<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 30, 1996
REGISTRATION NO. 333-6311
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO.1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
METRO NETWORKS, INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 4899 76-0505148
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Classification Identification No.)
incorporation or Code Number)
organization)
</TABLE>
2800 POST OAK BOULEVARD
SUITE 4000
HOUSTON, TEXAS 77056
(713) 407-6000
(Address, including zip code, and telephone number, including area code,
of Registrant's principal executive offices)
DAVID I. SAPERSTEIN
CHIEF EXECUTIVE OFFICER
METRO NETWORKS, INC.
2800 Post Oak Boulevard
Suite 4000
Houston, Texas 77056
(713) 407-6000
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
------------------------
COPIES TO:
<TABLE>
<S> <C>
Neil A. Torpey, Esq. Robert E. Buckholz, Jr.,
Paul, Hastings, Janofsky & Esq.
Walker Sullivan & Cromwell
399 Park Avenue 125 Broad Street
New York, New York 10022 New York, New York 10004
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
------------------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering: / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: / /
CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM
TITLE OF EACH CLASS OF SECURITIES TO BE AGGREGATE OFFERING AMOUNT OF REGISTRATION
REGISTERED PRICE(1) FEE
<S> <C> <C>
Common Stock, $.001 par value.......... $115,000,000 $39,656
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(o) of the Securities Act of 1933, as amended.
------------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
METRO NETWORKS, INC.
CROSS-REFERENCE SHEET
SHOWING LOCATION IN PROSPECTUS OF INFORMATION
REQUIRED BY ITEMS OF PART I OF FORM S-1
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<CAPTION>
REGISTRATION STATEMENT ITEM LOCATION IN PROSPECTUS
- ---------------------------------------------------------------- -----------------------------------------------------
<C> <S> <C>
1. Forepart of the Registration Statement and Outside
Front Cover Page of Prospectus....................... Front Cover Page of Registration Statement;
Cross-Reference Sheet; Outside Front Cover Page of
Prospectus
2. Inside Front and Outside Back Cover Pages of
Prospectus........................................... Inside Front and Outside Back Cover Pages of
Prospectus
3. Summary Information, Risk Factors and Ratio of
Earnings to Fixed Charges............................ Prospectus Summary; Risk Factors; The Company;
Selected Consolidated Financial Data
4. Use of Proceeds...................................... Use of Proceeds
5. Determination of Offering Price...................... Underwriting
6. Dilution............................................. Dilution
7. Selling Security Holders............................. Principal and Selling Stockholders
8. Plan of Distribution................................. Underwriting
9. Description of Securities to be Registered........... Description of Capital Stock
10. Interests of Named Experts and Counsel............... *
11. Information with Respect to the Registrant........... Outside Front Cover Page of Prospectus; Prospectus
Summary; Risk Factors; The Company; Capitalization;
Selected Financial and Operating Data; Management's
Discussion and Analysis of Financial Condition and
Results of Operations; Business; Management;
Principal and Selling Stockholders; Certain
Transactions; Description of Capital Stock; Shares
Eligible for Future Sale; Available Information;
Combined Financial Statements
12. Disclosure of Commission Position on Indemnification
for Securities Act Liabilities....................... *
</TABLE>
- ------------------------
* Not applicable.
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
<PAGE>
SUBJECT TO COMPLETION, DATED AUGUST 30, 1996
[ ] SHARES
METRO NETWORKS, INC.
[LOGO]
COMMON STOCK
(PAR VALUE $.001 PER SHARE)
--------------
Of the [ ] shares of Common Stock offered hereby, [ ] shares
are being sold by the Company and [ ] shares are being sold by the Selling
Stockholder. The Company will not receive any of the proceeds from the sale of
shares by the Selling Stockholder. See "Principal and Selling Stockholders."
Prior to this offering, there has been no public market for the Common Stock
of the Company. It is currently estimated that the initial public offering price
per share will be between $ and $ . For factors to be considered in
determining the initial public offering price, see "Underwriting."
SEE "RISK FACTORS" BEGINNING ON PAGE 11 HEREOF FOR CERTAIN CONSIDERATIONS
RELEVANT TO AN INVESTMENT IN THE COMMON STOCK.
Application will be made for quotation of the Common Stock on the Nasdaq
National Market under the symbol "MTNT."
--------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
--------------
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<S> <C> <C> <C> <C>
INITIAL PUBLIC UNDERWRITING PROCEEDS TO PROCEEDS TO SELLING
OFFERING PRICE DISCOUNT(1) COMPANY(2) STOCKHOLDER(2)
------------------ -------------------- -------------------- --------------------
Per Share........................... $ $ $ $
Total(3)............................ $ $ $ $
</TABLE>
- --------------
(1) The Company and the Selling Stockholder have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933.
(2) Before deducting estimated expenses of $ payable by the Company.
(3) The Company has granted the Underwriters an option for 30 days to purchase
up to an additional [ ] shares of Common Stock at the initial public
offering price per share, less the underwriting discount, solely to cover
over-allotments. If such option is exercised in full, the total initial
public offering price, underwriting discount and proceeds to the Company
will be $ , $ and $ , respectively. See "Underwriting".
--------------
The shares offered hereby are offered severally by the Underwriters, as
specified herein, subject to receipt and acceptance by them and subject to their
right to reject any order in whole or in part. It is expected that certificates
for the shares will be ready for delivery in New York, New York on or about
September , 1996, against payment therefor in immediately available funds.
GOLDMAN, SACHS & CO.
CS FIRST BOSTON
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
--------------
The date of this Prospectus is , 1996.
<PAGE>
EDGAR DESCRIPTION
[A map of the United States is depicted with circles used to indicate each
of Metro Networks Markets which are Phoenix and Tucson, Arizona; Los Angeles,
Modesto, Oxnard, Sacramento, Riverside/San Bernadino, San Diego, San Francisco,
San Jose and Stockton, California; Denver, Colorado; Danbury, Hartford and New
Haven, Connecticut; Wilmington, Delaware; Daytona Beach, Jacksonville, Miami/Ft.
Lauderdale, Orlando, Tampa/St. Petersburg/Clearwater and West Palm Beach,
Florida; Altanta, Georgia; Chicago, Illinois; Indianapolis, Indiana; Louisville,
Kentucky; Baltimore, Maryland; Boston, Massachusetts; Detroit, Michigan;
Minneapolis/St. Paul, Minnestoa; Kanasas City and St. Louis, Missouri; Omaha,
Nebraska; Las Vegas, Nevada; Monmouth/Ocean counties, New Jersey; Albuquerque,
New Mexico; Buffalo, New York, Rochester and Nassau County, New York;
Charlotte/Gastonia, North Carolina; Cincinnati, Cleveland/Akron/ Columbus, Ohio;
Oklahoma City, Oklahoma; Portland, Oregon; Philadelphia and Pittsburgh,
Pennsylvania; Providence, Rhode Island; Memphis and Nashville, Tennessee;
Austin, Dallas/Ft. Worth, Houston/Galveston, San Antonio, Texas; Salt Lake City,
Utah; Richmond, Norfolk/Virginia Beach, Virginia; Seattle/Tacoma, Washington;
Washington D.C. and Milwaukee, Wisconsin.
Color photographs of the types of news and information services that the
Company's networks may provide to its affiliates will be presented. These
include: a blazing fire, traffic jams, sporting events, weather updates and
information on current events. Certain text from the overview section of the
prospectus will also be repeated here. The logos of the Company's various
information services will also be presented including: Metro Video News, Metro
Network News, Metro Networks, Metro Traffic Control and Metro Information
Services.]
--------------
The Company intends to furnish to its shareholders annual reports containing
audited financial statements and quarterly reports containing unaudited interim
financial information for the first three fiscal quarters of each fiscal year.
--------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET, IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
DURING THIS OFFERING, CERTAIN PERSONS AFFILIATED WITH PERSONS PARTICIPATING
IN THE DISTRIBUTION MAY ENGAGE IN TRANSACTIONS FOR THEIR OWN ACCOUNTS OR FOR THE
ACCOUNTS OF OTHERS IN THE COMMON STOCK PURSUANT TO EXEMPTIONS FROM RULES 10B-6,
10B-7 AND 10B-8 UNDER THE SECURITIES EXCHANGE ACT OF 1934.
2
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND COMBINED FINANCIAL STATEMENTS AND NOTES THERETO, APPEARING
ELSEWHERE IN THIS PROSPECTUS. UNLESS OTHERWISE INDICATED, ALL INFORMATION IN
THIS PROSPECTUS ASSUMES THAT THE OVER-ALLOTMENT OPTIONS GRANTED TO THE
UNDERWRITERS ARE NOT EXERCISED. IN ADDITION, UNLESS THE CONTEXT REQUIRES
OTHERWISE, REFERENCES TO THE COMPANY REFER TO METRO NETWORKS, INC., A DELAWARE
CORPORATION, AND ITS SUBSIDIARY AFTER THE REORGANIZATION (AS DEFINED HEREIN). A
GLOSSARY OF CERTAIN TERMS APPEARING HEREIN HAS BEEN INCLUDED IN THIS PROSPECTUS.
SEE "GLOSSARY."
THE COMPANY
OVERVIEW
The Company is the largest provider of traffic reporting services and is a
leading supplier of local news, sports, weather and other information reporting
services to the television and radio broadcast industries. The Company's
information reports, which are customized to meet the specific needs of each of
the Company's individual radio and television station affiliates, are presently
being broadcast by approximately 1,275 radio station affiliates and 110
television station affiliates. The Company provides local broadcast information
reports in 47 of the 50 largest MSA markets in the United States. In exchange
for the Company's information reports, radio and television station affiliates
provide commercial airtime inventory to the Company. The packaging and sale of
this commercial airtime inventory accounts for substantially all of the
Company's revenues. See "-- Advertising Sales and Marketing" and "Business."
Because the Company has numerous radio station affiliates in each of its
markets (averaging 21 affiliates per market), the Company believes that its
broadcasts of local traffic information enable advertisers to reach more people,
more often, in a higher impact manner than can be achieved using other
advertising media. The Company's information reports are broadcast daily in 60
MSA markets and are heard by more than 100 million people (age 12 and over).
Such reports and the Company's commercial messages are listened to by an average
of 88% of the population (age 12 and over) in its markets. The Company's large
network of affiliates offers advertisers the opportunity to reach a broad-based
local, regional or national audience, through a single purchase of commercial
airtime inventory. See "Business."
The Company offers advertisers three different networks on which to
broadcast their advertisements: the network of radio stations (the "Radio
Traffic Services Network") which broadcasts the Company's traffic information
reports (the "Radio Traffic Services"); the network of radio stations (the
"Expanded Radio Services Network") which broadcasts an array of customized local
news, sports, weather and other programming services (the "Expanded Radio
Services"); and the network of television stations (the "MetroTV Network") which
broadcasts the Company's television traffic services and video news services
(the "Television Traffic Services" and "Video News Services" and collectively,
the "MetroTV Services"). The Company believes that the Expanded Radio Services
Network and the MetroTV Network, both of which are currently being developed,
will become separate broad-based networks through which the Company will be able
to acquire, package and sell additional commercial airtime inventory. See
"Business -- Operating Strategy" and " -- Advertising Sales and Marketing."
Since its founding in 1978, the Company has demonstrated growth in revenues
and EBITDA (I.E., earnings before other expense (income), interest expense,
taxes, depreciation and amortization). For the six months ended June 30, 1996,
the Company had revenues of $50.1 million, EBITDA of $11.5 million and adjusted
EBITDA (I.E., EBITDA plus predecessor shareholder costs) of $12.2 million. For
the year ended December 31, 1995, the Company had pro forma revenues of $78.1
million, pro forma EBITDA of $10.8 million and pro forma adjusted EBITDA of
$12.1 million. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and "Selected Financial and Operating Data."
3
<PAGE>
OPERATING STRATEGY
The Company's strategy is to realize operating efficiencies by; (i)
expanding geographically, (ii) increasing the number of affiliates using the
Radio Traffic Services within existing markets, (iii) developing the Expanded
Radio Services, (iv) developing the MetroTV Services and (v) continuing to
strengthen marketing, sales and inventory management operations.
-EXPAND GEOGRAPHICALLY. The Company, which currently operates in 60 MSA
markets in the United States, including 54 of the largest 75 MSA markets,
believes that the economic model for its local information services
business is viable in each of the largest 75 MSA markets. Since July 1994,
the Company has entered 16 new markets and the Company intends to expand
into the remaining 21 of the largest 75 MSA markets over the next three
years through strategic acquisitions and start-ups. The Company has
recently entered into two letters of intent to acquire certain assets of
Airborne Traffic Network, Inc. ("ATN") and Wisconsin Information Systems,
Inc. ("WIS") (collectively, the "Pending Acquisitions"). The Company is
always examining acquisition and expansion opportunities. See "-- Recent
Developments."
-INCREASE THE NUMBER OF AFFILIATES USING THE RADIO TRAFFIC SERVICES WITHIN
EXISTING MARKETS. The Company believes there are substantial opportunities
for continued growth in the Radio Traffic Services Network. As of June 30,
1996, the Company provided its Radio Traffic Services to approximately
1,230 radio station affiliates, an increase from approximately 900 radio
station affiliates as of December 31, 1994. The Company believes that
opportunities are available to increase its market penetration by
establishing affiliate relationships with additional radio stations
nationwide. Its current Radio Traffic Services Network represents 48.7% of
the approximately 2,524 radio stations in the 60 MSA markets in which the
Company operates.
-DEVELOP THE EXPANDED RADIO SERVICES. Having established a substantial
market presence in the Radio Traffic Services, the Company began during
1994 to leverage this business by offering the Expanded Radio Services to
its network of radio station affiliates. As of June 30, 1996, the Company
provided the Expanded Radio Services to more than 200 radio station
affiliates in 28 MSA markets, an increase from 92 radio station affiliates
in 17 MSA markets as of December 31, 1994. The Company intends to expand
these services to all of its markets by the end of 1997.
-DEVELOP THE METROTV SERVICES. The Company has provided Television Traffic
Services to the MetroTV Network for over ten years. As of June 30, 1996,
this network consisted of 110 television stations in 47 DMA markets, an
increase from 71 television stations in 33 DMA markets as of December 31,
1994. In connection with its core Radio Traffic Services business, the
Company developed an extensive array of video surveillance and broadcast
equipment, including jet helicopters, broadcast quality remote and
omni-directional aircraft-mounted camera systems, mobile units,
computer-generated graphic displays and broadcasting technology. In 1995,
the Company began to use this infrastructure to offer the Video News
Services to its network of television station affiliates, and is currently
providing these services to 16 of its television station affiliates in 12
of its 47 DMA markets. The MetroTV Services include full service, 24 hours
per day/7 days per week video coverage from camera crews in the Company's
aircraft and mobile ground units covering breaking news stories. The
Company intends to expand the Video News Services into the 25 largest DMA
markets in the United States over the next three years.
-CONTINUE TO STRENGTHEN MARKETING, SALES AND INVENTORY MANAGEMENT
OPERATIONS. Over the past year, the Company has invested in, and continues
to initiate and implement, new operating strategies and systems to increase
revenues and EBITDA. In order to increase the percentage of the Company's
commercial airtime inventory sold, the Company has (i) increased its sales
force from approximately 70 sales representatives as of December 31, 1994
to approximately 136 sales representatives as of June 30, 1996; (ii)
developed a corporate marketing department to support the efforts of its
sales representatives by providing extensive training, research,
sales/marketing materials and analysis; (iii) hired additional general
managers and sales managers to better manage the activities of its sales
representatives and enhance its affiliate relations; (iv) fully
4
<PAGE>
automated its commercial airtime inventory management system to improve
inventory control and pricing; and (v) reduced the level of reciprocal
arrangements (the exchange of commercial airtime for goods and services) to
focus sales representatives on cash revenue business.
PROGRAMMING
Every aspect of the Company's information reports (including the length of
report, content of report, specific geographic coverage area, time of broadcast,
number of reports aired per day, broadcaster's style, etc.) is customized to
meet each individual affiliate's requirements. The Company typically works
closely with the program directors, news directors, and general managers of its
affiliates to ensure that the Company's services meet its affiliates' quality
standards. The Company and its affiliates jointly select the on-air broadcasters
to ensure that each broadcaster's style is appropriate for the station's format.
The Company's broadcasters often become integral "personalities" on such
affiliates' stations as a result of their significant on-air presence and
interaction with the stations' on-air personnel. In order to realize operating
efficiencies, the Company endeavors to utilize its professional broadcasters on
multiple affiliate stations within a particular market. Generally, each of the
Company's broadcasters delivers reports to between two and four of the Company's
affiliates.
The Company does not require its affiliates to identify the Company as the
supplier of its information reports. This provides the Company's affiliates with
a high degree of customization and flexibility, as each affiliate has the right
to present the information reports provided by the Company as if the affiliate
had generated such reports with its own resources. For example, multiple
affiliates in a single market may suggest that the Company's infrastructure,
including its airplanes, helicopters and broadcasters, are those of the
affiliate. See "Business -- Programming".
INFRASTRUCTURE
The Company believes that its extensive fleet of aircraft and other
information-gathering technology and broadcast equipment have allowed the
Company to provide high quality programming, enabling it to retain and expand
its affiliate base. In the aggregate, the Company utilizes approximately 69
fixed-wing aircraft, 17 helicopters, 30 mobile units, 7 airborne camera systems,
16 fixed-position camera systems, 50 broadcast studios and 1,177 broadcasters
and producers. The Company also maintains a staff of computer programmers and
graphics experts to supply customized graphics and other visual programming
elements to television stations. In addition, the Company's operating centers
and broadcast studios have sophisticated computer technology, video and
broadcast equipment and cellular and wireless technology which enable the
Company's broadcasters to deliver accurate and timely reports to its affiliates.
The infrastructure and resources dedicated to a specific market by the Company
are determined by the size of the market, the number of affiliates the Company
serves in the market and the type of services being provided. See "Business --
Infrastructure."
ADVERTISING SALES AND MARKETING
The Company's primary source of revenue is the packaging and sale to
advertisers of commercial airtime inventory provided to the Company by its
affiliates in exchange for its information reports. The Company's standard radio
affiliate contract, which is generally for a term of one year or longer,
typically requires that for each report provided by the Company, the radio
station provide the Company with an opening announcement and a ten second
commercial message (or "sponsorship") to be broadcast as part of the report. The
Company packages its radio commercial airtime inventory for sale to advertisers
on a market-wide, regional or national basis and then broadcasts these
sponsorship advertisements among its entire network of affiliates within a
particular market on a fair and equal rotation (i.e., each advertiser receives
its pro rata share of advertisements on each of the Company's affiliates in the
relevant market). The Company believes that its radio sponsorships, which are
typically sold in multiple "sponsorship" packages (generally 125, 250 or 500
sponsorships broadcast over four week periods in each market), provide
advertisers with an effective and efficient medium to reach a high percentage of
the population in its markets. The Company's 500 sponsorship package (which the
Company believes is the most frequently purchased package) reaches an average of
approximately 70% of the population (age 12 and over) in the Company's MSA
markets. The Company's advertisers have the ability to target
5
<PAGE>
individual markets and customize their commercial messages by station format.
Because most of the sponsorships are read live, advertisers can change their
messages on short notice. The Company believes that its radio advertising
networks have a high degree of impact because the commercial messages are
imbedded in the affiliates' programming and are generally delivered live by the
Company's broadcasters during peak drive periods. The Company provides its
MetroTV Services to television stations in exchange for thirty second commercial
airtime inventory. The amount and day-part placement of the commercial airtime
inventory that the Company receives from television stations varies by market
and by the type of service provided by the Company.
In each of the markets in which it conducts operations, the Company
maintains an advertising sales office as part of its operations center. The
Company's advertising sales force is able to sell available commercial airtime
inventory in any and all of the Company's markets in addition to selling such
inventory in each local market. The Company believes this affords its sales
representatives an advantage over certain of their competitors. The Company's
advertising sales force is comprised of approximately 136 sales representatives.
Although the Company typically has two or three sales representatives in an
individual market, the number of sales representatives ranges from one to eight
depending on the size of the market and the number of potential regional and
national advertising clients headquartered in the market. Specialized programs
and marketing campaigns, which support nationwide sales and other special forms
of advertising, are managed from the Company's headquarters in Houston, Texas.
As the Company's business has developed, the Company has sold increasing
amounts of its commercial airtime inventory to regional/national advertisers.
For the year ended December 31, 1994, approximately 25% of the Company's
advertising revenue was attributable to regional/national advertisers, with the
balance attributable to local advertisers. For the six months ended June 30,
1996, sales to regional/national advertisers accounted for approximately 50% of
total advertising revenues. See "Business -- Advertising and Sales".
RECENT DEVELOPMENTS
Since July 1994, through strategic acquisitions and new start-ups, the
Company has expanded into 16 new markets, comprised of 14 new markets as a
result of strategic acquisitions and two new markets as a result of new
start-ups. In this period, the Company has made six strategic acquisitions
(which accounted for new markets including Salt Lake City, Utah; Phoenix and
Tucson, Arizona; Las Vegas, Nevada; St. Louis, Missouri; Milwaukee, Wisconsin;
Nashville and Memphis, Tennessee; Louisville, Kentucky; Charlotte, North
Carolina; Providence, Rhode Island; Hartford, Danbury and New Haven,
Connecticut) and made an additional strategic acquisition to expand its
operations in Atlanta, Georgia. The aggregate purchase price for these
acquisitions was approximately $20 million. On a pro forma basis, the operations
acquired by the Company in this period generated revenues of approximately $15
million and EBITDA of approximately $3 million for the year ended December 31,
1995. See "Business -- Acquisitions".
-SALT LAKE CITY ACQUISITION. On January 3, 1996, the Company acquired
Aeromedia, Inc. ("Aeromedia"). As of June 30, 1996, the Company (through
Aeromedia) provided traffic services to 22 radio station and two television
station affiliates in Salt Lake City, Utah, the thirty-fifth largest MSA
market.
-NEW ENGLAND ACQUISITION. On January 4, 1996, the Company acquired a group
of companies (the "Traffic Net Group"). As of June 30, 1996, the Company
(through the Traffic Net Group) provided local traffic information services
to approximately 70 radio station and three television station affiliates
in and around the Hartford, Connecticut area (the forty-first largest MSA
market), and Providence, Rhode Island (the thirty-first largest MSA
market). In addition, one of the companies in the Traffic Net Group
provides weather reporting services to approximately 46 radio station
affiliates in Boston, Massachusetts (the tenth largest MSA market), and
throughout New England. See "Business -- Acquisitions."
6
<PAGE>
-KANSAS CITY AND OMAHA LETTER OF INTENT. On June 20, 1996, the Company
entered into a letter of intent to acquire all the assets of ATN for
approximately $1.5 million. As of June 30, 1996 ATN provided traffic
services to 16 radio station affiliates in Kansas City, Missouri and Omaha,
Nebraska.
-OKLAHOMA CITY, ALBUQUERQUE, OMAHA AND MILWAUKEE LETTER OF INTENT. On July
24, 1996, the Company entered into a letter of intent to acquire all the
assets of WIS for approximately $650,000. As of June 30, 1996 WIS provided
traffic services to eight radio station affiliates and one television
station affiliate in Oklahoma City, 12 radio station affiliates and one
television affiliate in Albuquerque, eight radio station affiliates in
Omaha and one television station affiliate in Milwaukee.
REORGANIZATION
From 1978 until the closing of the offering, the business of the Company
will have been operated through Metro Traffic Control, Inc., a Maryland
corporation; Metro Networks, Ltd., a Texas limited partnership, Metro Video
News, Inc., a Texas corporation; Metro Reciprocal, Inc., a Texas corporation and
their subsidiaries (collectively, the "Predecessor Companies"). Until the
closing of this offering, all of the equity interests in the Predecessor
Companies will be owned by David I. Saperstein, the Chairman and Chief Executive
Officer of the Company, and certain trusts (the "Trusts") created for the
benefit of Mr. Saperstein's children (collectively, the "Saperstein Family").
In May 1996, Metro Networks, Inc. was incorporated in Delaware. Immediately
prior to the closing of this offering, the Saperstein Family will establish
Metro Networks, Inc. as a holding company and consolidate the issued and
outstanding equity interests in the Predecessor Companies, by exchanging such
interests for shares of Metro Network, Inc.'s Common Stock (the
"Reorganization"). Metro Networks, Inc. expects to conduct substantially all of
its operations through Metro Traffic Control, Inc. See "Business --
Reorganization."
The principal executive offices of Metro Networks, Inc. are located at 2800
Post Oak Boulevard, Suite 4000, Houston, Texas 77056. The telephone number at
that location is (713) 407-6000.
7
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THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by the Company.......... [ ] shares
Common Stock offered by the Selling
Stockholder................................. [ ] shares
Common Stock outstanding after the
offering.................................... [ ] shares(1)
Proposed Nasdaq National Market Symbol....... MTNT
Use of Proceeds.............................. To reduce bank indebtedness, to fund growth
through pending and potential acquisitions
and entry into new markets and for working
capital purposes. See "Use of Proceeds."
Risk Factors................................. See "Risk Factors" for a discussion of
certain considerations relevant to an
investment in the Common Stock.
</TABLE>
- ------------------------
(1) Does not include 350,000 shares of Common Stock reserved for issuance upon
the exercise of stock options to be granted to employees under the Company's
1996 Incentive Stock Option Plan upon the effective date of the offering
(the "1996 Plan"). See "Management -- Executive Compensation."
8
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL AND OTHER OPERATING DATA
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED
-------------------------------------------- JUNE 30,
PRO FORMA --------------------------
1993 1994 1995 1995(1) 1995 1996
--------- --------- --------- ----------- ----------- -------------
(IN THOUSANDS, EXCEPT PER SHARE AND OPERATING DATA)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Advertising revenues...................... $ 47,905 $ 60,048 $ 72,433 $ 78,102 $ 30,623 $ 50,077
Broadcasting costs........................ 27,384 32,239 41,286 43,243 19,816 24,173
Marketing expense......................... 8,848 11,355 14,504 15,980 6,821 10,101
General and administrative expense........ 6,994 5,939 7,193 8,122 4,055 4,350
Depreciation and amortization expense..... 1,814 1,302 3,981 5,920 1,694 2,936
--------- --------- --------- ----------- ----------- -------------
Total operating costs..................... 45,040 50,835 66,964 73,265 32,386 41,560
Income (loss) from operations............. 2,865 9,213 5,469 4,837 (1,763) 8,517
Other expense (income).................. 238 (164) (137) (123) (93) (66)
Interest expense........................ 145 293 1,260 1,838 421 934
--------- --------- --------- ----------- ----------- -------------
Income (loss) before tax provision........ 2,482 9,084 4,346 3,122 (2,091) 7,649
Income tax provision.................... 1,066 2,179 1,036 1,061 229 573
Income (loss) from continuing
operations............................... 1,416 6,905 3,310 2,061 (2,320) 7,076
--------- --------- --------- ----------- ----------- -------------
Discontinued operations................. (561) -- -- -- -- --
--------- --------- --------- ----------- ----------- -------------
Net income (loss)......................... $ 855 $ 6,905 $ 3,310 $ 2,061 $ (2,320) $ 7,076
Pro forma net income per share from
continuing operations(2)
--------- --------- --------- ----------- ----------- -------------
Pro forma weighted average shares
outstanding(2)
--------- --------- --------- ----------- ----------- -------------
CASH FLOWS DATA:
Net cash provided by (used in) operating
activities............................. $ (912) $ 1,253 $ 2,106 $ 3,392 $ 3,298 $ 3,771
Net cash used in investing activities... (1,218) (2,387) (11,908) (12,102) (10,442) (6,353)
Net cash provided by financing
activities............................. $ 1,963 $ 3,625 $ 9,175 $ 9,352 $ 5,824 $ 2,999
<CAPTION>
AT DECEMBER 31, AT JUNE 30, 1996
------------------------------- --------------------------
1993 1994 1995 ACTUAL AS ADJUSTED
--------- --------- --------- ------ -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital........................... $ 404 $ 7,414 $ 7,900 $ 6,843 $
Total assets.............................. 20,921 27,502 42,437 56,750
Total debt................................ 2,097 6,650 22,624 31,147
Common stockholder's equity/partners'
capital.................................. $ 8,582 $ 9,401 $ 4,478 $ 5,343 $
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED
-------------------------------------------- JUNE 30,
PRO FORMA --------------------------
1993 1994 1995 1995(1) 1995 1996
--------- --------- --------- ----------- ----------- -------------
(IN THOUSANDS, EXCEPT PER SHARE AND OPERATING DATA)
<S> <C> <C> <C> <C> <C> <C>
OTHER DATA:
EBITDA (3)................................ $ 4,679 $ 10,515 $ 9,450 $ 10,757 $ (69) $ 11,453
Predecessor shareholder costs (4)......... 2,022 1,734 1,392 1,392 625 726
--------- --------- --------- ----------- ----------- -------------
Adjusted EBITDA (5)....................... 6,701 12,249 10,842 12,149 556 12,179
Capital expenditures...................... $ 891 $ 2,712 $ 2,746 $ 2,746 $ 1,236 $ 2,134
Affiliates:
Radio................................. 754 914 1,152 1,244 1,125 1,284
Television............................ 59 71 91 96 82 110
Markets:
Radio................................. 38 46 54 59 52 60
Television............................ 29 33 38 41 38 47
</TABLE>
- ------------------------------
(1) The unaudited pro forma financial data for the year ended December 31, 1995
were prepared assuming that the 1995 Acquisitions (as defined herein), 1996
Acquisitions (as defined herein) and Pending Acquisitions were consummated
as of January 1, 1995. In addition, such data give effect to the
anticipated Reorganization. The unaudited pro forma financial data
9
<PAGE>
give effect to the 1995 Acquisitions, 1996 Acquisitions and Pending
Acquisitions under the purchase method of accounting and certain estimated
operational and financial effects that are direct results of the
acquisitions. See "Business -- Acquisitions, and -- Reorganization" and
"Pro Forma Financial Data."
(2) Weighted average shares outstanding and net income per common share are
calculated assuming the shares issued in conjunction with the
Reorganization were outstanding for all periods presented. Metro Networks,
Inc. has not declared or paid any dividends on its Common Stock. However,
the Predeccesor Companies have made cash distributions to their
shareholders from time to time. See "Business -- Reorganization."
(3) EBITDA is earnings before other expense (income), interest expense, taxes,
depreciation and amortization. EBITDA does not represent cash flows as
defined by generally accepted accounting principles and does not
necessarily indicate that cash flows are sufficient to fund all of the
Company's cash needs. EBITDA should not be considered in isolation or as a
substitute for net income, cash from operating activities or other measures
of liquidity determined in accordance with generally accepted accounting
principles.
(4) Predecessor shareholder costs consist of the expenses incurred by the
Predecessor Companies on behalf of their shareholders, which expenses will
not be incurred by the Company after the closing of this offering. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Certain Transactions."
(5) Adjusted EBITDA is EBITDA plus predecessor shareholder costs. The Company
believes that Adjusted EBITDA is useful to prospective investors as a
measure of the Company's historical financial performance.
10
<PAGE>
RISK FACTORS
IN ADDITION TO THE OTHER INFORMATION IN THIS PROSPECTUS, THE FOLLOWING
FACTORS SHOULD BE CAREFULLY CONSIDERED BY PROSPECTIVE INVESTORS IN EVALUATING
THE COMPANY AND ITS BUSINESS BEFORE PURCHASING THE COMMON STOCK OFFERED HEREBY.
INFORMATION SERVICES COMPETITION
The success of the Company's business is largely dependent on the Company's
ability to maintain and acquire affiliate contracts with radio and television
stations. The Company faces intense competition for such affiliates from other
providers of information reporting services in many of its markets.
Additionally, the Company faces competition from individual radio stations and
groups of radio stations that provide their own information services. As a
result of the passage of the Telecommunications Act of 1996 (the "Telecom Act"),
the Company may face additional competition from consolidated groups of radio
stations that choose to provide their own information services. Certain of the
Company's current and potential competitors may offer alternative types of
information services and may have substantially greater financial, technical,
marketing and other resources than the Company. There can be no assurance that
the Company's business will not be adversely affected by current or increased
competition for the provision of information services in the markets in which it
operates. See "Management's Discussion and Analysis of Financial Conditions and
Results of Operations -- Liquidity and Capital Resources."
DEPENDENCE ON ADVERTISING REVENUES
The success of the Company's business is closely linked to the performance
of the advertising industry. A significant decline in national and regional
advertising would have a material adverse effect on the Company's revenues.
There can be no assurance that such a decline will not occur, or that the
Company's business will not be materially adversely affected thereby. See
"Business."
COMPETITION FOR ADVERTISING SALES
The Company's business is dependent, in part, on its ability to sell the
commercial airtime inventory obtained from its affiliates in exchange for the
Company's provision of information reporting services. The business of selling
broadcast advertising time is highly competitive. The Company positions its
advertising so as not to compete with the advertising of its local radio and
television station affiliates. The Company competes for advertising dollars with
other media such as newspapers and magazines, outdoor advertising, network radio
and network television advertising, transit advertising, direct response
advertising, yellow page directories and point of sale advertising. There can be
no assurance that the Company will not be adversely affected by such competition
in the future. See "Business -- Competition."
LIMITED OPERATING HISTORY IN NEW BUSINESSES
The Company introduced its Expanded Radio Services to radio stations in 1994
and its Video News Services to television stations in 1995. Accordingly,
although the Company has provided its Radio Traffic Services and Television
Traffic Services for many years, the Company has a limited history of providing
its Expanded Radio Services and Video News Services. The success of the
Company's Radio Traffic Services may not be indicative of the results of its
efforts to provide the Expanded Radio Services and Video News Services. The
successful operation of the Expanded Radio Services Network and MetroTV Network
will require a certain level of continued capital expenditures and operating
expenditures which the Company is committed to undertaking. There can be no
assurance that the Company will be able to develop such businesses as
successfully as it has its Radio Traffic Services business. See "Business."
ACQUISITIONS AND NEW MARKETS
The Company's continued growth and expansion is dependent, in part, on its
ability to establish affiliate relations in new markets by acquiring existing
operations or developing new operations. There can be no assurance that the
Company will be able to identify and acquire operations or establish operations
in new markets or that it will be able to finance such acquisitions or expansion
in the future.
11
<PAGE>
There can be no assurance that the Company will be able to integrate
successfully any acquired business or realize any operating efficiencies
therefrom. The Company's past operating history may not be indicative of its
ability to integrate new markets and acquisitions. See "Business --
Acquisitions."
INCREASING CAPITAL REQUIREMENTS
The Company's expansion into new markets and continued growth of its
Expanded Radio Services Network and MetroTV Network will require significant
additional capital expenditures. There can be no assurance that the Company will
be able to secure financing for such expenditures when needed or on terms
acceptable to the Company. Moreover, the Company's day-to-day operations require
the use of sophisticated equipment and technology. The maintenance and
replacement of such equipment requires significant expenditures. There can be no
assurance that the Company will be able to continue to finance the maintenance
and replacement of such equipment.
DEPENDENCE ON KEY PERSONNEL
The Company's continued success is dependent to a significant degree upon
the efforts of its current executive officers. The loss or unavailability of any
such executive officer could have an adverse effect on the Company. The Company
has entered into employment agreements with Messrs. David I. Saperstein, the
Company's Founder, Chairman and Chief Executive Officer, Charles I. Bortnick,
the Company's President, Shane E. Coppola, the Company's Executive Vice
President, Curtis H. Coleman, the Company's Senior Vice President and Chief
Financial Officer and Gary L. Worobow, the Company's Senior Vice President,
General Counsel and Secretary; however, there can be no assurance that these
individuals will continue to provide services to the Company. At present the
Company does not maintain key man life insurance policies for any of these
individuals. Moreover, the continued success and viability of the Company is
dependent to a significant extent upon its ability to attract and retain
qualified personnel in all areas of its business, especially management
positions. In the event the Company is unable to attract and retain qualified
personnel, its business may be adversely affected. See "Management."
FEDERAL REGULATION OF BROADCASTING
The ownership, operation and sale of stations are subject to the
jurisdiction of the Federal Communications Commission (the "FCC"), which acts
under authority granted by the Communications Act of 1934, as amended, (the
"Communications Act"). Among other things, the FCC adopts and implements
regulations and policies that directly or indirectly affect the ownership,
operations and sale of radio and television stations, and has the power to
impose penalties for violations of its rules or the Communications Act. Such
regulation may adversely affect the Company's business. On February 8, 1996,
President Clinton signed the Telecom Act. The Telecom Act, among other measures,
directs the FCC to eliminate national radio ownership limits and increase local
radio ownership limits. Certain of these measures have been adopted by the FCC.
Other provisions of the Telecom Act will be acted upon by the FCC through
rulemaking proceedings, presently scheduled for completion by the end of 1996.
These measures could lead to greater industry consolidation. The effects of the
Telecom Act on the broadcasting industry and thus on the Company's businesses
are uncertain, and there can be no assurance that the Telecom Act will not
negatively impact the Company's operations in the future.
RESTRICTIONS IMPOSED BY LENDERS
The Credit Agreement among NationsBank of Texas, N.A. ("NationsBank") and
the Company's subsidiaries, Metro Traffic Control, Inc. and Metro Networks,
Ltd., dated October 21, 1994, as amended (the "Credit Agreement") prohibits the
Company from, among other things, (i) incurring certain additional indebtedness,
(ii) incurring certain liens, (iii) disposing of the assets of the Company
through merger, consolidation or sale, (iv) making certain acquisitions without
the consent of the lenders, (v) achieving certain leverage ratios and (vi)
paying dividends. Although these restrictions to date have not restricted the
Company's ability to operate or to make strategic acquisitions, there can be no
assurance that such restrictions will not have a materially adverse effect on
the Company's operations in the future. The Company has obtained a commitment
letter to enter into an amended and restated credit agreement (the "Amended Line
of Credit") with NationsBank upon completion of this offering. The
12
<PAGE>
Company anticipates that the Amended Line of Credit will be secured by the
granting of a lien by the Company on all of its assets and the pledge of its
equity interests in each of the Predecessor Companies in favor of NationsBank.
See "Management's Discussion and Analysis of Financial Conditions and Results of
Operations -- Liquidity and Capital Resources."
CONTROL BY EXISTING STOCKHOLDERS
Upon completion of this offering, the Saperstein Family will beneficially
own % of the Company's outstanding Common Stock and all of the Series A
Convertible Preferred Stock. Assuming conversion of all of the Series A
Convertible Preferred Stock, the Saperstein Family will own % ( % if the
Underwriters' overallotment option is exercised in full) of the issued and
outstanding voting stock of the Company. As a result, the Saperstein Family will
continue to have the ability to elect or remove any or all of the Company's
Directors and to control substantially all corporate activities involving the
Company, including tender offers, mergers, proxy contests or other purchases of
Common Stock that could give the stockholders of the Company the opportunity to
realize a premium over the then prevailing market price for their shares of
Common Stock. See "Principal and Selling Stockholders."
ANTI-TAKEOVER PROVISIONS
The Company's Amended and Restated Certificate of Incorporation and Bylaws
contain provisions that could have the effect of making it more difficult for a
third party to acquire, or of discouraging a third party from attempting to
acquire, control of the Company. Such provisions could limit the price that
certain investors might be willing to pay in the future for shares of Common
Stock. The Company's Amended and Restated Certificate of Incorporation provides
that up to 10,000,000 shares of Preferred Stock may be issued by the Company
from time to time in one or more series. The Board of Directors may authorize
and issue Preferred Stock with voting or conversion rights that could adversely
affect the voting power or other rights of the holders of Common Stock. See "--
Control by Existing Stockholders" and "Description of Capital Stock -- Preferred
Stock."
DILUTION
Purchasers of Common Stock in this offering will experience immediate
dilution of $ per share in the net tangible book value per share of Common
Stock from the initial public offering price and may incur additional
substantial dilution upon the exercise of outstanding stock options. See
"Dilution."
INTANGIBLE ASSETS
Of the Company's total assets at June 30, 1996, approximately $16.4 million,
or 29.0%, represented purchased broadcast contracts and other intangibles
associated with recent acquisitions. It is possible that no cash would be
recoverable from the voluntary or involuntary sale of the intangible assets of
the Company, including its goodwill. However, the Company believes that its
affiliation contracts and operating systems constitute assets having substantial
value, although there can be no assurance that such value or any substantial
part thereof would actually be realized upon a voluntary or involuntary sale.
See "Business -- Affiliates."
SHARES ELIGIBLE FOR FUTURE SALE; NO PRIOR TRADING MARKET
Sales of a substantial number of shares of the Company's Common Stock could
have the effect of depressing the prevailing market price of its Common Stock.
Upon completion of this offering, the Company will have outstanding shares of
Common Stock. Of these shares, the shares sold in this offering, (
if the over-allotment option is exercised in full) will be freely transferable
without restriction or further registration under the Securities Act of 1993
(the "Securities Act") unless purchased by "affiliates" of the Company as that
term is defined in Rule 144 of the Securities Act (an "Affiliate"), which Shares
purchased by Affiliates will be subject to the resale limitations of Rule 144
adopted under the Securities Act. The remaining shares outstanding upon
completion of this offering, ( if the over-allotment option is exercised in
full) and held by existing shareholders will be "Restricted Securities" as that
term is defined under Rule 144 (the "Restricted Shares"). The Company intends to
file one or more registration statements on Form S-8 under the Securities Act to
register shares of Common Stock subject to stock options which will permit
resale of such shares, subject to the Rule 144 volume
13
<PAGE>
limitations applicable to affiliates, vesting restrictions with the Company and
lock-up agreements between the option holders and the Company and the
Underwriters. See "Shares Eligible for Future Sale" and "Description of Capital
Stock."
ABSENCE OF PUBLIC MARKET
There is currently no public market for the Common Stock. Although
application will be made to approve the Common Stock for quotation and trading
on the Nasdaq National Market, there can be no assurance that an active public
market in the Common Stock will develop or that the initial public offering
price thereof will correspond to the price at which the Common Stock will trade
in the public market subsequent to this offering. The initial public offering
price for the Common Stock will be determined by negotiations among the Company
and the representatives of the Underwriters based on the factors described under
"Underwriting."
14
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the offering are estimated to be
approximately $ million ($ million if the Underwriters' over-allotment
option is exercised in full), based on an assumed offering price of $ per
share and after deductions for the underwriting discount and the estimated
offering expenses. The Company will not receive any proceeds from the sale of
shares of Common Stock by the Selling Stockholder.
The Company intends to use approximately $30 million of the proceeds to
repay existing indebtedness under the Credit Agreement and the balance of the
proceeds, including any proceeds from the Underwriters' exercise of the
over-allotment option, to fund its growth, including additional strategic
acquisitions or development of businesses complementary to the operations of the
Company including broadcast traffic reporting services and news, sports, weather
and other programming and information services. In addition, the Company will
use the proceeds to fund the continued expansion of its networks, its
development of new products and services, including capital expenditures for the
expansion of its networks and for working capital purposes. The Company has
entered into letters of intent to acquire the assets of ATN and WIS and intends
to finance these acquisitions with available cash, including the proceeds to the
Company from this offering. The Company continually reviews potential
acquisitions and has engaged in discussions concerning certain acquisitions
(some of which are currently on-going); however, the Company currently has no
other commitments, arrangements, or understandings with respect to any such
acquisition. The Company does not intend to distribute any portion of its
proceeds from this offering to former shareholders of the Predecessor Companies.
See "Certain Transactions."
The Company's indebtedness outstanding under the Credit Agreement has a
final maturity of June 30, 2000 and bears interest at a variable rate
(approximately 6.94% at June 30, 1996). In fiscal 1995, interest on borrowings
under the Credit Agreement ranged from 6.80% to 7.55%. The Company has obtained
a commitment letter to enter into the Amended Line of Credit upon completion of
this offering. See "Capitalization" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources." Following the repayment of outstanding indebtedness under the Credit
Agreement, approximately $30 million principal amount will be available
thereunder for borrowing.
Pending the application of the net proceeds for the purposes described
above, the Company will invest the net proceeds from the sale of the Common
Stock offered hereby in short-term interest-bearing marketable securities. See
"Capitalization" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources."
DIVIDEND POLICY
The Company intends to retain all of its earnings to finance the development
and expansion of its business and therefore does not intend to pay any cash
dividends on the Common Stock for the foreseeable future. The Credit Agreement
prohibits the payment of cash dividends and the Company anticipates that the
Amended Line of Credit will restrict the payment of dividends in certain
situations. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources."
15
<PAGE>
CAPITALIZATION
The following table sets forth the combined capitalization of the Company at
June 30, 1996 and as adjusted to reflect the sale of shares of Common
Stock offered by the Company hereby (assuming an initial public offering price
of $ per share) after deducting the estimated underwriting discount and
estimated offering expenses payable by the Company and the application of the
net proceeds as described under "Use of Proceeds." This table should be read in
conjunction with the Company's Combined Financial Statements and the Notes
thereto included elsewhere in this Prospectus. See "Use of Proceeds" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
<TABLE>
<CAPTION>
AS OF JUNE 30, 1996
-----------------------
ACTUAL AS ADJUSTED
--------- ------------
(IN THOUSANDS, EXCEPT
SHARE DATA)
<S> <C> <C>
Cash and cash equivalents............................................................... $ 3,466 $
--------- ------------
--------- ------------
SHORT-TERM DEBT:
Current portion of long-term debt..................................................... $ 6,475 $
Notes payable......................................................................... 707
--------- ------------
Total short-term debt............................................................... 7,182
--------- ------------
--------- ------------
LONG-TERM DEBT:
Bank debt............................................................................. 23,966
--------- ------------
--------- ------------
STOCKHOLDERS' EQUITY:
Preferred Stock, par value $.001 per share, 10,000,000 shares authorized; shares
of Series A Convertible Preferred Stock issued and outstanding as adjusted..... --
Common Stock, par value $.001 per share, 25,000,000 shares authorized, shares
issued and outstanding; shares issued and outstanding as adjusted........ 3
Additional paid-in capital............................................................ 4,024
Partners' capital..................................................................... 575
Retained earnings..................................................................... 741
---------
Total stockholder's equity/partners' equity........................................... 5,343
--------- ------------
Total capitalization................................................................ $ 29,309 $
--------- ------------
--------- ------------
</TABLE>
16
<PAGE>
DILUTION
The net tangible book value of the Company at June 30, 1996 was $ million,
or $ per share of Common Stock. Net tangible book value per share is equal to
the Company's total tangible assets less total liabilities, divided by the total
number of outstanding shares of Common Stock. After giving effect to the sale of
shares of Common Stock offered by the Company hereby (after deduction of the
underwriting discount and estimated expenses of this offering) and the
application of the estimated proceeds to be received by the Company therefrom,
the pro forma net tangible book value at June 30, 1996 would have been $ ,
or $ per share. This represents an immediate increase in net tangible book
value of $ per share to existing shareholders and an immediate dilution of
$ per share to new investors. The following table illustrates this per
share dilution with respect to a new investor's purchase of a share of Common
Stock at June 30, 1996:
<TABLE>
<S> <C> <C>
Assumed initial public offering price.......................... $
Net tangible book value per share before this offering......... $
Increase in net tangible book value per share attributable to
new investors................................................. $
Pro forma net tangible book value per share after this
offering...................................................... $
Dilution in net tangible book value per share to new
investors..................................................... $
</TABLE>
The following table summarizes, on a pro forma basis as of June 30, 1996,
the number of shares of Common Stock outstanding, the total consideration paid,
and the average price per share paid by current stockholders and by new
investors who purchase Common Stock pursuant to this offering, assuming an
initial public offering price of $ per share:
<TABLE>
<CAPTION>
AVERAGE
SHARES PURCHASED TOTAL CONSIDERATION PRICE PER
-------------------- -------------------- ---------
NUMBER PERCENT AMOUNT PERCENT SHARE
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders(1)............................... % $ % $
New investors..........................................
--------- --------- --------- --------- ---------
Total.............................................. 100.0% $ 100.0%
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
- ------------------------
(1) Sales by the Selling Stockholder in this offering will reduce the number of
shares of Common Stock held by the current stockholders to shares, or
% of the total number of shares of Common Stock to be outstanding after
this offering, and will increase the number of shares held by new investors
after this offering to shares, or % of the total number of shares
of Common Stock outstanding after this offering.
The foregoing tables do not assume exercise of any outstanding options. Upon
the effective date of this offering, there will be outstanding options to
purchase 350,000 shares of Common Stock under the 1996 Plan. The exercise price
of such options will be the price at which Common Stock is offered to the public
pursuant hereto. To the extent that any options are exercised in the future,
there may be further dilution to new investors. See "Business," "Management --
1996 Incentive Stock Option Plan and -- Board of Directors."
17
<PAGE>
SELECTED FINANCIAL AND OPERATING DATA
The following selected financial and operating data should be read in
conjunction with the Predecessor Companies' historical combined financial
statements and related notes thereto and with Management's Discussion and
Analysis of Financial Condition and Results of Operations included elsewhere
herein. The statement of operations data set forth below with respect to the
years ended December 31, 1993, 1994 and 1995 are derived from the audited
financial statements included elsewhere in the Prospectus. The selected
financial data for the years ended December 31, 1991 and 1992 and the six months
ended June 30, 1995 and 1996 are unaudited and reflect all normal recurring
adjustments that in the opinion of management of the Company are necessary for a
fair presentation of the results of such periods. The unaudited results of
operations for the six months ended June 30, 1996 are not necessarily
indications of results expected for the year ended December 31, 1996. The
unaudited pro forma financial information for 1995 presents the results of
operations of the Company as if the 1995 Acquisitions, 1996 Acquisitions and
Pending Acquisitions had been completed at the beginning of 1995. The unaudited
pro forma financial data presented are not necessarily indicative of the
Company's financial results of operations that might have occurred had such
transactions and the Reorganization been completed at the beginning of the
period and do not purport to indicate the Company's results of operations for
any future periods.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------ JUNE 30,
PRO FORMA --------------------
1991 1992 1993 1994 1995 1995(1) 1995 1996
--------- --------- --------- --------- --------- ----------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Advertising revenues............. $ 39,092 $ 41,957 $ 47,905 $ 60,048 $ 72,433 $ 78,102 $ 30,623 $ 50,077
Broadcasting costs............... 20,672 26,760 27,384 32,239 41,286 43,243 19,816 24,173
Marketing expense................ 8,278 8,393 8,848 11,355 14,504 15,529 6,821 10,101
General and administrative
expense......................... 3,845 4,522 6,994 5,939 7,193 8,573 4,055 4,350
Depreciation and amortization
expense......................... 1,564 1,841 1,814 1,302 3,981 5,920 1,694 2,936
--------- --------- --------- --------- --------- ----------- --------- ---------
Total operating costs............ 34,359 41,516 45,040 50,835 66,964 73,265 32,386 41,560
Income (loss) from operations.... 4,733 441 2,865 9,213 5,469 4,837 (1,763) 8,517
Other expense (income)......... 63 (60) 238 (164) (137) (123) (93) (66)
Interest expense............... 43 97 145 293 1,260 1,838 421 934
--------- --------- --------- --------- --------- ----------- --------- ---------
Income before tax provision...... 4,627 404 2,482 9,084 4,346 3,122 (2,091) 7,649
Income tax provision........... 1,241 2,649 1,066 2,179 1,036 1,061 229 573
--------- --------- --------- --------- --------- ----------- --------- ---------
Income (loss) from continuing
operations...................... 3,386 (2,245) 1,416 6,905 3,310 2,061 (2,320) 7,076
--------- --------- --------- --------- --------- ----------- --------- ---------
Discontinued operations........ -- (563) (561) -- -- -- -- --
--------- --------- --------- --------- --------- ----------- --------- ---------
Net income (loss)................ $ 3,386 $ (2,808) $ 855 $ 6,905 $ 3,310 $ 2,061 $ (2,320) $ 7,076
--------- --------- --------- --------- --------- ----------- --------- ---------
--------- --------- --------- --------- --------- ----------- --------- ---------
Pro forma income (loss) per
common share from continuing
operations (2)..................
--------- --------- --------- --------- --------- ----------- --------- ---------
--------- --------- --------- --------- --------- ----------- --------- ---------
Pro forma weighted average shares
outstanding (2).................
--------- --------- --------- --------- --------- ----------- --------- ---------
--------- --------- --------- --------- --------- ----------- --------- ---------
CASH FLOWS DATA:
Net Cash Provided by (used in)
Operating Activities.......... $ 5,006 $ (33) $ (912) $ 1,253 $ 2,106 $ 3,392 $ 3,298 $ 3,771
Net Cash Used in Investing
Activities.................... (4,880) (5) (1,218) (2,387) (11,908) (12,102) (10,442) (6,353)
Net Cash Provided by (used in)
Financing Activities.......... $ 1,480 $ (907) $ 1,963 $ 3,625 $ 9,175 $ 9,352 $ 5,824 $ 2,999
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31, AT JUNE 30,
----------------------------------------------------- --------------------
1991 1992 1993 1994 1995 1995 1996
--------- --------- --------- --------- --------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital............................. $ 1,782 $ 18 $ 404 $ 7,414 $ 7,900 $ (1,137) $ 6,843
Total assets................................ 21,458 24,356 20,921 27,502 42,437 35,796 56,750
Total debt.................................. 82 466 2,097 6,650 22,624 18,746 31,147
Common stockholder's equity/partners'
capital.................................... $ 6,798 $ 3,711 $ 8,582 $ 9,401 $ 4,478 $ (346) $ 5,343
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------ JUNE 30,
PRO FORMA --------------------
1991 1992 1993 1994 1995 1995(1) 1995 1996
--------- --------- --------- --------- --------- ----------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
OTHER DATA:
EBITDA (3)..................... $ 6,297 $ 2,282 $ 4,679 $ 10,515 $ 9,450 $ 10,757 $ (69) $ 11,453
Predecessor shareholder
costs (4)..................... 597 1,091 2,022 1,734 1,392 1,392 625 726
--------- --------- --------- --------- --------- ----------- --------- ---------
Adjusted EBITDA (5)............ 6,894 3,373 6,701 12,249 10,842 12,149 556 12,179
Capital expenditures........... $ 1,299 $ 1,063 $ 891 $ 2,712 $ 2,746 $ 2,746 $ 1,236 $ 2,134
</TABLE>
- ------------------------
* See discussions of acquisitions in "Business -- Acquisitions" and
"Management's Discussion and Analysis of Financial Conditions and Results of
Operations."
(1) The unaudited pro forma financial data for the year ended December 31, 1995
were prepared assuming that the 1995 Acquisitions, 1996 Acquisitions and
Pending Acquisitions were consummated as of January 1, 1995. In addition
such data give effect to the anticipated Reorganization. The unaudited pro
forma financial data give effect to the Pending Acquisitions under the
purchase method of accounting and certain estimated operational and
financial effects that are direct results of the acquisitions. See
"Business -- Acquisitions" and " -- Reorganization" and "Pro Forma
Financial Data."
(2) Weighted average shares outstanding and net income per common share are
calculated assuming the shares issued in conjunction with the
reorganization were outstanding for all periods presented. Metro Networks,
Inc. has not declared or paid any dividends on its Common Stock. However,
the Predecessor Companies have made cash distributions to their
shareholders from time to time. See "Business -- Reorganization."
(3) EBITDA is earnings before other expense (income), interest expense, taxes,
depreciation and amortization. EBITDA does not represent cash flows as
defined by generally accepted accounting principles and does not
necessarily indicate that cash flows are sufficient to fund all of the
Company's cash needs. EBITDA should not be considered in isolation or as a
substitute for net income, cash from operating activities or other measures
of liquidity determined in accordance with generally accepted accounting
principles.
(4) Predecessor shareholder costs consist of the expenses incurred by the
Predecessor Companies on behalf of their shareholders, which expenses will
not be incurred by the Company after the closing of this offering. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
(5) Adjusted EBITDA consists of EBITDA plus predecessor shareholder costs. The
Company believes that adjusted EBITDA is useful to prospective investors as
a measure of the Company's historical financial performance.
19
<PAGE>
MANAGEMENTS' DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company, which was founded in 1978, is the largest provider of traffic
reporting services and a leading supplier of local news, sports, weather and
other information reporting services to the television and radio broadcast
industries in the United States. The Company provides customized information
reports to affiliated radio and television stations in exchange for commercial
airtime inventory. The Company generates revenues by packaging such commercial
airtime inventory and selling it on a local, regional or national basis. While
the majority of the Company's revenues are currently generated from sales of
advertising on its Radio Traffic Services Network, the Company is experiencing
increased revenues from its Expanded Radio Services Network and its MetroTV
Network. The Company's expenses are primarily comprised of three categories: (i)
operations, which includes all the expenses related to gathering, producing, and
broadcasting information reports; (ii) marketing, which includes sales
commissions, salaries and benefits for sales personnel; and (iii) general and
administrative expenses, which includes corporate overhead. Most of the
Company's expenses are associated with its Radio Traffic Services. However,
during 1994, 1995 and the six months ended June 30, 1996, the Company incurred
additional expenses attributable to the development and operation of its
Expanded Radio Services (including operating expenses incurred prior to the
generation of significant revenue from the Expanded Radio Services), and during
1995 and the six months ended June 30, 1996, the Company incurred similar
additional expenses associated with the development of its MetroTV Services.
From 1978 through the closing of this offering, the business of the Company
will have been operated through the Predecessor Companies. Until the closing of
this offering, all of the equity interests in the Predecessor Companies will be
owned by the Saperstein Family.
Metro Networks, Inc. was incorporated in May 1996, as a holding company.
Subsequent to the Reorganization, Metro Networks, Inc. expects to conduct
substantially all of its operations through Metro Traffic Control, Inc., its
wholly owned subsidiary. To date, there have been no financial transactions or
operations carried out by Metro Networks, Inc.
The Company has experienced 18 years of growth in revenues. The Company has
also experienced increases in EBITDA, which has grown in each of the last 18
years with the exception of 1992 and 1995. In 1995, EBITDA and adjusted EBITDA
results reflect the impact of approximately $3.1 million of expenses (with
minimal incremental revenues) associated with the development and operation of
the Company's Expanded Radio Services and MetroTV Services, which the Company
introduced in 1994 and 1995, respectively. The Company has grown through
acquisitions, new market expansion, internally generated growth, and by offering
new products and services to its affiliate stations and advertising clients.
EBITDA consists of earnings before other expense (income), interest expense,
taxes, depreciation and amortization. EBITDA does not represent cash flows as
defined by generally accepted accounting principles and does not necessarily
indicate that cash flows are sufficient to fund all of the Company's cash needs.
EBITDA should not be considered in isolation or as a substitute for net income,
cash from operating activities or other measures of liquidity determined in
accordance with generally accepted accounting principles.
In the analysis set forth below, the Company discusses its adjusted EBITDA.
"Adjusted EBITDA" consists of EBITDA plus predecessor shareholder costs.
"Predecessor shareholder costs" consist of expenses incurred by the Predecessor
Companies on behalf of their shareholders which will not be incurred by the
Company after its initial public offering. Such predecessor shareholder costs
include the portion of David I. Saperstein's current salary which exceeds that
which Mr. Saperstein will receive after the offering, certain costs incurred by
the Company in connection with the lease of certain real property, costs related
to reciprocal transactions entered into by the Company for the sole benefit of
Mr. Saperstein, certain costs related to the operation of Pro Journey Travel,
Inc., (a company owned by Mr. Saperstein) and certain costs related to the
personal use of the services of certain of the Company's employees by Mr.
Saperstein, which costs are not expected to be incurred after the completion of
this
20
<PAGE>
offering. See "Certain Transactions." The Company believes that EBITDA is a
measure of financial performance widely used in the media and broadcast
industries and that adjusted EBITDA is useful to prospective investors as a
measure of the Company's historical financial performance.
In certain circumstances, the Company engages in reciprocal arrangements
with advertisers whereby the Company exchanges a portion of its unsold
commercial airtime inventory for goods and services. The Company believes that
reciprocal arrangements are common in the broadcasting industry. The Company's
reciprocal arrangements are recorded based on their estimated fair market value
and generally have had a net neutral effect on EBITDA; the net impact of
reciprocal arrangements in 1994 and 1995 on EBITDA was $0.6 million and ($0.1)
million, respectively. In recent years, however, the Company has reduced the
number of reciprocal arrangements in which it engages in order to better focus
its efforts on cash revenue generation and reduce the administrative costs
associated with reciprocal arrangements. In 1993, revenues from reciprocal
arrangements accounted for 16.8% of total revenues and declined to 13.3% in 1994
and 11.6% in 1995. During the six months ended June 30, 1996, revenues from
reciprocal arrangements decreased to 9.5% of total revenues. The Company expects
revenues from reciprocal arrangements to be approximately 10% or less of total
revenues in 1996.
The Company's advertising revenues vary moderately over the calendar year
with the first quarter generally reflecting the lowest revenues and the fourth
quarter the highest revenues for the year. Expenses, other than broadcasting
costs, are generally spread evenly over the year, resulting in some seasonality
in the Company's EBITDA.
INCOME TAXES
The combined financial statements are derived from the combined financial
statements of Metro Traffic Control, Inc., Metro Reciprocal, Inc., Metro
Networks, Ltd. and Metro Video News, Inc. and their subsidiaries. Metro
Reciprocal, Inc., Metro Video News, Inc. and Metro Traffic Control, Inc. have
elected to be taxed under the S Corporation provisions of the Internal Revenue
Code. Metro Networks, Ltd. is a partnership for federal income tax purposes.
These entities are, therefore, not subject to federal income taxes on their
taxable income and accordingly no provision for federal income taxes in respect
of these entities is made in the combined financial statements. Metro Networks,
Ltd., however, owns one hundred percent (100%) of the outstanding stock of one
subsidiary corporation, which in turn owns one hundred percent (100%) of the
outstanding stock of six (6) subsidiaries which collectively file a consolidated
federal income tax return and are subject to United States federal, state and
local income tax. The income taxes payable by these corporations have been
reflected in the combined financial statements. The income tax expense included
in the combined Predecessor Companies' financial statements presently reflects
the varying levels of income of the taxable and nontaxable entities included in
the combined financial statements rather than the aggregate levels of income of
the combined companies. After consummation of the Reorganization, Metro Traffic
Control, Inc., a wholly-owned subsidiary of the Company will be subject to
United States federal, state and local income taxes. In addition, any
differential between the book and tax basis in the underlying net assets which
is not presently reflected as a deferred tax asset or liability will be recorded
with a corresponding increase or decrease in income tax expense. As of June 30,
1996, the recognition of this differential would have resulted in an estimated
tax expense of approximately $352,000 had the Reorganization been effective on
that date.
21
<PAGE>
RESULTS OF OPERATIONS
The following table provides a summary of the Company's statement of
operations on an actual and percentage of revenues basis for the periods
indicated:
SUMMARY COMBINED FINANCIAL DATA
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED
-------------------------------------------------------------------------------------- JUNE 30,
PRO FORMA --------------------
1993 1994 1995 1995(1) 1995
-------------------- -------------------- -------------------- -------------------- --------------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Advertising
revenues........... $ 47,905 100.0% $ 60,048 100.0% $ 72,433 100.0% $ 78,102 100.0% $ 30,623 100.0%
Broadcasting
costs.............. 27,384 57.2 32,239 53.7 41,286 57.0 43,243 55.4 19,816 64.7
Marketing expense... 8,848 18.5 11,355 18.9 14,504 20.0 15,980 20.5 6,821 22.3
General and
administrative
expense............ 6,994 14.6 5,939 9.9 7,193 9.9 8,122 10.4 4,055 13.2
Depreciation and
amortization
expense............ 1,814 3.8 1,302 2.2 3,981 5.5 5,920 7.6 1,694 5.5
--------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
Total operating
costs............ 45,040 94.0 50,835 84.7 66,964 92.5 73,265 93.8 32,386 105.8
Income (loss) from
operations......... 2,865 6.0 9,213 15.3 5,469 7.6 4,837 6.2 (1,763) (5.8)
Other expenses
(income) (2)..... 238 0.5 (164) (0.3) (137) (0.2) (123) (0.2) (93) (0.4)
Interest
expense.......... 145 0.3 293 0.5 1,260 1.7 1,838 2.4 421 1.4
--------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
Income before income
tax provision...... 2,482 5.2 9,084 15.1 4,346 6.0 3,122 4.0 (2,091) (6.8)
Income tax
provision........ 1,066 2.2 2,179 3.6 1,036 1.4 1,061 1.4 229 0.7
Discontinued
operations....... (561) (1.2) -- * -- * -- * -- *
--------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
Net income (loss)... $ 855 1.8% $ 6,905 11.5% $ 3,310 4.6% $ 2,061 2.6% $ (2,320) (7.6)%
--------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
<CAPTION>
1996
--------------------
<S> <C> <C>
Advertising
revenues........... $ 50,077 100.0%
Broadcasting
costs.............. 24,173 48.3
Marketing expense... 10,101 20.2
General and
administrative
expense............ 4,350 8.7
Depreciation and
amortization
expense............ 2,936 5.9
--------- ---------
Total operating
costs............ 41,560 83.0
Income (loss) from
operations......... 8,517 17.0
Other expenses
(income) (2)..... (66) (0.1)
Interest
expense.......... 934 1.9
--------- ---------
Income before income
tax provision...... 7,649 15.3
Income tax
provision........ 573 1.1
Discontinued
operations....... -- *
--------- ---------
Net income (loss)... $ 7,076 14.1%
--------- ---------
--------- ---------
</TABLE>
- ------------------------------
(1) The unaudited pro forma financial data for the year ended December 31, 1995
were prepared assuming that the 1995 Acquisitions, 1996 Acquisitions and
Pending Acquisitions were consummated as of January 1, 1995. The unaudited
pro forma financial data give effect to the Pending Acquisitions under the
purchase method of accounting and certain estimated operational and
financial effects that are direct results of the acquisitions. See
"Business -- Acquisitions."
(2) Includes loss (gain) on disposition of property, loss (gain) on investment
in partnership and interest income.
SIX MONTHS ENDED JUNE 30, 1996 COMPARED TO SIX MONTHS ENDED JUNE 30, 1995
REVENUES. Revenues increased by $19.5 million, or approximately 63.5%, to
$50.1 million for the six months ended June 30, 1996 (the "June 1996 Period")
from $30.6 million for the six months ended June 30, 1995 (the "June 1995
Period"), primarily due to increased sales of commercial air time inventory. The
1995 Acquisitions and 1996 Acquisitions contributed $8.1 million of revenue to
the June 1996 Period as compared to $2.4 million to the June 1995 Period, as a
result of the timing of the acquisitions. "Same market" (i.e., excluding markets
that the Company did not own and operate during the June 1995 Period) revenues
increased by $14.9 million, or 47.8%, to $45.5 million in the June 1996 Period
from $30.6 million in the June 1995 Period. The increase in "same market"
revenues was primarily attributable to an increase in the portion of commercial
airtime inventory sold ("sell-through rate"), which increased from approximately
64% in the June 1995 Period to approximately 71% in the June 1996 Period. The
increase in the sell-through rate resulted from the Company's continued efforts
to strengthen its sales, marketing, and inventory management operations. The
increased sell-through rate
22
<PAGE>
created opportunities for the Company to increase prices on its sales of
commercial airtime inventory, which increased by approximately 8.0% from the
June 1995 Period to the June 1996 Period. Revenues from reciprocal arrangements
were $4.8 million in the June 1996 Period, an increase of $2.3 million from $2.5
million in the June 1995 Period. As a percentage of total revenues, revenues
from reciprocal arrangements increased marginally to 9.5% in the June 1996
Period from 8.2% in the June 1995 Period but were consistent with the Company's
expectation that such revenues will comprise 10% or less of the Company's total
revenues for the full year 1996.
BROADCASTING COSTS. Broadcasting costs increased by $4.4 million, or
approximately 22.0%, to $24.2 million in the June 1996 Period from $19.8 million
in the June 1995 Period. This increase was primarily attributable to increased
operating costs associated with new market operations acquired in the 1995
Acquisitions and 1996 Acquisitions, which accounted for approximately $1.5
million of the increase. Additionally, the Company's continued development of
its Expanded Radio Services, development of its MetroTV Services, and
commencement of its operations in Cincinnati, Ohio accounted for approximately
$0.6 million, $0.6 million, and $0.1 million, respectively, of the increase.
Excluding the increases discussed above, the Company's broadcasting costs
increased by approximately $1.5 million, or 7.6%, to $21.3 million in the June
1996 Period from $19.8 million in the June 1995 Period. As a percentage of
revenues, broadcasting costs declined to 48.2% for the June 1996 Period from
68.5% for the June 1995 Period due to the relatively fixed nature of certain of
the Company's broadcasting costs. Broadcasting costs attributable to reciprocal
arrangements decreased from approximately $2.9 million in the June 1995 Period
to $2.7 million in the June 1996 Period.
MARKETING EXPENSE. Marketing expense increased by $3.3 million to $10.1
million in the June 1996 Period from $6.8 million in the June 1995 Period. This
increase resulted from increased sales commissions associated with the increased
revenues generated in the June 1996 Period. The 1995 Acquisitions and 1996
Acquisitions accounted for $0.9 million of this increase. Because a portion of
the Company's marketing expense is relatively fixed, marketing expense as a
percentage of revenues decreased to 20.2% in the June 1996 Period as compared to
22.3% in the June 1995 Period. On a same market basis, marketing expense
increased by $2.4 million to $9.2 million in the June 1996 Period from $6.8
million in the June 1995 Period. As a percentage of revenues, on a same market
basis, marketing expense decreased to 20.2% in the June 1996 Period from 22.3%
in the June 1995 Period. Marketing expense related to reciprocal arrangements
decreased by approximately $0.6 million from $1.2 million in the June 1995
Period to $0.6 million in the June 1996 Period.
GENERAL AND ADMINISTRATIVE EXPENSE. General and administrative expense
increased by $0.3 million, or approximately 7.2%, to $4.4 million in the June
1996 Period from $4.1 million in the June 1995 Period. This increase was
primarily due to increased salaries and related overhead costs attributable to
the Company's continued growth. General and administrative expense related to
reciprocal arrangements decreased by approximately $0.7 million from $1.1
million in the June 1995 Period to $0.4 million in the June 1996 Period.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense
increased by $1.2 million to $2.9 million in the June 1996 Period from $1.7
million in the June 1995 Period, primarily as a result of the Company's
increased asset base following the 1995 Acquisitions and 1996 Acquisitions.
These acquisitions accounted for $0.8 million of this increase. Depreciation and
amortization expense attributable to reciprocal arrangements decreased by
approximately $0.1 million from $0.5 million in the June 1995 Period to $0.4
million in the June 1996 Period.
OTHER EXPENSES (INCOME). Other expenses (income) were $(0.1) million in
both the June 1996 Period and the June 1995 Period.
INTEREST EXPENSE. Interest expense increased by $0.5 million to $0.9
million in the June 1996 Period from $0.4 million in the June 1995 Period. The
increase was attributable to the incurrence of indebtedness in connection with
the 1995 Acquisitions and 1996 Acquisitions.
23
<PAGE>
NET INCOME. As a result of the factors discussed above, net income
increased to $7.1 million in the June 1996 Period from a loss of $2.3 million in
the June 1995 Period.
EBITDA AND ADJUSTED EBITDA. EBITDA increased by approximately $11.6 million
to $11.5 million in the June 1996 Period from a $0.1 million loss in the June
1995 Period. In addition, EBITDA as a percentage of revenues ("operating
margin") improved to 22.9% in the June 1996 Period. The increases in EBITDA and
operating margin were primarily attributable to the relatively fixed nature of
certain of the Company's broadcasting costs. Because broadcasting costs and
general and administrative expense, which typically account for approximately
70-75% of the Company's operating expenses, tend not to increase proportionately
with revenues, increases in the Company's revenues typically result in increases
in operating margin and EBITDA. On a same market basis, EBITDA increased by
approximately $10.0 million to $10.5 million in the June 1996 Period. Adjusted
EBITDA (I.E., EBITDA plus predecessor shareholder costs) increased by
approximately $11.6 million to $12.2 million in the June 1996 Period. Adjusted
EBITDA as a percentage of revenues increased to 24.3% in the June 1996 Period
from 1.8% in the June 1995 Period.
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994.
REVENUES. Revenues increased by $12.4 million, or approximately 20.6%, to
$72.4 million in 1995 from $60.0 million in 1994. This increase was primarily
due to revenues generated by the operations acquired in connection with the 1995
Acquisitions and increased sales of commercial airtime inventory on the Radio
Traffic Services Network. The 1995 Acquisitions generated revenues of
approximately $7.1 million in 1995. Excluding these revenues, same market
revenues increased $5.3 million in 1995, or 8.9%. The Company's sell-through
rate increased to 72.0% in 1995 from 69.0% in 1994. The Company's average
commercial airtime inventory prices increased by approximately 1.0% in 1995 over
1994 prices. Including the 1995 Acquisitions, 1996 Acquisitions and Pending
Acquisitions, pro forma revenues increased 30.1% to $78.1 million in 1995 from
$60.0 million in 1994. Revenues from reciprocal arrangements as a percentage of
total revenues declined to 11.6% in 1995 from 13.3% in 1994.
BROADCASTING COSTS. Broadcasting costs increased by $9.0 million, or 28.1%,
to $41.3 million in 1995 from $32.2 million in 1994. This increase was
attributable to the addition of 16 markets to the Company's operations
(including personnel costs and costs related to the facilities required to
support the Company's operations in its new markets), continued development of
the Expanded Radio Services and the development and operation of the MetroTV
Services. The 1995 Acquisitions accounted for $2.8 million, or 6.8%, of the
total cost of operations in 1995. Primarily as a result of an increase in
operating costs associated with the development and operation of the Expanded
Radio Services and the Video News Services from $1.4 million in 1994 to $3.1
million in 1995, broadcasting costs as a percentage of revenues increased from
53.7% in 1994 to 57.0% in 1995. Broadcasting costs associated with reciprocal
arrangements increased by $0.6 million to $5.0 million in 1995, from $4.4
million in 1994.
MARKETING EXPENSE. Marketing expense increased by $3.1 million, or
approximately 27.7%, to $14.5 million in 1995 from $11.4 million in 1994. This
increase resulted from increased sales commissions associated with the increased
revenues generated in 1995. As a percentage of revenues, marketing expense was
20.0% in 1995 and 18.9% in 1994. This increase in percentage terms resulted
primarily from the addition of sales representatives, sales managers and
managerial staff in connection with the Company's efforts to improve the
sell-through rate and higher marketing costs associated with the 1995
Acquisitions. Specifically, the 1995 Acquisitions accounted for $1.5 million of
total marketing expense in 1995. Marketing expense associated with reciprocal
arrangements increased by $0.8 million to $2.6 million in 1995, from $1.8
million in 1994.
GENERAL AND ADMINISTRATIVE EXPENSE. General and administrative expense
increased by $1.3 million, or approximately 21.1%, to $7.2 million in 1995 from
$5.9 million in 1994. This increase was primarily attributable to costs
associated with the acquisition and operation of the 1995 Acquisitions and the
development and expansion of the Expanded Radio Services and the MetroTV
Services. General and administrative expense associated with reciprocal
arrangements decreased by $0.2 million to $1.0 million in 1995, from $1.2
million in 1994.
24
<PAGE>
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense
increased to $4.0 million in 1995 from $1.3 million in 1994. This increase
resulted primarily from the increases in the Company's asset base resulting from
the 1995 Acquisitions and the 1994 Acquisitions (as defined herein). The 1995
Acquisitions accounted for $1.9 million of the total depreciation and
amortization costs in 1995. Depreciation and amortization expense associated
with reciprocal arrangements increased to $1.0 million in 1995 from $0.4 million
in 1994.
OTHER EXPENSES (INCOME). Other expenses (income) increased to $(0.1)
million in 1995 from $(0.2) million in 1994.
INTEREST EXPENSE. Interest expense increased to $1.3 million in 1995 from
$0.3 million in 1994. This increase resulted primarily from increases in
indebtedness incurred in connection with the 1995 Acquisitions.
NET INCOME. As a result of the factors discussed above, net income
decreased by $3.6 million to $3.3 million in 1995 from $6.9 million in 1994.
EBITDA AND ADJUSTED EBITDA. EBITDA decreased by $1.0 million, or
approximately 10.5%, to $9.5 million in 1995 from approximately $10.5 million in
1994. This decrease was attributable to increases in broadcasting costs,
marketing expense and general and administrative expense as discussed above.
EBITDA as a percentage of revenues decreased to 13.0% in 1995 from 17.5% in
1994. Adjusted EBITDA decreased by $1.4 million to $10.8 million in 1995 from
$12.2 million in 1994. Adjusted EBITDA as a percentage of revenues decreased to
15.0% in 1995 from 20.4% in 1994. If the 1995 Acquisitions, 1996 Acquisitions
and Pending Acquisitions had occurred as of January 1, 1995, pro forma adjusted
EBITDA would have been $12.2 million in 1995.
YEAR ENDED DECEMBER 31, 1994 COMPARED TO YEAR ENDED DECEMBER 31, 1993
REVENUES. Revenues increased by $12.1 million, or approximately 25.3%, to
$60.0 million in 1994 from $47.9 million in 1993, primarily due to increased
sales of commercial airtime inventory in existing markets. The sell-through rate
increased to approximately 69.0% in 1994 from approximately 65.0% in 1993. In
addition, the Company's average commercial airtime inventory prices increased by
approximately 6.0% in 1994 over 1993 prices. In 1994, the operations acquired in
the 1994 Acquisitions generated revenues of approximately $0.6 million. Revenues
from reciprocal arrangements as a percentage of total revenues declined to 13.3%
in 1994 from 16.8% in 1993.
BROADCASTING COSTS. Broadcasting costs increased by $4.9 million, or
approximately 17.7%, to $32.2 million in 1994 from $27.4 million in 1993. Such
increase was attributable to the 1994 Acquisitions, start-ups in new markets and
costs of $1.4 million related to the development of the Expanded Radio Services.
Broadcasting costs as a percentage of revenues decreased to 53.7% in 1994 from
57.2% in 1993, primarily as a result of strong revenue growth. Such costs
generally do not increase proportionately with revenues. Broadcasting costs
associated with reciprocal arrangements increased by $0.8 million to $4.4
million in 1994, from $3.6 million in 1993.
MARKETING EXPENSE. Marketing expense increased by $2.5 million, or
approximately 28.3%, to $11.4 million in 1994 from $8.8 million in 1993. This
increase was attributable to increased sales commissions associated with revenue
increases in 1994. Marketing expense as a percentage of revenues remained
relatively constant at 18.9% in 1994 and 18.5% in 1993. Marketing expense
associated with reciprocal arrangements increased by $0.1 million to $1.8
million in 1994, from $1.7 million in 1993.
GENERAL AND ADMINISTRATIVE EXPENSE. General and administrative expense
decreased $1.1 million, or approximately 15.1%, to $5.9 million in 1994 from
$7.0 million in 1993. This decrease was primarily due to a decrease in
predecessor shareholder costs, specifically a decrease in the salary paid to Mr.
Saperstein. General and administrative expense associated with reciprocal
arrangements decreased by $0.9 million to $1.2 million in 1994, from $2.1
million in 1993.
25
<PAGE>
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense
decreased by $0.5 million, or 28.2%, to $1.3 million in 1994 from $1.8 million
in 1993, as a result of certain intangible assets associated with prior
acquisitions becoming fully amortized. Depreciation and amortization expense
associated with reciprocal arrangements decreased by $0.4 million in 1994 from
$1.1 million in 1993.
OTHER EXPENSES (INCOME). Other expenses (income) decreased to $(0.2)
million in 1994 from $0.2 million in 1993. This decreases was primarily
attributable to a $0.3 million loss on disposition of property in 1993.
INTEREST EXPENSE. Interest expense increased by $0.2 million, to $0.3
million in 1994 from $0.1 million in 1993. This increase was primarily due to an
increase in indebtedness related to the 1994 Acquisitions.
NET INCOME. As a result of the factors discussed above, net income
increased by $6.0 million to $6.9 million in 1994 from $0.9 million in 1993.
DISCONTINUED OPERATIONS. In 1992 the Company acquired Houston Metropolitan,
Ltd., a magazine concern in Houston, Texas, for notes payable and reciprocal
merchandise totaling $0.4 million. In 1993 the Company incurred a loss from
operations of $0.3 million (net of tax benefit of $0.2 million) and a loss on
disposal of $0.2 million (net of tax benefit of $0.1 million).
EBITDA AND ADJUSTED EBITDA. EBITDA increased by $5.8 million, or 124.7%, to
$10.5 million in 1994 from $4.7 million in 1993. This increase was due to an
increase in revenues and was partially offset by increases in broadcasting
costs, marketing expense and general and administrative expense. EBITDA as a
percentage of revenues increased to 17.5% in 1994 from 9.8% in 1993. Adjusted
EBITDA increased by $5.5 million to $12.2 million in 1994 from $6.7 million in
1993. Adjusted EBITDA as a percentage of revenues increased to 20.4% in 1994
from 14.0% in 1993.
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company has financed its operations with cash generated by
operations and funds provided pursuant to the Credit Agreement. The Company has
used cash provided by operating activities to fund capital expenditures,
operations and distributions to its stockholders.
Net cash provided by operating activities increased by approximately $0.5
million, to $3.8 million in the June 1996 Period from $3.3 million in the June
1995 Period as a result of increases in net earnings before depreciation and
amortization and an increase in accrued liabilities. This increase was partially
offset by an increase in accounts receivable, an increase in cash used by net
reciprocal arrangements, and a decrease in deferred revenues. Net cash used in
investing activities decreased by $4.1 million, to $6.3 million in the June 1996
Period from $10.4 million in the June 1995 Period, due to a decrease in
acquisition costs. This decrease was partially offset by an increase in the
acquisition costs of property and equipment. Net cash provided by financing
activities decreased by $2.8 million, to $3.0 million in the June 1996 Period
from $5.8 million in the June 1995 Period as a result of (i) the reduction in
the rate of growth of long term debt and (ii) an increase in shareholder's
distributions. Such decrease in net cash provided by financing activities was
partially offset by an increase in disbursement float.
Net cash provided by operating activities increased by $0.8 million to $2.1
million in 1995 from $1.3 million in 1994. This increase was primarily
attributable to an increase in income taxes payable and a decrease in cash used
by reciprocal arrangements. These factors were partially offset by a decrease in
net earnings before depreciation and amortization and deferred revenue and a
decrease in the rate of growth of accounts receivable. Net cash used in
investing activities was $2.4 million in 1994 and $11.9 million in 1995. Cash
used in investing activities related primarily to (i) in 1994, the 1994
Acquisitions and advances to a stockholder of the Company (primarily for the
payment of income taxes payable by the shareholders in respect of S Corporation
income) and (ii) in 1995, the 1995 Acquisitions and acquisitions of information
gathering and broadcasting equipment. Net cash provided by financing activities
in 1994 and 1995 was $3.6 million and $9.2 million, respectively. Cash provided
by financing activities was comprised primarily of proceeds from funds provided
pursuant to the Credit Agreement. As of June 30,
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1996, the Company had short-term debt of $7.2 million and long-term debt of
$24.0 million. Short-term debt consisted of current maturities of borrowings
under the Credit Agreement, current portions of long-term debt and current
portions of capitalized lease obligations. Long-term debt consisted of the long-
term portion of the Credit Agreement and the long-term portion of the notes
relating to certain acquisitions.
Net cash provided by operating activities increased to $1.3 million in 1994
from $(0.9) million in 1993 due to the increases in net earnings and deferred
revenues. The increase in net earnings and deferred revenues was partially
offset by an increase in accounts receivable and cash used by net reciprocal
arrangements and a decrease in income taxes payable. Net cash used in investing
activities increased to $2.4 million in 1994 from $1.2 million in 1993 as a
result of an increase in advances on receivables from stockholders. This
increase was partially offset by an increase in proceeds from the sale of
property and equipment. Net cash provided by financing activities increased to
$3.6 million in 1994 from $2.0 million in 1993 due to an increase in long term
debt. This increase was partially offset by distributions to shareholders.
Accounts receivable increased $4.0 million in 1995 primarily as a result of
an increase in sales to $72.4 million in 1995 from $60.0 million in 1994. Income
taxes payable decreased $1.8 million in 1994 primarily due to the fact that the
largest of the Predecessor Companies elected to be treated as an S corporation
for tax purposes effective July 1, 1994. A major customer's declaration of
bankruptcy caused 1994 bad debt expense to be significantly higher than in 1995.
Since 1994, the Company's bad debt expense has been relatively constant. Net
reciprocal activities decreased by $1.8 million in 1995 primarily due to the
Company's decision to decrease its reciprocal arrangements and concentrate on
generation of cash revenues.
THE CREDIT AGREEMENT AND NOTES PAYABLE
The maximum aggregate permitted borrowings (the "Line of Credit") under the
Credit Agreement are $30.0 million. The Line of Credit bears interest at a
variable rate determined by the lender's prime rate or LIBOR and the Company's
total leverage; the interest rate ranges from 50 to 100 basis points over the
prime rate or 100 to 200 basis points over LIBOR. The Line of Credit has a
commitment fee of 0.375% per annum on the daily average unborrowed balance of
the Line of Credit. The Line of Credit currently is secured by a pledge of the
equity interests in each of the Predecessor Companies. The Credit Agreement
provides for various restrictions on the Company which preclude the Company,
without first obtaining the lender's consent, from taking certain actions,
including incurring additional indebtedness, purchasing the assets of any entity
other than in the ordinary course of business, merging or consolidating with any
other entity, altering its existing capital structure and paying certain
dividends. As of June 30, 1996, the Company had $29.3 million outstanding under
the Line of Credit. The Company intends to repay the balance outstanding under
the Line of Credit with a portion of the net proceeds of this offering.
The Company has obtained a commitment letter to enter into an amended and
restated credit agreement with its lender upon the closing of this offering.
Such Amended Line of Credit is expected to provide for maximum aggregate
permitted borrowings of $30.0 million. The Amended Line of Credit is expected to
expire September 30, 2003, and to begin amortizing in September 1998. The
Amended Line of Credit is expected to bear interest at a variable rate indexed
to the lender's prime rate or LIBOR and the Company's total leverage. The
Amended Line of Credit is expected to have a commitment fee based on the daily
average unborrowed balance of the Amended Line of Credit. Upon the closing, the
Company anticipates that the Amended Line of Credit will be secured by the
granting of a lien by the Company on all of its assets and a pledge of its
equity interests in each of the Predecessor Companies in favor of its lender.
The Amended Line of Credit is expected to provide for various restrictions on
the Company which would preclude the Company, without first obtaining the
lender's consent, from taking certain actions, including incurring additional
indebtedness, purchasing the assets of any entity other than in the ordinary
course of business, merging or consolidating with any other entity, altering its
existing capital structure and paying certain dividends.
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The Company issued non-interest bearing notes in connection with the
acquisitions in 1995 of the stock of Skyview Broadcasting Networks, Inc. and
Airborne Broadcast Consultants and the acquisition in 1995 of the assets of
Airborne Broadcasting Systems, Inc. and the 1994 acquisition of Charlotte
Traffic Patrol, Inc. which had principal amounts of $0.2 million, $0.1 million,
$0.1 million and $0.7 million, respectively, outstanding as of June 30, 1996.
The Company has guaranteed a $0.7 million letter of credit related to the
Charlotte acquisition as of June 30, 1996. See "Business -- Acquisitions."
CAPITAL EXPENDITURES
Capital expenditures were $2.7 million in both 1994 and 1995. Historically,
the Company's capital expenditures have related principally to increasing the
Company's information gathering capabilities, broadcasting capacity and
technology base. The Company anticipates that capital expenditures in 1996 will
be approximately $7.0 million. This $7.0 million is expected to include between
$4.0 million and $5.0 million for expenditures associated with expanding the
Company's information gathering and broadcasting capabilities, including
significant expenditures on video broadcasting and surveillance.
