directors.
TURNER BROADCASTING SYSTEM, INC.
By: /s/ STEVEN W. KORN
----------------------------------
Its: Vice President and General Counsel
ATTEST:
By: /s/ LOUISE S. SAMS
-------------------
Its: Assistant Secretary
12
<PAGE> 1
EXHIBIT 10.42
TURNER BROADCASTING SYSTEM, INC.
RESOLUTIONS TO BE ADOPTED BY STOCK OPTION AND
COMPENSATION COMMITTEE RELATIVE TO
1988 STOCK OPTION PLAN
WHEREAS, the Turner Broadcasting System, Inc. 1988 Stock Option Plan
(the "Stock Option Plan) does not currently permit a participant in the Stock
Option Plan during his or her lifetime to designate in writing a beneficiary to
receive the participant's options upon the death of the participant; and
WHEREAS, the Stock Option and Compensation Committee of the Board of
Directors (the "Committee") desires to provide such an alternative to
participants as a means of avoiding the delays and expense of probate and
permitting greater estate planning flexibility; and
NOW, THEREFORE, BE IT RESOLVED, That the following resolutions be and
hereby are adopted (capitalized terms not otherwise defined herein to have the
meanings ascribed thereto in the Stock Option Plan):
RESOLVED, That in order to permit participants in the Stock Option
Plan to designate in writing during their lifetime beneficiaries to receive the
participant's options in the event of a participant's death prior to exercise
of such options, the Stock Option Plan be and hereby is amended in the
following respects:
(a) Section 10(a) of the Stock Option Plan be and hereby is amended to
read in its entirety as follows (new material indicated in italics):
Death. In the event an Optionee dies (i) while in the employ of the
Company or a Subsidiary or (ii) within three (3) months of the
termination of such employment (other than termination for cause or
voluntary termination without the consent of the Company or the
Subsidiary, as the case may be), his Option may be exercised, solely
to the extent that the Optionee was entitled to exercise the Option at
the date of his death or, if earlier, the date of his termination, by
his beneficiary as designed in writing by the Optionee pursuant to
Section 15 of the Plan, or, if no such designation has been made, by
the person or persons to whom Optionee's rights under the Option shall
pass by will or the laws of descent and distribution, at any time or
from time to
<PAGE> 2
time within one (1) year after the date of Optionee's death or prior to
the expiration of the period for which the Option was granted,
whichever is the shorter period.
(b) Section 15 of the Stock Option Plan be and hereby is amended to
read in its entirety as follows (new material indicated in italics):
No Option granted under the Plan shall be transferable by an Optionee
otherwise than by will or by the laws of descent and distribution, and
an Option may be exercised, during the lifetime of the Optionee, only
by the Optionee. An Optionee may during his or her lifetime designate
in writing a beneficiary to receive his or her Option in the event of
Optionee's death prior to exercise of the Option.
RESOLVED FURTHER, That the form of Notice of Designation of
Beneficiary (the "Notice") attached hereto as Exhibit A be and hereby is
approved; and that the Plan Administrator of the Corporation be and hereby is
authorized to distribute a copy of such Notice to existing and future
participants in the Stock Option Plan, and to act in accordance with the
instructions set forth therein;
RESOLVED FURTHER, That the proper officers of the Corporation be, and
each of them hereby is, authorized and directed to take such further actions as
they deem necessary or desirable in order to effectuate the purposes and intent
of the foregoing resolutions.
- 2 -
<PAGE> 3
EXHIBIT A
TURNER BROADCASTING SYSTEM, INC.
1988 STOCK OPTION PLAN
NOTICE OF DESIGNATION OF BENEFICIARY
TO THE PLAN ADMINISTRATOR OF THE 1988 STOCK OPTION PLAN OF TURNER BROADCASTING
SYSTEM, INC.
Pursuant to Section 15 of the Turner Broadcasting System, Inc. 1988
Stock Option Plan (the "Plan"), you are hereby notified that in the event of my
death, the following person shall have the right to exercise the options
granted to me pursuant to the Plan. Any such exercise shall be in accordance
with and subject to the provisions of the Plan and the Stock Option Agreement
relative to the grant of said options.
Primary Beneficiary Relationship Address
- ------------------- ------------ -------
In the event said beneficiary does not survive me, the following
person shall have the above-described right to exercise such options.