The Company believes its existing sources of liquidity, cash provided by
operations, the Credit Agreement and the proceeds of this offering will satisfy
the Company's anticipated working capital and capital expenditure requirements
for the foreseeable future.
EFFECTS OF INFLATION
The Company believes that the relatively moderate rate of inflation over the
past few years has not had a significant impact on the Company's results of
operations.
RECENT ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board issued SFAS No. 123, "Accounting
for Stock Based Compensation" in October 1995, which establishes financial
accounting and reporting standards for stock based on employee compensation
plans including, stock purchase plans, stock options, restricted stock and stock
appreciation rights. The Company has elected to continue accounting for stock
based on compensation under Accounting Principles Board Opinion No. 25. The
disclosure requirements of SFAS No. 123 will be effective for the Company's
financial statements beginning in 1996. Management does not believe that the
implementation of SFAS 123 will have a material effect on its financial
statements.
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BUSINESS
OVERVIEW
The Company is the largest provider of traffic reporting services and is a
leading supplier of local news, sports, weather and other information reporting
services to the television and radio broadcast industries. The Company's
information reports, which are customized to meet the specific needs of each of
the Company's individual radio and television station affiliates, are presently
being broadcast by more than 1,275 radio stations affiliates and 100 television
station affiliates. The Company provides local broadcast information reports in
47 of the 50 largest MSA markets in the United States. In exchange for the
Company's information reports, radio and television station affiliates provide
commercial airtime inventory to the Company. The packaging and sale of this
commercial airtime inventory accounts for substantially all of the Company's
revenues.
Because the Company has numerous radio station affiliates in each of its
markets (averaging 21 affiliates per market), the Company believes that its
broadcasts of local traffic information enable advertisers to reach more people,
more often, in a higher impact manner than can be achieved using other
advertising media. The Company's information reports are broadcast daily in 60
MSA markets and are heard by more than 100 million people (age 12 and over).
Such reports and the Company's commercial messages are listened to by an average
of 88% of the population (age 12 and over) in its markets. The Company's large
network of affiliates offers advertisers the opportunity to reach a broad-based
local, regional or national audience, through a single purchase of commercial
airtime inventory from the Company.
The Company offers advertisers three different networks on which to
broadcast their advertisements: the Radio Traffic Services Network which
broadcasts the Radio Traffic Services, the Expanded Radio Services Network which
broadcasts the Expanded Radio Services and the MetroTV Network which broadcasts
the MetroTV Services. The Company believes that the Expanded Radio Services
Network and the MetroTV Network, both of which are currently being developed,
will become separate broad-based networks through which the Company will be able
to acquire, package and sell additional commercial airtime inventory. See
"--Operating Strategy" and "-- Advertising Sales and Marketing."
Since its founding in 1978, the Company has demonstrated growth in net
revenues and EBITDA. For the six months ended June 30, 1996, the Company had
revenues of $50.1 million, EBITDA of $11.5 million and adjusted EBITDA of $12.2
million. For the year ended December 31, 1995, the Company had pro forma
revenues of $78.1 million, pro forma EBITDA of $10.8 million and pro forma
adjusted EBITDA of $12.1 million.
OPERATING STRATEGY
The Company's strategy is to realize operating efficiencies by: (i)
expanding geographically, (ii) increasing the number of affiliates using the
Radio Traffic Services within existing markets, (iii) developing the Expanded
Radio Services, (iv) developing the MetroTV Services and (v) continuing to
strengthen its marketing, sales and inventory management operations.
EXPAND GEOGRAPHICALLY. The Company, which currently operates in 60 MSA
markets in the United States, including 54 of the largest 75 MSA markets in the
United States, believes that the economic model for its local information
services business is viable in each of the largest 75 markets. Since July 1994,
the Company has entered 16 new markets, including six strategic acquisitions
accounting for an additional 14 markets and start-ups in two new markets
throughout the United States. Additionally, the Company intends to expand into
the remaining 21 markets over the next three years through strategic
acquisitions and start-ups. Strategic acquisitions afford the Company the
opportunity to realize economies of scale and cost savings as existing
operations are acquired and duplicative functions eliminated.
INCREASE THE NUMBER OF AFFILIATES USING THE RADIO TRAFFIC SERVICES WITHIN
EXISTING MARKETS. The Company believes that there are substantial opportunities
for continued growth in its Radio Traffic
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Services Network. As of June 30, 1996, the Company provided the Radio Traffic
Services to approximately 1,230 radio station affiliates, an increase from
approximately 900 radio station affiliates as of December 31, 1994. The Company
believes that opportunities are available to increase its market penetration by
establishing affiliate relationships with additional radio stations. Its current
Radio Traffic Services Network represents 48.7% of the approximately 2,524 radio
stations in the 60 MSA markets in which the Company operates. Once the Company
establishes a presence in a market by providing its services to at least one
affiliate, it can leverage its investment in information gathering technology,
such as aircraft and fixed-position cameras, by providing traffic services to
multiple affiliates, at minimal additional costs.
DEVELOP THE EXPANDED RADIO SERVICES. Having established a substantial
market presence in the Radio Traffic Services, the Company began during 1994 to
leverage this business by offering the Expanded Radio Services to its network of
radio station affiliates. As of June 30, 1996, the Company provided the Expanded
Radio Services to more than 200 radio station affiliates in 28 MSA markets, an
increase from 92 radio station affiliates in 17 MSA markets as of December 31,
1994. The Company believes it can provide customized information reports of a
superior quality, at a lower cost than an individual station can provide on its
own. Moreover, the Company believes that consolidation in the radio industry may
increase the demand for the Expanded Radio Services Network because radio
station owners are likely to continue to increase their out-sourcing of various
programming elements in order to minimize operating costs. The Company plans to
focus on increasing the number of radio stations broadcasting the Expanded Radio
Services within its current markets, and to expand these services to all of its
markets by the end of 1997.
DEVELOP THE METROTV SERVICES. The Company has provided its Television
Traffic Services to the MetroTV Network for over ten years. As of June 30, 1996,
this network consisted of 110 television stations in 47 DMA markets, an increase
from 71 television stations in 33 DMA markets as of December 31, 1994. In
connection with its core Radio Traffic Services business, the Company developed
an extensive infrastructure of video surveillance and broadcast equipment,
including jet helicopters, broadcast quality remote and omni-directional
aircraft-mounted camera systems, mobile units, computer generated graphic
displays and broadcasting technology. In 1995, the Company began to use this
infrastructure to offer the Video News Services to its network of television
station affiliates; the Company currently provides this service to 16 of its
television station affiliates in 12 of its DMA markets. The Company's MetroTV
Services include full service, 24 hours per day/7 days per week video coverage
from camera crews in the Company's aircraft and in the Company's mobile ground
units covering news stories. In addition, the Company's strategically located
fixed-position ground-based camera systems offer affiliates coverage of crucial
traffic arteries and news stories, and are capable of providing panoramic views
of the cities in which such cameras are located. The Company intends to expand
the Video News Services into the 25 largest DMA markets in the United States
over the next three years.
CONTINUE TO STRENGTHEN MARKETING, SALES AND INVENTORY MANAGEMENT
OPERATIONS. Over the past year, the Company has invested in, and continues to
initiate and implement, new operating strategies and systems to increase
revenues and EBITDA in its operations. In order to increase the percentage of
the Company's commercial airtime inventory sold, the Company has (i) increased
its sales force from approximately 70 sales representatives as of December 31,
1994 to approximately 136 sales representatives as of June 30, 1996; (ii)
developed a corporate marketing department to support the efforts of its sales
representatives by providing extensive training, research, sales/marketing
materials and analysis; (iii) hired additional general managers and sales
managers to better manage the activities of its sales representatives and
enhance its affiliate relations; (iv) fully automated its commercial airtime
inventory management system to improve inventory control and pricing; and (v)
reduced the level of reciprocal arrangements to focus sales representatives on
cash revenue business. These enhancements have allowed the Company to increase
advertising rates in each of 1994 and 1995. In addition, the Company estimates
that it sold approximately 69% in 1994 and 72% in 1995, respectively, of its
Radio Traffic
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Services Network and Expanded Radio Services Network commercial airtime
inventory. For the six months ended June 30, 1996, the Company estimates that it
sold approximately 71% of its existing radio network commercial airtime
inventory.
PROGRAMMING
Every aspect of the Company's information reports (including the length of
report, content of report, specific geographic coverage area, time of broadcast,
number of reports aired per day, broadcaster's style, etc.) is customized to
meet each individual affiliate's requirements. The Company typically works
closely with the program directors, news directors, and general managers of its
affiliates to ensure that the Company's services meet its affiliates' quality
standards. The Company and its affiliates jointly select the on-air broadcasters
to ensure that each broadcaster's style is appropriate for the station's format.
The Company's broadcasters often become integral "personalities" on such
affiliates' stations as a result of their significant on-air presence and
interaction with the stations' on-air personnel. In order to realize operating
efficiencies, the Company endeavors to utilize its professional broadcasters on
multiple affiliate stations within a particular market. Generally, each of the
Company's broadcasters delivers reports to between two and four of the Company's
affiliates.
The Company does not require its affiliates to identify the Company as the
supplier of its information reports. This provides the Company's affiliates with
a high degree of customization and flexibility, as each affiliate has the right
to present the information reports provided by the Company as if the affiliate
had generated such reports with its own resources. For example, multiple
affiliates in a single market may suggest that the Company's infrastructure,
including its airplanes, helicopters and broadcasters, are those of the
affiliate.
RADIO PROGRAMMING SERVICES
The Company has been supplying radio stations with customized Radio Traffic
Services since its inception in 1978. The Company is now the largest supplier of
the Radio Traffic Services in the United States. The Company has offered its
Expanded Radio Services since 1994 and is now a leading supplier of such
services, with over 200 affiliates in 28 markets. The Company intends to have a
general news reporting presence in all of its 60 markets by the end of 1997.
The Company gathers traffic and other data utilizing the Company's
information-gathering infrastructure, which includes aircraft (jet helicopters
and airplanes), broadcast quality remote camera systems positioned both at
strategically located ground positions and on aircraft, mobile units and
cellular systems, and by accessing various government based traffic tracking
systems. The Company also gathers information through various services including
Reuters America Inc., Turner Program Services, Inc., WeatherBank, Inc., Weather
Services Corporation, City News Service of Los Angeles, Sports Final Radio Net,
Inc. and Bay City News, Inc. The information is then processed, written into
broadcast copy and entered into the Company's computer systems by the Company's
local writers and producers. The Company's professional broadcasters then read
the customized reports on the air.
The Company's information-gathering infrastructure and the flexibility
created by its ability to provide services 24 hours per day/7 days per week to
its affiliates enable the Company to respond to changing conditions and enable
the Company's affiliates to provide their listeners with accurate up-to-
the-minute information. For example, responding to numerous radio station
requests during the Long Island fires in 1995, the Company's New York operations
center substantially increased the number of reports regarding this subject
provided to affiliates. Rapid response in similar circumstances, such as in
connection with the 1994 Los Angeles earthquake, is routinely achieved by the
Company whenever weather or other events impact either traffic or other
conditions of interest to the listeners or viewers of the Company's affiliates.
See "-- Infrastructure."
As a result of its extensive network of operations and broadcasters, the
Company often reports important news stories and provides its affiliates with
live coverage of these stories. The Company is able to customize and personalize
its reports of breaking stories using its individual affiliates' call letters
from the scene of news events. For example, during the TWA Flight 800 crisis,
the Company provided live
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customized reports from New York to its affiliates all over the country. The
Company believes that it is the only radio network news organization that has
local studio operations that cover 60 markets and that is able to provide such
customized reports to these markets.
In addition, the Company is currently test marketing a regional news wire
service (non-customized text and audio) in five markets. If the test is
successful, the Company plans to launch its news wire service in various regions
beginning in 1997. The Company could eventually offer this service in small and
medium-sized markets without opening any local operations centers as this would
be a non-customized service and distributed via satellite, thereby generating
additional commercial airtime inventory for the Expanded Radio Services.
TELEVISION PROGRAMMING SERVICES
The Company has been supplying its Television Traffic Services to television
stations for over ten years and is currently providing such services to 110
television stations in 47 markets. Originally, the Company provided television
stations with audio reports of traffic information and simple graphics; as the
Company developed its Television Traffic Services, it provided more
sophisticated graphics displays to the MetroTV Network. In 1995, the Company
began to expand and enhance the information services that it provides to
television stations. The Company is now providing its Video News Services to
approximately 16 television stations in 12 markets. As with its radio
programming services, with its MetroTV services the Company supplies customized
information reports which are delivered on air by its professional broadcasters
to its television station affiliates. In addition, the Company supplies
customized graphics and other visual programming elements to its television
station affiliates.
The Company began utilizing live studio cameras in order to enable its
traffic reporters to provide its Video News Services on television from the
Company's local broadcast studios. In addition, the Company began in 1995 to
provide its Video News Services from its aircraft and ground based camera
systems. The Company provides its Television Traffic Services and Video News
Services to television stations owned by some of the largest television groups
in the nation, including A.H. Belo Corporation, Cox Communications, Inc., ABC
Inc., a subsidiary of The Walt Disney Company, Ellis Communications, Inc., Fox
Television Stations, Inc., a subsidiary of The News Corporation Limited,
National Broadcasting Company, Inc., a subsidiary of General Electric Company,
The Washington Post Co. and CBS, Inc., a subsidiary of Westinghouse Electric
Company.
The Video News Services include: (i) full-service, 24 hours per day/7 days
per week video coverage from the Company's camera crews, using broadcast quality
camera equipment and news vehicles; (ii) live video news feeds from the
Company's aircraft; and (iii) live video coverage from strategically located
ground based camera systems. Currently, the Company is providing all of such
Video News Services to four affiliates in Houston, Texas, where the Company has
tested the product for the past fifteen months, and plans to expand it into the
25 largest DMA markets in the country over the next three years. The capital and
operating expenditures needed to expand the Company's Video News Services have
been and will continue to be significant relative to the capital expenditures
required by the Company to operate its radio information services business.
METRO INFORMATION SERVICES
The Company initiated its Metro Information Services ("MIS") division to
develop non-broadcast traffic information business. MIS develops innovative
techniques of gathering local traffic and transportation information as well as
new methods of distributing such information to the public. The Company believes
that in order to remain competitive and to continue to provide an information
product of the highest quality to its affiliates, it is necessary to invest in
and participate in the development of new technology. The Company is currently
working with numerous public and private entities across the United States to
improve dissemination of traffic and transportation information. The Company is
a large supplier of information to the wireless telephone industry, providing
customized traffic information, direction services, and other local information
to cellular subscribers via the Company's STAR JAM (TM) and STAR FIND (TM)
services. Also, the Company plans to offer traffic information services via the
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Internet, other wireless communications, in-vehicle systems and other potential
delivery mechanisms. The Company believes that it is well-positioned, as a
leading supplier of local traffic and other information, to benefit from the
evolution of future distribution systems.
The Company has participated in several United States Department of
Transportation ("USDOT") funded "Intelligent Transportation Systems" projects
including: (i) The Atlanta Showcase, a federally funded technology demonstration
project which took place during the Summer Olympics in 1996 and involved the
delivery of traffic and mobility information and (ii) TravInfo Traveler
Information Center, a field operational test being conducted in the San
Francisco Bay Area to implement a region-wide, open-access, multi-model advanced
traveler information service.
INFRASTRUCTURE
The Company's geographically dispersed operations have historically been
organized into several regions. Formerly, a regional General Manager would
typically have overall management responsibility for sales and operations in
such General Manager's region, which would be comprised of four to six markets,
depending on the size of the markets. However, the Company believes that as it
continues to grow its Expanded Radio Services and Video News Services, a General
Manager focused exclusively on one market or a smaller number of markets will be
able to more effectively implement and maintain affiliate relationships and
maximize the percentage of available advertising inventory sold. Accordingly,
the Company presently intends to reorganize its management to place a single
General Manager in each of its 10 largest markets and to assign a General
Manager in its remaining markets to a small number of markets, generally one to
three.
In each of its markets, the Company employs a Director of Operations who is
responsible for all aspects of the Company's day-to-day operations. Each
Director of Operations is responsible for supervising all of the broadcasters,
airborne reporters, producers, editors, and writers in such Director's operation
center. Moreover, the Director of Operations is responsible for maintaining
day-to-day relations with affiliates and pursuing relationships with
unaffiliated stations. In addition, the Company employs eight Regional Directors
of Operations who supervise the Directors of Operation and who report to the
Company's General Managers.
The Company believes that its extensive fleet of aircraft and other
information-gathering technology and broadcast equipment have allowed the
Company to provide high quality programming, enabling it to retain and expand
its affiliate base. In the aggregate, the Company utilizes approximately 69
fixed-wing aircraft, 17 helicopters, 30 mobile units, 7 airborne camera systems,
16 fixed-position camera systems, 50 broadcast studios and 1,177 broadcasters
and producers. The Company also maintains a staff of computer programmers and
graphics experts to supply customized graphics and other visual programming
elements to television stations. In addition, the Company's operating centers
and broadcast stations has sophisticated computer technology, video and
broadcast equipment and cellular and wireless technology which enables the
Company's broadcasters to deliver accurate reports to its affiliates. The
infrastructure and resources dedicated to a specific market by the Company are
determined by the size of the market, the number of affiliates the Company
serves in the market and the type of services being provided.
For example, in the New York City metropolitan area, the Company currently
utilizes two jet helicopters with mounted omni-directional cameras, four
airplanes, and fixed-position cameras positioned strategically to deliver
up-to-the-minute live reports. Traffic conditions are relayed via two way radio
to the producers in the Company's New York broadcast studio who transcribe the
report, enter it into the computer system and produce the broadcast copy which
is then delivered on-air to the Company's New York radio and television
affiliates by its broadcasters. The Company recently installed cameras on its
helicopters and on certain buildings, including the Empire State Building,
enabling the Company to provide its television station affiliates with live
video of breaking news and traffic conditions. The Company believes that its
investment in its New York City-area infrastructure has been a significant
factor in the increase in its number of radio station and television station
affiliates in its New York City, Nassau/
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Suffolk Counties (Long Island) and Monmouth/Ocean Counties, NJ markets from 24
as of December 31, 1994 to 31 as of June 30, 1996. The following diagram depicts
the infrastructure supporting the Company's New York City metropolitan area
operation:
[ART]
[EDGAR DESCRIPTION: GRAPHIC DEPICTING THE NEW YORK METROPOLITAN AREA'S
OPERATIONAL RESOURCES.
This graphic demonstrates the infrastructure utilized in the operations of
the New York City metropolitan area. The New York City metropolitan area is
serviced by (i) four airplanes (one in Central/ Northern New Jersey, one in
Westchester County and two in Long Island), (ii) two jet helicopters (each with
a mounted camera system); and (iii) three fixed-position camera systems, one at
Newark Airport and two on the Empire State Building. Traffic and news
information reports and video are relayed back to the New York City bureau. The
graphic also shows the total personnel servicing the local bureaus in the New
York City metropolitan area. The New Jersey bureau has two broadcasters and
producers, the Long Island bureau has two broadcasters, the Westchester County
bureau has four broadcasters and producers and the New York City broadcast
studio has 25 traffic broadcasters, five news, sports and weather broadcasters
and eight producers and writers.]
In 1995, the Company established an electronic communications network in its
headquarters in Houston, Texas. The Company began expanding this network to
include its marketing and operations offices throughout the country in 1996. The
Company has created this Intranet for internal management as well as Internet
access. The Company believes that by networking each of its regional offices to
the corporate office, access to certain sales, marketing, scheduling and
accounting information will be more effectively updated, maintained and
disseminated to the Company's employees. The Company believes this will result
in an improvement in sales and marketing efficiency, and will also be beneficial
to general managers in tracking and maintaining commercial airtime inventory and
rate controls and affiliate information for their respective markets. The
Company has invested in this infrastructure, with ten markets currently on the
network, and plans to add its remaining markets to this network by 1997.
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ADVERTISING SALES AND MARKETING
The Company packages its radio commercial airtime inventory on a network
basis, covering all affiliates in relevant markets. This packaged inventory
typically appeals to advertisers seeking a broader demographic reach than that
delivered by individual radio stations, which generally deliver an audience with
narrow, specific demographic characteristics. Because the Company sells its
commercial airtime inventory on a network basis rather than station by station,
the Company does not compete for advertising dollars with its local radio
station affiliates. The Company believes that this corporate policy is a key
factor in maintaining its affiliate relationships.
Currently, the Company's television commercial airtime inventory is sold by
members of its general advertising sales force. The Company is developing a
separate sales force to sell its television commercial airtime inventory.
Currently, the Company packages its television commercial airtime inventory on a
local, regional and national network basis. However, advertisers on the MetroTV
Network have the ability to select specific markets and television stations for
their advertisements. This enables advertisers to customize advertising packages
to their individual requirements.
In each of the markets in which it conducts operations, the Company
maintains an advertising sales office as part of its operations center. The
Company's advertising sales force is able to sell available commercial airtime
inventory in any and all of the Company's markets in addition to selling such
inventory in each local market, which the Company believes affords its sales
representatives an advantage over certain of their competitors. For example, an
airline advertiser can purchase airtime inventory in multiple markets from the
Company's local sales representative in the city in which the airline is
headquartered. The Company's advertising sales force is comprised of
approximately 136 sales representatives. Although the Company typically has two
or three sales representatives in an individual market, the number of sales
representatives in an individual market ranges from one to eight depending on
the size of the market and the number of potential national and regional
advertising clients headquartered in the market. Specialized programs and
marketing campaigns, which support nationwide sales and other special forms of
advertising, are managed from the Company's headquarters in Houston, Texas.
Due to the number of the Company's markets, its reach within its markets and
the range of services it provides, the Company has a large number of advertising
clients in a diverse group of industries. For the year ended December 31, 1995,
no single advertiser represented more than 6% of the Company's total revenues
and the Company's top ten advertisers, as a group, represented only 21% of the
Company's total revenues.
As the following table indicates, for the year ended December 31, 1995,
advertising sales to the ten largest industry groups which are purchasers of the
Company's commercial airtime inventory accounted for approximately 58% of the
Company's total sales and no single industry group accounted for more than 8% of
the Company's total sales.
<TABLE>
<CAPTION>
% OF TOTAL SALES FOR
TWELVE MONTHS
ADVERTISER INDUSTRY ENDED 12/31/95
- --------------------------------------------------------------------- ---------------------
<S> <C>
Consumer Goods....................................................... 8%
Retail (Home Improvement)............................................ 7%
Supermarkets......................................................... 6%
Automotive (Retail).................................................. 6%
Automotive........................................................... 6%
Other Retail......................................................... 6%
Cellular............................................................. 5%
Newspapers........................................................... 5%
Oil & Gasoline....................................................... 5%
Lotteries............................................................ 4%
---
Total.............................................................. 58%
---
---
</TABLE>
35
<PAGE>
Due to the relatively long lead-time required to educate advertising
agencies on the merits of the Company's advertising packages, the Company has
historically targeted its advertising sales efforts directly to advertisers.
Many advertisers, however, have directed their advertising agencies to place
advertising with the Company and, as a result, such agencies have themselves
begun to direct more advertisers to the Company. Due to the growing strength of
the Company's advertising agency relationships, advertising sales booked through
advertising agencies grew to approximately 75% of the Company's total revenues
in 1995, an increase from 63% in 1992. The Company does not have significant
sales concentration among its agency-placed advertising, with advertising
inventory sold through an estimated 400 agencies during 1995.
THE RADIO TRAFFIC SERVICES NETWORK AND THE EXPANDED RADIO SERVICES NETWORK
The Company's typical radio advertisement on the Radio Traffic Services
Network and the Expanded Radio Services Network consists of an opening
announcement and a ten second commercial message presented immediately prior to,
in the middle of, or immediately following a regularly scheduled information
report. Because the Company has numerous radio station affiliates in each of its
markets (averaging 21 affiliates per market), the Company believes that its
traffic broadcasts reach more people, more often, in a higher impact manner than
can be achieved using any other advertising medium. The Company combines its
commercial airtime inventory into multiple "sponsorship" packages (generally
125, 250 or 500 sponsorships broadcast over a four week period in each market)
which it then sells as an information sponsorship package to radio advertisers.
These Company sponsorship packages are run on a fair and equal rotation (i.e.,
each advertiser receives its pro rata share of advertisements sold by the
Company for broadcast on each of the Company's affiliates in the relevant market
or markets) throughout the Traffic Services Network on a local, regional or
national basis, primarily during prime morning and afternoon drive periods. The
Company does not allow an advertiser to select individual stations from the
Radio Traffic Services Network or Expanded Radio Services Network on which to
run its advertising campaign. The Company's 500 sponsorship package (which the
Company believes is its most frequently purchased package), reaches an average
of approximately 70% of the population (age 12 and over) in the Company's MSA
markets. In addition, the Company's large network of affiliates allows the
Company to offer advertisers the opportunity to purchase advertising in multiple
markets nationwide through a single purchase from the Company.
As the Company has developed and expanded the Expanded Radio Services
Network, it has primarily packaged and sold its commercial sponsorships of the
Expanded Radio Services in conjunction with its existing traffic report
sponsorships. Because the Expanded Radio Services Network is not fully mature,
the Company has not yet maximized the marketing of commercial airtime inventory
on the Expanded Radio Services Network as a separate product line. Accordingly,
the Company has only generated minimal revenues from the sale of advertisements
on the Expanded Radio Services Network. As the Company develops the Expanded
Radio Services Network in individual markets, it intends to package and sell
advertisements as a separate product. During the first quarter of 1996, the
Company began to package and sell separate Expanded Radio Services Network
sponsorship packages in five markets (Boston, Washington, Houston, Phoenix, and
Los Angeles). The Company intends to introduce the Expanded Radio Services
Network sponsorships in additional markets as it further develops the Expanded
Radio Services Network throughout 1996 and 1997.
As the Company's business has developed, it has sold increasing amounts of
its advertising to regional/national advertisers. For the year ended December
31, 1994, approximately 25% of the Company's radio advertising revenue was
attributable to regional/national advertisers, with the balance attributable to
local advertisers, and for the six months ended June 30, 1996, sales to
regional/national advertisers accounted for approximately 50% of sales of total
commercial airtime inventory.
The Company believes that the positioning of advertisements within or
adjacent to its information reports appeals to advertisers because the
advertisers' messages are broadcast along with regularly scheduled programming
during peak morning and afternoon drive times when a majority of the radio
audience is listening. Radio advertisements broadcast during these times
typically generate premium
36
<PAGE>
rates. Moreover, surveys commissioned by the Company demonstrate that because
the Company's customized information reports are related to topics of
significant interest to listeners, listeners often seek out the Company's
information reports. Since advertisers' messages are imbedded in the Company's
information reports, such messages have a high degree of impact on listeners and
generally will not be "pre-empted" (i.e., moved by the radio station to another
time slot). Most of the Company's advertisements are read live by the Company's
on-air broadcasters, providing the Company's advertisers with the added benefit
of an implied endorsement for their product.
THE METROTV SERVICES
The Company provides its MetroTV Services to television stations in exchange
for thirty-second commercial airtime inventory. The amount and day-part
placement of the commercial airtime inventory that the Company receives from
television stations varies by market and by the type of service provided by the
Company. As the Company has provided more enhanced MetroTV Services, it has been
able to acquire more commercial airtime inventory with better day-part
placement. The Company, in turn, packages this commercial airtime inventory and
sells it to advertisers on a local, regional and national basis. The Company
believes that it offers advertisers significant benefits because, unlike
traditional television networks, the MetroTV Network often delivers more than
one station in a market and advertisers have the ability to select specific
television stations and markets. Therefore, the Company can customize
advertising packages for individual advertisers based on each advertiser's
requirements.
Historically, revenues from sales of television commercial airtime inventory
have been an insignificant part of the Company's total revenues. In order to
significantly increase the Company's revenues from sales of television
commercial airtime inventory, in early 1996 the Company: (i) formed a separate
television advertising sales staff; (ii) began seeking an increased amount of
higher value fixed position commercial airtime inventory from television
stations in exchange for providing enhanced Video News Services; and (iii)
pre-sold a significant amount of commercial airtime inventory to a large
national advertiser. As the Company continues to expand all aspects of its
Television Traffic Services and Video News Services, the Company believes that
revenues from television advertising sales will continue to increase.
AFFILIATES
The Company's large network of affiliates allows the Company to offer
advertisers the opportunity to reach a broad-based, local, regional or national
audience through a single purchase of commercial airtime from the Company. The
Company has demonstrated consistent affiliate growth; for example, the number of
radio station affiliates has grown 40.5% from 914 as of December 31, 1994 to
1,284 as of June 30, 1996, and the number of the Company's television station
affiliates has increased 54.9% from 71 to 110 over the same period. In addition,
the Company's relationships with numerous radio station and television station
affiliates within a certain market create economies of scale which allow the
Company to utilize a wide array of professional broadcasters,
information-gathering equipment and technology and extended hour operations less
expensively than if it had an affiliate relationship with only one individual
station or group in a particular market.
The number of the Company's radio station affiliates in an individual market
varies from 55 in the Los Angeles, California market to two in the Cincinnati,
Ohio market (which was a 1996 start-up) and currently averages 21 affiliates per
market. The Company's primary goal when entering a market is to enter into
affiliate relationships with every radio station and television station in the
market, thereby maximizing the percentage of listeners (i.e., the number of
people in the radio audience who have heard a report in a particular market) of
the Company's networks within each of its markets; such maximization is an
integral part of the Company's sales and marketing strategy. With the exception
of Cincinnati, Ohio, the Company's reports and sponsorships are heard by a low
of 43.7% in Nashville, Tennessee to a high of 100% of the radio listening
audience in six markets. On average the Company's reports and sponsorships are
heard by over 88% of the population (age 12 and over) in its markets.
37
<PAGE>
The following chart presents, in order of MSA population (age 12 and over),
the Company's current number of radio station affiliates in each of its MSAs,
the MSA's population and the Company's audience reached in the relevant MSA.
<TABLE>
<CAPTION>
# OF RADIO
STATION MSA
MSA(1) AFFILIATES POPULATION(1) % LISTENERS(2)
- -------------------- ----------- ------------- ---------------
<S> <C> <C> <C>
New York, NY 28 14,114,700 83.5
Monmouth/Ocean, NJ 884,300 48.9
Los Angeles, CA 55 9,687,300 80.6
Riverside/San
Bernardino, CA 1,343,200 89.3
Oxnard, CA 362,000 68.9
Chicago, IL 33 6,895,700 81.8
San Francisco/ 28 5,367,400 78.6
Oakland, CA
Philadelphia, PA 35 4,067,000 95.3
Detroit, MI 26 3,652,100 91.3
Dallas/Ft. Worth, TX 30 3,570,000 84.0
Washington, DC 34 3,512,500 98.6
Houston/Galveston, 35 3,348,800 99.7
TX
Boston, MA 32 3,236,600 84.4
Miami/Ft. 32 2,936,100 96.9
Lauderdale/
Hollywood, FL
Atlanta, GA 41 2,843,600 80.3
Seattle/Tacoma, WA 24 2,698,900 100.0
Nassau/Suffolk (Long 3 2,253,200 64.5
Island), NY
San Diego, CA 21 2,212,900 75.3
Minneapolis/St. 30 2,202,400 98.4
Paul, MN
St. Louis, MO 27 2,083,800 95.6
Baltimore, MD 23 2,056,700 81.9
Pittsburgh, PA 25 2,036,900 84.1
Phoenix, AZ 38 1,997,400 99.8
Tampa/St. 30 1,885,200 100.0
Petersburg/
Clearwater, FL
Cleveland, OH 25 1,759,300 100.0
Denver/Boulder, CO 37 1,733,500 98.2
Portland, OR 21 1,598,900 83.0
Cincinnati, OH 2 1,556,300 6.0
Kansas City, MO 20 1,349,300 60.3
Milwaukee/Racine, WI 23 1,339,700 98.3
<CAPTION>
# OF RADIO
STATION MSA
MSA(1) AFFILIATES POPULATION(1) % LISTENERS(2)
- -------------------- ----------- ------------- ---------------
<S> <C> <C> <C>
Sacramento, CA 38 1,337,200 99.2
Stockton, CA 420,400 67.4
Modesto, CA 330,400 67.2
San Jose, CA 9 1,317,700 47.3
Providence/Warwick/ 24 1,263,700 96.9
Pawtucket, RI
Columbus, OH 13 1,223,900 60.4
Norfolk/Virginia 29 1,210,900 100.0
Beach/Newport News,
VA
San Antonio, TX 24 1,183,200 96.0
Salt Lake City/ 24 1,158,600 99.6
Ogden/Provo, UT
Indianapolis, IN 19 1,108,500 91.6
Charlotte/Gastonia/ 21 1,077,400 87.9
Rock Hill, NC
Orlando, FL 27 1,017,100 100.0
Buffalo/Niagara 15 991,600 98.5
Falls, NY
Hartford, CT 40 962,700 91.2
New Haven, CT 389,300 83.6
Danbury, CT 164,300 57.3
Memphis, TN 12 931,800 69.4
Nashville, TN 25 911,900 43.7
Rochester, NY 15 900,700 85.2
West Palm Beach/ 20 850,200 79.0
Boca Raton, FL
Las Vegas, NV 23 847,700 99.8
Louisville, KY 24 845,900 88.9
Oklahoma City, OK(3) 8 836,200 70.5
Jacksonville, FL(4) 21 823,900 98.7
Austin, TX 18 821,600 95.9
Richmond, VA 22 775,000 100.0
Tucson, AZ 12 628,100 94.1
Albuquerque, NM(3) 12 537,700 78.1
Wilmington, DE 2 506,900 67.4
Daytona Beach, FL 5 390,300 46.5
TOTAL (5) 1,260 117,606,500(6) 88.0%
</TABLE>
- ------------------------
(1) Listed in The Arbitron Radio Metro and Television Market Population
Estimates in 1995-1996.*
(2) Percentage of the MSA population which hears the Company's information
reports, calculated using Arbitron Winter 1996 Radio Market Reports* and
Strata Marketing, Inc. Statistical Analysis.
(3) The Company has a license agreement with WIS to provide national sales,
marketing and operational support in exchange for certain amounts of
commercial airtime inventory in Oklahoma City, OK, and Albuquerque, NM. The
Company packages and sells such commercial airtime on a regional and
national basis to its advertisers. The Company has entered into a letter of
intent with WIS to acquire the assets of WIS in Oklahoma City and
Albuquerque.
(4) Pursuant to a Joint Marketing Agreement, the Company receives advertising
inventory in Jacksonville, Florida. The Company packages and sells such
commercial airtime on a regional and national basis to its advertisers.
(5) Does not include 24 affiliates of the Company's New England Weather Bureau,
which are located in various MSA markets throughout New England. The
Company has a total of approximately 1,284 radio station affiliates,
including the New England Weather Bureau.
(6) Arbitron includes the population of Nassau/Suffolk and Monmouth counties in
the New York MSA. Therefore, these populations are not duplicated in the
total population figure.
* Copyright 1996 The Arbitron Company. All Rights Reserved.
38
<PAGE>
The following chart presents, in order of market population (age 12 and
over), the Company's current number of television affiliates in each market and
the DMA's population.
<TABLE>
<CAPTION>
# OF TELEVISION
STATION DMA
DMA(1) AFFILIATES POPULATION(1)
- --------------------------- --------------- -------------
<S> <C> <C>
New York, NY 2 15,922,200
Los Angeles, CA 2 12,447,700
Chicago, IL 2 7,153,300
Philadelphia, PA 2 6,046,200
San Francisco/Oakland/ San 4 5,304,500
Jose CA
Boston, MA 3 4,850,800
Washington, DC 4 4,323,100
Dallas/Ft. Worth, TX 2 4,033,000
Detroit, MI 2 3,899,200
Houston, TX 7 3,610,800
Atlanta, GA 4 3,557,400
Seattle/Tacoma, WA 2 3,199,100
Cleveland/Akron, OH 4 3,193,200
Minneapolis/St. Paul, MN 2 3,100,200
Miami/Ft. Lauderdale, FL 3 3,009,000
Tampa/St. Petersburg/ 3 2,901,800
Sarasota, FL
Phoenix, AZ 4 2,584,000
Sacramento/Stockton/ 4 2,561,700
Modesto, CA
Pittsburgh, PA 1 2,498,400
Denver, CO 1 2,437,800
St. Louis, MO 4 2,433,600
Baltimore, MD 2 2,214,500
Orlando/Daytona Beach/ 2 2,176,500
Melbourne, FL
Portland, OR 1 2,053,500
Hartford/New Haven, CT 3 2,050,700
<CAPTION>
# OF TELEVISION
STATION DMA
DMA(1) AFFILIATES POPULATION(1)
- --------------------------- --------------- -------------
<S> <C> <C>
Indianapolis, IN 2 2,033,200
Charlotte, NC 1 1,780,700
Nashville, TN 1 1,695,100
Kansas City, MO 3 1,682,200
Columbus, OH 1 1,609,200
Salt Lake City, UT 2 1,602,600
San Antonio, TX 2 1,514,400
Norfolk/Portsmouth/ Newport 3 1,411,000
News, VA
Buffalo, NY 2 1,400,800
Memphis, TN 2 1,366,800
Oklahoma City, OK(2) 1 1,271,500
Albuquerque/Santa Fe, NM(2) 1 1,266,300
Providence/New Bedford, RI 1 1,263,700
West Palm Beach/Ft. Pierce, 2 1,206,900
FL
Louisville, KY 2 1,199,600
Richmond/Petersburg, VA 2 1,109,700
Austin, TX 1 894,200
Las Vegas, NV 2 869,800
Rochester, NY 2 812,500
Tucson, AZ 1 747,300
Springfield/Holyoke, MA 1 554,100
Monterey/Salinas, CA 1 511,900
Total Affiliates 106
Cable News Channels(3) 4
TOTAL 110 135,365,700
</TABLE>
- ------------------------
(1) Listed in The Arbitron Radio Metro and Television Market Population
Estimates in 1995-1996.*
(2) The Company has a license agreement with WIS to provide national sales,
marketing and operational support in exchange for certain amounts of
commercial airtime inventory in Oklahoma City, OK, and Albuquerque, NM. The
Company packages and sells such commercial airtime on a regional and
national basis to its advertisers. The Company has entered into a letter of
intent with WIS to acquire the assets of WIS in Oklahoma City and
Albuquerque.
(3) Cable news channel affiliates in New York, NY(2), Washington, DC(1), and
Rochester, NY(1).
* Copyright 1996 The Arbitron Company. All Rights Reserved.
The Company provides its Television Traffic Services to four cable
television affiliates. The Company believes that opportunities exist to increase
the number of cable news channel affiliates receiving the Television Traffic
Services and Video News Services, and it intends to continue to market its
services to those stations.
ACQUISITIONS
Since July 1994, the Company has expanded into 14 markets through six
strategic acquisitions, and made an additional acquisition to expand its
operations in Atlanta, Georgia, for a total consideration of approximately $20
million.
The Company is in various stages of pursuing additional strategic
acquisitions. The Company has entered into a letter of intent to acquire the
assets of ATN, a provider of traffic services to 16 radio station affiliates in
Kansas City, Missouri and Omaha, Nebraska. Additionally, the Company has entered
into a letter of intent to acquire the assets of the WIS, a provider of traffic
services to eight radio station affiliates and one television station affiliate
in Oklahoma City, Oklahoma, 12 radio station affiliates and one television
station affiliate in Alberquerque, New Mexico, eight radio station affiliates in
Omaha, Nebraska and one television station affiliate in Milwaukee, Wisconsin.
The Company is currently in discussions with several other entities that, if
acquired, would result in new or expanded coverage of approximately eight to ten
markets by the Company. The Company, however, does not have any commitments,
39
<PAGE>
arrangements, or understandings with respect to any such acquisitions. Further,
there can be no assurance that the Company will be able to effect any such
transaction or that any such transactions, if consummated, will prove to be
beneficial to the Company.
The Company generally consolidates the operations of acquired companies or
assets into its existing operations so that duplicative costs can be eliminated,
resulting in margin improvements for the consolidated operations. In addition,
as a result of the Company's significant sales force and existing advertising
relationships, the Company is generally able to increase revenues by selling
advertising in the acquired market to the Company's existing regional and
national sponsors. Moreover, as the Company continues to add new markets and to
increase its presence in existing markets, it has been able to offer advertisers
increased market penetration and to generate incremental revenues from existing
advertising clients.
The following acquisitions have been completed in 1996 (the "1996
Acquisitions"):
SALT LAKE CITY ACQUISITION. On January 3, 1996, the Company acquired (the
"Salt Lake City Acquisition") all of the tangible and intangible assets of
Aeromedia, Inc. ("Aeromedia"). As of June 30, 1996, the Company, (through
Aeromedia), provided Radio Traffic Services to a network of 22 radio stations
and two television stations in Salt Lake City, Utah, which is the thirty-fifth
largest MSA market.
NEW ENGLAND ACQUISITION. On January 4, 1996, the Company acquired (the "New
England Acquisition") all of the stock of Traffic Net Inc., a Rhode Island
corporation, Traffic Net of Connecticut, Inc., a Connecticut corporation, and
The Weather Bureau, Inc., a Massachusetts corporation (collectively, the
"Traffic Net Group"). As of June 30, 1996, the Company (through the Traffic Net
Group) provided local traffic information services to approximately 60 radio
station and four television station affiliates in and around the Hartford,
Connecticut area (the forty-first largest MSA market), and Providence, Rhode
Island (the thirty-first largest MSA market). In addition, The Weather Bureau,
Inc. (d/b/a The New England Weather Bureau) provides weather reporting services
to approximately 46 radio station affiliates in Boston, Massachusetts (the tenth
largest MSA market), and throughout New England.
The following acquisitions were completed in 1995 (the "1995 Acquisitions"):
THE ARIZONA ACQUISITION. On March 9, 1995, the Company acquired (the
"Arizona Acquisition") all of the stock of Skyview Broadcasting Networks, Inc.,
an Arizona corporation ("SBN"). As of June 30, 1996, the Company (through SBN)
provided services to 50 radio and five television stations in Phoenix and
Tucson, Arizona, the twentieth and sixty-second largest MSAs, respectively.
THE LAS VEGAS ACQUISITION. On March 9, 1995, the Company acquired (the "Las
Vegas Acquisition") all of the stock of Airborne Broadcast Consultants, a Nevada
corporation ("Airborne"), which was under common ownership with SBN. As of June
30, 1996, the Company (through Airborne) provided traffic programming services
to 23 radio and two television stations in Las Vegas, Nevada, the forty-eighth
largest MSA market.
THE TENNESSEE/KENTUCKY ACQUISITION. On March 9, 1995, the Company acquired
(the "Tennessee/ Kentucky Acquisition") substantially all of the tangible and
intangible assets and certain liabilities of Airborne Broadcasting Systems,
Inc., a Tennessee corporation ("ABS", which was also under common ownership with
SBN (ABS, SBN and Airborne are collectively referred to as the "Skyview
Group")). As of June 30, 1996, the Company provided traffic information reports
to a network of 61 radio station affiliates serving the greater Nashville and
Memphis, Tennessee markets and the Louisville, Kentucky market. The MSA market
rank of these MSA markets is forty-fourth, forty-third and forty-ninth,
respectively.
THE ATLANTA ACQUISITION. On March 24, 1995, the Company acquired (the
"Atlanta Acquisition") all of the stock of TrafficScan, Incorporated, a Georgia
corporation ("TSI"). As of June 30, 1996, the Company (through TSI) provided
traffic information services to 23 radio station affiliates and one television
station affiliate in the greater Atlanta region. Atlanta is the twelfth largest
MSA market.
The following acquisitions were completed in 1994 (the "1994 Acquisitions"):
40
<PAGE>
THE WISCONSIN ACQUISITION. On July 1, 1994, the Company acquired (the
"Wisconsin Acquisition") certain of the tangible and intangible assets of
Wisconsin Information Systems, Inc. d/b/a The Milwaukee Traffic Network, an Ohio
corporation ("Wisconsin"). As of June 30, 1996, the Company provided traffic
information reports to 23 radio station affiliates in Milwaukee, Wisconsin, the
twenty-eighth largest MSA market.
THE ST. LOUIS ACQUISITION. On July 19, 1994, the Company acquired (the "St.
Louis Acquisition") substantially all of the tangible and intangible assets of
Hildebrand Communications, Inc. ("Hildebrand"). As of June 30, 1996, the Company
provided traffic information reports to 27 radio station affiliates and four
television station affiliates in St. Louis, Missouri, the seventeenth largest
MSA market.
THE CHARLOTTE ACQUISITION. On October 24, 1994, the Company acquired (the
"Charlotte Acquisition") substantially all of the tangible and intangible assets
of Charlotte Traffic Patrol, Inc., a North Carolina corporation ("CTP"). As of
June 30, 1996, the Company provided traffic reports to 21 radio station
affiliates and one television station affiliate in the metropolitan area of
Charlotte, North Carolina, the thirty-seventh largest MSA market.
RADIO AND TELEVISION INDUSTRY
Total radio and television advertising revenues increased 4.2% to $39.4
billion during 1995, according to industry sources. Total radio advertising
revenues were $11.5 billion while television advertising revenues were
approximately $23.9 billion in 1995, the highest levels in each respective
industry's history.
The growth in total radio and television advertising revenues tends to be
fairly stable and has generally grown at a faster rate than the Gross National
Product ("GNP"). With the exception of 1991, when total radio and television
advertising revenues fell by approximately 3.4% compared to the prior year,
advertising revenues have risen in each of the past 15 years more rapidly than
either inflation or the GNP.
The United States radio market is comprised of approximately 11,528
commercially licensed stations which primarily serve local markets. The United
States television market is comprised of approximately 1,103 commercially
licensed stations which also serve primarily local markets.
According to the Radio Advertising Bureau's Radio Marketing Guide and Fact
Book for Advertisers (1993-1994), each week, radio reaches approximately 96% of
all Americans over the age of 12. More than one-half of all radio listening is
done outside the home, in contrast to other advertising mediums, and three out
of four adults are reached by car radio each week. The average listener spends
approximately three hours and 12 minutes per day listening to radio. The highest
portion of radio listenership occurs during the morning, particularly between
the time a listener wakes up and the time the listener reaches work. This
"morning drive time" period reaches more than 85% of people over 12 years of
age. According to the Television Advertising Bureau, television reaches
approximately 98% of all American households each week. The average household
spends approximately seven hours and sixteen minutes per day watching
television.
INTERNATIONAL
The Company's international presence has been limited to its participation
in licensing agreements in the United Kingdom and France. Pursuant to these
license agreements, the Company provides its licensees the right to use its
name, computer technology, training and sales expertise in exchange for
commercial airtime inventory. Revenues from such licensing agreements are not
material and the Company has no immediate intention to pursue opportunities
internationally, although it may choose to do so in the future if resources and
opportunities are available.
COMPETITION
The Company faces various sources of competition in the provision of its
information reporting services. Single market operators and groups of radio
stations providing their own information reports comprise the Company's primary
competition. Although the Company is significantly larger than the
41
<PAGE>
next largest provider of traffic and local information services, there are
several multi-market operators providing local radio and television programming
services in various markets. The Company believes that the next largest provider
of traffic and local information services (which operates under the names
"Shadow Traffic" and "Express Traffic") currently has a presence in
approximately 14 of the 50 largest MSA markets in the United States, as compared
to the Company's operations in 47 of the 50 largest MSA markets.
The Company also faces competition in the sale of its commercial airtime
inventory. The Company positions its advertising so as not to compete with the
advertising of its local radio and television affiliates. However, the Company
competes for advertising dollars with other media such as newspapers and
magazines, outdoor advertising, network radio and network television
advertising, transit advertising, direct response advertising, yellow page
directories and point-of-sale advertising.
EMPLOYEES
The Company employed approximately 924 full-time and 499 part-time persons
as of June 30, 1996, none of whom was covered by a collective bargaining
arrangement. Of these employees, approximately 1,177 were engaged in
broadcasting and operations; 136 in sales and marketing; and 110 in general and
administrative activities. Approximately 16% of the Company's employees are
located in the Company's Houston, Texas headquarters. The Company considers its
relationship with its employees to be satisfactory.
PROPERTIES
The Company's headquarters facility, which includes its principal
administrative, sales, marketing, management information systems and product
development offices and its local operations center, is located in approximately
30,844 square feet of subleased space in Houston, Texas. The sublease on this
facility terminates in March 2004.
The Company leases additional operation centers/broadcast studios and
marketing and administrative offices across the United States consisting of
approximately 68,196 square feet in the aggregate, pursuant to the terms of
various lease agreements. The Company believes that its existing facilities are
adequate to meet current requirements and that suitable additional space in
close proximity to its existing headquarters will be available as needed to
accommodate growth of its operations and additional sales and support offices
through the foreseeable future.
For the year ended December 31, 1995, the Company incurred $2.7 million in
facilities rental expense.
TRADEMARKS
The Company has registered "Metro Traffic Control", "Metro Networks" and
certain other marks which are relevant to its business. The Company does not
believe that its operations are materially dependent on these trademarks.
LEGAL PROCEEDINGS
The Company is subject to certain litigation arising in the ordinary course
of business. Management believes that the resolution of such matters will not
have a material adverse effect on the Company's financial position or results of
operations.
REORGANIZATION
From 1978 through the closing of this offering, the business of the Company
will have been operated through the Predecessor Companies. Until the closing of
this offering, all of the equity interests in the Predecessor Companies will be
owned by the Saperstein Family. Immediately prior to the closing of this
offering, the Saperstein Family will establish the Company as a holding company
and consolidate the issued and outstanding equity interests in the Predecessor
Companies, by exchanging such interests for shares of the Company's Common
Stock.
42
<PAGE>
Prior to the Reorganization, the Company intends to enter into an agreement
with Mr. Saperstein pursuant to which Mr. Saperstein will be distributed certain
goods and the rights to certain services which the Company holds for his
benefit. See "Certain Transactions." As of the date of the closing of this
offering, Metro Networks, Ltd. will distribute certain of its assets, other than
MTC GP stock, to Metro Traffic Control, Inc. in partial redemption of Metro
Traffic Control, Inc.'s interest in Metro Networks, Ltd.; thereafter Metro
Networks, Ltd. will be liquidated. In addition, as of the date of the closing of
this offering Metro Video News, Inc., Metro Reciprocal, Inc., MTC GP, Inc.,
Skyview Broadcasting Networks, Inc., Airborne Broadcast Consultants,
TrafficScan, Incorporated, Traffic Net Inc., The Weather Bureau, Inc. and
Traffic Net of Connecticut, Inc. will be merged into Metro Traffic Control, Inc.
pursuant to a transaction in which the shareholders of each corporation will
receive shares of Metro Traffic Control, Inc. stock. Metro Traffic Control, Inc.
will become a wholly-owned subsidiary of the Company as a result of a reverse
subsidiary merger of Metro Networks Acquisition, Inc. and Metro Traffic Control,
Inc., with Metro Traffic Control, Inc. being the surviving entity. The reverse
subsidiary merger will qualify as a tax-free reorganization under Section
368(a)(2) of the Internal Revenue Code of 1986, as amended.
43
<PAGE>
MANAGEMENT
The following table sets forth certain information regarding the directors
and executive officers of the Company.
<TABLE>
<CAPTION>
NAME AGE TITLE
- --------------------------------- ----------- --------------------------------------------------------------------
<S> <C> <C>
David I. Saperstein 55 Chairman of the Board of Directors and Chief Executive Officer
Charles I. Bortnick 42 President and Director
Shane E. Coppola 30 Executive Vice President and Director
Curtis H. Coleman 46 Senior Vice President, Chief Financial Officer and Director
Gary L. Worobow 31 Senior Vice President, General Counsel, Secretary and Director
James A. Arcara 61 Director
</TABLE>
DAVID I. SAPERSTEIN founded the Company in 1978. Since 1978, Mr. Saperstein
has been the Chief Executive Officer and a Director of the Company. Mr.
Saperstein serves on the Boards of Directors for the Business Arts Fund, the
Houston Symphony and the Toxoplasmosis Research Institute of the Michael Reese
Hospital in Chicago. Mr. Saperstein serves on the Board of Trustees for the
local chapter of the United Way and is a member of the Dean's Advisory Council
for Touro College of Law in New York. Prior to 1978, Mr. Saperstein owned and
operated several Ford automobile dealerships in Baltimore, Maryland.
CHARLES I. BORTNICK has been President and a Director of the Company since
June 1996. From April 1994 to May 1996, Mr. Bortnick served as Executive Vice
President/General Manager of the Company. Mr. Bortnick joined the Company in
March 1993 as Vice President/General Manager-Midwest Region based in Chicago.
Prior to joining the Company, Mr. Bortnick had 17 years of experience in the
radio broadcasting industry. From November 1987 through March 1993, Mr. Bortnick
served as Vice President/General Manager for Malrite Communications at its
WMMS-FM/WHK-AM radio station in Cleveland, Ohio and its KKHT-FM radio station in
Houston, Texas. From September 1984 to October 1987, Mr. Bortnick served as Vice
President/General Manager for TK Communications at its WSHE-FM/WSRF-AM radio
stations in Miami/Ft. Lauderdale.
SHANE E. COPPOLA has served as Executive Vice President and a Director of
the Company since June 1996. From April 1992 through May 1996, Mr. Coppola was
Vice President -- Corporate Development of the Company. From August 1989 through
March 1992, Mr. Coppola was a member of the Communications Finance Group at The
Toronto-Dominion Bank. Mr. Coppola earned a Masters of Business Administration
from the William E. Simon School of Business Administration in 1989 and a
Bachelor of Arts from the University of Rochester in 1988. Mr. Coppola is the
son-in-law of Mr. Saperstein.
CURTIS H. COLEMAN has served as Chief Financial Officer of the Company since
September 1995, as a Senior Vice President and a Director of the Company since
June 1996. Mr. Coleman served as Vice President-Treasurer and Vice
President-Controller of the Company from March 1990 through September 1995.
Prior to joining the Company, Mr. Coleman served in various financial and
accounting positions with Energy Service Company, Inc., Crutcher Resources
Corporation and Arthur Young & Company. Mr. Coleman is a certified public
accountant.
GARY L. WOROBOW has served as General Counsel and Secretary of the Company
since May 1995, as a Senior Vice President and a Director of the Company since
June 1996. From August 1991 until joining the Company, Mr. Worobow was an
attorney with the New York law firm of Stursberg & Veith. Mr. Worobow earned a
Juris Doctorate from Fordham Law School in 1991, a Masters of Business
Administration from the William E. Simon School of Business Administration in
1989 and a Bachelor of Arts from the University of Rochester in 1987.
JAMES A. ARCARA will become a Director of the Company upon consummation of
the offering. Mr. Arcara is Chairman of Radio Enterprises Incorporated, a
company that he founded in 1996 to acquire
44
<PAGE>
and operate radio stations. Mr. Arcara served as President of Capital Cities/ABC
Radio, a division of Capital Cities/ABC, Inc., from 1986 until April 1996. From
1980 until 1986, prior to the merger of Capital Cities Communications, Inc. with
ABC, Inc., Mr. Arcara served as Executive Vice President for Capital Cities
Radio. Mr. Arcara is a past President of the Radio Advertising Bureau and a past
Director of the National Association of Broadcasters. From 1970 until 1980, Mr.
Arcara served as Vice President/ General Manager for WPAT-AM/FM radio in
Clifton, New Jersey. From 1967 until 1970, Mr. Arcara served as Vice
President/General Manager for WPRO-AM radio in Providence, Rhode Island. From
1961 until 1967, Mr. Arcara served as General Sales Manager for WKBW-AM radio in
Buffalo, New York.
BOARD OF DIRECTORS
The Company intends to name an additional outside director to the Board of
Directors upon consummation of the offering.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Arcara and Coppola and the additional outside director will comprise
the Company's Compensation Committee. Prior to the offering, the Company did not
have a Compensation Committee and compensation decisions were made primarily by
Mr. Saperstein.
AUDIT COMMITTEE
The outside directors will serve as the Company's Audit Committee. The
committee will meet periodically with management, the Company's internal audit
staff, and representatives of the Company's independent auditors to assure that
appropriate audits of the Company's affairs are being conducted. In carrying out
these responsibilities, the committee will review the scope of internal and
external audit activities and the results of the annual audit. The committee is
also responsible for recommending a public accounting firm to serve as
independent auditors each year. Both the independent auditors and the internal
auditors will have direct access to the Audit Committee to discuss the results
of their examinations, the adequacy of internal accounting controls, and the
integrity of financial reporting.
NON-EMPLOYEE DIRECTOR COMPENSATION
Each member of the Board of Directors who is not an officer or an owner, or
the representative of an owner, of more than 5% of the outstanding Common Stock
of the Company receives compensation of $1,000 per meeting for serving on the
Board of Directors. The Company also reimburses Directors for any expenses
incurred in attending meetings of the Board of Directors and the committees
thereof. Upon their election to the Board of Directors or the closing of this
offering (whichever is later), each non-employee Board member will be granted
options to purchase 10,000 shares of the Company's Common Stock. Such options
will be exercisable at the fair market value of the common stock at the date of
grant. These options will become vested and exercisable for up to 33% of the
total optioned shares upon the first anniversary of the grant of the options and
for an additional 33% of the total optioned shares upon each succeeding
anniversary until the option is fully exercisable at the end of the third year.
EXECUTIVE COMPENSATION
The following table sets forth certain information for the fiscal years
indicated concerning the cash and non-cash compensation earned by or awarded to
the Chief Executive Officer of the Company and each of the other three most
highly compensated executive officers of the Company whose combined salary and
bonus exceeded $100,000 in such periods (the "Named Executive Officers").
45
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
---------------------------------------------
NAME AND OTHER ANNUAL STOCK
PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION($) OPTIONS(#) ALL OTHER
- --------------------------------------- --------- ----------- ----------- ------------------- --------------- -------------
<S> <C> <C> <C> <C> <C> <C>
David I. Saperstein.................... 1995 960,000 -- 58,982(1)
23,081(2) -- --
Charles I. Bortnick.................... 1995 256,290(3) 58,303 -- -- --
Shane E. Coppola....................... 1995 247,917 -- -- -- --
Curtis H. Coleman...................... 1995 131,042(3) -- -- -- --
</TABLE>
- ------------------------------
(1) Expenses related to automobiles.
(2) Non-taxable shareholder distribution.
(3) Includes the Company's contributions under the 401(k) Plan.
1996 INCENTIVE STOCK OPTION PLAN
The Company's Board of Directors has adopted the 1996 Incentive Stock Option
Plan (the "1996 Plan") for the Company's officers and employees. The Board of
Directors has discretionary authority, subject to certain restrictions, to
administer the 1996 Plan, including but not limited to determining the
individuals to whom, the times at which, and the exercise price for which
options will be granted. The total number of shares reserved for issuance under
the 1996 Plan is , of which 350,000 will be issued upon the
effective date of this offering. The exercise price of options granted under the
1996 Plan may not be less than 100% of the fair market value (or not less than
110% of the fair market value as to any individual who, at the time the option
is granted, owned more than 10% of the total combined voting power of all
classes of stock of the Company) of the Common Stock on the date such option was
granted. Options granted under the 1996 Plan are not transferable by the
optionholders except by will or by the laws of descent and distribution. Options
granted under the 1996 Plan typically become vested and exercisable for up to
33 1/3% of the total optioned shares upon the first anniversary of the grant of
the option and for an additional 33 1/3% of the total optioned shares upon each
succeeding anniversary until the option is fully exercisable at the end of the
third year. Generally, the unexercised portion of any option automatically
terminates upon the earlier of (i) termination of the optionee's employment with
the Company, (ii) the expiration of 90 days from the date his employment with
the Company terminates for any reason other than cause, death, or disability
(iii) the expiration of one year after the optionee's death or (iv) the
expiration of the option. Upon the sale, merger or liquidation of the Company,
outstanding options may be exercised immediately prior to the consummation of
such a transaction, whether or not vested as of such date of consummation.
EMPLOYEE STOCK PURCHASE PLAN
A total of shares of the Company's Common Stock have been reserved
for issuance under the Company's 1996 Employee Stock Purchase Plan (the
"Purchase Plan"). None of such shares have been issued. The Purchase Plan
permits an eligible employee of the Company to purchase common stock at a
discount through payroll deductions not to exceed 10% of the compensation
received by such employee during such pay period ("Employee Purchases").
Employee Purchases cannot exceed $25,000 in any plan year. The price at which
the Common Stock is purchased under the Purchase Plan is set by the Board of
Directors but may not be less than 95% of the fair market value of the Common
Stock on the date of purchase.
DEFINED BENEFIT AND DEFINED CONTRIBUTION PLAN
Effective in April 1995, the Company established a profit sharing plan under
Section 401(k) of the Internal Revenue Code (the "401(k) Plan") for all eligible
employees. Under the 401(k) Plan, all eligible employees are permitted to defer
compensation up to a maximum of 10% of their income. The 401(k) Plan provides
for a matching contribution by the Company equal to 25% of the amount
contributed by the employee, up to 6% of the employee's total compensation.
These contributions amounted to
46
<PAGE>
$195,000 in 1995. The employee's contribution is immediately vested and 20% of
the Company's matching contribution vests every year after the second year of
the employee's participation in the plan. Accordingly, the matching contribution
is fully vested six years after such contribution.
EMPLOYMENT AGREEMENTS
As discussed more particularly below, the Company intends to enter into
employment agreements with each of the Named Executive Officers and with Gary L.
Worobow, the Company's Senior Vice President, Secretary and General Counsel
("Mr. Worobow", and collectively with the Named Executive Officers, the
"Executive Officers"). Such employment agreements prohibit each of the Executive
Officers from competing with the Company for a period of one year after
termination of employment.
Mr. Saperstein will be a party to an employment agreement with the Company
pursuant to which he will serve as Chief Executive Officer of the Company. Under
the terms of Mr. Saperstein's employment agreement, he will be entitled to
receive an annual base salary of $350,000. Such base salary will increase by 5%
during each year term of the employment agreement. The employment agreement will
provide that Mr. Saperstein may receive a bonus of up to $150,000 per annum at
the discretion of the Board of Directors or the Compensation Committee. The
bonus potential will increase by 5% during each year of the term of the
employment agreement. Pursuant to the employment agreement, Mr. Saperstein will
be granted stock options under the 1996 Plan to purchase up to 100,000 shares of
the Company's Common Stock at an exercise price equal to 110% of the initial
public offering price. Subsequent grants of options to Mr. Saperstein during the
term of the employment agreement will be at the discretion of the Board of
Directors or the Compensation Committee. Mr. Saperstein's employment agreement
will be effective as of the closing of this offering, and will have a two year
term subject to automatic renewal at the end of the second year for an
additional period of one year, unless the Company gives written notice at least
90 days prior to the end of such second year of its election to terminate such
employment agreement at the end of such second year (hereinafter, a
"Non-Renewal"). Mr. Saperstein currently receives a base salary of $960,000.
Mr. Bortnick is a party to an employment agreement with the Company pursuant
to which he serves as President of the Company. Under the terms of Mr.
Bortnick's employment agreement he is entitled to receive an annual base salary
of $275,000. Such base salary will increase by 5% upon each anniversary of the
closing during the term of the employment agreement. The agreement provides that
Mr. Bortnick may receive a bonus of up to $100,000 per annum at the discretion
of the Board of Directors or the Compensation Committee. The bonus potential
increases by 5% during each year of the term of the employment agreement.
Pursuant to the employment agreement, Mr. Bortnick will be granted stock options
under the 1996 Plan to purchase up to 75,000 shares of the Company's Common
Stock at an exercise price equal to the initial public offering price.
Subsequent grants during the term of the employment agreement will be at the
discretion of the Board of Directors or the Compensation Committee. Mr.
Bortnick's employment agreement has a two year term from the closing date of the
offering with an automatic renewal provision of one year, subject to
Non-Renewal. Mr. Bortnick currently receives a base salary of $275,000. Mr.
Bortnick's agreement also provides that upon the termination of such agreement
by the Company or Mr. Bortnick under certain circumstances, Mr. Bortnick will
continue to receive the salary provided for under his employment agreement for
three months following termination of employment. Additionally, upon a change of
control (as defined in the employment agreement) of the Company, if Mr.
Bortnick's employment does not continue for a minimum of one year, he would be
entitled to receive two (2) times his then current base salary.
Mr. Coppola will be a party to an employment agreement with the Company
pursuant to which he will serve as Executive Vice President of the Company.
Under the terms of Mr. Coppola's employment agreement he will be entitled to
receive an annual base salary of $200,000. Such base salary will be increased by
5% during each year of the term of the employment agreement. The employment
agreement provides that Mr. Coppola may receive a bonus of up to $100,000 per
annum at the discretion of the Board of Directors or the Compensation Committee.
The bonus potential will increase by 5% during each year of the term of the
employment agreement. Pursuant to the employment agreement,
47
<PAGE>
Mr. Coppola will be granted stock options under the 1996 Plan to purchase up to
75,000 shares of the Company's Common Stock at an exercise price equal to the
initial public offering price. Subsequent grants during the term of the
employment agreement will be at the discretion of the Board of Directors or the
Compensation Committee. Mr. Coppola's employment agreement will be effective as
of the closing of this offering, and will have a two year term with an automatic
renewal provision of one year, subject to Non-Renewal. Mr. Coppola currently
receives a base salary of $410,000.
Mr. Coleman will be a party to an employment agreement with the Company
pursuant to which he will serve as Senior Vice President and Chief Financial
Officer of the Company. Under the terms of Mr. Coleman's employment agreement he
will be entitled to receive an annual base salary of $150,000. Such base salary
will increase by 5% during each year of the term of the employment agreement.
The employment agreement provides that Mr. Coleman may receive a bonus of up to
$50,000 per annum at the discretion of the Board of Directors or the
Compensation Committee. The bonus potential will increase by 5% during each year
of the term of the employment agreement. Pursuant to the employment agreement,
Mr. Coleman will be granted stock options under the 1996 Plan to purchase up to
55,000 shares of the Company's Common Stock at an exercise price equal to the
initial public offering price. Subsequent grants during the term of the
employment agreement will be at the discretion of the Board of Directors or the
Compensation Committee. Mr. Coleman's employment agreement will be effective as
of the closing of this offering, and will have a two year term with an automatic
renewal provision of one year, subject to Non-Renewal. Mr. Coleman currently
receives a base salary of $150,000.
Mr. Worobow will be a party to an employment agreement with the Company
pursuant to which he will serve as Senior Vice President, General Counsel and
Secretary of the Company. Under the terms of Mr. Worobow's employment agreement
he will be entitled to receive an annual base salary of $117,500. Such base
salary will increase by 5% during each year of the term of the employment
agreement. The employment agreement provides that Mr. Worobow may receive a
bonus of up to $37,500 per annum at the discretion of the Board of Directors or
the Compensation Committee. The bonus potential will increase by 5% during each
year of the term of the employment agreement. Pursuant to the employment
agreement, Mr. Worobow will be granted stock options under the 1996 Plan to
purchase up to 45,000 shares of the Company's Common Stock at an exercise price
equal to the initial public offering price. Subsequent grants during the term of
the employment agreement will be at the discretion of the Board of Directors or
the Compensation Committee. Mr. Worobow's employment agreement will be effective
as of the closing of this offering, and will have a two year term with an
automatic renewal provision of one year, subject to Non-Renewal. Mr. Worobow
currently receives a base salary of $105,000.
INDEMNIFICATION MATTERS
The Company's Amended and Restated Certificate of Incorporation and Bylaws
require the Company to indemnify each officer, director or employee in respect
of claims made by reason of his or her status with the Company, including
stockholder derivative suits, provided he or she acted in good faith and in a
manner he or she reasonably believed to be in or not opposed to the best
interest of the Company and, with respect to any criminal act or proceeding, had
no reasonable cause to believe his or her conduct was unlawful. Expenses
incurred in the defense of any such action may be paid by the Company in advance
of final disposition upon receipt of an undertaking from the officer, director
or employee to repay the advances if there is an ultimate determination that he
or she is not entitled to be indemnified.
CERTAIN TRANSACTIONS
The Company has entered into several arrangements with or on behalf of
parties related to the Company. Upon the closing of this offering these
arrangements will terminate, except as indicated below, and the Company will
enter into transactions with related parties only on an arm's-length basis.
The Company has leased certain real property in Vail, Colorado and in
Malibu, California from Five S Properties, Ltd., a limited partnership of which
a company owned by Mr. Saperstein is the general partner ("Five S"). Such
properties were used for affiliate relations and for other Company business-
48
<PAGE>
related purposes. The annual lease payments on these properties are $60,000 and
$240,000, respectively. The amounts of such lease payments were determined by
the Company based on its estimate of the value of the leased properties but
without reference to outside sources of valuation. Because the Company has not
made full-time use of these properties, such leases will be terminated as of the
closing of this offering, and the Company has no intention to enter into similar
leases.
The Company has entered into certain reciprocal arrangements with unrelated
third parties as a result of which the Company will receive goods and services
for the benefit of Mr. Saperstein. The reciprocal arrangements obligate the
Company to provide commercial airtime, provide other goods and services, and
make cash disbursements to such third parties in exchange for the goods and
services received by the Company. The dollar values of such arrangements have
typically been calculated based upon the Company's estimate of the fair market
value of the commercial airtime inventory involved and the Company believes that
its estimates have been made on a basis similar to the basis on which estimates
are made by others in the broadcast industry. As of June 30, 1996, the Company
was obligated to provide approximately $3.5 million of commercial airtime, goods
and services and cash under these reciprocal arrangements. Immediately prior to
the offering, the Company intends to enter into an agreement with Mr. Saperstein
pursuant to which Mr. Saperstein will be distributed the goods and services the
Company holds for Mr. Saperstein's benefit. The Company also will distribute to
Mr. Saperstein all of its rights to the goods and rights to services that are
the subject of existing reciprocal arrangements but which have not yet been
delivered to the Company. The value of such goods and services is expected to be
approximately $3.0 million. Following the offering, the Company does not intend
to enter into reciprocal arrangements for the benefit of Mr. Saperstein.
The Company has entered into certain transactions with Pro Journey Travel,
Inc., a company owned by Mr. Saperstein ("Pro Journey"). The Company has
guaranteed annual lease payments for Pro Journey, in the amount of $60,000 per
annum; such obligation shall continue through December 31, 1996. Additionally,
the Company has (i) posted a bond of $20,000 with the Airline Reservations
Clearinghouse on behalf of Pro Journey and (ii) provided coverage for Pro
Journey under the Company's liability insurance policies. The premiums which
would have been paid by Pro Journey to obtain such coverage had a value in 1995
equal to approximately $2,548. In addition, the employees of Pro Journey
participate in the Company's insurance plans; the premiums which would have been
paid by Pro Journey to obtain coverage under similar insurance plans had a value
in 1995 equal to approximately $6,539. The Company purchases the majority of its
travel tickets through Pro Journey, on terms which the Company believes are no
less favorable than those available from third parties. As of June 30, 1996, Pro
Journey owed the Company approximately $52,000. Upon the closing of this
offering and the Reorganization, the Company will forgive this receivable. After
December 31, 1996, the Company will cease all transactions and arrangements with
Pro Journey.
Mr. Saperstein has personally utilized the services of several of the
Company's employees. The total compensation paid to such employees was $180,995
in 1995. Except for two individuals who will provide security and transportation
services to Mr. Saperstein, these persons will cease to be employees of the
Company as of the closing of this offering. The individuals who will remain in
the Company's employ will be paid combined annual compensation of approximately
$75,000.
Through a separate company, Mr. Saperstein holds an equity interest in Posh
International, Inc. ("Posh"), a car care products company. In exchange for such
interest, the Company provided Posh with commercial airtime inventory valued at
$566,000 during the twelve months ended December 31, 1995 and $363,000 during
the year ended December 31, 1994. The Company has agreed to sell commercial
airtime inventory valued at $1.1 million to Posh at a discount through December
31, 1996, subject to availability and prepayment. As of the date of this
Prospectus, Posh has not purchased any such inventory from the Company.
Upon the closing of this offering, the Company and Mr. Saperstein will enter
into an agreement pursuant to which Mr. Saperstein may seek reimbursement from
the Company for any income tax obligation attributable to any period prior to
the Reorganization. Alternatively, in the event that the status
49
<PAGE>
of any of Metro Video News, Inc., Metro Reciprocal, Inc., or Metro Traffic
Control, Inc. as a subchapter S corporation is not respected, the Company may
seek reimbursement from Mr. Saperstein, but only to the extent that Mr.
Saperstein receives a tax refund attributable to amounts he previously included
in income in his capacity as a shareholder of such corporations. The Company
does not anticipate that the subchapter S status of Metro Video News, Inc.,
Metro Reciprocal, Inc., or Metro Traffic Control, Inc., will be successfully
challenged.
Immediately prior to the closing of this offering, the Company will enter
into a Stock Loan and Pledge Agreement with Mr. Saperstein pursuant to which the
Company will loan Mr. Saperstein __ shares of Common Stock. The loan will be for
a term of ten years, although the Company will have the right to require the
return of the loaned Common Stock (the "Loaned Stock") from Mr. Saperstein prior
to that time upon three days notice. As security for the loan, Mr. Saperstein
will pledge a number of shares of Series A Convertible Preferred Stock of the
Company which when converted into common stock will be equal to the number of
shares of Loaned Stock. Mr. Saperstein will be obligated to pay to the Company
an annual fee over the term of the loan of % of the average fair market value
of the Loaned Stock during the five day period immediately following the date of
the Stock Loan and Pledge Agreement. One-half of this fee will be payable
annually, and the remaining one-half of this fee will be payable upon the
termination of the loan if such termination occurs pursuant to an Event of
Default (as defined in the Stock Loan and Pledge Agreement) or at the end of the
ten year term of the Stock Loan and Pledge Agreement. The Company will forfeit
this portion of the fee if it calls the loan prior to the end of the ten year
term. In addition, Mr. Saperstein will pay an upfront transaction fee of
$ to the Company.
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<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of the Company's Common Stock by (i) the Selling
Stockholder, (ii) each person known to the Company to be the beneficial owner of
5% or more thereof, (iii) each director of the Company, (iv) each Executive
Officer and (v) all executive officers and directors as a group, as of September
, 1996, and as adjusted to reflect the sale of the Common Stock offered
hereby. Each of the named persons has sole voting and investment power with
respect to all shares of Common Stock owned by such person. See "Management."
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED SHARES BENEFICIALLY OWNED
PRIOR TO THIS OFFERING AFTER THIS OFFERING
---------------------------- SHARES BEING --------------------------
NAME AND ADDRESS SHARES PERCENTAGE OFFERED SHARES PERCENTAGE
- --------------------------------------------------- ----------- --------------- ----------------- --------- ---------------
%
<S> <C> <C> <C> <C> <C>
David I. Saperstein................................ % (1)
Charles I. Bortnick................................ -- -- -- 75,000(2) *
Shane E. Coppola................................... -- (3)
Curtis H. Coleman.................................. -- -- -- 55,000(2) *
Gary L. Worobow.................................... -- -- -- 45,000(2) *
All executive officers and directors as a group (5
persons).......................................... % (2)
</TABLE>
- ------------------------------
* Less than 1%.
(1) Includes 100,000 shares pursuant to the grant of stock options under the
1996 Plan upon the effective date of this offering.
(2) Pursuant to the grant of stock options under the 1996 Plan upon the
effective date of the offering.
(3) Includes shares beneficially owned through the Michelle Joy Coppola
Trust. Mrs. Coppola, the beneficiary of the trust, is Mr. Coppola's wife.
Also includes 75,000 shares pursuant to the grant of stock options under
the 1996 Plan upon the effective date of this offering.
All of the shares of Common Stock being offered for sale by David I.
Saperstein were borrowed from the Michelle Joy Coppola 1994 Trust, the Jennifer
Beth Saperstein 1994 Trust, the Jonathan Alexander Saperstein 1994 Trust, the
Alexis Daniella Saperstein 1994 Trust, and the Stefanie Nicole Saperstein 1994
Trust (collectively, the "Trusts") and the Company. Mr. Saperstein will be
obligated to repay these loans by delivering a number of shares of Common Stock
equal to the number of borrowed shares. Mr. Saperstein will pledge an equivalent
number of shares of Series A Convertible Preferred Stock as security for the
loans from the Company. See "Management" and "Certain Transactions."
51
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The Company is authorized to issue 25,000,000 shares of Common Stock, par
value $0.001 per share, 10,000,000 shares of preferred stock, par value $0.001
per share. At September , 1996, there were shares of Common Stock and
shares of Series A Convertible Preferred Stock outstanding.
COMMON STOCK
Holders of Common Stock are entitled to one vote for each share held on all
matters submitted to a vote of stockholders and do not have cumulative voting
rights. Stockholders casting a plurality of votes of the stockholders entitled
to vote in an election of directors may elect all of the directors standing for
election. Holders of Common Stock are entitled to receive ratably such
dividends, if any, as may be declared by the Board of Directors out of funds
legally available therefore, subject to any preferential dividend rights of
Preferred Stock that may be issued at such future time or times. Upon the
liquidation, dissolution or winding up of the Company, the holders of Common
Stock are entitled to receive ratably the net assets of the Company that may be
available after the payment of all debts and other liabilities and subject to
the prior rights of Preferred Stock that may be issued and outstanding at such
time. Holders of Common Stock have no preemptive, subscription, redemption or
conversion rights. The outstanding shares of Common Stock are, and the shares of
Common Stock offered in this offering, when issued and paid for, will be fully
paid and nonassessable. The rights, preferences and privileges of holders of
Common Stock are subject to the rights of the holders of shares of any series of
Preferred Stock which the Company may designate and issue in the future.
As of September , 1996 there were shares of Common Stock
outstanding held only by or for the benefit of members of the Saperstein Family.
PREFERRED STOCK
Preferred Stock may be issued from time to time by the Company's Board of
Directors, without stockholder approval, in one or more classes or series.
Subject to the provisions of the Amended and Restated Certificate of
Incorporation and the limitations prescribed by law, the Board of Directors is
expressly authorized to adopt resolutions to issue the shares of Preferred
Stock, to fix the number of shares and to change the number of shares
constituting any series, and to provide for or change the voting powers,
designations, preferences and relative, participating, optional or other special
rights, qualifications, limitations or restrictions thereof, including dividend
rights (including whether dividends are cumulative), dividend rates, terms of
redemption (including sinking fund provisions), redemption prices, conversion
rights and liquidation preferences of the shares constituting any class or
series of Preferred Stock, in each case without any further action or vote by
the stockholders.
One of the effects of undesignated Preferred Stock may be to enable the
Board of Directors to render more difficult or to discourage an attempt to
obtain control of the Company by means of a tender offer, proxy contest, merger
or otherwise, and thereby to protect the continuity of the Company's management.
The issuance of shares of the Preferred Stock pursuant to the Board of
Directors' authority described above may adversely affect the rights of the
holders of Common Stock. For example, Preferred Stock issued by the Company may
rank prior to the Common Stock as to dividend rights, liquidation preference or
both, may have full or limited voting rights and may be convertible into shares
of Common Stock. Accordingly, the issuance of shares of Preferred Stock may
discourage bids for the Common Stock at a premium or may otherwise adversely
affect the market price of the Common Stock.
SERIES A CONVERTIBLE PREFERRED STOCK
The Company has created a series of Preferred Stock designated as "Series A
Convertible Preferred Stock." Such series consists of 7,500,000 shares. Holders
of Series A Convertible Preferred Stock are entitled to one vote for each share
held on all matters submitted to a vote of stockholders and do not have
cumulative voting rights. Shares of the Series A Convertible Preferred Stock
will not be entitled to receive dividends. Upon the liquidation, dissolution or
winding-up of the Company, the holders of the Series A Convertible Preferred
Stock are entitled to a liquidation preference over the then outstanding
52
<PAGE>
Common Stock and any other then outstanding Preferred Stock of other classes
with respect to the assets of the Company in an amount equal to 10% of the fair
market value of the issued and outstanding Common Stock to be determined at the
closing of the initial public offering. Each share of Series A Convertible
Preferred Stock is convertible upon three days notice with no premium into one
share of Common Stock (subject to adjustment for stock splits, stock dividends,
reverse stock splits, recapitalization and similar events) at the option of the
holder.
The Series A Convertible Preferred Stock will be, when issued and paid for,
fully paid and nonassessable.
CERTAIN PROVISIONS OF DELAWARE LAW
Upon consummation of this offering, the Company will be subject to the
provisions of Section 203 of Delaware General ("Section 203"). Section 203
provides, with certain exceptions, that a Delaware corporation may not engage in
any of a broad range of business combinations with a person or an affiliate, or
associate of such person, who is an "interested stockholder" for a period of
three years from the date that such person became an interested stockholder
unless (i) prior to such date either the transaction which resulted in the
person becoming an interested stockholder, or the business combination, is
approved by the board of directors, (ii) upon consummation of the transaction
which resulted in such person becoming an interested stockholder, the interested
stockholder owned 85% or more of the outstanding voting stock of the corporation
(excluding shares owned by persons who are both officers and directors of the
corporation, and shares held by certain employee stock ownership plans) or (iii)
on or after the date the person becomes an interested stockholder, the business
combination is approved by the corporation's board of directors and by the
holders of at least 66 2/3% of the corporation's outstanding voting stock at an
annual or special meeting, excluding shares owned by the interested stockholder.
Under Section 203, an "interested stockholder" is defined as any person who is
(i) the owner of 15% or more of the outstanding voting stock of the corporation
or (ii) an affiliate or associate of the corporation and who was the owner of
15% or more of the outstanding voting stock of the corporation at any time
within the three-year period immediately prior to the date on which it is sought
to be determined whether such person is an interested stockholder. Mr.
Saperstein will not be subject to the restrictions of Section 203 because he was
an interested stockholder at the time of Reorganization.
A corporation may, at its option, exclude itself from the coverage of
Section 203 by amending its certificate of incorporation or bylaws by action of
its stockholders to exempt itself from coverage, provided that such bylaw or
certificate of incorporation amendment shall not become effective until 12
months after the date it is adopted. The Company intends to adopt an amendment
to its Certificate of Incorporation to exempt itself from coverage of Section
203.
CERTAIN CHARTER AND BYLAW PROVISIONS
STAGGERED BOARD OF DIRECTORS
Pursuant to Article 3 of the Company's Bylaws the Company's Board of
Directors is divided into three classes, which are elected for staggered terms
of three years. As a result, a change in a majority of the directors of the
Company cannot be effected at a single annual meeting of stockholders. While the
principal purpose of Article 3 is to provide continuity on the Board of
Directors, the provisions could have the effect of discouraging a third party
from attempting to change the management and policies of the Company by
effecting a change in the majority of the Board of Directors through a proxy
contest.
These provisions of the Company's Bylaws may have the effect of delaying
consideration of a stockholder proposal until the next annual meeting of
stockholders, unless a special meeting is called by the Chief Executive Officer
or the Board of Directors. These provisions also would prevent the holders of a
majority of the voting power of the Company from using the written consent
procedure to take stockholder action without giving all the stockholders of the
Company entitled to vote on a particular matter the opportunity to participate
in determining such proposed action. Additionally, a stockholder
53
<PAGE>
could not force consideration of a proposal by stockholders over the opposition
of the Board of Directors of the Company by calling a special meeting of
stockholders prior to the time the Board believes such consideration to be
appropriate.
ADVANCE NOTICE OF STOCKHOLDER NOMINEES AND STOCKHOLDER BUSINESS
The Company's Bylaws establish an advance notice procedure for the
nomination of candidates for election as directors and the presentation of
certain other matters before an annual meeting of stockholders of the Company,
other than by or at the direction of the Board of Directors or the chairman of
the meeting. For such nominations or other business to be considered properly
brought by a stockholder before an annual meeting of stockholders of the
Company, such stockholder must have given timely prior written notice to the
Secretary of the Company of his or her intent to bring such nominations or
business before the meeting. To be timely, such notice must be received by the
Secretary at least 90 days prior to the date on which, in the immediately
preceding calendar year, the annual meeting of stockholders of the Company for
such year was held (provided that if the date of the annual meeting is changed
by more than 30 days from such anniversary date, such stockholder's notice must
be received by the Secretary no later than 10 days after notice or prior public
disclosure of the meeting is first given or made to stockholders).
A stockholder notice must contain a brief description of the nomination or
business to be brought before the meeting, the name and address of the
stockholder making the notice and of any person to be nominated, a
representation that the stockholder is a holder of record of stock of the
Company entitled to vote at the meeting and intends to appear at the meeting to
bring such nominations or business before the meeting; a description of all
arrangements or understandings between the stockholder and each nominee (in the
case of a nomination) or of any material interest of the stockholder in the
business matter (in the case of other business); such other information
regarding the nominee or matter of business to be proposed as would be required
to be included in a proxy statement soliciting proxies for the election of such
nominee or approval of such other business; and, in the case of a nomination of
the nominee.
The purpose of these procedures is to provide an orderly procedure for
conducting annual meetings of stockholders and to afford the Board of Directors
a meaningful opportunity to consider the qualifications of the proposed nominees
and to inform themselves, and where appropriate to inform stockholders, in
advance of the meeting of any business proposed to be conducted at the meeting.
Although the Company's Bylaws do not give the Board of Directors any power to
approve or disapprove stockholder nominations for the election of directors or
any other business proposed by a stockholder to be conducted at any annual
meeting, the Bylaws may have the effect of precluding a nomination or the
consideration of certain business at a particular annual meeting if the proper
procedures are not followed. These procedures may also discourage or deter a
third party from conducting a solicitation of proxies to elect its own slate of
directors or from attempting to obtain control of the Company, even if the
conduct of such solicitation or such attempt might be beneficial to the Company
and its stockholders.
INDEMNIFICATION OF DIRECTORS AND OFFICERS; LIMITATION OF MONETARY LIABILITY
Section 145 of the General Corporation Law of the State of Delaware Law
permits the Company to indemnify an officer, director or employee in respect of
claims made by reason of his or her status with the Company, including
stockholder derivative suits, provided he or she acted in good faith and in a
manner he or she reasonably believed to be in or not opposed to the best
interest of the Company and, with respect to any criminal act or proceeding, had
no reasonable cause to believe his or her conduct was unlawful. Expenses
incurred in the defense of any such action may be paid by the Company in advance
of final disposition upon receipt of an undertaking from the officer, director
or employee to repay the advances if there is an ultimate determination that he
or she is not entitled to be indemnified. Article 8 of the Company's Amended and
Restated Certificate of Incorporation provides such indemnification to the full
extent permitted by law. The Company intends to purchase directors' and
officers' liability coverage to insure its indemnification of the Company's
directors and officers.
Article 6 of the Company's Certificate of Incorporation exonerates the
Company's directors from personal liability to the Company or its stockholders
for monetary damages for breach of the fiduciary
54
<PAGE>
duty of care as a director, provided that Article 6 does not eliminate or limit
liability for any breach of the directors' duty of loyalty for acts or omissions
not in good faith or which involve intentional misconduct or knowing violations
of law, for any improper declaration of dividend or for any transaction from
which the director derived an improper personal benefit. Article 6 does not
eliminate a stockholder's right to seek non-monetary, equitable remedies, such
as an injunction or recision to redress an action taken by the directors.
However, as a principal matter, equitable remedies may not be available in all
situations, and there may be instances in which no effective remedy is
available.
The discussions of the Common Stock and Preferred Stock here and elsewhere
in this Prospectus are qualified in their entirety by reference to (i) the
Amended and Restated Certificate of Incorporation of the Company, as amended,
and the Bylaws of the Company, copies of which have been filed as exhibits to
the Registration Statement of which this Prospectus is a part, and (ii) the
applicable provisions of Delaware law.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Company's Common Stock is American
Stock Transfer & Trust Company.
SHARES ELIGIBLE FOR FUTURE SALE
Upon consummation of this offering, there will be shares of Common
Stock outstanding. Of these shares, the shares sold in this offering will
be freely tradeable without restriction (except as to "Affiliates" of the
Company (as defined under the Securities Act)) or registration under the
Securities Act of 1933. The remaining shares will be "Restricted
Securities" as defined in Rule 144 under the Securities Act ("Rule 144"). Of
such shares, without consideration of the contractual restrictions described
below, approximately shares would be available for resale in the public
market pursuant to Rule 144(k) (see below).
Restricted Securities may be sold in the public market only if registered or
if they qualify for an exemption from registration under Rules 144, 144(k) or
701 promulgated under the Securities Act, which rules are summarized below. As a
result of the contractual restrictions described below, and the provisions of
Rule 144, 144(k) and 701, additional shares will be available for sale in the
public market as follows: (i) no shares will be available for immediate sale in
the public market on the date of the Prospectus, (ii) no shares will be issuable
upon the exercise of stock options granted under the 1996 Plan that will vest
and, if exercised, will become eligible for sale without lock-up restrictions on
various dates prior to 180 days following the date of this Prospectus, (iii)
currently outstanding shares will be eligible for sale upon expiration of
lock-up agreements 180 days after the date of this Prospectus, and (iv)
currently outstanding shares will be eligible for sale upon expiration of their
respective two-year holding periods, subject in the case of shares held by
Affiliates to compliance with certain volume restrictions.
Rule 701 under the Securities Act provides that, beginning ninety (90) days
after the date of this Prospectus, shares of Common Stock acquired upon the
exercise of outstanding options may be resold by persons other than Affiliates
subject only to the manner of sale provisions of Rule 144 (d), and by Affiliates
subject to all provisions of Rule 144 except the two-year minimum holding
period.
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated) who has beneficially owned restricted shares of
Common Stock for at least two years, including an "Affiliate" as that term is
defined under the Securities Act, is entitled to sell a number of shares that
does not exceed the greater of 1% of the then outstanding shares of Common Stock
or the average weekly trading volume of the Common Stock on all exchanges and/or
reported through the automated quotation system of a registered securities
association during the four calendar weeks preceding the date on which notice of
the sale is filed with the Securities and Exchange Commission. Sales under Rule
144 are also subject to certain manner of sale provisions, notice requirements
and the availability of current public information about the Company. A person
(or persons whose shares are aggregated) who
55
<PAGE>
is not deemed to have been an Affiliate of the Company at any time during the 90
days preceding a sale, and who has beneficially owned the shares proposed to be
sold for at least three years, would be entitled to sell such shares under Rule
144(k) without regard to the limitations described above.
VALIDITY OF COMMON STOCK
The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by Paul, Hastings, Janofsky & Walker, New York, New York
and for the Underwriters by Sullivan & Cromwell, New York, New York.
EXPERTS
The combined financial statements of Metro Traffic Control, Inc., Metro
Reciprocal, Inc., Metro Networks, Ltd. and Metro Video News, Inc. as of December
31, 1994 and 1995, and for each of the years in the three-year period ended
December 31, 1995 and the combined financial statements of Airborne Broadcast
Consultants, Skyview Broadcasting Networks, Inc. and Airborne Broadcasting
Services, Inc. for the year ended December 31, 1994, included herein have been
included herein in reliance upon the report of KPMG Peat Marwick LLP,
independent certified public accountants, appearing elsewhere herein, and upon
the authority of such firm as experts in accounting and auditing.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission"), a Registration Statement on Form S-1 under the Securities Act,
with respect to the shares of Common Stock offered hereby. This Prospectus does
not contain all of the information set forth in the Registration Statement and
the exhibits and schedules thereto. For further information with respect to the
Company and the shares of Common Stock offered hereby, reference is hereby made
to such Registration Statement, and the exhibits and schedules thereto, copies
of which may be inspected without charge at the public reference facilities
maintained by the Commission at Judiciary Plaza Building, 450 Fifth Street,
N.W., Room 1024, Washington, D.C. 20549 and its regional offices located at 7
World Trade Center, 13th Floor, New York, New York 10048 and Northwestern Atrium
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511, and
copies of all or any part thereof may be obtained from each office upon payment
of the fees prescribed by the Commission. The summaries in this Prospectus of
additional information included in the Registration Statement or any exhibit
thereto are qualified in their entirety by reference to such information or
exhibit.
56
<PAGE>
GLOSSARY
AFFILIATES. The radio and television stations to which the Company provides
information services in exchange for commercial airtime inventory. The Company
typically is the exclusive provider to an affiliate of the specific information
services contracted for by such affiliate, but such affiliate may also receive
other information from other service providers. With the exception of its
contractual relationships, the Company does not have financial interests in its
affiliates.
DMA. Designated Market Area, as listed on The Arbitron Radio Metro and
Television Market Population Estimates 1995-1996.
EXPANDED RADIO SERVICES. The Company's news, sports, weather and other
information reports provided to radio station affiliates.
EXPANDED RADIO SERVICES NETWORK. The network of radio station affiliates to
which the Company provides its Expanded Radio Services.
GAAP. Generally accepted accounting principles.
% LISTENERS. Percentage of an MSA population which hears the Company's
information reports over a 4-week period calculated using data from the Arbitron
Winter 1996 Radio Market Reports* and Strata Marketing, Inc. statistical
analysis.
METROTV NETWORK. The network of broadcast television station affiliates and
cable news channel affiliates to which the Company provides its Television
Traffic Services and Video News Services.
MSA. Metro Survey Area, as listed in The Arbitron Radio Metro and Television
Market Population Estimates 1995-1996.*
RADIO TRAFFIC SERVICES. The Company's core traffic information reports
provided to radio station affiliates.
RADIO TRAFFIC SERVICES NETWORK. The network of radio station affiliates to
which the Company provides its Radio Traffic Services.
RECIPROCAL ARRANGEMENTS. Arrangements in which the Company exchanges certain
commercial advertising inventory for goods and services.
ROS. Thirty second and sixty second commercial advertising that the
Company's affiliate radio and television stations broadcast for the Company
based on availabilities in such affiliates's schedules. Generally, ROS time
provided to the Company is broadcast between 6:00 a.m. and 11:00 p.m., Monday-
Sunday.
SPONSORSHIP. An opening announcement and ten second commercial message
broadcast during, immediately before or immediately after one of the Company's
information reports on either the Radio Traffic Services Network or the Expanded
Radio Services Network.
TELEVISION TRAFFIC SERVICES. The Company's traffic information reports
provided to television station affiliates.
VIDEO NEWS SERVICES. The Company's video news (other than traffic)
information products provided to television station affiliates.
- ------------------------
* Copyright 1996 by The Arbitron Company. All Rights Reserved. The information
provided herein regarding Arbitron's audience listening estimates is based on
Arbitron's copyrighted and proprietary data and estimates concerning the
applicable stations' average quarter hour persons share, Monday- Sunday,
6am-Midnight, from the applicable Winter 1996 Radio Market Reports for the
demographic, day-part and metro areas listed herein and from The Arbitron Radio
Metro Television Market Population Estimates 1995-1996.
57
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
The Combined Financial Statements of Metro Traffic Control, Inc., Metro Reciprocal, Inc., Metro
Networks, Ltd., and Metro Video News, Inc.:
Independent Auditors' Report........................................................................ F-2
Combined Balance Sheets............................................................................. F-3
Combined Statements of Operations................................................................... F-5
Combined Statements of Stockholder's Equity/Partners' Capital....................................... F-6
Combined Statements of Cash Flows................................................................... F-7
Notes to Combined Financial Statements.............................................................. F-9
Financial statements of business acquired:
The Combined Financial Statements of Skyview Broadcasting Networks, Inc., Airborne Broadcasting
Consultants and Airborne Broadcasting Systems, Inc.:
Independent Auditors' Report........................................................................ F-20
Combined Statement of Operations.................................................................... F-21
Combined Statement of Cash Flows.................................................................... F-22
Notes to Combined Financial Statement............................................................... F-23
Pro Forma Condensed Financial Data:................................................................... F-25
Pro Forma Condensed Balance Sheet as of December 31,1995............................................ F-26
Pro Forma Condensed Statement of Operations for the six months ended June 30, 1996.................. F-27
Pro Forma Condensed Statement of Operations for the year ended December 31, 1995.................... F-28
Notes to Condensed Pro Forma Financial Statements................................................... F-29
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
Boards of Directors and Partners
Metro Traffic Control, Inc.
Metro Reciprocal, Inc.
Metro Networks, Ltd.
Metro Video News, Inc.:
We have audited the accompanying combined balance sheets of Metro Traffic
Control, Inc., Metro Reciprocal, Inc., Metro Networks, Ltd., and Metro Video
News, Inc. (collectively, the "Companies") as of December 31, 1995 and 1994, and
the related combined statements of operations, stockholder's equity/ partners'
capital and cash flows for each of the years in the three-year period ended
December 31, 1995. These financial statements are the responsibility of the
Companies' management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the combined financial position of the
Companies as of December 31, 1995 and 1994, and the combined results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 1995, in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
Houston, Texas
June 13, 1996
F-2
<PAGE>
METRO TRAFFIC CONTROL, INC., METRO RECIPROCAL, INC.,
METRO NETWORKS, LTD., AND METRO VIDEO NEWS, INC.
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, JUNE 30, 1996
ASSETS 1994 1995 (UNAUDITED)
-------------- -------------- --------------
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents..................................... $ 3,676,357 $ 3,049,946 $ 3,466,200
Accounts receivable, net...................................... 8,636,230 12,662,716 19,840,971
Prepaid expenses and other current assets..................... 226,129 357,473 902,088
Reciprocal receivables, net................................... 5,002,719 4,561,786 5,744,712
Merchandise and scrip inventory............................... 422,851 399,606 384,292
Reciprocal prepaid expenses and other current assets.......... 838,249 679,199 804,155
-------------- -------------- --------------
Total current assets........................................ 18,802,535 21,710,726 31,142,418
Receivables from related parties................................ 288,669 1,075,030 1,685,792
Note receivable from stockholder................................ 1,706,641 -- --
Property and equipment:
Operating equipment........................................... 5,627,122 7,887,769 8,941,683
Transportation equipment...................................... 136,876 709,323 824,692
Leasehold improvements........................................ 476,190 615,380 667,709
-------------- -------------- --------------
6,240,188 9,212,472 10,434,084
-------------- -------------- --------------
Less: accumulated depreciation 3,046,307 4,234,972 4,961,155
-------------- -------------- --------------
3,193,881 4,977,500 5,472,929
Purchased broadcast contracts and other intangibles, net of
accumulated amortization of $4,103,863 in 1995 and $3,437,712
in 1994........................................................ 3,107,634 13,749,644 16,435,009
Other assets.................................................... 402,244 923,714 2,013,864
-------------- -------------- --------------
$ 27,501,604 $ 42,436,614 $ 56,750,012
-------------- -------------- --------------
-------------- -------------- --------------
</TABLE>
See accompanying notes to combined financial statements.
F-3
<PAGE>
METRO TRAFFIC CONTROL, INC., METRO RECIPROCAL, INC.,
METRO NETWORKS, LTD., AND METRO VIDEO NEWS, INC.
COMBINED BALANCE SHEETS, CONTINUED
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
------------------------------ 1996
LIABILITIES 1994 1995 (UNAUDITED)
-------------- -------------- --------------
<S> <C> <C> <C>
Current liabilities
Disbursement float............................................ $ 1,511,672 $ 1,800,433 $ 2,323,713
Accounts payable.............................................. 1,465,253 1,808,274 2,432,529
Accrued liabilities........................................... 1,146,228 1,707,085 4,002,984
Accrued payroll liabilities................................... 863,831 996,695 1,212,899
Notes payable................................................. 120,148 84,280 706,904
Current portion of long-term debt............................. 82,610 662,257 6,474,873
Deferred revenues............................................. 1,340,017 727,947 1,113,564
Income tax payable............................................ 68,868 302,000 162,228
Accrued reciprocal liabilities................................ 2,350,367 2,316,975 2,743,473
Reciprocal and airtime obligations............................ 2,439,990 3,404,296 3,126,047
-------------- -------------- --------------
Total current liabilities................................. 11,388,984 13,810,242 24,299,214
-------------- -------------- --------------
Long-term debt.................................................. 6,447,245 21,877,156 23,965,534
Deferred income tax............................................. -- 2,083,842 2,941,787
Other liabilities............................................... 264,189 187,146 200,103
-------------- -------------- --------------
Total liabilities......................................... 18,100,418 37,958,386 51,406,638
-------------- -------------- --------------
Stockholder's equity/partners' capital
Common stock.................................................... 3,015 3,015 3,015
Additional paid-in capital...................................... 1,023,811 4,023,811 4,023,811
Partners' capital............................................... 1,235,484 650,908 575,394
Retained earnings (deficit)..................................... 7,138,876 (199,506) 741,154
-------------- -------------- --------------
Total stockholder's equity/partners' capital.............. 9,401,186 4,478,228 5,343,374
-------------- -------------- --------------
$ 27,501,604 $ 42,436,614 $ 56,750,012
-------------- -------------- --------------
-------------- -------------- --------------
</TABLE>
See accompanying notes to combined financial statements.
F-4
<PAGE>
METRO TRAFFIC CONTROL, INC., METRO RECIPROCAL, INC.,
METRO NETWORKS, LTD., AND METRO VIDEO NEWS, INC.
COMBINED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED
FOR THE YEAR ENDED JUNE 30,
DECEMBER 31, (UNAUDITED)
---------------------------------------------- ------------------------------
1993 1994 1995 1995 1996
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Advertising revenues.................. $ 47,904,876 $ 60,048,350 $ 72,432,951 $ 30,623,017 $ 50,077,032
Broadcasting costs.................... 27,384,125 32,239,358 41,285,973 19,816,422 24,172,646
Marketing expense..................... 8,848,207 11,354,698 14,503,640 6,820,696 10,101,411
General and administrative expense.... 6,993,305 5,938,488 7,194,011 4,054,886 4,350,708
Depreciation and amortization......... 1,814,257 1,302,434 3,980,525 1,694,080 2,936,082
-------------- -------------- -------------- -------------- --------------
Total operating costs................. 45,039,894 50,834,978 66,964,149 32,386,084 41,560,847
-------------- -------------- -------------- -------------- --------------
Income (loss) from operations......... 2,864,982 9,213,372 5,468,802 (1,763,067) 8,516,185
-------------- -------------- -------------- -------------- --------------
Other (income) expense:
Interest income..................... (59,929) (165,551) (165,079) (125,559) (53,734)
Interest expense.................... 145,064 293,010 1,260,185 420,518 933,895
Other............................... 297,354 1,785 27,967 32,895 (12,600)
-------------- -------------- -------------- -------------- --------------
382,489 129,244 1,123,073 327,854 867,561
-------------- -------------- -------------- -------------- --------------
Income (loss) from continuing
operations before income tax......... 2,482,493 9,084,128 4,345,729 (2,090,921) 7,648,624
Income tax expense (benefit).......... 1,066,448 2,179,143 1,036,352 229,087 572,855
-------------- -------------- -------------- -------------- --------------
Income (loss) from continuing
operations........................... 1,416,045 6,904,985 3,309,377 (2,320,008) 7,075,769
Discontinued operations:
Loss from operations (net of tax
benefit of $166,600)............... 323,435 -- -- -- --
Loss on disposal (net of tax benefit
of $122,200)....................... 237,363 -- -- -- --
-------------- -------------- -------------- -------------- --------------
Net income (loss)................. $ 855,247 $ 6,904,985 $ 3,309,377 $ (2,320,008) $ 7,075,769
-------------- -------------- -------------- -------------- --------------
-------------- -------------- -------------- -------------- --------------
Pro forma income (loss) data
(unaudited):
Income (loss) from continuing
operations as reported before
tax................................ $ 4,345,729 $ 7,648,624
Proforma federal and state income
tax................................ (1,542,734) (2,715,262)
-------------- --------------
Pro forma net income................ $ 2,802,995 $ 4,933,362
-------------- --------------
-------------- --------------
</TABLE>
See accompanying notes to combined financial statements.
F-5
<PAGE>
METRO TRAFFIC CONTROL, INC., METRO RECIPROCAL, INC.,
METRO NETWORKS, LTD., AND METRO VIDEO NEWS, INC.
COMBINED STATEMENTS OF STOCKHOLDER'S EQUITY/PARTNERS' CAPITAL
For the years ended December 31, 1995, 1994, 1993 and
for the six month period ended June 30, 1996
<TABLE>
<CAPTION>
ADDITIONAL RETAINED
COMMON PAID-IN PARTNERS' EARNINGS
STOCK CAPITAL CAPITAL (DEFICIT) TOTAL
----------- ------------- ------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1992......... $ 2,995 $ 21,831 $ -- $ 5,143,183 $ 5,168,009
Distribution......................... -- -- -- (1,871,296) (1,871,296)
Capital contributed.................. 10 990 -- -- 1,000
Net income........................... -- -- -- 855,247 855,247
----------- ------------- ------------- --------------- ---------------
Balance at December 31, 1993......... 3,005 22,821 -- 4,127,134 4,152,960
Distribution......................... -- -- -- (3,857,759) (3,857,759)
Stock issuance....................... 10 990 -- -- 1,000
Capital contributed.................. -- 1,000,000 1,200,000 -- 2,200,000
Net income........................... -- -- 35,484 6,869,501 6,904,985
----------- ------------- ------------- --------------- ---------------
Balance at December 31, 1994......... 3,015 1,023,811 1,235,484 7,138,876 9,401,186
Distribution......................... -- -- -- (11,232,335) (11,232,335)
Capital contributed.................. -- 3,000,000 -- -- 3,000,000
Net income (loss).................... -- -- (584,576) 3,893,953 3,309,377
----------- ------------- ------------- --------------- ---------------
Balance at December 31, 1995......... 3,015 4,023,811 650,908 (199,506) 4,478,228
Distribution - unaudited............. -- -- -- (6,210,623) (6,210,623)
Net income (loss) - unaudited........ -- -- (75,514) 7,151,283 7,075,769
----------- ------------- ------------- --------------- ---------------
Balance at June 30, 1996 -
unaudited........................... $ 3,015 $ 4,023,811 $ 575,394 $ 741,154 $ 5,343,374
----------- ------------- ------------- --------------- ---------------
----------- ------------- ------------- --------------- ---------------
</TABLE>
See accompanying notes to combined financial statements.
F-6
<PAGE>
METRO TRAFFIC CONTROL, INC., METRO RECIPROCAL, INC.,
METRO NETWORKS, LTD., AND METRO VIDEO NEWS, INC.
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
FOR THE YEAR ENDED ENDED JUNE 30,
DECEMBER 31, (UNAUDITED)
------------------------------------------------ --------------------------------
1993 1994 1995 1995 1996
-------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Cash flows from operating
activities:
Net (loss) earnings............... $ 855,247 $ 6,904,985 $ 3,309,377 $ (2,320,008) $ 7,075,769
Adjustments to reconcile net
earnings to cash provided by (used
in) operating activities:
Depreciation and amortization... 1,814,257 1,302,434 3,980,525 1,694,080 2,936,082
(Gain) loss on disposition of
property and equipment......... 297,353 (98,215) 1,607 5,995 --
Loss on discontinued
operations..................... 849,598 -- -- -- --
Loss on investment.............. -- 100,000 26,900 26,900 --
Amortization of discount on note
payable -- -- 27,580 27,945 44,150
Provision for doubtful
receivables.................... 681,810 802,230 443,169 257,763 438,725
Deferred federal income tax..... (66,599) 366,599 -- -- (367,727)
Decrease (increase) in, net of
acquisition of businesses
Accounts receivable, net........ (1,697,853) (4,178,646) (3,496,445) 638,148 (7,063,998)
Prepaid expenses and other
current assets................. (580,491) (8,822) (124,344) (438,681) (544,614)
Other assets.................... 27,554 (116,606) (286,221) (44,506) (207,270)
(Decrease) increase in, net of
acquisition of businesses
Accounts payable................ (207,313) 365,984 (521,669) (703,315) 516,295
Accrued liabilities............. (120,861) 37,852 506,101 1,006,296 2,295,899
Accrued payroll liabilities..... 39,480 152,979 132,864 18,953 216,204
Deferred revenues............... (414,408) 725,347 (612,070) 1,817,026 385,617
Income tax payable.............. (124,015) (1,810,851) 220,328 (388,620) (139,772)
Other liabilities............... (77,043) (77,043) (77,043) (38,522) 12,956
Net reciprocal arrangements......... (2,188,772) (3,214,830) (1,424,927) 1,738,403 (1,827,737)
-------------- --------------- --------------- --------------- ---------------
Net cash provided by (used in)
operating activities............ (912,056) 1,253,397 2,105,732 3,297,857 3,770,579
-------------- --------------- --------------- --------------- ---------------
Cash flows from investing
activities:
Acquisitions of companies......... -- (585,432) (9,218,718) (9,218,718) (3,864,807)
Advances on receivables to related
parties........................... (1,004,150) (316,993) (786,361) (402,270) (680,703)
Payments on receivables from
related parties................... -- -- -- -- 150,000
Advances on receivable from
stockholders...................... 25,300 (1,693,043) (84,227) (84,227) --
Proceeds from sale of property and
equipment......................... 31,150 1,043,601 224,957 15,503 --
Acquisitions of property and
equipment......................... (270,400) (835,050) (2,043,245) (751,990) (1,957,823)
-------------- --------------- --------------- --------------- ---------------
Net cash used in investing
activities.................... $ (1,218,100) $ (2,386,917) $ (11,907,594) $ (10,441,702) $ (6,353,333)
-------------- --------------- --------------- --------------- ---------------
</TABLE>
See accompanying notes to combined financial statements.
F-7
<PAGE>
METRO TRAFFIC CONTROL, INC., METRO RECIPROCAL, INC.,
METRO NETWORKS, LTD., AND METRO VIDEO NEWS, INC.
COMBINED STATEMENTS OF CASH FLOWS, CONTINUED
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED
FOR THE YEAR ENDED JUNE 30,
DECEMBER 31, (UNAUDITED)
--------------------------------------------- ------------------------------
1993 1994 1995 1995 1996
------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Cash flows from financing activities:
Increase (decrease) in disbursements
float................................. $ 376,085 $ 451,249 $ 288,761 $ (324,049) $ 523,280
Financing costs....................... -- (229,885) (314,601) -- --
Proceeds from long-term debt.......... 1,981,564 8,008,536 16,890,155 11,890,107 8,948,351
Principal payments on long-term
debt.................................. (395,931) (4,441,471) (2,057,748) (935,925) (468,883)
Distributions......................... -- (2,364,225) (8,631,116) (4,805,980) (6,003,740)
Issuance of stock..................... 1,000 1,000 -- -- --
Capital contributions................. -- 2,200,000 3,000,000 -- --
------------- -------------- -------------- -------------- --------------
Net cash provided by financing
activities............................. 1,962,718 3,625,204 9,175,451 5,824,153 2,999,008
------------- -------------- -------------- -------------- --------------
Net (decrease) increase in cash and cash
equivalents............................ (167,438) 2,491,684 (626,411) (1,319,692) 416,254
Cash and cash equivalents at beginning
of year................................ 1,352,111 1,184,673 3,676,357 3,676,357 3,049,946
------------- -------------- -------------- -------------- --------------
Cash and cash equivalents at end of
year................................... $ 1,184,673 $ 3,676,357 $ 3,049,946 $ 2,356,665 $ 3,466,200
------------- -------------- -------------- -------------- --------------
------------- -------------- -------------- -------------- --------------
Supplemental disclosures of cash flow
information:
Cash paid during the year for
interest.............................. $ 154,064 $ 261,000 $ 1,246,000 $ 420,518 $ 959,265
------------- -------------- -------------- -------------- --------------
------------- -------------- -------------- -------------- --------------
Cash paid during the year for income
taxes................................. $ 1,115,387 $ 4,325,000 $ 923,000 $ 604,903 $ 686,054
------------- -------------- -------------- -------------- --------------
------------- -------------- -------------- -------------- --------------
Supplemental noncash investing and
financing activities:
Stockholder distributions by:
Reduction of stockholder note
receivable............................ -- 560,165 1,790,868 1,790,868 --
Transfer of property.................. 1,871,296 933,369 966,518 830,179 206,883
------------- -------------- -------------- -------------- --------------
$ 1,871,296 $ 1,493,534 $ 2,757,386 $ 2,621,047 $ 206,941
------------- -------------- -------------- -------------- --------------
------------- -------------- -------------- -------------- --------------
Property and equipment acquired
through reciprocal activities......... $ 620,868 $ 1,877,372 $ 702,970 $ 484,060 $ 176,610
------------- -------------- -------------- -------------- --------------
------------- -------------- -------------- -------------- --------------
Reciprocal activities related to
business acquisitions................. $ -- $ 2,000,000 $ 1,500,000 $ 1,500,000 $ --
------------- -------------- -------------- -------------- --------------
------------- -------------- -------------- -------------- --------------
</TABLE>
See accompanying notes to combined financial statements.
F-8
<PAGE>
METRO TRAFFIC CONTROL, INC., METRO RECIPROCAL, INC.,
METRO NETWORKS, LTD., AND METRO VIDEO NEWS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
(INFORMATION FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The combined financial statements consist of Metro Traffic Control, Inc.
("MTC"), Metro Reciprocal, Inc. ("MRI"), Metro Networks, Ltd. ("MNW") (a limited
liability partnership) and Metro Video News, Inc. ("MVN") and their subsidiaries
(collectively, the "Company"). These entities are all controlled by the same
shareholder. All intercompany accounts and transactions have been eliminated in
combination.
The Company provides traffic reporting services, local news, sports, weather
and other information reporting services to the television and radio broadcast
industries. In exchange for the Company's information reports, television and
radio station broadcast affiliates provide commercial airtime to the Company.
The packaging and sale of this commercial airtime accounts for substantially all
of the Company's revenue. The Companies' information reports are broadcast by
broadcast affiliates throughout the United states and in over 50 of the largest
metropolitan areas.
REVENUE RECOGNITION
The Company provides programming to radio and television stations in
exchange for commercial airtime. The airtime is subsequently sold to advertisers
for either cash or other goods and services. Revenue is recognized at the time
commercials are broadcasted, and accounts receivable are recorded at that time.
If cash, merchandise or services are received prior to the broadcast of the
commercial, deferred revenue is recorded.
Revenue from the Company's exchange of advertising time for goods and
services is recorded at the estimated fair market value of goods or services
received or to be received. The value of goods and services is charged to
expense when used.
Operations are charged with a provision for doubtful accounts based on
collection experience and a current review of the collectibility of accounts.
Accounts deemed uncollectible are applied against the allowance for doubtful
accounts.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid debt instruments purchased with an
original maturity of three months or less to be cash equivalents. The
disbursement float liability represents uncleared checks related to zero balance
accounts. The Company records these amounts as liabilities.
MERCHANDISE AND SCRIP INVENTORY
Merchandise and scrip inventory consists of miscellaneous merchandise and
airline tickets, lodging, meals and other goods received by the Company in
exchange for advertising time, and are valued at the fair market value of goods
received. The components of the merchandise and scrip inventory are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------ JUNE 30,
1994 1995 1996
----------- ----------- -----------
<S> <C> <C> <C>
Merchandise inventory........................ $ 319,784 $ 156,496 $ 152,752
Scrip inventory.............................. 103,067 243,110 231,540
----------- ----------- -----------
$ 422,851 $ 399,606 $ 384,292
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
F-9
<PAGE>
METRO TRAFFIC CONTROL, INC., METRO RECIPROCAL, INC.,
METRO NETWORKS, LTD., AND METRO VIDEO NEWS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
(INFORMATION FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. The cost of ordinary maintenance
is charged to operations, while renewals and replacements are capitalized.
Depreciation is computed based on the straight-line method over the following
estimated useful lives:
<TABLE>
<S> <C>
Operating equipment 3 - 10 years
Transportation equipment 3 years
Leasehold improvements 10 years
</TABLE>
Depreciation expense for the years ended December 31, 1995, 1994 and 1993
was $1,249,702, $882,577 and $746,919, respectively. Other expense for the year
ended December 31, 1993 of $297,354 consists of loss on disposal of certain
fixed assets.
INTANGIBLE ASSETS
Intangible assets include goodwill, purchased broadcast contracts,
non-compete agreements, trademarks and licenses. Intangible assets are amortized
on a straight-line basis over the estimated eventual term of the customer's
contract or the estimated useful life of the asset for periods ranging from
three to five years. The Company adopted FAS 121 (Accounting for Impairment Of
Long-Lived Assets And For Long-Lived Assets To Be Disposed Of) effective January
1, 1996. This standard requires that long-lived assets and certain identifiable
intangibles held and used by the Company be reviewed for impairment whenever
events or changes in events indicate that the carrying amount of the asset
cannot be recoverable. The adoption of FAS 121 did not materially affect the
Company's combined results of operations or financial position.
FEDERAL AND STATE INCOME TAX
The Companies file separate federal and state tax returns. Therefore, the
Companies record the income tax expense (recovery) based on their separate
returns.
MRI and MVN have elected to be taxed under S Corporation provisions of the
Internal Revenue Code. Effective July 1, 1994, MTC elected to be taxed under S
Corporation provisions of the Internal Revenue Code. Under these provisions,
MRI, MVN and MTC are not liable for federal income taxes. Instead, the
stockholders are liable for individual federal income taxes on their taxable
income. Accordingly, losses are not available to the Company to offset income.
MNW is a partnership for federal income tax purposes and accordingly, the
partners are liable for federal income taxes on their respective income.
MNW owns corporations which are taxed under the C corporation provisions of
the Internal Revenue Code. Taxes related to income from the entities taxed under
the C corporation provisions are reported under the liability method;
accordingly, deferred tax assets and liabilities are determined based on
differences between financial and tax basis of assets and liabilities and are
measured using the enacted tax rates and laws.
ACCRUED RECIPROCAL LIABILITIES
Accrued reciprocal liabilities represent goods and services owed to radio
stations in exchange for airtime received from these radio stations.
F-10
<PAGE>
METRO TRAFFIC CONTROL, INC., METRO RECIPROCAL, INC.,
METRO NETWORKS, LTD., AND METRO VIDEO NEWS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
(INFORMATION FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
RECIPROCAL AND AIRTIME OBLIGATIONS
Reciprocal and airtime obligations represent broadcast obligations incurred
as part of the purchase price for acquisitions. Such obligations are recorded at
the fair market value of the airtime when the acquisition was made.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
UNAUDITED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
In the opinion of management, the unaudited interim financial statements for
the six months ended June 30, 1995 and 1996, presented herein, include all
adjustments, consisting only of normal recurring adjustments, necessary for the
fair presentation of the Company's financial position, results of operations,
shareholder's equity and cash flows for the interim period. The combined results
of operations and cash flows for the six months ended June 30, 1996 and 1995 are
not necessarily indicative of the results which would be expected for a full
year.
PRO FORMA FINANCIAL DATA (UNAUDITED)
Pro forma income taxes are set forth herein because certain of the combined
companies operate as subchapter S corporations. Pro forma income taxes reflect
federal income taxes that would have been incurred had all the combined
companies been subject to such taxes. Such amounts have been deducted from net
earnings in the accompanying statement of operations pursuant to the rules and
regulations of the Securities and Exchange Commission.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair value of related party receivables, note receivable from
shareholder and long-term debt are not materially different from carrying value
for financial statement purposes.
NOTE 2 -- ACQUISITIONS
The Company made the following acquisitions, each of which has been
accounted for as a purchase.
On October 26, 1994, the Company acquired substantially all of the business
assets and assumed certain liabilities of Charlotte Traffic Patrol, Inc.
("CTP"), a North Carolina corporation. CTP is engaged in the business of
providing vehicular traffic condition reports through the broadcast media in the
metropolitan area of Charlotte, North Carolina and certain surrounding areas.
The purchase price of $3.5 million consisted of a $600,000 cash payment at
closing and notes payable of $900,000. The notes payable are secured by a
stand-by letter of credit issued by a commercial bank. As part of the
consideration for the purchase of the assets, the Company agreed to provide CTP
with advertising radio spots in the Charlotte area each calendar month during
the five-year period beginning the date of closing and ending October 31, 1999.
The Company also assumed CTP's obligations under its existing office lease and
CTP's affiliate contracts.
On July 19, 1994, the Company acquired substantially all of the tangible and
intangible assets, contracts, distributor relationships, advertiser and
affiliate lists of Hildebrand Communications, Inc.
F-11
<PAGE>
METRO TRAFFIC CONTROL, INC., METRO RECIPROCAL, INC.,
METRO NETWORKS, LTD., AND METRO VIDEO NEWS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
(INFORMATION FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)
NOTE 2 -- ACQUISITIONS (CONTINUED)
("Hildebrand"), and assumed certain liabilities in exchange for cash
consideration of $100,000. The excess of the aggregate purchase price over the
fair market value of the net assets acquired of $15,000 was recognized as the
value of the non-compete agreement executed by the seller and is being amortized
over a five-year period.
On July 1, 1994, the Company acquired certain of the tangible and intangible
assets, contracts, distributor relationships, advertiser and affiliate lists of
Wisconsin Information Systems, Inc. d/b/a The Milwaukee Traffic Network
("Wisconsin"), and assumed certain liabilities in exchange for cash
consideration of $79,000. MTC also agreed to provide the seller with a
performance fee for the initial twenty-four months of MTC's ownership equal to
15% of net operating revenue, as defined. The excess of the aggregate purchase
price over the fair market value of the net assets acquired of $15,000 was
recognized as the value of the non-compete agreement executed by the seller and
is being amortized over a five-year period.
On March 24, 1995, the Company acquired 100% of the stock of TrafficScan,
Incorporated ("TSI"). TSI is in the business of providing traffic information
services to the broadcast media in the greater Atlanta geographic region. The
consideration for the stock of TSI included cash of approximately $4 million and
trade credits of approximately $1.5 million. Approximately $5.1 million of the
purchase price was allocated to the value of purchased broadcast contracts,
non-compete agreements and goodwill and is being amortized on a straight-line
basis over five years.
On March 9, 1995, the Company acquired all of the outstanding shares of
Skyview Broadcasting Networks, Inc. ("SBN"), an Arizona corporation. The
consideration for the stock of SBN included cash of $2.28 million and
non-interest bearing notes payable of approximately $463,000. The purchase price
was allocated to the net assets based upon their estimated fair market values.
The excess of the purchase price over the estimated fair value of the net assets
acquired was approximately $2.5 million. The excess purchase price was allocated
to the value of purchased broadcast contracts, non-compete agreements and
goodwill and is being amortized on a straight-line basis over five years.
On March 9, 1995, the Company also acquired 100% of the shares of Airborne
Broadcast Consultants, Inc. ("Airborne"), a Nevada corporation. The Company
acquired the stock for cash consideration of $1.14 million and noninterest
bearing notes payable of approximately $232,000. The purchase price was
allocated to the net assets of the acquired company based upon their estimated
fair value. The excess purchase price of approximately $1.3 million was
allocated to the value of purchased broadcast contracts, non-compete agreements
and goodwill and is being amortized on a straight-line basis over five years.
The consideration represented by the notes payable for the SBN and Airborne
stock purchases are payable in the amounts of approximately $347,000 each to the
two previous owners in twenty-three equal installments of approximately $15,000,
with a final payment in the twenty-fourth month. These notes payable are
noninterest bearing and are discounted at an interest rate of 8%.
On March 9, 1995, the Company acquired substantially all of the tangible and
intangible business assets and acquired certain liabilities of Airborne
Broadcasting Systems, Inc. ("ABS"), a Tennessee corporation. ABS operates a
network of broadcast affiliates serving the greater Nashville and Memphis,
Tennessee markets and the Louisville, Kentucky market. Through these affiliates,
ABS provides traffic, news and weather information in exchange for advertising
availabilities. The purchase price of approximately $2.1 million consisted of
cash consideration of $1,780,000 and noninterest bearing notes payable of
approximately $358,000, less note discount at 8%. The purchase price was
allocated to the net
F-12
<PAGE>
METRO TRAFFIC CONTROL, INC., METRO RECIPROCAL, INC.,
METRO NETWORKS, LTD., AND METRO VIDEO NEWS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
(INFORMATION FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)
NOTE 2 -- ACQUISITIONS (CONTINUED)
assets based upon their estimated fair market values. The excess purchase price
of approximately $2.1 million was allocated to the value of purchased broadcast
contracts, non-compete agreements and goodwill and is being amortized over a
five-year period.
Subsequent to December 31, 1995, the Company made the following asset and
stock acquisitions. These acquisitions were accounted for on the purchase method
of accounting. Accordingly, the purchase price was allocated to the net assets
based upon their fair market values. The excess purchase price was allocated to
the value of purchased affiliate contracts, non-compete agreements and goodwill
and will be amortized over five years.
On January 3, 1996, the Company acquired substantially all of the tangible
and intangible business assets and certain liabilities of Aeromedia, Inc.
("Aeromedia"), a Utah corporation. Aeromedia operates a network of broadcast
affiliates serving the Salt Lake City metropolitan area in exchange for
advertising availabilities and other compensation. As consideration for the
asset purchase, the Company paid $200,000 at closing and agreed to pay
additional contingent consideration in a final payment based upon net sales of
Aeromedia for the calendar year 1996. The final payment, based upon net sales as
defined in the Asset Purchase Agreement, ranges from zero for net sales less
than $500,000 up to $250,000 for net sales greater than $600,000.
On January 4, 1996, the Company acquired the stock of Traffic Net Inc.
("TNI"), a Rhode Island corporation, Traffic Net of Connecticut, Inc. ("TNCI"),
a Connecticut corporation, and The Weather Bureau, Inc. ("TWB"), a Massachusetts
corporation (collectively, the "Traffic Net Group"). In exchange for 100% of the
outstanding shares of the Traffic Net Group, the Company paid cash consideration
of approximately $2.9 million, net of $100,000 in deferred purchase price
related to certain contingent liabilities, as described in the TNI Stock
Purchase Agreement. As additional consideration, the Company paid cash of
approximately $410,000 to acquire existing trade receivables, net of an escrow
reserve of approximately $137,000 for potentially uncollectible trade account.
The following is a summary of the acquisitions:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------- JUNE 30,
1994 1995 1996
------------- ------------- -------------
<S> <C> <C> <C>
Assets acquired:
Accounts receivable............................................. $ 126,831 $ 994,803 $ 553,982
Fixed Assets.................................................... 226,911 513,670 72,870
Other assets.................................................... 30,000 17,180 70,889
Purchased broadcast contracts and other intangibles............. 5,053,258 13,187,162 4,827,149
------------- ------------- -------------
5,437,000 14,712,815 5,524,890
Liabilities assumed:
Notes payable................................................... 601,839 730,452 --
Other liabilities............................................... 3,156,161 3,752,838 1,804,498
------------- ------------- -------------
3,758,000 4,483,290 1,804,498
Less: Notes payable issued........................................ 900,000 1,052,913 --
------------- ------------- -------------
Cash paid......................................................... $ 779,000 $ 9,176,612 $ 3,720,392
------------- ------------- -------------
</TABLE>
F-13
<PAGE>
METRO TRAFFIC CONTROL, INC., METRO RECIPROCAL, INC.,
METRO NETWORKS, LTD., AND METRO VIDEO NEWS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
(INFORMATION FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)
NOTE 2 -- ACQUISITIONS (CONTINUED)
The following unaudited pro forma information represents the combined
results of operations of the Company as if (i) the TSI, SBN, Airborne and ABS
acquisitions had been combined with the Company as of January 1, 1995 and 1994
and (ii) the CTP, Hildebrand and Wisconsin acquisitions had been combined with
the Company as of January 1, 1994.
<TABLE>
<CAPTION>
DECEMBER 31,
(000'S)
(UNAUDITED)
--------------------
1994 1995
--------- ---------
<S> <C> <C>
Advertising Revenues................................................... $ 67,469 $ 74,042
Net Income............................................................. 7,197 2,546
</TABLE>
The pro forma information is not necessarily indicative of operating results
that would have occurred if each major acquisition had been consummated as of
January 1 of each respective period, nor is it necessarily indicative of future
operating results. The actual results of operations of an acquired company are
included in the Company's combined financial statements only from the date of
acquisition.
NOTE 3 -- ALLOWANCE FOR DOUBTFUL ACCOUNTS
The activity in the allowance for doubtful accounts is as follows:
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO WRITE-OFFS
BEGINNING OF COSTS AND NET BALANCE AT THE
PERIOD EXPENSES OF RECOVERIES END OF PERIOD
------------- -------------- ------------- --------------
<S> <C> <C> <C> <C>
Year ended December 31, 1993...................... $ 633,740 $ 681,810 $ (623,638) $ 691,912
Year ended December 31, 1994...................... 691,912 802,230 (1,000,299) 493,843
Year ended December 31, 1995...................... 493,843 443,169 (626,750) 310,262
</TABLE>
NOTE 4 -- ACCRUED LIABILITIES
The following are the components of accrued liabilities as of the respective
dates:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------- JUNE 30,
1994 1995 1996
------------- ------------- -------------
<S> <C> <C> <C>
Trade Payables........................ $ 492,094 $ 786,436 $ 1,655,404
Commission............................ 249,589 534,860 1,429,489
Other................................. 404,545 385,789 918,091
------------- ------------- -------------
$ 1,146,228 $ 1,707,085 $ 4,002,984
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
NOTE 5 -- RECIPROCAL REVENUES AND EXPENSES
The following is a summary of reciprocal revenues and expenses for the
respective periods:
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
------------------------------------------- ----------------------------
1993 1994 1995 1995 1996
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Reciprocal Revenues......... $ 8,069,946 $ 7,983,076 $ 8,375,372 $ 2,452,322 $ 4,777,340
Reciprocal Expenses......... 8,428,187 7,755,871 9,464,790 5,608,033 3,930,548
</TABLE>
F-14
<PAGE>
METRO TRAFFIC CONTROL, INC., METRO RECIPROCAL, INC.,
METRO NETWORKS, LTD., AND METRO VIDEO NEWS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
(INFORMATION FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)
NOTE 6 -- PURCHASED BROADCAST CONTRACTS AND OTHER INTANGIBLES
Purchased broadcast contracts and other intangibles is comprised of the
following:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, JUNE 30,
1994 1995 1996
-------------- -------------- --------------
<S> <C> <C> <C>
Non-compete agreements........................................... $ 1,646,391 $ 2,935,649 $ 3,473,571
Purchased broadcast contracts.................................... 4,856,777 12,403,544 15,470,099
Goodwill, trademarks and licenses................................ 42,178 2,514,314 3,740,985
-------------- -------------- --------------
6,545,346 17,853,507 22,684,655
Less: accumulated amortization................................... 3,437,712 4,103,863 6,249,646
-------------- -------------- --------------
$ 3,107,634 $ 13,749,644 $ 16,435,009
-------------- -------------- --------------
-------------- -------------- --------------
</TABLE>
Amortization expense for the years ended December 31, 1995, 1994 and 1993
was $2,669,151 and $408,362, $1,067,338, respectively.
NOTE 7 -- NOTES PAYABLE AND LONG-TERM DEBT
Short term notes payable consists of various notes with an original maturity
of less than one year. Long-term debt consists of:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1994 1995 JUNE 30, 1996
-------------- -------------- --------------
<S> <C> <C> <C>
Notes payable related to $30,000,000 revolving credit agreement
at variable rates (weighted average of 7.57% at December 31,
1995).......................................................... $ 5,847,423 $ 21,121,000 $ 29,301,000
Various acquisition notes payable, discounted at 8%, due 1996
through 1999................................................... 682,432 1,224,083 933,005
Unsecured note payable to bank at prime (8.75% at December 31,
1995), due 1996 through 2000................................... -- 132,750 119,250
Various notes payable at fixed rates of 7% to 9.50%, due 1996
through 2000................................................... -- 61,580 87,152
-------------- -------------- --------------
6,529,855 22,539,413 30,440,407
Less: Current portion 82,610 662,257 6,474,873
-------------- -------------- --------------
$ 6,447,245 $ 21,877,156 $ 23,965,534
-------------- -------------- --------------
-------------- -------------- --------------
</TABLE>
The following is a schedule of future maturities of notes payable and
long-term debt as of December 31, 1995:
<TABLE>
<S> <C>
1996............ $ 662,257
1997............ 1,906,080
1998............ 5,919,310
1999............ 7,333,251
2000............ 6,718,515
-----------
$22,539,413
-----------
-----------
</TABLE>
In October, 1994, the Company entered into a credit agreement, as
subsequently amended, with a commercial bank that allows borrowings up to
$30,000,000 under notes payable indexed to the bank's prime rate or the London
Interbank Offered Rate (LIBOR). The credit agreement, as amended, provides
F-15
<PAGE>
METRO TRAFFIC CONTROL, INC., METRO RECIPROCAL, INC.,
METRO NETWORKS, LTD., AND METRO VIDEO NEWS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
(INFORMATION FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)
NOTE 7 -- NOTES PAYABLE AND LONG-TERM DEBT (CONTINUED)
for scheduled commitment reductions, which ranges between 5% and 10% of the
original commitment, beginning June 30, 1996 through June 30, 2000, at which
time the commitment matures. The credit agreement also contains, among other
provisions, requirements for maintaining defined levels of debt service
coverage, fixed charges coverage and maximum levels of leverage indebtedness,
executive compensation and other restrictions. The credit facility is secured by
a pledge of the stock or other equity interests of each of the combined
Companies. A commitment fee of .375% per year is charged on the daily unused
balance.
The Company issued noninterest bearing notes payable, discounted at 8% per
annum, in connection with the stock acquisitions of SBN and Airborne in 1995,
and the asset acquisitions of ABS in 1995 and CTP in 1994. The Company has
guaranteed $732,000 letters-of-credit related to its acquisition of the assets
of CTP as of December 31, 1995.
NOTE 8 -- INCOME TAXES
Income tax expense from continuing operations is comprised of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------------
1993 1994 1995
------------- ------------- -------------
<S> <C> <C> <C>
Current, federal.................................................... $ 1,022,307 $ 1,265,662 $ 722,254
Current, state...................................................... 110,740 546,882 314,098
Deferred, non-current federal....................................... (66,559) 366,599 --
------------- ------------- -------------
$ 1,066,448 $ 2,179,143 $ 1,036,352
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
The difference between the effective tax rate of income tax expense and the
amount which would be determined by applying the statutory U.S. income tax rates
to income from continuing operations before income tax expense is explained
below according to the tax implications of various items of income or expense:
<TABLE>
<CAPTION>
1993 1994 1995
------------- ------------- -------------
<S> <C> <C> <C>
Provision for income tax expense at U.S. statutory rates............ $ 844,048 $ 3,088,604 $ 1,477,548
Increase (decrease) in tax provision resulting from:
Nontaxable S-Corporation and partnership (earnings) losses........ 10,410 (1,645,277) (666,838)
State income taxes, net of federal tax benefit.................... 73,088 351,042 204,164
Deferred federal income tax reversal due to change in tax
status........................................................... -- 321,599 --
Other............................................................. 138,902 63,175 21,478
------------- ------------- -------------
$ 1,066,448 $ 2,179,143 $ 1,036,352
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
Deferred income taxes reflect the net tax effect of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and amounts used for income tax purposes related to the C corporations
included in the combined group. As of December 31, 1995, this amount primarily
relates to the differential in book and tax basis of the intangibles as a result
of the recent acquisitions.
F-16
<PAGE>
METRO TRAFFIC CONTROL, INC., METRO RECIPROCAL, INC.,
METRO NETWORKS, LTD., AND METRO VIDEO NEWS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
(INFORMATION FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)
NOTE 8 -- INCOME TAXES (CONTINUED)
MTC is subject to IRC 1374 tax on pre-election built-in gains on property
held prior to election as an S corporation for a ten-year period following the
election. Recognition of the built-in gain and the accompanying tax liability is
contingent upon assets owned at the time of the S election being sold in the
future at amounts exceeding their tax basis and their fair market values at
election date.
The book basis exceeds the tax basis in the underlying assets of the
entities included in the combined group which have elected by be taxed under the
S corporation provisions of the Internal Revenue Code by approximately $352,000.
NOTE 9 -- COMMITMENTS AND CONTINGENCIES
The Company leases certain of its office facilities and equipment over
periods ranging from one to ten years. Rent expense for the years ended December
31, 1995, 1994 and 1993, was $2,701,000, $2,256,000 and $636,000, respectively.
Future rentals for operating leases at December 31, 1995, are as follows:
<TABLE>
<S> <C>
1996.................................................. $ 1,329,000
1997.................................................. 1,104,000
1998.................................................. 780,000
1999.................................................. 474,000
2000.................................................. 401,000
Thereafter............................................ 1,266,000
-----------
$ 5,354,000
-----------
-----------
</TABLE>
Additionally, the Company is obligated to provide advertising in exchange
for leasing certain office facilities and equipment over periods ranging from
one to ten years. Future rentals for operating leases at December 31, 1995,
based on the fair market value of the lease are as follows:
<TABLE>
<S> <C>
1996.................................................. $ 1,297,000
1997.................................................. 1,030,000
1998.................................................. 593,000
1999.................................................. 524,000
2000.................................................. 399,000
Thereafter............................................ 642,000
-----------
$ 4,485,000
-----------
-----------
</TABLE>
The Company is subject to other litigation arising in the ordinary course of
business. Management believes that the resolution of such matters will not have
a material adverse effect on the Company's financial position or results of
operations.
NOTE 10 -- PROFIT SHARING PLAN
Effective April, 1995, the Company established a profit sharing plan under
Section 401(k) of the Internal Revenue Code for all eligible employees. All
eligible employees are permitted to defer compensation up to a maximum of 10% of
their income. The plan provides for a matching contribution by the Company,
which amounted to $195,000 in 1995.
F-17
<PAGE>
METRO TRAFFIC CONTROL, INC., METRO RECIPROCAL, INC.,
METRO NETWORKS, LTD., AND METRO VIDEO NEWS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
(INFORMATION FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)
NOTE 11 -- COMMON STOCK AND PARTNERS' CAPITAL
Common stock is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1995 1994
--------- ---------
<S> <C> <C>
METRO TRAFFIC CONTROL, INC.
Common stock - stated value $2.50, 2,600 shares authorized, 1,198 shares issued and
outstanding............................................................................... $ 2,995 $ 2,995
METRO RECIPROCAL, INC.
Common stock - $.01 par value, 1,000,000 shares authorized, 1,000 issued and outstanding... 10 10
METRO VIDEO NEWS, INC.
Common stock - $.01 par value, 1,000,000 shares authorized, 1,000 shares issued and
outstanding............................................................................... 10 10
--------- ---------
$ 3,015 $ 3,015
--------- ---------
--------- ---------
</TABLE>
Partners' capital account represents the partners capital of MNW.
NOTE 12 -- RELATED PARTY TRANSACTIONS
The Company leases certain real property in Vail, Colorado and in Malibu,
California from a partnership owned by the controlling shareholder. The annual
lease payments on these properties are $60,000 and $240,000, respectively.
The Company has entered into certain reciprocal arrangements with unrelated
third parties as a result of which the Company will receive goods and services
for the benefit of the controlling shareholder. The reciprocal arrangements
obligate the Company to provide commercial airtime, provide other goods and
services, and make cash disbursements to such third parties in exchange for the
goods and services received by the Company. As of June 30, 1996, the Company was
obligated to provide approximately $3.5 million (unaudited) of commercial
airtime, goods and services under these reciprocal arrangements. The Company
intends to enter into an agreement with the controlling shareholder pursuant to
which the controlling shareholder will be distributed the goods and services the
Company holds for the controlling shareholder's benefit. The Company also will
distribute to the controlling shareholder all of its rights to the goods and
services that are the subject of existing reciprocal arrangements but which have
not yet been delivered to the Company. The value of such goods and services is
expected to be approximately $3.0 million (unaudited). The Company does not
intend to enter into future reciprocal arrangements for the benefit of the
controlling shareholder.
The Company has entered into certain transactions with a company owned by
the stockholder. The Company has guaranteed the annual lease payments for such
company in the amount of $60,000; such obligations shall continue through
December 31, 1996. Additionally, the Company has posted a bond of $20,000 with
the Airline Reservations Clearinghouse for the company. The Company purchases
the majority of its travel tickets through the company.
The stockholder and members of his family have personally utilized the
services of several of the Company's employees. The total compensation paid to
such employees was $180,995 in 1995.
At December 31, 1994, the Company had a demand note receivable from the
stockholder totaling $1,706,641, bearing interest at the prime rate plus 1% for
cash advances made to the controlling stockholder. In addition, at December 31,
1995 and 1994, the Company had outstanding receivables
F-18
<PAGE>
METRO TRAFFIC CONTROL, INC., METRO RECIPROCAL, INC.,
METRO NETWORKS, LTD., AND METRO VIDEO NEWS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
(INFORMATION FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)
NOTE 12 -- RELATED PARTY TRANSACTIONS (CONTINUED)
from affiliated entities totaling $1,075,030 and $288,669, respectively, bearing
interest at the prime rate plus 1%. For the years ended December 31, 1995, 1994
and 1993, the Company had recorded $131,797, $105,641 and $112,736,
respectively, in interest income related to the above receivables.
The Company paid $300,000 and $100,000 in rent expense to an entity related
by common control for the years ended December 31, 1995 and 1994, respectively.
Additionally, the Company is obligated under lease agreements for future minimum
lease payments of $300,000 in 1996 and $135,000 in 1997. These amounts have been
included in Note 7.
NOTE 13 -- DISCONTINUED OPERATIONS
In June 1993, the Company approved a plan to discontinue the Company's
magazine publishing business, and disposed of the business in August 1993.
NOTE 14 -- EVENT SUBSEQUENT TO DATE OF AUDITORS' REPORT - REORGANIZATION
(UNAUDITED)
From 1978 through June 1996, the business of the Company was operated
through Metro Traffic Control, Inc. and the other combined companies. All of the
equity interests in these companies were controlled by a single shareholder. In
conjunction with an anticipated offering of equity securities, a new entity was
formed. It is expected that the single shareholder will contribute or cause to
be contributed all of the issued and outstanding equity interests in the
Predecessor Companies to this newly formed entity in exchange for common stock.
Subsequent to the Reorganization, Metro Traffic Control, Inc. will be a
wholly-owned subsidiary of the Company and the other Predecessor Companies will
have been merged into Metro Traffic Control, Inc.
As the equity interests are held under common control and will be
contributed by the resulting shareholder of the Company, the underlying assets
will be recorded at their historical costs, similar to pooling of interest
accounting.
Upon the Reorganization, the resulting entity will be liable for income
taxes, at which time the entity will be required to record a deferred tax
liability for the differential between the book and tax basis of the underlying
assets. Accordingly, this differential will result in an increase in income tax
expense at the time of reorganization of approximately $352,000.
F-19
<PAGE>
INDEPENDENT AUDITORS' REPORT
Boards of Directors
Skyview Broadcasting Networks, Inc.
Airborne Broadcast Consultants
Airborne Broadcasting Systems, Inc.:
We have audited the accompanying combined statement of operations and cash
flows of Skyview Broadcasting Networks, Inc., Airborne Broadcast Consultants and
Airborne Broadcasting Systems, Inc. (collectively, the "Company") for the year
ended December 31, 1994. This financial statement is the responsibility of the
Company's management. Our responsibility is to express an opinion on this
financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the combined statement of operations and cash flows referred
to above present fairly, in all material respects, the combined results of their
operations and their cash flows for the year ended December 31, 1994, in
conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Houston, Texas
August 21, 1996
F-20
<PAGE>
SKYVIEW BROADCASTING NETWORKS, INC.
AIRBORNE BROADCAST CONSULTANTS
AIRBORNE BROADCASTING SERVICES, INC.
COMBINED STATEMENT OF OPERATIONS
For the year ended December 31, 1994
<TABLE>
<CAPTION>
<S> <C>
Advertising revenues............................................................................... $ 5,152,767
Broadcasting costs................................................................................. 1,423,355
Marketing expense.................................................................................. 221,813
General and administrative expenses................................................................ 3,117,608
Depreciation & amortization........................................................................ 48,398
-------------
Total operating costs.............................................................................. 4,811,174
Income from operations............................................................................. 341,593
Interest expense................................................................................... 21,867
-------------
Income from continuing operations before income tax................................................ 319,726
Income tax expense................................................................................. 108,707
-------------
Net income......................................................................................... $ 211,019
-------------
-------------
</TABLE>
See accompanying notes to combined financial statements.
F-21
<PAGE>
SKYVIEW BROADCASTING NETWORKS, INC.
AIRBORNE BROADCAST CONSULTANTS
AIRBORNE BROADCASTING SERVICES, INC.
COMBINED STATEMENT OF CASH FLOWS
For the year ended December 31, 1994
<TABLE>
<CAPTION>
<S> <C>
Cash flows from operating activities:
Net earnings........................................................................................ $ 211,019
Adjustments to reconcile net earnings to net cash provided by (used in) operating activities:
Depreciation and amortization................................................................... 48,374
Decrease (increase) in:
Accounts receivable........................................................................... (253,864)
Due from stockholders......................................................................... 46,000
Other assets.................................................................................. (18,806)
Accounts payable and accrued liabilities...................................................... 8,837
Income taxes payable.......................................................................... 138,749
Other Liabilities............................................................................. (2,423)
------------
Net cash provided by operating activities..................................................... 177,886
Net cash used in investing activities:
Purchase of property and equipment................................................................ (85,533)
Cash flows from financing activities:
Payments on notes payable......................................................................... (61,588)
Distributions to stockholders..................................................................... (26,670)
------------
Net cash used in financing activities......................................................... (88,258)
------------
Net increase in Cash and cash equivalents........................................................... 4,095
Cash and cash equivalents at beginning.............................................................. 60,924
------------
Cash and cash equivalents at end.................................................................... $ 65,019
------------
------------
</TABLE>
See accompanying notes to combined financial statements.
F-22
<PAGE>
SKYVIEW BROADCASTING NETWORKS, INC.
AIRBORNE BROADCAST CONSULTANTS
AIRBORNE BROADCASTING SYSTEMS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF COMBINATION AND GENERAL
The combined statement of operations consist of Skyview Broadcasting
Networks, Inc., Airborne Broadcast Consultants, and Airborne Broadcasting
Systems, Inc. (collectively, the "Company"). These entities are all controlled
by the same shareholder. All intercompany accounts and transactions have been
eliminated in combination.
The Company provides traffic reporting services, local news, sports, weather
and other information reporting services to the television and radio broadcast
industries. In exchange for the Company's information reports, television and
radio station broadcast affiliates provide commercial airtime to the Company.
The packaging and sale of this commercial airtime accounts for substantially all
of the Company's revenue.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid debt instruments purchased with an
original maturity of three months or less to be cash equivalents. The
disbursement float liability represents uncleared checks related to zero balance
accounts. The Company records these amounts as liabilities.
REVENUE RECOGNITION
The Company provides programming to radio and television stations in
exchange for commercial airtime. The airtime is subsequently sold to advertisers
for either cash or other goods and services. Revenue is recognized at the time
commercials are broadcasted, and accounts receivable are recorded at that time.
If cash, merchandise or services are received prior to the broadcast of the
commercial, deferred revenue is recorded.
Revenue from the Company's exchange of advertising time for goods and
services is recorded at the estimated fair market value of goods or services
received or to be received. The value of goods and services is charged to
expense when used.
Operations are charged with a provision for doubtful accounts based on
collection experience and a current review of the collectibility of accounts.
Accounts deemed uncollectible are applied against the allowance for doubtful
accounts.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
INCOME TAXES
FEDERAL AND STATE INCOME TAX
The Companies are taxed under the C corporation provisions of the Internal
Revenue Code. Taxes related to income from the entities taxed under the C
corporation provisions are reported under the liability method; accordingly,
deferred tax assets and liabilities are determined based on differences between
financial and tax basis of assets and liabilities and are measured using the
enacted tax rates and laws.
F-23
<PAGE>
SKYVIEW BROADCASTING NETWORKS, INC.
AIRBORNE BROADCAST CONSULTANTS
AIRBORNE BROADCASTING SYSTEMS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Income tax expense is comprised of the following:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31, 1994
-------------------
<S> <C>
Current, federal......................................................... $ 23,121
Deferred, non-current federal............................................ 85,586
----------
$ 108,707
----------
----------
</TABLE>
NOTE 2 -- ACQUISITION
On March 8, 1995, the Company was acquired by Metro Networks, Ltd. for a
total purchase price of approximately $6.3 million, which consisted of cash
consideration of approximately $5.2 million and notes payable of approximately
$1.1 million.
F-24
<PAGE>
PRO FORMA CONDENSED FINANCIAL DATA
(UNAUDITED)
During 1995, the Company completed the acquisitions of all of the
outstanding common stock of each of TrafficScan, Incorporated, Skyview
Broadcasting Networks, Inc., and Airborne Broadcast Consultants and
substantially all of the assets and certain liabilities of Airborne Broadcasting
Systems, Inc. During January 1996, the Company completed the acquisitions of
substantially all of the assets and certain liabilities of Aeromedia, Inc. and
all of the outstanding common stock of Traffic Net Inc, Traffic Net of
Connecticut, Inc. and The Weather Bureau, Inc. Also in 1996, the Company signed
letters of intent to acquire the assets of Airborne Traffic Network, Inc. and
Wisconsin Information Systems, Inc. (collectively, the "Pending Acquisitions").
From 1978 until the closing of the offering, the business of the Company
will have been operated through Metro Traffic Control, Inc., a Maryland
corporation; Metro Networks, Ltd., a Texas limited partnership; Metro Video
News, Inc., a Texas corporation; Metro Reciprocal, Inc., a Texas corporation and
their subsidiaries (collectively, the "Predecessor Companies").
In May 1996, the Company was incorporated in Delaware. Immediately prior to
the closing of this offering, the issued and outstanding equity interests in the
Predecessor Companies will be exchanged for the shares of the Company's Common
Stock in order to consolidate the entities.
The accompanying unaudited pro forma balance sheet of the Company combines
the historical combined balance sheet of the Company and the balance sheets of
the Pending Acquisitions as if these acquisitions had occurred on June 30, 1996.
Additionally, the unaudited pro forma balance sheet reflects the effects of the
pending reorganization (the "Reorganization") as if the Reorganization occurred
on June 30, 1996. The accompanying unaudited pro forma statements of operations
of the Company combine the historical combined statement of operations of the
Predecessor Companies, the acquisitions consummated in 1995, 1996, and the
Pending Acquisitions and the effects of the Reorganization as if such
acquisitions and Reorganization had occurred at the beginning of the periods
presented.
The unaudited pro forma financial statements do not purport to represent
what the Company's results of operations would have been had the acquisitions
and Reorganization occurred on the dates indicated or for any future period or
date. The pro forma adjustments give effect to available information and
assumptions that management believes are reasonable. The pro forma financial
statements should be read in conjunction with the Predecessor Companies'
historical combined financial statements and the financial statements of certain
acquired companies and the notes thereto included elsewhere herein.
F-25
<PAGE>
METRO NETWORKS, INC.
PRO FORMA CONDENSED BALANCE SHEET
AS OF JUNE 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
PREDECESSOR ACQUISITION REORGANIZATION
COMBINED PENDING PRO FORMA PRO FORMA PRO FORMA THE COMPANY
HISTORICAL ACQUISITIONS ADJUSTMENTS COMBINED ADJUSTMENTS PRO FORMA
------------- ------------ ------------- ----------- -------------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Total current assets.... $31,142,418 $ 562,765 $ -- $31,705,183 $ -- $ 31,705,183
Receivables from related
parties................ 1,685,792 -- -- 1,685,792 -- 1,685,792
Operating equipment..... 8,941,683 122,880 -- 9,064,563 -- 9,064,563
Transportation
equipment.............. 824,692 -- -- 824,692 -- 824,692
Leasehold improvements.. 667,709 -- -- 667,709 -- 667,709
------------- ------------ ------------- ----------- ----------- --------------
10,434,084 122,880 -- 10,556,964 -- 10,556,964
Less accumulated
depreciation........... (4,961,155) (40,592) (5,001,747) (5,001,747)
------------- ------------ ------------- ----------- ----------- --------------
5,472,929 82,288 -- 5,555,217 -- 5,555,217
Purchase broadcast
contracts and other
intangibles 16,435,009 -- 1,832,543(B) 18,267,552 -- 18,267,552
Other assets............ 2,013,864 12,760 -- 2,026,624 -- 2,026,624
------------- ------------ ------------- ----------- ----------- --------------
56,750,012 657,813 1,832,543 59,240,368 -- 59,240,368
------------- ------------ ------------- ----------- ----------- --------------
------------- ------------ ------------- ----------- ----------- --------------
Total current
liabilities............ 24,299,214 340,356 151,500(C) 24,791,070 -- 24,791,070
Long-term debt.......... 23,965,534 12,253 1,986,247(C) 25,964,034 -- 25,964,034
Deferred income tax..... 2,941,787 -- -- 2,941,787 351,659(E) 3,293,446
Other liabilities....... 200,103 -- -- 200,103 3,500,000(J) 3,700,103
------------- ------------ ------------- ----------- ----------- --------------
Total liabilities..... 51,406,638 352,609 2,137,747 53,896,994 3,851,659 57,748,653
Common stock 3,015 12,000 (12,000 (A) 3,015 -- 3,015
Additional paid-in
capital................ 4,023,811 82,500 (82,500 (A) 4,023,811 -- 4,023,811
Partners' capital....... 575,394 -- -- 575,394 (575,394)(D) --
Retained earnings
(deficit) 741,154 210,704 (210,704 (A) 741,154 (3,276,265)(D),(E),(J) (2,535,111)
------------- ------------ ------------- ----------- ----------- --------------
Total stockholder's
equity (deficit)..... 5,343,374 305,204 (305,204) 5,343,374 (3,851,659) 1,491,715
------------- ------------ ------------- ----------- ----------- --------------
Total liabilities and
stockholders'
equity............... $56,750,012 $ 657,813 $ 1,832,543 $59,240,368 $ -- $ 59,240,368
------------- ------------ ------------- ----------- ----------- --------------
------------- ------------ ------------- ----------- ----------- --------------
</TABLE>
F-26
<PAGE>
METRO NETWORKS, INC.
PRO FORMA CONDENSED STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
PREDECESSOR ACQUISITIONS REORGANIZATION
COMBINED PENDING PRO FORMA PRO FORMA PRO FORMA THE COMPANY
HISTORICAL ACQUISITIONS ADJUSTMENTS COMBINED REORGANIZATION PRO FORMA
------------- ------------ ------------- ----------- ---------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Advertising revenues.... $50,077,032 $1,117,802 $ -- $51,194,834 $ -- $ 51,194,834
Broadcasting costs...... 24,172,646 369,762 -- 24,542,408 -- 24,542,408
Marketing expense....... 10,101,411 244,918 -- 10,346,329 -- 10,346,329
General and
administrative
expense................ 4,350,708 347,409 -- 4,698,117 -- 4,698,117
Depreciation and
amortization........... 2,936,082 12,025 192,032(L) 3,140,139 -- 3,140,139
------------- ------------ ------------- ----------- ---------------- --------------
Total operating costs... 41,560,847 974,114 192,032 42,726,993 -- 42,726,993
Income (loss) from
operations............. 8,516,185 143,688 (192,032) 8,467,841 -- 8,467,841
Other (income) expense:
Other income.......... (66,334) -- -- (66,334) -- (66,334)
Interest expense...... 933,895 3,747 104,076(M) 1,041,718 -- 1,041,718
------------- ------------ ------------- ----------- ---------------- --------------
867,561 3,747 104,076 975,384 -- 975,384
Income (loss) from
continuing operations
before income tax...... 7,648,624 139,941 (296,108) 7,492,457 -- 7,492,457
Income tax expenses
(benefit).............. 572,855 -- (53,097)(N) 519,758 2,027,677(O) 2,547,435
------------- ------------ ------------- ----------- ---------------- --------------
Income (loss)........... $ 7,075,769 $ 139,941 $ (243,011) $ 6,972,699 $ (2,027,677) $ 4,945,002
------------- ------------ ------------- ----------- ---------------- --------------
------------- ------------ ------------- ----------- ---------------- --------------
</TABLE>
F-27
<PAGE>
METRO NETWORKS, INC.
PRO FORMA CONDENSED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
PREDECESSOR TWO MONTHS ENDED THREE MONTHS ENDED YEAR ENDED
COMBINED FEBRUARY 28, 1995 MARCH 31, 1995 DECEMBER 31, 1995
HISTORICAL SKYVIEW TRAFFICSCAN AEROMEDIA
------------- ------------------- -------------------- -------------------
<S> <C> <C> <C> <C> <C>
Advertising revenues............... $ 72,432,951 $ 515,587 $ 428,075 $ 395,868
Broadcasting costs................. 41,285,973 242,038 152,582 138,434
Marketing expense.................. 14,503,640 104,990 100,759 83,972
General and administrative
expense........................... 7,194,011 236,992 118,183 111,631
Depreciation and amortization...... 3,980,525 4,540 9,000 8,732
------------- ------------------- -------------------- -------------------
Total operating costs 66,964,149 588,560 380,524 342,769
Income (loss) from operations...... 5,468,802 (72,973) 47,551 53,099
Other (income) expense:
Interest income.................. (165,079) -- -- --
Interest expense................. 1,260,185 -- -- --
Other............................ 27,967 2,262 876 9,350
------------- ------------------- -------------------- -------------------
1,123,073 2,262 876 9,350
Income (loss) from continuing
operations before income tax...... 4,345,729 (75,235) 46,675 43,749
Income tax expenses (benefit)...... 1,036,352 -- -- --
------------- ------------------- -------------------- -------------------
Income (loss)...................... $ 3,309,377 $ (75,235) $ 46,675 $ 43,749
------------- ------------------- -------------------- -------------------
------------- ------------------- -------------------- -------------------
<CAPTION>
YEAR ENDED ACQUISITION REORGANIZATION
DECEMBER 31, 1995 PENDING PRO FORMA PRO FORMA PRO FORMA THE COMPANY
TRAFFIC NET ACQUISITIONS ADJUSTMENTS COMBINED ADJUSTMENTS PRO FORMA
------------------- ------------ -------------- ----------- --------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Advertising revenues............... $ 2,256,769 $2,073,107 $ -- $78,102,357 $ -- $ 78,102,357
Broadcasting costs................. 422,124 1,001,758 -- 43,242,909 -- 43,242,909
Marketing expense.................. 987,167 199,070 -- 15,979,598 -- 15,979,598
General and administrative
expense........................... 767,235 440,961 (746,000) (K) 8,123,013 -- 8,123,013
Depreciation and amortization...... 7,320 18,290 1,891,403(F) 5,919,810 -- 5,919.810
------------------- ------------ -------------- ----------- --------------- --------------
Total operating costs 2,183,846 1,660,079 1,145,403 73,265,330 -- 73,265,330
Income (loss) from operations...... 72,923 413,028 (1,145,403) 4,837,027 -- 4,837,027
Other (income) expense:
Interest income.................. -- 873 (164,206) -- (164,206)
Interest expense................. -- 6,849 571,195(G) 1,838,229 -- 1,838,229
Other............................ -- 819 41,274 -- 41,274
------------------- ------------ -------------- ----------- --------------- --------------
-- 8,541 571,195 1,715,297 -- 1,715,297
Income (loss) from continuing
operations before income tax...... 72,923 404,487 (1,716,598) 3,121,730 -- 3,121,730
Income tax expenses (benefit)...... -- -- (416,160)(H) 620,192 441,196(I) 1,061,388
------------------- ------------ -------------- ----------- --------------- --------------
Income (loss)...................... $ 72,923 $ 404,487 $ (2,046,438) $ 2,501,538 $ (441,196) $ 2,060,342
------------------- ------------ -------------- ----------- --------------- --------------
------------------- ------------ -------------- ----------- --------------- --------------
</TABLE>
F-28
<PAGE>
METRO NETWORKS, INC.
NOTES TO PRO FORMA CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
ACQUISITIONS
During 1995 and 1996, the Company made the following Acquisitions:
<TABLE>
<CAPTION>
COMPANY DATE
- ---------------------------------------------------- ----------------------------------------------------
<S> <C>
TrafficScan, Incorporated March 24, 1995
Skyview Broadcasting Networks, Inc. March 9, 1995
Airborne Broadcast Consultants March 9, 1995
Airborne Broadcasting Systems, Inc. March 9, 1995
Aeromedia, Inc. January 3, 1996
Traffic Net Inc. January 4, 1996
Traffic Net of Connecticut, Inc. January 4, 1996
The Weather Bureau, Inc. January 4, 1996
</TABLE>
See footnote 2 to the combined financial statements.
On June 20, 1996, the Company entered into a letter of intent to acquire of
the assets of Airborne Traffic Network, Inc. ("ATN") for approximately $1.5
million. As of June 30, 1996 ATN provided traffic services to 16 radio stations
in Kansas City, Missouri and Omaha, Nebraska. On July 24, 1996, the Company
signed a letter of intent to purchase substantially all of the assets of
Wisconsin Information Systems, Inc. for $650,000. All of the Pending
Acquisitions will be accounted for as purchases and are assumed to be financed
under credit facilities with similar terms as prior acquisitions.
REORGANIZATION
From 1978 until the closing of the offering, the business of the Company
will have been operated through the Predecessor Companies. Until the closing of
this offering, all of the equity interests in the Predecessor Companies will be
owned by the Saperstein Family.
In May 1996, Metro Networks, Inc. was incorporated in Delaware. Immediately
prior to the closing of this offering, the Saperstein Family will establish
Metro Networks, Inc. as a holding company in order to consolidate the issued and
outstanding equity interests in the Predecessor Companies, in exchange for
shares of the Company's Common Stock. As of the date of the closing of this
offering, Metro Networks, Ltd. will distribute certain of its assets, other than
MTC GP stock, to Metro Traffic Control, Inc. in partial redemption of Metro
Traffic Control, Inc.'s interest in Metro Networks, Ltd.; thereafter Metro
Networks, Ltd. will be liquidated. In addition, as of the date of the closing of
this offering, Metro Video News, Inc., Metro Reciprocal, Inc., MTC GP, Inc.,
Skyview Broadcasting Networks, Inc., Airborne Broadcast Consultants,
TrafficScan, Incorporated, Traffic Net Inc., The Weather Bureau, Inc. and
Traffic Net of Connecticut, Inc. will be merged into Metro Traffic Control, Inc.
pursuant to a transaction in which the shareholders of each corporation will
receive shares of Metro Traffic Control, Inc. stock. Metro Traffic Control, Inc.
will become a wholly-owned subsidiary of the Company as a result of a reverse
subsidiary merger of Metro Networks Acquisition, Inc. and Metro Traffic Control
Inc. with Metro Traffic Control, Inc. being the surviving entity. The reverse
subsidiary merger will qualify as a tax-free reorganization under Section
368(a)(2) of the Internal Revenue Code of 1986, as amended. Metro Networks, Inc.
expects to conduct substantially all of its operations through Metro Traffic
Control, Inc.
The unaudited pro forma combined statement of operations was prepared to
reflect the transactions as though each of the 1995 Acquisitions, 1996
Acquisitions and Pending Acquisitions had been
F-29
<PAGE>
METRO NETWORKS, INC.
NOTES TO PRO FORMA CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
completed and the Reorganization effected at the beginning of the period
presented. The unaudited pro forma combined balance sheet as of June 30, 1996
was prepared as though the Pending Acquisitions and the Reorganization had
occurred on June 30, 1996.
The accompanying pro forma combined balance sheet as of June 30, 1996
reflects the following adjustments:
(A)A pro forma adjustment is made to reflect the fair value of those assets
and liabilities that were acquired as a result of the Pending
Acquisitions.
(B)A pro forma adjustment is made to goodwill equal to the excess of the
applicable purchase price over the fair values assigned to specific
assets less liabilities assumed.
(C)A pro forma entry is made to (i) reverse the $12,253 of long-term debt of
the Pending Acquisitions that will not be assumed by the Company and (ii)
record the additional current and long-term portion of debt to finance the
Pending Acquisitions.
(D)A pro forma adjustment is made to reflect the conversion of partnerships
and subchapter S corporations into C corporations.
(E)A pro forma adjustment is made to reflect the deferred taxes related to
the conversion of partnerships and subchapter S corporations to C
corporations.
The accompanying pro forma statements of operations for the year ended
December 31, 1995 have been prepared by combining the historical results of the
Company with the 1995 and 1996 Acquisitions and the Pending Acquisitions and the
Reorganization and reflect the following adjustments:
(F)Pro forma adjustments are made to the statement of operations to reflect
additional depreciation and amortization expense on the fair value of the
assets acquired as if the acquisitions had occurred at January 1, 1995. Pro
forma depreciation is computed by the straight-line method over the remaining
estimated useful lives of the assets. The purchased broadcast contracts and
other intangibles are amortized on a straight-line method over a five-year term.
(G)Pro forma adjustments are made to the statement of operations to reflect
(i) the reversal of interest expense of $6,849 on debt not assumed by the
Company and (ii) the increase in interest expense due to the additional
borrowings to finance the 1995 Acquisitions and 1996 Acquisitions and the
Pending Acquisitions. Interest expense on the 1995 Acquisitions and 1996
Acquisitions is based on the actual interest rate under the Company's credit
facilities at the date of acquisition for the completed acquisitions. Interest
expense on the Pending Acquisitions is based on estimated terms available to the
Company at June 30, 1996 for such acquisitions. In addition, interest is
provided on the maximum deferred payments related to the pending acquisition of
ATN.
(H)A pro forma adjustment is made to reflect the effect upon the income tax
provision as if the 1995 Acquisitions, and 1996 Acquisitions and Pending
Acquisitions had occurred at January 1, 1995.
(I)A pro forma adjustment is made to reflect the effect upon the income tax
provision and deferred income taxes payable in connection with the
Reorganization to account for the conversion of partnerships and subchapter S
corporations to C corporations.
(J)A pro forma adjustment is made to reflect the Company's obligation that
results from entering into an agreement with the controlling shareholder
pursuant to which the controlling shareholder will be provided certain goods and
services in the future that are the subject of existing reciprocal arrangements
but which have not yet been earned by or delivered to the Company.
F-30
<PAGE>
METRO NETWORKS, INC.
NOTES TO PRO FORMA CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
(K)A pro forma adjustment to general and administative expenses represents
identifiable salary expenses that would not have been incurred had the
acquistions occurred at the beginning of the periods presented.
The accompanying pro forma statements of operations for the six months ended
June 30, 1996 have been prepared by combining the historical results of the
Company with the 1996 Acquisitions and the Pending Acquisitions and the
Reorganization and reflect the following adjustments:
(L)Pro forma adjustments are made to the statement of operations to reflect
additional depreciation and amortization expense on the fair value of the
assets acquired as if the acquisitions had occurred at January 1, 1996. Pro
forma depreciation is computed by the straight-line method over the remaining
estimated useful lives of the assets. The goodwill is amortized on a
straight-line method over a five-year term.
(M)Pro forma adjustments are made to the statement of operations to reflect
interest expense on the Pending Acquisitions based on estimated terms
available to the Company at June 30, 1996 for such acquisitions. In addition,
interest is provided on the maximum deferred payments related to the pending
acquisition of ATN.
(N)A pro forma adjustment is made to reflect the effect upon the income tax
provision as if the Pending Acquisitions had occurred at January 1, 1996.
(O)A pro forma adjustment is made to reflect the effect upon the income tax
provision and deferred income taxes payable in connection with the
Reorganization to account for the conversion of partnerships and subchapter S
corporations to C corporations.
F-31
<PAGE>
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Company and the Selling Stockholder have agreed to sell to each of the
Underwriters named below, and each of such Underwriters, for whom Goldman, Sachs
& Co., CS First Boston Corporation and Donaldson, Lufkin & Jenrette Securities
Corporation are acting as representatives, has severally agreed to purchase from
the Company and the Selling Stockholder, the respective number of shares of
Common Stock set forth opposite its name below:
<TABLE>
<CAPTION>
NUMBER OF
SHARES OF
UNDERWRITER COMMON STOCK
- ------------------------------------------------------------------------- ---------------
<S> <C>
Goldman, Sachs & Co......................................................
CS First Boston Corporation..............................................
Donaldson, Lufkin & Jenrette Securities Corporation......................
---------------
Total............................................................
---------------
---------------
</TABLE>
Under the terms and conditions of the Underwriting Agreement, the
Underwriters are committed to take and pay for all of the shares offered hereby,
if any are taken.
The Underwriters propose to offer the shares in part directly to the public
at the public offering price set forth on the cover page of this Prospectus and
in part to certain securities dealers at such a price less a concession of $
per share. The Underwriters may allow, and such dealers may reallow, a
concession not in excess of $ per share to certain brokers and dealers. After
the shares of Common Stock are released for sale to the public, the offering
price and other selling terms may from time to time be varied by the
representatives.
The Company has granted the Underwriters an option exercisable for 30 days
after the date of this Prospectus to purchase up to an aggregate of
additional shares of Common Stock to cover over-allotments, if any. If the
Underwriters exercise their over-allotment option, the Underwriters have
severally agreed, subject to certain conditions, to purchase approximately the
same percentage thereof that the number of shares to be purchased by each of
them, as shown in the foregoing table, bears to the shares of Common Stock
offered.
The Company, the Seller Stockholder and the Trusts have agreed that, during
the period beginning from the date of this Prospectus and continuing to and
including the date 180 days after the date of the Prospectus, they will not
offer, sell, contract to sell or otherwise dispose of any securities of the
Company (other than pursuant to employee stock option plans existing, or on the
conversion or exchange of convertible or exchangeable securities outstanding, on
the date of this Prospectus) which are substantially similar to the shares of
Common Stock or which are convertible or exchangeable into securities which are
substantially similar to the shares of Common stock without the prior written
consent of the representatives, except for the shares of Common Stock offered in
connection with the offering.
The representatives of the Underwriters have informed the Company that they
do not expect sales to accounts over which the Underwriters exercise
discretionary authority to exceed five percent of the total number of shares of
Common Stock offered by them.
U-1
<PAGE>
Prior to this offering, there has been no public market for the shares. The
initial public offering price will be negotiated among the Company, the Selling
Stockholder and the representatives. Among the factors to be considered in
determining the initial public offering price of the Common stock, in addition
to prevailing market conditions, will be the Company's historical performance,
estimates of the business potential and earnings prospects of the Company, an
assessment of the Company's management and the consideration of the above
factors in relation to market valuation of companies in related businesses.
The Common Stock will be quoted on the Nasdaq National Market under the
symbol "MTNT".
The Company and the Selling Stockholder have agreed to indemnify the several
underwriters against certain liabilities, including liabilities under the
Securities Act of 1933.
U-2
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH
SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Prospectus Summary............................. 3
Risk Factors................................... 11
Use of Proceeds................................ 15
Dividend Policy................................ 15
Capitalization................................. 16
Dilution....................................... 17
Selected Financial and Operating Data.......... 18
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.................................... 20
Business....................................... 29
Management..................................... 44
Certain Transactions........................... 48
Principal and Selling Stockholders............. 51
Description of Capital Stock................... 52
Shares Eligible For Future Sale................ 55
Validity of Common Stock....................... 56
Experts........................................ 56
Additional Information......................... 56
Glossary....................................... 57
Index to Financial Statements.................. F-1
Underwriting................................... U-1
</TABLE>
THROUGH AND INCLUDING OCTOBER , 1996 (THE 25TH DAY AFTER THE DATE OF THIS
PROSPECTUS), ALL DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR
NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
SHARES
METRO NETWORKS, INC.
COMMON STOCK
(PAR VALUE $.001 PER SHARE)
[LOGO]
GOLDMAN, SACHS & CO.
CS FIRST BOSTON
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
REPRESENTATIVES OF THE UNDERWRITERS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than
underwriting discounts, payable by the Company in connection with the sale of
the Common Stock being registered. All amounts are estimates except the
registration and filing fees:
<TABLE>
<CAPTION>
AMOUNT TO
BE PAID
-----------
<S> <C>
Securities and Exchange Commission
Registration Fee............................................................. $ 39,656
NASD Fee...................................................................... 12,000
Printing and engraving expenses............................................... *
Legal fees and expenses....................................................... *
Accounting fees and expenses.................................................. *
Blue Sky fees and expenses.................................................... *
Transfer Agent and Registrar fee.............................................. *
Miscellaneous expenses........................................................ *
-----------
Total......................................................................... *
</TABLE>
- ------------------------
* To be supplied by amendment.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware Law General Law and Article EIGHTH of the
Company's Certificate of Incorporation provide for indemnification of the
Company's directors and officers in a variety of circumstances which may include
liabilities under the Securities Act of 1933. Article EIGHTH provides that
unless otherwise determined by the Board of Directors of the Company, the
Company shall indemnify to the full extent permitted by the laws of Delaware as
from time to time in effect, the persons described in Section 145 of Delaware
Law.
The general effect of the provisions in the Company's Amended and Restated
Certificate of Incorporation and Delaware Law is to provide that the Company
shall indemnify its directors and officers against all liabilities and expenses
actually and reasonably incurred in connection with the defense or settlement of
any judicial or administrative proceedings in which they have become involved by
reason of their status as corporate directors or officers, if they acted in good
faith and in the reasonable belief that their conduct was neither unlawful (in
the case of criminal proceedings) nor inconsistent with the best interests of
the Company. With respect to legal proceedings by or in the right of the Company
in which a director or officer is adjudged liable for improper performance of
his duty to the Company or another enterprise which such person served in a
similar capacity at the request of the Company, indemnification is limited by
such provisions that amount which is permitted by the court.
The Company will maintain officers' and directors' liability insurance which
will insure against liabilities that officers and directors of the Company may
incur in such capacities. The Company has also entered into indemnification
agreements with its directors and officers.
Reference is made to the Proposed Form of Underwriting Agreement filed as
Exhibit 1 which provides for indemnification of the directors and officers of
the Company signing the Registration Statement and certain controlling persons
of the Company against certain liabilities, including those arising under the
Securities Act in certain instances, of the Underwriters.
II-1
<PAGE>
RECENT SALES OF UNREGISTERED SECURITIES
In connection with the Reorganization, the Company issued shares of
Common Stock to Mr. David Saperstein, shares of Common Stock to the Michelle
Joy Saperstein Coppola 1994 Trust, shares of Common Stock to the Jennifer
Beth Saperstein 1994 Trust, shares of Common Stock to the Jonathan Alexander
Saperstein 1994 Trust, shares of Common Stock to the Alexis Daniella
Saperstein 1994 Trust and shares to the Stefanie Nicole Saperstein 1994
Trust.
EXHIBITS
(2a) Exhibits. See Exhibit Index
UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
The undersigned registrant hereby undertakes that:
(1)For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2)For the purpose of determining any liability under the Securities Act of
1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, State of New
York on August 29, 1996.
METRO NETWORKS, INC.
By: /s/ DAVID I. SAPERSTEIN
-----------------------------------
David I. Saperstein
CHIEF EXECUTIVE OFFICER
POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated.
<TABLE>
<C> <S> <C>
NAME TITLE DATE
- ------------------------------------------------------ ------------------------------------ -------------------
/S/ DAVID I. SAPERSTEIN
------------------------------------------- Chairman of the Board of Directors August 29, 1996
David I. Saperstein and Chief Executive Officer
/s/ CHARLES I. BORTNICK*
------------------------------------------- President and Director August 29, 1996
Charles I. Bortnick
/s/ SHANE E. COPPOLA*
------------------------------------------- Executive Vice President and August 29, 1996
Shane E. Coppola Director
Senior Vice President, Chief
/s/ CURTIS H. COLEMAN* Financial Officer and Director
------------------------------------------- (Chief Financial and Accounting August 29, 1996
Curtis H. Coleman Officer)
/s/ GARY L. WOROBOW*
------------------------------------------- Senior Vice President, General August 29, 1996
Gary L. Worobow Counsel, Secretary and Director
</TABLE>
* by David I. Saperstein as attorney-in-fact
II-3
<PAGE>
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<C> <S> <C>
1.1*** Form of Underwriting Agreement between the Registrant and the
Representatives.