Contingent Beneficiary Relationship Address
- ---------------------- ------------ -------
If no designated beneficiary survives, options issued to me pursuant
to the Plan shall be exercisable in accordance with the provisions of the Plan.
I hereby reserve the right to revoke or change this designation at any
time. All previous designations are hereby revoked.
--------------------------------------
Signature of Participant
Date:
------------- --------------------------------------
Print or Type Name of Participant
--------------------------------------
Address
--------------------------------------
Social Security Number
Accepted this day of , 19 .
------- ----------------- --
By:
----------------------------------
Plan Administrator
- 3 -
<PAGE> 1
EXHIBIT 10.43
EXHIBIT A
TURNER BROADCASTING SYSTEM, INC.
1988 STOCK OPTION PLAN
AMENDMENT NO. 2
WHEREAS, the Turner Broadcasting System, Inc. 1988 Stock Option Plan (as
heretofore amended, the "Plan") was approved by the Stock Option and
Compensation Committee (the "Committee") of the Board of Directors of Turner
Broadcasting System, Inc. (the "Corporation") and by the holders of a majority
of the outstanding shares of the stock of the Corporation entitled to vote
thereon at such time;
WHEREAS, the Plan does not currently limit the aggregate number of shares of
Common Stock of the Corporation for which Options may be granted to any
individual during any calendar year;
WHEREAS, the Plan does not currently provide the Committee the discretion to
establish different terms and conditions pertaining to the effect on an Option
granted under the Plan of the death, disability or other termination of
employment of the optionee thereof;
WHEREAS, the Committee in its administration of the Plan has determined that
it is in the best interest of the Corporation and the Optionees under the Plan
to amend the Plan as more fully described below, subject to the limitations set
forth in Section 20 of the Plan;
WHEREAS, the Plan shall be amended as follows:
1. Amendments. (a) Section 4 of the Plan is hereby amended by the insertion
of the following language at the end of the last sentence thereof:
"; provided, however, that the aggregate number of shares of Common Stock for
which Options may be granted to any individual during any calendar year may
not, subject to adjustment as provided in Section 14 hereof, exceed 1,000,000
shares of Common Stock reserved for the purposes of the Plan in accordance
with the provisions of Section 5 hereof"
(b) Subject to the approval of the shareholders of the Corporation, Section
10 of the Plan is hereby amended by the addition of a subsection (f) at the end
thereof as follows:
"(f) Committee Discretion. Notwithstanding the provisions of paragraphs (a),
(b) or (c) of this Section 10, the Committee, in its sole and absolute
discretion, may, at the date an Option is granted or thereafter, establish
different terms and conditions pertaining to the effect on that Option of the
death, disability or other termination of employment of the Optionee, to the
extent permitted by applicable federal and state law."
2. Effectiveness. The foregoing amendments to the Plan were approved on
April 15, 1994 by the Committee and were recommended for submission to the
shareholders of the Corporation for approval at the 1994 annual meeting of
shareholders. The amendment set forth in paragraph 1 (a) above became effective
upon approval thereof by the Committee. The amendment set forth in paragraph 1
(b) above shall become effective as of and only upon the approval by the
holders of a majority of the outstanding shares of the stock of the Corporation
represented at such annual meeting, provided that a quorum of shareholders is
present in person or by proxy.
3. Defined Terms. All capitalized terms used herein without definition shall
have the meanings assigned thereto in the Plan.
4. No Other Amendment. This Amendment No. 2 is limited precisely as written
and shall not constitute a modification of any other provision of the Plan.
Except as specifically modified or amended by this Amendment No. 2, the Plan
shall remain in full force and effect in accordance with its terms.
A - 1
<PAGE> 1
EXHIBIT 10.44
TURNER BROADCASTING SYSTEM, INC.
THE LONG-TERM INCENTIVE PLAN (LTIP)
Effective January 1992
<PAGE> 2
THE LONG-TERM INCENTIVE PLAN (LTIP)
===============================================================================
PAGE
2 AN INTRODUCTION
A basic overview of the purpose and administrative
procedures of LTIP.
3 PLAN PARTICIPATION
An outline of the selection process for participation in the
Plan.
4 AWARD OPPORTUNITIES AND PERFORMANCE MEASURES
A broad overview of the plan award opportunities and
performance measures.