3.1*** Certificate of Incorporation of the Registrant
3.2*** Form of Amended and Restated Certificate of Incorporation of the
Registrant
3.3*** Bylaws of the Registrant
4.1*** Form of Common Stock Certificate
4.2*** Form of Series A Convertible Preferred Stock Certificate
5.1*** Opinion of Paul, Hastings, Janofsky & Walker as to the validity of the
Common Stock.
10.1* Credit Agreement dated October 21, 1994 among Metro Traffic Control, Inc.,
Metro Networks, Ltd, and NationsBank of Texas, N.A.
10.2* First Amendment to Credit Agreement dated May 22, 1995 among Metro Traffic
Control, Inc., Metro Networks, Ltd, and NationsBank of Texas, N.A.
10.3* Second Amendment to Credit Agreement dated November 22, 1995 among Metro
Traffic Control, Inc., Metro Networks, Ltd, and NationsBank of Texas,
N.A.
10.4* Lease Agreement, dated April 15, 1988 between Tower, Limited and Metro
Traffic Control, Inc.
10.5* First Amendment to Lease Agreement, dated September 1, 1988 between Tower,
Limited and Metro Traffic Control, Inc.
10.6* Lease Amendment Number Two, dated April 23, 1991 between Tower, Limited
and the Registrant.
10.7* Lease Amendment Number Three, dated January 28, 1992 between Tower,
Limited and the Registrant.
10.8* Sublease Agreement dated January 5, 1996 between Transcontinental Gas Pipe
Line Corporation and Metro Traffic Control, Inc.
10.9* Lease Agreement dated April 18, 1980 between Transco Tower Limited and
Metro Traffic Control, Inc.
10.10* Lease Amendment Number One dated October 19, 1988 between Transco Tower,
Limited and Metro Traffic Control, Inc.
10.11* Lease Amendment Number Two dated January 29, 1992 between Transco Tower,
Limited and Metro Traffic Control, Inc.
10.12* Lease Amendment Number Three dated May 28, 1992 between Transco Tower,
Limited and Metro Traffic Control, Inc.
10.13** Employment Agreement between the Registrant and Mr. David I. Saperstein.
10.14** Employment Agreement between the Registrant and Mr. Charles I. Bortnick
10.15** Employment Agreement between the Registrant and Mr. Shane E. Coppola
10.16** Employment Agreement between the Registrant and Mr. Curtis H. Coleman
10.17** Employment Agreement between the Registrant and Mr. Gary L. Worobow
10.18*** Metro Networks, Inc. Employee Payroll Deduction Stock Purchase Plan
10.19** 1996 Incentive Stock Option Plan
10.20*** Stock Loan and Pledge Agreement between the Registrant and David I.
Saperstein
10.21*** Indemnification Agreement between the Registrant and David I. Saperstein
10.22** Third Amendment to Credit Agreement dated June 18, 1996 among Metro
Traffic Control, Inc., Metro Networks, Ltd. and NationsBank of Texas,
N.A.
11.1*** Statement re: computation of per share earnings
21.1*** Subsidiaries of the Company.
23.1** Consent of KPMG Peat Marwick LLP
23.2*** Consent of Paul, Hastings, Janofsky & Walker (included in Exhibit 5.1).
24.* Powers of Attorney, included on pages II-3.
27.1* Financial Data Schedule
99.1** Consent of James A. Arcara
</TABLE>
- ------------------------
* Filed in Registration Statement dated June 19, 1996
** Filed herewith.
*** To be filed by amendment
<PAGE>
EXECUTIVE
EMPLOYMENT AGREEMENT
This Agreement ("AGREEMENT") is entered into by and between David I.
Saperstein ("EMPLOYEE") and METRO TRAFFIC CONTROL, INC., a Maryland corporation
with its principal office located in Harris County, Texas (the "COMPANY").
WITNESSETH:
WHEREAS, the Company is in the business of managing a sales
force, selling broadcast and other advertising, and developing, producing
and broadcasting traffic, news, sports, weather and other information
reports throughout the United States; and
WHEREAS, Employee has extensive management, marketing and
operations experience; and
WHEREAS, the Company desires to continue to engage the services
of Employee to serve as Chief Executive Officer of the Company on the terms
and conditions herein contained; and
NOW, THEREFORE, for and in consideration of the mutual covenants
and agreements herein contained, the parties hereto agree as follows:
1. EMPLOYMENT. The Company hereby employs Employee, and Employee accepts
such employment, and agrees to devote Employee's full time and efforts to the
interests of the Company upon the terms and conditions hereinafter set forth.
2. TERM OF EMPLOYMENT. Subject to the provisions for termination
hereinafter provided, Employee's term of employment by the Company shall
commence on the effective date of an initial public offering (the "PUBLIC
OFFERING") of the company's proposed parent (the "EFFECTIVE DATE") and shall
continue in effect until three (3) years following the closing of the PUBLIC
OFFERING (the "TERM"); provided, however, the Company shall have the right to
terminate this Agreement on the second anniversary of the closing of the Public
Offering by giving the Employee written notice of
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8.23.96 VERSION
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such termination at least ninety (90) days prior to such second anniversary.
Unless otherwise terminated pursuant hereto, if Employee continues to be
employed by the Company after the Term, then Employee's employment shall be
deemed to continue on a month-to-month basis until such time as either party
shall deliver written notice to the other party and this Agreement shall
terminate ninety (90) days after the giving of such notice. Except as otherwise
set forth herein, if either party hereto desires to terminate this Agreement at
the end of the Term or thereafter, the same ninety (90) days prior written
notice shall apply. The period from the Effective Date through the date ninety
(90) days from the date any notice of termination referred to above is delivered
is hereinafter referred to as the "Employment Period".
3. SERVICES TO BE RENDERED BY EMPLOYEE.
(a) During the Employment Period, Employee shall serve as Chief
Executive Officer of the Company or in such other position as is determined from
time to time by the Board of Directors of the Company or if the Company has a
parent company, such parent company's Board of Directors (the "BOARD OF
DIRECTORS"). Subject to the direction of the Board of Directors, Employee shall
perform such executive and managerial duties as from time to time may be
delegated to Employee by the Board of Directors. Employee shall devote all of
his professional time, energy and ability to the proper and efficient conduct of
the Company's business. Employee shall observe and comply with all reasonable
lawful directions and instructions by and on the part of the Board of Directors
and endeavor to promote the interests of the Company and not at any time do
anything which may cause or tend to be likely to cause any loss or damage to the
Company in business, reputation or otherwise.
(b) The Company may from time to time call on Employee to perform
services related to the business of developing and broadcasting traffic, news,
sports and weather reports, which may include (in the Company's sole discretion)
contributing to the day-to-day management and operation of such business,
soliciting Sponsors, Corporate Affiliates (as such terms are defined in Section
20 hereof) or customers or dealing with their accounts, or the television or
radio broadcast of traffic, news, sports and weather reports, or other
activities related to the Company's business, as reasonably specified from time
to time by the Board of Directors. Subject to the foregoing, Employee's
specific responsibilities shall include hiring, training, managing and
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8.23.96 VERSION
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motivating the Company's employees. The Company may, in its sole discretion,
restrict, expand, change or otherwise alter the Employee's duties, title and
responsibilities; provided, however, such changes shall be consistent with
Employee's position as an executive officer of the Company. Any change shall be
binding on Employee for all purposes of this Agreement.
(c) Employee acknowledges that Employee will have and owe fiduciary
duties to the Company and its shareholders including, without limitation, the
duties of care, confidentiality and loyalty.
(d) Employee acknowledges that the Company does not allow personal
trade, including but not limited to automobiles.
4. COMPENSATION.
(a) BASE SALARY. For the services to be rendered by Employee during
Employee's employment by the Company, the Company shall pay Employee, and
Employee agrees to accept, a monthly base salary (the "BASE SALARY") of TWENTY
NINE THOUSAND ONE HUNDRED and SIXTY-SIX Dollars and SIXTY-SEVEN Cents
($29,166.67). Employee's Base Salary shall be payable semi-monthly in arrears on
the tenth day and on the twenty-fifth day of each calendar month or such other
date in conformity with the Company's payroll policies in effect from time to
time. The Base Salary shall increase five (5%) percent for each year per annum
during the Term on the anniversary of the closing of the Public Offering.
(b) BONUS. Employee shall be eligible for a bonus of up to ONE
HUNDRED AND FIFTH THOUSAND ($150,000.00) Dollars per annum (the "DISCRETIONARY
BONUS"), in the sole discretion of the Board of Directors or its Compensation
Committee. The Discretionary Bonus potential shall increase by five (5%)
percent per annum for each year during the Term on the anniversary of the
closing of the Public Offering.
(c) STOCK OPTIONS. Upon the effective date of the Public Offering,
Employee will be granted options under the Company's proposed parent company's
1996 Incentive Stock Option Plan (the "1996 PLAN") to purchase one hundred
thousand (100,000)
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8.23.96 VERSION
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shares of the Company's proposed parent company's common stock pursuant a stock
option agreement substantially in the form attached hereto as Exhibit A.
Additional options may be granted in the sole discretion of the Board of
Directors or its Compensation Committee. Such stock options shall be
immediately null and void if the Public Offering does not close.
(d) CUSTOMARY EMPLOYEE DEDUCTIONS. For any and all compensation paid
by the Company to Employee pursuant to this Section 4, the Company shall be
entitled to deduct income tax withholdings, social security and other customary
employee deductions in conformity with the Company's payroll policies in effect
from time to time.
5. EXPENSES. Subject to compliance by Employee with such policies
regarding expenses and expense reimbursement as may be adopted from time to time
by the Company, the Company shall reimburse Employee, or cause Employee to be
reimbursed, in cash for all reasonable expenses. The Company currently
maintains trade relationships for restaurants, hotels, automobile rentals,
courier services, promotional items, etc. which may be used from time to time to
cover ordinary and necessary expenses of Employee and for reimbursement. Except
as expressly set forth in this Section 5, any out-of-pocket cash expenses
incurred by Employee shall be at his own expense and without reimbursement by
the Company. Employee agrees that no travel expense will be reimbursed unless
booked through the Company's travel department.
6. BENEFITS.
(a) COMPANY PLANS; INSURANCE. During the term of Employee's
employment hereunder, Employee shall be entitled to participate in all benefit
plans, programs, group insurance policies, vacation sick leave and other
benefits that may from time to time be established by the Company for its
employees, provided that Employee is eligible under the respective provisions
thereof.
(b) VACATION. Employee shall be entitled each year to a vacation in
accordance with the prevailing practice of the Company in regard to vacations
for its employees.
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8.23.96 VERSION
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7. TERMINATION OF EMPLOYMENT.
(a) During the Employment Period, the Company shall have the right,
if exercised in good faith, to terminate the employment of Employee hereunder
immediately by giving prior written notice thereof to Employee in the event of
any of the following:
(i) if Employee has (A) willfully failed, refused or habitually has
neglected to carry out or to perform the reasonable duties required of
Employee hereunder or otherwise breached any provision of this Agreement
(other than Sections 8, 9 and 12 hereof, which are governed by Section
7(a)(iv) hereof) after notice from the Board of Directors of such failure
or neglect and the expiration of thirty (30) days following the delivery of
such notice which failure or neglect has remained unremedied, (B) willfully
breached any statutory or common law duty; or (C) breached Section 3(c) or
3(d) of this Agreement.
(ii) if Employee is convicted of a felony or a crime involving moral
turpitude or if the Company, acting in good faith and upon reasonable
grounds, determines that Employee has willfully engaged in business conduct
which would injure the reputation of the Company or otherwise adversely
affect its interest if Employee were retained as an employee of the
Company;
(iii) if Employee becomes unable by reason of physical disability or other
incapacity (as may be defined in applicable disability insurance policies)
to carry out or to perform the duties required of Employee hereunder for a
continuous period of ninety (90) days; PROVIDED, HOWEVER, that Employee's
compensation during any period in which Employee is unable to perform the
duties required of Employee hereunder shall be reduced by any disability
payments (excluding any reimbursements for medical expenses and the like)
which Employee is entitled to receive under group or other disability
insurance policies of the Company during such period;
(iv) if Employee breaches any of the provisions of Section 8, 9 or 12
hereof or breaches any of the terms or obligations of any other
noncompetition and/or
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8.23.96 VERSION
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confidentiality agreements entered into between Employee and the Company,
or the Company's Related Entities (as defined in Section 20 hereof), if
any; or
(v) if employee steals or embezzles assets of the Company.
(b) Employee's employment with the Company shall automatically
terminate (without notice to Employee's estate) upon the death or loss of legal
capacity of Employee.
(c) In the event of any termination of employment pursuant to this
Section 7, Employee (or Employee's estate, as the case may be) shall be entitled
to receive (i) the Base Salary herein provided prorated to the date of such
termination, (ii) Employee's present entitlement, if any, under the Company's
employee benefit plans and programs and (iii) no other compensation.
8. NO CONFLICT OF INTEREST; PROPER CONDUCT; COVENANT NOT TO COMPETE.
(a) The Company and Employee acknowledge and agree that the Company
expects to divulge to Employee certain confidential information and trade
secrets relating to the Company's business, provide information relating to the
Company's customer base and otherwise provide Employee with the ability to
injure the Company's goodwill unless certain reasonable restrictions are imposed
upon Employee which are contained in this Section. Employee agrees that such
restrictions are reasonable and necessary to protect the goodwill, confidential
information and other legitimate business interests of the Company and such
restrictions are entered into freely by Employee.
(b) While employed by the Company, Employee will not compete with the
Company, directly or indirectly, either for Employee or as a member of any
association, partnership, joint venture, limited liability partnership or
limited liability company or other entity, or as a stockholder (except as a
stockholder of less than one percent (1%) of the issued and outstanding stock of
a publicly-held corporation whose gross assets exceed $100,000,000), investor,
officer or director of a corporation, or as an employee, agent, trustee,
associate or consultant of any person, association, trust, partnership, joint
venture, registered limited liability partnership or limited liability company,
NY-163705.1 SAPERSTEIN EMPLOYMENT AGREEMENT
8.23.96 VERSION
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corporation or other entity, in any business in competition with that carried
on by the Company or its Related Entities. Employee shall not, without the
Company's prior written consent, engage in any activity during Employee's
employment that would conflict with, interfere with, impede or hamper the
performance of Employee's duties for the Company or would otherwise be
prejudicial to the Company's business interests. Employee shall refrain from
any offensive or distasteful remarks or conduct in performance of Employee's
duties and shall faithfully comply to the best of Employee's ability with all of
the Company's decisions relating to on-the-air material and the manner of
delivering or using same. Employee shall not commit any act or become involved
in any situation or occurrence that, in the Company's reasonable judgment, could
tend to bring Employee or the Company into public disrepute, contempt, scandal
or ridicule, could provoke, insult or offend the community or any group or class
thereof, or could reflect unfavorably upon the Company or any of its Sponsors or
Corporate Affiliates. Employee shall comply with all applicable laws and
regulations governing the Company and its business, including without
limitation, regulations promulgated by the Federal Communications Commission or
any other regulatory agency.
(c) Employee further agrees that, for a period of one (1) year from
and after Employee's last day of employment under this Agreement (the
"NONCOMPETITION PERIOD"), because of disability or termination by the Company
(with or without cause), Employee will not engage in or carry on, directly or
indirectly, either for Employee or as a member of an association, trust,
partnership, joint venture, limited liability partnership or limited liability
company or other entity, or as a stockholder (other than as a stockholder of
less than one percent (1%) of the issued and outstanding stock of a publicly-
held corporation, whose gross assets exceed $100,000,000), or as an investor,
officer or director of a corporation, or as an employee, agent, trustee,
associate or consultant of any person, association, trust, partnership,
corporation, joint venture, registered limited liability partnership or limited
liability company, or other entity, any business in any standard metropolitan
statistical area (according to the SMSA definitions published from time to time
by the National Census Bureau/National Bureau of Labor Statistics) comprising
any part of the territory in which the Company (or any Related Entity) was or
had been engaged prior to the date of termination, which business is the same as
or substantially similar to any business engaged in by the Company (or any
Related Entity) on the date of
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8.23.96 VERSION
<PAGE>
termination of employment as provided herein. The activities of Employee sought
to be restricted by the provisions of this Section 8(c) shall include, without
limitation, (i) the management or operation of a traffic, news, weather, sports
or other information report gathering and broadcast service, (ii) soliciting
Sponsors and dealing with accounts with respect thereto, (iii) soliciting
Corporate Affiliates to enter into any contract or arrangement with any person
or organization to provide traffic, news, weather, sports or other information
report gathering or broadcast services, (iv) broadcasting traffic, news, weather
or sports reports on television or radio, (v) the sale or packaging of
Competitive Broadcast Advertising Vehicles, as that term is defined in Section
20 and (vi) forming or providing operational assistance to any business
primarily engaged in the foregoing activities; provided, that such restricted
activities shall exclude general news gathering or general broadcast
responsibilities which involve traffic, news, weather, sports or other
information reports only occasionally or incidentally, if rendered as a regular
employee of a television or radio station or a network (in a role unrelated to a
competitive activity and which network does not derive the majority of its
revenues from traffic, news, sports, weather or other information reports on a
network basis).
(d) Employee further covenants and agrees that during the
Noncompetition Period, Employee will not either individually, or on behalf of
any other person, association, trust, partnership, joint venture, limited
liability partnership or limited company or other entity as an owner, member,
partner, agent, trustee, shareholder, joint venturer or otherwise, directly or
indirectly, solicit any customer of the Company or its Related Entities in
competition with the Company.
(e) Employee further agrees that during the Noncompetition Period
Employee will neither employ nor offer to employ nor solicit employment of any
employee or consultant of the Company or its Related Entities.
(f) Employee further agrees not to solicit, divert or attempt to
divert any business, patronage or customer of the Company or its Related
Entities to Employee or a competitor or rival of the Company or its Related
Entities during the Noncompetition Period.
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8.23.96 VERSION
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(g) Employee agrees that the limitations set forth herein on
Employee's rights to compete with the Company and its Related Entities are
reasonable and necessary for the protection of the Company and its Related
Entities. In this regard, Employee specifically agrees that the limitations as
to period of time and geographic area, as well as all other restrictions on his
activities specified herein, are reasonable and necessary for the protection of
the Company and its Related Entities.
(h) Employee agrees that the remedy at law for any breach by Employee
of this Section 8 will be inadequate and that the Company shall be entitled to
injunctive relief (without bond or other undertaking).
(i) Employee and Company agree that to the extent a court of
competent jurisdiction finds any of the foregoing covenants to be overly broad
based on applicable law, then the parties agree that the court shall reform the
covenants to the extent necessary to cause such covenants to be reasonable and
enforce such covenants as reformed against Employee.
9. CONFIDENTIAL INFORMATION AND THE RESULTS OF SERVICES. Employee
acknowledges that the Company has established a valuable and extensive trade in
the services it provides, which has been developed at considerable expense to
the Company. Employee agrees that, by virtue of the special knowledge that
Employee has received or will receive from the Company, and the relationship of
trust and confidence between Employee and the Company, Employee has or will have
certain information and knowledge of the operations of the Company that are
confidential and proprietary in nature, including, without limitation,
information about Corporate Affiliates and Sponsors. Employee agrees that
during the term hereof and at any time thereafter Employee will not make use of
or disclose, without the prior consent of the Company, Confidential Information
(as hereinafter defined) relating to the Company and any of its Related Entities
(including, without limitation, its Sponsor lists, its Corporate Affiliates, its
technical systems, its contracts, its methods of operation, its business plans
and opportunities and its trade secrets), and further, that Employee will return
to the Company all written materials in Employee's possession embodying such
Confidential Information. For purposes of this Agreement, "CONFIDENTIAL
INFORMATION" means information obtained by Employee during Employee's employment
relationship with the Company which concerns the affairs of the Company or its
Related Entities and
NY-163705.1 SAPERSTEIN EMPLOYMENT AGREEMENT
8.23.96 VERSION
<PAGE>
which the Company has requested be held in confidence and could reasonably
expect to be held in confidence, or the disclosure of which would likely be
embarrassing, detrimental or disadvantageous to the Company or its Related
Entities. Confidential Information, however, shall not include information
which Employee can show by written document to be:
(a) Information that is at the time of receipt by Employee in the public
domain or is otherwise generally known in the industry or subsequently
enters the public domain or becomes generally known in the industry through
no fault of Employee;
(b) Information that at any time is received in good faith by Employee
from a third party which was lawfully in possession of the same and had the
right to disclose the same.
The parties hereto agree that the remedy at law for any breach of Employee's
obligations under this Section 9 of this Agreement would be inadequate and that
any enforcing party shall be entitled to injunctive or other equitable relief
(without bond or undertaking) in any proceeding which may be brought to enforce
any provisions of this Section.
10. ADVERTISING AND PUBLICITY. Employee hereby grants the Company the
royalty-free right to use and license others to use Employee's name, nickname,
recorded voice, biographical material, portraits, pictures, and likenesses for
advertising purposes and purposes of trade, promotion and publicity in
connection with the institutions, services and products for the Company, its
Related Entities, Sponsors and Corporate Affiliates, such uses to be at such
times, in such manner and through such media as the Company may in its sole
discretion determine. Such right shall last for so long as Employee is employed
by the Company and, in connection with the use or exploitation of any material
in which Employee has been involved during Employee's employment, perpetually
thereafter. Employee shall not authorize or release any advertising or
promotional matter or publicity in any form with reference to Employee's
services hereunder, or to the Company's or its related Entities' programs,
Sponsors or Corporate Affiliates, without the Company's prior written consent.
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8.23.96 VERSION
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11. WORK FOR HIRE. Employee agrees that any ideas, concepts, techniques,
or computer programs relating to the business or operations of the Company and
its Related Entities which are developed by Employee during Employee's
employment hereunder, including each program and announcement prepared for
broadcast, and the titles, content, format, idea, theme, script,
characteristics, and other attributes thereof, shall be deemed to have been made
within the scope of Employee's employment and therefore constitute works for
hire and shall automatically upon their creation become the exclusive property
of the Company. To the extent such items are not works for hire under
applicable law, Employee assigns them and any and all intangible proprietary
rights relating thereto to the Company in their entirety and agrees to execute
any and all documents necessary or desired by the Company to reflect the
Company's ownership thereof.
12. COMMUNICATIONS ACT OF 1934. Employee represents and warrants that, to
the best of Employee's knowledge, information and belief, neither Employee nor
any other person has accepted or agreed to accept, or has paid or provided or
agreed to pay or provide, any money, service or any other valuable
consideration, as defined in Section 507 of the Communications Act of 1934, as
amended, for the broadcast of any matter contained in programs. Employee
further represents and warrants that, during Employee's employment, Employee
shall comply with all legal requirements.
13. MERGER OR REORGANIZATION. In the event of any merger, consolidation,
dissolution or reorganization of the Company (including but not limited to any
reorganization where the Company is not the surviving or resulting entity), or
any transfer of all or substantially all of the assets of the Company, the
provisions of this Agreement shall inure to the benefit of and shall be binding
upon the surviving or resulting partnership or the corporation (or other entity)
or person(s) to which such assets shall be transferred.
14. REMEDIES. Except as it may elect otherwise, the Company shall have
all rights, powers or remedies provided by law or equity for breach of this
Agreement available to it, it being understood and agreed that no one of them
shall be considered as exclusive of the others or as exclusive of any other
rights, powers and remedies allowed by law. The exercise or partial exercise of
any right, power or remedy shall neither constitute the election thereof nor the
waiver of any other right, power or remedy.
NY-163705.1 SAPERSTEIN EMPLOYMENT AGREEMENT
8.23.96 VERSION
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Without limiting the generality of the foregoing, Employee agrees that, in
addition to all other rights and remedies available at law or in equity, the
Company shall be entitled to enforcement of this Agreement in accordance with
the principles of equity, the remedy at law being hereby agreed and acknowledged
by Employee to be inadequate.
15. WAIVER OF BREACH OF AGREEMENT. If either party waives a breach of
this Agreement by the other party, that waiver will not operate or be construed
as a waiver of any subsequent breaches.
16. ASSIGNMENT. The rights of the Company hereunder may, without the
consent of Employee, be assigned by the Company to any Related Entity or
successor of the Company or any entity which acquires all or substantially all
of the Company's assets. Except as provided in the preceding sentence or in
Section 13 hereof, the Company may not assign all or any of its rights, duties
or obligations hereunder without the prior written consent of Employee. This
Agreement is not assignable by Employee. Any attempt by Employee to assign this
Agreement, or any portion thereof, shall be deemed null and void and of no force
and effect.
17. NOTICES. All notices, requests, demands and other communications
permitted or required hereunder shall be in writing and shall be deemed to have
been duly given if personally delivered or if deposited in the United States
mail, first class, postage prepaid, registered or certified, addressed as
follows:
(a) If to Employee, addressed to Employee at the address set forth
below Employee's name on the execution page hereof.
(b) If to the Company, addressed to:
Metro Traffic Control, Inc.
2700 Post Oak Blvd., Suite #1400
Houston, Texas 77056
Attention: Chief Executive Officer
or to such other address as either party hereto may request by written notice as
herein provided.
18. SEVERABILITY. Any provision hereof prohibited by or unenforceable
under any applicable law of any jurisdiction shall as
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8.23.96 VERSION
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to such jurisdiction be deemed ineffective and deleted herefrom without
affecting any other provision of this Agreement. It is the desire of the parties
hereto that this Agreement be enforced to the maximum extent permitted by law,
and should any provision contained herein be held unenforceable, the parties
hereby agree and consent that such provision shall be reformed to make it a
valid and enforceable provision to the maximum extent permitted by law.
19. TITLE AND HEADINGS; EXHIBITS. Titles and headings to Sections hereof
are for the purpose of reference only and shall in no way limit, define or
otherwise affect the provisions hereof. Any and all exhibits referred to herein
are, by such reference, incorporated herein and made a part hereof.
20. CERTAIN DEFINITIONS. As used in this Agreement, the following
capitalized terms shall have the meanings indicated:
(a) CORPORATE AFFILIATES. Any organization, entity or person with
whom the Company has a contract or other arrangement to provide traffic, news,
weather, sports or other information, whether by broadcast, computer or any
other means.
(b) SPONSOR(S). Any and all advertisers (including their
subsidiaries and affiliates) whose commercial material is to be or is
incorporated in any one or more programs or announcements, live or recorded,
broadcast over the facilities of the Company or by the Company.
(c) RELATED ENTITY OR RELATED ENTITIES. Any entity (or entities)
that directly or indirectly controls, is controlled by, or is under common
control with, the Company or David Saperstein or members of his immediate family
or trust for their benefit. The term "entity" as used in this Section 20(c)
means an individual, corporation, partnership, joint venture, limited liability
partnership or limited liability company, trust, unincorporated organization,
association or other entity whose principal business is gathering, disseminating
or reporting traffic, news, sports, weather or other information or the sale or
packaging of Competitive Broadcast Advertising Vehicles. As used in this
Section 20(c), the term "control" means the possession, directly or indirectly,
of the power to direct or cause the direction of the management and policies of
a person or entity, whether through the ownership of voting securities, by
contract or otherwise.
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8.23.96 VERSION
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(d) COMPETITIVE BROADCAST ADVERTISING VEHICLE(S). An advertising
vehicle shall be deemed to be a Competitive Broadcast Advertising Vehicle if (i)
it consists of five to fifteen second commercial mentions imbedded in any news
break format, news, weather, sports or traffic information broadcast immediately
before or after any such programming, or in connection with such programming,
and (ii) it is offered for sale in a package including the broadcast of such
commercial mentions or identification as a Sponsor of any such programming on
more than three radio stations in any one ADI area of dominant influence as
defined by Arbitron, Inc.
21. CHOICE OF LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES RELATING TO THE SUBJECT MATTER OF THIS AGREEMENT, SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, WITHOUT REGARD
TO PRINCIPLES OF CONFLICTS OF LAW.
22. WAIVER OF RIGHTS AND CONSENT TO ARBITRATION. Employee shall and does
hereby irrevocably waive the right to file any complaints against the Company
with any federal, state or local agencies, including but not limited to, the
Equal Employment Opportunity Commission, and the Texas or other state Commission
on Human Rights or to file any claim, institute litigation or other legal action
based on the employment relationship or any activity covered by the terms of
this agreement. The Employee agrees and acknowledges that in exchange for the
relinquishment of those rights that any dispute, controversy or claim arising
out of this Agreement, except for the injunctive relief provided for in
paragraphs 8 and 9 above, or the employment relationship between Employee and
the Company shall be finally settled by arbitration in Houston, Texas in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association in effect on the date of this Agreement and judgment upon the award
may be entered in any court having jurisdiction thereof.
23. BINDING EFFECT. This Agreement shall be binding upon and inure to the
benefit of the parties hereto , their respective heirs, executors, successors
and permitted assigns.
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24. ENTIRE AGREEMENT AND AMENDMENT. This Agreement supersedes all prior
understandings and agreements between the parties with respect to the subject
matter hereof. This Agreement contains the entire agreement of the parties with
respect to the subject matter covered hereby and may be amended, waived or
terminated only by an instrument in writing executed by both parties hereto.
25. EXECUTION BY COMPANY. Submission of this Agreement to Employee, or
Employee's agents or attorneys, for examination or signature does not constitute
or imply an offer of employment, and this Agreement shall have no binding effect
until execution hereof by both the Company and Employee.
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26. NO INFERENCE AGAINST AUTHOR. No provision of this Agreement shall be
interpreted against any party because such party or its legal representative
drafted such provision.
IN WITNESS WHEREOF, this Agreement is EXECUTED as of the30th day of
July 1996 to be EFFECTIVE FOR ALL PURPOSES as of the "Effective Date".
"COMPANY"
METRO TRAFFIC CONTROL, INC.
By: /S/ GARY WOROBOW
-----------------------------
Printed Name: GARY WOROBOW
-------------------
Title: SENIOR VICE PRESIDENT
--------------------------
"EMPLOYEE"
/S/ DAVID SAPERSTEIN
--------------------------------
DAVID I. SAPERSTEIN
Address: 2222 RIVER OAKS BLVD
------------------------
HOUSTON, TX 77019
------------------------
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EXHIBIT A
INCENTIVE STOCK OPTION AGREEMENT ("Agreement"), dated this ___________
between Metro Networks, Inc., a Delaware corporation (the "Company") and
________________ the "Optionee").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Board of Directors of the Company (the "Board") has
adopted and the shareholders of the Company have approved the Metro Networks,
Inc., 1996 Incentive Stock Option Plan (the "Plan") for the issuance of options
pursuant to the Plan ("Options") to employees of the Company (unless otherwise
defined herein, capitalized terms used herein shall have the meanings ascribed
to such terms in the Plan); and
WHEREAS, the Plan authorizes the Board, in its discretion, to grant
Options and to determine the details of each Agreement to which such granted
Options relate; and
WHEREAS, the Board believes it to be in the best interest of the
Company to grant the Optionee Options to purchase shares of Common Stock of the
Company (the "Stock"), at the price and subject to the terms herein, and in all
respects subject to the terms, definitions and provisions of the Plan which is
incorporated by reference herein.
NOW, THEREFORE, IN CONSIDERATION of the promises and the mutual
covenants and agreements hereinafter set forth, the Company and the Optionee
agree as follows:
1. OPTION
(a) GRANT OF OPTION. The Company hereby grants the
Optionee an Option to purchase an aggregate of
___________________________________________ shares of Stock in accordance with
the terms and conditions of this Agreement.
(b) EXERCISE PERIOD. Except as otherwise provided in this
Agreement, the Option granted hereunder shall become exercisable by the Optionee
according to the following schedule: thirty-three and one-third percent (33
1/3%) upon the first anniversary of the date of execution of this Agreement and
an additional thirty-three and one-third percent (33 1/3%) upon each of the
second and third anniversaries of the date of execution of this Agreement until
all such Options are exercisable; PROVIDED, HOWEVER, that in the event the
<PAGE>
Company elects to terminate that certain Executive Employment Agreement between
the Company and the Optionee dated ___________, 199__, (the "Employment
Agreement") on the second anniversary of the closing of the Public Offering (as
defined in the Employment Agreement) pursuant to Section 2 of the Employment
Agreement, then the remaining sixty-six and two thirds percent (66 2/3%) of such
Options shall become exercisable upon the effective date of such termination;
and PROVIDED, FURTHER, HOWEVER, that the right to exercise an Option as to any
fractional share of Stock shall be deemed the right to exercise an Option as to
a full share of Stock with appropriate adjustments made to the last exercise
period so that the total number of Options shall not exceed that specified under
paragraph (a) of Section 1 hereof.
(c) NO LAPSE OF EXERCISE POWER. Any Option which becomes
exercisable on a certain date but is not exercised in full on that date shall
not lapse but shall remain outstanding as to the unexercised portion and shall
continue in effect throughout the remainder of the Option Term (taking into
account any early termination of such Option Term which may be provided for
under this Agreement or the Plan).
(d) OPTION TERM. An option which is not exercised shall
expire upon the earlier of:
(i) ten (10) years after the date such Option was granted
unless the Optionee is a 10% Holder (as defined herein) in which case the
Option shall expire five (5) years after such date;
(ii) three (3) months after the date the Optionee's
employment with the Company terminates, unless such termination was the
result of the Optionee's death or disability or unless the Company
terminates the employment for cause;
(iii) one (1) year after the Optionee's death or disability;
and
(iv) any such earlier termination date as may be provided by
this Agreement or the Plan.
(e) OPTION PRICE. Except as otherwise provided herein, the
purchase price for each share of Stock subject to the Option shall be $_______
per share, which is
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<PAGE>
the fair market value of the Stock on the date of the Option grant.
(f) ADJUSTMENTS. If the outstanding shares of Stock of the
Company are subdivided, consolidated, increased, decreased, changed into, or
exchanged for a different number or kind of shares or securities through
reorganization, merger, recapitalization, reclassification, capital adjustment
or otherwise, or if the Company shall issue shares of Stock as a dividend or
upon a stock split, the number and kind of shares of Stock available for
purposes of this Agreement or the Plan and all shares of Stock subject to the
unexercised portion of any Options theretofore granted and the Option Price of
such Options shall be appropriately adjusted to prevent dilution or enlargement
of rights. However, any such adjustment in outstanding Options shall be made
without change in the total Option Price applicable to the unexercised portion
of any outstanding Options. Adjustments under this Section 1(f) shall be made
by the Board, whose determination as to what adjustments shall be made, and the
extent thereof, shall be final, binding and conclusive. In computing any
adjustment under this Section 1(f), any fractional share which might otherwise
become subject to an Option shall be eliminated.
2. LIMITATIONS ON OPTIONS.
(a) GREATER THAN 10% SHAREHOLDER. If, at the time this
Option is granted, the Optionee owns stock (including for this purpose any stock
which may be purchased by the Optionee under an Option) possessing more than ten
percent (10%) of the total combined voting power of all classes of stock of the
Company (hereinafter, a "10% Holder"), its parent or its subsidiaries, then the
purchase price shall instead be $110% of the FMV on the date of grant per share
and the Option shall not be exercisable after five (5) years from the date it is
granted.
(b) MAXIMUM NUMBER OF INCENTIVE OPTIONS EXERCISABLE DURING
ONE YEAR. To the extent that the aggregate fair market value of the Stock
(determined as of the time an Option is granted pursuant to the Plan)
exercisable for the first time by an employee during any calendar year under the
Plan and all similar plans maintained by the Company exceeds $100,000.00,
options for such shares shall be treated as options that are not Incentive Stock
Options. For purposes of
-3-
<PAGE>
this provision, Options shall be taken into account in the order in which they
were granted.
(c) SEQUENTIAL EXERCISE. Options granted to the Optionee
may be exercised in any order, so that the Optionee may exercise an Option if
another Option, granted to him at an earlier time, remains outstanding in whole
or in part.
(d) NONTRANSFERABILITY OF OPTION. The Option may not be
assigned or transferred other than pursuant to a Qualified Domestic Relations
Order or by will or by the laws of descent and distribution. During the
lifetime of the Optionee, the Option may be exercisable only by the Optionee.
Transfer of an Option by will or by the laws of descent and distribution shall
not be effective to bind the Company unless the Company shall have been
furnished with written notice thereof and an authenticated copy of the will or
such other evidence as the Board may deem necessary to establish the validity of
the transfer and the acceptance by the transferee of the terms and conditions of
such Option. Any attempted assignment, transfer, pledge, hypothecation or other
disposition of the Option contrary to the provisions hereof, or the levy of any
execution, attachment or similar process upon the Option shall be null and void
and without effect.
3. METHOD OF EXERCISING OPTIONS. Options shall be exercised by a
written notice delivered to the Company at its principal office in Houston,
Texas specifying the number of shares of Stock to be purchased and tendering
payment in full for such Stock. Payment may be tendered in cash or by
certified, bank cashier's or teller's check or by Stock (valued at fair market
value as of the date of tender), or some combination of the foregoing. In the
event all or part of the Option Price is paid in Stock, any excess of the value
of such Stock over the Option Price will be returned to the Optionee as follows:
(i) any whole share of Stock remaining in excess of the Option Price will be
returned in kind, and may be represented by one or more share certificates, and
(ii) any partial shares of Stock remaining in excess of the Option price will be
returned in cash.
In the event the Company determines that it is required to withhold
state or Federal income tax as a result of the exercise of an Option, as a
condition to the exercise thereof, the Optionee may be required to make
arrangements satisfactory to the Company to enable it to satisfy such
-4-
<PAGE>
withholding requirements. Payment of such withholding requirements may be made,
in the discretion of the Board, (i) in cash, (ii) by delivery of Shares
registered in the name of the Optionee, or by the Company not issuing such
number of Shares subject to the Option, having a Fair Market Value at the time
of exercise equal to the amount to be withheld or (iii) any combination of (i)
and (ii) above. If (i) any Shares are registered under Section 12 of the
Exchange Act, (ii) the Optionee is an officer (as defined in Section 16 of the
Exchange Act) of the Company subject to Section 16(b) of the Exchange Act and
(iii) such payment is made with Shares acquired by the Optionee upon the
exercise which gives rise to such withholding, an election under the preceding
sentence (a) must be irrevocable and with respect to all Shares covered by the
Option subject to the election, provided, however, that such election may be
changed through another irrevocable election that takes effect at least six
months after the prior election; or (b) may be made during the period beginning
on the third business day following the date of release of quarterly and annual
summary statements of sales and earnings as provided by Rule 16b-3(e)(3) of the
Securities and Exchange Commission and ending on the twelfth (12th) business day
following such date and only if such period occurs before the date the Company
requires payment of the withholding tax. The election need not be made during
the ten-day window period if counsel to the Company determines that compliance
with such requirement is unnecessary.
4. TIME PERIOD ON TRANSFERS OF STOCK. Any Optionee, or person
representing such Optionee, who sells, exchanges, transfers or otherwise
disposes of any Stock acquired pursuant to the exercise of an Option (other than
Stock sold or otherwise transferred to the Company) within two years following
the grant of such Option or within one year following the actual transfer of
such Stock to the Optionee, shall be obligated to notify the Company in writing
of the date of disposition, the number of shares of Stock so disposed and the
amount of consideration received as a result of such disposition. The Company
shall have the right to take whatever reasonable action it deems appropriate
against an Optionee, including early termination of any Options which remain
outstanding, in order to recover any additional taxes the Company incurs as a
result of such Optionee's failure to so notify the Company.
-5-
<PAGE>
5. ISSUANCE OF OPTIONED STOCK.
(a) ISSUANCE OF CERTIFICATES. The Company shall not be
required to issue or deliver any certificate for Stock purchased upon the
exercise of any Option, or any portion thereof, prior to fulfillment of each of
the following applicable conditions:
(i) The admission of such Stock to listing on all stock
exchanges or markets on which the Stock is then listed to the extent such
admission is necessary;
(ii) The completion of any registration or other
qualification of such Stock under any federal or state securities laws or
under the rulings or regulations of the Securities and Exchange Commission
or any other governmental regulatory body, which the Board shall in its
sole discretion deem necessary or advisable or the determination by the
Board in its sole discretion that no such registration or qualification is
required;
(iii) The obtaining of any approval or other clearance from
any federal or state governmental agency which the Board shall, in its sole
discretion, determine to be necessary or advisable; and
(iv) The lapse of such reasonable period of time following
the exercise of the Option as the Board from time to time may establish for
reasons of administrative convenience.
(b) COMPLIANCE WITH SECURITIES AND OTHER LAWS. In no event
shall the Company be required to sell, issue or deliver Stock pursuant to
Options if in the opinion of the Board the issuance thereof would constitute a
violation by either the Optionee or the Company of any provision of any law or
regulation of any governmental authority or any securities exchange. As a
condition of any sale or issuance of Stock pursuant to Options, the Company may
place legends on the Stock, issue stop-transfer orders and require such
agreements or undertakings from the Optionee as the Company may deem necessary
or advisable to assure compliance with any such law or regulation, including, if
the Company or its counsel deems it appropriate, representations from the
Optionee that he is acquiring the Stock solely for investment and not with a
view to distribution and that no distribution of Stock acquired by him will be
made unless registered pursuant to applicable
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<PAGE>
federal and state securities laws or unless, in the opinion of counsel to the
Company, such registration is unnecessary.
6. OPTION RIGHTS IN THE EVENT OF CERTAIN EVENTS.
(a) RIGHTS IN THE EVENT OF SALE, MERGER OR OTHER
REORGANIZATION OF COMPANY. In the event of a merger or consolidation where the
Company is not the surviving corporation, and the agreement of merger or
consolidation does not provide for the substitution of a new option for the
unexercised portion of the Option or for the assumption of the Option by the
surviving corporation, or in the event of the sale or transfer of assets,
liquidation or dissolution and the plan of liquidation or dissolution or
agreement of sale does not make special provision for the Option, Optionee shall
have the right immediately prior to the effective date of such merger,
consolidation, sale or transfer of assets, liquidation or dissolution to
exercise the Option in whole or in part without regard to any installment
provision contained in paragraph (b) of Section 1 hereof. In no event, however,
may any Option which becomes exercisable pursuant to this paragraph (a) of
Section 6, be exercised, in whole or in part, later than the date specified in
paragraph (d) of Section 1 above. If not so exercised, the Option shall
terminate at the time of any such merger, consolidation, sale or transfer of
assets, liquidation or dissolution.
(b) TERMINATION OF EMPLOYMENT. In the event that an
Optionee's employment with the Company terminates, other than by reason of death
or Total and Permanent Disability or termination for "cause", the Optionee shall
have (subject to Section 2 above) the right, for a period which shall not exceed
the earlier of the remaining Option Term (taking into account any earlier
termination date provided by the Plan) or three months from such termination of
employment, to exercise any Options which such Optionee would have been entitled
to exercise on the date of his termination of employment. At the expiration of
such three month period, or such earlier time as may be applicable, any such
Options which remain unexercised shall expire. In no event may any Options be
exercised that could not have been exercised by an Optionee on the date of his
termination of employment. Notwithstanding the foregoing, if the Optionee's
employment is terminated for "cause", the Company may notify the Optionee that
any Options not exercised prior to the termination are cancelled. For purposes
hereof, a termination of employment for "cause" shall include, but not be
limited to, dismissal as a result of (1)
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<PAGE>
Optionee's conviction of any crime or offense involving money or other property
of the Company or its subsidiaries or which constitutes a felony in the
jurisdiction involved; (2) Optionee's gross negligence, gross incompetence or
willful misconduct in the performance of his or her duties; or (3) Optionee's
willful failure or refusal to perform his or her duties.
(c) TOTAL AND PERMANENT DISABILITY. If an Optionee's
employment with the Company is terminated on account of Total and Permanent
Disability, the Optionee shall have (subject to Section 2 above) the right, for
a period which shall not exceed the earlier of the remaining Option Term (taking
into account any earlier termination date provided by the Plan) or one year from
the date of such Optionee's disability, to exercise any Options which such
Optionee would have been entitled to exercise on the date of his Total and
Permanent Disability. At the expiration of such one year period, or such
earlier time as may be applicable, any such Options which remain unexercised
shall expire. In no event may any Options be exercised that could not have been
exercised by an Optionee on the date of his Total and Permanent Disability.
(d) DEATH. If an Optionee's employment with the Company is
terminated on account of death, the person or persons who shall have acquired
the right, by will or the laws of descent and distribution, to exercise his
Options shall continue to have (subject to Section 2 above) the right, for a
period which shall not exceed the earlier of the remaining Option Term (taking
into account any earlier termination date provided by the Plan) or one year from
the date of such Optionee's death, to exercise any Options which such Optionee
would have been entitled to exercise on the date of his death. At the
expiration of such one year period, or such earlier time as may be applicable,
any such Options which remain unexercised shall expire. In no event may any
Options be exercised that could not have been exercised by an Optionee on the
date of his death.
7. OPTION AND AGREEMENT SUBJECT TO THE PLAN. This Agreement and the
grant of any Option hereunder are subject to all the terms, conditions and
limitations set forth in the Plan, which is incorporated herein by reference and
should be read in conjunction herewith. The Plan may subject the Options
granted hereunder to additional terms, conditions or limitations which are not
specifically set forth herein. Any
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<PAGE>
inconsistency between the Plan and this Agreement shall be resolved in favor of
the Plan language. A copy of the plan is on file for inspection at the
Company's principal offices located in Houston, Texas.
8. ADMINISTRATION BY BOARD OF DIRECTORS. The Board or a committee
appointed by the Board (the "Committee") has the exclusive authority to select
the officers and employees who are to be granted Options, determine the number
of Shares to be subject to Options to be granted to each Optionee and designate
such Options as Incentive Stock Options. The interpretation and construction by
the Board or the Committee of any provisions of the Plan or of any Option
granted thereunder shall be final. No member of the Administrator shall be
liable for any action or determination made in good faith with respect to the
Plan or any Option granted hereunder.
If any Shares are registered under Section 12 of the Exchange Act,
then notwithstanding the first or second sentence of the immediately preceding
paragraph, after such registration the grant of any Option under the Plan to any
person who shall be an officer (as defined in Section 16 of the Exchange Act) of
the Company at the time of such grant shall only be made either (A) with the
approval of the Board if all of its members are Disinterested Persons or (B)
with the approval of the Committee if all of the members of the Committee are
Disinterested Persons.
9. RESTRICTIVE COVENANTS.
(a) COVENANT NOT TO COMPETE. The Optionee acknowledges
that he or she is aware that the services performed by him or her for the
Company have been and are of a special and unique character. The Optionee
further acknowledges and recognizes his or her possession of confidential and
proprietary information regarding the business of the Company. Accordingly, the
Optionee agrees that he or she will not, without the written permission of the
Company, within or outside of the United States for a period of one (1) year
from the date on which such Optionee's employment by or on behalf of the Company
is terminated (i) directly or indirectly engage or become interested or
involved in any Competitive Business (as hereinafter defined), whether such
engagement, interest or involvement shall be as an employer, officer, director,
owner, shareholder, employee, partner or in any other capacity or relationship,
(ii) assist
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<PAGE>
others in engaging in any Competitive Business in the manner described in the
foregoing clause (i), or (iii) induce employees of the Company to terminate
their employment with the Company or engage in any Competitive Business;
provided, however, that nothing contained in this Section 9(a) shall be deemed
to prohibit the Optionee from acquiring, solely for investment purposes, less
than 5% of the publicly-traded shares of the capital stock of any corporation.
As used in this Section 9(a), the term "Competitive Business" means and includes
any business or activity that is now or at any time in the future competitive
with or directly related to the business conducted by the Company on the date
the Optionee's employment by or on behalf of the Company is terminated.
(b) AGREEMENT NOT TO SOLICIT CUSTOMERS. For a period of
one (1) year from the date on which such Optionee's employment by or on behalf
of the Company is terminated, the Optionee agrees that he or she will not, for
or on behalf of a Competitive Business, directly or indirectly, as owner,
officer, stockholder, partner, associate, consultant, manager, advisor,
representative, employee, agent, creditor or otherwise, attempt to solicit or in
any other way disturb or service any person, firm or corporation that has been a
customer account of the Company at any time or times prior to the date hereof,
whether or not the Optionee had direct account responsibility for such customer
account.
(c) CONFIDENTIAL INFORMATION.
(i) The Optionee agrees not to disclose to any person or
use, at any time after the date hereof, any confidential information of the
Company, whether the Optionee has such information in his memory or
embodied in writing or any other physical form. For purposes of this
Agreement the phrase "confidential information of the Company" means all
information which (a) is known only to the Company's employees, or others
in a confidential relationship with the Company or employees of affiliated
companies, (b) relates to specific technical matters, such as the Company's
or its subsidiaries' proprietary information, plans, reports, and
promotional, sales or operational procedures and materials, or (c) relates
to the identity and solicitation of customers and accounting procedures of
the Company or other business practices of the Company.
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<PAGE>
(ii) The Optionee agrees not to remove from the premises of
the Company, at any time after the date hereof, any document or object
containing or reflecting any confidential information of the Company, and
the Optionee recognizes that all such documents and objects, whether
developed by the Company or by someone else for the Company, are the
exclusive property of the Company.
(iii) It is agreed that the names and addresses of customers
who were contacted by the Optionee on behalf of the Company, or of whom the
Optionee became aware through his or her employment with the Company, are
trade secrets of the Company, as is other such confidential information of
the Company, including but not limited to the customer's business needs and
requirements.
(iv) The Optionee shall, at any time requested by the
Company after the date hereof, promptly deliver to the Company all
confidential memoranda, notes, reports, lists, and other documents (and all
copies thereof) relating to the business of the Company which he or she may
then possess or have under his or her control.
10. LOCK-UP AGREEMENT. The Optionee agrees, if requested by the
Company and an underwriter of Common Stock (or other securities) of the Company,
not to sell or otherwise transfer or dispose of any Common Stock (or other
securities) of the Company held by the Optionee during the one hundred eighty
(180) day period following the effective date of a registration statement filed
under the 1933 Act, as amended, without the prior consent of the Company or such
underwriter, as the case may be, provided that such agreement only applies to
registration statements including securities to be sold to the public in an
underwritten offering during the period ending on __________________.
11. MISCELLANEOUS.
(a) NO EMPLOYMENT RIGHTS. Nothing in the Agreement or
in-any Option granted hereunder shall confer upon any employee the right to
continue in the employ of the Company.
(b) BINDING EFFECT. The Agreement shall be binding upon,
and inure to the benefit of the Company, Optionee, and their respective personal
representatives, successors and permitted assigns.
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<PAGE>
(c) SINGULAR, PLURAL; GENDER. Whenever used herein, except
where the context clearly indicates to the contrary, nouns in the singular shall
include the plural, and the masculine pronoun shall include the feminine gender.
(d) HEADINGS. Headings of the Sections hereof are inserted
for convenience and reference and constitute no part of the Agreement.
(e) RIGHTS AS SHAREHOLDERS. An Optionee or transferee of
an Option shall have no rights as a shareholder with respect to any Stock
subject to such Option prior to the purchase of such Stock by exercise of such
Option as provided herein.
(f) APPLICABLE LAW. This Agreement and the Options granted
hereunder shall be interpreted, administered and otherwise subject to the laws
of the State of Texas, except to the extent the General Corporation Law of
Delaware shall govern.
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<PAGE>
IN WITNESS WHEREOF, the Company and the Optionee have executed this
Agreement as of the day and year first written above.
OPTIONEE METRO NETWORKS, INC.
_________________________ By:_________________________
Name: Name:
Address: Title:
<PAGE>
EXECUTIVE
EMPLOYMENT AGREEMENT
This Agreement ("AGREEMENT") is entered into by and between Charles I.
Bortnick ("EMPLOYEE") and METRO TRAFFIC CONTROL, INC., a Maryland corporation
with its principal office located in Harris County, Texas (the "COMPANY").
WITNESSETH:
WHEREAS, the Company is in the business of managing a sales
force, selling broadcast and other advertising, and developing, producing
and broadcasting traffic, news, sports, weather and other information
reports throughout the United States; and
WHEREAS, Employee has extensive management, marketing and
operations experience; and
WHEREAS, the Company and Employee entered into an agreement
effective July 1, 1994 (the "PRIOR AGREEMENT"); and
WHEREAS, the Company desires to continue to engage the services
of Employee to serve as President of the Company on the terms and
conditions herein contained; and
NOW, THEREFORE, for and in consideration of the mutual covenants
and agreements herein contained, the parties hereto agree as follows:
1. EMPLOYMENT. The Company hereby employs Employee, and Employee accepts
such employment, and agrees to devote Employee's full time and efforts to the
interests of the Company upon the terms and conditions hereinafter set forth.
Upon the Effective Date (as hereinafter defined), the Prior Agreement shall be
terminated. Employee, however, shall continue to be entitled to any bonus
pursuant to the Prior Agreement which was earned prior to the Effective Date
hereof, but which has not yet been paid.
NY-163630.1 BORTNICK EMPLOYMENT AGREEMENT
8.23.96 VERSION
<PAGE>
2. TERM OF EMPLOYMENT. Subject to the provisions for termination
hereinafter provided, Employee's term of employment by the Company shall
commence on July 1, 1996 (the "EFFECTIVE DATE") and shall continue in effect
until three (3) years following the closing of an initial public offering (the
"PUBLIC OFFERING") of the Company or its proposed parent company (the "TERM");
provided, however, the Company shall have the right to terminate this Agreement
on the second anniversary of the closing of the Public Offering by giving the
Employee written notice of such termination at least ninety (90) days prior to
such second anniversary. Unless otherwise terminated pursuant hereto, if
Employee continues to be employed by the Company after the Term, then Employee's
employment shall be deemed to continue on a month-to-month basis until such time
as either party shall deliver written notice to the other party and this
Agreement shall terminate ninety (90) days after the giving of such notice.
Except as otherwise set forth herein, if either party hereto desires to
terminate this Agreement at the end of the Term or thereafter, the same ninety
(90) days prior written notice shall apply. Further, if the Public Offering
does not close on or before December 31, 1996, either party may terminate this
Agreement upon ninety (90) days prior written notice. The period from the
Effective Date through the date ninety (90) days from the date any notice of
termination referred to above is delivered is hereinafter referred to as the
"Employment Period". Unless otherwise terminated as set forth in this
Agreement, if (i) the Company chooses not to continue the Employee's employment
hereunder after the end of the Term, (ii) the Company exercises its right to
terminate this Agreement on the second anniversary of the Public Offering or
(iii) at the end of the Term the parties are unable to agree on the terms of a
new employment agreement, the Company shall pay Employee the equivalent of his
then current monthly Base Salary for ninety (90) days following the end of the
Employment Period.
3. SERVICES TO BE RENDERED BY EMPLOYEE.
(a) During the Employment Period, Employee shall serve as President
of the Company or in such other position as is determined from time to time by
the Board of Directors of the Company or if the Company has a parent company,
such parent company's Board of Directors (the "BOARD OF DIRECTORS"). Subject to
the direction of the Chief Executive Officer of the Company, the Board of
Directors or its designee, Employee shall perform such executive and managerial
duties as from time to time may be delegated to Employee by the Chief Executive
Officer, the Board of
NY-163630.1 BORTNICK EMPLOYMENT AGREEMENT
8.23.96 VERSION
<PAGE>
Directors, or their designee. Employee shall devote all of his professional
time, energy and ability to the proper and efficient conduct of the Company's
business. Employee shall observe and comply with all reasonable lawful
directions and instructions by and on the part of the Chief Executive Officer,
the Board of Directors or their designee and endeavor to promote the interests
of the Company and not at any time do anything which may cause or tend to be
likely to cause any loss or damage to the Company in business, reputation or
otherwise.
(b) The Company may from time to time call on Employee to perform
services related to the business of developing and broadcasting traffic, news,
sports and weather reports, which may include (in the Company's sole discretion)
contributing to the day-to-day management and operation of such business,
soliciting Sponsors, Corporate Affiliates (as such terms are defined in Section
20 hereof) or customers or dealing with their accounts, or the television or
radio broadcast of traffic, news, sports and weather reports, or other
activities related to the Company's business, as reasonably specified from time
to time by the Chief Executive Officer, the Board of Directors or their
designee. Subject to the foregoing, Employee's specific responsibilities shall
include hiring, training, managing and motivating the Company's employees. The
Company may, in its sole discretion, restrict, expand, change or otherwise alter
the Employee's duties, title and responsibilities; provided, however, such
changes shall be consistent with Employee's position as an executive officer of
the Company. Any change shall be binding on Employee for all purposes of this
Agreement.
(c) Employee acknowledges that Employee will have and owe fiduciary
duties to the Company and its shareholders including, without limitation, the
duties of care, confidentiality and loyalty.
(d) Employee acknowledges that the Company does not allow personal
trade, including but not limited to automobiles.
4. COMPENSATION.
(a) BASE SALARY. For the services to be rendered by Employee during
Employee's employment by the Company, the Company shall pay Employee, and
Employee agrees to accept, a monthly base salary (the "BASE SALARY") of TWENTY
TWO THOUSAND NINE HUNDRED and
NY-163630.1 BORTNICK EMPLOYMENT AGREEMENT
8.23.96 VERSION
<PAGE>
SIXTEEN Dollars and SIXTY-SEVEN Cents ($22,916.67). Employee's Base Salary shall
be payable semi-monthly in arrears on the tenth day and on the twenty-fifth day
of each calendar month or such other date in conformity with the Company's
payroll policies in effect from time to time. The Base Salary shall increase
five (5%) percent for each year per annum during the Term on the anniversary of
the closing of the Public Offering.
(b) BONUS. Employee shall be eligible for a bonus of up to ONE
HUNDRED THOUSAND ($100,000.00) Dollars per annum (the "DISCRETIONARY BONUS"), in
the sole discretion of the Board of Directors (or if the Company has a parent
company, the Board of Directors of such parent company) or its Compensation
Committee. The Discretionary Bonus potential shall increase by five (5%)
percent per annum for each year during the Term on the anniversary of the
closing of the Public Offering.
(c) STOCK OPTIONS. Upon the effective date of the Public Offering,
Employee will be granted options under the Company's proposed parent company's
1996 Incentive Stock Option Plan (the "1996 PLAN") to purchase seventy five
thousand (75,000) shares of the Company's proposed parent company's common stock
pursuant a stock option agreement substantially in the form attached hereto as
Exhibit A. Additional options may be granted in the sole discretion of the
Board of Directors of the Company (or if the Company has a parent company, the
Board of Directors of such parent company) or its Compensation Committee. Such
stock options shall be immediately null and void if the Public Offering does not
close.
(d) CHANGE OF CONTROL. In the event of a change in control of the
Company whereby David Saperstein, including members of his family, are no longer
direct or indirect beneficial owners of 10% or more of the outstanding equity
interests in the Company or its parent company (a "CHANGE OF CONTROL") and
Employee's employment with the Company is terminated other than pursuant to
Section 7 hereof within one (1) year of such Change of Control (and Employee is
not offered continued employment, in an executive position, with a base salary
and bonus potential substantially similar to that set forth herein), Employee
shall be entitled to receive in a lump sum payment upon such termination an
amount equal to two (2) times his then current Base Salary. Employee shall not
in such situation also be entitled to ninety (90) days additional pay pursuant
to Section 2.
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8.23.96 VERSION
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(e) CUSTOMARY EMPLOYEE DEDUCTIONS. For any and all compensation paid
by the Company to Employee pursuant to this Section 4, the Company shall be
entitled to deduct income tax withholdings, social security and other customary
employee deductions in conformity with the Company's payroll policies in effect
from time to time.
5. EXPENSES. Subject to compliance by Employee with such policies
regarding expenses and expense reimbursement as may be adopted from time to time
by the Company, the Company shall reimburse Employee, or cause Employee to be
reimbursed, in cash for all reasonable expenses. The Company currently
maintains trade relationships for restaurants, hotels, automobile rentals,
courier services, promotional items, etc. which may be used from time to time to
cover ordinary and necessary expenses of Employee and for reimbursement. Except
as expressly set forth in this Section 5, any out-of-pocket cash expenses
incurred by Employee shall be at his own expense and without reimbursement by
the Company. Employee agrees that no travel expense will be reimbursed unless
booked through the Company's travel department.
6. BENEFITS.
(a) COMPANY PLANS; INSURANCE. During the term of Employee's
employment hereunder, Employee shall be entitled to participate in all benefit
plans, programs, group insurance policies, vacation sick leave and other
benefits that may from time to time be established by the Company for its
employees, provided that Employee is eligible under the respective provisions
thereof.
(b) VACATION. Employee shall be entitled each year to a vacation in
accordance with the prevailing practice of the Company in regard to vacations
for its employees.
7. TERMINATION OF EMPLOYMENT.
(a) During the Employment Period, the Company shall have the right,
if exercised in good faith, to terminate the employment of Employee hereunder
immediately by giving prior written notice thereof to Employee in the event of
any of the following:
(i) if Employee has (A) willfully failed, refused or habitually has
neglected to carry out or to perform the
NY-163630.1 BORTNICK EMPLOYMENT AGREEMENT
8.23.96 VERSION
<PAGE>
reasonable duties required of Employee hereunder or otherwise breached any
provision of this Agreement (other than Sections 8, 9 and 12 hereof, which
are governed by Section 7(a)(iv) hereof) after notice from the Chief
Executive Officer, the Board of Directors or their designee of such failure
or neglect and the expiration of thirty (30) days following the delivery of
such notice which failure or neglect has remained unremedied, (B) willfully
breached any statutory or common law duty; or (C) breached Section 3(c) or
3(d) of this Agreement.
(ii) if Employee is convicted of a felony or a crime involving moral
turpitude or if the Company, acting in good faith and upon reasonable
grounds, determines that Employee has willfully engaged in business conduct
which would injure the reputation of the Company or otherwise adversely
affect its interest if Employee were retained as an employee of the
Company;
(iii) if Employee becomes unable by reason of physical disability or other
incapacity (as may be defined in applicable disability insurance policies)
to carry out or to perform the duties required of Employee hereunder for a
continuous period of ninety (90) days; PROVIDED, HOWEVER, that Employee's
compensation during any period in which Employee is unable to perform the
duties required of Employee hereunder shall be reduced by any disability
payments (excluding any reimbursements for medical expenses and the like)
which Employee is entitled to receive under group or other disability
insurance policies of the Company during such period;
(iv) if Employee breaches any of the provisions of Section 8, 9 or 12
hereof or breaches any of the terms or obligations of any other
noncompetition and/or confidentiality agreements entered into between
Employee and the Company, or the Company's Related Entities (as defined in
Section 20 hereof), if any; or
(v) if employee steals or embezzles assets of the Company.
(b) Employee's employment with the Company shall automatically
terminate (without notice to Employee's estate) upon the death or loss of legal
capacity of Employee.
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8.23.96 VERSION
<PAGE>
(c) In the event of any termination of employment pursuant to this
Section 7, Employee (or Employee's estate, as the case may be) shall be entitled
to receive (i) the Base Salary herein provided prorated to the date of such
termination, (ii) Employee's present entitlement, if any, under the Company's
employee benefit plans and programs and (iii) no other compensation.
8. NO CONFLICT OF INTEREST; PROPER CONDUCT; COVENANT NOT TO COMPETE.
(a) The Company and Employee acknowledge and agree that the Company
expects to divulge to Employee certain confidential information and trade
secrets relating to the Company's business, provide information relating to the
Company's customer base and otherwise provide Employee with the ability to
injure the Company's goodwill unless certain reasonable restrictions are imposed
upon Employee which are contained in this Section. Employee agrees that such
restrictions are reasonable and necessary to protect the goodwill, confidential
information and other legitimate business interests of the Company and such
restrictions are entered into freely by Employee.
(b) While employed by the Company, Employee will not compete with the
Company, directly or indirectly, either for Employee or as a member of any
association, partnership, joint venture, limited liability partnership or
limited liability company or other entity, or as a stockholder (except as a
stockholder of less than one percent (1%) of the issued and outstanding stock of
a publicly-held corporation whose gross assets exceed $100,000,000), investor,
officer or director of a corporation, or as an employee, agent, trustee,
associate or consultant of any person, association, trust, partnership, joint
venture, registered limited liability partnership or limited liability company,
corporation or other entity, in any business in competition with that carried
on by the Company or its Related Entities. Employee shall not, without the
Company's prior written consent, engage in any activity during Employee's
employment that would conflict with, interfere with, impede or hamper the
performance of Employee's duties for the Company or would otherwise be
prejudicial to the Company's business interests. Employee shall refrain from
any offensive or distasteful remarks or conduct in performance of Employee's
duties and shall faithfully comply to the best of Employee's ability with all of
the Company's decisions relating to
NY-163630.1 BORTNICK EMPLOYMENT AGREEMENT
8.23.96 VERSION
<PAGE>
on-the-air material and the manner of delivering or using same. Employee shall
not commit any act or become involved in any situation or occurrence that, in
the Company's reasonable judgment, could tend to bring Employee or the Company
into public disrepute, contempt, scandal or ridicule, could provoke, insult or
offend the community or any group or class thereof, or could reflect unfavorably
upon the Company or any of its Sponsors or Corporate Affiliates. Employee shall
comply with all applicable laws and regulations governing the Company and its
business, including without limitation, regulations promulgated by the Federal
Communications Commission or any other regulatory agency.
(c) Employee further agrees that, for a period of one (1) year from
and after Employee's last day of employment under this Agreement (the
"NONCOMPETITION PERIOD"), because of disability or termination by the Company
(with or without cause), Employee will not engage in or carry on, directly or
indirectly, either for Employee or as a member of an association, trust,
partnership, joint venture, limited liability partnership or limited liability
company or other entity, or as a stockholder (other than as a stockholder of
less than one percent (1%) of the issued and outstanding stock of a publicly-
held corporation, whose gross assets exceed $100,000,000), or as an investor,
officer or director of a corporation, or as an employee, agent, trustee,
associate or consultant of any person, association, trust, partnership,
corporation, joint venture, registered limited liability partnership or limited
liability company, or other entity, any business in any standard metropolitan
statistical area (according to the SMSA definitions published from time to time
by the National Census Bureau/National Bureau of Labor Statistics) comprising
any part of the territory in which the Company (or any Related Entity) was or
had been engaged prior to the date of termination, which business is the same as
or substantially similar to any business engaged in by the Company (or any
Related Entity) on the date of termination of employment as provided herein.
The activities of Employee sought to be restricted by the provisions of this
Section 8(c) shall include, without limitation, (i) the management or operation
of a traffic, news, weather, sports or other information report gathering and
broadcast service, (ii) soliciting Sponsors and dealing with accounts with
respect thereto, (iii) soliciting Corporate Affiliates to enter into any
contract or arrangement with any person or organization to provide traffic,
news, weather, sports or other information report gathering or broadcast
services, (iv) broadcasting traffic, news, weather or sports reports on
NY-163630.1 BORTNICK EMPLOYMENT AGREEMENT
8.23.96 VERSION
<PAGE>
television or radio, (v) the sale or packaging of Competitive Broadcast
Advertising Vehicles, as that term is defined in Section 20 and (vi) forming or
providing operational assistance to any business primarily engaged in the
foregoing activities; provided, that such restricted activities shall exclude
general news gathering or general broadcast responsibilities which involve
traffic, news, weather, sports or other information reports only occasionally or
incidentally, if rendered as a regular employee of a television or radio station
or a network (in a role unrelated to a competitive activity and which network
does not derive the majority of its revenues from traffic, news, sports, weather
or other information reports on a network basis).
(d) Employee further covenants and agrees that during the
Noncompetition Period, Employee will not either individually, or on behalf of
any other person, association, trust, partnership, joint venture, limited
liability partnership or limited company or other entity as an owner, member,
partner, agent, trustee, shareholder, joint venturer or otherwise, directly or
indirectly, solicit any customer of the Company or its Related Entities in
competition with the Company.
(e) Employee further agrees that during the Noncompetition Period
Employee will neither employ nor offer to employ nor solicit employment of any
employee or consultant of the Company or its Related Entities.
(f) Employee further agrees not to solicit, divert or attempt to
divert any business, patronage or customer of the Company or its Related
Entities to Employee or a competitor or rival of the Company or its Related
Entities during the Noncompetition Period.
(g) Employee agrees that the limitations set forth herein on
Employee's rights to compete with the Company and its Related Entities are
reasonable and necessary for the protection of the Company and its Related
Entities. In this regard, Employee specifically agrees that the limitations as
to period of time and geographic area, as well as all other restrictions on his
activities specified herein, are reasonable and necessary for the protection of
the Company and its Related Entities.
(h) Employee agrees that the remedy at law for any breach by Employee
of this Section 8 will be inadequate and that
NY-163630.1 BORTNICK EMPLOYMENT AGREEMENT
8.23.96 VERSION
<PAGE>
the Company shall be entitled to injunctive relief (without bond or other
undertaking).
(i) Employee and Company agree that to the extent a court of
competent jurisdiction finds any of the foregoing covenants to be overly broad
based on applicable law, then the parties agree that the court shall reform the
covenants to the extent necessary to cause such covenants to be reasonable and
enforce such covenants as reformed against Employee.
9. CONFIDENTIAL INFORMATION AND THE RESULTS OF SERVICES. Employee
acknowledges that the Company has established a valuable and extensive trade in
the services it provides, which has been developed at considerable expense to
the Company. Employee agrees that, by virtue of the special knowledge that
Employee has received or will receive from the Company, and the relationship of
trust and confidence between Employee and the Company, Employee has or will have
certain information and knowledge of the operations of the Company that are
confidential and proprietary in nature, including, without limitation,
information about Corporate Affiliates and Sponsors. Employee agrees that
during the term hereof and at any time thereafter Employee will not make use of
or disclose, without the prior consent of the Company, Confidential Information
(as hereinafter defined) relating to the Company and any of its Related Entities
(including, without limitation, its Sponsor lists, its Corporate Affiliates, its
technical systems, its contracts, its methods of operation, its business plans
and opportunities and its trade secrets), and further, that Employee will return
to the Company all written materials in Employee's possession embodying such
Confidential Information. For purposes of this Agreement, "CONFIDENTIAL
INFORMATION" means information obtained by Employee during Employee's employment
relationship with the Company which concerns the affairs of the Company or its
Related Entities and which the Company has requested be held in confidence and
could reasonably expect to be held in confidence, or the disclosure of which
would likely be embarrassing, detrimental or disadvantageous to the Company or
its Related Entities. Confidential Information, however, shall not include
information which Employee can show by written document to be:
(a) Information that is at the time of receipt by Employee in the public
domain or is otherwise generally known in the industry or subsequently
enters the public domain or
NY-163630.1 BORTNICK EMPLOYMENT AGREEMENT
8.23.96 VERSION
<PAGE>
becomes generally known in the industry through no fault of Employee;
(b) Information that at any time is received in good faith by Employee
from a third party which was lawfully in possession of the same and had the
right to disclose the same.
The parties hereto agree that the remedy at law for any breach of Employee's
obligations under this Section 9 of this Agreement would be inadequate and that
any enforcing party shall be entitled to injunctive or other equitable relief
(without bond or undertaking) in any proceeding which may be brought to enforce
any provisions of this Section.
10. ADVERTISING AND PUBLICITY. Employee hereby grants the Company the
royalty-free right to use and license others to use Employee's name, nickname,
recorded voice, biographical material, portraits, pictures, and likenesses for
advertising purposes and purposes of trade, promotion and publicity in
connection with the institutions, services and products for the Company, its
Related Entities, Sponsors and Corporate Affiliates, such uses to be at such
times, in such manner and through such media as the Company may in its sole
discretion determine. Such right shall last for so long as Employee is employed
by the Company and, in connection with the use or exploitation of any material
in which Employee has been involved during Employee's employment, perpetually
thereafter. Employee shall not authorize or release any advertising or
promotional matter or publicity in any form with reference to Employee's
services hereunder, or to the Company's or its related Entities' programs,
Sponsors or Corporate Affiliates, without the Company's prior written consent.
11. WORK FOR HIRE. Employee agrees that any ideas, concepts, techniques,
or computer programs relating to the business or operations of the Company and
its Related Entities which are developed by Employee during Employee's
employment hereunder, including each program and announcement prepared for
broadcast, and the titles, content, format, idea, theme, script,
characteristics, and other attributes thereof, shall be deemed to have been made
within the scope of Employee's employment and therefore constitute works for
hire and shall automatically upon their creation become the exclusive property
of the Company. To the extent such items are not works for hire under
applicable law, Employee assigns them
NY-163630.1 BORTNICK EMPLOYMENT AGREEMENT
8.23.96 VERSION
<PAGE>
and any and all intangible proprietary rights relating thereto to the Company in
their entirety and agrees to execute any and all documents necessary or desired
by the Company to reflect the Company's ownership thereof.
12. COMMUNICATIONS ACT OF 1934. Employee represents and warrants that, to
the best of Employee's knowledge, information and belief, neither Employee nor
any other person has accepted or agreed to accept, or has paid or provided or
agreed to pay or provide, any money, service or any other valuable
consideration, as defined in Section 507 of the Communications Act of 1934, as
amended, for the broadcast of any matter contained in programs. Employee
further represents and warrants that, during Employee's employment, Employee
shall comply with all legal requirements.
13. MERGER OR REORGANIZATION. In the event of any merger, consolidation,
dissolution or reorganization of the Company (including but not limited to any
reorganization where the Company is not the surviving or resulting entity), or
any transfer of all or substantially all of the assets of the Company, the
provisions of this Agreement shall inure to the benefit of and shall be binding
upon the surviving or resulting partnership or the corporation (or other entity)
or person(s) to which such assets shall be transferred.
14. REMEDIES. Except as it may elect otherwise, the Company shall have
all rights, powers or remedies provided by law or equity for breach of this
Agreement available to it, it being understood and agreed that no one of them
shall be considered as exclusive of the others or as exclusive of any other
rights, powers and remedies allowed by law. The exercise or partial exercise of
any right, power or remedy shall neither constitute the election thereof nor the
waiver of any other right, power or remedy. Without limiting the generality of
the foregoing, Employee agrees that, in addition to all other rights and
remedies available at law or in equity, the Company shall be entitled to
enforcement of this Agreement in accordance with the principles of equity, the
remedy at law being hereby agreed and acknowledged by Employee to be inadequate.
15. WAIVER OF BREACH OF AGREEMENT. If either party waives a breach of
this Agreement by the other party, that waiver will not operate or be construed
as a waiver of any subsequent breaches.
NY-163630.1 BORTNICK EMPLOYMENT AGREEMENT
8.23.96 VERSION
<PAGE>
16. ASSIGNMENT. The rights of the Company hereunder may, without the
consent of Employee, be assigned by the Company to any Related Entity or
successor of the Company or any entity which acquires all or substantially all
of the Company's assets. Except as provided in the preceding sentence or in
Section 13 hereof, the Company may not assign all or any of its rights, duties
or obligations hereunder without the prior written consent of Employee. This
Agreement is not assignable by Employee. Any attempt by Employee to assign this
Agreement, or any portion thereof, shall be deemed null and void and of no force
and effect.
17. NOTICES. All notices, requests, demands and other communications
permitted or required hereunder shall be in writing and shall be deemed to have
been duly given if personally delivered or if deposited in the United States
mail, first class, postage prepaid, registered or certified, addressed as
follows:
(a) If to Employee, addressed to Employee at the address set forth
below Employee's name on the execution page hereof.
(b) If to the Company, addressed to:
Metro Traffic Control, Inc.
2700 Post Oak Blvd., Suite #1400
Houston, Texas 77056
Attention: Chief Executive Officer
or to such other address as either party hereto may request by written notice as
herein provided.
18. SEVERABILITY. Any provision hereof prohibited by or unenforceable
under any applicable law of any jurisdiction shall as to such jurisdiction be
deemed ineffective and deleted herefrom without affecting any other provision of
this Agreement. It is the desire of the parties hereto that this Agreement be
enforced to the maximum extent permitted by law, and should any provision
contained herein be held unenforceable, the parties hereby agree and consent
that such provision shall be reformed to make it a valid and enforceable
provision to the maximum extent permitted by law.
19. TITLE AND HEADINGS; EXHIBITS. Titles and headings to Sections hereof
are for the purpose of reference only and shall in no way limit, define or
otherwise affect the provisions hereof.
NY-163630.1 BORTNICK EMPLOYMENT AGREEMENT
8.23.96 VERSION
<PAGE>
Any and all exhibits referred to herein are, by such reference, incorporated
herein and made a part hereof.
20. CERTAIN DEFINITIONS. As used in this Agreement, the following
capitalized terms shall have the meanings indicated:
(a) CORPORATE AFFILIATES. Any organization, entity or person with
whom the Company has a contract or other arrangement to provide traffic, news,
weather, sports or other information, whether by broadcast, computer or any
other means.
(b) SPONSOR(S). Any and all advertisers (including their
subsidiaries and affiliates) whose commercial material is to be or is
incorporated in any one or more programs or announcements, live or recorded,
broadcast over the facilities of the Company or by the Company.
(c) RELATED ENTITY OR RELATED ENTITIES. Any entity (or entities)
that directly or indirectly controls, is controlled by, or is under common
control with, the Company or David Saperstein or members of his immediate family
or trust for their benefit. The term "entity" as used in this Section 20(c)
means an individual, corporation, partnership, joint venture, limited liability
partnership or limited liability company, trust, unincorporated organization,
association or other entity whose principal business is gathering, disseminating
or reporting traffic, news, sports, weather or other information or the sale or
packaging of Competitive Broadcast Advertising Vehicles. As used in this
Section 20(c), the term "control" means the possession, directly or indirectly,
of the power to direct or cause the direction of the management and policies of
a person or entity, whether through the ownership of voting securities, by
contract or otherwise.
(d) COMPETITIVE BROADCAST ADVERTISING VEHICLE(S). An advertising
vehicle shall be deemed to be a Competitive Broadcast Advertising Vehicle if (i)
it consists of five to fifteen second commercial mentions imbedded in any news
break format, news, weather, sports or traffic information broadcast immediately
before or after any such programming, or in connection with such programming,
and (ii) it is offered for sale in a package including the broadcast of such
commercial mentions or identification as a Sponsor of any such programming on
more than three radio stations
NY-163630.1 BORTNICK EMPLOYMENT AGREEMENT
8.23.96 VERSION
<PAGE>
in any one ADI area of dominant influence as defined by Arbitron, Inc.
21. CHOICE OF LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES RELATING TO THE SUBJECT MATTER OF THIS AGREEMENT, SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, WITHOUT REGARD
TO PRINCIPLES OF CONFLICTS OF LAW.
22. WAIVER OF RIGHTS AND CONSENT TO ARBITRATION. Employee shall and does
hereby irrevocably waive the right to file any complaints against the Company
with any federal, state or local agencies, including but not limited to, the
Equal Employment Opportunity Commission, and the Texas or other state Commission
on Human Rights or to file any claim, institute litigation or other legal action
based on the employment relationship or any activity covered by the terms of
this agreement. The Employee agrees and acknowledges that in exchange for the
relinquishment of those rights that any dispute, controversy or claim arising
out of this Agreement, except for the injunctive relief provided for in
paragraphs 8 and 9 above, or the employment relationship between Employee and
the Company shall be finally settled by arbitration in Houston, Texas in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association in effect on the date of this Agreement and judgment upon the award
may be entered in any court having jurisdiction thereof.
23. BINDING EFFECT. This Agreement shall be binding upon and inure to the
benefit of the parties hereto , their respective heirs, executors, successors
and permitted assigns.
24. ENTIRE AGREEMENT AND AMENDMENT. This Agreement supersedes all prior
understandings and agreements between the parties with respect to the subject
matter hereof. This Agreement contains the entire agreement of the parties with
respect to the subject matter covered hereby and may be amended, waived or
terminated only by an instrument in writing executed by both parties hereto.
25. EXECUTION BY COMPANY. Submission of this Agreement to Employee, or
Employee's agents or attorneys, for examination or signature does not constitute
or imply an offer of employment, and this Agreement shall have no binding effect
until execution hereof by both the Company and Employee.
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8.23.96 VERSION
<PAGE>
26. NO INFERENCE AGAINST AUTHOR. No provision of this Agreement shall be
interpreted against any party because such party or its legal representative
drafted such provision.
IN WITNESS WHEREOF, this Agreement is EXECUTED as of the ___ day of
June 1996 to be EFFECTIVE FOR ALL PURPOSES as of the 1st day of July 1996 (the
"Effective Date").
"COMPANY"
METRO TRAFFIC CONTROL, INC.
By: /s/ Shane E. Coppola
-----------------------------
Printed Name: Shane Coppola
-------------------
Title: Executive Vice President
--------------------------
"EMPLOYEE"
/s/ Charles Bortnick
--------------------------------
CHARLES I. BORTNICK
Address: 4909 Holly ST.
-----------------------
Bellaire, TX 77401
------------------------
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8.23.96 VERSION
<PAGE>
EXHIBIT A
INCENTIVE STOCK OPTION AGREEMENT ("Agreement"), dated this ___________
between Metro Networks, Inc., a Delaware corporation (the "Company") and
________________ the "Optionee").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Board of Directors of the Company (the "Board") has
adopted and the shareholders of the Company have approved the Metro Networks,
Inc., 1996 Incentive Stock Option Plan (the "Plan") for the issuance of options
pursuant to the Plan ("Options") to employees of the Company (unless otherwise
defined herein, capitalized terms used herein shall have the meanings ascribed
to such terms in the Plan); and
WHEREAS, the Plan authorizes the Board, in its discretion, to grant
Options and to determine the details of each Agreement to which such granted
Options relate; and
WHEREAS, the Board believes it to be in the best interest of the
Company to grant the Optionee Options to purchase shares of Common Stock of the
Company (the "Stock"), at the price and subject to the terms herein, and in all
respects subject to the terms, definitions and provisions of the Plan which is
incorporated by reference herein.
NOW, THEREFORE, IN CONSIDERATION of the promises and the mutual
covenants and agreements hereinafter set forth, the Company and the Optionee
agree as follows:
1. OPTION
(a) GRANT OF OPTION. The Company hereby grants the
Optionee an Option to purchase an aggregate of
___________________________________________ shares of Stock in accordance with
the terms and conditions of this Agreement.
(b) EXERCISE PERIOD. Except as otherwise provided in this
Agreement, the Option granted hereunder shall become exercisable by the Optionee
according to the following schedule: thirty-three and one-third percent (33
1/3%) upon the first anniversary of the date of execution of this Agreement and
an additional thirty-three and one-third percent (33 1/3%) upon each of the
second and third anniversaries of the date of execution of this Agreement until
all such Options are exercisable; PROVIDED, HOWEVER, that in the event the
<PAGE>
Company elects to terminate that certain Executive Employment Agreement between
the Company and the Optionee dated ___________, 199__, (the "Employment
Agreement") on the second anniversary of the closing of the Public Offering (as
defined in the Employment Agreement) pursuant to Section 2 of the Employment
Agreement, then the remaining sixty-six and two thirds percent (66 2/3%) of such
Options shall become exercisable upon the effective date of such termination;
and PROVIDED, FURTHER, HOWEVER, that the right to exercise an Option as to any
fractional share of Stock shall be deemed the right to exercise an Option as to
a full share of Stock with appropriate adjustments made to the last exercise
period so that the total number of Options shall not exceed that specified under
paragraph (a) of Section 1 hereof.
(c) NO LAPSE OF EXERCISE POWER. Any Option which becomes
exercisable on a certain date but is not exercised in full on that date shall
not lapse but shall remain outstanding as to the unexercised portion and shall
continue in effect throughout the remainder of the Option Term (taking into
account any early termination of such Option Term which may be provided for
under this Agreement or the Plan).
(d) OPTION TERM. An option which is not exercised shall
expire upon the earlier of:
(i) ten (10) years after the date such Option was granted
unless the Optionee is a 10% Holder (as defined herein) in which case the
Option shall expire five (5) years after such date;
(ii) three (3) months after the date the Optionee's
employment with the Company terminates, unless such termination was the
result of the Optionee's death or disability or unless the Company
terminates the employment for cause;
(iii) one (1) year after the Optionee's death or disability;
and
(iv) any such earlier termination date as may be provided by
this Agreement or the Plan.
(e) OPTION PRICE. Except as otherwise provided herein, the
purchase price for each share of Stock subject to the Option shall be $_______
per share, which is
-2-
<PAGE>
the fair market value of the Stock on the date of the Option grant.
(f) ADJUSTMENTS. If the outstanding shares of Stock of the
Company are subdivided, consolidated, increased, decreased, changed into, or
exchanged for a different number or kind of shares or securities through
reorganization, merger, recapitalization, reclassification, capital adjustment
or otherwise, or if the Company shall issue shares of Stock as a dividend or
upon a stock split, the number and kind of shares of Stock available for
purposes of this Agreement or the Plan and all shares of Stock subject to the
unexercised portion of any Options theretofore granted and the Option Price of
such Options shall be appropriately adjusted to prevent dilution or enlargement
of rights. However, any such adjustment in outstanding Options shall be made
without change in the total Option Price applicable to the unexercised portion
of any outstanding Options. Adjustments under this Section 1(f) shall be made
by the Board, whose determination as to what adjustments shall be made, and the
extent thereof, shall be final, binding and conclusive. In computing any
adjustment under this Section 1(f), any fractional share which might otherwise
become subject to an Option shall be eliminated.
2. LIMITATIONS ON OPTIONS.
(a) GREATER THAN 10% SHAREHOLDER. If, at the time this
Option is granted, the Optionee owns stock (including for this purpose any stock
which may be purchased by the Optionee under an Option) possessing more than ten
percent (10%) of the total combined voting power of all classes of stock of the
Company (hereinafter, a "10% Holder"), its parent or its subsidiaries, then the
purchase price shall instead be $110% of the FMV on the date of grant per share
and the Option shall not be exercisable after five (5) years from the date it is
granted.
(b) MAXIMUM NUMBER OF INCENTIVE OPTIONS EXERCISABLE DURING
ONE YEAR. To the extent that the aggregate fair market value of the Stock
(determined as of the time an Option is granted pursuant to the Plan)
exercisable for the first time by an employee during any calendar year under the
Plan and all similar plans maintained by the Company exceeds $100,000.00,
options for such shares shall be treated as options that are not Incentive Stock
Options. For purposes of
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this provision, Options shall be taken into account in the order in which they
were granted.
(c) SEQUENTIAL EXERCISE. Options granted to the Optionee
may be exercised in any order, so that the Optionee may exercise an Option if
another Option, granted to him at an earlier time, remains outstanding in whole
or in part.
(d) NONTRANSFERABILITY OF OPTION. The Option may not be
assigned or transferred other than pursuant to a Qualified Domestic Relations
Order or by will or by the laws of descent and distribution. During the
lifetime of the Optionee, the Option may be exercisable only by the Optionee.
Transfer of an Option by will or by the laws of descent and distribution shall
not be effective to bind the Company unless the Company shall have been
furnished with written notice thereof and an authenticated copy of the will or
such other evidence as the Board may deem necessary to establish the validity of
the transfer and the acceptance by the transferee of the terms and conditions of
such Option. Any attempted assignment, transfer, pledge, hypothecation or other
disposition of the Option contrary to the provisions hereof, or the levy of any
execution, attachment or similar process upon the Option shall be null and void
and without effect.
3. METHOD OF EXERCISING OPTIONS. Options shall be exercised by a
written notice delivered to the Company at its principal office in Houston,
Texas specifying the number of shares of Stock to be purchased and tendering
payment in full for such Stock. Payment may be tendered in cash or by
certified, bank cashier's or teller's check or by Stock (valued at fair market
value as of the date of tender), or some combination of the foregoing. In the
event all or part of the Option Price is paid in Stock, any excess of the value
of such Stock over the Option Price will be returned to the Optionee as follows:
(i) any whole share of Stock remaining in excess of the Option Price will be
returned in kind, and may be represented by one or more share certificates, and
(ii) any partial shares of Stock remaining in excess of the Option price will be
returned in cash.
In the event the Company determines that it is required to withhold
state or Federal income tax as a result of the exercise of an Option, as a
condition to the exercise thereof, the Optionee may be required to make
arrangements satisfactory to the Company to enable it to satisfy such
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withholding requirements. Payment of such withholding requirements may be made,
in the discretion of the Board, (i) in cash, (ii) by delivery of Shares
registered in the name of the Optionee, or by the Company not issuing such
number of Shares subject to the Option, having a Fair Market Value at the time
of exercise equal to the amount to be withheld or (iii) any combination of (i)
and (ii) above. If (i) any Shares are registered under Section 12 of the
Exchange Act, (ii) the Optionee is an officer (as defined in Section 16 of the
Exchange Act) of the Company subject to Section 16(b) of the Exchange Act and
(iii) such payment is made with Shares acquired by the Optionee upon the
exercise which gives rise to such withholding, an election under the preceding
sentence (a) must be irrevocable and with respect to all Shares covered by the
Option subject to the election, provided, however, that such election may be
changed through another irrevocable election that takes effect at least six
months after the prior election; or (b) may be made during the period beginning
on the third business day following the date of release of quarterly and annual
summary statements of sales and earnings as provided by Rule 16b-3(e)(3) of the
Securities and Exchange Commission and ending on the twelfth (12th) business day
following such date and only if such period occurs before the date the Company
requires payment of the withholding tax. The election need not be made during
the ten-day window period if counsel to the Company determines that compliance
with such requirement is unnecessary.
4. TIME PERIOD ON TRANSFERS OF STOCK. Any Optionee, or person
representing such Optionee, who sells, exchanges, transfers or otherwise
disposes of any Stock acquired pursuant to the exercise of an Option (other than
Stock sold or otherwise transferred to the Company) within two years following
the grant of such Option or within one year following the actual transfer of
such Stock to the Optionee, shall be obligated to notify the Company in writing
of the date of disposition, the number of shares of Stock so disposed and the
amount of consideration received as a result of such disposition. The Company
shall have the right to take whatever reasonable action it deems appropriate
against an Optionee, including early termination of any Options which remain
outstanding, in order to recover any additional taxes the Company incurs as a
result of such Optionee's failure to so notify the Company.
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5. ISSUANCE OF OPTIONED STOCK.
(a) ISSUANCE OF CERTIFICATES. The Company shall not be
required to issue or deliver any certificate for Stock purchased upon the
exercise of any Option, or any portion thereof, prior to fulfillment of each of
the following applicable conditions:
(i) The admission of such Stock to listing on all stock
exchanges or markets on which the Stock is then listed to the extent such
admission is necessary;
(ii) The completion of any registration or other
qualification of such Stock under any federal or state securities laws or
under the rulings or regulations of the Securities and Exchange Commission
or any other governmental regulatory body, which the Board shall in its
sole discretion deem necessary or advisable or the determination by the
Board in its sole discretion that no such registration or qualification is
required;
(iii) The obtaining of any approval or other clearance from
any federal or state governmental agency which the Board shall, in its sole
discretion, determine to be necessary or advisable; and
(iv) The lapse of such reasonable period of time following
the exercise of the Option as the Board from time to time may establish for
reasons of administrative convenience.
(b) COMPLIANCE WITH SECURITIES AND OTHER LAWS. In no event
shall the Company be required to sell, issue or deliver Stock pursuant to
Options if in the opinion of the Board the issuance thereof would constitute a
violation by either the Optionee or the Company of any provision of any law or
regulation of any governmental authority or any securities exchange. As a
condition of any sale or issuance of Stock pursuant to Options, the Company may
place legends on the Stock, issue stop-transfer orders and require such
agreements or undertakings from the Optionee as the Company may deem necessary
or advisable to assure compliance with any such law or regulation, including, if
the Company or its counsel deems it appropriate, representations from the
Optionee that he is acquiring the Stock solely for investment and not with a
view to distribution and that no distribution of Stock acquired by him will be
made unless registered pursuant to applicable
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federal and state securities laws or unless, in the opinion of counsel to the
Company, such registration is unnecessary.
6. OPTION RIGHTS IN THE EVENT OF CERTAIN EVENTS.
(a) RIGHTS IN THE EVENT OF SALE, MERGER OR OTHER
REORGANIZATION OF COMPANY. In the event of a merger or consolidation where the
Company is not the surviving corporation, and the agreement of merger or
consolidation does not provide for the substitution of a new option for the
unexercised portion of the Option or for the assumption of the Option by the
surviving corporation, or in the event of the sale or transfer of assets,
liquidation or dissolution and the plan of liquidation or dissolution or
agreement of sale does not make special provision for the Option, Optionee shall
have the right immediately prior to the effective date of such merger,
consolidation, sale or transfer of assets, liquidation or dissolution to
exercise the Option in whole or in part without regard to any installment
provision contained in paragraph (b) of Section 1 hereof. In no event, however,
may any Option which becomes exercisable pursuant to this paragraph (a) of
Section 6, be exercised, in whole or in part, later than the date specified in
paragraph (d) of Section 1 above. If not so exercised, the Option shall
terminate at the time of any such merger, consolidation, sale or transfer of
assets, liquidation or dissolution.
(b) TERMINATION OF EMPLOYMENT. In the event that an
Optionee's employment with the Company terminates, other than by reason of death
or Total and Permanent Disability or termination for "cause", the Optionee shall
have (subject to Section 2 above) the right, for a period which shall not exceed
the earlier of the remaining Option Term (taking into account any earlier
termination date provided by the Plan) or three months from such termination of
employment, to exercise any Options which such Optionee would have been entitled
to exercise on the date of his termination of employment. At the expiration of
such three month period, or such earlier time as may be applicable, any such
Options which remain unexercised shall expire. In no event may any Options be
exercised that could not have been exercised by an Optionee on the date of his
termination of employment. Notwithstanding the foregoing, if the Optionee's
employment is terminated for "cause", the Company may notify the Optionee that
any Options not exercised prior to the termination are cancelled. For purposes
hereof, a termination of employment for "cause" shall include, but not be
limited to, dismissal as a result of (1)
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Optionee's conviction of any crime or offense involving money or other property
of the Company or its subsidiaries or which constitutes a felony in the
jurisdiction involved; (2) Optionee's gross negligence, gross incompetence or
willful misconduct in the performance of his or her duties; or (3) Optionee's
willful failure or refusal to perform his or her duties.
(c) TOTAL AND PERMANENT DISABILITY. If an Optionee's
employment with the Company is terminated on account of Total and Permanent
Disability, the Optionee shall have (subject to Section 2 above) the right, for
a period which shall not exceed the earlier of the remaining Option Term (taking
into account any earlier termination date provided by the Plan) or one year from
the date of such Optionee's disability, to exercise any Options which such
Optionee would have been entitled to exercise on the date of his Total and
Permanent Disability. At the expiration of such one year period, or such
earlier time as may be applicable, any such Options which remain unexercised
shall expire. In no event may any Options be exercised that could not have been
exercised by an Optionee on the date of his Total and Permanent Disability.
(d) DEATH. If an Optionee's employment with the Company is
terminated on account of death, the person or persons who shall have acquired
the right, by will or the laws of descent and distribution, to exercise his
Options shall continue to have (subject to Section 2 above) the right, for a
period which shall not exceed the earlier of the remaining Option Term (taking
into account any earlier termination date provided by the Plan) or one year from
the date of such Optionee's death, to exercise any Options which such Optionee
would have been entitled to exercise on the date of his death. At the
expiration of such one year period, or such earlier time as may be applicable,
any such Options which remain unexercised shall expire. In no event may any
Options be exercised that could not have been exercised by an Optionee on the
date of his death.
7. OPTION AND AGREEMENT SUBJECT TO THE PLAN. This Agreement and the
grant of any Option hereunder are subject to all the terms, conditions and
limitations set forth in the Plan, which is incorporated herein by reference and
should be read in conjunction herewith. The Plan may subject the Options
granted hereunder to additional terms, conditions or limitations which are not
specifically set forth herein. Any
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inconsistency between the Plan and this Agreement shall be resolved in favor of
the Plan language. A copy of the plan is on file for inspection at the
Company's principal offices located in Houston, Texas.
8. ADMINISTRATION BY BOARD OF DIRECTORS. The Board or a committee
appointed by the Board (the "Committee") has the exclusive authority to select
the officers and employees who are to be granted Options, determine the number
of Shares to be subject to Options to be granted to each Optionee and designate
such Options as Incentive Stock Options. The interpretation and construction by
the Board or the Committee of any provisions of the Plan or of any Option
granted thereunder shall be final. No member of the Administrator shall be
liable for any action or determination made in good faith with respect to the
Plan or any Option granted hereunder.
If any Shares are registered under Section 12 of the Exchange Act,
then notwithstanding the first or second sentence of the immediately preceding
paragraph, after such registration the grant of any Option under the Plan to any
person who shall be an officer (as defined in Section 16 of the Exchange Act) of
the Company at the time of such grant shall only be made either (A) with the
approval of the Board if all of its members are Disinterested Persons or (B)
with the approval of the Committee if all of the members of the Committee are
Disinterested Persons.
9. RESTRICTIVE COVENANTS.
(a) COVENANT NOT TO COMPETE. The Optionee acknowledges
that he or she is aware that the services performed by him or her for the
Company have been and are of a special and unique character. The Optionee
further acknowledges and recognizes his or her possession of confidential and
proprietary information regarding the business of the Company. Accordingly, the
Optionee agrees that he or she will not, without the written permission of the
Company, within or outside of the United States for a period of one (1) year
from the date on which such Optionee's employment by or on behalf of the Company
is terminated (i) directly or indirectly engage or become interested or
involved in any Competitive Business (as hereinafter defined), whether such
engagement, interest or involvement shall be as an employer, officer, director,
owner, shareholder, employee, partner or in any other capacity or relationship,
(ii) assist
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others in engaging in any Competitive Business in the manner described in the
foregoing clause (i), or (iii) induce employees of the Company to terminate
their employment with the Company or engage in any Competitive Business;
provided, however, that nothing contained in this Section 9(a) shall be deemed
to prohibit the Optionee from acquiring, solely for investment purposes, less
than 5% of the publicly-traded shares of the capital stock of any corporation.
As used in this Section 9(a), the term "Competitive Business" means and includes
any business or activity that is now or at any time in the future competitive
with or directly related to the business conducted by the Company on the date
the Optionee's employment by or on behalf of the Company is terminated.
(b) AGREEMENT NOT TO SOLICIT CUSTOMERS. For a period of
one (1) year from the date on which such Optionee's employment by or on behalf
of the Company is terminated, the Optionee agrees that he or she will not, for
or on behalf of a Competitive Business, directly or indirectly, as owner,
officer, stockholder, partner, associate, consultant, manager, advisor,
representative, employee, agent, creditor or otherwise, attempt to solicit or in
any other way disturb or service any person, firm or corporation that has been a
customer account of the Company at any time or times prior to the date hereof,
whether or not the Optionee had direct account responsibility for such customer
account.
(c) CONFIDENTIAL INFORMATION.
(i) The Optionee agrees not to disclose to any person or
use, at any time after the date hereof, any confidential information of the
Company, whether the Optionee has such information in his memory or
embodied in writing or any other physical form. For purposes of this
Agreement the phrase "confidential information of the Company" means all
information which (a) is known only to the Company's employees, or others
in a confidential relationship with the Company or employees of affiliated
companies, (b) relates to specific technical matters, such as the Company's
or its subsidiaries' proprietary information, plans, reports, and
promotional, sales or operational procedures and materials, or (c) relates
to the identity and solicitation of customers and accounting procedures of
the Company or other business practices of the Company.
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(ii) The Optionee agrees not to remove from the premises of
the Company, at any time after the date hereof, any document or object
containing or reflecting any confidential information of the Company, and
the Optionee recognizes that all such documents and objects, whether
developed by the Company or by someone else for the Company, are the
exclusive property of the Company.
(iii) It is agreed that the names and addresses of customers
who were contacted by the Optionee on behalf of the Company, or of whom the
Optionee became aware through his or her employment with the Company, are
trade secrets of the Company, as is other such confidential information of
the Company, including but not limited to the customer's business needs and
requirements.
(iv) The Optionee shall, at any time requested by the
Company after the date hereof, promptly deliver to the Company all
confidential memoranda, notes, reports, lists, and other documents (and all
copies thereof) relating to the business of the Company which he or she may
then possess or have under his or her control.
10. LOCK-UP AGREEMENT. The Optionee agrees, if requested by the
Company and an underwriter of Common Stock (or other securities) of the Company,
not to sell or otherwise transfer or dispose of any Common Stock (or other
securities) of the Company held by the Optionee during the one hundred eighty
(180) day period following the effective date of a registration statement filed
under the 1933 Act, as amended, without the prior consent of the Company or such
underwriter, as the case may be, provided that such agreement only applies to
registration statements including securities to be sold to the public in an
underwritten offering during the period ending on __________________.
11. MISCELLANEOUS.
(a) NO EMPLOYMENT RIGHTS. Nothing in the Agreement or
in-any Option granted hereunder shall confer upon any employee the right to
continue in the employ of the Company.
(b) BINDING EFFECT. The Agreement shall be binding upon,
and inure to the benefit of the Company, Optionee, and their respective personal
representatives, successors and permitted assigns.
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(c) SINGULAR, PLURAL; GENDER. Whenever used herein, except
where the context clearly indicates to the contrary, nouns in the singular shall
include the plural, and the masculine pronoun shall include the feminine gender.
(d) HEADINGS. Headings of the Sections hereof are inserted
for convenience and reference and constitute no part of the Agreement.
(e) RIGHTS AS SHAREHOLDERS. An Optionee or transferee of
an Option shall have no rights as a shareholder with respect to any Stock
subject to such Option prior to the purchase of such Stock by exercise of such
Option as provided herein.
(f) APPLICABLE LAW. This Agreement and the Options granted
hereunder shall be interpreted, administered and otherwise subject to the laws
of the State of Texas, except to the extent the General Corporation Law of
Delaware shall govern.
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IN WITNESS WHEREOF, the Company and the Optionee have executed this
Agreement as of the day and year first written above.
OPTIONEE METRO NETWORKS, INC.
_________________________ By:_________________________
Name: Name:
Address: Title:
<PAGE>
EXECUTIVE
EMPLOYMENT AGREEMENT
This Agreement ("AGREEMENT") is entered into by and between Shane E.
Coppola ("EMPLOYEE") and METRO TRAFFIC CONTROL, INC., a Maryland corporation
with its principal office located in Harris County, Texas (the "COMPANY").
WITNESSETH:
WHEREAS, the Company is in the business of managing a sales
force, selling broadcast and other advertising, and developing, producing
and broadcasting traffic, news, sports, weather and other information
reports throughout the United States; and
WHEREAS, Employee is currently Vice President of Corporate
Development of the Company; and
WHEREAS, the Company desires to continue to engage the services
of Employee to serve as Executive Vice President of the Company on the
terms and conditions herein contained; and
NOW, THEREFORE, for and in consideration of the mutual covenants
and agreements herein contained, the parties hereto agree as follows:
1. EMPLOYMENT. The Company hereby employs Employee, and Employee accepts
such employment, and agrees to devote Employee's full time and efforts to the
interests of the Company upon the terms and conditions hereinafter set forth.
2. TERM OF EMPLOYMENT. Subject to the provisions for termination
hereinafter provided, Employee's term of employment by the Company shall
commence on the effective date of an initial public offering (the "PUBLIC
OFFERING") of the Company's proposed parent company (the "EFFECTIVE DATE") and
shall continue in effect until three (3) years following the closing of the
Public Offering (the "TERM"); provided, however, the Company shall have the
right to terminate this Agreement on the second anniversary of the closing of
the Public Offering by giving the Employee written
NY-163706.1 COPPOLA EMPLOYMENT AGREEMENT
8.23.96 VERSION
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notice of such termination at least ninety (90) days prior to such second
anniversary. Unless otherwise terminated pursuant hereto, if Employee continues
to be employed by the Company after the Term, then Employee's employment shall
be deemed to continue on a month-to-month basis until such time as either party
shall deliver written notice to the other party and this Agreement shall
terminate ninety (90) days after the giving of such notice. Except as otherwise
set forth herein, if either party hereto desires to terminate this Agreement at
the end of the Term or thereafter, the same ninety (90) days prior written
notice shall apply. The period from the Effective Date through the date ninety
(90) days from the date any notice of termination referred to above is delivered
is hereinafter referred to as the "Employment Period".
3. SERVICES TO BE RENDERED BY EMPLOYEE.
(a) During the Employment Period, Employee shall serve as Executive
Vice President of the Company or in such other position as is determined from
time to time by the Board of Directors of the Company or if the Company has a
parent company, such parent company's Board of Directors (the "BOARD OF
DIRECTORS"). Subject to the direction of the Chief Executive Officer of the
Company, the Board of Directors or its designee, Employee shall perform such
executive and managerial duties as from time to time may be delegated to
Employee by the Chief Executive Officer, the Board of Directors, or their
designee. Employee shall devote all of his professional time, energy and
ability to the proper and efficient conduct of the Company's business. Employee
shall observe and comply with all reasonable lawful directions and instructions
by and on the part of the Chief Executive Officer, the Board of Directors or
their designee and endeavor to promote the interests of the Company and not at
any time do anything which may cause or tend to be likely to cause any loss or
damage to the Company in business, reputation or otherwise.
(b) The Company may from time to time call on Employee to perform
services related to the business of developing and broadcasting traffic, news,
sports and weather reports, which may include (in the Company's sole discretion)
contributing to the day-to-day management and operation of such business,
soliciting Sponsors, Corporate Affiliates (as such terms are defined in Section
20 hereof) or customers or dealing with their accounts, or the television or
radio broadcast of traffic, news, sports and weather reports, or other
activities related to the Company's
NY-163706.1 COPPOLA EMPLOYMENT AGREEMENT
8.23.96 VERSION
<PAGE>
business, as reasonably specified from time to time by the Chief Executive
Officer, the Board of Directors or their designee. Subject to the foregoing,
Employee's specific responsibilities shall include hiring, training, managing
and motivating the Company's employees. The Company may, in its sole
discretion, restrict, expand, change or otherwise alter the Employee's duties,
title and responsibilities. Any change shall be binding on Employee for all
purposes of this Agreement.
(c) Employee acknowledges that Employee will have and owe fiduciary
duties to the Company and its shareholders including, without limitation, the
duties of care, confidentiality and loyalty.
(d) Employee acknowledges that the Company does not allow personal
trade, including but not limited to automobiles.
4. COMPENSATION.
(a) BASE SALARY. For the services to be rendered by Employee during
Employee's employment by the Company, the Company shall pay Employee, and
Employee agrees to accept, a monthly base salary (the "BASE SALARY") of SIXTEEN
THOUSAND SIX HUNDRED and SIXTY SIX Dollars and SIXTY-SEVEN Cents ($16,666.67).
Employee's Base Salary shall be payable semi-monthly in arrears on the tenth day
and on the twenty-fifth day of each calendar month or such other date in
conformity with the Company's payroll policies in effect from time to time. The
Base Salary shall increase five (5%) percent for each year per annum during the
Term on the anniversary of the closing of the Public Offering.
(b) BONUS. Employee shall be eligible for a bonus of up to ONE
HUNDRED THOUSAND ($100,000.00) Dollars per annum (the "DISCRETIONARY BONUS"), in
the sole discretion of the Board of Directors or its Compensation Committee.
The Discretionary Bonus potential shall increase by five (5%) percent per annum
for each year during the Term on the anniversary of the closing of the Public
Offering.
(c) STOCK OPTIONS. Upon the effective date of the Public Offering,
Employee will be granted options under the Company's proposed parent company's
1996 Incentive Stock Option Plan (the "1996 PLAN") to purchase seventy five
thousand (75,000)
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8.23.96 VERSION
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shares of the Company's proposed parent company's common stock pursuant a stock
option agreement substantially in the form attached hereto as Exhibit A.
Additional options may be granted in the sole discretion of the Board of
Directors or its Compensation Committee. Such stock options shall be
immediately null and void if the Public Offering does not close.
(d) CUSTOMARY EMPLOYEE DEDUCTIONS. For any and all compensation paid
by the Company to Employee pursuant to this Section 4, the Company shall be
entitled to deduct income tax withholdings, social security and other customary
employee deductions in conformity with the Company's payroll policies in effect
from time to time.
5. EXPENSES. Subject to compliance by Employee with such policies
regarding expenses and expense reimbursement as may be adopted from time to time
by the Company, the Company shall reimburse Employee, or cause Employee to be
reimbursed, in cash for all reasonable expenses. The Company currently
maintains trade relationships for restaurants, hotels, automobile rentals,
courier services, promotional items, etc. which may be used from time to time to
cover ordinary and necessary expenses of Employee and for reimbursement. Except
as expressly set forth in this Section 5, any out-of-pocket cash expenses
incurred by Employee shall be at his own expense and without reimbursement by
the Company. Employee agrees that no travel expense will be reimbursed unless
booked through the Company's travel department.
6. BENEFITS.
(a) COMPANY PLANS; INSURANCE. During the term of Employee's
employment hereunder, Employee shall be entitled to participate in all benefit
plans, programs, group insurance policies, vacation sick leave and other
benefits that may from time to time be established by the Company for its
employees, provided that Employee is eligible under the respective provisions
thereof.
(b) VACATION. Employee shall be entitled each year to a vacation in
accordance with the prevailing practice of the Company in regard to vacations
for its employees.
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8.23.96 VERSION
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7. TERMINATION OF EMPLOYMENT.
(a) During the Employment Period, the Company shall have the right,
if exercised in good faith, to terminate the employment of Employee hereunder
immediately by giving prior written notice thereof to Employee in the event of
any of the following:
(i) if Employee has (A) willfully failed, refused or habitually has
neglected to carry out or to perform the reasonable duties required of
Employee hereunder or otherwise breached any provision of this Agreement
(other than Sections 8, 9 and 12 hereof, which are governed by Section
7(a)(iv) hereof) after notice from the Chief Executive Officer, the Board
of Directors or their designee of such failure or neglect and the
expiration of thirty (30) days following the delivery of such notice which
failure or neglect has remained unremedied, (B) willfully breached any
statutory or common law duty; or (C) breached Section 3(c) or 3(d) of this
Agreement.
(ii) if Employee is convicted of a felony or a crime involving moral
turpitude or if the Company, acting in good faith and upon reasonable
grounds, determines that Employee has willfully engaged in business conduct
which would injure the reputation of the Company or otherwise adversely
affect its interest if Employee were retained as an employee of the
Company;
(iii) if Employee becomes unable by reason of physical disability or other
incapacity (as may be defined in applicable disability insurance policies)
to carry out or to perform the duties required of Employee hereunder for a
continuous period of ninety (90) days; PROVIDED, HOWEVER, that Employee's
compensation during any period in which Employee is unable to perform the
duties required of Employee hereunder shall be reduced by any disability
payments (excluding any reimbursements for medical expenses and the like)
which Employee is entitled to receive under group or other disability
insurance policies of the Company during such period;
(iv) if Employee breaches any of the provisions of Section 8, 9 or 12
hereof or breaches any of the terms or
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8.23.96 VERSION
<PAGE>
obligations of any other noncompetition and/or confidentiality agreements
entered into between Employee and the Company, or the Company's Related
Entities (as defined in Section 20 hereof), if any; or
(v) if employee steals or embezzles assets of the Company.
(b) Employee's employment with the Company shall automatically
terminate (without notice to Employee's estate) upon the death or loss of legal
capacity of Employee.
(c) In the event of any termination of employment pursuant to this
Section 7, Employee (or Employee's estate, as the case may be) shall be entitled
to receive (i) the Base Salary herein provided prorated to the date of such
termination, (ii) Employee's present entitlement, if any, under the Company's
employee benefit plans and programs and (iii) no other compensation.
8. NO CONFLICT OF INTEREST; PROPER CONDUCT; COVENANT NOT TO COMPETE.
(a) The Company and Employee acknowledge and agree that the Company
expects to divulge to Employee certain confidential information and trade
secrets relating to the Company's business, provide information relating to the
Company's customer base and otherwise provide Employee with the ability to
injure the Company's goodwill unless certain reasonable restrictions are imposed
upon Employee which are contained in this Section. Employee agrees that such
restrictions are reasonable and necessary to protect the goodwill, confidential
information and other legitimate business interests of the Company and such
restrictions are entered into freely by Employee.
(b) While employed by the Company, Employee will not compete with the
Company, directly or indirectly, either for Employee or as a member of any
association, partnership, joint venture, limited liability partnership or
limited liability company or other entity, or as a stockholder (except as a
stockholder of less than one percent (1%) of the issued and outstanding stock of
a publicly-held corporation whose gross assets exceed $100,000,000), investor,
officer or director of a corporation, or as an employee, agent, trustee,
associate or consultant of any person, association, trust, partnership, joint
venture, registered
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8.23.96 VERSION
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limited liability partnership or limited liability company, corporation or
other entity, in any business in competition with that carried on by the Company
or its Related Entities. Employee shall not, without the Company's prior
written consent, engage in any activity during Employee's employment that would
conflict with, interfere with, impede or hamper the performance of Employee's
duties for the Company or would otherwise be prejudicial to the Company's
business interests. Employee shall refrain from any offensive or distasteful
remarks or conduct in performance of Employee's duties and shall faithfully
comply to the best of Employee's ability with all of the Company's decisions
relating to on-the-air material and the manner of delivering or using same.
Employee shall not commit any act or become involved in any situation or
occurrence that, in the Company's reasonable judgment, could tend to bring
Employee or the Company into public disrepute, contempt, scandal or ridicule,
could provoke, insult or offend the community or any group or class thereof, or
could reflect unfavorably upon the Company or any of its Sponsors or Corporate
Affiliates. Employee shall comply with all applicable laws and regulations
governing the Company and its business, including without limitation,
regulations promulgated by the Federal Communications Commission or any other
regulatory agency.
(c) Employee further agrees that, for a period of one (1) year from
and after Employee's last day of employment under this Agreement (the
"NONCOMPETITION PERIOD"), because of disability or termination by the Company
(with or without cause), Employee will not engage in or carry on, directly or
indirectly, either for Employee or as a member of an association, trust,
partnership, joint venture, limited liability partnership or limited liability
company or other entity, or as a stockholder (other than as a stockholder of
less than one percent (1%) of the issued and outstanding stock of a publicly-
held corporation, whose gross assets exceed $100,000,000), or as an investor,
officer or director of a corporation, or as an employee, agent, trustee,
associate or consultant of any person, association, trust, partnership,
corporation, joint venture, registered limited liability partnership or limited
liability company, or other entity, any business in any standard metropolitan
statistical area (according to the SMSA definitions published from time to time
by the National Census Bureau/National Bureau of Labor Statistics) comprising
any part of the territory in which the Company (or any Related Entity) was or
had been engaged prior to the date of termination, which business is the same as
or substantially similar to any business
NY-163706.1 COPPOLA EMPLOYMENT AGREEMENT
8.23.96 VERSION
<PAGE>
engaged in by the Company (or any Related Entity) on the date of termination of
employment as provided herein. The activities of Employee sought to be
restricted by the provisions of this Section 8(c) shall include, without
limitation, (i) the management or operation of a traffic, news, weather, sports
or other information report gathering and broadcast service, (ii) soliciting
Sponsors and dealing with accounts with respect thereto, (iii) soliciting
Corporate Affiliates to enter into any contract or arrangement with any person
or organization to provide traffic, news, weather, sports or other information
report gathering or broadcast services, (iv) broadcasting traffic, news, weather
or sports reports on television or radio, (v) the sale or packaging of
Competitive Broadcast Advertising Vehicles, as that term is defined in Section
20 and (vi) forming or providing operational assistance to any business
primarily engaged in the foregoing activities; provided, that such restricted
activities shall exclude general news gathering or general broadcast
responsibilities which involve traffic, news, weather, sports or other
information reports only occasionally or incidentally, if rendered as a regular
employee of a television or radio station or a network (in a role unrelated to a
competitive activity and which network does not derive the majority of its
revenues from traffic, news, sports, weather or other information reports on a
network basis).
(d) Employee further covenants and agrees that during the
Noncompetition Period, Employee will not either individually, or on behalf of
any other person, association, trust, partnership, joint venture, limited
liability partnership or limited company or other entity as an owner, member,
partner, agent, trustee, shareholder, joint venturer or otherwise, directly or
indirectly, solicit any customer of the Company or its Related Entities in
competition with the Company.
(e) Employee further agrees that during the Noncompetition Period
Employee will neither employ nor offer to employ nor solicit employment of any
employee or consultant of the Company or its Related Entities.
(f) Employee further agrees not to solicit, divert or attempt to
divert any business, patronage or customer of the Company or its Related
Entities to Employee or a competitor or rival of the Company or its Related
Entities during the Noncompetition Period.
NY-163706.1 COPPOLA EMPLOYMENT AGREEMENT
8.23.96 VERSION
<PAGE>
(g) Employee agrees that the limitations set forth herein on
Employee's rights to compete with the Company and its Related Entities are
reasonable and necessary for the protection of the Company and its Related
Entities. In this regard, Employee specifically agrees that the limitations as
to period of time and geographic area, as well as all other restrictions on his
activities specified herein, are reasonable and necessary for the protection of
the Company and its Related Entities.
(h) Employee agrees that the remedy at law for any breach by Employee
of this Section 8 will be inadequate and that the Company shall be entitled to
injunctive relief (without bond or other undertaking).
(i) Employee and Company agree that to the extent a court of
competent jurisdiction finds any of the foregoing covenants to be overly broad
based on applicable law, then the parties agree that the court shall reform the
covenants to the extent necessary to cause such covenants to be reasonable and
enforce such covenants as reformed against Employee.
9. CONFIDENTIAL INFORMATION AND THE RESULTS OF SERVICES. Employee
acknowledges that the Company has established a valuable and extensive trade in
the services it provides, which has been developed at considerable expense to
the Company. Employee agrees that, by virtue of the special knowledge that
Employee has received or will receive from the Company, and the relationship of
trust and confidence between Employee and the Company, Employee has or will have
certain information and knowledge of the operations of the Company that are
confidential and proprietary in nature, including, without limitation,
information about Corporate Affiliates and Sponsors. Employee agrees that
during the term hereof and at any time thereafter Employee will not make use of
or disclose, without the prior consent of the Company, Confidential Information
(as hereinafter defined) relating to the Company and any of its Related Entities
(including, without limitation, its Sponsor lists, its Corporate Affiliates, its
technical systems, its contracts, its methods of operation, its business plans
and opportunities and its trade secrets), and further, that Employee will return
to the Company all written materials in Employee's possession embodying such
Confidential Information. For purposes of this Agreement, "CONFIDENTIAL
INFORMATION" means information obtained by Employee during Employee's employment
relationship with the Company which concerns the affairs of the Company or its
Related Entities and
NY-163706.1 COPPOLA EMPLOYMENT AGREEMENT
8.23.96 VERSION
<PAGE>
which the Company has requested be held in confidence and could reasonably
expect to be held in confidence, or the disclosure of which would likely be
embarrassing, detrimental or disadvantageous to the Company or its Related
Entities. Confidential Information, however, shall not include information
which Employee can show by written document to be:
(a) Information that is at the time of receipt by Employee in the public
domain or is otherwise generally known in the industry or subsequently
enters the public domain or becomes generally known in the industry through
no fault of Employee;
(b) Information that at any time is received in good faith by Employee
from a third party which was lawfully in possession of the same and had the
right to disclose the same.
The parties hereto agree that the remedy at law for any breach of Employee's
obligations under this Section 9 of this Agreement would be inadequate and that
any enforcing party shall be entitled to injunctive or other equitable relief
(without bond or undertaking) in any proceeding which may be brought to enforce
any provisions of this Section.
10. ADVERTISING AND PUBLICITY. Employee hereby grants the Company the
royalty-free right to use and license others to use Employee's name, nickname,
recorded voice, biographical material, portraits, pictures, and likenesses for
advertising purposes and purposes of trade, promotion and publicity in
connection with the institutions, services and products for the Company, its
Related Entities, Sponsors and Corporate Affiliates, such uses to be at such
times, in such manner and through such media as the Company may in its sole
discretion determine. Such right shall last for so long as Employee is employed
by the Company and, in connection with the use or exploitation of any material
in which Employee has been involved during Employee's employment, perpetually
thereafter. Employee shall not authorize or release any advertising or
promotional matter or publicity in any form with reference to Employee's
services hereunder, or to the Company's or its related Entities' programs,
Sponsors or Corporate Affiliates, without the Company's prior written consent.
NY-163706.1 COPPOLA EMPLOYMENT AGREEMENT
8.23.96 VERSION
<PAGE>
11. WORK FOR HIRE. Employee agrees that any ideas, concepts, techniques,
or computer programs relating to the business or operations of the Company and
its Related Entities which are developed by Employee during Employee's
employment hereunder, including each program and announcement prepared for
broadcast, and the titles, content, format, idea, theme, script,
characteristics, and other attributes thereof, shall be deemed to have been made
within the scope of Employee's employment and therefore constitute works for
hire and shall automatically upon their creation become the exclusive property
of the Company. To the extent such items are not works for hire under
applicable law, Employee assigns them and any and all intangible proprietary
rights relating thereto to the Company in their entirety and agrees to execute
any and all documents necessary or desired by the Company to reflect the
Company's ownership thereof.
12. COMMUNICATIONS ACT OF 1934. Employee represents and warrants that, to
the best of Employee's knowledge, information and belief, neither Employee nor
any other person has accepted or agreed to accept, or has paid or provided or
agreed to pay or provide, any money, service or any other valuable
consideration, as defined in Section 507 of the Communications Act of 1934, as
amended, for the broadcast of any matter contained in programs. Employee
further represents and warrants that, during Employee's employment, Employee
shall comply with all legal requirements.
13. MERGER OR REORGANIZATION. In the event of any merger, consolidation,
dissolution or reorganization of the Company (including but not limited to any
reorganization where the Company is not the surviving or resulting entity), or
any transfer of all or substantially all of the assets of the Company, the
provisions of this Agreement shall inure to the benefit of and shall be binding
upon the surviving or resulting partnership or the corporation (or other entity)
or person(s) to which such assets shall be transferred.
14. REMEDIES. Except as it may elect otherwise, the Company shall have
all rights, powers or remedies provided by law or equity for breach of this
Agreement available to it, it being understood and agreed that no one of them
shall be considered as exclusive of the others or as exclusive of any other
rights, powers and remedies allowed by law. The exercise or partial exercise of
any right, power or remedy shall neither constitute the election thereof nor the
waiver of any other right, power or remedy.
NY-163706.1 COPPOLA EMPLOYMENT AGREEMENT
8.23.96 VERSION
<PAGE>
Without limiting the generality of the foregoing, Employee agrees that, in
addition to all other rights and remedies available at law or in equity, the
Company shall be entitled to enforcement of this Agreement in accordance with
the principles of equity, the remedy at law being hereby agreed and acknowledged
by Employee to be inadequate.
15. WAIVER OF BREACH OF AGREEMENT. If either party waives a breach of
this Agreement by the other party, that waiver will not operate or be construed
as a waiver of any subsequent breaches.
16. ASSIGNMENT. The rights of the Company hereunder may, without the
consent of Employee, be assigned by the Company to any Related Entity or
successor of the Company or any entity which acquires all or substantially all
of the Company's assets. Except as provided in the preceding sentence or in
Section 13 hereof, the Company may not assign all or any of its rights, duties
or obligations hereunder without the prior written consent of Employee. This
Agreement is not assignable by Employee. Any attempt by Employee to assign this
Agreement, or any portion thereof, shall be deemed null and void and of no force
and effect.
17. NOTICES. All notices, requests, demands and other communications
permitted or required hereunder shall be in writing and shall be deemed to have
been duly given if personally delivered or if deposited in the United States
mail, first class, postage prepaid, registered or certified, addressed as
follows:
(a) If to Employee, addressed to Employee at the address set forth
below Employee's name on the execution page hereof.
(b) If to the Company, addressed to:
Metro Traffic Control, Inc.
2700 Post Oak Blvd., Suite #1400
Houston, Texas 77056
Attention: Chief Executive Officer
or to such other address as either party hereto may request by written notice as
herein provided.
18. SEVERABILITY. Any provision hereof prohibited by or unenforceable
under any applicable law of any jurisdiction shall as
NY-163706.1 COPPOLA EMPLOYMENT AGREEMENT
8.23.96 VERSION
<PAGE>
to such jurisdiction be deemed ineffective and deleted herefrom without
affecting any other provision of this Agreement. It is the desire of the parties
hereto that this Agreement be enforced to the maximum extent permitted by law,
and should any provision contained herein be held unenforceable, the parties
hereby agree and consent that such provision shall be reformed to make it a
valid and enforceable provision to the maximum extent permitted by law.
19. TITLE AND HEADINGS; EXHIBITS. Titles and headings to Sections hereof
are for the purpose of reference only and shall in no way limit, define or
otherwise affect the provisions hereof. Any and all exhibits referred to herein
are, by such reference, incorporated herein and made a part hereof.
20. CERTAIN DEFINITIONS. As used in this Agreement, the following
capitalized terms shall have the meanings indicated:
(a) CORPORATE AFFILIATES. Any organization, entity or person with
whom the Company has a contract or other arrangement to provide traffic, news,
weather, sports or other information, whether by broadcast, computer or any
other means.
(b) SPONSOR(S). Any and all advertisers (including their
subsidiaries and affiliates) whose commercial material is to be or is
incorporated in any one or more programs or announcements, live or recorded,
broadcast over the facilities of the Company or by the Company.
NY-163706.1 COPPOLA EMPLOYMENT AGREEMENT
8.23.96 VERSION
<PAGE>
(c) RELATED ENTITY OR RELATED ENTITIES. Any entity (or entities)
that directly or indirectly controls, is controlled by, or is under common
control with, the Company or David Saperstein or members of his immediate family
or trust for their benefit. The term "entity" as used in this Section 20(c)
means an individual, corporation, partnership, joint venture, limited liability
partnership or limited liability company, trust, unincorporated organization,
association or other entity whose principal business is gathering, disseminating
or reporting traffic, news, sports, weather or other information or the sale or
packaging of Competitive Broadcast Advertising Vehicles. As used in this
Section 20(c), the term "control" means the possession, directly or indirectly,
of the power to direct or cause the direction of the management and policies of
a person or entity, whether through the ownership of voting securities, by
contract or otherwise.
(d) COMPETITIVE BROADCAST ADVERTISING VEHICLE(S). An advertising
vehicle shall be deemed to be a Competitive Broadcast Advertising Vehicle if (i)
it consists of five to fifteen second commercial mentions imbedded in any news
break format, news, weather, sports or traffic information broadcast immediately
before or after any such programming, or in connection with such programming,
and (ii) it is offered for sale in a package including the broadcast of such
commercial mentions or identification as a Sponsor of any such programming on
more than three radio stations in any one ADI area of dominant influence as
defined by Arbitron, Inc.
21. CHOICE OF LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES RELATING TO THE SUBJECT MATTER OF THIS AGREEMENT, SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, WITHOUT REGARD
TO PRINCIPLES OF CONFLICTS OF LAW.
22. WAIVER OF RIGHTS AND CONSENT TO ARBITRATION. Employee shall and does
hereby irrevocably waive the right to file any complaints against the Company
with any federal, state or local agencies, including but not limited to, the
Equal Employment Opportunity Commission, and the Texas or other state Commission
on Human Rights or to file any claim, institute litigation or other legal action
based on the employment relationship or any activity covered by the terms of
this agreement. The Employee agrees and acknowledges that in exchange for the
relinquishment of those
NY-163706.1 COPPOLA EMPLOYMENT AGREEMENT
8.23.96 VERSION
<PAGE>
rights that any dispute, controversy or claim arising out of this Agreement,
except for the injunctive relief provided for in paragraphs 8 and 9 above, or
the employment relationship between Employee and the Company shall be finally
settled by arbitration in Houston, Texas in accordance with the Commercial
Arbitration Rules of the American Arbitration Association in effect on the date
of this Agreement and judgment upon the award may be entered in any court having
jurisdiction thereof.
23. BINDING EFFECT. This Agreement shall be binding upon and inure to the
benefit of the parties hereto , their respective heirs, executors, successors
and permitted assigns.
24. ENTIRE AGREEMENT AND AMENDMENT. This Agreement supersedes all prior
understandings and agreements between the parties with respect to the subject
matter hereof. This Agreement contains the entire agreement of the parties with
respect to the subject matter covered hereby and may be amended, waived or
terminated only by an instrument in writing executed by both parties hereto.
25. EXECUTION BY COMPANY. Submission of this Agreement to Employee, or
Employee's agents or attorneys, for examination or signature does not constitute
or imply an offer of employment, and this Agreement shall have no binding effect
until execution hereof by both the Company and Employee.
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8.23.96 VERSION
<PAGE>
26. NO INFERENCE AGAINST AUTHOR. No provision of this Agreement shall be
interpreted against any party because such party or its legal representative
drafted such provision.
IN WITNESS WHEREOF, this Agreement is EXECUTED as of the 17th day of
July 1996 to be EFFECTIVE FOR ALL PURPOSES the Effective Date.
"COMPANY"
METRO TRAFFIC CONTROL, INC.
By: /s/ Gary Worobow
-----------------------------
Printed Name: Gary Worobow
-------------------
Title: Senior Vice President
--------------------------
"EMPLOYEE"
/s/ Shane E. Coppola
--------------------------------
SHANE E. COPPOLA
Address: 33 Ardsley Avenue East
------------------------
Irvington, NY 10533
------------------------
NY-163706.1 COPPOLA EMPLOYMENT AGREEMENT
8.23.96 VERSION
<PAGE>
EXHIBIT A
INCENTIVE STOCK OPTION AGREEMENT ("Agreement"), dated this ___________
between Metro Networks, Inc., a Delaware corporation (the "Company") and
________________ the "Optionee").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Board of Directors of the Company (the "Board") has
adopted and the shareholders of the Company have approved the Metro Networks,
Inc., 1996 Incentive Stock Option Plan (the "Plan") for the issuance of options
pursuant to the Plan ("Options") to employees of the Company (unless otherwise
defined herein, capitalized terms used herein shall have the meanings ascribed
to such terms in the Plan); and
WHEREAS, the Plan authorizes the Board, in its discretion, to grant
Options and to determine the details of each Agreement to which such granted
Options relate; and
WHEREAS, the Board believes it to be in the best interest of the
Company to grant the Optionee Options to purchase shares of Common Stock of the
Company (the "Stock"), at the price and subject to the terms herein, and in all
respects subject to the terms, definitions and provisions of the Plan which is
incorporated by reference herein.
NOW, THEREFORE, IN CONSIDERATION of the promises and the mutual
covenants and agreements hereinafter set forth, the Company and the Optionee
agree as follows:
1. OPTION
(a) GRANT OF OPTION. The Company hereby grants the
Optionee an Option to purchase an aggregate of
___________________________________________ shares of Stock in accordance with
the terms and conditions of this Agreement.
(b) EXERCISE PERIOD. Except as otherwise provided in this
Agreement, the Option granted hereunder shall become exercisable by the Optionee
according to the following schedule: thirty-three and one-third percent (33
1/3%) upon the first anniversary of the date of execution of this Agreement and
an additional thirty-three and one-third percent (33 1/3%) upon each of the
second and third anniversaries of the date of execution of this Agreement until
all such Options are exercisable; PROVIDED, HOWEVER, that in the event the
<PAGE>
Company elects to terminate that certain Executive Employment Agreement between
the Company and the Optionee dated ___________, 199__, (the "Employment
Agreement") on the second anniversary of the closing of the Public Offering (as
defined in the Employment Agreement) pursuant to Section 2 of the Employment
Agreement, then the remaining sixty-six and two thirds percent (66 2/3%) of such
Options shall become exercisable upon the effective date of such termination;
and PROVIDED, FURTHER, HOWEVER, that the right to exercise an Option as to any
fractional share of Stock shall be deemed the right to exercise an Option as to
a full share of Stock with appropriate adjustments made to the last exercise
period so that the total number of Options shall not exceed that specified under
paragraph (a) of Section 1 hereof.
(c) NO LAPSE OF EXERCISE POWER. Any Option which becomes
exercisable on a certain date but is not exercised in full on that date shall
not lapse but shall remain outstanding as to the unexercised portion and shall
continue in effect throughout the remainder of the Option Term (taking into
account any early termination of such Option Term which may be provided for
under this Agreement or the Plan).
(d) OPTION TERM. An option which is not exercised shall
expire upon the earlier of:
(i) ten (10) years after the date such Option was granted
unless the Optionee is a 10% Holder (as defined herein) in which case the
Option shall expire five (5) years after such date;
(ii) three (3) months after the date the Optionee's
employment with the Company terminates, unless such termination was the
result of the Optionee's death or disability or unless the Company
terminates the employment for cause;
(iii) one (1) year after the Optionee's death or disability;
and
(iv) any such earlier termination date as may be provided by
this Agreement or the Plan.
(e) OPTION PRICE. Except as otherwise provided herein, the
purchase price for each share of Stock subject to the Option shall be $_______
per share, which is
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<PAGE>
the fair market value of the Stock on the date of the Option grant.
(f) ADJUSTMENTS. If the outstanding shares of Stock of the
Company are subdivided, consolidated, increased, decreased, changed into, or
exchanged for a different number or kind of shares or securities through
reorganization, merger, recapitalization, reclassification, capital adjustment
or otherwise, or if the Company shall issue shares of Stock as a dividend or
upon a stock split, the number and kind of shares of Stock available for
purposes of this Agreement or the Plan and all shares of Stock subject to the
unexercised portion of any Options theretofore granted and the Option Price of
such Options shall be appropriately adjusted to prevent dilution or enlargement
of rights. However, any such adjustment in outstanding Options shall be made
without change in the total Option Price applicable to the unexercised portion
of any outstanding Options. Adjustments under this Section 1(f) shall be made
by the Board, whose determination as to what adjustments shall be made, and the
extent thereof, shall be final, binding and conclusive. In computing any
adjustment under this Section 1(f), any fractional share which might otherwise
become subject to an Option shall be eliminated.
2. LIMITATIONS ON OPTIONS.
(a) GREATER THAN 10% SHAREHOLDER. If, at the time this
Option is granted, the Optionee owns stock (including for this purpose any stock
which may be purchased by the Optionee under an Option) possessing more than ten
percent (10%) of the total combined voting power of all classes of stock of the
Company (hereinafter, a "10% Holder"), its parent or its subsidiaries, then the
purchase price shall instead be $110% of the FMV on the date of grant per share
and the Option shall not be exercisable after five (5) years from the date it is
granted.
(b) MAXIMUM NUMBER OF INCENTIVE OPTIONS EXERCISABLE DURING
ONE YEAR. To the extent that the aggregate fair market value of the Stock
(determined as of the time an Option is granted pursuant to the Plan)
exercisable for the first time by an employee during any calendar year under the
Plan and all similar plans maintained by the Company exceeds $100,000.00,
options for such shares shall be treated as options that are not Incentive Stock
Options. For purposes of
-3-
<PAGE>
this provision, Options shall be taken into account in the order in which they
were granted.
(c) SEQUENTIAL EXERCISE. Options granted to the Optionee
may be exercised in any order, so that the Optionee may exercise an Option if
another Option, granted to him at an earlier time, remains outstanding in whole
or in part.
(d) NONTRANSFERABILITY OF OPTION. The Option may not be
assigned or transferred other than pursuant to a Qualified Domestic Relations
Order or by will or by the laws of descent and distribution. During the
lifetime of the Optionee, the Option may be exercisable only by the Optionee.
Transfer of an Option by will or by the laws of descent and distribution shall
not be effective to bind the Company unless the Company shall have been
furnished with written notice thereof and an authenticated copy of the will or
such other evidence as the Board may deem necessary to establish the validity of
the transfer and the acceptance by the transferee of the terms and conditions of
such Option. Any attempted assignment, transfer, pledge, hypothecation or other
disposition of the Option contrary to the provisions hereof, or the levy of any
execution, attachment or similar process upon the Option shall be null and void
and without effect.
3. METHOD OF EXERCISING OPTIONS. Options shall be exercised by a
written notice delivered to the Company at its principal office in Houston,
Texas specifying the number of shares of Stock to be purchased and tendering
payment in full for such Stock. Payment may be tendered in cash or by
certified, bank cashier's or teller's check or by Stock (valued at fair market
value as of the date of tender), or some combination of the foregoing. In the
event all or part of the Option Price is paid in Stock, any excess of the value
of such Stock over the Option Price will be returned to the Optionee as follows:
(i) any whole share of Stock remaining in excess of the Option Price will be
returned in kind, and may be represented by one or more share certificates, and
(ii) any partial shares of Stock remaining in excess of the Option price will be
returned in cash.
In the event the Company determines that it is required to withhold
state or Federal income tax as a result of the exercise of an Option, as a
condition to the exercise thereof, the Optionee may be required to make
arrangements satisfactory to the Company to enable it to satisfy such
-4-
<PAGE>
withholding requirements. Payment of such withholding requirements may be made,
in the discretion of the Board, (i) in cash, (ii) by delivery of Shares
registered in the name of the Optionee, or by the Company not issuing such
number of Shares subject to the Option, having a Fair Market Value at the time
of exercise equal to the amount to be withheld or (iii) any combination of (i)
and (ii) above. If (i) any Shares are registered under Section 12 of the
Exchange Act, (ii) the Optionee is an officer (as defined in Section 16 of the
Exchange Act) of the Company subject to Section 16(b) of the Exchange Act and
(iii) such payment is made with Shares acquired by the Optionee upon the
exercise which gives rise to such withholding, an election under the preceding
sentence (a) must be irrevocable and with respect to all Shares covered by the
Option subject to the election, provided, however, that such election may be
changed through another irrevocable election that takes effect at least six
months after the prior election; or (b) may be made during the period beginning
on the third business day following the date of release of quarterly and annual
summary statements of sales and earnings as provided by Rule 16b-3(e)(3) of the
Securities and Exchange Commission and ending on the twelfth (12th) business day
following such date and only if such period occurs before the date the Company
requires payment of the withholding tax. The election need not be made during
the ten-day window period if counsel to the Company determines that compliance
with such requirement is unnecessary.
4. TIME PERIOD ON TRANSFERS OF STOCK. Any Optionee, or person
representing such Optionee, who sells, exchanges, transfers or otherwise
disposes of any Stock acquired pursuant to the exercise of an Option (other than
Stock sold or otherwise transferred to the Company) within two years following
the grant of such Option or within one year following the actual transfer of
such Stock to the Optionee, shall be obligated to notify the Company in writing
of the date of disposition, the number of shares of Stock so disposed and the
amount of consideration received as a result of such disposition. The Company
shall have the right to take whatever reasonable action it deems appropriate
against an Optionee, including early termination of any Options which remain
outstanding, in order to recover any additional taxes the Company incurs as a
result of such Optionee's failure to so notify the Company.
-5-
<PAGE>
5. ISSUANCE OF OPTIONED STOCK.
(a) ISSUANCE OF CERTIFICATES. The Company shall not be
required to issue or deliver any certificate for Stock purchased upon the
exercise of any Option, or any portion thereof, prior to fulfillment of each of
the following applicable conditions:
(i) The admission of such Stock to listing on all stock
exchanges or markets on which the Stock is then listed to the extent such
admission is necessary;
(ii) The completion of any registration or other
qualification of such Stock under any federal or state securities laws or
under the rulings or regulations of the Securities and Exchange Commission
or any other governmental regulatory body, which the Board shall in its
sole discretion deem necessary or advisable or the determination by the
Board in its sole discretion that no such registration or qualification is
required;
(iii) The obtaining of any approval or other clearance from
any federal or state governmental agency which the Board shall, in its sole
discretion, determine to be necessary or advisable; and
(iv) The lapse of such reasonable period of time following
the exercise of the Option as the Board from time to time may establish for
reasons of administrative convenience.
(b) COMPLIANCE WITH SECURITIES AND OTHER LAWS. In no event
shall the Company be required to sell, issue or deliver Stock pursuant to
Options if in the opinion of the Board the issuance thereof would constitute a
violation by either the Optionee or the Company of any provision of any law or
regulation of any governmental authority or any securities exchange. As a
condition of any sale or issuance of Stock pursuant to Options, the Company may
place legends on the Stock, issue stop-transfer orders and require such
agreements or undertakings from the Optionee as the Company may deem necessary
or advisable to assure compliance with any such law or regulation, including, if
the Company or its counsel deems it appropriate, representations from the
Optionee that he is acquiring the Stock solely for investment and not with a
view to distribution and that no distribution of Stock acquired by him will be
made unless registered pursuant to applicable
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federal and state securities laws or unless, in the opinion of counsel to the
Company, such registration is unnecessary.
6. OPTION RIGHTS IN THE EVENT OF CERTAIN EVENTS.
(a) RIGHTS IN THE EVENT OF SALE, MERGER OR OTHER
REORGANIZATION OF COMPANY. In the event of a merger or consolidation where the
Company is not the surviving corporation, and the agreement of merger or
consolidation does not provide for the substitution of a new option for the
unexercised portion of the Option or for the assumption of the Option by the
surviving corporation, or in the event of the sale or transfer of assets,
liquidation or dissolution and the plan of liquidation or dissolution or
agreement of sale does not make special provision for the Option, Optionee shall
have the right immediately prior to the effective date of such merger,
consolidation, sale or transfer of assets, liquidation or dissolution to
exercise the Option in whole or in part without regard to any installment
provision contained in paragraph (b) of Section 1 hereof. In no event, however,
may any Option which becomes exercisable pursuant to this paragraph (a) of
Section 6, be exercised, in whole or in part, later than the date specified in
paragraph (d) of Section 1 above. If not so exercised, the Option shall
terminate at the time of any such merger, consolidation, sale or transfer of
assets, liquidation or dissolution.
(b) TERMINATION OF EMPLOYMENT. In the event that an
Optionee's employment with the Company terminates, other than by reason of death
or Total and Permanent Disability or termination for "cause", the Optionee shall
have (subject to Section 2 above) the right, for a period which shall not exceed
the earlier of the remaining Option Term (taking into account any earlier
termination date provided by the Plan) or three months from such termination of
employment, to exercise any Options which such Optionee would have been entitled
to exercise on the date of his termination of employment. At the expiration of
such three month period, or such earlier time as may be applicable, any such
Options which remain unexercised shall expire. In no event may any Options be
exercised that could not have been exercised by an Optionee on the date of his
termination of employment. Notwithstanding the foregoing, if the Optionee's
employment is terminated for "cause", the Company may notify the Optionee that
any Options not exercised prior to the termination are cancelled. For purposes
hereof, a termination of employment for "cause" shall include, but not be
limited to, dismissal as a result of (1)
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Optionee's conviction of any crime or offense involving money or other property
of the Company or its subsidiaries or which constitutes a felony in the
jurisdiction involved; (2) Optionee's gross negligence, gross incompetence or
willful misconduct in the performance of his or her duties; or (3) Optionee's
willful failure or refusal to perform his or her duties.
(c) TOTAL AND PERMANENT DISABILITY. If an Optionee's
employment with the Company is terminated on account of Total and Permanent
Disability, the Optionee shall have (subject to Section 2 above) the right, for
a period which shall not exceed the earlier of the remaining Option Term (taking
into account any earlier termination date provided by the Plan) or one year from
the date of such Optionee's disability, to exercise any Options which such
Optionee would have been entitled to exercise on the date of his Total and
Permanent Disability. At the expiration of such one year period, or such
earlier time as may be applicable, any such Options which remain unexercised
shall expire. In no event may any Options be exercised that could not have been
exercised by an Optionee on the date of his Total and Permanent Disability.
(d) DEATH. If an Optionee's employment with the Company is
terminated on account of death, the person or persons who shall have acquired
the right, by will or the laws of descent and distribution, to exercise his
Options shall continue to have (subject to Section 2 above) the right, for a
period which shall not exceed the earlier of the remaining Option Term (taking
into account any earlier termination date provided by the Plan) or one year from
the date of such Optionee's death, to exercise any Options which such Optionee
would have been entitled to exercise on the date of his death. At the
expiration of such one year period, or such earlier time as may be applicable,
any such Options which remain unexercised shall expire. In no event may any
Options be exercised that could not have been exercised by an Optionee on the
date of his death.
7. OPTION AND AGREEMENT SUBJECT TO THE PLAN. This Agreement and the
grant of any Option hereunder are subject to all the terms, conditions and
limitations set forth in the Plan, which is incorporated herein by reference and
should be read in conjunction herewith. The Plan may subject the Options
granted hereunder to additional terms, conditions or limitations which are not
specifically set forth herein. Any
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<PAGE>
inconsistency between the Plan and this Agreement shall be resolved in favor of
the Plan language. A copy of the plan is on file for inspection at the
Company's principal offices located in Houston, Texas.
8. ADMINISTRATION BY BOARD OF DIRECTORS. The Board or a committee
appointed by the Board (the "Committee") has the exclusive authority to select
the officers and employees who are to be granted Options, determine the number
of Shares to be subject to Options to be granted to each Optionee and designate
such Options as Incentive Stock Options. The interpretation and construction by
the Board or the Committee of any provisions of the Plan or of any Option
granted thereunder shall be final. No member of the Administrator shall be
liable for any action or determination made in good faith with respect to the
Plan or any Option granted hereunder.
If any Shares are registered under Section 12 of the Exchange Act,
then notwithstanding the first or second sentence of the immediately preceding
paragraph, after such registration the grant of any Option under the Plan to any
person who shall be an officer (as defined in Section 16 of the Exchange Act) of
the Company at the time of such grant shall only be made either (A) with the
approval of the Board if all of its members are Disinterested Persons or (B)
with the approval of the Committee if all of the members of the Committee are
Disinterested Persons.
9. RESTRICTIVE COVENANTS.
(a) COVENANT NOT TO COMPETE. The Optionee acknowledges
that he or she is aware that the services performed by him or her for the
Company have been and are of a special and unique character. The Optionee
further acknowledges and recognizes his or her possession of confidential and
proprietary information regarding the business of the Company. Accordingly, the
Optionee agrees that he or she will not, without the written permission of the
Company, within or outside of the United States for a period of one (1) year
from the date on which such Optionee's employment by or on behalf of the Company
is terminated (i) directly or indirectly engage or become interested or
involved in any Competitive Business (as hereinafter defined), whether such
engagement, interest or involvement shall be as an employer, officer, director,
owner, shareholder, employee, partner or in any other capacity or relationship,
(ii) assist
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others in engaging in any Competitive Business in the manner described in the
foregoing clause (i), or (iii) induce employees of the Company to terminate
their employment with the Company or engage in any Competitive Business;
provided, however, that nothing contained in this Section 9(a) shall be deemed
to prohibit the Optionee from acquiring, solely for investment purposes, less
than 5% of the publicly-traded shares of the capital stock of any corporation.
As used in this Section 9(a), the term "Competitive Business" means and includes
any business or activity that is now or at any time in the future competitive
with or directly related to the business conducted by the Company on the date
the Optionee's employment by or on behalf of the Company is terminated.
(b) AGREEMENT NOT TO SOLICIT CUSTOMERS. For a period of
one (1) year from the date on which such Optionee's employment by or on behalf
of the Company is terminated, the Optionee agrees that he or she will not, for
or on behalf of a Competitive Business, directly or indirectly, as owner,
officer, stockholder, partner, associate, consultant, manager, advisor,
representative, employee, agent, creditor or otherwise, attempt to solicit or in
any other way disturb or service any person, firm or corporation that has been a
customer account of the Company at any time or times prior to the date hereof,
whether or not the Optionee had direct account responsibility for such customer
account.
(c) CONFIDENTIAL INFORMATION.
(i) The Optionee agrees not to disclose to any person or
use, at any time after the date hereof, any confidential information of the
Company, whether the Optionee has such information in his memory or
embodied in writing or any other physical form. For purposes of this
Agreement the phrase "confidential information of the Company" means all
information which (a) is known only to the Company's employees, or others
in a confidential relationship with the Company or employees of affiliated
companies, (b) relates to specific technical matters, such as the Company's
or its subsidiaries' proprietary information, plans, reports, and
promotional, sales or operational procedures and materials, or (c) relates
to the identity and solicitation of customers and accounting procedures of
the Company or other business practices of the Company.
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(ii) The Optionee agrees not to remove from the premises of
the Company, at any time after the date hereof, any document or object
containing or reflecting any confidential information of the Company, and
the Optionee recognizes that all such documents and objects, whether
developed by the Company or by someone else for the Company, are the
exclusive property of the Company.
(iii) It is agreed that the names and addresses of customers
who were contacted by the Optionee on behalf of the Company, or of whom the
Optionee became aware through his or her employment with the Company, are
trade secrets of the Company, as is other such confidential information of
the Company, including but not limited to the customer's business needs and
requirements.
(iv) The Optionee shall, at any time requested by the
Company after the date hereof, promptly deliver to the Company all
confidential memoranda, notes, reports, lists, and other documents (and all
copies thereof) relating to the business of the Company which he or she may
then possess or have under his or her control.
10. LOCK-UP AGREEMENT. The Optionee agrees, if requested by the
Company and an underwriter of Common Stock (or other securities) of the Company,
not to sell or otherwise transfer or dispose of any Common Stock (or other
securities) of the Company held by the Optionee during the one hundred eighty
(180) day period following the effective date of a registration statement filed
under the 1933 Act, as amended, without the prior consent of the Company or such
underwriter, as the case may be, provided that such agreement only applies to
registration statements including securities to be sold to the public in an
underwritten offering during the period ending on __________________.
11. MISCELLANEOUS.
(a) NO EMPLOYMENT RIGHTS. Nothing in the Agreement or
in-any Option granted hereunder shall confer upon any employee the right to
continue in the employ of the Company.
(b) BINDING EFFECT. The Agreement shall be binding upon,
and inure to the benefit of the Company, Optionee, and their respective personal
representatives, successors and permitted assigns.
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<PAGE>
(c) SINGULAR, PLURAL; GENDER. Whenever used herein, except
where the context clearly indicates to the contrary, nouns in the singular shall
include the plural, and the masculine pronoun shall include the feminine gender.
(d) HEADINGS. Headings of the Sections hereof are inserted
for convenience and reference and constitute no part of the Agreement.
(e) RIGHTS AS SHAREHOLDERS. An Optionee or transferee of
an Option shall have no rights as a shareholder with respect to any Stock
subject to such Option prior to the purchase of such Stock by exercise of such
Option as provided herein.
(f) APPLICABLE LAW. This Agreement and the Options granted
hereunder shall be interpreted, administered and otherwise subject to the laws
of the State of Texas, except to the extent the General Corporation Law of
Delaware shall govern.
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<PAGE>
IN WITNESS WHEREOF, the Company and the Optionee have executed this
Agreement as of the day and year first written above.
OPTIONEE METRO NETWORKS, INC.
_________________________ By:_________________________
Name: Name:
Address: Title:
<PAGE>
EXECUTIVE
EMPLOYMENT AGREEMENT
This Agreement ("AGREEMENT") is entered into by and between Curtis H.
Coleman ("EMPLOYEE") and METRO TRAFFIC CONTROL, INC., a Maryland corporation
with its principal office located in Harris County, Texas (the "COMPANY").
WITNESSETH:
WHEREAS, the Company is in the business of managing a sales
force, selling broadcast and other advertising, and developing, producing
and broadcasting traffic, news, sports, weather and other information
reports throughout the United States; and
WHEREAS, Employee has extensive management and operations
experience; and
WHEREAS, the Company and Employee entered into an agreement
effective July 1, 1995 (the "PRIOR AGREEMENT"); and
WHEREAS, the Company desires to continue to engage the services
of Employee to serve as Senior Vice President and Chief Financial Officer
of the Company on the terms and conditions herein contained; and
NOW, THEREFORE, for and in consideration of the mutual covenants
and agreements herein contained, the parties hereto agree as follows:
1. EMPLOYMENT. The Company hereby employs Employee, and Employee accepts
such employment, and agrees to devote Employee's full time and efforts to the
interests of the Company upon the terms and conditions hereinafter set forth.
Upon the Effective Date (as hereinafter defined), the Prior Agreement shall be
terminated.
2. TERM OF EMPLOYMENT. Subject to the provisions for termination
hereinafter provided, Employee's term of employment by the Company shall
commence on the effective date of an initial
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8.23.96 VERSION
<PAGE>
public offering (the "PUBLIC OFFERING") of the Company's proposed parent company
(the "EFFECTIVE DATE") and shall continue in effect until three (3) years
following the closing of the Public Offering (the "TERM"); provided, however,
the Company shall have the right to terminate this Agreement on the second
anniversary of the closing of the Public Offering by giving the Employee written
notice of such termination at least ninety (90) days prior to such second
anniversary. Unless otherwise terminated pursuant hereto, if Employee continues
to be employed by the Company after the Term, then Employee's employment shall
be deemed to continue on a month-to-month basis until such time as either party
shall deliver written notice to the other party and this Agreement shall
terminate ninety (90) days after the giving of such notice. Except as otherwise
set forth herein, if either party hereto desires to terminate this Agreement at
the end of the Term or thereafter, the same ninety (90) days prior written
notice shall apply. Further, if the Public Offering does not close on or before
December 31, 1996, this Agreement shall be null and void and the Prior Agreement
shall remain in full force and effect. The period from the Effective Date
through the date ninety (90) days from the date any notice of termination
referred to above is delivered is hereinafter referred to as the "Employment
Period".
3. SERVICES TO BE RENDERED BY EMPLOYEE.
(a) During the Employment Period, Employee shall serve as Senior Vice
President and Chief Financial Officer of the Company or in such other position
as is determined from time to time by the Board of Directors of the Company or
if the Company has a parent company, such parent company's Board of Directors
(the "BOARD OF DIRECTORS"). Subject to the direction of the Chief Executive
Officer of the Company, the Board of Directors or its designee, Employee shall
perform such executive and managerial duties as from time to time may be
delegated to Employee by the Chief Executive Officer, the Board of Directors, or
their designee. Employee shall devote all of his professional time, energy and
ability to the proper and efficient conduct of the Company's business. Employee
shall observe and comply with all reasonable lawful directions and instructions
by and on the part of the Chief Executive Officer, the Board of Directors or
their designee and endeavor to promote the interests of the Company and not at
any time do anything which may cause or tend to be likely to cause any loss or
damage to the Company in business, reputation or otherwise.
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8.23.96 VERSION
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(b) The Company may from time to time call on Employee to perform
services related to the business of developing and broadcasting traffic, news,
sports and weather reports, which may include (in the Company's sole discretion)
contributing to the day-to-day management and operation of such business,
soliciting Sponsors, Corporate Affiliates (as such terms are defined in Section
20 hereof) or customers or dealing with their accounts, or the television or
radio broadcast of traffic, news, sports and weather reports, or other
activities related to the Company's business, as reasonably specified from time
to time by the Chief Executive Officer, the Board of Directors or their
designee. Subject to the foregoing, Employee's specific responsibilities shall
include hiring, training, managing and motivating the Company's employees. The
Company may, in its sole discretion, restrict, expand, change or otherwise alter
the Employee's duties, title and responsibilities. Any change shall be binding
on Employee for all purposes of this Agreement.
(c) Employee acknowledges that Employee will have and owe fiduciary
duties to the Company and its shareholders including, without limitation, the
duties of care, confidentiality and loyalty.
(d) Employee acknowledges that the Company does not allow personal
trade, including but not limited to automobiles.
4. COMPENSATION.
(a) BASE SALARY. For the services to be rendered by Employee during
Employee's employment by the Company, the Company shall pay Employee, and
Employee agrees to accept, a monthly base salary (the "BASE SALARY") of TWELVE
THOUSAND FIVE HUNDRED Dollars and NO Cents ($12,500.00). Employee's Base Salary
shall be payable semi-monthly in arrears on the tenth day and on the twenty-
fifth day of each calendar month or such other date in conformity with the
Company's payroll policies in effect from time to time. The Base Salary shall
increase five (5%) percent for each year per annum during the Term on the
anniversary of the closing of the Public Offering.
(b) BONUS. Employee shall be eligible for a bonus of up to FIFTY
THOUSAND ($50,000.00) Dollars per annum (the "DISCRETIONARY BONUS"), in the sole
discretion of the Board of Directors or its Compensation Committee. The
Discretionary Bonus
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8.23.96 VERSION
<PAGE>
potential shall increase by five (5%) percent per annum for each year during the
Term on the anniversary of the closing of the Public Offering.
(c) STOCK OPTIONS. Upon the effective date of the Public Offering,
Employee will be granted options under the Company's proposed parent company's
1996 Incentive Stock Option Plan (the "1996 PLAN") to purchase fifty five
thousand (55,000) shares of the Company's proposed parent company's common stock
pursuant a stock option agreement substantially in the form attached hereto as
Exhibit A. Additional options may be granted in the sole discretion of the
Board of Directors or its Compensation Committee. Such stock options shall be
immediately null and void if the Public Offering does not close.
(d) CUSTOMARY EMPLOYEE DEDUCTIONS. For any and all compensation paid
by the Company to Employee pursuant to this Section 4, the Company shall be
entitled to deduct income tax withholdings, social security and other customary
employee deductions in conformity with the Company's payroll policies in effect
from time to time.
5. EXPENSES. Subject to compliance by Employee with such policies
regarding expenses and expense reimbursement as may be adopted from time to time
by the Company, the Company shall reimburse Employee, or cause Employee to be
reimbursed, in cash for all reasonable expenses. The Company currently
maintains trade relationships for restaurants, hotels, automobile rentals,
courier services, promotional items, etc. which may be used from time to time to
cover ordinary and necessary expenses of Employee and for reimbursement. Except
as expressly set forth in this Section 5, any out-of-pocket cash expenses
incurred by Employee shall be at his own expense and without reimbursement by
the Company. Employee agrees that no travel expense will be reimbursed unless
booked through the Company's travel department.
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8.23.96 VERSION
<PAGE>
6. BENEFITS.
(a) COMPANY PLANS; INSURANCE. During the term of Employee's
employment hereunder, Employee shall be entitled to participate in all benefit
plans, programs, group insurance policies, vacation sick leave and other
benefits that may from time to time be established by the Company for its
employees, provided that Employee is eligible under the respective provisions
thereof.
(b) VACATION. Employee shall be entitled each year to a vacation in
accordance with the prevailing practice of the Company in regard to vacations
for its employees.
7. TERMINATION OF EMPLOYMENT.
(a) During the Employment Period, the Company shall have the right,
if exercised in good faith, to terminate the employment of Employee hereunder
immediately by giving prior written notice thereof to Employee in the event of
any of the following:
(i) if Employee has (A) willfully failed, refused or habitually has
neglected to carry out or to perform the reasonable duties required of
Employee hereunder or otherwise breached any provision of this Agreement
(other than Sections 8, 9 and 12 hereof, which are governed by Section
7(a)(iv) hereof) after notice from the Chief Executive Officer, the Board
of Directors or their designee of such failure or neglect and the
expiration of thirty (30) days following the delivery of such notice which
failure or neglect has remained unremedied, (B) willfully breached any
statutory or common law duty; or (C) breached Section 3(c) or 3(d) of this
Agreement.
(ii) if Employee is convicted of a felony or a crime involving moral
turpitude or if the Company, acting in good faith and upon reasonable
grounds, determines that Employee has willfully engaged in business conduct
which would injure the reputation of the Company or otherwise adversely
affect its interest if Employee were retained as an employee of the
Company;
(iii) if Employee becomes unable by reason of physical disability or other
incapacity (as may be defined in
NY-163703.1 COLEMAN EMPLOYMENT AGREEMENT
8.23.96 VERSION
<PAGE>
applicable disability insurance policies) to carry out or to perform the
duties required of Employee hereunder for a continuous period of ninety
(90) days; PROVIDED, HOWEVER, that Employee's compensation during any
period in which Employee is unable to perform the duties required of
Employee hereunder shall be reduced by any disability payments (excluding
any reimbursements for medical expenses and the like) which Employee is
entitled to receive under group or other disability insurance policies of
the Company during such period;
(iv) if Employee breaches any of the provisions of Section 8, 9 or 12
hereof or breaches any of the terms or obligations of any other
noncompetition and/or confidentiality agreements entered into between
Employee and the Company, or the Company's Related Entities (as defined in
Section 20 hereof), if any; or
(v) if employee steals or embezzles assets of the Company.
(b) Employee's employment with the Company shall automatically
terminate (without notice to Employee's estate) upon the death or loss of legal
capacity of Employee.
(c) In the event of any termination of employment pursuant to this
Section 7, Employee (or Employee's estate, as the case may be) shall be entitled
to receive (i) the Base Salary herein provided prorated to the date of such
termination, (ii) Employee's present entitlement, if any, under the Company's
employee benefit plans and programs and (iii) no other compensation.
8. NO CONFLICT OF INTEREST; PROPER CONDUCT; COVENANT NOT TO COMPETE.
(a) The Company and Employee acknowledge and agree that the Company
expects to divulge to Employee certain confidential information and trade
secrets relating to the Company's business, provide information relating to the
Company's customer base and otherwise provide Employee with the ability to
injure the Company's goodwill unless certain reasonable restrictions are imposed
upon Employee which are contained in this Section. Employee agrees that such
restrictions are reasonable and necessary to protect the goodwill, confidential
information and
NY-163703.1 COLEMAN EMPLOYMENT AGREEMENT
8.23.96 VERSION
<PAGE>
other legitimate business interests of the Company and such restrictions are
entered into freely by Employee.
(b) While employed by the Company, Employee will not compete with the
Company, directly or indirectly, either for Employee or as a member of any
association, partnership, joint venture, limited liability partnership or
limited liability company or other entity, or as a stockholder (except as a
stockholder of less than one percent (1%) of the issued and outstanding stock of
a publicly-held corporation whose gross assets exceed $100,000,000), investor,
officer or director of a corporation, or as an employee, agent, trustee,
associate or consultant of any person, association, trust, partnership, joint
venture, registered limited liability partnership or limited liability company,
corporation or other entity, in any business in competition with that carried
on by the Company or its Related Entities. Employee shall not, without the
Company's prior written consent, engage in any activity during Employee's
employment that would conflict with, interfere with, impede or hamper the
performance of Employee's duties for the Company or would otherwise be
prejudicial to the Company's business interests. Employee shall refrain from
any offensive or distasteful remarks or conduct in performance of Employee's
duties and shall faithfully comply to the best of Employee's ability with all of
the Company's decisions relating to on-the-air material and the manner of
delivering or using same. Employee shall not commit any act or become involved
in any situation or occurrence that, in the Company's reasonable judgment, could
tend to bring Employee or the Company into public disrepute, contempt, scandal
or ridicule, could provoke, insult or offend the community or any group or class
thereof, or could reflect unfavorably upon the Company or any of its Sponsors or
Corporate Affiliates. Employee shall comply with all applicable laws and
regulations governing the Company and its business, including without
limitation, regulations promulgated by the Federal Communications Commission or
any other regulatory agency.
(c) Employee further agrees that, for a period of one (1) year from
and after Employee's last day of employment under this Agreement (the
"NONCOMPETITION PERIOD"), because of disability or termination by the Company
(with or without cause), Employee will not engage in or carry on, directly or
indirectly, either for Employee or as a member of an association, trust,
partnership, joint venture, limited liability partnership or limited liability
company or other entity, or as a stockholder (other than as a
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8.23.96 VERSION
<PAGE>
stockholder of less than one percent (1%) of the issued and outstanding stock of
a publicly-held corporation, whose gross assets exceed $100,000,000), or as an
investor, officer or director of a corporation, or as an employee, agent,
trustee, associate or consultant of any person, association, trust, partnership,
corporation, joint venture, registered limited liability partnership or limited
liability company, or other entity, any business in any standard metropolitan
statistical area (according to the SMSA definitions published from time to time
by the National Census Bureau/National Bureau of Labor Statistics) comprising
any part of the territory in which the Company (or any Related Entity) was or
had been engaged prior to the date of termination, which business is the same as
or substantially similar to any business engaged in by the Company (or any
Related Entity) on the date of termination of employment as provided herein.
The activities of Employee sought to be restricted by the provisions of this
Section 8(c) shall include, without limitation, (i) the management or operation
of a traffic, news, weather, sports or other information report gathering and
broadcast service, (ii) soliciting Sponsors and dealing with accounts with
respect thereto, (iii) soliciting Corporate Affiliates to enter into any
contract or arrangement with any person or organization to provide traffic,
news, weather, sports or other information report gathering or broadcast
services, (iv) broadcasting traffic, news, weather or sports reports on
television or radio, (v) the sale or packaging of Competitive Broadcast
Advertising Vehicles, as that term is defined in Section 20 and (vi) forming or
providing operational assistance to any business primarily engaged in the
foregoing activities; provided, that such restricted activities shall exclude
general news gathering or general broadcast responsibilities which involve
traffic, news, weather, sports or other information reports only occasionally or
incidentally, if rendered as a regular employee of a television or radio station
or a network (in a role unrelated to a competitive activity and which network
does not derive the majority of its revenues from traffic, news, sports, weather
or other information reports on a network basis).
(d) Employee further covenants and agrees that during the
Noncompetition Period, Employee will not either individually, or on behalf of
any other person, association, trust, partnership, joint venture, limited
liability partnership or limited company or other entity as an owner, member,
partner, agent, trustee, shareholder, joint venturer or otherwise, directly or
indirectly,
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8.23.96 VERSION
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solicit any customer of the Company or its Related Entities in competition with
the Company.
(e) Employee further agrees that during the Noncompetition Period
Employee will neither employ nor offer to employ nor solicit employment of any
employee or consultant of the Company or its Related Entities.
(f) Employee further agrees not to solicit, divert or attempt to
divert any business, patronage or customer of the Company or its Related
Entities to Employee or a competitor or rival of the Company or its Related
Entities during the Noncompetition Period.
(g) Employee agrees that the limitations set forth herein on
Employee's rights to compete with the Company and its Related Entities are
reasonable and necessary for the protection of the Company and its Related
Entities. In this regard, Employee specifically agrees that the limitations as
to period of time and geographic area, as well as all other restrictions on his
activities specified herein, are reasonable and necessary for the protection of
the Company and its Related Entities.
(h) Employee agrees that the remedy at law for any breach by Employee
of this Section 8 will be inadequate and that the Company shall be entitled to
injunctive relief (without bond or other undertaking).
(i) Employee and Company agree that to the extent a court of
competent jurisdiction finds any of the foregoing covenants to be overly broad
based on applicable law, then the parties agree that the court shall reform the
covenants to the extent necessary to cause such covenants to be reasonable and
enforce such covenants as reformed against Employee.
9. CONFIDENTIAL INFORMATION AND THE RESULTS OF SERVICES. Employee
acknowledges that the Company has established a valuable and extensive trade in
the services it provides, which has been developed at considerable expense to
the Company. Employee agrees that, by virtue of the special knowledge that
Employee has received or will receive from the Company, and the relationship of
trust and confidence between Employee and the Company, Employee has or will have
certain information and knowledge of the operations of the Company that are
confidential and proprietary in nature, including,
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<PAGE>
without limitation, information about Corporate Affiliates and Sponsors.
Employee agrees that during the term hereof and at any time thereafter Employee
will not make use of or disclose, without the prior consent of the Company,
Confidential Information (as hereinafter defined) relating to the Company and
any of its Related Entities (including, without limitation, its Sponsor lists,
its Corporate Affiliates, its technical systems, its contracts, its methods of
operation, its business plans and opportunities and its trade secrets), and
further, that Employee will return to the Company all written materials in
Employee's possession embodying such Confidential Information. For purposes of
this Agreement, "CONFIDENTIAL INFORMATION" means information obtained by
Employee during Employee's employment relationship with the Company which
concerns the affairs of the Company or its Related Entities and which the
Company has requested be held in confidence and could reasonably expect to be
held in confidence, or the disclosure of which would likely be embarrassing,
detrimental or disadvantageous to the Company or its Related Entities.
Confidential Information, however, shall not include information which Employee
can show by written document to be:
(a) Information that is at the time of receipt by Employee in the public
domain or is otherwise generally known in the industry or subsequently
enters the public domain or becomes generally known in the industry through
no fault of Employee;
(b) Information that at any time is received in good faith by Employee
from a third party which was lawfully in possession of the same and had the
right to disclose the same.
The parties hereto agree that the remedy at law for any breach of Employee's
obligations under this Section 9 of this Agreement would be inadequate and that
any enforcing party shall be entitled to injunctive or other equitable relief
(without bond or undertaking) in any proceeding which may be brought to enforce
any provisions of this Section.
10. ADVERTISING AND PUBLICITY. Employee hereby grants the Company the
royalty-free right to use and license others to use Employee's name, nickname,
recorded voice, biographical material, portraits, pictures, and likenesses for
advertising purposes and purposes of trade, promotion and publicity in
connection with the
NY-163703.1 COLEMAN EMPLOYMENT AGREEMENT
8.23.96 VERSION
<PAGE>
institutions, services and products for the Company, its Related Entities,
Sponsors and Corporate Affiliates, such uses to be at such times, in such manner
and through such media as the Company may in its sole discretion determine.
Such right shall last for so long as Employee is employed by the Company and, in
connection with the use or exploitation of any material in which Employee has
been involved during Employee's employment, perpetually thereafter. Employee
shall not authorize or release any advertising or promotional matter or
publicity in any form with reference to Employee's services hereunder, or to the
Company's or its related Entities' programs, Sponsors or Corporate Affiliates,
without the Company's prior written consent.
11. WORK FOR HIRE. Employee agrees that any ideas, concepts, techniques,
or computer programs relating to the business or operations of the Company and
its Related Entities which are developed by Employee during Employee's
employment hereunder, including each program and announcement prepared for
broadcast, and the titles, content, format, idea, theme, script,
characteristics, and other attributes thereof, shall be deemed to have been made
within the scope of Employee's employment and therefore constitute works for
hire and shall automatically upon their creation become the exclusive property
of the Company. To the extent such items are not works for hire under
applicable law, Employee assigns them and any and all intangible proprietary
rights relating thereto to the Company in their entirety and agrees to execute
any and all documents necessary or desired by the Company to reflect the
Company's ownership thereof.
12. COMMUNICATIONS ACT OF 1934. Employee represents and warrants that, to
the best of Employee's knowledge, information and belief, neither Employee nor
any other person has accepted or agreed to accept, or has paid or provided or
agreed to pay or provide, any money, service or any other valuable
consideration, as defined in Section 507 of the Communications Act of 1934, as
amended, for the broadcast of any matter contained in programs. Employee
further represents and warrants that, during Employee's employment, Employee
shall comply with all legal requirements.
13. MERGER OR REORGANIZATION. In the event of any merger, consolidation,
dissolution or reorganization of the Company (including but not limited to any
reorganization where the Company is not the surviving or resulting entity), or
any transfer of all or substantially all of the assets of the Company, the
provisions
NY-163703.1 COLEMAN EMPLOYMENT AGREEMENT
8.23.96 VERSION
<PAGE>
of this Agreement shall inure to the benefit of and shall be binding upon the
surviving or resulting partnership or the corporation (or other entity) or
person(s) to which such assets shall be transferred.
14. REMEDIES. Except as it may elect otherwise, the Company shall have
all rights, powers or remedies provided by law or equity for breach of this
Agreement available to it, it being understood and agreed that no one of them
shall be considered as exclusive of the others or as exclusive of any other
rights, powers and remedies allowed by law. The exercise or partial exercise of
any right, power or remedy shall neither constitute the election thereof nor the
waiver of any other right, power or remedy. Without limiting the generality of
the foregoing, Employee agrees that, in addition to all other rights and
remedies available at law or in equity, the Company shall be entitled to
enforcement of this Agreement in accordance with the principles of equity, the
remedy at law being hereby agreed and acknowledged by Employee to be inadequate.
15. WAIVER OF BREACH OF AGREEMENT. If either party waives a breach of
this Agreement by the other party, that waiver will not operate or be construed
as a waiver of any subsequent breaches.
16. ASSIGNMENT. The rights of the Company hereunder may, without the
consent of Employee, be assigned by the Company to any Related Entity or
successor of the Company or any entity which acquires all or substantially all
of the Company's assets. Except as provided in the preceding sentence or in
Section 13 hereof, the Company may not assign all or any of its rights, duties
or obligations hereunder without the prior written consent of Employee. This
Agreement is not assignable by Employee. Any attempt by Employee to assign this
Agreement, or any portion thereof, shall be deemed null and void and of no force
and effect.
17. NOTICES. All notices, requests, demands and other communications
permitted or required hereunder shall be in writing and shall be deemed to have
been duly given if personally delivered or if deposited in the United States
mail, first class, postage prepaid, registered or certified, addressed as
follows:
(a) If to Employee, addressed to Employee at the address set forth
below Employee's name on the execution page hereof.
NY-163703.1 COLEMAN EMPLOYMENT AGREEMENT
8.23.96 VERSION
<PAGE>
(b) If to the Company, addressed to:
Metro Traffic Control, Inc.
2700 Post Oak Blvd., Suite #1400
Houston, Texas 77056
Attention: Chief Executive Officer
or to such other address as either party hereto may request by written notice as
herein provided.
18. SEVERABILITY. Any provision hereof prohibited by or unenforceable
under any applicable law of any jurisdiction shall as to such jurisdiction be
deemed ineffective and deleted herefrom without affecting any other provision of
this Agreement. It is the desire of the parties hereto that this Agreement be
enforced to the maximum extent permitted by law, and should any provision
contained herein be held unenforceable, the parties hereby agree and consent
that such provision shall be reformed to make it a valid and enforceable
provision to the maximum extent permitted by law.
19. TITLE AND HEADINGS; EXHIBITS. Titles and headings to Sections hereof
are for the purpose of reference only and shall in no way limit, define or
otherwise affect the provisions hereof. Any and all exhibits referred to herein
are, by such reference, incorporated herein and made a part hereof.
20. CERTAIN DEFINITIONS. As used in this Agreement, the following
capitalized terms shall have the meanings indicated:
(a) CORPORATE AFFILIATES. Any organization, entity or person with
whom the Company has a contract or other arrangement to provide traffic, news,
weather, sports or other information, whether by broadcast, computer or any
other means.
(b) SPONSOR(S). Any and all advertisers (including their
subsidiaries and affiliates) whose commercial material is to be or is
incorporated in any one or more programs or announcements, live or recorded,
broadcast over the facilities of the Company or by the Company.
(c) RELATED ENTITY OR RELATED ENTITIES. Any entity (or entities)
that directly or indirectly controls, is controlled by, or is under common
control with, the Company or David Saperstein or members of his immediate family
or trust for their
NY-163703.1 COLEMAN EMPLOYMENT AGREEMENT
8.23.96 VERSION
<PAGE>
benefit. The term "entity" as used in this Section 20(c) means an individual,
corporation, partnership, joint venture, limited liability partnership or
limited liability company, trust, unincorporated organization, association or
other entity whose principal business is gathering, disseminating or reporting
traffic, news, sports, weather or other information or the sale or packaging of
Competitive Broadcast Advertising Vehicles. As used in this Section 20(c), the
term "control" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of a person or
entity, whether through the ownership of voting securities, by contract or
otherwise.
(d) COMPETITIVE BROADCAST ADVERTISING VEHICLE(S). An advertising
vehicle shall be deemed to be a Competitive Broadcast Advertising Vehicle if (i)
it consists of five to fifteen second commercial mentions imbedded in any news
break format, news, weather, sports or traffic information broadcast immediately
before or after any such programming, or in connection with such programming,
and (ii) it is offered for sale in a package including the broadcast of such
commercial mentions or identification as a Sponsor of any such programming on
more than three radio stations in any one ADI area of dominant influence as
defined by Arbitron, Inc.
21. CHOICE OF LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES RELATING TO THE SUBJECT MATTER OF THIS AGREEMENT, SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, WITHOUT REGARD
TO PRINCIPLES OF CONFLICTS OF LAW.