6 AWARD PAYMENTS
A description of the award payment process.
7 TERMINATION AND TRANSFER
A basic description of the consequences of a participant's
termination or transfer during a plan cycle.
<PAGE> 3
AN INTRODUCTION
===============================================================================
The Long-Term Incentive Plan (LTIP) has been designed to:
- - enable TBS to attract and retain key executives by providing a
competitive and diversified total compensation package; and
- - help focus executives' attention on the long-term performance of the
Company as reflected by growth in operating income over a three-year
period.
The Compensation Committee of the Board of Directors has the ultimate
responsibility for management of the Plan. However, the Plan Administrator
(i.e., the Vice President - Administration) will conduct the daily business of
the LTIP and will report directly to the Compensation Committee concerning the
Plan.
This plan will enable TBS to reward executives for superior long-term
performance and will assist the Company in retaining executives of high calibre
such as those currently running TBS.
- 2 -
<PAGE> 4
PLAN PARTICIPATION
===============================================================================
Participation criteria for the LTIP are completely discretionary. The
selection process and guidelines are established solely by the Compensation
Committee. Participation in the LTIP is determined for each three-year plan
cycle. Before each cycle begins, the Plan Administrator and the Committee will
discuss the participants for the upcoming cycle.
Selection as a participant in one cycle in no way guarantees participation in
future plan cycles.
In general, participation in the LTIP is limited to officers and other key
executives who can significantly and directly affect the Company's long-term
perfomance. However, the Compensation Committee, in its discretion, may
approve any TBS employee as a plan participant.
- 3 -
<PAGE> 5
AWARD OPPORTUNITIES AND PERFORMANCE MEASURES
================================================================================
AWARD OPPORTUNITIES
The plan's award opportunities are based on a competitive market analysis of
long-term incentive award opportunities in other entertainment companies. On
the basis of this analysis and TBS's compensation philosophy, a target cash
award is established for eligible employees.
To recognize a range of performance around "target," participants may earn up
to 150% of their target award opportunities based on actual performance
compared to the specified Plan goals. The threshold level of performance is
designed to be the minimal level of performance for which any cash LTIP award
will be earned. At threshold, 75% of the target award opportunity will be
earned. Performance below threshold will not generate any award payment. The
maximum level of performance is the highest, reasonable level of performance
that may be achieved. Maximum performance will result in an award of 150% of
the target opportunity.
THE PERFORMANCE MEASURES
The Plan's performance measures have been established as compounded growth in
operating income and revenues during the performance cycle over benchmark
levels set at the beginning of each cycle. Growth in operating income will
provide 75% of the award opportunity; the remaining 25% will come from growth
in revenues.
<TABLE>
<CAPTION>
Operating Income Revenues
Compounded Compounded
Annual Growth % of Target Annual Growth % of Target
Over Benchmark Award Earned Over Benchmark Award Earned
<S> <C> <C> <C>
<3% 0% <8% 0%
3% 75% 8% 75%
4% 100% 10% 100%
6% 150% 12% 150%
and higher and higher
</TABLE>
- 4 -
<PAGE> 6
THE PERFORMANCE MEASURES (continued)
The benchmark levels of operating income and revenues will be approved by the
Compensation Committee for each plan cycle. The Plan Administrator will
calculate annual compounded growth for each performance measure, apply the
appropriate weightings, and notify plan participants of these results.
PLAN CYCLE LENGTH AND FREQUENCY
Each plan cycle in the LTIP will consist of three consecutive calendar years.
The first plan cycle will run from January 1, 1992 through December 31, 1994.
New plan cycles may start no sooner than three years after the first plan
cycle. It is anticipated that plan cycles will run "end to end."
- 5 -
<PAGE> 7
AWARD PAYMENTS
================================================================================
Awards will be paid in cash to participants after the end of the plan cycle as
administratively possible. TBS's annual financial results must be compiled
before awards can be calculated and paid.
<TABLE>
<CAPTION>
Goal
Contribution to
Goal % of Goal % Target
Weighting Attained Award Earned
--------- -------- ------------
<S> <C> <C> <C>
Operating Income 75% * [________] = [____________]
Revenue 25% * [________] = [____________]
PERCENT OF TARGET OPPORTUNITY EARNED ____________
</TABLE>
Subject to thc approval of the Compensation Committee, operating income may be
adjusted for the effects of any acquisitions, dispositions or extraordinary
items.
- 6 -
<PAGE> 8
TERMINATION AND TRANSFER
===============================================================================
The LTIP provides specific provisions in the case of a participant's
termination from TBS or transfer between Company units during a plan year.
If a participant's employment at TBS is terminated during a plan cycle because
of disability, death or approved retirement, he or she would receive a prorated
award payment based on performance through the end of the plan cycle. For any
other type of termination, the participant would earn no award for that plan
cycle. However, if termination occurred after the end of the plan year but
prior to actual payment of the award, the participant would then be entitled to
full payment under the Plan, except in the case of termination for cause or
"behavior not in the best interests of TBS."
Lateral transfers within TBS generally would not require any adjustments to the
LTIP opportunities for a participant. In the event of a promotion or demotion
during a plan cycle, the Compensation Committee would determine if the LTIP
opportunity needed to be adjusted. If adjusted, the new LTIP opportunity would
be a prorated award based on the number of full months in the plan cycle spent
in each position.
Individuals hired during a plan cycle for a position that is approved for plan
participation may receive a prorated award based on the Company's performance,
the number of full months the new hire was in the plan cycle, and the approval
of the Compensation Committee.
- 7 -
<PAGE> 1
EXHIBIT 11
TURNER BROADCASTING SYSTEM,INC.
Computation of Primary Earnings Per Share
(in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, 1994 June 30, 1994
------------------ ----------------
<S> <C> <C>
Net income (loss) applicable to common stock $ 12,919 $ (705)
======== ========
Weighted average number of shares outstanding during the period 205,635 202,847
Add: Common equivalent shares issuable assuming conversion of
Class C Convertible Preferred Stock 74,382 0
Shares issuable upon exercise of stock options 13,850 0
Subtract: Shares which would have been purchased with proceeds
from exercise of such stock options 11,241 0
-------- --------
Weighted average number of common stock, common stock
equivalents and converted shares outstanding 282,626 202,847
======== ========
Weighted average number of Class A common shares and common
stock equivalents 68,330 68,330
======== ========
Weighted average number of Class B common shares and common
stock equivalents 214,296 134,517
======== ========
Income (loss) per share and common stock equivalent of Class A
and Class B common stock $ 0.05 $ (0.00)
======== ========
</TABLE>
For the six month period ended June 30, 1994, no common stock equivalents are
included in the calculation of primary earnings per share, due to their
anti-dilutive effect on net loss for the period.
<PAGE> 2
TURNER BROADCASTING SYSTEM, INC.
Computation of Fully-Diluted Earnings Per Share
(in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, 1994 June 30, 1994
------------------ ----------------
<S> <C> <C>
Net income (loss) applicable to common stock $ 12,919 $ (705)
======== ========
Add: Interest expense on zero coupon subordinated convertible
notes due 2007 4,190 8,308
Interest expense on 6.5% convertible notes 487 975
Subtract: Additional income taxes (1,952) (3,760)
-------- --------
Adjusted net income (loss) applicable to Common Stock $ 15,644 $ 4,818
======== ========
Weighted average number of common stock, common stock
equivalents and converted shares outstanding 282,626 202,847
Add: Shares issuable assuming conversion of zero coupon
convertible notes due 2007 7,440 7,440
Shares issuable assuming conversion of 6.5%
convertible notes 1,664 1,379
Shares issuable assuming conversion of Class C Preferred
stock 0 74,382
Shares issuable assuming exercise of outstanding options 0 3,186
-------- --------
Weighted average number of common stock, common stock
equivalents and convertible shares, assuming full dilution 291,730 289,234
======== ========
Weighted average number of Class A common shares and common
equivalents and convertible shares, assuming full dilution 68,330 68,330
======== ========
Weighted average number of Class B common shares and common
equivalents and convertible shares, assuming full dilution 223,400 220,904
======== ========
Loss per share and common stock equivalent of Class A
and Class B common stock $ 0.05 $ 0.02
======== ========
</TABLE>
This calculation is submitted in accordance with the rules and regulations of
the Securities and Exchange Commission. Under generally accepted accounting
principles this presentation would not be made because it is anti-dilutive.