22. WAIVER OF RIGHTS AND CONSENT TO ARBITRATION. Employee shall and does
hereby irrevocably waive the right to file any complaints against the Company
with any federal, state or local agencies, including but not limited to, the
Equal Employment Opportunity Commission, and the Texas or other state Commission
on Human Rights or to file any claim, institute litigation or other legal action
based on the employment relationship or any activity covered by the terms of
this agreement. The Employee agrees and acknowledges that in exchange for the
relinquishment of those rights that any dispute, controversy or claim arising
out of this Agreement, except for the injunctive relief provided for in
paragraphs 8 and 9 above, or the employment relationship between Employee and
the Company shall be finally settled by arbitration in
NY-163703.1 COLEMAN EMPLOYMENT AGREEMENT
8.23.96 VERSION
<PAGE>
Houston, Texas in accordance with the Commercial Arbitration Rules of the
American Arbitration Association in effect on the date of this Agreement and
judgment upon the award may be entered in any court having jurisdiction thereof.
23. BINDING EFFECT. This Agreement shall be binding upon and inure to the
benefit of the parties hereto , their respective heirs, executors, successors
and permitted assigns.
24. ENTIRE AGREEMENT AND AMENDMENT. This Agreement supersedes all prior
understandings and agreements between the parties with respect to the subject
matter hereof. This Agreement contains the entire agreement of the parties with
respect to the subject matter covered hereby and may be amended, waived or
terminated only by an instrument in writing executed by both parties hereto.
25. EXECUTION BY COMPANY. Submission of this Agreement to Employee, or
Employee's agents or attorneys, for examination or signature does not constitute
or imply an offer of employment, and this Agreement shall have no binding effect
until execution hereof by both the Company and Employee.
26. NO INFERENCE AGAINST AUTHOR. No provision of this Agreement shall be
interpreted against any party because such party or its legal representative
drafted such provision.
IN WITNESS WHEREOF, this Agreement is EXECUTED as of the 18 day of
July 1996 to be EFFECTIVE FOR ALL PURPOSES the Effective Date.
"COMPANY"
METRO TRAFFIC CONTROL, INC.
By: /s/ Shane Coppola
----------------------------
Printed Name: Shane Coppola
-----------------
Title: Executive Vice President
-------------------------
"EMPLOYEE"
/s/ Curtis H. Coleman
--------------------------------
CURTIS H. COLEMAN
NY-163703.1 COLEMAN EMPLOYMENT AGREEMENT
8.23.96 VERSION
<PAGE>
Address: 1214 Crossfield
-----------------------
Katy TX 77450
-----------------------
NY-163703.1 COLEMAN EMPLOYMENT AGREEMENT
8.23.96 VERSION
<PAGE>
EXHIBIT A
INCENTIVE STOCK OPTION AGREEMENT ("Agreement"), dated this ___________
between Metro Networks, Inc., a Delaware corporation (the "Company") and
________________ the "Optionee").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Board of Directors of the Company (the "Board") has
adopted and the shareholders of the Company have approved the Metro Networks,
Inc., 1996 Incentive Stock Option Plan (the "Plan") for the issuance of options
pursuant to the Plan ("Options") to employees of the Company (unless otherwise
defined herein, capitalized terms used herein shall have the meanings ascribed
to such terms in the Plan); and
WHEREAS, the Plan authorizes the Board, in its discretion, to grant
Options and to determine the details of each Agreement to which such granted
Options relate; and
WHEREAS, the Board believes it to be in the best interest of the
Company to grant the Optionee Options to purchase shares of Common Stock of the
Company (the "Stock"), at the price and subject to the terms herein, and in all
respects subject to the terms, definitions and provisions of the Plan which is
incorporated by reference herein.
NOW, THEREFORE, IN CONSIDERATION of the promises and the mutual
covenants and agreements hereinafter set forth, the Company and the Optionee
agree as follows:
1. OPTION
(a) GRANT OF OPTION. The Company hereby grants the
Optionee an Option to purchase an aggregate of
___________________________________________ shares of Stock in accordance with
the terms and conditions of this Agreement.
(b) EXERCISE PERIOD. Except as otherwise provided in this
Agreement, the Option granted hereunder shall become exercisable by the Optionee
according to the following schedule: thirty-three and one-third percent (33
1/3%) upon the first anniversary of the date of execution of this Agreement and
an additional thirty-three and one-third percent (33 1/3%) upon each of the
second and third anniversaries of the date of execution of this Agreement until
all such Options are exercisable; PROVIDED, HOWEVER, that in the event the
<PAGE>
Company elects to terminate that certain Executive Employment Agreement between
the Company and the Optionee dated ___________, 199__, (the "Employment
Agreement") on the second anniversary of the closing of the Public Offering (as
defined in the Employment Agreement) pursuant to Section 2 of the Employment
Agreement, then the remaining sixty-six and two thirds percent (66 2/3%) of such
Options shall become exercisable upon the effective date of such termination;
and PROVIDED, FURTHER, HOWEVER, that the right to exercise an Option as to any
fractional share of Stock shall be deemed the right to exercise an Option as to
a full share of Stock with appropriate adjustments made to the last exercise
period so that the total number of Options shall not exceed that specified under
paragraph (a) of Section 1 hereof.
(c) NO LAPSE OF EXERCISE POWER. Any Option which becomes
exercisable on a certain date but is not exercised in full on that date shall
not lapse but shall remain outstanding as to the unexercised portion and shall
continue in effect throughout the remainder of the Option Term (taking into
account any early termination of such Option Term which may be provided for
under this Agreement or the Plan).
(d) OPTION TERM. An option which is not exercised shall
expire upon the earlier of:
(i) ten (10) years after the date such Option was granted
unless the Optionee is a 10% Holder (as defined herein) in which case the
Option shall expire five (5) years after such date;
(ii) three (3) months after the date the Optionee's
employment with the Company terminates, unless such termination was the
result of the Optionee's death or disability or unless the Company
terminates the employment for cause;
(iii) one (1) year after the Optionee's death or disability;
and
(iv) any such earlier termination date as may be provided by
this Agreement or the Plan.
(e) OPTION PRICE. Except as otherwise provided herein, the
purchase price for each share of Stock subject to the Option shall be $_______
per share, which is
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<PAGE>
the fair market value of the Stock on the date of the Option grant.
(f) ADJUSTMENTS. If the outstanding shares of Stock of the
Company are subdivided, consolidated, increased, decreased, changed into, or
exchanged for a different number or kind of shares or securities through
reorganization, merger, recapitalization, reclassification, capital adjustment
or otherwise, or if the Company shall issue shares of Stock as a dividend or
upon a stock split, the number and kind of shares of Stock available for
purposes of this Agreement or the Plan and all shares of Stock subject to the
unexercised portion of any Options theretofore granted and the Option Price of
such Options shall be appropriately adjusted to prevent dilution or enlargement
of rights. However, any such adjustment in outstanding Options shall be made
without change in the total Option Price applicable to the unexercised portion
of any outstanding Options. Adjustments under this Section 1(f) shall be made
by the Board, whose determination as to what adjustments shall be made, and the
extent thereof, shall be final, binding and conclusive. In computing any
adjustment under this Section 1(f), any fractional share which might otherwise
become subject to an Option shall be eliminated.
2. LIMITATIONS ON OPTIONS.
(a) GREATER THAN 10% SHAREHOLDER. If, at the time this
Option is granted, the Optionee owns stock (including for this purpose any stock
which may be purchased by the Optionee under an Option) possessing more than ten
percent (10%) of the total combined voting power of all classes of stock of the
Company (hereinafter, a "10% Holder"), its parent or its subsidiaries, then the
purchase price shall instead be $110% of the FMV on the date of grant per share
and the Option shall not be exercisable after five (5) years from the date it is
granted.
(b) MAXIMUM NUMBER OF INCENTIVE OPTIONS EXERCISABLE DURING
ONE YEAR. To the extent that the aggregate fair market value of the Stock
(determined as of the time an Option is granted pursuant to the Plan)
exercisable for the first time by an employee during any calendar year under the
Plan and all similar plans maintained by the Company exceeds $100,000.00,
options for such shares shall be treated as options that are not Incentive Stock
Options. For purposes of
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<PAGE>
this provision, Options shall be taken into account in the order in which they
were granted.
(c) SEQUENTIAL EXERCISE. Options granted to the Optionee
may be exercised in any order, so that the Optionee may exercise an Option if
another Option, granted to him at an earlier time, remains outstanding in whole
or in part.
(d) NONTRANSFERABILITY OF OPTION. The Option may not be
assigned or transferred other than pursuant to a Qualified Domestic Relations
Order or by will or by the laws of descent and distribution. During the
lifetime of the Optionee, the Option may be exercisable only by the Optionee.
Transfer of an Option by will or by the laws of descent and distribution shall
not be effective to bind the Company unless the Company shall have been
furnished with written notice thereof and an authenticated copy of the will or
such other evidence as the Board may deem necessary to establish the validity of
the transfer and the acceptance by the transferee of the terms and conditions of
such Option. Any attempted assignment, transfer, pledge, hypothecation or other
disposition of the Option contrary to the provisions hereof, or the levy of any
execution, attachment or similar process upon the Option shall be null and void
and without effect.
3. METHOD OF EXERCISING OPTIONS. Options shall be exercised by a
written notice delivered to the Company at its principal office in Houston,
Texas specifying the number of shares of Stock to be purchased and tendering
payment in full for such Stock. Payment may be tendered in cash or by
certified, bank cashier's or teller's check or by Stock (valued at fair market
value as of the date of tender), or some combination of the foregoing. In the
event all or part of the Option Price is paid in Stock, any excess of the value
of such Stock over the Option Price will be returned to the Optionee as follows:
(i) any whole share of Stock remaining in excess of the Option Price will be
returned in kind, and may be represented by one or more share certificates, and
(ii) any partial shares of Stock remaining in excess of the Option price will be
returned in cash.
In the event the Company determines that it is required to withhold
state or Federal income tax as a result of the exercise of an Option, as a
condition to the exercise thereof, the Optionee may be required to make
arrangements satisfactory to the Company to enable it to satisfy such
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<PAGE>
withholding requirements. Payment of such withholding requirements may be made,
in the discretion of the Board, (i) in cash, (ii) by delivery of Shares
registered in the name of the Optionee, or by the Company not issuing such
number of Shares subject to the Option, having a Fair Market Value at the time
of exercise equal to the amount to be withheld or (iii) any combination of (i)
and (ii) above. If (i) any Shares are registered under Section 12 of the
Exchange Act, (ii) the Optionee is an officer (as defined in Section 16 of the
Exchange Act) of the Company subject to Section 16(b) of the Exchange Act and
(iii) such payment is made with Shares acquired by the Optionee upon the
exercise which gives rise to such withholding, an election under the preceding
sentence (a) must be irrevocable and with respect to all Shares covered by the
Option subject to the election, provided, however, that such election may be
changed through another irrevocable election that takes effect at least six
months after the prior election; or (b) may be made during the period beginning
on the third business day following the date of release of quarterly and annual
summary statements of sales and earnings as provided by Rule 16b-3(e)(3) of the
Securities and Exchange Commission and ending on the twelfth (12th) business day
following such date and only if such period occurs before the date the Company
requires payment of the withholding tax. The election need not be made during
the ten-day window period if counsel to the Company determines that compliance
with such requirement is unnecessary.
4. TIME PERIOD ON TRANSFERS OF STOCK. Any Optionee, or person
representing such Optionee, who sells, exchanges, transfers or otherwise
disposes of any Stock acquired pursuant to the exercise of an Option (other than
Stock sold or otherwise transferred to the Company) within two years following
the grant of such Option or within one year following the actual transfer of
such Stock to the Optionee, shall be obligated to notify the Company in writing
of the date of disposition, the number of shares of Stock so disposed and the
amount of consideration received as a result of such disposition. The Company
shall have the right to take whatever reasonable action it deems appropriate
against an Optionee, including early termination of any Options which remain
outstanding, in order to recover any additional taxes the Company incurs as a
result of such Optionee's failure to so notify the Company.
-5-
<PAGE>
5. ISSUANCE OF OPTIONED STOCK.
(a) ISSUANCE OF CERTIFICATES. The Company shall not be
required to issue or deliver any certificate for Stock purchased upon the
exercise of any Option, or any portion thereof, prior to fulfillment of each of
the following applicable conditions:
(i) The admission of such Stock to listing on all stock
exchanges or markets on which the Stock is then listed to the extent such
admission is necessary;
(ii) The completion of any registration or other
qualification of such Stock under any federal or state securities laws or
under the rulings or regulations of the Securities and Exchange Commission
or any other governmental regulatory body, which the Board shall in its
sole discretion deem necessary or advisable or the determination by the
Board in its sole discretion that no such registration or qualification is
required;
(iii) The obtaining of any approval or other clearance from
any federal or state governmental agency which the Board shall, in its sole
discretion, determine to be necessary or advisable; and
(iv) The lapse of such reasonable period of time following
the exercise of the Option as the Board from time to time may establish for
reasons of administrative convenience.
(b) COMPLIANCE WITH SECURITIES AND OTHER LAWS. In no event
shall the Company be required to sell, issue or deliver Stock pursuant to
Options if in the opinion of the Board the issuance thereof would constitute a
violation by either the Optionee or the Company of any provision of any law or
regulation of any governmental authority or any securities exchange. As a
condition of any sale or issuance of Stock pursuant to Options, the Company may
place legends on the Stock, issue stop-transfer orders and require such
agreements or undertakings from the Optionee as the Company may deem necessary
or advisable to assure compliance with any such law or regulation, including, if
the Company or its counsel deems it appropriate, representations from the
Optionee that he is acquiring the Stock solely for investment and not with a
view to distribution and that no distribution of Stock acquired by him will be
made unless registered pursuant to applicable
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<PAGE>
federal and state securities laws or unless, in the opinion of counsel to the
Company, such registration is unnecessary.
6. OPTION RIGHTS IN THE EVENT OF CERTAIN EVENTS.
(a) RIGHTS IN THE EVENT OF SALE, MERGER OR OTHER
REORGANIZATION OF COMPANY. In the event of a merger or consolidation where the
Company is not the surviving corporation, and the agreement of merger or
consolidation does not provide for the substitution of a new option for the
unexercised portion of the Option or for the assumption of the Option by the
surviving corporation, or in the event of the sale or transfer of assets,
liquidation or dissolution and the plan of liquidation or dissolution or
agreement of sale does not make special provision for the Option, Optionee shall
have the right immediately prior to the effective date of such merger,
consolidation, sale or transfer of assets, liquidation or dissolution to
exercise the Option in whole or in part without regard to any installment
provision contained in paragraph (b) of Section 1 hereof. In no event, however,
may any Option which becomes exercisable pursuant to this paragraph (a) of
Section 6, be exercised, in whole or in part, later than the date specified in
paragraph (d) of Section 1 above. If not so exercised, the Option shall
terminate at the time of any such merger, consolidation, sale or transfer of
assets, liquidation or dissolution.
(b) TERMINATION OF EMPLOYMENT. In the event that an
Optionee's employment with the Company terminates, other than by reason of death
or Total and Permanent Disability or termination for "cause", the Optionee shall
have (subject to Section 2 above) the right, for a period which shall not exceed
the earlier of the remaining Option Term (taking into account any earlier
termination date provided by the Plan) or three months from such termination of
employment, to exercise any Options which such Optionee would have been entitled
to exercise on the date of his termination of employment. At the expiration of
such three month period, or such earlier time as may be applicable, any such
Options which remain unexercised shall expire. In no event may any Options be
exercised that could not have been exercised by an Optionee on the date of his
termination of employment. Notwithstanding the foregoing, if the Optionee's
employment is terminated for "cause", the Company may notify the Optionee that
any Options not exercised prior to the termination are cancelled. For purposes
hereof, a termination of employment for "cause" shall include, but not be
limited to, dismissal as a result of (1)
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<PAGE>
Optionee's conviction of any crime or offense involving money or other property
of the Company or its subsidiaries or which constitutes a felony in the
jurisdiction involved; (2) Optionee's gross negligence, gross incompetence or
willful misconduct in the performance of his or her duties; or (3) Optionee's
willful failure or refusal to perform his or her duties.
(c) TOTAL AND PERMANENT DISABILITY. If an Optionee's
employment with the Company is terminated on account of Total and Permanent
Disability, the Optionee shall have (subject to Section 2 above) the right, for
a period which shall not exceed the earlier of the remaining Option Term (taking
into account any earlier termination date provided by the Plan) or one year from
the date of such Optionee's disability, to exercise any Options which such
Optionee would have been entitled to exercise on the date of his Total and
Permanent Disability. At the expiration of such one year period, or such
earlier time as may be applicable, any such Options which remain unexercised
shall expire. In no event may any Options be exercised that could not have been
exercised by an Optionee on the date of his Total and Permanent Disability.
(d) DEATH. If an Optionee's employment with the Company is
terminated on account of death, the person or persons who shall have acquired
the right, by will or the laws of descent and distribution, to exercise his
Options shall continue to have (subject to Section 2 above) the right, for a
period which shall not exceed the earlier of the remaining Option Term (taking
into account any earlier termination date provided by the Plan) or one year from
the date of such Optionee's death, to exercise any Options which such Optionee
would have been entitled to exercise on the date of his death. At the
expiration of such one year period, or such earlier time as may be applicable,
any such Options which remain unexercised shall expire. In no event may any
Options be exercised that could not have been exercised by an Optionee on the
date of his death.
7. OPTION AND AGREEMENT SUBJECT TO THE PLAN. This Agreement and the
grant of any Option hereunder are subject to all the terms, conditions and
limitations set forth in the Plan, which is incorporated herein by reference and
should be read in conjunction herewith. The Plan may subject the Options
granted hereunder to additional terms, conditions or limitations which are not
specifically set forth herein. Any
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<PAGE>
inconsistency between the Plan and this Agreement shall be resolved in favor of
the Plan language. A copy of the plan is on file for inspection at the
Company's principal offices located in Houston, Texas.
8. ADMINISTRATION BY BOARD OF DIRECTORS. The Board or a committee
appointed by the Board (the "Committee") has the exclusive authority to select
the officers and employees who are to be granted Options, determine the number
of Shares to be subject to Options to be granted to each Optionee and designate
such Options as Incentive Stock Options. The interpretation and construction by
the Board or the Committee of any provisions of the Plan or of any Option
granted thereunder shall be final. No member of the Administrator shall be
liable for any action or determination made in good faith with respect to the
Plan or any Option granted hereunder.
If any Shares are registered under Section 12 of the Exchange Act,
then notwithstanding the first or second sentence of the immediately preceding
paragraph, after such registration the grant of any Option under the Plan to any
person who shall be an officer (as defined in Section 16 of the Exchange Act) of
the Company at the time of such grant shall only be made either (A) with the
approval of the Board if all of its members are Disinterested Persons or (B)
with the approval of the Committee if all of the members of the Committee are
Disinterested Persons.
9. RESTRICTIVE COVENANTS.
(a) COVENANT NOT TO COMPETE. The Optionee acknowledges
that he or she is aware that the services performed by him or her for the
Company have been and are of a special and unique character. The Optionee
further acknowledges and recognizes his or her possession of confidential and
proprietary information regarding the business of the Company. Accordingly, the
Optionee agrees that he or she will not, without the written permission of the
Company, within or outside of the United States for a period of one (1) year
from the date on which such Optionee's employment by or on behalf of the Company
is terminated (i) directly or indirectly engage or become interested or
involved in any Competitive Business (as hereinafter defined), whether such
engagement, interest or involvement shall be as an employer, officer, director,
owner, shareholder, employee, partner or in any other capacity or relationship,
(ii) assist
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others in engaging in any Competitive Business in the manner described in the
foregoing clause (i), or (iii) induce employees of the Company to terminate
their employment with the Company or engage in any Competitive Business;
provided, however, that nothing contained in this Section 9(a) shall be deemed
to prohibit the Optionee from acquiring, solely for investment purposes, less
than 5% of the publicly-traded shares of the capital stock of any corporation.
As used in this Section 9(a), the term "Competitive Business" means and includes
any business or activity that is now or at any time in the future competitive
with or directly related to the business conducted by the Company on the date
the Optionee's employment by or on behalf of the Company is terminated.
(b) AGREEMENT NOT TO SOLICIT CUSTOMERS. For a period of
one (1) year from the date on which such Optionee's employment by or on behalf
of the Company is terminated, the Optionee agrees that he or she will not, for
or on behalf of a Competitive Business, directly or indirectly, as owner,
officer, stockholder, partner, associate, consultant, manager, advisor,
representative, employee, agent, creditor or otherwise, attempt to solicit or in
any other way disturb or service any person, firm or corporation that has been a
customer account of the Company at any time or times prior to the date hereof,
whether or not the Optionee had direct account responsibility for such customer
account.
(c) CONFIDENTIAL INFORMATION.
(i) The Optionee agrees not to disclose to any person or
use, at any time after the date hereof, any confidential information of the
Company, whether the Optionee has such information in his memory or
embodied in writing or any other physical form. For purposes of this
Agreement the phrase "confidential information of the Company" means all
information which (a) is known only to the Company's employees, or others
in a confidential relationship with the Company or employees of affiliated
companies, (b) relates to specific technical matters, such as the Company's
or its subsidiaries' proprietary information, plans, reports, and
promotional, sales or operational procedures and materials, or (c) relates
to the identity and solicitation of customers and accounting procedures of
the Company or other business practices of the Company.
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(ii) The Optionee agrees not to remove from the premises of
the Company, at any time after the date hereof, any document or object
containing or reflecting any confidential information of the Company, and
the Optionee recognizes that all such documents and objects, whether
developed by the Company or by someone else for the Company, are the
exclusive property of the Company.
(iii) It is agreed that the names and addresses of customers
who were contacted by the Optionee on behalf of the Company, or of whom the
Optionee became aware through his or her employment with the Company, are
trade secrets of the Company, as is other such confidential information of
the Company, including but not limited to the customer's business needs and
requirements.
(iv) The Optionee shall, at any time requested by the
Company after the date hereof, promptly deliver to the Company all
confidential memoranda, notes, reports, lists, and other documents (and all
copies thereof) relating to the business of the Company which he or she may
then possess or have under his or her control.
10. LOCK-UP AGREEMENT. The Optionee agrees, if requested by the
Company and an underwriter of Common Stock (or other securities) of the Company,
not to sell or otherwise transfer or dispose of any Common Stock (or other
securities) of the Company held by the Optionee during the one hundred eighty
(180) day period following the effective date of a registration statement filed
under the 1933 Act, as amended, without the prior consent of the Company or such
underwriter, as the case may be, provided that such agreement only applies to
registration statements including securities to be sold to the public in an
underwritten offering during the period ending on __________________.
11. MISCELLANEOUS.
(a) NO EMPLOYMENT RIGHTS. Nothing in the Agreement or
in-any Option granted hereunder shall confer upon any employee the right to
continue in the employ of the Company.
(b) BINDING EFFECT. The Agreement shall be binding upon,
and inure to the benefit of the Company, Optionee, and their respective personal
representatives, successors and permitted assigns.
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(c) SINGULAR, PLURAL; GENDER. Whenever used herein, except
where the context clearly indicates to the contrary, nouns in the singular shall
include the plural, and the masculine pronoun shall include the feminine gender.
(d) HEADINGS. Headings of the Sections hereof are inserted
for convenience and reference and constitute no part of the Agreement.
(e) RIGHTS AS SHAREHOLDERS. An Optionee or transferee of
an Option shall have no rights as a shareholder with respect to any Stock
subject to such Option prior to the purchase of such Stock by exercise of such
Option as provided herein.
(f) APPLICABLE LAW. This Agreement and the Options granted
hereunder shall be interpreted, administered and otherwise subject to the laws
of the State of Texas, except to the extent the General Corporation Law of
Delaware shall govern.
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IN WITNESS WHEREOF, the Company and the Optionee have executed this
Agreement as of the day and year first written above.
OPTIONEE METRO NETWORKS, INC.
_________________________ By:_________________________
Name: Name:
Address: Title:
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EXECUTIVE
EMPLOYMENT AGREEMENT
This Agreement ("AGREEMENT") is entered into by and between Gary L.
Worobow ("EMPLOYEE") and METRO TRAFFIC CONTROL, INC., a Maryland corporation
with its principal office located in Harris County, Texas (the "COMPANY").
WITNESSETH:
WHEREAS, the Company is in the business of managing a sales
force, selling broadcast and other advertising, and developing, producing
and broadcasting traffic, news, sports, weather and other information
reports throughout the United States; and
WHEREAS, Employee is currently Vice President and General Counsel
of the Company; and
WHEREAS, the Company desires to continue to engage the services
of Employee to serve as Senior Vice President, General Counsel and
Secretary of the Company on the terms and conditions herein contained; and
NOW, THEREFORE, for and in consideration of the mutual covenants
and agreements herein contained, the parties hereto agree as follows:
1. EMPLOYMENT. The Company hereby employs Employee, and Employee accepts
such employment, and agrees to devote Employee's full time and efforts to the
interests of the Company upon the terms and conditions hereinafter set forth.
2. TERM OF EMPLOYMENT. Subject to the provisions for termination
hereinafter provided, Employee's term of employment by the Company shall
commence on the effective date of an initial public offering (the "Public
Offering") of the Company's proposed parent company (the "EFFECTIVE DATE") and
shall continue in effect until three (3) years following the closing of the
PUBLIC OFFERING (the "TERM"); provided, however, the Company shall have the
right to terminate this Agreement on the second anniversary of the closing of
the Public Offering by giving the Employee written
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notice of such termination at least ninety (90) days prior to such second
anniversary. Unless otherwise terminated pursuant hereto, if Employee continues
to be employed by the Company after the Term, then Employee's employment shall
be deemed to continue on a month-to-month basis until such time as either party
shall deliver written notice to the other party and this Agreement shall
terminate ninety (90) days after the giving of such notice. Except as otherwise
set forth herein, if either party hereto desires to terminate this Agreement at
the end of the Term or thereafter, the same ninety (90) days prior written
notice shall apply. The period from the Effective Date through the date ninety
(90) days from the date any notice of termination referred to above is delivered
is hereinafter referred to as the "Employment Period".
3. SERVICES TO BE RENDERED BY EMPLOYEE.
(a) During the Employment Period, Employee shall serve as Senior Vice
President, General Counsel and Secretary of the Company or in such other
position as is determined from time to time by the Board of Directors of the
Company or if the Company has a parent company, such parent company's Board of
Directors (the "BOARD OF DIRECTORS"). Subject to the direction of the Chief
Executive Officer of the Company, the Board of Directors or its designee,
Employee shall perform such executive and managerial duties as from time to time
may be delegated to Employee by the Chief Executive Officer, the Board of
Directors, or their designee. Employee shall devote all of his professional
time, energy and ability to the proper and efficient conduct of the Company's
business. Employee shall observe and comply with all reasonable lawful
directions and instructions by and on the part of the Chief Executive Officer,
the Board of Directors or their designee and endeavor to promote the interests
of the Company and not at any time do anything which may cause or tend to be
likely to cause any loss or damage to the Company in business, reputation or
otherwise.
(b) The Company may from time to time call on Employee to perform
services related to the business of developing and broadcasting traffic, news,
sports and weather reports, which may include (in the Company's sole discretion)
contributing to the day-to-day management and operation of such business,
soliciting Sponsors, Corporate Affiliates (as such terms are defined in Section
20 hereof) or customers or dealing with their accounts, or the television or
radio broadcast of traffic, news, sports and weather reports, or other
activities related to the Company's
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business, as reasonably specified from time to time by the Chief Executive
Officer, the Board of Directors or their designee. Subject to the foregoing,
Employee's specific responsibilities shall include hiring, training, managing
and motivating the Company's employees. The Company may, in its sole
discretion, restrict, expand, change or otherwise alter the Employee's duties,
title and responsibilities. Any change shall be binding on Employee for all
purposes of this Agreement.
(c) Employee acknowledges that Employee will have and owe fiduciary
duties to the Company and its shareholders including, without limitation, the
duties of care, confidentiality and loyalty.
(d) Employee acknowledges that the Company does not allow personal
trade, including but not limited to automobiles.
4. COMPENSATION.
(a) BASE SALARY. For the services to be rendered by Employee during
Employee's employment by the Company, the Company shall pay Employee, and
Employee agrees to accept, a monthly base salary (the "BASE SALARY") of NINE
THOUSAND SEVEN HUNDRED and NINETY ONE Dollars and SIXTY-SEVEN Cents ($9,791.67).
Employee's Base Salary shall be payable semi-monthly in arrears on the tenth day
and on the twenty-fifth day of each calendar month or such other date in
conformity with the Company's payroll policies in effect from time to time. The
Base Salary shall increase five (5%) percent for each year per annum during the
Term on the anniversary of the closing of the Public Offering.
(b) BONUS. Employee shall be eligible for a bonus of up to THIRTY
SEVEN THOUSAND FIVE HUNDRED ($37,500.00) Dollars per annum (the "DISCRETIONARY
BONUS"), in the sole discretion of the Board of Directors or its Compensation
Committee. The Discretionary Bonus potential shall increase by five (5%)
percent per annum for each year during the Term on the anniversary of the
closing of the Public Offering.
(c) STOCK OPTIONS. Upon the effective date of the Public Offering,
Employee will be granted options under the Company's proposed parent company's
1996 Incentive Stock Option Plan (the "1996 PLAN") to purchase forty five
thousand (45,000)
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shares of the Company's proposed parent company's common stock pursuant a stock
option agreement substantially in the form attached hereto as Exhibit A.
Additional options may be granted in the sole discretion of the Board of
Directors or its Compensation Committee. Such stock options shall be
immediately null and void if the Public Offering does not close.
(d) CUSTOMARY EMPLOYEE DEDUCTIONS. For any and all compensation paid
by the Company to Employee pursuant to this Section 4, the Company shall be
entitled to deduct income tax withholdings, social security and other customary
employee deductions in conformity with the Company's payroll policies in effect
from time to time.
5. EXPENSES. Subject to compliance by Employee with such policies
regarding expenses and expense reimbursement as may be adopted from time to time
by the Company, the Company shall reimburse Employee, or cause Employee to be
reimbursed, in cash for all reasonable expenses. The Company currently
maintains trade relationships for restaurants, hotels, automobile rentals,
courier services, promotional items, etc. which may be used from time to time to
cover ordinary and necessary expenses of Employee and for reimbursement. Except
as expressly set forth in this Section 5, any out-of-pocket cash expenses
incurred by Employee shall be at his own expense and without reimbursement by
the Company. Employee agrees that no travel expense will be reimbursed unless
booked through the Company's travel department.
6. BENEFITS.
(a) COMPANY PLANS; INSURANCE. During the term of Employee's
employment hereunder, Employee shall be entitled to participate in all benefit
plans, programs, group insurance policies, vacation sick leave and other
benefits that may from time to time be established by the Company for its
employees, provided that Employee is eligible under the respective provisions
thereof.
(b) VACATION. Employee shall be entitled each year to a vacation in
accordance with the prevailing practice of the Company in regard to vacations
for its employees.
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7. TERMINATION OF EMPLOYMENT.
(a) During the Employment Period, the Company shall have the right,
if exercised in good faith, to terminate the employment of Employee hereunder
immediately by giving prior written notice thereof to Employee in the event of
any of the following:
(i) if Employee has (A) willfully failed, refused or habitually has
neglected to carry out or to perform the reasonable duties required of
Employee hereunder or otherwise breached any provision of this Agreement
(other than Sections 8, 9 and 12 hereof, which are governed by Section
7(a)(iv) hereof) after notice from the Chief Executive Officer, the Board
of Directors or their designee of such failure or neglect and the
expiration of thirty (30) days following the delivery of such notice which
failure or neglect has remained unremedied, (B) willfully breached any
statutory or common law duty; or (C) breached Section 3(c) or 3(d) of this
Agreement.
(ii) if Employee is convicted of a felony or a crime involving moral
turpitude or if the Company, acting in good faith and upon reasonable
grounds, determines that Employee has willfully engaged in business conduct
which would injure the reputation of the Company or otherwise adversely
affect its interest if Employee were retained as an employee of the
Company;
(iii) if Employee becomes unable by reason of physical disability or other
incapacity (as may be defined in applicable disability insurance policies)
to carry out or to perform the duties required of Employee hereunder for a
continuous period of ninety (90) days; PROVIDED, HOWEVER, that Employee's
compensation during any period in which Employee is unable to perform the
duties required of Employee hereunder shall be reduced by any disability
payments (excluding any reimbursements for medical expenses and the like)
which Employee is entitled to receive under group or other disability
insurance policies of the Company during such period;
(iv) if Employee breaches any of the provisions of Section 8, 9 or 12
hereof or breaches any of the terms or
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obligations of any other noncompetition and/or confidentiality agreements
entered into between Employee and the Company, or the Company's Related
Entities (as defined in Section 20 hereof), if any; or
(v) if employee steals or embezzles assets of the Company.
(b) Employee's employment with the Company shall automatically
terminate (without notice to Employee's estate) upon the death or loss of legal
capacity of Employee.
(c) In the event of any termination of employment pursuant to this
Section 7, Employee (or Employee's estate, as the case may be) shall be entitled
to receive (i) the Base Salary herein provided prorated to the date of such
termination, (ii) Employee's present entitlement, if any, under the Company's
employee benefit plans and programs and (iii) no other compensation.
8. NO CONFLICT OF INTEREST; PROPER CONDUCT; COVENANT NOT TO COMPETE.
(a) The Company and Employee acknowledge and agree that the Company
expects to divulge to Employee certain confidential information and trade
secrets relating to the Company's business, provide information relating to the
Company's customer base and otherwise provide Employee with the ability to
injure the Company's goodwill unless certain reasonable restrictions are imposed
upon Employee which are contained in this Section. Employee agrees that such
restrictions are reasonable and necessary to protect the goodwill, confidential
information and other legitimate business interests of the Company and such
restrictions are entered into freely by Employee.
(b) While employed by the Company, Employee will not compete with the
Company, directly or indirectly, either for Employee or as a member of any
association, partnership, joint venture, limited liability partnership or
limited liability company or other entity, or as a stockholder (except as a
stockholder of less than one percent (1%) of the issued and outstanding stock of
a publicly-held corporation whose gross assets exceed $100,000,000), investor,
officer or director of a corporation, or as an employee, agent, trustee,
associate or consultant of any person, association, trust, partnership, joint
venture, registered
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limited liability partnership or limited liability company, corporation or
other entity, in any business in competition with that carried on by the Company
or its Related Entities. Employee shall not, without the Company's prior
written consent, engage in any activity during Employee's employment that would
conflict with, interfere with, impede or hamper the performance of Employee's
duties for the Company or would otherwise be prejudicial to the Company's
business interests. Employee shall refrain from any offensive or distasteful
remarks or conduct in performance of Employee's duties and shall faithfully
comply to the best of Employee's ability with all of the Company's decisions
relating to on-the-air material and the manner of delivering or using same.
Employee shall not commit any act or become involved in any situation or
occurrence that, in the Company's reasonable judgment, could tend to bring
Employee or the Company into public disrepute, contempt, scandal or ridicule,
could provoke, insult or offend the community or any group or class thereof, or
could reflect unfavorably upon the Company or any of its Sponsors or Corporate
Affiliates. Employee shall comply with all applicable laws and regulations
governing the Company and its business, including without limitation,
regulations promulgated by the Federal Communications Commission or any other
regulatory agency.
(c) Employee further agrees that, for a period of one (1) year from
and after Employee's last day of employment under this Agreement (the
"NONCOMPETITION PERIOD"), because of disability or termination by the Company
(with or without cause), Employee will not engage in or carry on, directly or
indirectly, either for Employee or as a member of an association, trust,
partnership, joint venture, limited liability partnership or limited liability
company or other entity, or as a stockholder (other than as a stockholder of
less than one percent (1%) of the issued and outstanding stock of a publicly-
held corporation, whose gross assets exceed $100,000,000), or as an investor,
officer or director of a corporation, or as an employee, agent, trustee,
associate or consultant of any person, association, trust, partnership,
corporation, joint venture, registered limited liability partnership or limited
liability company, or other entity, any business in any standard metropolitan
statistical area (according to the SMSA definitions published from time to time
by the National Census Bureau/National Bureau of Labor Statistics) comprising
any part of the territory in which the Company (or any Related Entity) was or
had been engaged prior to the date of termination, which business is the same as
or substantially similar to any business
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engaged in by the Company (or any Related Entity) on the date of termination of
employment as provided herein. The activities of Employee sought to be
restricted by the provisions of this Section 8(c) shall include, without
limitation, (i) the management or operation of a traffic, news, weather, sports
or other information report gathering and broadcast service, (ii) soliciting
Sponsors and dealing with accounts with respect thereto, (iii) soliciting
Corporate Affiliates to enter into any contract or arrangement with any person
or organization to provide traffic, news, weather, sports or other information
report gathering or broadcast services, (iv) broadcasting traffic, news, weather
or sports reports on television or radio, (v) the sale or packaging of
Competitive Broadcast Advertising Vehicles, as that term is defined in Section
20 and (vi) forming or providing operational assistance to any business
primarily engaged in the foregoing activities; provided, that such restricted
activities shall exclude general news gathering or general broadcast
responsibilities which involve traffic, news, weather, sports or other
information reports only occasionally or incidentally, if rendered as a regular
employee of a television or radio station or a network (in a role unrelated to a
competitive activity and which network does not derive the majority of its
revenues from traffic, news, sports, weather or other information reports on a
network basis).
(d) Employee further covenants and agrees that during the
Noncompetition Period, Employee will not either individually, or on behalf of
any other person, association, trust, partnership, joint venture, limited
liability partnership or limited company or other entity as an owner, member,
partner, agent, trustee, shareholder, joint venturer or otherwise, directly or
indirectly, solicit any customer of the Company or its Related Entities in
competition with the Company.
(e) Employee further agrees that during the Noncompetition Period
Employee will neither employ nor offer to employ nor solicit employment of any
employee or consultant of the Company or its Related Entities.
(f) Employee further agrees not to solicit, divert or attempt to
divert any business, patronage or customer of the Company or its Related
Entities to Employee or a competitor or rival of the Company or its Related
Entities during the Noncompetition Period.
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(g) Employee agrees that the limitations set forth herein on
Employee's rights to compete with the Company and its Related Entities are
reasonable and necessary for the protection of the Company and its Related
Entities. In this regard, Employee specifically agrees that the limitations as
to period of time and geographic area, as well as all other restrictions on his
activities specified herein, are reasonable and necessary for the protection of
the Company and its Related Entities.
(h) Employee agrees that the remedy at law for any breach by Employee
of this Section 8 will be inadequate and that the Company shall be entitled to
injunctive relief (without bond or other undertaking).
(i) Employee and Company agree that to the extent a court of
competent jurisdiction finds any of the foregoing covenants to be overly broad
based on applicable law, then the parties agree that the court shall reform the
covenants to the extent necessary to cause such covenants to be reasonable and
enforce such covenants as reformed against Employee.
9. CONFIDENTIAL INFORMATION AND THE RESULTS OF SERVICES. Employee
acknowledges that the Company has established a valuable and extensive trade in
the services it provides, which has been developed at considerable expense to
the Company. Employee agrees that, by virtue of the special knowledge that
Employee has received or will receive from the Company, and the relationship of
trust and confidence between Employee and the Company, Employee has or will have
certain information and knowledge of the operations of the Company that are
confidential and proprietary in nature, including, without limitation,
information about Corporate Affiliates and Sponsors. Employee agrees that
during the term hereof and at any time thereafter Employee will not make use of
or disclose, without the prior consent of the Company, Confidential Information
(as hereinafter defined) relating to the Company and any of its Related Entities
(including, without limitation, its Sponsor lists, its Corporate Affiliates, its
technical systems, its contracts, its methods of operation, its business plans
and opportunities and its trade secrets), and further, that Employee will return
to the Company all written materials in Employee's possession embodying such
Confidential Information. For purposes of this Agreement, "CONFIDENTIAL
INFORMATION" means information obtained by Employee during Employee's employment
relationship with the Company which concerns the affairs of the Company or its
Related Entities and
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which the Company has requested be held in confidence and could reasonably
expect to be held in confidence, or the disclosure of which would likely be
embarrassing, detrimental or disadvantageous to the Company or its Related
Entities. Confidential Information, however, shall not include information
which Employee can show by written document to be:
(a) Information that is at the time of receipt by Employee in the public
domain or is otherwise generally known in the industry or subsequently
enters the public domain or becomes generally known in the industry through
no fault of Employee;
(b) Information that at any time is received in good faith by Employee
from a third party which was lawfully in possession of the same and had the
right to disclose the same.
The parties hereto agree that the remedy at law for any breach of Employee's
obligations under this Section 9 of this Agreement would be inadequate and that
any enforcing party shall be entitled to injunctive or other equitable relief
(without bond or undertaking) in any proceeding which may be brought to enforce
any provisions of this Section.
10. ADVERTISING AND PUBLICITY. Employee hereby grants the Company the
royalty-free right to use and license others to use Employee's name, nickname,
recorded voice, biographical material, portraits, pictures, and likenesses for
advertising purposes and purposes of trade, promotion and publicity in
connection with the institutions, services and products for the Company, its
Related Entities, Sponsors and Corporate Affiliates, such uses to be at such
times, in such manner and through such media as the Company may in its sole
discretion determine. Such right shall last for so long as Employee is employed
by the Company and, in connection with the use or exploitation of any material
in which Employee has been involved during Employee's employment, perpetually
thereafter. Employee shall not authorize or release any advertising or
promotional matter or publicity in any form with reference to Employee's
services hereunder, or to the Company's or its related Entities' programs,
Sponsors or Corporate Affiliates, without the Company's prior written consent.
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11. WORK FOR HIRE. Employee agrees that any ideas, concepts, techniques,
or computer programs relating to the business or operations of the Company and
its Related Entities which are developed by Employee during Employee's
employment hereunder, including each program and announcement prepared for
broadcast, and the titles, content, format, idea, theme, script,
characteristics, and other attributes thereof, shall be deemed to have been made
within the scope of Employee's employment and therefore constitute works for
hire and shall automatically upon their creation become the exclusive property
of the Company. To the extent such items are not works for hire under
applicable law, Employee assigns them and any and all intangible proprietary
rights relating thereto to the Company in their entirety and agrees to execute
any and all documents necessary or desired by the Company to reflect the
Company's ownership thereof.
12. COMMUNICATIONS ACT OF 1934. Employee represents and warrants that, to
the best of Employee's knowledge, information and belief, neither Employee nor
any other person has accepted or agreed to accept, or has paid or provided or
agreed to pay or provide, any money, service or any other valuable
consideration, as defined in Section 507 of the Communications Act of 1934, as
amended, for the broadcast of any matter contained in programs. Employee
further represents and warrants that, during Employee's employment, Employee
shall comply with all legal requirements.
13. MERGER OR REORGANIZATION. In the event of any merger, consolidation,
dissolution or reorganization of the Company (including but not limited to any
reorganization where the Company is not the surviving or resulting entity), or
any transfer of all or substantially all of the assets of the Company, the
provisions of this Agreement shall inure to the benefit of and shall be binding
upon the surviving or resulting partnership or the corporation (or other entity)
or person(s) to which such assets shall be transferred.
14. REMEDIES. Except as it may elect otherwise, the Company shall have
all rights, powers or remedies provided by law or equity for breach of this
Agreement available to it, it being understood and agreed that no one of them
shall be considered as exclusive of the others or as exclusive of any other
rights, powers and remedies allowed by law. The exercise or partial exercise of
any right, power or remedy shall neither constitute the election thereof nor the
waiver of any other right, power or remedy.
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Without limiting the generality of the foregoing, Employee agrees that, in
addition to all other rights and remedies available at law or in equity, the
Company shall be entitled to enforcement of this Agreement in accordance with
the principles of equity, the remedy at law being hereby agreed and acknowledged
by Employee to be inadequate.
15. WAIVER OF BREACH OF AGREEMENT. If either party waives a breach of
this Agreement by the other party, that waiver will not operate or be construed
as a waiver of any subsequent breaches.
16. ASSIGNMENT. The rights of the Company hereunder may, without the
consent of Employee, be assigned by the Company to any Related Entity or
successor of the Company or any entity which acquires all or substantially all
of the Company's assets. Except as provided in the preceding sentence or in
Section 13 hereof, the Company may not assign all or any of its rights, duties
or obligations hereunder without the prior written consent of Employee. This
Agreement is not assignable by Employee. Any attempt by Employee to assign this
Agreement, or any portion thereof, shall be deemed null and void and of no force
and effect.
17. NOTICES. All notices, requests, demands and other communications
permitted or required hereunder shall be in writing and shall be deemed to have
been duly given if personally delivered or if deposited in the United States
mail, first class, postage prepaid, registered or certified, addressed as
follows:
(a) If to Employee, addressed to Employee at the address set forth
below Employee's name on the execution page hereof.
(b) If to the Company, addressed to:
Metro Traffic Control, Inc.
2700 Post Oak Blvd., Suite #1400
Houston, Texas 77056
Attention: Chief Executive Officer
or to such other address as either party hereto may request by written notice as
herein provided.
18. SEVERABILITY. Any provision hereof prohibited by or unenforceable
under any applicable law of any jurisdiction shall as
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to such jurisdiction be deemed ineffective and deleted herefrom without
affecting any other provision of this Agreement. It is the desire of the parties
hereto that this Agreement be enforced to the maximum extent permitted by law,
and should any provision contained herein be held unenforceable, the parties
hereby agree and consent that such provision shall be reformed to make it a
valid and enforceable provision to the maximum extent permitted by law.
19. TITLE AND HEADINGS; EXHIBITS. Titles and headings to Sections hereof
are for the purpose of reference only and shall in no way limit, define or
otherwise affect the provisions hereof. Any and all exhibits referred to herein
are, by such reference, incorporated herein and made a part hereof.
20. CERTAIN DEFINITIONS. As used in this Agreement, the following
capitalized terms shall have the meanings indicated:
(a) CORPORATE AFFILIATES. Any organization, entity or person with
whom the Company has a contract or other arrangement to provide traffic, news,
weather, sports or other information, whether by broadcast, computer or any
other means.
(b) SPONSOR(S). Any and all advertisers (including their
subsidiaries and affiliates) whose commercial material is to be or is
incorporated in any one or more programs or announcements, live or recorded,
broadcast over the facilities of the Company or by the Company.
(c) RELATED ENTITY OR RELATED ENTITIES. Any entity (or entities)
that directly or indirectly controls, is controlled by, or is under common
control with, the Company or David Saperstein or members of his immediate family
or trust for their benefit. The term "entity" as used in this Section 20(c)
means an individual, corporation, partnership, joint venture, limited liability
partnership or limited liability company, trust, unincorporated organization,
association or other entity whose principal business is gathering, disseminating
or reporting traffic, news, sports, weather or other information or the sale or
packaging of Competitive Broadcast Advertising Vehicles. As used in this
Section 20(c), the term "control" means the possession, directly or indirectly,
of the power to direct or cause the direction of the management and policies of
a person or entity, whether through the ownership of voting securities, by
contract or otherwise.
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(d) COMPETITIVE BROADCAST ADVERTISING VEHICLE(S). An advertising
vehicle shall be deemed to be a Competitive Broadcast Advertising Vehicle if (i)
it consists of five to fifteen second commercial mentions imbedded in any news
break format, news, weather, sports or traffic information broadcast immediately
before or after any such programming, or in connection with such programming,
and (ii) it is offered for sale in a package including the broadcast of such
commercial mentions or identification as a Sponsor of any such programming on
more than three radio stations in any one ADI area of dominant influence as
defined by Arbitron, Inc.
21. CHOICE OF LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES RELATING TO THE SUBJECT MATTER OF THIS AGREEMENT, SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, WITHOUT REGARD
TO PRINCIPLES OF CONFLICTS OF LAW.
22. WAIVER OF RIGHTS AND CONSENT TO ARBITRATION. Employee shall and does
hereby irrevocably waive the right to file any complaints against the Company
with any federal, state or local agencies, including but not limited to, the
Equal Employment Opportunity Commission, and the Texas or other state Commission
on Human Rights or to file any claim, institute litigation or other legal action
based on the employment relationship or any activity covered by the terms of
this agreement. The Employee agrees and acknowledges that in exchange for the
relinquishment of those rights that any dispute, controversy or claim arising
out of this Agreement, except for the injunctive relief provided for in
paragraphs 8 and 9 above, or the employment relationship between Employee and
the Company shall be finally settled by arbitration in Houston, Texas in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association in effect on the date of this Agreement and judgment upon the award
may be entered in any court having jurisdiction thereof.
23. BINDING EFFECT. This Agreement shall be binding upon and inure to the
benefit of the parties hereto , their respective heirs, executors, successors
and permitted assigns.
24. ENTIRE AGREEMENT AND AMENDMENT. This Agreement supersedes all prior
understandings and agreements between the parties with respect to the subject
matter hereof. This Agreement contains the entire agreement of the parties with
respect to the
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subject matter covered hereby and may be amended, waived or terminated only by
an instrument in writing executed by both parties hereto.
25. EXECUTION BY COMPANY. Submission of this Agreement to Employee, or
Employee's agents or attorneys, for examination or signature does not constitute
or imply an offer of employment, and this Agreement shall have no binding effect
until execution hereof by both the Company and Employee.
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26. NO INFERENCE AGAINST AUTHOR. No provision of this Agreement shall be
interpreted against any party because such party or its legal representative
drafted such provision.
IN WITNESS WHEREOF, this Agreement is EXECUTED as of the17th day of
July 1996 to be EFFECTIVE FOR ALL PURPOSES as of the "Effective Date".
"COMPANY"
METRO TRAFFIC CONTROL, INC.
By: /s/ Shane E. Coppola
----------------------------
Printed Name: Shane Coppola
------------------
Title: Executive Vice President
-------------------------
"EMPLOYEE"
/s/ Gary Worobow
--------------------------------
GARY L. WOROBOW
Address: 125 East 87th #8G
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New York, NY 10128
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NY-163702.1 Worobow Employment Agreement
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EXHIBIT A
INCENTIVE STOCK OPTION AGREEMENT ("Agreement"), dated this ___________
between Metro Networks, Inc., a Delaware corporation (the "Company") and
________________ the "Optionee").
W I T N E S S E T H:
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WHEREAS, the Board of Directors of the Company (the "Board") has
adopted and the shareholders of the Company have approved the Metro Networks,
Inc., 1996 Incentive Stock Option Plan (the "Plan") for the issuance of options
pursuant to the Plan ("Options") to employees of the Company (unless otherwise
defined herein, capitalized terms used herein shall have the meanings ascribed
to such terms in the Plan); and
WHEREAS, the Plan authorizes the Board, in its discretion, to grant
Options and to determine the details of each Agreement to which such granted
Options relate; and
WHEREAS, the Board believes it to be in the best interest of the
Company to grant the Optionee Options to purchase shares of Common Stock of the
Company (the "Stock"), at the price and subject to the terms herein, and in all
respects subject to the terms, definitions and provisions of the Plan which is
incorporated by reference herein.
NOW, THEREFORE, IN CONSIDERATION of the promises and the mutual
covenants and agreements hereinafter set forth, the Company and the Optionee
agree as follows:
1. OPTION
(a) GRANT OF OPTION. The Company hereby grants the
Optionee an Option to purchase an aggregate of
___________________________________________ shares of Stock in accordance with
the terms and conditions of this Agreement.
(b) EXERCISE PERIOD. Except as otherwise provided in this
Agreement, the Option granted hereunder shall become exercisable by the Optionee
according to the following schedule: thirty-three and one-third percent (33
1/3%) upon the first anniversary of the date of execution of this Agreement and
an additional thirty-three and one-third percent (33 1/3%) upon each of the
second and third anniversaries of the date of execution of this Agreement until
all such Options are exercisable; PROVIDED, HOWEVER, that in the event the
<PAGE>
Company elects to terminate that certain Executive Employment Agreement between
the Company and the Optionee dated ___________, 199__, (the "Employment
Agreement") on the second anniversary of the closing of the Public Offering (as
defined in the Employment Agreement) pursuant to Section 2 of the Employment
Agreement, then the remaining sixty-six and two thirds percent (66 2/3%) of such
Options shall become exercisable upon the effective date of such termination;
and PROVIDED, FURTHER, HOWEVER, that the right to exercise an Option as to any
fractional share of Stock shall be deemed the right to exercise an Option as to
a full share of Stock with appropriate adjustments made to the last exercise
period so that the total number of Options shall not exceed that specified under
paragraph (a) of Section 1 hereof.
(c) NO LAPSE OF EXERCISE POWER. Any Option which becomes
exercisable on a certain date but is not exercised in full on that date shall
not lapse but shall remain outstanding as to the unexercised portion and shall
continue in effect throughout the remainder of the Option Term (taking into
account any early termination of such Option Term which may be provided for
under this Agreement or the Plan).
(d) OPTION TERM. An option which is not exercised shall
expire upon the earlier of:
(i) ten (10) years after the date such Option was granted
unless the Optionee is a 10% Holder (as defined herein) in which case the
Option shall expire five (5) years after such date;
(ii) three (3) months after the date the Optionee's
employment with the Company terminates, unless such termination was the
result of the Optionee's death or disability or unless the Company
terminates the employment for cause;
(iii) one (1) year after the Optionee's death or disability;
and
(iv) any such earlier termination date as may be provided by
this Agreement or the Plan.
(e) OPTION PRICE. Except as otherwise provided herein, the
purchase price for each share of Stock subject to the Option shall be $_______
per share, which is
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the fair market value of the Stock on the date of the Option grant.
(f) ADJUSTMENTS. If the outstanding shares of Stock of the
Company are subdivided, consolidated, increased, decreased, changed into, or
exchanged for a different number or kind of shares or securities through
reorganization, merger, recapitalization, reclassification, capital adjustment
or otherwise, or if the Company shall issue shares of Stock as a dividend or
upon a stock split, the number and kind of shares of Stock available for
purposes of this Agreement or the Plan and all shares of Stock subject to the
unexercised portion of any Options theretofore granted and the Option Price of
such Options shall be appropriately adjusted to prevent dilution or enlargement
of rights. However, any such adjustment in outstanding Options shall be made
without change in the total Option Price applicable to the unexercised portion
of any outstanding Options. Adjustments under this Section 1(f) shall be made
by the Board, whose determination as to what adjustments shall be made, and the
extent thereof, shall be final, binding and conclusive. In computing any
adjustment under this Section 1(f), any fractional share which might otherwise
become subject to an Option shall be eliminated.
2. LIMITATIONS ON OPTIONS.
(a) GREATER THAN 10% SHAREHOLDER. If, at the time this
Option is granted, the Optionee owns stock (including for this purpose any stock
which may be purchased by the Optionee under an Option) possessing more than ten
percent (10%) of the total combined voting power of all classes of stock of the
Company (hereinafter, a "10% Holder"), its parent or its subsidiaries, then the
purchase price shall instead be $110% of the FMV on the date of grant per share
and the Option shall not be exercisable after five (5) years from the date it is
granted.
(b) MAXIMUM NUMBER OF INCENTIVE OPTIONS EXERCISABLE DURING
ONE YEAR. To the extent that the aggregate fair market value of the Stock
(determined as of the time an Option is granted pursuant to the Plan)
exercisable for the first time by an employee during any calendar year under the
Plan and all similar plans maintained by the Company exceeds $100,000.00,
options for such shares shall be treated as options that are not Incentive Stock
Options. For purposes of
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this provision, Options shall be taken into account in the order in which they
were granted.
(c) SEQUENTIAL EXERCISE. Options granted to the Optionee
may be exercised in any order, so that the Optionee may exercise an Option if
another Option, granted to him at an earlier time, remains outstanding in whole
or in part.
(d) NONTRANSFERABILITY OF OPTION. The Option may not be
assigned or transferred other than pursuant to a Qualified Domestic Relations
Order or by will or by the laws of descent and distribution. During the
lifetime of the Optionee, the Option may be exercisable only by the Optionee.
Transfer of an Option by will or by the laws of descent and distribution shall
not be effective to bind the Company unless the Company shall have been
furnished with written notice thereof and an authenticated copy of the will or
such other evidence as the Board may deem necessary to establish the validity of
the transfer and the acceptance by the transferee of the terms and conditions of
such Option. Any attempted assignment, transfer, pledge, hypothecation or other
disposition of the Option contrary to the provisions hereof, or the levy of any
execution, attachment or similar process upon the Option shall be null and void
and without effect.
3. METHOD OF EXERCISING OPTIONS. Options shall be exercised by a
written notice delivered to the Company at its principal office in Houston,
Texas specifying the number of shares of Stock to be purchased and tendering
payment in full for such Stock. Payment may be tendered in cash or by
certified, bank cashier's or teller's check or by Stock (valued at fair market
value as of the date of tender), or some combination of the foregoing. In the
event all or part of the Option Price is paid in Stock, any excess of the value
of such Stock over the Option Price will be returned to the Optionee as follows:
(i) any whole share of Stock remaining in excess of the Option Price will be
returned in kind, and may be represented by one or more share certificates, and
(ii) any partial shares of Stock remaining in excess of the Option price will be
returned in cash.
In the event the Company determines that it is required to withhold
state or Federal income tax as a result of the exercise of an Option, as a
condition to the exercise thereof, the Optionee may be required to make
arrangements satisfactory to the Company to enable it to satisfy such
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<PAGE>
withholding requirements. Payment of such withholding requirements may be made,
in the discretion of the Board, (i) in cash, (ii) by delivery of Shares
registered in the name of the Optionee, or by the Company not issuing such
number of Shares subject to the Option, having a Fair Market Value at the time
of exercise equal to the amount to be withheld or (iii) any combination of (i)
and (ii) above. If (i) any Shares are registered under Section 12 of the
Exchange Act, (ii) the Optionee is an officer (as defined in Section 16 of the
Exchange Act) of the Company subject to Section 16(b) of the Exchange Act and
(iii) such payment is made with Shares acquired by the Optionee upon the
exercise which gives rise to such withholding, an election under the preceding
sentence (a) must be irrevocable and with respect to all Shares covered by the
Option subject to the election, provided, however, that such election may be
changed through another irrevocable election that takes effect at least six
months after the prior election; or (b) may be made during the period beginning
on the third business day following the date of release of quarterly and annual
summary statements of sales and earnings as provided by Rule 16b-3(e)(3) of the
Securities and Exchange Commission and ending on the twelfth (12th) business day
following such date and only if such period occurs before the date the Company
requires payment of the withholding tax. The election need not be made during
the ten-day window period if counsel to the Company determines that compliance
with such requirement is unnecessary.
4. TIME PERIOD ON TRANSFERS OF STOCK. Any Optionee, or person
representing such Optionee, who sells, exchanges, transfers or otherwise
disposes of any Stock acquired pursuant to the exercise of an Option (other than
Stock sold or otherwise transferred to the Company) within two years following
the grant of such Option or within one year following the actual transfer of
such Stock to the Optionee, shall be obligated to notify the Company in writing
of the date of disposition, the number of shares of Stock so disposed and the
amount of consideration received as a result of such disposition. The Company
shall have the right to take whatever reasonable action it deems appropriate
against an Optionee, including early termination of any Options which remain
outstanding, in order to recover any additional taxes the Company incurs as a
result of such Optionee's failure to so notify the Company.
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5. ISSUANCE OF OPTIONED STOCK.
(a) ISSUANCE OF CERTIFICATES. The Company shall not be
required to issue or deliver any certificate for Stock purchased upon the
exercise of any Option, or any portion thereof, prior to fulfillment of each of
the following applicable conditions:
(i) The admission of such Stock to listing on all stock
exchanges or markets on which the Stock is then listed to the extent such
admission is necessary;
(ii) The completion of any registration or other
qualification of such Stock under any federal or state securities laws or
under the rulings or regulations of the Securities and Exchange Commission
or any other governmental regulatory body, which the Board shall in its
sole discretion deem necessary or advisable or the determination by the
Board in its sole discretion that no such registration or qualification is
required;
(iii) The obtaining of any approval or other clearance from
any federal or state governmental agency which the Board shall, in its sole
discretion, determine to be necessary or advisable; and
(iv) The lapse of such reasonable period of time following
the exercise of the Option as the Board from time to time may establish for
reasons of administrative convenience.
(b) COMPLIANCE WITH SECURITIES AND OTHER LAWS. In no event
shall the Company be required to sell, issue or deliver Stock pursuant to
Options if in the opinion of the Board the issuance thereof would constitute a
violation by either the Optionee or the Company of any provision of any law or
regulation of any governmental authority or any securities exchange. As a
condition of any sale or issuance of Stock pursuant to Options, the Company may
place legends on the Stock, issue stop-transfer orders and require such
agreements or undertakings from the Optionee as the Company may deem necessary
or advisable to assure compliance with any such law or regulation, including, if
the Company or its counsel deems it appropriate, representations from the
Optionee that he is acquiring the Stock solely for investment and not with a
view to distribution and that no distribution of Stock acquired by him will be
made unless registered pursuant to applicable
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federal and state securities laws or unless, in the opinion of counsel to the
Company, such registration is unnecessary.
6. OPTION RIGHTS IN THE EVENT OF CERTAIN EVENTS.
(a) RIGHTS IN THE EVENT OF SALE, MERGER OR OTHER
REORGANIZATION OF COMPANY. In the event of a merger or consolidation where the
Company is not the surviving corporation, and the agreement of merger or
consolidation does not provide for the substitution of a new option for the
unexercised portion of the Option or for the assumption of the Option by the
surviving corporation, or in the event of the sale or transfer of assets,
liquidation or dissolution and the plan of liquidation or dissolution or
agreement of sale does not make special provision for the Option, Optionee shall
have the right immediately prior to the effective date of such merger,
consolidation, sale or transfer of assets, liquidation or dissolution to
exercise the Option in whole or in part without regard to any installment
provision contained in paragraph (b) of Section 1 hereof. In no event, however,
may any Option which becomes exercisable pursuant to this paragraph (a) of
Section 6, be exercised, in whole or in part, later than the date specified in
paragraph (d) of Section 1 above. If not so exercised, the Option shall
terminate at the time of any such merger, consolidation, sale or transfer of
assets, liquidation or dissolution.
(b) TERMINATION OF EMPLOYMENT. In the event that an
Optionee's employment with the Company terminates, other than by reason of death
or Total and Permanent Disability or termination for "cause", the Optionee shall
have (subject to Section 2 above) the right, for a period which shall not exceed
the earlier of the remaining Option Term (taking into account any earlier
termination date provided by the Plan) or three months from such termination of
employment, to exercise any Options which such Optionee would have been entitled
to exercise on the date of his termination of employment. At the expiration of
such three month period, or such earlier time as may be applicable, any such
Options which remain unexercised shall expire. In no event may any Options be
exercised that could not have been exercised by an Optionee on the date of his
termination of employment. Notwithstanding the foregoing, if the Optionee's
employment is terminated for "cause", the Company may notify the Optionee that
any Options not exercised prior to the termination are cancelled. For purposes
hereof, a termination of employment for "cause" shall include, but not be
limited to, dismissal as a result of (1)
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Optionee's conviction of any crime or offense involving money or other property
of the Company or its subsidiaries or which constitutes a felony in the
jurisdiction involved; (2) Optionee's gross negligence, gross incompetence or
willful misconduct in the performance of his or her duties; or (3) Optionee's
willful failure or refusal to perform his or her duties.
(c) TOTAL AND PERMANENT DISABILITY. If an Optionee's
employment with the Company is terminated on account of Total and Permanent
Disability, the Optionee shall have (subject to Section 2 above) the right, for
a period which shall not exceed the earlier of the remaining Option Term (taking
into account any earlier termination date provided by the Plan) or one year from
the date of such Optionee's disability, to exercise any Options which such
Optionee would have been entitled to exercise on the date of his Total and
Permanent Disability. At the expiration of such one year period, or such
earlier time as may be applicable, any such Options which remain unexercised
shall expire. In no event may any Options be exercised that could not have been
exercised by an Optionee on the date of his Total and Permanent Disability.
(d) DEATH. If an Optionee's employment with the Company is
terminated on account of death, the person or persons who shall have acquired
the right, by will or the laws of descent and distribution, to exercise his
Options shall continue to have (subject to Section 2 above) the right, for a
period which shall not exceed the earlier of the remaining Option Term (taking
into account any earlier termination date provided by the Plan) or one year from
the date of such Optionee's death, to exercise any Options which such Optionee
would have been entitled to exercise on the date of his death. At the
expiration of such one year period, or such earlier time as may be applicable,
any such Options which remain unexercised shall expire. In no event may any
Options be exercised that could not have been exercised by an Optionee on the
date of his death.
7. OPTION AND AGREEMENT SUBJECT TO THE PLAN. This Agreement and the
grant of any Option hereunder are subject to all the terms, conditions and
limitations set forth in the Plan, which is incorporated herein by reference and
should be read in conjunction herewith. The Plan may subject the Options
granted hereunder to additional terms, conditions or limitations which are not
specifically set forth herein. Any
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inconsistency between the Plan and this Agreement shall be resolved in favor of
the Plan language. A copy of the plan is on file for inspection at the
Company's principal offices located in Houston, Texas.
8. ADMINISTRATION BY BOARD OF DIRECTORS. The Board or a committee
appointed by the Board (the "Committee") has the exclusive authority to select
the officers and employees who are to be granted Options, determine the number
of Shares to be subject to Options to be granted to each Optionee and designate
such Options as Incentive Stock Options. The interpretation and construction by
the Board or the Committee of any provisions of the Plan or of any Option
granted thereunder shall be final. No member of the Administrator shall be
liable for any action or determination made in good faith with respect to the
Plan or any Option granted hereunder.
If any Shares are registered under Section 12 of the Exchange Act,
then notwithstanding the first or second sentence of the immediately preceding
paragraph, after such registration the grant of any Option under the Plan to any
person who shall be an officer (as defined in Section 16 of the Exchange Act) of
the Company at the time of such grant shall only be made either (A) with the
approval of the Board if all of its members are Disinterested Persons or (B)
with the approval of the Committee if all of the members of the Committee are
Disinterested Persons.
9. RESTRICTIVE COVENANTS.
(a) COVENANT NOT TO COMPETE. The Optionee acknowledges
that he or she is aware that the services performed by him or her for the
Company have been and are of a special and unique character. The Optionee
further acknowledges and recognizes his or her possession of confidential and
proprietary information regarding the business of the Company. Accordingly, the
Optionee agrees that he or she will not, without the written permission of the
Company, within or outside of the United States for a period of one (1) year
from the date on which such Optionee's employment by or on behalf of the Company
is terminated (i) directly or indirectly engage or become interested or
involved in any Competitive Business (as hereinafter defined), whether such
engagement, interest or involvement shall be as an employer, officer, director,
owner, shareholder, employee, partner or in any other capacity or relationship,
(ii) assist
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others in engaging in any Competitive Business in the manner described in the
foregoing clause (i), or (iii) induce employees of the Company to terminate
their employment with the Company or engage in any Competitive Business;
provided, however, that nothing contained in this Section 9(a) shall be deemed
to prohibit the Optionee from acquiring, solely for investment purposes, less
than 5% of the publicly-traded shares of the capital stock of any corporation.
As used in this Section 9(a), the term "Competitive Business" means and includes
any business or activity that is now or at any time in the future competitive
with or directly related to the business conducted by the Company on the date
the Optionee's employment by or on behalf of the Company is terminated.
(b) AGREEMENT NOT TO SOLICIT CUSTOMERS. For a period of
one (1) year from the date on which such Optionee's employment by or on behalf
of the Company is terminated, the Optionee agrees that he or she will not, for
or on behalf of a Competitive Business, directly or indirectly, as owner,
officer, stockholder, partner, associate, consultant, manager, advisor,
representative, employee, agent, creditor or otherwise, attempt to solicit or in
any other way disturb or service any person, firm or corporation that has been a
customer account of the Company at any time or times prior to the date hereof,
whether or not the Optionee had direct account responsibility for such customer
account.
(c) CONFIDENTIAL INFORMATION.
(i) The Optionee agrees not to disclose to any person or
use, at any time after the date hereof, any confidential information of the
Company, whether the Optionee has such information in his memory or
embodied in writing or any other physical form. For purposes of this
Agreement the phrase "confidential information of the Company" means all
information which (a) is known only to the Company's employees, or others
in a confidential relationship with the Company or employees of affiliated
companies, (b) relates to specific technical matters, such as the Company's
or its subsidiaries' proprietary information, plans, reports, and
promotional, sales or operational procedures and materials, or (c) relates
to the identity and solicitation of customers and accounting procedures of
the Company or other business practices of the Company.
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(ii) The Optionee agrees not to remove from the premises of
the Company, at any time after the date hereof, any document or object
containing or reflecting any confidential information of the Company, and
the Optionee recognizes that all such documents and objects, whether
developed by the Company or by someone else for the Company, are the
exclusive property of the Company.
(iii) It is agreed that the names and addresses of customers
who were contacted by the Optionee on behalf of the Company, or of whom the
Optionee became aware through his or her employment with the Company, are
trade secrets of the Company, as is other such confidential information of
the Company, including but not limited to the customer's business needs and
requirements.
(iv) The Optionee shall, at any time requested by the
Company after the date hereof, promptly deliver to the Company all
confidential memoranda, notes, reports, lists, and other documents (and all
copies thereof) relating to the business of the Company which he or she may
then possess or have under his or her control.
10. LOCK-UP AGREEMENT. The Optionee agrees, if requested by the
Company and an underwriter of Common Stock (or other securities) of the Company,
not to sell or otherwise transfer or dispose of any Common Stock (or other
securities) of the Company held by the Optionee during the one hundred eighty
(180) day period following the effective date of a registration statement filed
under the 1933 Act, as amended, without the prior consent of the Company or such
underwriter, as the case may be, provided that such agreement only applies to
registration statements including securities to be sold to the public in an
underwritten offering during the period ending on __________________.
11. MISCELLANEOUS.
(a) NO EMPLOYMENT RIGHTS. Nothing in the Agreement or
in-any Option granted hereunder shall confer upon any employee the right to
continue in the employ of the Company.
(b) BINDING EFFECT. The Agreement shall be binding upon,
and inure to the benefit of the Company, Optionee, and their respective personal
representatives, successors and permitted assigns.
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(c) SINGULAR, PLURAL; GENDER. Whenever used herein, except
where the context clearly indicates to the contrary, nouns in the singular shall
include the plural, and the masculine pronoun shall include the feminine gender.
(d) HEADINGS. Headings of the Sections hereof are inserted
for convenience and reference and constitute no part of the Agreement.
(e) RIGHTS AS SHAREHOLDERS. An Optionee or transferee of
an Option shall have no rights as a shareholder with respect to any Stock
subject to such Option prior to the purchase of such Stock by exercise of such
Option as provided herein.
(f) APPLICABLE LAW. This Agreement and the Options granted
hereunder shall be interpreted, administered and otherwise subject to the laws
of the State of Texas, except to the extent the General Corporation Law of
Delaware shall govern.
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IN WITNESS WHEREOF, the Company and the Optionee have executed this
Agreement as of the day and year first written above.
OPTIONEE METRO NETWORKS, INC.
_________________________ By:_________________________
Name: Name:
Address: Title:
<PAGE>
METRO NETWORKS, INC.
1996 INCENTIVE STOCK OPTION PLAN
<PAGE>
PLAN SUMMARY
The Plan is designed to advance the Company's interests by encouraging
employees (who may be officers) of the Employer Company to acquire a proprietary
interest in the Company. It provides that an aggregate of _______ shares of the
Company's Common Stock may be optioned to employees (who may be officers) of the
Employer Company. Options granted under the Plan are designed to be Incentive
Stock Options, which may qualify for favorable federal income tax treatment.
All employees (who may be officers) of the Employer Company are eligible to
receive Incentive Stock Options, but the Administrator is entitled to select the
individuals to whom such options actually will be granted.
Following the statutory requirements for Incentive Stock Options under
Internal Revenue Code Section 422, the Plan provides the purchase price of the
optioned stock must be fixed at no less than the fair market value of the
Company's Common Stock as of the time the Option is granted (or in the case of a
Participant who beneficially owns more than ten percent (10%) of the total
combined voting power of all classes of outstanding shares of capital stock of
the Employer Company or its Parent or Subsidiary, no less than one hundred ten
percent (110%) of the fair market value of the Company's Common Stock as of the
time the Option is granted). To the extent that the aggregate fair market value
of stock exercisable by an employee for the first time in any one calendar year
under all plans of the Employer Company and any Parent and Subsidiary exceeds
$100,000, options for such shares shall not be considered Incentive Stock
Options. Options granted under the Plan are nontransferable (other than by will
or the laws of descent and distribution) and may not be exercised more than ten
years (five years in the case of a Participant who beneficially owns more than
ten percent (10%) of the total combined voting power of all classes of
outstanding shares of capital stock of the Employer Company or Parent or
Subsidiary) after the date they are granted.
The Company will receive no cash consideration for granting Options
under the Plan. However, when an Option is exercised, the holder is required to
pay the Option Price for the number of shares of stock to be issued under the
exercised Option.
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The Plan will be administered by the Administrator and will terminate
five years after the earlier of the date it is adopted by the Board of Directors
or the date it is approved by the Company's stockholders, unless earlier
terminated by the Administrator.
<PAGE>
METRO NETWORKS, INC.
1996 INCENTIVE STOCK OPTION PLAN
SECTION 1
DEFINITIONS
As used herein, the following terms have the meanings hereinafter set
forth unless the context clearly indicates to the contrary:
(a) "Act" means the Securities Act of 1933, as amended.
(b) "Administrator" means the Board or the Committee, whichever shall
be administering the Plan from time to time in the discretion of the Board, as
described in Section 3 of the Plan.
(c) "Board" means the Board of Directors of the Company.
(d) "Code" means the Internal Revenue Code of 1986, as amended.
(e) "Committee" means the committee appointed by the Board in
accordance with Section 3 of the Plan.
(f) "Company" means Metro Networks, Inc., a Delaware corporation.
(g) "Disinterested Person" shall have the meaning assigned to this
phrase in Rule 16b-3 of the Securities and Exchange Commission adopted under the
Exchange Act.
(h) "Employer Company" means the company, whether the Company or a
subsidiary of the Company, which employs the employee (who may be an officer).
(i) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(j) "Fair Market Value of Shares" shall mean (i) if the Shares are
not publicly traded on the day in question, the fair market value of the Shares
on the day in question as determined and set forth in writing by the
Administrator (which, in making such determination, shall
<PAGE>
make a good faith effort to establish the true fair market value of the Shares
as of such date using such methods as they deem appropriate, including
independent appraisals, and taking into consideration any requirements set forth
in the Code or the regulations thereunder) or (ii) if the Shares are publicly
traded on the day in question, the closing price of the Shares on the day in
question. The closing price shall be the last reported sale price on the New
York Stock Exchange or, if the Shares are not listed or admitted to trading on
such Exchange, on the principal national securities exchange on which the Shares
are listed or admitted to trading or, if not listed or admitted to trading on
any national securities exchange, the average of the highest closing bid and
asked prices as reported by the Nasdaq Stock Market's National Market.
(k) "Incentive Stock Option" means an Option for Shares which
qualifies for treatment pursuant to Section 422 of the Code.
(l) "Incentive Stock Option Agreement" means the agreement described
in Section 6.1 between the Company and the Optionee under which the Optionee may
purchase Shares hereunder.
(m) "Option" means an option to purchase a Share pursuant to the
provisions of this Plan.
(n) "Optionee" means an employee (who may be an officer) of the
Company or a subsidiary of the Company to whom an Option has been granted
hereunder.
(o) "Option Price" means the price per share of the Shares subject to
each option as provided in Section 6.3.
(p) "Option Term" means the period of time during which an Option may
be exercised.
(q) "Parent" shall have the meaning assigned to that term under
Section 424 of the Code.
(r) "Plan" means the Metro Networks, Inc. 1996 Incentive Stock Option
Plan, the terms of which are set forth herein.
(s) "Share" or "Shares" means Common Stock of the Company, par value
$.001 per share, or, in the event that the outstanding Shares are hereafter
changed into or ex-
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changed for different shares or securities of the Company or some other
corporation or other entity, such other shares or securities.
(t) "Subsidiary" shall have the meaning assigned to that term under
Section 424 of the Code.
(u) "Total and Permanent Disability" means the inability of an
employee to engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment which can be expected to
result in death or which has lasted or can be expected to last for a continuous
period of not less than twelve months.
SECTION 2
THE PLAN
2.1. NAME. This Plan shall be known as "Metro Networks, Inc. 1996
Incentive Stock Option Plan".
2.2. PURPOSE. The purpose of this Plan is to advance the interests of
the Company and its stockholders by affording employees (who may be officers) of
the Employer Company an opportunity to acquire or increase their proprietary
interest in the Company by the grant to such individuals of Options under the
terms set forth herein. By thus encouraging such individuals to acquire or
increase their proprietary interest in the Company, the Company seeks to
attract, motivate and retain those highly competent individuals upon whose
judgment, initiative, leadership, and continued efforts the success of the
Company in large measure depends.
2.3. INTENTION. It is intended that the Options issued under this
Plan will qualify as Incentive Stock Options if they are issued in accordance
with the rules as set forth herein, and the terms of this Plan shall be
interpreted in accordance with such intention.
SECTION 3
ADMINISTRATION
3.1. ADMINISTRATION. The Plan shall be administered, in the
discretion of the Board from time to time, by the Board or by the Committee.
The Committee shall be appointed by the Board, in a manner consistent with the
Company's Bylaws, and shall consist of not less than two (2)
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members of the Board. The Board may from time to time remove members from, or
add members to, the Committee. Vacancies on the Committee, however caused,
shall be filled by the Board. The Board may appoint one (1) of the members of
the Committee as Chairman. The Administrator shall hold meetings at such times
and places as it may determine. Acts of a majority of the Administrator at
which a quorum is present, or acts reduced to or approved in writing by the
unanimous consent of the members of the Administrator, shall be the valid acts
of the Administrator.
The Administrator shall from time to time at its discretion select the
employees (who may be officers) who are to be granted Options, determine the
number of Shares to be subject to Options to be granted to each Optionee and
designate such Options as Incentive Stock Options. The interpretation and
construction by the Administrator of any provisions of the Plan or of any Option
granted thereunder shall be final. No member of the Administrator shall be
liable for any action or determination made in good faith with respect to the
Plan or any Option granted hereunder.
If any Shares are registered under Section 12 of the Exchange Act,
then notwithstanding the first or second sentence of the immediately preceding
paragraph, after such registration the grant of any Option under the Plan to any
person who shall be an officer (as defined in Section 16 of the Exchange Act) of
the Employer Company at the time of such grant shall only be made either (A)
with the approval of the Board if all of its members are Disinterested Persons
or (B) with the approval of the Committee if all of the members of the Committee
are Disinterested Persons.
SECTION 4
PARTICIPATION
4.1. ELIGIBILITY. The Optionees shall be such persons (collectively,
"Participants"; individually a "Participant") as the Administrator may select
from among the following classes of persons, subject to the terms and conditions
of Section 4.2 below:
(a) Employees (who may be officers) of the Company; and
(b) Employees (who may be officers) of the Company's
subsidiaries.
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<PAGE>
4.2. TEN-PERCENT STOCKHOLDERS. A Participant who beneficially owns
more than ten percent (10%) of the total combined voting power of all classes of
outstanding stock of the Employer Company or its Parent or its Subsidiary shall
not be eligible to receive an Option unless (i) the Option Price of the Shares
subject to such Option is at least one hundred ten percent (110%) of the Fair
Market Value of such Shares on the date of grant and (ii) such Option by its
terms is not exercisable after the expiration of five (5) years from the date of
grant.
(a) STOCK OWNERSHIP. For purposes of Section 4.2 above, in
determining stock ownership, a Participant's beneficial ownership of any class
of outstanding stock of the Employer Company or a Parent or a Subsidiary shall
be determined as provided in Rule 16a-1(c) of the Securities and Exchange
Commission adopted under the Exchange Act, and in any event (i) such Participant
shall be considered as owning the stock owned, directly or indirectly, by or for
his or her brothers and sisters, spouse, ancestors and lineal descendants; (ii)
stock owned, directly or indirectly, by or for a corporation, partnership,
estate or trust shall be considered as being owned proportionately by or for its
stockholders, partners or beneficiaries; and (iii) stock with respect to which
such Participant holds an Option shall not be counted.
(b) OUTSTANDING STOCK. For purposes of Section 4.2 above,
"outstanding stock" shall include all stock actually issued and outstanding
immediately after the grant of the Option to the Optionee. "Outstanding stock"
shall not include shares authorized for issue under outstanding Options held by
the Optionee or by any other person.
SECTION 5
SHARES SUBJECT TO PLAN
5.1. SHARES AVAILABLE FOR OPTIONS. Subject to adjustment pursuant to
the provisions of Section 5.2 hereof, the total number of Shares which may be
issued upon the exercise of all Options shall not exceed _______ Shares. Such
Shares may be either authorized and unissued Shares or issued Shares which have
been reacquired by the Company. If any Option shall expire or terminate for any
reason without having been exercised in full, new Options may be granted
covering Shares originally set aside for the exercise of such expired or
terminated Option.
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5.2. ADJUSTMENTS.
(a) STOCK SPLITS AND DIVIDENDS. Subject to any required action
by the Board and/or stockholders, the number of Shares covered by the Plan as
provided in Section 5.1 hereof, the number of Shares covered by each outstanding
Option and the Option Price thereof shall be proportionately adjusted for any
increase or decrease in the number of issued Shares resulting from a subdivision
or consolidation of Shares or the payment of a stock dividend (but only if paid
in Shares), a stock split or any other increase or decrease in the number of
issued Shares effected without receipt of consideration by the Company.
(b) MERGERS. Subject to any required action by the Board and/or
stockholders, if the Company shall merge with another corporation and the
Company is the surviving corporation in such merger and under the terms of such
merger the Shares outstanding immediately prior to the merger remain outstanding
and unchanged, each outstanding Option shall continue to apply to the Shares
subject thereto and shall also pertain and apply to any additional securities
and other property, if any, to which a holder of the number of Shares subject to
the Option would have been entitled as a result of the merger.
(c) ADJUSTMENT DETERMINATION. To the extent that the foregoing
adjustments relate to securities of the Company, such adjustments shall be made
by the Administrator, whose determination shall be conclusive and binding on all
persons. In computing any adjustment under this Section 5.2, any fractional
Share which might otherwise become subject to an Option shall be eliminated.
SECTION 6
OPTIONS
6.1. OPTION GRANT AND AGREEMENT. Each Option grant shall be evidenced
by a written Incentive Stock Option Agreement dated as of the date of grant and
executed by the Company and the Optionee, which Agreement shall set forth the
number of Options granted, the Option Price, the Option Term and such other
terms and conditions as may be determined appropriate by the Administrator,
provided that such terms and conditions are consistent with the Plan. The
Incentive Stock Option Agreement shall incorporate this Plan by reference and
provide that any inconsistencies or disputes shall be resolved in favor of the
Plan language.
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<PAGE>
6.2. OPTION CONDITIONS. Each Option shall be subject to the following
conditions, which conditions shall be stated within the applicable Incentive
Stock Option Agreement. Any Option which does not comply with these provisions
shall not be considered an Incentive Stock Option and shall not be considered as
issued under this Plan:
(a) To the extent that the aggregate Fair Market Value of Shares
(determined as of the time an Option is granted) exercisable for the first
time by an Optionee during any calendar year under this Plan and all
similar plans maintained by the Employer Company and its Subsidiary and its
Parent exceeds $100,000, options for such shares shall be treated as
options that are not Incentive Stock Options. For purposes of this
provision, Options shall be taken into account in the order in which they
were granted.
(b) Options granted to an Optionee may be exercised in any
order, so that an Optionee may exercise an Option if another Option,
granted to him at an earlier time, remains outstanding.
(c) No Option may be assigned or transferred by an Optionee
other than by will or by the laws of descent and distribution. During the
lifetime of an Optionee, the Option may be exercisable only by the
Optionee. Transfer of an Option by will or by the laws of descent and
distribution shall not be effective to bind the Company unless the Company
shall have been furnished with written notice thereof and an authenticated
copy of the will or such other evidence as the Board may deem necessary to
establish the validity of the transfer and the acceptance by the transferee
of the terms and conditions of such Option.
(d) The maximum number of Options which any Participant may
receive under the Plan during any calendar year is 100,000.
6.3. OPTION PRICE. The Option Price shall be determined by the
Administrator, subject to any limitations imposed by this Plan, but shall not be
less than the Fair Market Value of Shares on the date the Option is granted and,
in the case of an Option granted to an Optionee described in Section 4.2 hereof,
the Option Price shall not be less than one hundred ten percent (110%) of the
Fair Market Value on the date of grant.
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<PAGE>
6.4. OPTION TERM. The Option Term shall be determined by the
Administrator, subject to any limitations imposed by this Plan, but in any event
shall not be more than ten years from the date such Option is granted, and, in
the case of an Option granted to an Optionee described in Section 4.2 hereof,
shall not be more than five years from the date such Option is granted. Options
may be subject to earlier termination as provided in this Plan.
6.5. LIMITATIONS ON EXERCISE OF OPTIONS. Notwithstanding anything
contained in this Plan to the contrary:
(a) Options may not be exercised until the Plan has been
ratified by the stockholders as provided in Section 9.5.
(b) Options shall be exercised in full or in such equal or
unequal installments as the Administrator shall determine; provided that if
an Optionee does not purchase all of the Shares which the Optionee is
entitled to purchase on a certain date or within an established installment
period, the Optionee's right to purchase any unpurchased Shares shall
continue during the Option Term (taking into account any early termination
of such Option Term which may be provided for under the Plan).
(c) If any Shares are registered under Section 12 of the
Exchange Act, all Options granted thereafter to an officer (as defined in
Section 16 of the Exchange Act) of the Company shall be subject to the
limitation that such Options shall not be exercised within six (6) months
from the date of grant.
6.6. METHOD OF EXERCISING OPTIONS; WITHHOLDING TAX. Options shall be
exercised by a written notice, delivered to the Company at its principal office
in Houston, Texas, specifying the number of Shares to be purchased and tendering
payment in full for such Shares. Payment may be tendered in cash or by
certified, bank cashier's or teller's check or by Shares (valued at fair market
value as of the date of tender), or some combination of the foregoing. In the
event all or part of the Option Price is paid in Shares, any excess of the value
of such Shares over the Option Price will be returned to the Optionee as
follows: (i) any whole Share remaining in excess of the Option Price will be
returned in kind, and may be represented by one or more share certificates; and
(ii) any partial Shares remaining in excess of the Option Price will be returned
in cash.
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<PAGE>
In the event the Company determines that it is required to withhold
state or Federal income tax as a result of the exercise of an Option, as a
condition to the exercise thereof, the Optionee may be required to make
arrangements satisfactory to the Company to enable it to satisfy such
withholding requirements. Payment of such withholding requirements may be made,
in the discretion of the Administrator, (i) in cash, (ii) by delivery of Shares
registered in the name of the Optionee, or by the Company not issuing such
number of Shares subject to the Option, having a Fair Market Value at the time
of exercise equal to the amount to be withheld or (iii) any combination of (i)
and (ii) above. If (i) any Shares are registered under Section 12 of the
Exchange Act, (ii) the Optionee is an officer (as defined in Section 16 of the
Exchange Act) of the Employer Company subject to Section 16(b) of the Exchange
Act and (iii) such payment is made with Shares acquired by the Optionee upon the
exercise which gives rise to such withholding, an election under the preceding
sentence (a) must be irrevocable and with respect to all Shares covered by the
Option subject to the election, provided, however, that such election may be
changed through another irrevocable election that takes effect at least six
months after the prior election; or (b) may be made during the period beginning
on the third business day following the date of release of quarterly and annual
summary statements of sales and earnings as provided by Rule 16b-3(e)(3) of the
Securities and Exchange Commission and ending on the twelfth (12th) business day
following such date and only if such period occurs before the date the Company
requires payment of the withholding tax. The election need not be made during
the ten-day window period if counsel to the Company determines that compliance
with such requirement is unnecessary.
6.7. RIGHTS IN THE EVENT OF SALE, MERGER OR OTHER REORGANIZATION.
Except as expressly provided in Section 5.2 and this Section 6.7, the Optionee
shall have no rights by reason of any subdivision or consolidation of shares of
stock of any class, the payment of any stock dividend or any other increase or
decrease in the number of shares of stock of any class or by reason of any
dissolution, liquidation, merger or consolidation or spin-off of assets or stock
of another corporation, and any issue by the Company of shares of stock of any
class, or securities convertible into shares of stock of any class, shall not
affect, and no adjustment by reason thereof shall be made with respect to, the
number or Option Price of Shares subject to an Option. The grant of an Option
pursuant to the Plan shall not affect in any way the right or power of the
Company to make adjustments,
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reclassifications, reorganizations or changes of its capital or business
structure, to merge or consolidate or to dissolve, liquidate, sell or transfer
all or any part of its business or assets. In any such event (other than a
merger in which the Company is the surviving corporation as described in
Section 5.2(b) and under the terms of which the shares of Common Stock
outstanding immediately prior to the merger remain outstanding and unchanged),
all rights of the Optionee with respect to the unexercised portion of any Option
shall wholly and completely terminate and all Options shall be cancelled at the
time of any such merger, consolidation, sale or transfer of assets, liquidation
or dissolution, except to the extent that any agreement or undertaking of any
party to any such merger, consolidation, or sale or transfer of assets, or any
plan pursuant to which such liquidation or dissolution is effected, shall make
specific provision with respect to the Plan and the rights of Optionees with
respect to Options granted thereunder. Notwithstanding the foregoing, the
holder of any such Option or right theretofore granted and still outstanding
shall have the right immediately prior to the effective date of such merger,
consolidation, sale or transfer of assets, liquidation or dissolution to
exercise such Option in whole or in part without regard to any installment
provision that may have been made part of the terms and conditions of such
Option or right; PROVIDED, that any conditions precedent to such exercise set
forth in the Stock Option Agreement referred to in Section 6.1 above, other than
the passage of time, have occurred. In no event, however, may any Option which
becomes exercisable pursuant to this Section 6.7 be exercised, in whole or in
part, later than the date preceding the tenth anniversary date of the grant
thereof.
6.8. RIGHTS IN THE EVENT OF DEATH. If an Optionee's employment with
the Employer Company is terminated on account of death, the person or persons
who shall have acquired the right, by will or the laws of descent and
distribution, to exercise the Optionee's Options shall continue to have (subject
to Sections 6.2 and 6.5 above) the right, for a period which shall not exceed
the earlier of the remaining Option Term (taking into account any earlier
termination date provided by the Plan) or one year from the date of such
Optionee's death, to exercise any Options which such Optionee would have been
entitled to exercise on the date of such Optionee's death. At the expiration of
such one year period, or such earlier time as may be applicable, any such
Options which remain unexercised shall expire. In no event may any Options be
exercised that
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could not have been exercised by an Optionee on the date of such Optionee's
death.
6.9. RIGHTS IN THE EVENT OF TOTAL AND PERMANENT DISABILITY. If an
Optionee's employment with the Employer Company is terminated on account of
Total and Permanent Disability, the Optionee shall have (subject to Sections 6.2
and 6.5 above) the right, for a period which shall not exceed the earlier of the
remaining Option Term (taking into account any earlier termination date provided
by the Plan) or one year from the date of such Optionee's Total and Permanent
Disability, to exercise any Options which such Optionee would have been entitled
to exercise on the date of such Optionee's Total and Permanent Disability. At
the expiration of such one year period, or such earlier time as may be
applicable, any such Options which remain unexercised shall expire. In no event
may any Options be exercised that could not have been exercised by an Optionee
on the date of such Optionee's Total and Permanent Disability.
6.10. RIGHTS IN THE EVENT OF TERMINATION OF EMPLOYMENT. In the event
that an Optionee's employment with the Employer Company terminates, other than
by reason of death or Total and Permanent Disability or termination for cause,
the Optionee shall have (subject to Sections 6.2 and 6.5 above) the right, for a
period which shall not exceed the earlier of the remaining Option Term (taking
into account any earlier termination date provided by the Plan) or three months
from such termination of employment, to exercise any Options which such Optionee
would have been entitled to exercise on the date of such Optionee's termination.
At the expiration of such three month period, or such earlier time as may be
applicable, any such Options which remain unexercised shall expire. In no event
may any Options be exercised that could not have been exercised by an Optionee
on the date of such Optionee's termination of employment. Notwithstanding the
foregoing, if an Optionee's employment is terminated for "cause", the Company
may notify the Optionee that any Options not exercised prior to the termination
are cancelled. For purposes hereof, a termination of employment or service for
"cause" shall include, but not be limited to, dismissal as a result of (1)
Optionee's conviction of any crime or offense involving money or other property
of the Company or its subsidiaries or which constitutes a felony in the
jurisdiction involved; (2) Optionee's gross negligence, gross incompetence or
willful misconduct in the performance of his or her duties; or (3) Optionee's
willful failure or refusal to perform his or her duties.
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SECTION 7
SHARES ISSUED PURSUANT TO AN OPTION
7.1. ISSUANCE OF CERTIFICATES. The Company shall not be required to
issue or deliver any certificate for Shares purchased upon the exercise of any
Option, or any portion thereof, prior to fulfillment of all of the following
applicable conditions:
(a) The admission of such Shares to listing on all stock
exchanges or markets on which the Shares are then listed to the extent such
admission is necessary;
(b) The completion of any registration or other qualification of
such Shares under any federal or state securities laws or under the rulings
or regulations of the Securities and Exchange Commission or any other
governmental regulatory body, which the Board shall in its sole discretion
deem necessary or advisable, or the determination by the Board in its sole
discretion that no such registration or qualification is required;
(c) The obtaining of any approval or other clearance from any
federal or state governmental agency which the Board shall, in its sole
discretion, determine to be necessary or advisable; and
(d) The lapse of such reasonable period of time following the
exercise of the Option as the Board from time to time may establish for
reasons of administrative convenience.
7.2. COMPLIANCE WITH SECURITIES AND OTHER LAWS. In no event shall the
Company be required to sell, issue or deliver Shares pursuant to Options if in
the opinion of the Board the issuance thereof would constitute a violation by
either the Optionee or the Company of any provision of any law or regulation of
any governmental authority or any securities exchange. As a condition of any
sale or issuance of Shares pursuant to Options, the Company may place legends on
the Shares, issue stop-transfer orders and require such agreements or
undertakings from the Optionee as the Company may deem necessary or advisable to
assure compliance with any such law or regulation, including if the Company or
its counsel deems it appropriate, representations from the Optionee that the
Optionee is acquiring the Shares solely for
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investment and not with a view to distribution and that no distribution of the
Shares acquired by the Optionee will be made unless registered pursuant to
applicable federal and state securities laws or unless, in the opinion of
counsel to the Company, such registration is unnecessary.
7.3. REQUIREMENTS IN THE EVENT OF A DISPOSITION OF SHARES. Any
Optionee, or person representing such Optionee, who sells, exchanges, transfers
or otherwise disposes of any Shares acquired pursuant to the exercise of an
Option within two years following the grant of such Option or within one year
following the actual transfer of such Shares to the Optionee, shall be obligated
to notify the Company in writing of the date of disposition, the number of
Shares so disposed and the amount of consideration received as a result of such
disposition. The Company shall have the right to take whatever reasonable
action it deems appropriate against an Optionee, including early termination of
any Options which remain outstanding, in order to recover any additional taxes
the Company incurs as a result of such Optionee's failure to so notify the
Company.
SECTION 8
TERMINATION, AMENDMENT AND MODIFICATION OF PLAN
8.1. BOARD TERMINATION, AMENDMENT AND MODIFICATION OF PLAN. The Board
may at any time amend or modify the Plan; PROVIDED, HOWEVER, that no such action
of the Board, without approval of the stockholders of the Company (in the same
manner as provided in Section 9.5), may:
(a) Increase the benefits accruing to Participants under the
Plan;
(b) Increase the number of Shares which may be issued under the
Plan;
(c) Modify the requirements as to eligibility for participation
in the Plan;
(d) Change the Option Price with respect to any outstanding
Option other than to change the manner of determining the Fair Market Value
of the Shares to conform with any then applicable provisions of the Code or
regulations or rulings thereunder; or
(e) Amend this Section 8.1 to defeat its purpose.
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8.2. PLAN TERMINATION. Unless terminated earlier as provided in
Section 8.1, the Plan shall terminate five years from the date it is adopted by
the Board or, if earlier, five years from the date it is approved by
stockholders of the Company and no Option shall be granted under this plan after
such date.
8.3. EFFECT OF TERMINATION, AMENDMENT OR MODIFICATION OF PLAN.
Notwithstanding Sections 8.1 and 8.2, no termination, amendment or modification
of the Plan shall in any manner affect any Option theretofore granted under the
Plan without the consent of the Optionee or a person who shall have acquired the
right to exercise the Option by will or the laws of descent and distribution.
SECTION 9
MISCELLANEOUS
9.1. NO EMPLOYMENT RIGHTS. Nothing in the Plan or in any Option
granted hereunder or in any Incentive Stock Option Agreement relating thereto
shall confer upon any individual the right to continue in the employ of the
Employer Company.
9.2. BINDING EFFECT. The Plan shall be binding upon the successors
and assigns of the Company.
9.3. SINGULAR, PLURAL, GENDER. Whenever used herein, except where the
context clearly indicates to the contrary, nouns in the singular shall include
the plural, and the masculine pronoun shall include the feminine gender.
9.4. HEADINGS. Headings of the Sections hereof are inserted for
convenience and reference and constitute no part of the Plan.
9.5. EFFECTIVE DATE; RATIFICATION BY STOCKHOLDERS. This Plan shall
become effective upon its adoption by the Board but is subject to the
ratification and approval by the affirmative vote of the holders of a majority
of the Company's outstanding shares of capital stock within 12 months following
such adoption. If this Plan is not so approved by the stockholders this Plan
shall become null and void and of no force or effect. Any Options granted
pursuant to the Plan may not be exercised until the Plan shall have been
ratified and approved by the stockholders pursuant to this Section.
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9.6. RIGHTS AS STOCKHOLDER. An Optionee or transferee of an Option
shall have no rights as a stockholder with respect to any Shares subject to such
Option prior to the purchase of such Shares by exercise of such Option as
provided herein.
9.7. APPLICABLE LAW. This Plan and the Options granted hereunder
shall be interpreted, administered and otherwise subject to the laws of the
State of Texas, except to the extent the General Corporation Law of Delaware
shall govern.
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METRO NETWORKS, INC.
1996 INCENTIVE STOCK OPTION PLAN
TABLE OF CONTENTS
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SECTION 1 DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 2 THE PLAN. . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.1. Name. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.2. Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.3. Intention . . . . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 3 ADMINISTRATION. . . . . . . . . . . . . . . . . . . . . . . 3
3.1. Administration. . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 4 PARTICIPATION . . . . . . . . . . . . . . . . . . . . . . . 4
4.1. Eligibility . . . . . . . . . . . . . . . . . . . . . . . . 4
4.2. Ten-Percent Stockholders. . . . . . . . . . . . . . . . . . 5
SECTION 5 SHARES SUBJECT TO PLAN. . . . . . . . . . . . . . . . . . . 5
5.1. Shares Available for Options. . . . . . . . . . . . . . . . 5
5.2. Adjustments . . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 6 OPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 6
6.1. Option Grant and Agreement. . . . . . . . . . . . . . . . . 6
6.2. Option Conditions . . . . . . . . . . . . . . . . . . . . . 7
6.3. Option Price. . . . . . . . . . . . . . . . . . . . . . . . 7
6.4. Option Term . . . . . . . . . . . . . . . . . . . . . . . . 8
6.5. Limitations on Exercise of Options. . . . . . . . . . . . . 8
6.6. Method of Exercising Options; Withholding Tax . . . . . . . 8
6.7. Rights in the Event of Sale, Merger or
Other Reorganization. . . . . . . . . . . . . . . . . . . . 9
6.8. Rights in the Event of Death. . . . . . . . . . . . . . . . 10
6.9. Rights in the Event of Total and Permanent Disability . . . 11
6.10. Rights in the Event of Termination of Employment. . . . . . 11
SECTION 7 SHARES ISSUED PURSUANT TO AN OPTION . . . . . . . . . . . . 12
7.1. Issuance of Certificates. . . . . . . . . . . . . . . . . . 12
7.2. Compliance with Securities and Other Laws . . . . . . . . . 12
7.3. Requirements in the Event of a Disposition of Shares. . . . 13
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SECTION 8 TERMINATION, AMENDMENT AND MODIFICATION OF PLAN . . . . . . 13
8.1. Board Termination, Amendment and Modification of Plan . . . 13
8.2. Plan Termination. . . . . . . . . . . . . . . . . . . . . . 14
8.3. Effect of Termination, Amendment or Modification of Plan. . 14
SECTION 9 MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . 14
9.1. No Employment Rights. . . . . . . . . . . . . . . . . . . . 14
9.2. Binding Effect. . . . . . . . . . . . . . . . . . . . . . . 14
9.3. Singular, Plural, Gender. . . . . . . . . . . . . . . . . . 14
9.4. Headings. . . . . . . . . . . . . . . . . . . . . . . . . . 14
9.5. Effective Date; Ratification by Stockholders. . . . . . . . 14
9.6. Rights as Stockholder . . . . . . . . . . . . . . . . . . . 15
9.7. Applicable Law. . . . . . . . . . . . . . . . . . . . . . . 15
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CREDIT AGREEMENT
THIS CREDIT AGREEMENT is dated as of October 21, 1994, among METRO TRAFFIC
CONTROL, INC., a Maryland corporation ("Metro"), METRO NETWORKS, LTD., a Texas
limited partnership ("MNLP") (Metro and MNLP are each a "Borrower", and together
with other Persons who may from time to time become a Borrower hereunder,
collectively, the "Borrowers"), the Lenders from time to time party hereto, and
NATIONSBANK OF TEXAS, N.A., a national banking association, as administrative
agent for the Lenders.
BACKGROUND
The Borrowers have requested that the Lenders make a credit facility
available to the Borrowers up to the maximum principal amount of $15,000,000.
The Lenders have agreed to do so, subject to the terms and conditions set forth
below.
In consideration of the mutual covenants and agreements contained herein,
and other good and valuable consideration hereby acknowledged, the parties
hereto agree as follows:
ARTICLE 1
Definitions
Section 1.1 Defined Terms. For purposes of this Agreement:
"Accounts" shall have the meaning assigned to such term in the UCC.
"Acquisition" shall mean any transaction pursuant to which any Borrower or
any Subsidiary, (i) whether by means of a capital contribution or purchase or
other acquisition of stock or other securities or other equity participation or
interest, (A) acquires more than 50% of the equity interest in any Person
pursuant to a solicitation by such Borrower or such Subsidiary of tenders of
equity securities of such Person, or through one or more negotiated block,
market, private or other transactions not involving a tender offer, or a
combination of any of the foregoing, (B) makes any corporation a Subsidiary, or
causes any corporation to be merged into such Borrower or such Subsidiary (or
agrees to be merged into any other corporation other than a wholly-owned
Subsidiary), or (C) agrees to purchase all or substantially all of the assets of
any corporation, pursuant to a merger, purchase of assets or other
reorganization providing for the delivery or issuance to the holders of such
corporation's then outstanding securities, in exchange for such securities, of
cash or securities of such Borrower or such Subsidiary, or any combination
thereof, or (ii) purchases all or substantially all of the business or assets of
any Person or of any operating division of any Person.
"Acquisition Consideration" shall mean, without duplication, the
consideration given by any Borrower or any Subsidiary for an Acquisition,
including, but not limited to, the fair market
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value of any cash, property, stock or services given, the amount of any
Indebtedness assumed or incurred.
"Adjusted Excess Cash Flow" shall mean, for any year, calculated for the
Borrowers and the Subsidiaries on a combined basis, an amount equal to the
remainder of (a) Operating Cash Flow for said year (which calculation of
Operating Cash Flow shall not exclude from net income compensation to David
Saperstein permitted pursuant to Section 7.18(ii) hereof), minus (b) the sum of
(i) the greater of (X)$750,000, or (Y) Capital Expenditures for said year, plus
(ii) Dividends paid during said year, plus (iii) cash expenditures (other than
Cash Tax Dividends) for the payment of taxes during said year, if applicable,
plus (iv) principal, interest, fees and other amounts scheduled to be paid for
said year with respect to Indebtedness.
"Administrative Lender" shall mean NationsBank of Texas, N.A., a national
banking association, as administrative agent for Lenders, or such successor
administrative agent appointed pursuant to Section 10.1(b) hereof.
"Advance" shall mean any amount advanced by the Lenders to any Borrower
pursuant to Article 2 hereof on the occasion of any borrowing, including without
limitation any Refinancing Advance.
"Affiliate" shall mean any Person that directly or indirectly through one
or more Subsidiaries Controls, or is Controlled By or Under Common Control with,
any Borrower.
"Agreement" shall mean this Credit Agreement, as amended or renewed from
time to time.
"Agreement Date" shall mean the date of this Agreement.
"Applicable Environmental Laws" shall mean applicable laws pertaining to
health or the environment, including without limitation, the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as amended by
the Superfund Amendments and Reauthorization Act of 1986 (as amended from time
to time, "CERCLA"), the Resource Conservation and Recovery Act of 1976, as
amended by the Used Oil Recycling Act of 1980, the Solid Waste Disposal Act
amendments of 1980, and the Hazardous and Solid Waste Amendments of 1984 (as
amended from time to time, "RCRA"), the Texas Water Code, and the Texas Solid
Waste Disposal Act.
"Applicable Law" shall mean (a) in respect of any Person, all provisions of
constitutions, statutes, rules, regulations and orders of governmental bodies or
regulatory agencies applicable to such Person and its properties, including,
without limiting the foregoing, all orders and decrees of all courts and
arbitrators in proceedings or actions to which the Person in question is a
party, and (b) in respect of contracts relating to interest or finance charges
that are made or performed in the State of Texas, "Applicable Law" shall mean
the laws of the United States of America, including without limitation 12 USC
Sections 85 and 86, as amended from time to time,
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and any other statute of the United States of America now or at any time
hereafter prescribing the maximum rates of interest on loans and extensions of
credit, and the laws of the State of Texas, including, without limitation,
Article 5069-1.04, Title 79, Revised Civil Statutes of Texas, 1925, as amended
("Art. 1.04"), and any other statute of the State of Texas now or at any time
hereafter prescribing maximum rates of interest on loans and extensions of
credit; provided that the parties hereto agree that the provisions of Chapter
15,
Title 79, Revised Civil Statutes of Texas, 1925, as amended, shall not apply to
Advances, this Agreement, the Notes or any other Loan Documents.
"Applicable Margin" shall mean the following per annum percentages,
applicable in the following situations:
Prime Rate LIBOR
Applicability Basis Basis
------------- ----- -----
(i) If the Leverage Ratio is not less than 2.0 to 1 0.875 1.875
(ii) If the Leverage Ratio is less than 2.0 to 1 but 0.750 1.750
is not less than 1.5 to 1
(iii) If the Leverage Ratio is less than 1.5 to 1 but 0.500 1.500
is not less than 1.0 to 1
(iv) If the Leverage Ratio is less than 1.0 to 1 0.250 1.250
The Applicable Margin payable by the Borrowers on the Advances outstanding
hereunder shall be subject to reduction or increase, as applicable and as set
forth in the table above, on a quarterly basis according to the performance of
the Borrowers as tested by the Leverage Ratio. Except as set forth in the last
sentence hereof, any such increase or reduction in the Applicable Margin
provided for herein shall be effective three Business Days after receipt by
Administrative Lender of the financial statements required to be delivered
pursuant to Section 6.l(b) or 6.2(b) hereof, as applicable. If financial
statements of the Borrowers setting forth the Leverage Ratio are not received by
the Administrative Lender by the date required pursuant to Section 6.1 (b) or
6.2(b) hereof, as applicable, the Applicable Margin shall be determined as if
the Leverage Ratio is not less than 2.0 to 1 until such time as such financial
statements are received. For the final quarter of any fiscal year of the
Borrowers, the Borrowers may provide their unaudited financial statements,
subject only to year-end adjustments, for the purpose of adjusting the
Applicable Margin.
"Art. 1.04" shall have the meaning ascribed thereto in the definition of
"Applicable
"Assignees" shall mean any assignee of a Lender pursuant to an Assignment
Agreement and shall have the meaning ascribed thereto in Section 11.6 hereof.
"Assignment Agreement" shall have the meaning ascribed thereto in Section
11.6 hereof.
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"Authorized Signatory" shall mean such senior personnel of the Notification
Agent as may be duly authorized and designated in writing by the Notification
Agent to execute documents, agreements and instruments on behalf of the
Notification Agent, and to request Advances and Letters of Credit hereunder.
"Borrowers" shall mean, collectively, Metro, MNLP, and any other Persons
who as a result of a Corporate Reorganization shall become a Borrower hereunder
and for which the conditions precedent set forth in Section 3.3 hereof have been
satisfied, and "Borrower" means any one of them, as appropriate.
"Borrower Pledge Agreement" shall mean one or more pledge agreements,
executed by any Borrower, granting a first priority Lien on (i) the Pledged
Stock owned directly by such Borrower and (ii) each Intercompany Note evidencing
intercompany advances made by such Borrower, as security for the Obligations,
substantially in the form of Exhibit B hereto, as such agreement may be amended,
modified, renewed or extended from time to time.
"Borrower Security Agreement" shall mean one or more security agreements,
executed by any Borrower, granting a first priority Lien on (i) the Accounts and
related items of such Borrower and (ii) the tangible personal property of such
Borrower, as security for the Obligations, substantially in the form of Exhibit
E hereto, as such agreement may be amended, modified, renewed or extended from
time to time.
"Borrowers' Business" shall mean the communications, broadcasting
(including, but not limited to, traffic, news, sports and weather reports on
radio and television stations), media, information services, and advertising and
activities related thereto.
"Business Day" shall mean a day on which banks are open for the transaction
of business as required by this Agreement in Dallas, Texas and, with respect to
any LIBOR Advance, in London, England, and as otherwise relevant to the
determination to be made or the action to be taken.
"Capital Expenditures" shall mean cash expenditures for the purchase of
tangible assets of long-term use which are capitalized in accordance with GAAP.
"Capitalized Lease Obligations" shall mean that portion of any obligation
of any Borrower or any Subsidiary as lessee under a lease which at the time
would be required to be capitalized on a balance sheet prepared in accordance
with GAAP.
"Cash Tax Dividends" shall mean Dividends paid by (a) any corporate
Borrower which has elected Subchapter S status under the Code to such Borrower's
shareholders to pay income Taxes incurred by such shareholders solely as a
result of net income generated by such Borrower and (b) any Borrower which is a
partnership to such Borrower's partners to pay income Taxes incurred by such
partners solely as a result of net income generated by such Borrower.
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"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Collateral" shall mean any collateral hereafter granted by any Person to
the Administrative Lender for the benefit of the Lenders to secure the
Obligations.
"Commitment" shall mean $15,000,000, as reduced from time to time pursuant
to Section 2.6 hereof.
"Commitment Reduction Date" shall mean the last Business Day of March 1995.
"Control" or "Controlled By" or "Under Common Control" shall mean
possession, directly or indirectly, of power to direct or cause the direction of
management or policies (whether through ownership of voting securities, by
contract or otherwise); provided, however, that any Person which beneficially
owns, directly or indirectly, 5% or more (in number of votes) of the securities
(or in the case of a Person that is not a corporation, 5% or more of the equity
interest) having ordinary voting power shall be conclusively presumed to control
such Person.
"Controlled Group" shall mean, as to any Person, all members of a
controlled group of corporations and all trades or businesses (whether or not
incorporated) which are under common control with such Person and which,
together with such Person, are treated as a single employer under Section
414(b), (c), (m) or (o) of the Code; provided, however, that the Subsidiaries of
any Borrower shall be deemed to be members of such Borrower's Controlled Group,
and any Borrower and any other entities (whether incorporated or not
incorporated) which are under common control with such Borrower and which,
together with such Borrower, are treated as a single employer under Section
414(b), (c), (m) or (o) of the Code, shall be deemed to be members of such
Borrower's Controlled Group on and after the Agreement Date.
"Default" shall mean an Event of Default and/or any of the events specified
in Section 8.1, regardless of whether there shall have occurred any passage of
time or giving of notice that would be necessary in order to constitute such
event an Event of Default.
"Default Rate" shall mean a simple per annum interest rate equal to the
lesser of (a) the Highest Lawful Rate, or (b) the sum of the Prime Rate Basis
plus two percent.
"Determining Lenders" shall mean, on any date of determination, any
combination of the Lenders having at least 100% of the aggregate amount of
Advances then outstanding; provided, however, that if there are no Advances
outstanding hereunder, "Determining Lenders" shall mean any combination of
Lenders whose Specified Percentages aggregate 100%. In the event that at any
time there shall be more than two Lenders, "Determining Lenders" shall mean, on
any date of determination, any combination of the Lenders having at least
66-2/3% of the aggregate amount of the Advances then outstanding; provided,
however, that if there are no Advances outstanding hereunder, "Determining
Lenders" shall mean any combination of Lenders whose Specified Percentages
aggregate at least 66-2/3%.
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"Dividend" shall mean, as to any Person, (a) any payment of any dividend
(other than a stock dividend) on, or the making of any distribution, loan,
advance or investment to or in any holder of, any shares of capital stock of
such Person and with respect to such shares, or (b) any purchase, redemption, or
other acquisition or retirement for value of any shares of capital stock of such
Person.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any regulation promulgated thereunder.
"ERISA Event" shall mean, with respect to any Borrower and its
Subsidiaries, (a) a Reportable Event (other than a Reportable Event not subject
to the provision for 30-day notice to the PBGC under regulations issued under
Section 4043 of ERISA), (b) the withdrawal of any such Person or any member of
its Controlled Group from a Plan during a plan year in which it was a
"substantial employer" as defined in Section 4001(a)(2) of ERISA, (c) the
(filing of a notice of intent to terminate under Section 4041 of ERISA, (d) the
institution of proceedings to terminate a Plan by the PBGC, (e) the failure to
make required contributions which could result in the imposition of a lien under
Section 412 of the Code or Section 302 of ERISA, or (f) any other event or
condition which might reasonably be expected to constitute grounds under Section
4042 of ERISA for the termination of, or the appointment of a trustee to
administer, any Plan or the imposition of any liability under Title IV of ERISA
other than PBGC premiums due but not delinquent under Section 4007 of ERISA.
"Event of Default" shall mean any of the events specified in Section 8.1,
provided that any requirement for notice or lapse of time has been satisfied.
"Excess Cash Flow" shall mean, for any year, calculated for the Borrowers
and the Subsidiaries on a combined basis, an amount equal to the remainder of
(a) Operating Cash Flow for said year, minus (b) the sum of (i) Capital
Expenditures for said year, plus (ii) Dividends paid during said year, plus
(iii) cash expenditures (other than Cash Tax Dividends) for the payment of taxes
during said year, if applicable, plus (iv) principal, interest, fees, and other
amounts scheduled to be paid for said year with respect to Indebtedness.
"Existing Loan Agreement" shall mean that certain Amended and Restated Loan
Agreement dated as of March 15, 1993, by and between Metro and Southwest Bank of
Texas, N.A., as the same may have been amended, modified, renewed or extended
from time to time.
"Federal Funds Rate" shall mean, for any day, the rate per annum (rounded
upwards if necessary, to the nearest 1/100th of 1%) equal to the weighted
average of the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers on such day, as
published by the Federal Reserve Bank of New York on the Business Day next
succeeding such day, provided that (a) if such day is not a Business Day, the
Federal Funds Rate for such day shall be such rate on such transactions on the
next preceding Business Day as so published on the next succeeding Business Day,
and (b) if no such rate is so published on such next succeeding Business Day,
the Federal Funds Rate for such day shall
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be the average rate quoted to the Administrative Lender on such day on such
transactions as determined by Administrative Lender.
"Fixed Charges" shall mean, for the Borrowers and the Subsidiaries on a
combined basis determined in accordance with GAAP, for the four most recently
ended fiscal quarters preceding any date of determination, an amount equal to
the sum of (a) all payments of principal, interest, fees and other amounts paid
on Total Debt, plus (b) all payments under Capitalized Leases, plus (c) all
Capital Expenditures, plus (d) cash expenditures (including Cash Tax Dividends)
for the payment of taxes.
"GAAP" shall mean generally accepted accounting principles applied on a
consistent basis, set forth in the Opinions of the Accounting Principles Board
of the American Institute of Certified Public Accountants, or the successors
which are applicable in the circumstances as of the date in question. The
requisite that such principles be applied on a consistent basis shall mean that
the accounting principles observed in a current period are comparable in all
material respects to those applied in a preceding period.
"Governmental Authority" shall mean (a) the government of (i) the United
States of America and any State or other political subdivision thereof or (ii)
any jurisdiction in which any Borrower or any Subsidiary conducts all or any
part of its business or owns any property or (b) any entity exercising
executive, legislative, judicial, regulatory or administrative functions of, or
pertaining to, any such government.
"Guaranty" or "Guaranteed", as applied to an obligation, shall mean and
include (a) a guaranty, direct or indirect, in any manner, of any part or all of
such obligation, and (b) an agreement, direct or indirect, contingent or
otherwise, the practical effect of which is to assure in any way the payment or
performance (or payment of damages in the event of nonperformance) of any part
or all of such obligation.
"Highest Lawful Rate" shall mean at the particular time in question the
maximum rate of interest which, under Applicable Law, the Lenders are then
permitted to charge on the Obligations. If the maximum rate of interest which,
under Applicable Law, the Lenders are permitted to charge on the Obligations
shall change after the date hereof, the Highest Lawful Rate shall be
automatically increased or decreased, as the case may be, from time to time as
of the effective time of each change in the Highest Lawful Rate without notice
to the Borrowers or the Notification Agent. For purposes of determining the
Highest Lawful Rate under the Applicable Law of the State of Texas, the
applicable rate ceiling shall be (a) the indicated rate ceiling described in and
computed in accordance with the provisions of Section (a)(1) of Art. 1.04, or
(b) if the parties subsequently contract as allowed by Applicable Law, the
quarterly ceiling or the annualized ceiling computed pursuant to Section (d) of
Art. 1.04; provided, however, that at any time the indicated rate ceiling, the
quarterly ceiling or the annualized ceiling shall be less than 18% per annum or
more than 24% per annum, the provisions of Sections (b)(1) and (2) of said Art.
1.04 shall control for purposes of such determination, as applicable.
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"Indebtedness" shall mean, with respect to any Person, (a) all items,
except items of partners' equity or of capital stock or of surplus or of general
contingency or deferred tax reserves, which in accordance with GAAP would be
included in determining total liabilities as shown on the liability side of a
balance sheet of such Person, (b) the market value of any property or asset
owned by such Person on which a Lien has been granted to secure any obligation,
whether or not the obligation secured thereby shall have been assumed, (c) to
the extent not otherwise included, all Capitalized Lease Obligations of such
Person, all obligations of such Person with respect to leases constituting part
of a sale and leaseback arrangement, all Guaranties, all obligations under
Interest Hedge Agreements or similar hedge agreements, all indebtedness for
borrowed money (excluding, for purposes of calculation of financial covenants
only, indebtedness evidenced by Intercompany Notes), and all reimbursement
obligations with respect to outstanding letters of credit, (d) any "withdrawal
liability" of any Borrower or Subsidiary, as such term is defined under Part I
of Subtitle E of Title IV of ERISA, and (e) all Seller Obligations of any
Borrower or Subsidiary.
"Indemnified Matters" shall have the meaning ascribed to it in Section
5.10(a) hereof.
"Indemnitees" shall have the meaning ascribed to it in Section 5.10(a)
hereof.
"Intercompany Notes" shall mean any promissory note executed by any
Subsidiary made payable to the order of any Borrower in the original principal
amount not to exceed $15,000,000 evidencing loans and advances made or to be
made by such Borrower to such Subsidiary, together with any extension, renewal,
increase or amendment thereof, or substitution therefor.
"Interest Hedge Agreements" shall mean any and all agreements, devices or
arrangements designed to protect at least one of the parties thereto from the
fluctuations of interest rates, exchange rates or forward rates applicable to
such party's assets, liabilities or exchange transactions, including, but not
limited to, dollar-denominated or cross-currency interest rate exchange
agreements, forward currency exchange agreements, interest rate cap or collar
protection agreements, forward rate currency or interest rate options, puts and
warrants, as the same may be amended or modified and in effect from time to
time, and any and all cancellations, buy backs, reversals, terminations or
assignments of any of the foregoing.
"Interest Period" shall mean (a) for any Prime Rate Advance, the period
beginning on the day the Advance was made and ending on the first Quarterly Date
thereafter, and (b) for any LIBOR Advance, the period beginning on the day the
Advance is made and ending one, two, three or six months thereafter (as the
Borrowers shall select).
"Investment" shall mean any acquisition of all or substantially all assets
of any Person, or any direct or indirect purchase or other acquisition of, or
beneficial interest in, capital stock or other securities of any other Person,
or any direct or indirect loan, advance (other than advances to employees for
moving and travel expenses, drawing accounts and similar expenditures in the
ordinary course of business) or capital contribution to, or investment in any
other Person, including without limitation the incurrence or sufferance of
Indebtedness or the
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purchase (other than purchases in connection with an Acquisition) of accounts
receivable of any other Person that are not current assets or do not arise in
the ordinary course of business, which is not an Acquisition.
"Issuing Bank" shall mean NationsBank of Texas, N.A., in its capacity as
issuer of the Letters of Credit.
"Lender" shall mean each financial institution shown on the signature pages
hereof so long as such financial institution maintains a Commitment or is owed
any part of the Obligations (including the Administrative Lender in its
individual capacity), and each Assignee that hereafter becomes party hereto
pursuant to Section 11.6 hereof.
"L/C Cash Collateral Account" shall have the meaning specified in Section
2.16(g) hereof.
"L/C Related Documents" shall have the meaning specified in Section 2.16(d)
hereof.
"Letter of Credit" shall have the meaning specified in Section 2.16(a)
hereof.
"Letter of Credit Agreement" shall have the meaning specified in Section
2.16(b) hereof.
"Letter of Credit Facility" shall mean the amount of the Letters of Credit
the Issuing Bank may issue pursuant to Section 2.16(a) hereof.
"Leverage Ratio" shall mean, for any date of determination, the ratio of
Total Debt as of the date of determination to Operating Cash Flow for the four
most recently ended fiscal quarters preceding such date of determination.
"LIBOR Advance" shall mean an Advance which the Borrowers request to be
made as a LIBOR Advance or which is reborrowed as a LIBOR Advance, in accordance
with the provisions of Section 2.2 hereof.
"LIBOR Basis" shall mean a simple per annum interest rate equal to the
lesser of (a) the Highest Lawful Rate, or (b) the sum of the LIBOR Rate plus the
Applicable Margin. The LIBOR Basis shall, with respect to LIBOR Advances with
Interest Periods in excess of six months, be subject to premiums assessed by
each Lender, which are payable directly to each Lender. Once determined, the
LIBOR Basis shall remain unchanged during the applicable Interest Period.
"LIBOR Lending Office" shall mean, with respect to a Lender, the office
designated as its LIBOR Lending Office on Schedule 1 attached hereto, and such
other office of the Lender or any of its affiliates hereafter designated by
notice to the Notification Agent and the Administrative Lender.
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"LIBOR Rate" shall mean, for any Interest Period, the interest rate per
annum rounded upward to the nearest one-sixteenth (1/16th) of one percent) at
which deposits in United States Dollars are offered to the Administrative Lender
by leading banks reasonably selected by the Administrative Lender in the London
interbank market at approximately 11:00 a.m. (London time), two Business Days
before the first day of such Interest Period, in an amount approximately equal
to the principal amount of, and for a length of time approximately equal to the
Interest Period for, the LIBOR Advance sought by the Borrowers.
"Lien" shall mean, with respect to any property, any mortgage, lien,
pledge, collateral assignment, hypothecation, charge, security interest, title
retention agreement, levy, execution, seizure, attachment, garnishment or other
encumbrance of any kind in respect of such property, whether or not choate,
vested or perfected.
"Loan Documents" shall mean this Agreement, the Notes, the Pledge
Agreements, the Subsidiary Guaranty, the Security Agreements, any Interest Hedge
Agreement, with any of the Lenders, fee letters, and any other document,
agreement or instrument executed or delivered from time to time by any Borrower,
any Subsidiary or any other Person in connection herewith or as security for the
Obligations.
"Material Adverse Effect" shall mean any act or circumstance or event which
(a) causes a Default, (b) otherwise could be material and adverse to the
business, consolidated assets, liabilities, financial condition, results of
operations or prospects of the Borrowers and the Subsidiaries, together taken as
a whole, (c) in any material manner could adversely affect the validity or
enforceability of any of the Loan Documents, or (d) in any manner could impair
the value of any Collateral.
"Maturity Date" shall mean the last Business Day of September 30, 1999.
"Maximum Amount" shall mean the maximum amount of interest which, under
Applicable Law, the Lenders are permitted to charge on the Obligations.
"Metro" shall mean Metro Traffic Control, Inc., a Maryland corporation.
"MNLP" shall mean Metro Networks, Ltd., a Texas limited partnership.
"Multiemployer Plan" shall mean, as to any Person, at any time, a
"multiemployer plan" within the meaning of Section 4001(a)(3) of ERISA and to
which such Person or any member of its Controlled Group is making, or is
obligated to make contributions or has made, or been obligated to make,
contributions.
"Necessary Authorization" shall mean any license, permit, consent, approval
or authorization from, or any filing or registration with, any governmental or
other regulatory authority necessary or appropriate to enable any Borrower or
Subsidiary to maintain and operate its business and properties.
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"Note" shall mean each promissory note of the Borrowers evidencing Advances
hereunder, substantially in the form of Exhibit A hereto, together with any
extension, renewal or amendment thereof, or substitution therefor.
"Notification Agent" shall mean Metro, or such other Borrower designated by
Metro and agreed to in writing by the Administrative Lender.
"Obligations" shall mean (a) all obligations of any nature (whether matured
or unmatured fixed or contingent, including the Reimbursement Obligations) of
the Borrowers and the Subsidiaries to the Lenders under the Loan Documents
(including obligations under any Interest Hedge Agreement to any Lender), as
they may be amended from time to time, and (b) all obligations of the Borrowers
and the Subsidiaries for losses, damages, expenses or any other liabilities of
any kind that any Lender may suffer by reason of a breach by any Borrower or any
Subsidiary of any obligation, covenant or undertaking with respect to any Loan
Document.
"Operating Cash Flow" shall mean, for any period, determined in accordance
with GAAP on a combined basis for the Borrowers and the Subsidiaries, the sum of
(a) pre-tax net income (pre-tax net income shall exclude (i) any items of
extraordinary gain, including net gains on the sale of assets other than asset
sales in the ordinary course of business, (ii) any items of extraordinary loss,
including net losses on the sale of assets other than asset sales in the
ordinary course of business, (iii) non-cash credits to the extent included in
net income, and (iv) any Seller Obligations to the extent such Seller
Obligations are treated as an expense and not a liability according to GAAP),
plus (b) interest expense, depreciation and amortization, and other non-cash
expenses. For purpose of calculation of Operating Cash Flow with respect to
assets not owned at all times during the four fiscal quarters preceding the date
of determination of Operating Cash Flow there shall be (i) included in Operating
Cash Flow the Operating Cash Flow of any assets acquired during any of such four
fiscal quarters for the twelve month period preceding the date of determination
and (ii) excluded from Operating Cash Flow the Operating Cash Flow of any assets
disposed of during any of such four fiscal quarters for the twelve month period
preceding the date of determination.
"Owner Pledge Agreement" shall mean one or more Pledge Agreements executed
by any Person owning or otherwise holding an equity interest in any Borrower,
granting a first priority Lien on the Pledged Stock owned by such Person,
substantially in the form of Exhibit I hereto, as such agreement may be amended,
modified, renewed or extended from time to time.
"Participant" shall have the meaning ascribed to it in Section 11.6(c)
hereof.
"Participation" shall have the meaning ascribed to it in Section 11.6(c)
hereof.
"Payment Date" shall mean the last day of the Interest Period for any
Advance.
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"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"Permitted Liens" shall mean, as applied to any Person:
(a) any Lien in favor of the Lenders to secure the Obligations hereunder;
(b) (i) Liens on real estate for real estate taxes not yet delinquent, (ii)
Liens created by lease agreements to secure the payments of rental amounts and
other sums not yet due thereunder, (iii) Liens on leasehold interests created by
the lessor in favor of any mortgagee of the leased premises, and (iv) Liens for
taxes, assessments, governmental charges, levies or claims that are being
diligently contested in good faith by appropriate proceedings and for which
adequate reserves shall have been set aside on such Person's books, but only so
long as no foreclosure, restraint, sale or similar proceedings have been
commenced with respect thereto;
(c) Liens of carriers, warehousemen, mechanics, laborers and materialmen
and other similar Liens incurred in the ordinary course of business for sums not
yet due or being contested in good faith, if such reserve or appropriate
provision, if any, as shall be required by GAAP shall have been made therefor;
(d) Liens incurred in the ordinary course of business in connection with
worker's compensation, unemployment insurance or similar legislation;
(e) Easements, right-of-way, restrictions and other similar encumbrances on
the use of real property which do not interfere with the ordinary conduct of the
business of such Person;
(f) Liens created to secure Indebtedness permitted by Section 7.l(f)
hereof which is incurred solely for the purpose of financing the acquisition of
such assets and incurred at the time of acquisition, so long as (i) each such
Lien shall at all times be confined solely to the asset or assets so acquired
(and proceeds thereof), and refinancings thereof and (ii) the amount of
Indebtedness related thereto does not result in a violation of Section 7.1(f)
hereof;
(g) Liens in respect of judgments or awards for which appeals or
proceedings for review are being prosecuted and in respect of which a stay of
execution upon any such appeal or proceeding for review shall have been secured,
provided that (i) such Person shall have established adequate reserves for such
judgments or awards, (ii) such judgments or awards shall be fully insured and
the insurer shall not have denied coverage, or (iii) such judgments or awards
shall have been bonded to the satisfaction of the Determining Lenders; and
(h) Any Liens existing on the Agreement Date which are described on
Schedule 2 hereto, and Liens resulting from the refinancing of the related
Indebtedness, provided that the Indebtedness secured thereby shall not be
increased and the Liens shall not cover additional assets of the Borrowers or
the Subsidiaries.
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"Person" shall mean an individual, corporation, partnership, trust or
unincorporated organization, or a government or any agency or political
subdivision thereof.
"Plan" shall mean an employee pension benefit plan as defined in Section
3(2) of ERISA (including a Multiemployer Plan) that is covered by Title IV of
ERISA or subject to the minimum funding standards under Section 412 of the Code
and is maintained for the employees of any Borrower, its Subsidiaries or any
member of their Controlled Group.
"Pledge Agreements" shall mean the Borrower Pledge Agreements, the
Subsidiary Pledge Agreements and the Owner Pledge Agreements.
"Pledged Stock" shall mean, (a) as to any Borrower, the equity interests in
such Borrower, including, without limitation, the shares of each class of
capital stock of any Borrower that is a corporation and partnership interests
(general and limited) in any Borrower that is a partnership and (b) as to any
Subsidiary, the equity interests in such Subsidiary, including, without
limitation, the shares of each class of capital stock of any Subsidiary that is
a corporation and partnership interests (general and limited) in any Subsidiary
that is a partnership.
"Prime Rate" shall mean, at any time, the prime interest rate announced or
published by the Administrative Lender from time to time as its reference rate
for the determination of interest rates for loans of varying maturities in
United States dollars to United States residents of varying degrees of
creditworthiness and being quoted at such time by the Administrative Lender as
its "prime rate;" it being understood that such rate may not be the lowest rate
of interest charged by the Administrative Lender.
"Prime Rate Advance" shall mean any Advance bearing interest at the Prime
Rate Basis.
"Prime Rate Basis" shall mean, for any day, a per annum interest rate equal
to the lesser of (a) the Highest Lawful Rate on such day, or (b) the higher of
(i) the sum of (A) 0.50% plus (B) the Federal Funds Rate plus (C) the Applicable
Margin, or (ii) the sum of (A) the Prime Rate on such day plus (B) the
Applicable Margin. The Prime Rate Basis shall be adjusted automatically as of
the opening of business on the effective date of each change in the Prime Rate
or Federal Funds Rate, as the case may be, to account for such change.
"Pro-Forma Debt Service" shall mean, as of any date of determination,
determined in accordance with GAAP for the Borrowers and the Subsidiaries on a
combined basis, the sum (without duplication) of all payments of principal,
interest, fees and other amounts scheduled to be paid on all Indebtedness during
the succeeding four fiscal quarters (assuming for any Indebtedness subject to a
floating interest rate, an interest rate equal to the applicable rate in effect
on the date of determination).
"Quarterly Date" shall mean the last Business Day of each September,
December, March and June, beginning December, 1994.
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"Radio Affiliate Contracts" shall mean any agreements between any Borrower
or Subsidiary and any radio station pursuant to which such radio station agrees
to broadcast such Borrower's or such Subsidiary's traffic reports.
"Refinancing Advance" shall mean any Advance which is used to pay the
principal amount (or any portion thereof) of an Advance at the end of its
Interest Period and which, after giving effect to such application, does not
result in an increase in the aggregate amount of outstanding Advances.
"Reimbursement Obligation" shall mean, in respect of any Letter of Credit
as at any date of determination, the maximum aggregate amount which is then
available to be drawn under such Letter of Credit.
"Release Date" shall mean the date on which the Notes have been paid, all
other Obligations due and owing have been paid and performed in full, and the
Commitment has been terminated.
"Reportable Event" shall have the meaning set forth in Title IV of ERISA.
"Security Agreements" shall mean the Borrower Security Agreements and the
Subsidiary Security Agreements.
"Seller Obligations" shall mean all unconditional obligations to pay a sum
certain, of any Borrower or Subsidiary in respect of an Acquisition, whether or
not such obligations arise under a non-competition agreement, management
agreement, employment contract, earn-out or under any other agreement.
"Solvent" shall mean, with respect to any Person, that the fair value of
the assets of such Person (both at fair valuation and at present fair saleable
value) is, on the date of determination, greater than the total amount of
liabilities (including contingent and unliquidated liabilities) of such Person
as of such date and that, as of such date, such Person is able to pay all
liabilities of such Person as such liabilities mature and such Person does not
have unreasonably small capital with which to carry on its business. In
computing the amount of contingent or unliquidated liabilities at any time, such
liabilities will be computed at the amount which, in light of all the facts and
circumstances existing at such time, represents the amount that can reasonably
be expected to become an actual or matured liability discounted to present value
at rates believed to be reasonable by such Person.
"Special Counsel" shall mean the law firm of Donohoe, Jameson & Carroll,
P.C., or such other legal counsel as the Administrative Lender may select.
"Specified Percentage" shall mean, as to any Lender, the percentage
indicated beside its name on the signature pages hereof, or if applicable,
specified in its most recent Assignment Agreement.
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"Subordinated Debt" shall mean any Indebtedness of any Borrower or
Subsidiaries which shall have been and continues to be, validly and effectively
subordinated to the prior payment of the Obligations on terms and documentation
approved in writing by the Determining Lenders.
"Subsidiary" shall mean (a) any corporation of which 50% or more of the
outstanding stock (other than directors' qualifying shares) having ordinary
voting power to elect a majority of its board of directors, regardless of the
existence at the time of a right of the holders of any class of securities of
such corporation to exercise such voting power by reason of the happening of any
contingency, is at the time owned by any Borrower, directly or through one or
more intermediaries, (b) any other entity which is Controlled or then capable of
being Controlled by any Borrower, directly or through one or more
intermediaries, and (c) Metro Reciprocal, Inc., a Texas corporation, and Metro
Video News, Inc., a Texas corporation.
"Subsidiary Guaranty" shall mean any Guaranty executed by one or more
Subsidiaries, guarantying payment and performance of the Obligations,
substantially in the form of Exhibit D hereto, as such agreement may be amended,
modified, renewed or extended from time to time.
"Subsidiary Pledge Agreement" shall mean one or more Pledge Agreements
executed by a Subsidiary, granting a first priority Lien on (i) the Pledged
Stock owned by such Subsidiary and (ii) each Intercompany Note evidencing
intercompany advances made by such Subsidiary, as security for the Obligations,
substantially in the form of Exhibit C hereto, as such agreement may be amended,
modified, renewed or extended from time to time.
"Subsidiary Security Agreement" shall mean one or more security
agreements, executed by a Subsidiary, granting a first priority Lien on (i) the
Accounts and related items of such Subsidiary and (ii) the tangible personal
property of such Subsidiary, as security for the Obligations, substantially in
the form of Exhibit F hereto, as such agreement may be amended, modified,
renewed or extended from time to time.
"Tax" shall mean all taxes, assessments, imposts, fees, or other charges at
any time imposed by any laws or any state, commonwealth, federal, foreign,
international or other court or government body, subdivision, agency,
department, commission, board, bureau, or instrumentality of a governmental
body.
"Tax Benefits" shall mean, with respect to (a) each shareholder of any
Borrower which is a corporation, net operating losses and other Tax benefits
available to such shareholder solely as a result of such shareholder's ownership
interest in such Borrower, excluding and without giving effect to any Tax
benefits otherwise available to such shareholder and (b) each partner of any
Borrower which is a partnership, net operating losses and other Tax benefits
available to such partner solely as a result of such partner's ownership
interest in such Borrower, excluding and without giving effect to any Tax
benefits otherwise available to such partner..
"Termination Event" shall mean, with respect to any Borrower, any
Subsidiary, or any Plan, (a) a Reportable Event, (b) the withdrawal from a Plan
during a Plan year in which it was
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a "substantial employer" as defined in Section 4001(a)(2) of ERISA, (c) the
filing of a notice of intent to terminate a Plan or the treatment of a Plan
amendment as a termination under Section 4041 of ERISA, (d) the institution of
proceedings by the Pension Benefit Guaranty Corporation to terminate a Plan or
appoint a trustee to administer a Plan, (e) the failure to comply with the
minimum funding requirements of ERISA with respect to any Plan, or (f) any other
event or condition which might constitute grounds under Section 4042 of ERISA
for the termination of, or the appointment of a trustee to administer, any Plan.
"Total Debt" shall mean, as of any date of determination, determined for
the Borrowers and the Subsidiaries on a combined basis, the sum (without
duplication and excluding debt evidenced by Intercompany Notes) of (a) all
principal and interest owing under the Loan Documents, (b) all debt evidenced by
a promissory note or otherwise representing borrowed money, (c) all Capitalized
Lease Obligations, (d) all Guaranties, (e) all reimbursement obligations for
letters of credit, and (f) all Seller Obligations.
"Trusts" shall mean, collectively, Michelle Joy Coppola 1994 Trust,
Jennifer Beth Saperstein 1994 Trust, Jonathan Alexander Saperstein 1994 Trust,
Alexis Daniella Saperstein 1994 Trust and Stephanie Nicole Saperstein 1994
Trust, all trusts organized under the laws of the State of Texas.
Section 1.2 Amendments and Renewals. Each definition of an agreement in
this Article 1 shall include such agreement as amended to date, and as amended
or renewed from time to time in accordance with its terms, but only with the
prior written consent of the Determining Lenders.
Section 1.3 Construction. The terms defined in this Article 1 (except as
otherwise expressly provided in this Agreement) for all purposes shall have the
meanings set forth in Section 1.1 hereof, and the singular shall include the
plural, and vice versa, unless otherwise specifically required by the context.
All accounting terms used in this Agreement which are not otherwise defined
herein shall be construed in accordance with GAAP on a combined basis for the
Borrowers and the Subsidiaries, unless otherwise expressly stated herein. For
the purpose of calculating the financial ratios set forth in Sections 7.10, 7.11
and 7.12 hereof and the maximum compensation of David Saperstein pursuant to
Section 7.18 hereof, such calculations shall be based solely on cash financial
statements without inclusion of any barter transactions.
ARTICLE 2
Advances
Section 2.1 The Advances. Each Lender severally agrees, upon the terms and
subject to the conditions of this Agreement, to make Advances to the Borrowers
from time to time in an aggregate amount not to exceed its Specified Percentage
of the Commitment less its Specified Percentage of the Reimbursement Obligations
then outstanding (assuming compliance with all
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conditions to drawing) for the purposes set forth in Section 5.9 hereof. Subject
to Section 2.9 hereof, Advances may be repaid and then reborrowed. Any Advance
shall, at the option of the Borrowers as provided in Section 2.2 hereof (and, in
the case of LIBOR Advances, subject to availability and to the provisions of
Article 9 hereof), be made as a Prime Rate Advance or a LIBOR Advance; provided
that there shall not be outstanding to any Lender, at any one time, more than
six LIBOR Advances. Notwithstanding any provision in any Loan Document to the
contrary, in no event shall the principal amount of all outstanding Advances and
Reimbursement Obligations exceed the Commitment. On the Maturity Date unless
sooner paid as provided herein, the Obligations shall be repaid in full.
Section 2.2 Manner of Borrowing and Disbursement.
(a) In the case of Prime Rate Advances, the Notification Agent, through an
Authorized Signatory, shall give the Administrative Lender at least one Business
Days' irrevocable written notice, or irrevocable telephonic notice followed
immediately by written notice (provided, however, that the Notification Agent's
failure to confirm any telephonic notice in writing shall not invalidate any
notice so given), of the Borrowers' intention to borrow or reborrow a Prime Rate
Advance hereunder. Notice shall be given to the Administrative Lender prior to
11:00 a.m., Dallas, Texas time, in order for such Business Day to count toward
the minimum number of Business Days required. Such notice of borrowing shall
specify the requested funding date, which shall be a Business Day, and the
amount of the proposed aggregate Prime Rate Advances to be made by Lenders. Each
Prime Rate Advance shall have an Interest Period beginning on the date such
Advance is made and ending on the Quarterly Date next following the date the
Advance is made; provided that no such Interest Period shall extend past the
Maturity Date.
(b) In the case of (i) LIBOR Advances other than the initial LIBOR Advance,
the Notification Agent, through an Authorized Signatory, shall give the
Administrative Lender at least three Business Days irrevocable written notice,
or irrevocable telephonic notice followed immediately by written notice
(provided, however, that the Notification Agent's failure to confirm any
telephonic notice in writing shall not invalidate any notice so given), of the
Borrowers' intention to borrow or reborrow a LIBOR Advance hereunder and (ii)
the initial LIBOR Advance, the Notification Agent, through an Authorized
Signatory, shall give the Administrative Lender at least two Business Days'
irrevocable written notice, or irrevocable telephonic notice followed
immediately by written notice (provided, however, that the Notification Agent's
failure to confirm any telephonic notice in writing shall not invalidate any
notice so given), of the Borrowers' intention to borrow or reborrow a LIBOR
Advance hereunder. Notice shall be given to the Administrative Lender prior to
11:00 a.m., Dallas, Texas time, in order for such Business Day to count toward
the minimum number of Business Days required. LIBOR Advances shall in all cases
be subject to availability and to Article 9 hereof. For LIBOR Advances, the
notice of borrowing shall specify the requested funding date, which shall be a
Business Day, the amount of the proposed aggregate LIBOR Advances to be made by
Lenders and the Interest Period of the proposed aggregate LIBOR Advances,
provided
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that no such Interest Period shall extend past the Maturity Date or prohibit or
impair any Borrower's ability to comply with Section 2.8 hereof.
(c) Subject to Sections 2.1 and 2.9 hereof, at least three Business Days
prior to each Payment Date for a LIBOR Advance, the Notification Agent, through
an Authorized Signatory, shall give the Administrative Lender irrevocable
written notice, or irrevocable telephonic notice followed immediately by written
notice (provided, however, that the Notification Agent's failure to confirm any
telephonic notice in writing shall not invalidate any notice so given),
specifying whether all or a portion of such LIBOR Advance outstanding on the
Payment Date (i) is to be repaid and then reborrowed in whole or in part as a
LIBOR Advance, (ii) is to be repaid and then reborrowed in whole or in part as a
Prime Rate Advance, or (iii) is to be repaid and not reborrowed; provided,
however, notwithstanding anything in this Agreement to the contrary, if on any
Payment Date a Default shall exist, such LIBOR Advance may only be reborrowed as
a Prime Rate Advance. Upon such Payment Date, such LIBOR Advance shall, subject
to the provisions hereof, be so repaid and, as applicable, reborrowed.
(d) Subject to Sections 2.1 and 2.9 hereof, upon at least one Business
Day's irrevocable prior written notice (or three Business Days if the Borrowers
wish to reborrow a LIBOR Advance); the Notification Agent, through an Authorized
Signatory, or irrevocable telephonic notice followed immediately by written
notice (provided, however, that the Notification Agent's failure to confirm any
telephonic notice in writing shall not invalidate any notice so given), the
Borrowers may repay a Prime Rate Advance on its Payment Date, or prepay a Prime
Rate Advance without regard to its Payment Date, and (i) reborrow all or a
portion of the principal amount thereof as a Prime Rate Advance, (ii) reborrow
all or a portion of the principal amount thereof as one or more LIBOR Advances,
or (iii) not reborrow all or any portion of such Prime Rate Advance. Upon such
Payment Date or date of repayment, such Prime Rate Advance shall, subject to the
provisions hereof, be so repaid and, as applicable, reborrowed.
(e) The aggregate amount of Prime Rate Advances to be made by the Lenders
on any day shall be in a principal amount which is at least $50,000 and which is
an integral multiple of $10,000; provided, however, that such amount may equal
the unused amount of the Commitment. The aggregate amount of LIBOR Advances
having the same Interest Period and to be made by the Lenders on any day shall
be in a principal amount which is at least $250,000 and which is an integral
multiple of $50,000.
(f) The Administrative Lender shall promptly notify the Lenders of each
notice received from the Notification Agent pursuant to this Section. Failure of
the Notification Agent to give any notice in accordance with Sections 2.2(c) and
(d) hereof shall result in a repayment of any such existing Advance on the
applicable Payment Date by a Refinancing Advance which is a Prime Rate Advance.
Each Lender shall, not later than noon, Dallas, Texas time, on the date of any
Advance that is not a Refinancing Advance, deliver to the Administrative Lender,
at its address set forth herein, such Lender's Specified Percentage of such
Advance in immediately available funds in accordance with the Administrative
Lender's instructions. Prior
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to 2:00 p.m., Dallas, Texas time, on the date of any Advance hereunder, the
Administrative Lender shall, subject to satisfaction of the conditions set forth
in Article 3, disburse the amounts made available to the Administrative Lender
by the Lenders by (i) transferring such amounts by wire transfer pursuant to the
Notification Agent's instructions, or (ii) in the absence of such instructions,
crediting such amounts to the joint account of the Borrowers maintained with the
Administrative Lender. All Advances shall be made by each Lender according to
its Specified Percentage.
Section 2.3 Interest.
(a) On Prime Rate Advances.
(i) The Borrowers jointly and severally shall pay interest on the
outstanding unpaid principal amount of each Prime Rate Advance, from the
date such Advance is made until it is due (whether at maturity, by reason
of acceleration, by scheduled reduction, or otherwise) or repaid, at a
simple interest rate per annum equal to the Prime Rate Basis as in effect
from time to time, provided that interest on Prime Rate Advances shall not
exceed the Maximum Amount. If at any time the Prime Rate Basis would exceed
the Highest Lawful Rate, interest payable on Prime Rate Advances shall be
limited to the Highest Lawful Rate, but the Prime Rate Basis shall not
thereafter be reduced below the Highest Lawful Rate until the total amount
of interest accrued on such Advances equals the amount of interest that
would have accrued if the Prime Rate Basis had been in effect at all times.
(ii) Interest on each Prime Rate Advance shall be computed on the
basis of a year of 365 or 366 days, as applicable, for the number of days
actually elapsed, and shall be payable in arrears on each Quarterly Date
and on the Maturity Date.
(b) On LIBOR Advances.
(i) The Borrowers jointly and severally shall pay interest on the
unpaid principal amount of each LIBOR Advance, from the date such Advance
is made until it is due (whether at maturity, by reason of acceleration, by
scheduled reduction, or otherwise) or repaid, at a rate per annum equal to
the LIBOR Basis for such Advance. The Administrative Lender, whose
determination shall be conclusive, shall determine the LIBOR Basis on the
second Business Day prior to the applicable funding date and shall notify
the Notification Agent and the Lenders of such LIBOR Basis.
(ii) Subject to Section 11.9 hereof, interest on each LIBOR Advance
shall be computed on the basis of a 360-day year for the actual number of
days elapsed, and shall be payable in arrears on the applicable Payment
Date and on the Maturity Date; provided, however, that if the Interest
Period for such Advance exceeds three months, interest shall also be due
and payable in arrears on each Quarterly Date during such Interest Period.
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(c) Interest if No Notice of Selection of LIBOR Basis or Interest Period.
If the Notification Agent fails to give the Administrative Lender timely notice
of the Borrowers' selection of a LIBOR Basis for a LIBOR Advance, or if for any
reason a determination of a LIBOR Basis for any Advance is not timely concluded
due to the fault of the Borrowers or the Notification Agent, the Prime Rate
Basis shall apply to the applicable Advance. If the Notification Agent fails to
give the Administrative Lender timely notice of the Borrowers' selection of an
Interest Period for a LIBOR Advance, a one-month Interest Period shall apply to
the applicable Advance.
(d) Interest After an Event of Default. (i) After an Event of Default
(other than an Event of Default specified in Section 8.1 (g) or (h) hereof) and
during any continuance thereof, at the option of Determining Lenders, and
(ii) after an Event of Default specified in Section 8.l (g) or (h) hereof and
during any continuance thereof, automatically and without any action by the
Administrative Lender or any Lender, the Obligations shall bear interest at a
rate per annum equal to the Default Rate. Such interest shall be payable on the
earlier of demand or the Maturity Date, and shall accrue until the earlier of
(i) waiver or cure (to the satisfaction of the Determining Lenders) of the
applicable Event of Default, (ii) agreement by the Lenders to rescind the
charging of interest at the Default Rate, or (iii) payment in full of the
Obligations. The Lenders shall not be required to accelerate the maturity of
the Advances, to exercise any other rights or remedies under the Loan Documents,
or to give notice to the Borrowers or the Notification Agent of the decision to
charge interest at the Default Rate. The Lenders will undertake to notify the
Notification Agent, after the effective date, of the decision to charge interest
at the Default Rate.
Section 2.4 Fees.
(a) Commitment Fee. Subject to Section 11.9 hereof, the Borrowers jointly
and severally agree to pay to the Administrative Lender, for the ratable account
of the Lenders, a commitment fee equal to 0.375% per annum of the daily average
unborrowed balance of the Commitment. Such fees shall be (i) payable in arrears
on each Quarterly Date and the Maturity Date, fully earned when due and, subject
to Section 11.9 hereof, nonrefundable when paid and (ii) subject to Section 11.9
hereof, computed on the basis of a year of 360 days for the actual number of
days elapsed. For purposes of calculating the commitment fee, undrawn portions
of Letters of Credit outstanding from time to time will reduce the unused
portion of the Commitment.
(b) Facility Fee. Subject to Section 11.9 hereof, the Borrowers jointly and
severally agree to pay directly to each Lender a facility fee in the amount
provided for in a facility fee letter between the Borrowers and each Lender.
Such fee shall be payable on the Agreement Date, fully earned when due and,
subject to Section 11.9 hereof, nonrefundable when paid.
(c) Administrative Fee. If at any time there shall be more than one Lender
party to this Credit Agreement and subject to Section 11.9 hereof, the Borrowers
jointly and severally shall pay to the Administrative Lender, for its account
and not the account of the Lenders, an
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administrative fee to be agreed upon by the Borrowers and the Administrative
Lender. Such fee shall be payable in arrears on each Quarterly Date and the
Maturity Date, fully earned when due and, subject to Section 11.9 hereof,
nonrefundable when paid.
Section 2.5 Prepayment.
(a) Voluntary Prepayments. The principal amount of any Prime Rate Advance
may be prepaid in full or in part at any time, without penalty and without
regard to the Payment Date for such Advance, upon one Business Day's (or three
Business Days for prepayment of a LIBOR Advance) prior telephonic notice (to be
promptly followed by written notice) by the Notification Agent, through an
Authorized Signatory, to the Administrative Lender. LIBOR Advances may be
voluntarily prepaid only so long as the Borrowers concurrently reimburse the
Lenders in accordance with Section 2.9 hereof. Any notice of prepayment shall be
irrevocable.
(b) Mandatory Prepayment. On or before the date of any reduction of the
Commitment, the Borrowers jointly and severally shall prepay applicable
outstanding Advances in an amount necessary to reduce the sum of outstanding
Advances and Reimbursement Obligations to an amount less than or equal to the
Commitment as so reduced. The Borrowers jointly and severally shall first prepay
all Prime Rate Advances and shall thereafter prepay LIBOR Advances. To the
extent that any prepayment requires that a LIBOR Advance be repaid on a date
other than the last day of its Interest Period, the Borrowers jointly and
severally shall reimburse each Lender in accordance with Section 2.9 hereof.
(c) Prepayments from Excess Cash Flow. Commencing on September 30, 1995 and
on each September 30 thereafter, the Borrowers jointly and severally shall
prepay Advances in an aggregate amount equal to 50% of the Excess Cash Flow, if
any, for the fiscal year ending on each June 30 immediately preceding each such
September 30; provided, however, that no such prepayment shall be required (i)
if the Leverage Ratio as of the June 30th date immediately preceding the
September 30th date such prepayment is to be made is less than or equal to 1.50
to 1 and (ii) in an amount exceeding the product of (Y) .25 times (Z) the
required Commitment reduction pursuant to Section 2.6(c) hereof on the June 30th
date immediately preceding the September 30th date such prepayment is to be
made.
(d) Prepayments, Generally. Any prepayment of an Advance shall be
accompanied by interest accrued on the principal amount being prepaid. Any
voluntary partial prepayment of a Prime Rate Advance shall be in a principal
amount which is at least $50,000 and which is an integral multiple of $10,000.
Any voluntary partial prepayment of a LIBOR Advance shall be in a principal
amount which is at least $100,000 and which is an integral multiple thereof.
Following the Commitment Reduction Date, prepayments shall be applied to the
mandatory reductions of the Commitment pursuant to Section 2.6(c) hereof in
inverse order and such prepayment shall not otherwise reduce the scheduled
Commitment reductions required pursuant to Section 2.6(c) hereof.
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Section 2.6 Reduction of Commitment.
(a) Voluntary Reduction. The Borrowers shall have the right, upon not less
than three Business Days' notice (provided no notice shall be required for a
termination in whole of the Commitment) by the Notification Agent, through an
Authorized Signatory, to the Administrative Lender (if telephonic, to be
confirmed by telex or in writing on or before the date of reduction or
termination), which shall promptly notify the Lenders, to terminate or reduce
the Commitment, in whole or in part. Each partial termination shall be in an
aggregate amount which is at least $100,000 and which is an integral multiple of
$100,000, and no voluntary reduction in the Commitment shall cause any LIBOR
Advance to be repaid prior to the last day of its Interest Period.
Notwithstanding anything herein to the contrary, in no event shall the Borrowers
have the right to reduce the Commitment to an amount less than the aggregate
outstanding Reimbursement Obligations.
(b) Mandatory Reduction. The Commitment shall be automatically reduced (i)
by the amount of any amount prepaid or required to be prepaid pursuant to
Section 2.5(b) or (c) hereof, and (ii) as set forth in Section 2.6(c) hereof.
Notwithstanding anything herein to the contrary, in no event shall the Borrowers
reduce the Commitment to an amount less than the aggregate outstanding
Reimbursement Obligations.
(c) Scheduled Reductions. On each Quarterly Date, commencing on the
Commitment Reduction Date, through the last Business Day of September 1999, the
Commitment outstanding on the Commitment Reduction Date shall automatically
reduce by an amount equal to the percentage reduction that the Commitment is to
reduce on the Quarterly Date pursuant to the table below. Notwithstanding the
foregoing, on the Maturity Date, the Commitment shall automatically reduce to
zero.
Quarterly Date % Reduction
-------------- -----------
March 1995 5.26%
June 1995 5.26%
September 1995 5.26%
December 1995 5.26%
March 1996 5.26%
June 1996 5.26%
September 1996 5.26%
December 1996 5.26%
March 1997 5.26%
June 1997 5.26%
September 1997 5.26%
December 1997 5.26%
March 1998 5.26%
June 1998 5.26%
September 1998 5.26%
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December 1998 5.26%
March 1999 5.26%
June 1999 5.26%
September 1999 5.32% and any remaining
balance such that the
Commitment shall be zero
(d) General Requirements. Upon any reduction of the Commitment pursuant to
Section 2.6(b) or 2.6(c), the Borrowers jointly and severally shall immediately
make a repayment of applicable Advances in accordance with Section 2.5(b)
hereof. The Borrowers jointly and severally shall reimburse each Lender for any
loss or out-of-pocket expense incurred by each Lender in connection with any
such payment, as set forth in Section 2.9 hereof. The Borrowers shall not have
any right to rescind any termination or reduction. Once reduced, the Commitment
may not be increased or reinstated.
Section 2.7 Non-Receipt of Funds by the Administrative Lender. Unless the
Administrative Lender shall have been notified by a Lender prior to the date of
any proposed Advance (which notice shall be effective upon receipt) that such
Lender does not intend to make the proceeds of such Advance available to the
Administrative Lender, the Administrative Lender may assume that such Lender has
made such proceeds available to the Administrative Lender on such date, and the
Administrative Lender may in reliance upon such assumption (but shall not be
required to) make available to the Borrowers a corresponding amount. If such
corresponding amount is not in fact made available to the Administrative Lender
by such Lender, the Administrative Lender shall be entitled to recover such
amount on demand from such Lender (or, if such Lender fails to pay such amount
forthwith upon such demand, from the Borrowers) together with interest thereon
in respect of each day during the period commencing on the date such amount was
available to the Borrowers and ending on (but excluding) the date the
Administrative Lender receives such amount from the Lender, with interest
thereon at a per annum rate equal to the Federal Funds Rate. No Lender shall be
liable for any other Lender's failure to fund an Advance hereunder.
Section 2.8 Payment of Principal of Advances. The Borrowers jointly and
severally agree to pay the principal amount of the Advances to the
Administrative Lender for the account of the Lenders as follows:
(a) End of Interest Period. The principal amount of each Advance hereunder
shall be due and payable on its Payment Date, which principal payment may be
made by means of a Refinancing Advance.
(b) Commitment Reduction. On the date of reduction of the Commitment
pursuant to Section 2.6 hereof, including the Maturity Date, the aggregate
amount of the Advances outstanding on such date of reduction in excess of the
Commitment as reduced minus all outstanding Reimbursement Obligations shall be
due and payable, which principal payment may not be made by means of Refinancing
Advances.
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(c) Maturity Date. The principal amount of the Advances, all accrued
interest and fees thereon, and all other Obligations, shall be due and payable
in full on the Maturity Date.
Section 2.9 Reimbursement. Whenever any Lender shall sustain or incur any
losses or reasonable out-of-pocket expenses in connection with (a) failure by
the Borrowers to borrow any LIBOR Advance after having given notice of their
intention to borrow in accordance with Section 2.2 hereof (whether by reason of
the Borrowers' election not to proceed or the non-fulfillment of any of the
conditions set forth in Article 3 hereof), or (b) any prepayment for any reason
of any LIBOR Advance in whole or in part (including a prepayment pursuant to
Sections 2.5(c) and 9.3(b) hereof), the Borrowers jointly and severally agree to
pay to any such Lender, upon its demand, an amount sufficient to compensate such
Lender for all such losses and out-of-pocket expenses. Such Lender's good faith
determination of the amount of such losses or out-of-pocket expenses, calculated
in its usual fashion, absent manifest error, shall be binding and conclusive.
Such losses shall include, without limiting the generality of the foregoing,
lost profits and reasonable expenses incurred by such Lender in connection with
the re-employment of funds prepaid, repaid, converted or not borrowed, converted
or paid, as the case may be. Upon request of the Notification Agent, such Lender
shall provide a certificate setting forth the amount to be paid to it by the
Borrowers hereunder and calculations therefor.
Section 2.10 Manner of Payment.
(a) Each payment (including prepayments) by the Borrowers of the principal
of or interest on the Advances, fees, and any other amount owed under this
Agreement or any other Loan Document shall be made not later than 1:00 p.m.
(Dallas, Texas time) on the date specified for payment under this Agreement to
the Administrative Lender at the Administrative Lender's office, in lawful money
of the United States of America constituting immediately available funds.
(b) If any payment under this Agreement or any other Loan Document shall be
specified to be made upon a day which is not a Business Day, it shall be made on
the next succeeding day which is a Business Day, unless such Business Day falls
in another calendar month, in which case payment shall be made on the preceding
Business Day. Any extension or reduction of time shall in such case be included
in computing interest and fees, if any, in connection with such payment.
(c) The Borrowers jointly and severally agree to pay principal, interest,
fees and all other amounts due under the Loan Documents without deduction for
set-off or counterclaim or any deduction whatsoever.
(d) If some but less than all amounts due from the Borrowers are received
by the Administrative Lender, the Administrative Lender shall apply such amounts
in the following order of priority: (i) to the payment of the Administrative
Lender's expenses incurred on behalf of the Lenders then due and payable, if
any; (ii) to the payment of all other fees then due and payable; (iii) to the
payment of interest then due and payable on the Advances; (iv) to the
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payment of all other amounts not otherwise referred to in this clause (d) then
due and payable under the Loan Documents; and (v) to the payment of principal
then due and payable on the Advances.
Section 2.11 LIBOR Lending Offices. Each Lender's initial LIBOR Lending
Office is set forth opposite its name in Schedule I attached hereto. Each Lender
shall have the right at any time and from time to time to designate a different
office of itself or of any Affiliate as such Lender's LIBOR Lending Office, and
to transfer any outstanding LIBOR Advance to such LIBOR Lending Office. No such
designation or transfer shall result in any liability on the part of the
Borrowers for increased costs or expenses resulting solely from such designation
or transfer (except any such transfer which is made by a Lender pursuant to
Section 9.2 or 9.3 hereof, or otherwise for the purpose of complying with
Applicable Law). Increased costs for expenses resulting from a change in law
occurring subsequent to any such designation or transfer shall be deemed not to
result solely from such designation or transfer.
Section 2.12 Sharing of Payments. Any Lender obtaining a payment (whether
voluntary or involuntary, due to the exercise of any right of set-off, or
otherwise) on account of its Advances in excess of its Specified Percentage of
all payments made by the Borrowers with respect to Advances shall purchase from
each other Lender such participation in the Advances made by such other Lender
as shall be necessary to cause such purchasing Lender to share the excess
payment pro rata according to Specified Percentages with each other Lender which
is not in default of its obligations hereunder with respect to such Advance;
provided, however, that if all or any portion of such excess payment is
thereafter recovered from such purchasing Lender, the purchase shall be
rescinded and the purchase price restored to the extent of such recovery, but
without interest. The Borrowers agree that any Lender so purchasing a
participation from another Lender pursuant to this Section, to the fullest
extent permitted by law, may exercise all its rights of payment (including the
fight of set-off with respect to such participation as fully as if such Lender
were the direct creditor of the Borrowers in the amount of such participation.
Section 2.13 Calculation of LIBOR Rate. The provisions of this Agreement
relating to calculation of the LIBOR Rate are included only for the purpose of
determining the rate of interest or other amounts to be paid hereunder that are
based upon such rate, it being understood that each Lender shall be entitled to
fund and maintain its funding of all or any part of a LIBOR Advance as it sees
fit.
Section 2.14 Booking Loans. Any Lender may make, carry or transfer Advances
at, to or for the account of any of its branch offices or the office of any
Affiliate.
Section 2.15 Taxes.
(a) Any and all payments by the Borrowers hereunder shall be made, in
accordance with Section 2.10, free and clear of and without deduction for any
and all present or future taxes, levies, imposts, and withholdings, and all
liabilities in respect of the Obligations, excluding, in the case of each Lender
and the Administrative Lender, taxes imposed on its
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overall net income, and franchise taxes imposed on it (including interest and
penalties imposed thereon), by the jurisdiction under the laws of which such
Lender or the Administrative Lender (as the case may be) is organized or any
political subdivision thereof (all such non-excluded taxes, levies, imposts,
withholdings and liabilities being hereinafter referred to as "Taxes"). If the
Borrowers shall be required by law to deduct any Taxes from or in respect of any
sum payable hereunder to any Lender or the Administrative Lender, (x) the sum
payable shall be increased as may be necessary so that after making all required
deductions (including deductions applicable to additional sums payable under
this Section 2.15) such Lender or the Administrative Lender (as the case may be)
receives an amount equal to the sum it would have received had no such
deductions been made, (y) the Borrowers jointly and severally shall make such
deductions and (z) the Borrowers jointly and severally shall pay the full amount
deducted to the relevant taxation authority or other authority in accordance
with applicable law.
(b) In addition, the Borrowers jointly and severally agree to pay any and
all stamp and documentary taxes and any and all other excise and property taxes,
charges and similar levies that arise from any payment made hereunder or from
the execution, delivery or registration of, or otherwise with respect to, this
Agreement or any other Loan Document (hereinafter referred to as "Other Taxes").
(c) The Borrowers jointly and severally will indemnify each Lender and the
Administrative Lender for the full amount of Taxes and Other Taxes (including,
without limitation, any Taxes or Other Taxes imposed by any jurisdiction on
amounts payable under this Section 2.15) paid by such Lender or the
Administrative Lender (as the case may be) and all liabilities (including
penalties, additions to tax, interest and reasonable expenses) arising therefrom
or with respect thereto whether or not such Taxes or Other Taxes were correctly
or legally asserted, other than penalties, additions to tax, interest and
expenses arising as a result of gross negligence on the part of such Lender or
the Administrative Lender, provided, however, that the Borrowers shall have no
obligation to indemnify such Lender or the Administrative Lender unless (i) such
Lender or the Administrative Lender, as applicable, has paid such Taxes or Other
Taxes, (ii) notice has been given by such Lender or the Administrative Lender,
as applicable, to the Notification Agent, in a time sufficient to afford the
Borrowers, in good faith and in the names of and on behalf of such Lender or the
Administrative Lender, a reasonable opportunity to contest such payment by such
Lender or the Administrative Lender, provided such opportunity to contest exists
under Applicable Law, and (iii) until such Lender or the Administrative Lender
shall have delivered to the Notification Agent a certificate setting forth in
reasonable detail the basis of the Borrowers' obligation to indemnify such
Lender or the Administrative Lender pursuant to this Section 2.15. This
indemnification shall be made within 45 days from the date such Lender or the
Administrative Lender (as the case may be) makes written demand therefor.
(d) Within 30 days after the date of any payment of Taxes, the Notification
Agent will furnish to the Administrative Lender the original or a certified copy
of a receipt evidencing payment thereof. If no Taxes are payable in respect of
any payment hereunder, the Notification Agent will furnish to the Administrative
Lender a certificate from each appropriate taxing
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authority, or an opinion of counsel acceptable to the Administrative Lender, in
either case stating that such payment is exempt from or not subject to Taxes,
provided, however, that such certificate or opinion need only be given if: (i)
the Borrowers make any payment from any account located outside the United
States, or (ii) the payment is made by a payor that is not a United States
Person. For purposes of this Section 2.15 the terms "United States" and "United
States Person" shall have the meanings set forth in Section 7701 of the Code.
(e) Each Lender which is not a United States Person hereby agrees that:
(i) it shall, no later than the Agreement Date (or, in the case of a
Lender which becomes a party hereto pursuant to Section 11.16 after the
Agreement Date, the date upon which such Lender becomes a party hereto)
deliver to the Notification Agent through the Administrative Lender, with a
copy to the Administrative Lender:
(A) if any lending office is located in the United States of America,
two (2) accurate and complete signed originals of Internal
Revenue Service Form 4224 or any successor thereto ("Form 4224"),
(B) if any lending office is located outside the United States of
America, two (2) accurate and complete signed originals of
Internal Revenue Service Form 1001 or any successor thereto
("Form 1001 ").
in each case indicating that such Lender is on the date of delivery thereof
entitled to receive payments of principal, interest and fees for the
account of such lending office or lending offices under this Agreement free
from withholding of United States Federal income tax;
(ii) if at any time such Lender changes its lending office or lending
offices or selects an additional lending office it shall, at the same time
or reasonably promptly thereafter but only to the extent the forms
previously delivered by it hereunder are no longer effective, deliver to
the Notification Agent through the Administrative Lender, with a copy to
the Administrative Lender, in replacement for the forms previously
delivered by it hereunder:
(A) if such changed or additional lending office is located in the
United States of America, two (2) accurate and complete signed
originals of Form 4224; or
(B) otherwise, two (2) accurate and complete signed originals of Form
1001,
in each case indicating that such Lender is on the date of delivery thereof
entitled to receive payments of principal, interest and fees for the
account of such changed or additional lending office under this Agreement
free from withholding of United States Federal income tax;
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(iii) it shall, before or promptly after the occurrence of any event
(including the passing of time but excluding any event mentioned in clause
(ii) above) requiring a change in the most recent Form 4224 or Form 1001
previously delivered by such Lender and if the delivery of the same be
lawful, deliver to the Notification Agent through the Administrative Lender
with a copy to the Administrative Lender, two (2) accurate and complete
original signed copies of Form 4224 or Form 1001 in replacement for the
forms previously delivered by such Lender; and
(iv) it shall, promptly upon the request of the Notification Agent to
that effect, deliver to the Notification Agent such other forms or similar
documentation as may be required from time to time by any applicable law,
treaty, rule or regulation in order to establish such Lender's tax status
for withholding purposes.
(f) Without prejudice to the survival of any other agreement of the
Borrowers hereunder, the agreements and obligations of the Borrowers contained
in this Section 2.15 shall survive the payment in full of principal and interest
hereunder.
(g) Any Lender claiming any additional amounts payable pursuant to this
Section 2.15 shall use its reasonable best efforts (consistent with its internal
policy and legal and regulatory restrictions) to change the jurisdiction of its
lending office, if the making of such a change would avoid the need for, or
reduce the amount of, any such additional amounts which may thereafter accrue
and would not, in the sole judgment of such Lender, be otherwise disadvantageous
to such Lender.
(h) Each Lender (and the Administrative Lender with respect to payments to
the Administrative Lender for its own account) agrees that (i) it will take all
reasonable actions by all usual means to maintain all exemptions, if any,
available to it from United States withholding taxes (whether available by
treaty, existing administrative waiver, by virtue of the location of any
Lender's lending office) and (ii) otherwise cooperate with the Borrowers to
minimize amounts payable by the Borrowers under this Section 2.15; provided,
however, the Lenders and the Administrative Lender shall not be obligated by
reason of this Section 2.15(h) to contest the payment of any Taxes or Other
Taxes or to disclose any information regarding its tax affairs or tax
computations or reorder its tax or other affairs or tax or other planning.
Section 2.16 Letters of Credit.
(a) The Letter of Credit Facility. The Borrowers, through an Authorized
Signatory of the Notification Agent, may request the Issuing Bank, on the terms
and conditions hereinafter set forth, to issue, and the Issuing Bank shall, if
so requested, issue, letters of credit (the "Letters of Credit") for the account
of any Borrower from time to time on any Business Day from the date of the
initial Advance until the Maturity Date in an aggregate maximum amount (assuming
compliance with all conditions to drawing) not to exceed at any time outstanding
the lesser of (i)$2,500,000 (the "Letter of Credit Facility"), and (ii) the sum
of (A) the Commitment minus (B) the aggregate principal amount of Advances then
outstanding. No Letter
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of Credit shall have an expiration date (including all rights of renewal) later
than the earlier of (i) the Maturity Date or (ii) one year after the date of
issuance thereof. The Borrowers shall be jointly and severally liable for all
obligations in respect of Letters of Credit. Immediately upon the issuance of
each Letter of Credit, the Issuing Bank shall be deemed to have sold and
transferred to each Lender, and each Lender shall be deemed to have purchased
and received from the Issuing Bank, in each case irrevocably and without any
further action by any party, an undivided interest and participation in such
Letter of Credit, each drawing thereunder and the obligations of the Borrowers
under this Agreement in respect thereof in an amount equal to the product of (i)
such Lender's Specified Percentage of the Commitment times (ii) the maximum
amount available to be drawn under such Letter of Credit (assuming compliance
with all conditions to drawing). Within the limits of the Letter of Credit
Facility, and subject to the limits referred to above, the Borrowers, through an
Authorized Signatory of the Notification Agent, may request the issuance of
Letters of Credit under this Section 2.16(a), repay any Advances resulting from
drawings thereunder pursuant to Section 2.16(c) and request the issuance of
additional Letters of Credit under this Section 2.16(a). During the term of this
Agreement, provided that no Default or Event of Default then exists and subject
to the appropriate conditions for the issuance of a Letter of Credit set forth
in Article 3 hereof, the Issuing Bank shall automatically renew any expiring
Letters of Credit for a period of time not to exceed the earlier of (x) the
Maturity Date or (y) one year after the date of issuance thereof.
(b) Request for Issuance. Each Letter of Credit shall be issued upon
notice, given not later than 11:00 a.m. (Dallas time) on the third Business Day
prior to the date of the proposed issuance of such Letter of Credit, by the
Notification Agent, through an Authorized Signatory, to the Issuing Bank, which
shall give to the Administrative Lender and each Lender prompt notice thereof by
telex, telecopier or cable. Each Letter of Credit shall be issued upon notice
given in accordance with the terms of any separate agreement between the
Borrowers and the Issuing Bank in form and substance reasonably satisfactory to
the Borrowers and the Issuing Bank providing for the issuance of Letters of
Credit pursuant to this Agreement and containing terms and conditions not
inconsistent with this Agreement (a "Letter of Credit Agreement"), provided that
if any such terms and conditions are inconsistent with this Agreement, this
Agreement shall control. Each such notice of issuance of a Letter of Credit (a
"Notice of Issuance") shall be by telex, telecopier or cable, specifying
therein, in the case of a Letter of Credit, the requested (A) date of such
issuance (which shall be a Business Day), (B) maximum amount of such Letter of
Credit, (C) expiration date of such Letter of Credit, (D) name and address of
the beneficiary of such Letter of Credit, (E) form of such Letter of Credit and
(F) such other information as shall be required pursuant to the relevant Letter
of Credit Agreement. If the requested terms of such Letter of Credit are
acceptable to the Issuing Bank in its reasonable discretion, the Issuing Bank
will, upon fulfillment of the applicable conditions set forth in Article 3
hereof, make such Letter of Credit available to the Notification Agent at its
office referred to in Section 11.1 or as otherwise agreed with the Borrowers in
connection with such issuance.
(c) Drawing and Reimbursement. The payment by the Issuing Bank of a draft
drawn under any Letter of Credit shall constitute for all purposes of this
Agreement the making by the
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Issuing Bank of an Advance, which shall bear interest at the applicable Prime
Rate Basis, in the amount of such draft (but without any requirement for
compliance with the conditions set forth in Article 3 hereof). In the event that
a drawing under any Letter of Credit is not reimbursed by the Borrowers by 11:00
a.m. (Dallas time) on the first Business Day after such drawing, the Issuing
Bank shall promptly notify Administrative Lender and each other Lender. Each
such Lender shall, on the first Business Day following such notification, make
an Advance, which shall bear interest at the applicable Prime Rate Basis, and
shall be used to repay the applicable portion of the Issuing Bank' s Advance
with respect to such Letter of Credit, in an amount equal to the amount of its
participation in such drawing for application to reimburse the Issuing Bank (but
without any requirement for compliance with the applicable conditions set forth
in Article 3 hereof) and shall make available to the Administrative Lender for
the account of the Issuing Bank, by deposit at the Administrative Lender's
office, in same day funds, the amount of such Advance. In the event that any
Lender fails to make available to the Administrative Lender for the account of
the Issuing Bank the amount of such Advance, the Issuing Bank shall be entitled
to recover such amount on demand from such Lender together with interest thereon
at a rate per annum equal to the lesser of (i) the Highest Lawful Rate or (ii)
the Federal Funds Rate.
(d) Increased Costs. If any change in any law or regulation or in the
interpretation thereof by any court or administrative or governmental authority
charged with the administration thereof shall either (i) impose, modify or deem
applicable any reserve, special deposit or similar requirement against letters
of credit or guarantees issued by, or assets held by, or deposits in or for the
account of, the Issuing Bank or any Lender or (ii) impose on the Issuing Bank or
any Lender any other condition regarding this Agreement or such Lender or any
Letter of Credit, and the result of any event referred to in the preceding
clause (i) or (ii) shall be, in the reasonable opinion of the Issuing Bank or
any Lender, to increase the cost to the Issuing Bank of issuing or maintaining
any Letter of Credit or to any Lender of purchasing any participation therein or
making any Advance pursuant to Section 2.16(c), then, upon demand by the Issuing
Bank or such Lender upon the Notification Agent, the Borrowers jointly and
severally shall, subject to Section 11.9 hereof, pay to the Issuing Bank or such
Lender, from time to time as specified by the Issuing Bank or such Lender,
additional amounts that shall be sufficient to compensate the Issuing Bank or
such Lender for such increased cost. A certificate as to the amount of such
increased cost, submitted to the Notification Agent by the Issuing Bank or such
Lender, shall include in reasonable detail the basis for the demand for
additional compensation and shall be conclusive and binding for all purposes,
absent demonstrable error. The obligations of the Borrowers under this Section
2.16(d) shall survive termination of this Agreement. The Issuing Bank or any
Lender claiming any additional compensation under this Section 2.16(d) shall use
reasonable efforts (consistent with legal and regulatory restrictions) to reduce
or eliminate any such additional compensation which may thereafter accrue and
which efforts would not, in the sole discretion of the Issuing Bank or such
Lender, be otherwise disadvantageous.
(e) Obligations Absolute. The obligations of the Borrowers under this
Agreement with respect to any Letter of Credit, any Letter of Credit Agreement
and any other agreement or instrument relating to any Letter of Credit or any
Advance pursuant to Section 2.16(c) shall be unconditional and irrevocable, and
shall be paid strictly in accordance with the terms of this
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Agreement, such Letter of Credit Agreement and such other agreement or
instrument under all circumstances, including, without limitation, the following
circumstances:
(i) any lack of validity or enforceability of this Agreement, any
other Loan Document, any Letter of Credit Agreement, any Letter of Credit
or any other agreement or instrument relating thereto (collectively, the
"L/C Related Documents");
(ii) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Obligations of the Borrowers in respect of
the Letters of Credit or any Advance pursuant to Section 2.16(c) or any
other amendment or waiver of or any consent to departure from all or any of
the L/C Related Documents;
(iii) the existence of any claim, set-off, defense or other right that
any Borrower may have at any time against any beneficiary or any transferee
of a Letter of Credit (or any Persons for whom any such beneficiary or any
such transferee may be acting), the Issuing Bank, any Lender or any other
Person, whether in connection with this Agreement, the transactions
contemplated hereby or by the L/C Related Documents or any unrelated
transaction;
(iv) any statement or any other document presented under a Letter of
Credit proving to be forged, fraudulent, invalid or insufficient in any
respect or any statement therein being untrue or inaccurate in any respect,
except to the extent that any payment by the Issuing Bank against any such
statement or other document shall be as a result of the Issuing Bank's
gross negligence or willful misconduct;
(v) payment by the Issuing Bank under a Letter of Credit against
presentation of a draft or certificate that does not comply with the terms
of the Letter of Credit, except for any payment made upon the Issuing
Bank's gross negligence or willful misconduct;
(vi) any exchange, release or non-perfection of any Collateral, or any
release or amendment or waiver of or consent to departure from any
Subsidiary Guaranty or any other guarantee, for all or any of the
Obligations of the Borrowers in respect of the Letters of Credit or any
Advance pursuant to Section 2.16(c); or
(vii) any other circumstance or happening whatsoever, whether or not
similar to any of the foregoing, including, without limitation, any other
circumstance that might otherwise constitute a defense available to, or a
discharge of, the Borrowers or a guarantor, other than the Issuing Bank's
gross negligence or wilful misconduct.
(f) Compensation for Letters of Credit.
(i) Credit Fees. Subject to Section 11.9 hereof, the Borrowers jointly
and severally shall pay to the Administrative Lender for the account of
each Lender a credit
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fee (which shall be payable quarterly in arrears on each Quarterly Date and
on the Maturity Date) on the average daily amount available for drawing
under all outstanding Letters of Credit (computed, subject to Section 11.9
hereof, on the basis of a 360-day year for the actual number of days
elapsed) at the following per annum percentages, applicable in the
following situations:
Applicability Percentage
------------- ----------
(A) If the Leverage Ratio is not less than 2.0 to 1 1.850%
(B) If the Leverage Ratio is less than 2.0 to 1 but is not 1.750%
less than 1.5 to 1
(C) If the Leverage Ratio is less than 1.5 to 1 but is not 1.500%
less than 1.0 to 1
(D) If the Leverage Ratio is less than 1.0 to 1 1.250%
(ii) Adjustment of Credit Fee. The credit fee payable in respect of
the Letters of Credit shall be subject to reduction or increase, as
applicable and as set forth in the table in (i) above, on a quarterly basis
according to the performance of the Borrowers as tested by the Leverage
Ratio. Except as set forth in the last sentence hereof, any such increase
or reduction in such fee shall be effective on the third Business Day
following the date of receipt of the applicable financial statements
required to be delivered pursuant to Section 6.l(b) or 6.2(b) hereof. If
financial statements of the Borrowers setting forth the Leverage Ratio are
not received by the Administrative Lender by the date required pursuant to
Section 6.1(b) or 6.2(a) hereof, as applicable, the fee payable in respect
of the Letters of Credit shall be determined as if the Leverage Ratio
exceeds 2.0 to 1 until such time as such financial statements are received.
For the last fiscal quarter of any fiscal year of the Borrowers, the
Borrowers may provide their unaudited financial statements, subject only to
year-end adjustments, for the purpose of adjusting the Letter of Credit
fee.
(iii) Issuance Fee. Subject to Section 11.9 hereof, the Borrowers
jointly and severally shall pay to the Administrative Lender, for the sole
account of the Issuing Bank, an issuance fee of $500 on the date of
issuance of each Letter of Credit.
(g) L/C Cash Collateral Account.
(i) Upon the occurrence of an Event of Default and demand by the
Administrative Lender pursuant to Section 8.2(c), the Borrowers jointly and
severally will promptly pay to the Administrative Lender in immediately
available funds an amount equal to 100% of the maximum amount then
available to be drawn under the Letters of Credit then outstanding. Any
amounts so received by the Administrative Lender shall
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be deposited by the Administrative Lender in a deposit account maintained
by the Issuing Bank (the "L/C Cash Collateral Account").
(ii) As security for the payment of all Reimbursement Obligations and
for any other Obligations, the Borrowers hereby grant, convey, assign,
pledge, set over and transfer to the Administrative Lender (for the benefit
of the Issuing Bank and Lenders), and creates in the Administrative
Lender's favor (for the benefit of the Issuing Bank and Lenders) a Lien in,
all money, instruments and securities at any time held in or acquired in
connection with the L/C Cash Collateral Account, together with all proceeds
thereof. The L/C Cash Collateral Account shall be under the sole dominion
and control of the Administrative Lender and the Borrowers shall have no
right to withdraw or to cause the Administrative Lender to withdraw any
funds deposited in the L/C Cash Collateral Account except as otherwise
provided in Section 2.16(g)(iii). At any time and from time to time, upon
the Administrative Lender's request delivered to the Notification Agent,
the Borrowers promptly shall execute and deliver any and all such further
instruments and documents, including UCC financing statements, as may be
necessary, appropriate or desirable in the Administrative Lender's
judgment to obtain the full benefits (including perfection and priority) of
the security interest created or intended to be created by this paragraph
(ii) and of the rights and powers herein granted. The Borrowers shall not
create or suffer to exist any Lien on any amounts or investments held in
the L/C Cash Collateral Account other than the Lien granted under this
paragraph (ii) and Liens arising by operation of Applicable Law and not by
contract which secure amounts not yet due and payable.
(iii) The Administrative Lender shall (A) apply any funds in the L/C
Cash Collateral Account on account of Reimbursement Obligations when the
same become due and payable if and to the extent that the Borrowers shall
fail directly to pay such Reimbursement Obligations, (B) after the Maturity
Date, apply any proceeds remaining in the L/C Cash Collateral Account first
to pay any unpaid Obligations then outstanding hereunder and then to refund
any remaining amount to the Borrowers, and (C) provided no Default or Event
of Default shall be in existence, return any funds in the L/C Cash
Collateral Account to the Borrowers.
(iv) The Borrowers, no more than once in any calendar month, may,
through an Authorized Signatory of the Notification Agent, direct the
Administrative Lender to invest the funds held in the L/C Cash Collateral
Account (so long as the aggregate amount of such funds exceeds any relevant
minimum investment requirement) in (A) direct obligations of the United
States or any agency thereof, or obligations guaranteed by the United
States or any agency thereof and (B) one or more other types of investments
permitted by the Determining Lenders, in each case with such maturities as
the Borrowers, with the consent of the Determining Lenders, may specify,
pending application of such funds on account of Reimbursement Obligations
or on account of other Obligations, as the case may be. In the absence of
any such direction from the Borrowers through an Authorized Signatory of
the Notification Agent, the Administrative
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Lender shall invest the funds held in the L/C Cash Collateral Account (so
long as the aggregate amount of such funds exceeds any relevant minimum
investment requirement) in one or more types of investments with the
consent of the Determining Lenders with such maturities as the Borrowers,
with the consent of the Determining Lenders and through an Authorized
Signatory of the Notification Agent, may specify, pending application of
such funds on account of Reimbursement Obligations or on account of other
Obligations, as the case may be. All such investments shall be made in the
Administrative Lender's name for the account of the Lenders. The Borrowers
recognize that any losses or taxes with respect to such investments shall
be borne solely by the Borrowers, and the Borrowers jointly and severally
agree to hold the Administrative Lender and the Lenders harmless from any
and all such losses and taxes. Administrative Lender may liquidate any
investment held in the L/C Cash Collateral Account in order to apply the
proceeds of such investment on account of the Reimbursement Obligations (or
on account of any other Obligation then due and payable, as the case may
be) without regard to whether such investment has matured and without
liability for any penalty or other fee incurred (with respect to which the
Borrowers hereby agree to jointly and severally reimburse the
Administrative Lender) as a result of such application.
(v) The Borrowers jointly and severally shall pay to the
Administrative Lender the fees customarily charged by the Issuing Bank with
respect to the maintenance of accounts similar to the L/C Cash Collateral
Account in an amount not to exceed $1,000 in aggregate per calendar year.
ARTICLE 3
Conditions Precedent
Section 3.1 Conditions Precedent to Closing and the Initial Advance to, and
Letters of Credit on behalf of, Metro. The obligation of each Lender to sign
this Agreement and to make the initial Advance to Metro, and the obligation of
the Issuing Bank to issue the initial Letter of Credit on behalf of Metro, is
subject to receipt by the Administrative Lender of each of the following, in
form and substance satisfactory to the Administrative Lender, with a copy
(except for the Notes) for each Lender:
(a) a loan certificate of Metro certifying as to the incumbency of each
Authorized Signatory, and including (i) a copy of the Articles of Incorporation
of Metro, certified to be true, complete and correct by the secretary of state
of its state of incorporation, (ii) a copy of the By-Laws of Metro, as in effect
on the Agreement Date, (iii) a copy of the resolutions of Metro authorizing it
to execute, deliver and perform this Agreement, the Notes, and the other Loan
Documents to which it is a party, and (iv) a copy of a certificate of good
standing and a certificate of existence, as applicable, for its state of
incorporation and a certificate of authority to do business for each state in
which it is qualified to do business;
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(b) for each Subsidiary, a certificate of an officer acceptable to the
Lenders of each such Subsidiary, certifying as to the incumbency of the officers
signing the Loan Documents to which it is a party, and including (i) a copy of
its Articles of Incorporation, certified as true, complete and correct by the
secretary of state of its state of incorporation, (ii) a copy of its By-Laws, as
in effect on the Agreement Date, (iii) a copy of the resolutions authorizing it
to execute, deliver and perform the Loan Documents to which it is a party, and
(iv) a copy of a certificate of good standing and a certificate of existence, as
applicable, for its state of incorporation and certificate of authority to do
business in each state in which it is qualified to do business;
(c) duly executed Notes, payable to the order of each Lender and in an
amount for each Lender equal to its Specified Percentage of the Commitment;
(d) an Owner Pledge Agreement, duly executed and completed by David
Saperstein and acknowledged and consented to by David Saperstein's spouse, dated
as of the Agreement Date, granting the Lenders a first priority Lien and
security interest in the Pledged Stock owned by David Saperstein;
(e) a Borrower Pledge Agreement, duly executed and completed by Metro,
dated as of the Agreement Date, granting the Lenders a first priority Lien and
security interest in (i) the Pledged Stock owned directly by Metro and (ii)
Intercompany Notes evidencing intercompany advances made, or to be made, by
Metro to Subsidiaries;
(f) duly executed and completed Subsidiary Pledge Agreements, dated as of
the Agreement Date, granting the Lenders a first priority Lien and security
interest in the (i) Pledged Stock owned directly by each Subsidiary, and (ii)
Intercompany Notes evidencing intercompany advances made, or to be made, each
Subsidiary to other Subsidiaries;
(g) a duly executed and completed Borrower Security Agreement, dated as of
the Agreement Date, granting the Lenders a first priority Lien and security
interest in (i) the Accounts of Metro and (ii) the tangible personal property of
Metro;
(h) a duly executed and completed Subsidiary Security Agreement, dated as
of the Agreement Date, granting the Lenders a first priority Lien and security
interest in (i) the Accounts of each Subsidiary and (ii) the tangible personal
property of each Subsidiary;
(i) the Pledged Stock, together with stock powers duly executed in blank;
(j) the Intercompany Notes, duly endorsed;
(k) a duly executed and completed Subsidiary Guaranty, dated as of the
Agreement Date executed by each Subsidiary;
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(l) copies of insurance binders or certificates covering the assets of the
Borrowers and the Subsidiaries, and meeting the requirements of Section 5.5
hereof;
(m) reimbursement for Administrative Lender for Special Counsel's
reasonable fees and expenses rendered through the date hereof;
(n) evidence that all corporate proceedings of the Borrowers and the
Subsidiaries taken in connection with the transactions contemplated by this
Agreement and the other Loan Documents shall be reasonably satisfactory in form
and substance to the Lenders and Special Counsel; and the Lenders shall have
received copies of all documents or other evidence which the Administrative
Lender, Special Counsel or any Lender may reasonably request in connection with
such transactions;
(o) copies of the following combined and combining financial statements for
Metro and its Subsidiaries, as of and for the period ended June 30, 1994: (i)
combined and combining balance sheets as of the end of such period, and (ii)
combined and combining statements of income and changes in cash for such period;
which financial statements shall set forth in comparative form figures for the
corresponding periods in the previous fiscal year, all in reasonable detail and
certified by an Authorized Signatory to the best of his knowledge to be complete
and correct and prepared in accordance with GAAP (other than footnotes thereto),
subject to year-end adjustment;
(p) the facility fee for the account of each Lender as required pursuant to
Section 2.4(b) hereof;
(q) all Indebtedness owing by Metro under the Existing Loan Agreement shall
have been paid in full;
(r) opinions of counsel to the Borrower and the Subsidiaries addressed to
the Lenders and in form and substance reasonably satisfactory to the Lenders,
dated the Agreement date; and
(s) in form and substance satisfactory to the Lenders and Special Counsel,
such other documents, instruments and certificates as the Administrative Lender
may reasonably require in connection with the transactions contemplated hereby,
including without limitation the status, organization or authority of the
Borrowers or any Subsidiary, and the enforceability of and security for the
Obligation.
Section 3.2 Conditions Precedent to the Initial Advance to, and Letters of
Credit on behalf of, MNLP. The obligation of each Lender to make the initial
Advance to MNLP, and the obligation of the Issuing Bank to issue the initial
Letter of Credit on behalf of MNLP, is subject to receipt by the Administrative
Lender of each of the following, in form and substance satisfactory to the
Administrative Lender, with a copy (except for the Notes) for each Lender:
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(a) a general partner's certificate executed by the general partner of MNLP
(i) certifying as to the general partner of the partnership, (ii) certifying as
to the name of the partnership, (iii) including a copy of the Partnership
Agreement, certified to be true, complete and correct, and in full force and
effect, without amendment except as shown, and (iv) a copy of the certificate of
limited partnership of the partnership, certified to be true and correct;
(b) a certificate of an officer acceptable to the Lenders of Metro,
certifying as to the incumbency of the officers signing Loan Documents on behalf
of Metro, as the general partner of MNLP, and including a copy of the
resolutions authorizing it to execute, deliver and perform the Loan Documents to
which MNLP is a party;
(c) a copy of the resolutions authorizing Metro to execute, deliver and
perform the Owner Pledge Agreement;
(d) a Trustee's certificate executed by the Trustees of each Trust (i)
certifying as the numbers of the Trustees and (ii) including a copy of the Trust
Agreement, certified to be true, complete and correct, and in full force and
effect, without amendment except as shown;
(e) [Intentionally Omitted];
(f) duly executed Notes, payable to the order of each Lender and in an
amount for each Lender equal to its Specified Percentage of the Commitment;
(g) an Owner Pledge Agreement, duly executed and completed by David
Saperstein and acknowledged and consented to by David Saperstein's spouse, dated
as of the Agreement Date, granting the Lenders a first priority Lien and
security interest in the Pledged Stock owned by David Saperstein;
(h) an Owner Pledge Agreement, duly executed and completed by Metro, dated
as of the Agreement Date, granting the Lenders a first priority Lien and
security
interest in the Pledged Stock owned directly by Metro;
(i) Owner Pledge Agreements, duly executed and delivered by the Trusts,
dated as of the Agreement Date, granting the Lenders a first priority Lien and
security interest in the Pledged Stock owned by the Trusts;
(j) a Borrower Pledge Agreement, duly executed and completed by MNLP, dated
as of the Agreement Date, granting the Lenders a first priority Lien and
security
interest in the Pledged Stock owned directly by MNLP;
(k) a duly executed and completed Borrower Security Agreement, dated as of
the Agreement Date, granting the Lenders a first priority Lien and security
interest in (i) the Accounts of MNLP and (ii) the tangible personal property of
MNLP;
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(l) the Pledged Stock, together with stock powers duly executed in blank;
(m) the Intercompany Notes, duly endorsed;
(n) copies of insurance binders or certificates covering the assets of the
Borrowers MNLP, and meeting the requirements of Section 5.5 hereof;
(o) opinions of counsel to the Borrower and the Subsidiaries addressed to
the Lenders and in form and substance reasonably satisfactory to the Lenders,
dated the Agreement date; and
(p) in form and substance satisfactory to the Lenders and Special Counsel,
such other documents, instruments and certificates as the Administrative Lender
may reasonably require in connection with the transactions contemplated hereby,
including without limitation the status, organization or authority of the MNLP,
and the enforceability of and security for the Obligation.
Section 3.3 Conditions Precedent to the Initial Advance to, and Letters of
Credit on behalf of, Additional Borrowers. The obligation of each Lender to make
the initial Advance to, and the obligation of the Issuing Bank to issue the
initial Letter of Credit on behalf of, additional Borrowers becoming party to
this Agreement is subject to receipt by the Administrative Lender of each of the
following, in form and substance satisfactory to the Administrative Lender, with
a copy (except for the Notes) for each Lender:
(a) to the extent such Borrower is a corporation, a loan certificate of
such Borrower certifying as to the incumbency of officers signing the Loan
Documents to which it is a party, and including (i) a copy of its Articles of
Incorporation, certified to be true, complete and correct by the secretary of
state of its state of incorporation, (ii) a copy of its By-Laws, as in effect on
the Agreement Date, (iii) a copy of its resolutions authorizing it to execute,
deliver and perform this Agreement, the Notes, and the other Loan Documents to
which it is a party, and (iv) a copy of a certificate of good standing and a
certificate of existence, as applicable, for its state of incorporation and a
certificate of authority to do business for each state in which it is qualified
to do business;
(b) to the extent such Borrower is a partnership (general or limited), a
partner's consent to borrowing executed by each of its general and/or limited
partners (i) certifying as to the general and/or limited partners of the
partnership, (ii) certifying as to the name of the partnership, (iii) if
applicable, consenting to actions by the general partner on behalf of the
Partnership, (iv) consenting to the borrowings under this Agreement, (v)
including a copy of the Partnership Agreement, certified to be true, complete
and correct, and in full force and effect, without amendment except as shown,
and (vi) if applicable a copy of the certificate of limited partnership of the
partnership, certified to be true and correct;
(c) if a Subsidiary of such Borrower is a corporation, a certificate of an
officer acceptable to the Lenders of each Subsidiary of such Borrower certifying
as to the incumbency of the officers signing the Loan Documents to which it is a
party, and including (i) a copy of
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its Articles of Incorporation, certified as true, complete and correct by the
secretary of state of its state of incorporation, (ii) a copy of its By-Laws, as
in effect on the Agreement Date, (iii) a copy of the resolutions authorizing it
to execute, deliver and perform the Loan Documents to which it is a party, and
(iv) a copy of a certificate of good standing and a certificate of existence, as
applicable, for its state of incorporation and certificate of authority to do
business in each state in which it is qualified to do business;
(d) to the extent any Subsidiary of such Borrower is a partnership (general
or limited) a partner's consent to borrowing executed by each of its general
and/or limited partners (i) certifying as to the general and/or limited partners
of the partnership, (ii) certifying as to the name of the partnership, (iii) if
applicable, consenting to actions by the general partner on behalf of the
Partnership, (iv) consenting to the borrowings under this Agreement, (v)
including a copy of the Partnership Agreement, certified to be true, complete
and correct, and in full force and effect, without amendment except as shown,
and (vi) if applicable a copy of the certificate of limited partnership of the
partnership, certified to be true and correct;
(e) duly executed Notes, payable to the order of each Lender and in an
amount for each Lender equal to its Specified Percentage of the Commitment;
(f) an Owner Pledge Agreement, duly executed and completed by each equity
interest owner of such Borrower granting the Lenders a first priority Lien and
security interest in the Pledged Stock owned by each such equity interest owner;
(g) a duly executed and completed Borrower Pledge Agreement granting the
Lenders a first priority Lien and security interest in (i) the Pledged Stock
owned directly by such Borrower and (ii) Intercompany Notes evidencing
intercompany advances made, or to be made, by such Borrower to Subsidiaries;
(h) duly executed and completed Subsidiary Pledge Agreements granting the
Lenders a first priority Lien and security interest in the (i) Pledged Stock
owned directly by each Subsidiary, and (ii) Intercompany Notes evidencing
intercompany advances made, or to be made, by each Subsidiary of such Borrower
to other Subsidiaries;
(i) a duly executed and completed Borrower Security Agreement granting the
Lenders a first priority Lien and security interest in (i) the Accounts of such
Borrower and (ii) the tangible personal property of such Borrower;
(j) a duly executed and completed Subsidiary Security Agreement granting
the Lenders a first priority Lien and security interest in (i) the Accounts of
each Subsidiary of such Borrower and (ii) the tangible personal property of each
Subsidiary of such Borrower;
(k) the Pledged Stock, together with stock powers duly executed in blank;
(l) the Intercompany Notes, duly endorsed;
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(m) a duly executed and completed Subsidiary Guaranty executed by each
Subsidiary of such Borrower;
(n) copies of insurance binders or certificates covering the assets of such
Borrower and its Subsidiaries, and meeting the requirements of Section 5.5
hereof;
(o) evidence that all corporate and partnership proceedings of such
Borrowers and its Subsidiaries taken in connection with the transactions
contemplated by this Agreement and the other Loan Documents shall be reasonably
satisfactory in form and substance to the Lenders and Special Counsel; and the
Lenders shall have received copies of all documents or other evidence which the
Administrative Lender, Special Counsel or any Lender may reasonably request in
connection with such transactions;
(p) if available copies of the following combined and combining financial
statements for such Borrower and its Subsidiaries, as of and for the most
recently ended fiscal quarter and fiscal year of such Borrower: (i) combined and
combining balance sheets as of the end of such period, and (ii) combined and
combining statements of income and changes in cash for such period; which
financial statements shall set forth in comparative form figures for the
corresponding periods in the previous fiscal year, all in reasonable detail and
certified by the president, vice president, treasurer or chief financial officer
of such Borrower to the best of his knowledge to be complete and correct and
prepared in accordance with GAAP (other than footnotes thereto), subject to
year-end adjustment;
(q) all prior Indebtedness of such Borrower shall have been paid in full;
(r) opinions of counsel to the Borrower and the Subsidiaries addressed to
the Lenders and in form and substance reasonably satisfactory to the Lenders,
dated the Agreement date; and
(s) in form and substance satisfactory to the Lenders and Special Counsel,
such other documents, instruments and certificates as the Administrative Lender
may reasonably require in connection with the transactions contemplated hereby,
including without limitation the status, organization or authority of such
Borrower or any of its Subsidiaries, and the enforceability of and security for
the Obligation.
Section 3.4 Conditions Precedent to All Advances. The obligation of each
Lender to make each Advance (including the initial Advance) and the obligation
of the Issuing Bank to issue each Letter of Credit (including the initial Letter
of Credit) hereunder is subject to fulfillment of the following conditions
immediately prior to or contemporaneously with each such Advance or issuance:
(a) With respect to Advances (other than Refinancing Advances) and each
issuance of a Letter of Credit, all of the representations and warranties of the
Borrowers under this Agreement, which, pursuant to Section 4.2 hereof, are made
at and as of the time of such
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Advance or issuance, shall be true and correct at such time in all material
respects, both before and after giving effect to the application of the proceeds
of the Advance or issuance;
(b) The incumbency of the Authorized Signatories and other officers shall
be as stated in the certificates of incumbency delivered in the certificates
pursuant to Sections 3.1(a) and (b), 3.2(a) and (b) and 3.3(a), (b) and (c)
hereof or as subsequently modified and reflected in certificates of incumbency
delivered to the Administrative Lender. The Lenders may, without waiving this
condition, consider it fulfilled and a representation by the Borrowers made to
such effect if no written notice to the contrary, dated on or before the date of
such Advance or issuance, is received by the Administrative Lender from the
Notification Agent prior to the making of such Advance or issuance;
(c) There shall not exist a Default hereunder, with respect to Advances
(other than Refinancing Advances) and with respect to issuance of each Letter of
Credit, or an Event of Default, with respect to any Refinancing Advance;
(d) The aggregate Advances and amount available for draws under Letters of
Credit, after giving effect to such proposed Advance or Letter of Credit, shall
not exceed the maximum principal amount then permitted to be outstanding
hereunder; and
(e) The Administrative Lender shall have received all such other
certificates, reports, statements or other documents as the Administrative
Lender may reasonably request.
Each request by the Notification Agent to the Administrative Lender or the
Issuing Bank, as appropriate, for an Advance or the issuance of a Letter of
Credit shall constitute a representation and warranty by the Borrowers as of the
date of the making of such Advance or the issuance of such Letter of Credit that
all the conditions contained in this Section 3.4 have been satisfied.
ARTICLE 4
Representations and Warranties
Section 4.1 Representations and Warranties. Each Borrower hereby represents
and warrants to each Lender as follows:
(a) Organization; Power; Qualification. As of the Agreement Date, the
respective jurisdictions of incorporation and percentage ownership by each
Borrower and each Subsidiary listed on Schedule 6 are true and correct. Each
Borrower and Subsidiary is a corporation duly organized, validly existing and in
good standing under the laws of its state of organization. Each Borrower and
Subsidiary has the corporate power and authority to own its properties and to
carry on its business as now being and hereafter proposed to be conducted. Each
Borrower and Subsidiary is duly qualified, in good standing and authorized to do
business in each jurisdiction
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in which the character of its properties or the nature of its business requires
such qualification or authorization.
(b) Authorization. Each Borrower has the corporate or partnership power, as
applicable, and has taken all necessary corporate or partnership action, as
applicable, to authorize it to borrow hereunder. Each Borrower and Subsidiary
has the corporate or partnership power, as applicable, and has taken all
necessary corporate or partnership action, as applicable, to execute, deliver
and perform the Loan Documents to which it is party in accordance with the terms
thereof, and to consummate the transactions contemplated thereby. Each Loan
Document has been duly executed and delivered by the Borrower or the Subsidiary
executing it. Each of the Loan Documents to which any Borrower or Subsidiary is
party is a legal, valid and binding respective obligation of such Borrower or
Subsidiary, as applicable, enforceable in accordance with its terms, subject, to
enforcement of remedies, to the following qualifications: (i) equitable
principles generally, and (ii) bankruptcy, insolvency, liquidation,
reorganization, reconstruction and other similar laws affecting enforcement of
creditors' rights generally (insofar as any such law relates to the bankruptcy,
insolvency or similar event of such Borrower or Subsidiary).
(c) Compliance with Other Loan Documents and Contemplated Transactions. The
execution, delivery and performance by each Borrower and Subsidiary of the other
Loan Documents to which they are respectively a party, and the consummation of
the transactions contemplated thereby, do not and will not (i) require any
consent or approval not already obtained, (ii) violate any Applicable Law, (iii)
conflict with, result in a breach of, or constitute a default under the articles
of incorporation, by-laws or partnership agreement as applicable, of such
Borrower or Subsidiary, or under any Necessary Authorization, indenture,
agreement or other instrument, to which such Borrower or Subsidiary is a party
or by which they or their respective properties may be bound, or (iv) result in
or require the creation or imposition of any Lien upon or with respect to any
property now owned or hereafter acquired by such Borrower or Subsidiary, except
Permitted Liens.
(d) Business. Each Borrower and Subsidiary is engaged solely in the
Borrowers' Business.
(e) Licenses, etc. All Necessary Authorizations have been duly authorized
and obtained, and are in full force and effect. Each Borrower and Subsidiary is
and will continue to be in compliance in all material respects with all
provisions thereof. No Necessary Authorization is the subject of any pending or,
to the best of each Borrower's knowledge, threatened challenge or revocation.
(f) Compliance with Law. Each Borrower and Subsidiary is in compliance with
all Applicable Laws, the violation of which could reasonably be expected to have
a Material Adverse Effect. Each Borrower and Subsidiary has duly and timely
filed all reports, statements and filings that are required to be filed by any
of them with any Governmental Authority, and are in all material respects in
compliance therewith, including without limitation the rules and
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regulations of any Governmental Authority relating to their business. Each
Borrower and Subsidiary has obtained all appropriate approvals and consents of,
and has made all filings with, the Governmental Authorities in connection with
the acquisition and ownership of each of their respective assets and the
operation of their business where the failure to obtain such consents and
approvals could have a Material Adverse Effect.
(g) Title to Properties. Each Borrower and Subsidiary has good and
indefeasible title to, or a valid leasehold interest in, all of their material
assets. None of their assets are subject to any Liens, except Permitted Liens.
No financing statement or other Lien filing (except relating to Permitted Liens)
is on file in any state or jurisdiction that names any Borrower or Subsidiary as
debtor or covers (or purports to cover) any assets of any Borrower or
Subsidiary. Each Borrower and Subsidiary has not signed any such financing
statement or filing, nor any security agreement authorizing any Person to file
any such financing statement or filing.
(h) Litigation. Except as reflected on Schedule 3 hereto, there is no
action, suit or proceeding pending against, or, to the best of each Borrower's
knowledge, threatened against such Borrower or any Subsidiary, or in any other
manner relating directly and materially adversely to such Borrower, any
Subsidiary, or any of their material properties, in any court or before any
arbitrator of any kind or before or by any governmental body the result of which
could reasonably be expected to require the payment of money by such Borrower or
any Subsidiary in an amount of $250,000 or more in any one such action, suit or
proceeding or $500,000 or more in the aggregate for all such actions, suits or
proceedings.
(i) Taxes. Except for where extensions have been duly filed and obtained,
all federal, state and other tax returns of each Borrower and Subsidiary
required by law to be filed have been duly filed and all federal, state and
other taxes, assessments and other governmental charges or levies upon each
Borrower, Subsidiary or any of their properties, income, profits and assets,
which are due and payable, have been paid (other than federal income taxes for
Metro's fiscal year ending on June 30, 1994), unless the same are being
diligently contested in good faith by appropriate proceedings, with adequate
reserves established therefor, and no Lien (other than a Permitted Lien) has
attached and no foreclosure, distraint, sale or similar proceedings have been
commenced. The charges, accruals and reserves on the books of each Borrower and
Subsidiary in respect of their taxes are, in the judgment of such Borrower,
adequate.
(j) Financial Statements; Material Liabilities. Metro has furnished or
caused to be furnished to the Lenders copies of its June 30, 1994, financial
statements, which are prepared in good faith and complete in all material
respects and present fairly in accordance with GAAP the financial position of
Metro and its Subsidiaries as at such dates and the results of operations for
the periods then ended, subject to normal year-end adjustments. No Borrower nor
any Subsidiary has any material liabilities, contingent or otherwise, or
material losses, except as disclosed in writing to the Lenders prior to the
Agreement Date.
(k) No Adverse Change. Since June 30, 1994, no event or circumstances has
occurred or arisen that could have a Material Adverse Effect.
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(l) ERISA. No Borrower or its Controlled Group maintains or contributes to
any Plan other than those disclosed to the Administrative Lender in writing.
Each such Plan is in compliance in all material respects with the applicable
provisions of ERISA, the Code, and any other applicable Federal or state law,
rule or regulation. With respect to each Plan of each Borrower and each member
of its Controlled Group (other than a Multiemployer Plan), all reports required
under ERISA or any other Applicable Law to be filed with any governmental
authority, the failure of which to file could reasonably result in liability of
such Borrower or any member of its Controlled Group in excess of $100,000, have
been duly filed. All such reports are true and correct in all material respects
as of the date given. No such Plan of any Borrower or any member of its
Controlled Group has been terminated nor has any accumulated funding deficiency
(as defined in Section 412(a) of the Code) been incurred (without regard to any
waiver granted under Section 412 of the Code), nor has any funding waiver from
the Internal Revenue Service been received or requested. No Borrower or any
member of its Controlled Group has failed to make any contribution or pay any
amount due or owing as required by Section 412 of the Code or Section 302 of
ERISA or the terms of any such Plan prior to the due date under Section 412 of
the Code and Section 302 of ERISA. There has been no ERISA Event or any event
requiring disclosure under Section 4041 (c)(3)(C), 4068(f), 4063(a) or 4043(b)
of ERISA with respect to any Plan or trust of any Borrower or any member of its
Controlled Group since the effective date of ERISA. The value of the assets of
each Plan (other than a Multiemployer Plan) of each Borrower and each member of
its Controlled Group equaled or exceeded the present value of the benefit
liabilities, as defined in Title IV of ERISA, of each such Plan as of the most
recent valuation date using Plan actuarial assumptions at such date. There are
no pending or, to the best of any Borrower's knowledge, threatened claims,
lawsuits or actions (other than routine claims for benefits in the ordinary
course) asserted or instituted against, and no Borrower or any member of its
Controlled Group has knowledge of any threatened litigation or claims against,
(i) the assets of any Plan or trust or against any fiduciary of a Plan with
respect to the operation of such Plan, or (ii) the assets of any employee
welfare benefit plan within the meaning of Section 3(1) or ERISA, or against any
fiduciary thereof with respect to the operation of any such plan. No Borrower or
any member of its Controlled Group has engaged in any prohibited transactions,
within the meaning of Section 406 of ERISA or Section 4975 of the Code, in
connection with any Plan. No Borrower or any member of its Controlled Group has
withdrawn from any Multiemployer Plan, nor has incurred or reasonably expects to
incur (A) any liability under Title IV of ERISA (other than premiums due under
Section 4007 of ERISA to the PBGC), (B) any withdrawal liability (and no event
has occurred which with the giving of notice under Section 4219 of ERISA would
result in such liability) under Section 4201 of ERISA as a result of a complete
or partial withdrawal (within the meaning of Section 4203 or 4205 of ERISA) from
a Multiemployer Plan, or (C) any liability under Section 4062 of ERISA to the
PBGC or to a trustee appointed under Section 4042 of ERISA. No Borrower, any
member of its Controlled Group, or any organization to which any Borrower or any
member of its Controlled Group is a successor or parent corporation within the
meaning of ERISA Section 4069(b), has engaged in a transaction within the
meaning of ERISA Section 4069. No Borrower or any member of its Controlled Group
maintains or has established any welfare benefit plan within the meaning of
Section 3(1) of ERISA which provides for continuing benefits or coverage for any
participant or any beneficiary of any participant after such
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participant's termination of employment except as may be required by the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA") and
the regulations thereunder, and at the expense of the participant or the
beneficiary of the participant, or retiree medical liabilities. Each Borrower
and its Controlled Group which maintains a welfare benefit plan within the
meaning of Section 3(1) of ERISA has complied in all material respects with any
applicable notice and continuation requirements of COBRA and the regulations
thereunder.
(m) Compliance with Regulations G, T, U and X. No Borrower is engaged
principally or as one of its important activities in the business of extending
credit for the purpose of purchasing or carrying any margin stock within the
meaning of Regulations G, T, U and X of the Board of Governors of the Federal
Reserve System, and no part of the proceeds of the Advances or the Letters of
Credit will be used to purchase or carry any margin stock or to extend credit to
others for the purpose of purchasing or carrying any margin stock. No assets of
any Borrower or any Subsidiary are margin stock, and none of the Pledged
Stock is margin stock. No Borrower or Subsidiary, nor any agent acting on their
behalf, have taken or will knowingly take any action which might cause this
Agreement or any Loan Documents to violate any regulation of the Board of
Governors of the Federal Reserve System or to violate the Securities Exchange
Act of 1934, in each case as in effect now or as the same may hereafter be in
effect.
(n) Governmental Regulation. Each Borrower and Subsidiary is not required
to obtain any Necessary Authorization that has not already been obtained from,
or effect any material filing or registration that has not already been effected
with, any federal, state or local regulatory authority in connection with the
execution and delivery of this Agreement or any other Loan Document, or the
performance thereof (other than any enforcement of remedies by the
Administrative Lender on behalf of the Lenders), in accordance with their
respective terms, including any borrowings hereunder.
(o) Absence of Default. Each Borrower and Subsidiary is in compliance in
all material respects with all of the provisions of their articles of
incorporation and by-laws, and no event has occurred or failed to occur, which
has not been remedied or waived, the occurrence or non-occurrence of which
constitutes, or which with the passage of time or giving of notice or both would
constitute, (i) an Event of Default or (ii) a default by such Borrower or
Subsidiary under any material indenture, agreement or other instrument, or any
judgment, decree or order to which such Borrower or Subsidiary is a party or by
which they or any of their material properties is bound.
(p) Investment Company Act. No Borrower is required to register under the
provisions of the Investment Company Act of 1940, as amended. Neither the
entering into or performance by any Borrower of this Agreement nor the issuance
of the Notes violates any provision of such act or requires any consent,
approval, or authorization of, or registration with, the Securities and Exchange
Commission or any other governmental or public body of authority pursuant to any
provisions of such act.
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(q) Environmental Matters. No Borrower nor any Subsidiary has any actual
knowledge or reason to believe that any substance deemed hazardous by any
Applicable Environmental Law, has been installed on any real property now owned
by any Borrower or any of its Subsidiaries. Each Borrower and Subsidiary are not
in violation of or subject to any existing, pending or, to the best of any
Borrower's knowledge, threatened investigation or inquiry by any governmental
authority or to any material remedial obligations under any Applicable
Environmental Laws, and this representation and warranty would continue to be
true and correct following disclosure to the applicable governmental authorities
of all relevant facts, conditions and circumstances, if any, pertaining to any
real property of any Borrower and its Subsidiaries. Each Borrower and Subsidiary
have not obtained and are not required to obtain any permits, licenses or
similar authorizations to construct, occupy, operate or use any buildings,
improvements, fixtures, and equipment forming a part of any real property of any
Borrower or any Subsidiary by reason of any Applicable Environmental Laws. Each
Borrower and Subsidiary undertook, at the time of acquisition of any real
property, reasonable inquiry into the previous ownership and uses of such real
property consistent with good commercial or customary practice. Each Borrower
and Subsidiary has taken all reasonable steps to determine, and no Borrower or
Subsidiary has actual knowledge or reason to believe, after reasonable
investigation, that any hazardous substances or solid wastes have been disposed
of or otherwise released on or to the real property of any Borrower or any
Subsidiary in any manner or quantities which would be deemed a violation of the
Applicable Environmental Laws.
(r) Valid Issuance of Securities. All Pledged Stock has been duly
authorized and validly issued, and is fully paid and nonassessable. The capital
stock described on Exhibit A to the Pledge Agreements constitutes all the issued
and outstanding capital stock of each Borrower, the Subsidiaries of each
Borrower or the Subsidiaries of another Subsidiary. No Person has conversion
rights with respect to, or any subscription rights, calls, commitments or claims
of any character for, or any repurchase or redemption options relating to, the
Pledged Stock, except for those listed on Schedule 5 hereto. The Pledged Stock,
when issued or sold, was either (i) registered or qualified under applicable
federal or state securities laws, or (ii) exempt therefrom.
(s) Certain Fees. No broker's, finder's or other fee or commission will be
payable by any Borrower (other than to the Lenders hereunder) with respect to
the making of the Commitments or the Advances hereunder or the issuance of
Letters of Credit. Each Borrower agrees to indemnify and hold harmless the
Administrative Lender and each Lender from and against any claims, demand,
liability, proceedings, costs or expenses asserted with respect to or arising in
connection with any such fees or commissions.
(t) Compliance. Attached as Schedule 4 hereto is a complete list of all
material licenses, consents, authorizations, permits and Necessary
Authorizations as of the Agreement Date. Such licenses, consents, permits and
authorizations constitute all that are necessary, appropriate or advisable for
each Borrower and Subsidiary to operation its business and own its properties,
and are in full force and effect. No event has occurred which permits (or with
the passage of time would permit) the revocation or termination of any such
license, consents,
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permits and authorizations, or which could result in the imposition of any
restriction thereon of such a nature that could reasonably be expected to have a
Material Adverse Effect.
(u) Patents, Etc. Each Borrower and Subsidiary has obtained all patents,
trademarks, service-marks, trade names, copyrights, licenses and other rights,
free from burdensome restrictions, that are necessary for the operation of their
business as presently conducted and as proposed to be conducted, the loss of
which could reasonably be expected to have a Material Adverse Effect. Nothing
has come to the attention of any Borrower or any Subsidiary to the effect that
(i) any process, method, part or other material presently contemplated to be
employed by any Borrower or Subsidiary may infringe any patent, trademark,
service-mark, trade name, copyright, license or other right owned by any other
Person, or (ii) there is pending or overtly threatened any claim or litigation
against or affecting any Borrower or Subsidiary contesting its right to sell or
use any such process, method, part or other material.
(v) Disclosure. Neither this Agreement nor any other document, certificate
or statement which has been furnished to any Lender by or on behalf of any
Borrower or Subsidiary in connection herewith contained any untrue statement of
a material fact or omitted to state a material fact necessary in order to make
the statement contained herein and therein not misleading at the time it was
furnished. There is no fact known to any Borrower and not known to the public
generally that could reasonably be expected to materially adversely affect the
assets or business of any Borrower or Subsidiary, or in the future could
reasonably be expected (so far as such Borrower can now foresee) to have a
Material Adverse Effect, which has not been set forth in this Agreement or in
the documents, certificates and statements furnished to the Lenders by or on
behalf of such Borrower prior to the date hereof in connection with the
transaction contemplated hereby.
(w) Solvency. Each Borrower is, and the Borrowers and the Subsidiaries on a
combined basis are, Solvent.
(x) Consolidated Business Entity. Each Borrower and Subsidiary is engaged
in the business set forth in Section 4.l(d) hereof. These operations require
financing on a basis such that the credit supplied can be made available from
time to time to the Borrowers and various of the Subsidiaries, as required for
the continued successful operation of the Borrowers and the Subsidiaries as a
whole. The Borrowers have requested Lenders to make credit available hereunder
primarily for the purposes of financing the operations and acquisitions of the
Borrowers and the Subsidiaries. The Borrowers and the Subsidiaries expect to
derive benefit (and the boards of directors of the Borrowers and the
Subsidiaries have determined that its Subsidiaries may reasonably be expected to
derive benefit), directly or indirectly, from the credit extended by Lenders
hereunder, both in their separate capacities and as members of the group of
companies, since the successful operation and condition of the Borrowers and the
Subsidiaries is dependent on the continued successful performance of the
functions of the group as a whole.
Section 4.2 Survival of Representations and Warranties, etc. All
representations and warranties made under this Agreement and the other Loan
Documents shall be deemed to be
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made at and as of the Agreement Date and at and as of the date of each Advance
and each Letter of Credit, and each shall be true and correct when made,
except to the extent (a) previously fulfilled in accordance with the terms
hereof, (b) applicable to a specific date or otherwise subsequently
inapplicable, or (c) previously waived in writing by the Determining Lenders
with respect to any particular factual circumstance. All such representations
and warranties shall survive, and not be waived by, the execution hereof by
any Lender, any investigation or inquiry by any Lender, or by the making of any
Advance under this Agreement.
ARTICLE 5
General Covenants
So long as any of the Obligations are outstanding and unpaid or any
Commitment is outstanding (whether or not the conditions to borrowing have been
or can be fulfilled):
Section 5.1 Preservation of Existence and Similar Matters. Each Borrower
shall, and shall cause each Subsidiary to:
(a) except in connection with any merger or consolidation permitted by
Section 7.5(b) hereof, preserve and maintain, or timely obtain and thereafter
preserve and maintain, its existence, rights, franchises, licenses,
authorizations, consents, privileges and all other Necessary Authorizations from
federal, state and local governmental bodies and any tribunal (regulatory or
otherwise), the loss of which could have a Material Adverse Effect; and
(b) qualify and remain qualified and authorized to do business in each
jurisdiction in which the character of its properties or the nature of its
business requires such qualification or authorization, unless the failure to do
so could not have a Material Adverse Effect.
Section 5.2 Business; Compliance with Applicable Law. Each Borrower and
Subsidiary shall (a) engage substantially in the Borrowers' Business, and (b)
comply in all material respects with the requirements of all Applicable Law, the
failure of which could reasonably be expected to have a Material Adverse Effect.
Section 5.3 Maintenance of Properties. Each Borrower shall, and shall cause
each Subsidiary to, maintain or cause to be maintained all its properties
(whether owned or held under lease) in reasonably good repair, working order and
condition, taken as a whole, and from time to time make or cause to be made all
appropriate repairs, renewals, replacements, additions, betterments and
improvements thereto.
Section 5.4 Accounting Methods and Financial Records. Each Borrower shall,
and shall cause each Subsidiary to, (a) maintain a system of accounting
established and administered in accordance with GAAP, keep adequate records and
books of account in which complete entries will be made and all transactions
reflected in accordance with GAAP, and keep accurate
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and complete records of its respective assets and (b) keep materially accurate
and complete records detailing separately items representing tangible cash
exchanges and intangible and barter exchanges. Each Borrower and Subsidiary
shall maintain a fiscal year ending on June 30 unless Metro, in connection with
its electing Subchapter S status under the Code, elects to have a fiscal year
ending on December 31, whereupon, each Borrower and Subsidiary shall thereafter
maintain a fiscal year ending on December 31.
Section 5.5 Insurance. Each Borrower shall, and shall cause each
Subsidiary to, maintain insurance from responsible companies in such amounts and
against such risks as shall be customary and usual in the industry for companies
of similar size and capability, but in no event less than the amount and types
insured as of the Agreement Date. Each insurance policy shall provide for at
least 30 days' prior notice to the Administrative Lender of any proposed
termination or cancellation of such policy, whether on account of default or
otherwise.
Section 5.6 Payment of Taxes and Claims. Each Borrower shall, and shall
cause each Subsidiary to, pay and discharge all taxes, assessments and
governmental charges or levies imposed upon it or its income or properties prior
to the date on which penalties attach thereto, and all lawful material claims
for labor, materials and supplies which, if unpaid, might become a Lien upon any
of its properties; except that no such tax, assessment, charge, levy or claim
need be paid which is being diligently contested in good faith by appropriate
proceedings and for which adequate reserves shall have been set aside on the
appropriate books, but only so long as no Lien (other than a Permitted Lien)
shall attach with respect thereto and no foreclosure, distraint, sale or similar
proceedings shall have been commenced. Each Borrower shall, and shall cause each
Subsidiary to, timely file all information returns required by federal, state or
local tax authorities.
Section 5.7 Visits and Inspections. Each Borrower shall, and shall cause
each Subsidiary to, promptly permit representatives of the Administrative Lender
or any Lender from time to time to (a) visit and inspect the properties of such
Borrower and Subsidiary as often as the Administrative Lender or any Lender
shall deem advisable, (b) inspect and make extracts from and copies of such
Borrower's and Subsidiary's books and records, and (c) discuss with such
Borrower's and Subsidiary's directors, officers, employees and auditors its
business, assets, liabilities, financial positions, results of operations and
business prospects.
Section 5.8 Payment of Indebtedness. Subject to Section 5.6 hereof, each
Borrower shall, and shall cause each Subsidiary to, pay its Indebtedness when
and as the same becomes due, other than amounts (other than the Obligations)
duly and diligently disputed in good faith.
Section 5.9 Use of Proceeds. Each Borrower shall use the proceeds of
Advances and Letters of Credit to make Acquisitions permitted under Section 7.6
hereof, to make Capital Expenditures, to make Investments (including advances
to Subsidiaries) permitted pursuant to Section 7.3 hereof, to repay all
outstanding Indebtedness under the Existing Loan Agreement, for working capital
and for other general corporate purposes.
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Section 5.10 Indemnity.
(a) Each Borrower jointly and severally agrees to defend, protect,
indemnify and hold harmless the Administrative Lender, each Lender, the Issuing
Bank, each of their respective Affiliates, and each of their respective
(including such Affiliates') officers, directors, employees, agents, attorneys,
shareholders and consultants (including, without limitation, those retained in
connection with the satisfaction or attempted satisfaction of any of the
conditions set forth herein) of each of the foregoing (collectively,
"Indemnitees") from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, claims, costs, expenses and
disbursements of any kind or nature whatsoever (including, without limitation,
the reasonable fees and disbursements of counsel for such Indemnitees in
connection with any investigative, administrative or judicial proceeding,
whether or not such Indemnitees shall be designated a party thereto), imposed
on, incurred by, or asserted against such Indemnitees (whether direct, indirect
or consequential and whether based on any federal, state, or local laws and
regulations, under common law or at equitable cause, or on contract, tort or
otherwise, arising from or connected with the past, present or future operations
of any Borrower or its predecessors in interest, or the past, present or future
environmental condition of property of any Borrower), in any manner relating to
or arising out of this Agreement, the Loan Documents, or any act, event or
transaction or alleged act, event or transaction relating or attendant thereto,
the making of or any participations in the Advances or the Letters of Credit and
the management of the Advances and the Letters of Credit, including in
connection with, or as a result, in whole or in part, of any negligence of
Administrative Lender, the Issuing Bank or any Lender (other than those matters
raised exclusively by a participant against the Administrative Lender, the
Issuing Bank or any Lender and not the Borrowers), or the use or intended use of
the proceeds of the Advances and the Letters of Credit hereunder, or in
connection with any investigation of any potential matter covered hereby, but
excluding any claim or liability that arises as the result of the gross
negligence or willful misconduct of any Indemnitee, as finally judicially
determined by a court of competent jurisdiction, but excluding matters raised by
one Lender against another Lender or by any shareholders of a Lender against a
Lender or its management (collectively, "Indemnified Matters"); provided
however, that so long as no Event of Default shall have occurred and be
continuing, there shall be no settlement by the Indemnitees or any of them with
respect to any Indemnified Matter without prior consultation with the Borrowers.
(b) In addition, the Borrowers jointly and severally shall periodically,
upon request, reimburse each Indemnitee for its reasonable legal and other
actual out-of-pocket expenses (including the cost of any investigation and
preparation) incurred in connection with any Indemnified Matter; provided,
however, that the Indemnitees agree that they shall endeavor to use legal
counsel common to all Indemnitees in connection with any Indemnification Matter
unless any such Indemnitee shall reasonably determine, in its sole discretion,
that the use of such common legal counsel would conflict with its interests in
such Indemnification Matter. If for any reason the foregoing indemnification is
unavailable to any Indemnitee or insufficient to hold any Indemnitee harmless
with respect to Indemnified Matters, then the Borrowers jointly and severally
shall contribute to the amount paid or payable by such Indemnitee as a result of
such loss, claim, damage or liability in such proportion as is appropriate to
reflect not only the
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relative benefits received by the Borrowers and the Borrowers' stockholders,
shareholders or partners, as applicable, on the one hand and such Indemnitee on
the other hand but also the relative fault of the Borrowers and such Indemnitee,
as well as any other relevant equitable considerations. The reimbursement,
indemnity and contribution obligations under this Section shall be in addition
to any liability which the Borrowers may otherwise have, shall extend upon the
same terms and conditions to each Indemnitee, and shall be binding upon and
inure to the benefit of any successors, assigns, heirs and personal
representatives of the Borrowers, the Administrative Lender, the Issuing Bank,
the Lenders and all other Indemnitees. This Section shall survive any
termination of this Agreement and payment of the Obligations.
Section 5.11 Environmental Law Compliance. The use which any Borrower or
Subsidiary intends to make of any real property owned by it will not result in
the disposal or other release of any hazardous substance or solid waste on or to
such real property in any manner or quantities which would be deemed a violation
of the Applicable Environmental Laws. As used herein, the terms "hazardous
substance" and "release" as used in this Section shall have the meanings
specified in CERCLA (as defined in the definition of Applicable Environmental
Laws), and the terms "solid waste" and "disposal" shall have the meanings
specified in RCRA (as defined in the definition of Applicable Environmental
Laws); provided, however, that if CERCLA or RCRA is amended so as to broaden the
meaning of any term defined thereby, such broader meaning shall apply subsequent
to the effective date of such amendment; and provided further, to the extent
that any other law applicable to any Borrower, any Subsidiary or any of their
properties establishes a meaning for "hazardous substance", "release,"
"solid waste," or "disposal" which is broader than that specified in either
CERCLA or RCRA, such broader meaning shall apply. The Borrowers jointly and
severally agree to indemnify and hold the Administrative Lender, the Issuing
Bank and each Lender harmless from and against, and to reimburse them with
respect to, any and all claims, demands, causes of action, loss, damage,
liabilities, costs and expenses (including attorneys' fees and courts costs) of
any kind or character, known or unknown, fixed or contingent, asserted against
or incurred by any of them at any time and from time to time by reason of or
arising out of (a) the failure of any Borrower or Subsidiary to perform any
obligation hereunder regarding asbestos or Applicable Environmental Laws, (b)
any violation on or before the Release Date of any Applicable Environmental Law
in effect on or before the Release Date, and (c) any act, omission, event or
circumstance existing or occurring on or prior to the Release Date (including
without limitation the presence on such real property or release from such real
property of hazardous substances or solid wastes disposed of or otherwise
released on or prior to the Release Date), resulting from or in connection with
the ownership of the real property, regardless of whether the act, omission,
event or circumstance constituted a violation of any Applicable Environmental
Law at the time of its existence or occurrence, or whether the act, omission,
event or circumstance is caused by or relates to the negligence of any
indemnified Person; provided that, no Borrower shall be under any obligation to
indemnify the Administrative Lender, the Issuing Bank or any Lender to the
extent that any such liability arises as the result of the gross negligence or
willful misconduct of such Person, as finally judicially determined by a court
of competent jurisdiction. The provisions of this paragraph shall survive the
Release Date and shall continue thereafter in full force and effect.
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Section 5.12 Interest Rate Hedging. Within 90 days after the Agreement
Date, the Borrower will hedge its interest rate exposure pursuant to and in
accordance with Interest Hedge Agreements, in an amount not less than 50% of the
difference between outstanding Advances on any day after the Agreement Date
minus $5,000,000; provided, however, that any such Interest Hedge Agreement
shall be on terms and conditions mutually acceptable to the Borrowers and the
Lenders.
ARTICLE 6
Information Covenants
So long as any of the Obligations are outstanding and unpaid or any
Commitment is outstanding (whether or not the conditions to borrowing have been
or can be fulfilled), the Borrowers shall furnish or cause to be furnished to
the Administrative Lender:
Section 6.1 Quarterly Financial Statements and Information.
(a) Within 45 days after the end of each fiscal quarter, cash balance
sheets of each Borrower and each Subsidiary detailing tangible cash exchanges as
at the end of such quarter and the related cash statements of income and
statements of changes in cash of each Borrower and each Subsidiary for such
quarter and for the elapsed portion of the year ended with the last day of such
quarter, all of which shall be certified by the president, vice president,
treasurer or chief financial officer of the Borrowers or of the general partner
of the Borrowers, as applicable, to be, in his or her opinion, complete and
correct in all material respects and to present fairly, the financial position
and results of operations of the Borrowers and the Subsidiaries as at the end of
and for such period, and for the elapsed portion of the year ended with the last
day of such period, subject only to normal year-end adjustments. In addition,
the Borrowers shall furnish within such time period a reconciliation of such
financial statements setting forth the difference in financial position and
results of operations between its Subsidiaries and its Subsidiaries for such
period and for the elapsed portion of the year ended with the last day on such
period, subject to sound year-end adjustments.
(b) Within 60 days after the end of each fiscal quarter, combined and
combining balance sheets of the Borrowers and the Subsidiaries as at the end of
such quarter and the related combined and combining statements of income and
combined statements of changes in cash for such quarter and for the elapsed
portion of the year ended with the last day of such quarter, all of which shall
(i) be certified by the president, vice president, treasurer or chief financial
officer of the Borrowers or of the general partner of the Borrowers, as
applicable, to be, in his or her opinion, complete and correct in all material
respects and to present fairly, in accordance with GAAP, the financial position
and results of operations of the Borrowers and the Subsidiaries as at the end of
and for such period, and for the elapsed portion of the year ended with the last
day of such period, subject only to normal year-end adjustments and (ii) detail
separately tangible cash exchange items and intangible and barter exchange
items. In addition, the Borrowers shall
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furnish within such time period a reconciliation of such financial statements
setting forth the difference in financial position and results of operations
between its Subsidiaries and its Subsidiaries for such period and for the
elapsed portion of the year ended with the last day on such period, subject to
sound year-end adjustments.
Section 6.2 Annual Financial Statements and Information; Certificate of No
Default.
(a) Within 90 days after the end of each fiscal year, a copy of (i) the
cash balance sheet of each Borrower and each Subsidiary, as of the end of the
current and prior fiscal years and (ii) cash statements of earnings, statements
of changes in shareholders' equity, and statements of changes in cash of each
Borrower and each Subsidiary as of and through the end of such fiscal year, all
of which are certified by independent certified public accountants acceptable to
the Lenders, whose opinion shall be in scope and substance in accordance with
generally accepted auditing standards and shall contain only such qualifications
as may be acceptable to the Administrative Lender. In addition, the Borrowers
shall furnish within such time period an unaudited reconciliation of such
financial statements setting forth the difference in financial portion and
results of operations between its Subsidiaries and its Subsidiaries as of and
through the end of such fiscal year.
(b) Within 120 days after the end of each fiscal year, a copy of (i) the
combined and combining balance sheet of the Borrowers and the Subsidiaries, as
of the end of the current and prior fiscal years and (ii) combined and combining
statements of earnings, statements of changes in shareholders' equity, and
statements of changes in cash as of and through the end of such fiscal year, all
of which (A) are prepared in accordance with GAAP, and certified by independent
certified public accountants acceptable to the Lenders, whose opinion shall be
in scope and substance in accordance with generally accepted auditing standards
and shall contain only such qualifications as may be acceptable to the
Administrative Lender and (B) shall detail separately tangible cash exchange
items and intangible and barter exchange items. In addition, the Borrowers shall
furnish within such time period an unaudited reconciliation of such financial
statements setting forth the difference in financial portion and results of
operations between its Subsidiaries and its Subsidiaries as of and through the
end of such fiscal year.
(c) Simultaneously with the delivery of the statements required by this
Section 6.2, a letter from the Borrowers' public accountants certifying that no
Default was detected during the examination of the Borrowers and the
Subsidiaries, and authorizing the Borrowers to deliver such financial
statements and opinion thereon to the Administrative Lender and Lenders pursuant
to this Agreement.
(d) As soon as available, but in any event within 60 days following the end
of each fiscal year, a copy of the annual combined operating budget of the
Borrowers and the Subsidiaries for the succeeding fiscal year.
Section 6.3 Compliance Certificates. At the time financial statements are
furnished pursuant to Sections 6.1 and 6.2 hereof, a certificate of an
Authorized Signatory:
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(a) setting forth at the end of such period, a calculation of the Leverage
Ratio, as well as certifications and arithmetical calculations required to
establish whether the Borrowers and the Subsidiaries were in compliance with the
requirements of Sections 7.1 (e) and (f), 7.3 (g), 7.6, 7.10, 7.11, 7.12, 7.18
and 7.19 hereof, which shall be substantially in the form of Exhibit G hereto;
(b) setting forth the aggregate amount of outstanding Advances and
Reimbursement Obligations and certifying as to compliance herewith; and
(c) stating that, to the best of his or her knowledge after due inquiry, no
Default has occurred as at the end of such period, or if a Default has occurred,
disclosing each such Default and its nature, when it occurred, whether it is
continuing and the steps being taken with respect to such Default.
Section 6.4 Copies of Other Reports and Notices.
Promptly upon their becoming available, a copy of (i) all material reports
or letters submitted to any Borrower or Subsidiary by accountants in connection
with any annual, interim or special audit, including without limitation any
report prepared in connection with the annual audit referred to in Section 6.2
hereof, and any other comment letter submitted to management in connection with
any such audit, (ii) each financial statement, report, notice or proxy statement
sent by any Borrower or Subsidiary to stockholders generally, (iii) each regular
or periodic report and any registration statement (other than statements on Form
S-8) or prospectus (or material written communication in respect of any thereof)
fried by any Borrower or Subsidiary with any securities exchange, with the
Securities and Exchange Commission or any successor agency, and (iv) all press
releases concerning material financial aspects of any Borrower or Subsidiary;
(b) Promptly upon becoming aware that (i) the holder(s) of any note(s) or
other evidence of indebtedness or other security of any Borrower or Subsidiary
in excess of $250,000 in the aggregate has given notice or taken any action with
respect to a breach, failure to perform, claimed default or event of default
thereunder, (ii) any party to any Capitalized Lease Obligations or any local
marketing agreement has given notice or taken any action with respect to a
breach, failure to perform, claimed default or event of default thereunder,
(iii) any occurrence or non-occurrence of any event which constitutes or which
with the passage of time or giving of notice or both could constitute a material
breach by any Borrower or Subsidiary under any material agreement or instrument
which could reasonably be expected to result in a liability in excess of
$250,000, other than this Agreement to which any Borrower or Subsidiary is a
party or by which any of their properties may be bound, or (iv) any event,
circumstance or condition which could reasonably be expected to have a Material
Adverse Effect, a written notice specifying the details thereof (or the nature
of any claimed default or event of default) and what action is being taken or is
proposed to be taken with respect thereto; provided, however, no notice shall be
required to be delivered hereunder with respect to any event, circumstance or
condition set forth in clause (i), (ii) or (iii) immediately preceding if, in
the opinion of counsel
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to such Borrower or Subsidiary, there is no reasonable possibility of an adverse
determination with respect to event, circumstance or condition;
(c) Promptly upon receipt thereof, information with respect to and copies
of any notices received from any federal, state or local regulatory agencies or
any tribunal relating to any order, ruling, law, information or policy that
could reasonably be expected to result in the payment of money by any Borrower
or Subsidiary in an amount of $250,000 or more in the aggregate, or otherwise
have a Material Adverse Effect, or result in the loss or suspension of any
Necessary Authorization; provided, however, no information shall be required to
be delivered hereunder if, in the opinion of counsel to such Borrower or
Subsidiary, there is no reasonable possibility of an adverse determination with
respect to such notice;
(d) Promptly upon receipt from any governmental agency, or any government,
political subdivision or other entity, any material notice, correspondence,
hearing, proceeding or order regarding or affecting any Borrower, any
Subsidiary, or any of their properties or businesses; and
(e) From time to time and promptly upon each request, such data,
certificates, reports, statements, opinions of counsel, documents or further
information regarding the assets, business, liabilities, financial position,
projections, results of operations or business prospects of any Borrowers or
Subsidiary, as the Administrative Lender or any Lender may reasonably request.
Section 6.5 Notice of Litigation, Default and Other Matters. Prompt notice
of the following events after any Borrower has knowledge or notice thereof:
(a) The commencement of all proceedings and investigations by or before any
Governmental Authority, and all actions and proceedings in any court or before
any arbitrator involving claims for damages, fines or penalties (including
punitive damages) in excess of $250,000 in aggregate (after deducting the amount
for which any Borrower or Subsidiary is insured), against or in any other way
relating directly to any Borrower, any Subsidiary, or any of their properties or
businesses; provided, however, no notice shall be required to be delivered
hereunder if, in the opinion of counsel to such Borrower or such Subsidiary,
there is no reasonable possibility of an adverse determination in such action or
proceeding;
(b) Promptly upon the happening of any condition or event which constitutes
a Default, a written notice specifying the nature and period of existence
thereof and what action is being taken or is proposed to be taken with respect
thereto; and
(c) Any material adverse change with respect to the business, assets,
liabilities financial position, results of operations or prospective business of
any Borrower or Subsidiary, other than changes in the ordinary course of
business which have not had and are not likely to have a Material Adverse
Effect.
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Section 6.6 ERISA Reporting Requirements.
(a) Promptly and in any event (i) within 30 days after any Borrower or any
member of its Controlled Group knows or has reason to know that any ERISA Event
described in clause (a) of the definition of ERISA Event or any event described
in Section 4063(a) of ERISA with respect to any Plan of any Borrower or any
member of its Controlled Group has occurred, and (ii) within 10 days after any
Borrower or any member of its Controlled Group knows or has reason to know that
any other ERISA Event with respect to any Plan of any Borrower or any member of
its Controlled Group has occurred or a request for a minimum funding waiver
under Section 412 of the Code with respect to any Plan of any Borrower or any
member of its Controlled Group, a written notice describing such event and
describing what action is being taken or is proposed to be taken with respect
thereto, together with a copy of any notice of event that is given to the PBGC;
(b) Promptly and in any event within two Business Days after receipt
thereof by any Borrower or any member of its Controlled Group from the PBGC,
copies of each notice received by such Borrower or any member of its Controlled
Group of the PBGC's intention to terminate any Plan or to have a trustee
appointed to administer any Plan;
(c) Promptly and in any event within 30 days after the filing thereof by
any Borrower or any member of its Controlled Group with the United States
Department of Labor, the Internal Revenue Service or the PBGC, copies of each
annual and other report (including Schedule B thereto) with respect to each
Plan;
(d) Promptly and in any event within 30 days after receipt thereof, a copy
of any notice, determination letter, ruling or opinion any Borrower or any
member of its Controlled Group receives from the PBGC, the United States
Department of Labor or the Internal Revenue Service with respect to any Plan;
(e) Promptly, and in any event within 10 Business Days after receipt
thereof, a copy of any correspondence any Borrower or any member of its
Controlled Group receives from the Plan Sponsor (as defined by Section
4001(a)(10) of ERISA) of any Plan concerning potential withdrawal liability
pursuant to Section 4219 or 4202 of ERISA, and a statement from the chief
financial officer of such Borrower or such member of its Controlled Group
setting forth details as to the events giving rise to such potential withdrawal
liability and the action which such Borrower or such member of its Controlled
Group is taking or proposes to take with respect thereto;
(f) Notification within 30 days of any material increases in the benefits
of any existing Plan which is not a Multiemployer Plan, or the establishment of
any new Plans, or the commencement of contributions to any Plan to which any
Borrower or any member of its Controlled Group was not previously contributing;
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(g) Notification within three Business Days after any Borrower or any
member of its Controlled Group knows or has reason to know that any Borrower or
any such member of its Controlled Group has or intends to file a notice of
intent to terminate any Plan under a distress termination within the meaning of
Section 4041(c) of ERISA and a copy of such notice; and
(h) Promptly after receipt of written notice of commencement thereof,
notice of all actions, suits and proceedings before any court or governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, affecting any Borrower or any member of its Controlled Group with
respect to any Plan, except those which, in the aggregate, if adversely
determined could not have a Material Adverse Effect.
ARTICLE 7
Negative Covenants
So long as any of the Obligations are outstanding and unpaid or any
Commitment is outstanding (whether or not the conditions to borrowing have been
or can be fulfilled):
Section 7.1 Indebtedness. The Borrowers shall not, and shall not permit any
Subsidiary to, create, assume, incur or otherwise become or remain obligated in
respect of, or permit to be outstanding, or suffer to exist any Indebtedness,
except:
(a) Indebtedness of the Borrowers and the Subsidiaries under the Loan
Documents;
(b) Accounts payable of the Borrowers and the Subsidiaries incurred in the
ordinary course of business;
(c) Indebtedness of the Borrowers and the Subsidiaries evidenced by the
Intercompany Notes;
(d) Indebtedness of the Borrowers and the Subsidiaries set forth on
Schedule 8 hereto, and all renewals and extensions (but not increases) thereof;
(e) Subordinated Debt of the Borrowers and the Subsidiaries not to exceed
$2,500,000 in aggregate amount, provided that the Lenders shall have received at
least 10 Business Days prior to the incurrence of any Subordinated Debt a
Compliance Certificate setting forth on a pro-forma basis, taking into account
the proposed incurrence of the Subordinated Debt for the four fiscal quarters
immediately preceding the date of determination, the covenant calculations
described in Section 6.3(a) hereof; and
(f) Other Indebtedness of the Borrowers and the Subsidiaries not to exceed
$500,000 in aggregate amount;
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provided, however, the incurrence of Indebtedness otherwise permitted pursuant
to clauses (c), (e) and (f) immediately preceding shall be permitted only if
there shall exist no Default prior to or after giving effect to any such
proposed Indebtedness.
Section 7.2 Liens. The Borrowers shall not, and shall not permit any
Subsidiary to, create, assume, incur, permit or suffer to exist, directly or
indirectly, any Lien on any of their assets, whether now owned or hereafter
acquired, except Permitted Liens. The Borrowers shall not, and shall not permit
any Subsidiary to, agree with any other Person that it shall not create, assume,
incur, permit or suffer to exist or to be created, assumed, incurred or
permitted to exist, directly or indirectly, any Lien on any of its assets.
Section 7.3 Investments. The Borrowers shall not, and shall not permit any
Subsidiary to, make, own or maintain any Investment, except that the Borrowers
may purchase or otherwise acquire and own and maintain:
(a) Marketable, direct obligations of, or guaranteed by, the United States
of America and maturing within 365 days of the date of purchase;
(b) Commercial paper maturing not more than 1 year from the date of
creation having a rating of A-l/P-1 or better by Moody's Investors Service, Inc.
or Standard & Poor's Ratings Group, a division of McGraw-Hill, Inc., a New York
corporation;
(c) Certificates of deposit of domestic banks maturing within 365 days of
the date of purchase, which banks' debt obligations have one of the two highest
ratings obtainable from Moody's Investors Service, Inc. or Standard & Poor's
Ratings Group, a division of McGraw-Hill, Inc., a New York corporation;
(d) Securities issued by U.S. corporations that have one of the two highest
ratings obtainable from Moody' s Investors Service, Inc. or Standard & Poor's
Ratings Group, a division of McGraw-Hill, Inc., a New York corporation;
(e) Accounts receivable that arise in the ordinary course of business and
are payable on standard terms;
(f) Investments in existence on the Agreement Date which are described on
Schedule 7 hereto; and
(g) Other Investments primarily related to the Borrowers' Business not to
exceed $100,000 in aggregate amount provided that no Default exists prior to or
after giving effect to such an Investment.
Section 7.4 Amendment and Waiver. Except in connection with any merger or
consolidation permitted pursuant to Section 7.5(b) hereof, the Borrowers shall
not, and shall not permit any Subsidiary to, enter into any amendment of any
material term or provision of its
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articles of incorporation, by-laws, or partnership agreement, as applicable. In
addition, the Borrowers shall not, and shall not permit any Subsidiary to, enter
into any amendment of, or agree to or accept any waiver of any of the provisions
of, any Necessary Authorization, unless (a) the Determining Lenders consent to
such amendment and (b) the Lenders are provided with 10 days' written notice
prior to the execution or effectiveness of the proposed amendment or waiver.
Section 7.5 Liquidation, Disposition or Acquisition of Assets, Merger, New
Subsidiaries. The Borrowers shall not, and shall not permit any Subsidiary to,
at any time:
(a) liquidate or dissolve itself (or suffer any liquidation or dissolution)
or otherwise wind up; or sell, lease, abandon, transfer or otherwise dispose of
all or any part of its assets, properties or business, other than immaterial
assets sold in the ordinary course of business;
(b) enter into any merger or consolidation; provided, however, that, so
long as there shall exist no Default prior to or after giving effect to a
proposed transaction, any Borrower or any Subsidiary may merge or consolidate
with another Person, so long as (i) the Lenders shall have received prior
written notice at least 30 Business Days prior to the date of such transaction,
(ii) the Administrative Lender shall have received at least 10 Business Days
prior to the date of such transaction a Compliance Certificate in the form
required by Section 6.3 hereof, but setting forth the covenant calculations
described in Section 6.3(a) hereof both prior to and after giving effect to the
proposed merger or consolidation, (iii) such merger or consolidation shall be
pursuant to documentation acceptable to the Administrative Lender, (iv) the
Person with whom such merger or consolidation is being consummated with shall be
engaged in the Borrowers' Business, (v) such Borrower or Subsidiary shall be the
surviving entity, provided, that if a Borrower merges or consolidates with a
Subsidiary, either (Y) such Borrower shall be the surviving entity, or (Z) such
Subsidiary shall have become a Borrower hereunder and all of the conditions
precedent to the initial Advance to additional Borrowers set forth in Section
3.3 hereof shall have been satisfied with respect to such Subsidiary, and (vi)
the Administrative Lender shall have received copies of all documents,
instruments, opinions and other information relating to the seller and assets to
be acquired as it may reasonably request; or
(c) create or acquire any Subsidiary, except as permitted by Section 7.6.
Section 7.6 Acquisitions. The Borrowers shall not, and shall not permit any
Subsidiary to make (a) except for the Acquisition of Charlotte Traffic Control,
Inc., any single Acquisition during the period commencing on the Agreement Date
and ending on June 30, 1995, or during any fiscal year ending after June 30,
1995, the Acquisition Consideration for which exceeds $500,000; (b) any single
Acquisition during the period commencing on the Agreement Date and ending on
June 30, 1995, or during any fiscal year ending after June 30, 1995, if, during
any such period, aggregate Acquisition Consideration given by the Borrowers and
the Subsidiaries for Acquisitions prior to such Acquisition shall have equalled
or exceeded $2,500,000; and (c) any Acquisition, including, without limitation,
the Acquisition of Charlotte Traffic Control,
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Inc., unless (i) the Lenders shall have received prior written notice at least
30 Business Days prior to the date of such transaction, (ii) the Administrative
Lender shall have received at least 10 Business Days prior to the date of such
transaction a Compliance Certificate in the form required by Section 6.3 hereof,
but setting forth the covenant calculations described in Section 6.3(a) hereof
both prior to and after giving effect to the proposed transaction, (iii) no
Default or Event of Default shall exist prior to or after such Acquisition, (iv)
the Person who is, or whose assets are being, acquired is engaged in the
Borrowers' Business, (v) the capital stock, partnership interests and
Intercompany Notes, as applicable, of the Subsidiary being acquired are pledged
pursuant to the appropriate Pledge Agreement, (vi) the assets of the Subsidiary
being acquired, or the assets being acquired, are pledged pursuant to the
appropriate Security Agreement, and (vii) the Subsidiary being acquired becomes
party to a Subsidiary Guaranty.
Section 7.7 Dividends. The Borrowers shall not, and shall not permit any
Subsidiary to, directly or indirectly declare or pay any Dividend; provided,
however, (a) any Subsidiary may declare and pay Dividends to the Borrowers or to
any other Subsidiary, (b) so long as (i) there exists no Default or Event of
Default before and after such payment, (ii) the Borrowers have delivered to the
Lenders a Compliance Certificate, demonstrating such compliance after giving
effect to any such Dividend, and (iii) all the conditions precedent to the
initial Advance to MNLP set forth in Section 3.2 hereof shall have been
satisfied, a one-time payment of Dividends to David Saperstein used solely for
the purpose of capitalizing MNLP not to exceed $2,000,000 in aggregate amount,
and (c) so long as (i) there exists no Default or Event of Default before and
after such payment and the Borrowers have delivered to the Lenders a Compliance
Certificate demonstrating such compliance after giving effect to any Cash Tax
Dividends and (ii) each shareholder and partner, as applicable, of the Borrowers
delivers to the Lenders a certificate of each such shareholder and partner
executed by the President, Vice President, Treasurer, Chief Financial Officer or
auditor for such shareholder and partner, setting forth the amount of estimated
income Taxes payable by such shareholder and partner as a direct result of the
income of the Borrowers, taking into account all other Tax Benefits available to
such shareholder and partner, in detail reasonably sufficient to the Lenders,
Cash Tax Dividends payable to each shareholder and partner of the Borrowers, not
to exceed an amount per year in the aggregate equal to the aggregate income Tax
liability of such shareholder and partner set forth in the Certificates required
to be delivered by such shareholder and partner pursuant to this Section 7.7(b).
Section 7.8 Affiliate Transactions. Except for transactions between
Borrowers between any Borrower and Metro Reciprocal, Inc. and Metro Video News,
Inc. or between Metro Reciprocal, Inc. and Metro Video News, Inc., the Borrowers
shall not, and shall not permit any Subsidiary to, at any time engage in any
transaction with an Affiliate, nor make an assignment or other transfer of any
of its assets or properties to any Affiliate, on terms materially less
advantageous to the Borrowers or such Subsidiary than would be the case if such
transaction had been effected with a non-Affiliate (other than advances to
employees in the ordinary course of business). Notwithstanding the foregoing,
the Borrowers may loan the proceeds of Advances to Subsidiaries, so long as (a)
there shall exist no Default prior to or after giving effect to such
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proposed loan, (b) such advances are evidenced by Intercompany Notes that have
been pledged pursuant to the Pledge Agreements and for which entries in the
financial records of the Borrowers and the Subsidiaries are made evidencing
such loans and repayments thereof, (c) the Subsidiary to which such advance is
being made has (i) pledged its assets pursuant to the Subsidiary Security
Agreement, (ii) become a party to the SubSidiary Guaranty, and (d) the capital
and stock of the Subsidiary to which such an advance is being made has been
pledged pursuant to the appropriate Pledge Agreement.
Section 7.9 Compliance with ERISA. The Borrowers shall not, and shall not
permit any Subsidiary to, directly or indirectly, or permit any member of its
Controlled Group to directly or indirectly, (a) terminate any Plan so as to
result in any material (in the opinion of the Determining Lenders) liability to
any Borrower or any member of its Controlled Group, (b) permit to exist any
ERISA Event, or any other event or condition which presents the risk of a
material (in the opinion of the Determining Lenders) liability of any Borrower
or any member of its Controlled Group, (c) make a complete or partial withdrawal
(within the meaning of Section 4201 of ERISA) from any Multiemployer Plan so as
to result in any material (in the opinion of the Determining Lenders) liability
to any Borrower or any member of its Controlled Group, (d) enter into any new
Plan or modify any existing Plan so as to increase its obligations thereunder
except in the ordinary course of business consistent with past practice which
could result in any material (in the opinion of the Determining Lenders)
liability to any Borrower or any member of its Controlled Group, or (e) permit
the present value of all benefit liabilities, as defined in Title IV of ERISA,
under each Plan of any Borrower or any member of its Controlled Group (using the
actuarial assumptions utilized by the PBGC upon termination of a plan) to
materially (in the opinion of the Determining Lenders) exceed the fair market
value of Plan assets allocable to such benefits all determined as of the most
recent valuation date for each such Plan.
Section 7.10 Leverage Ratio. At the end of each fiscal quarter occurring
during the periods indicated below, the Borrowers, on a combined basis, shall
not permit the Leverage Ratio to be greater than:
Period Ratio
------ -----
From date hereof through June 30, 1995 2.50 to 1
September 30, 1995 through June 30, 1996 2.00 to 1
September 30, 1996 and thereafter 1.50 to 1
Section 7.11 Fixed Charges Coverage Ratio. The Borrowers, on a combined
basis shall not permit the ratio of (a) Operating Cash Flow for the four fiscal
quarters then ending to (b) Fixed Charges for such fiscal quarters to be, as of
the last day of any fiscal quarter during the term of this Agreement, to be less
than 1.35 to 1.
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Section 7.12 Debt Service Coverage Ratio. The Borrowers, on a combined
basis, shall not permit the ratio of (a) Operating Cash Flow for the four fiscal
quarters then ending, to (b) Pro-Forma Debt Service for the four succeeding
fiscal quarters, to be less than 1.75 to 1 at the end of each fiscal quarter
during the term of this Agreement.
Section 7.13 Capital Stock of the Borrowers. No Borrower shall, and no
Borrower shall permit any Subsidiary to, make or permit any issuance, transfer,
assignment, distribution, mortgage, pledge or gift of any shares of Pledged
Stock, except in connection with issuances permitted by Schedule 5 hereto and
then only if such shares are pledged and delivered to the Administrative Lender
pursuant to the Pledge Agreements.
Section 7.14 Sale and Leaseback. The Borrowers shall not, and shall not
permit any Subsidiary to, enter into any arrangement whereby it sells or
transfers any of its assets, and thereafter rents or leases such assets.
Section 7.15 Sale or Discount of Receivables. No Borrower shall, and no
Borrower shall permit any Subsidiary to, directly or indirectly sell, with or
without recourse, for discount or otherwise, any notes or accounts receivable.
Section 7.16 Conduct of Business. The Borrowers shall not, and shall not
permit any Subsidiary to, engage in any type of business except the Borrowers'
Business.
Section 7.17 Subordinated Debt. The Borrowers shall not, and shall not
permit any Subsidiary to, (a) after the occurrence and during the continuance of
a Default or Event of Default, make any payment of principal, interest, premium,
fee or otherwise with respect to Subordinated Debt, (b) prepay, redeem,
repurchase or defease, or set aside funds for the prepayment, redemption,
repurchase or defeasance of all or any portion of the Subordinated Debt or (c)
amend or change (or take any action or fail to take any action the result of
which is an effective amendment or change) or accept any waiver or consent with
respect to, any document or instrument in connection with any Subordinated Debt
that would result in (i) an increase in the outstanding principal amount of the
Subordinated Debt, (ii) a change in any principal, interest, fees, or other
amounts payable under the Subordinated Debt (including without limitation a
waiver or action that results in the waiver of any payment default under the
Subordinated Debt), (iii) a change in any date fixed for any payment of
principal, interest, fees, or other amounts payable under the Subordinated Debt
(including, without limitation, as a result of any redemption, defeasance or
otherwise), (iv) a change in any percentage of holders of the Subordinated Debt
required to take (or refrain from taking) any action, (v) a change in any
financial covenant, (vi) a change in any remedy or right of the holders of the
Subordinated Debt, (vii) a change in any covenant, term or provision which would
result in such term or provision being more restrictive than the terms of this
Agreement and the other Loan Documents, (viii) a change that grants or permits
the granting of any security interest or Lien on any asset or property of any
Borrower or any Subsidiary to secure any Subordinated Debt, or (ix) a change in
any term or provision of any document or instrument in connection with any
Subordinated Debt that could have, in any material respect, an adverse effect on
the interests of Lenders.
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Section 7.18 Executive Compensation. Total cash compensation to David
Saperstein during any fiscal year, including, without limitation, salary, bonus
and Dividends (but excluding Cash Tax Dividends) shall not exceed the sum of (i)
$950,000, plus (ii) 35% of Adjusted Excess Cash Flow.
Section 7.19 Radio Affiliate Contracts. The aggregate number of Radio
Affiliate Contracts of the Borrowers and the Subsidiaries, collectively,
existing as of the last day of any fiscal quarter of the Borrowers shall not be
less than the aggregate number of Radio Affiliate Contracts of the Borrowers and
the Subsidiaries, collectively, existing as of the last day of the immediately
preceding fiscal quarter; provided, however, that no Event of Default shall
occur as a result of a violation of this Section 7.19 unless such violation
exists for two consecutive fiscal quarters.
ARTICLE 8
Default
Section 8.1 Events of Default. Each of the following shall constitute an
Event of Default, whatever the reason for such event, and whether voluntary,
involuntary, or effected by operation of law or pursuant to any judgment or
order of any court or any order, rule or regulation of any governmental or
non-governmental body:
(a) Any representation or warranty made under any Loan Document shall prove
to have been incorrect or misleading in any material respect when made;
(b) Any Borrower shall default in the payment of (i) any interest under any
Note or any fees payable hereunder or any other costs, fees, expenses or other
amounts payable hereunder or under the Loan Documents, when due, which Default
is not cured by the earlier of two Business Days after notice (which may be
oral) from the Administrative Agent to the Notification Agent and three days
from the date such payment became due by payment of such late amount, or (ii)
any principal under any of the Notes;
(c) If any Letter of Credit shall be then outstanding, the Administrative
Lender may (or, upon the direction of the Determining Lenders, shall) demand
upon the Borrowers through the Notification Agent to, and forthwith upon such
demand, the Borrowers jointly and severally shall, pay to the Administrative
Lender in same day funds at the office of the Administrative Lender on such
demand for deposit in the L/C Cash Collateral Account, an amount equal to the
maximum amount available to be drawn under the Letters of Credit then
outstanding;
(d) Any Borrower or Subsidiary shall default in the performance or
observance of any agreement or covenant contained in Section 5.1 or Article 7
hereof;
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(e) Any Borrower or Subsidiary shall default in the performance or
observance of any other agreement or covenant contained in this Agreement not
specifically referred to elsewhere in this Section 8.1, and such default shall
not be cured within a period of 30 days after the earlier of written notice from
the Administrative Lender thereof or actual notice thereof;
(f) There shall occur any default or breach in the performance or
observance of any agreement or covenant (after the expiration of any applicable
grace period) or breach of any representation or warranty contained in any of
the Loan Documents (other than this Agreement);
(g) There shall be entered a decree or order by a court having jurisdiction
in the premises constituting an order for relief in respect of any Borrower or
Subsidiary under Title 11 of the United States Code, as now constituted or
hereafter amended, or any other applicable Federal or state bankruptcy law or
other similar law, or appointing a receiver, liquidator, assignee, trustee,
custodian, sequestrator or similar official of any Borrower or Subsidiary, or of
any substantial part of their respective properties, or ordering the winding-up
or liquidation of the affairs of any Borrower or Subsidiary, and any such decree
or order shall continue unstayed and in effect for a period of 60 consecutive
days;
(h) Any Borrower or Subsidiary shall file a petition, answer or consent
seeking relief under Title 11 of the United States Code, as now constituted or
hereafter amended, or any other applicable Federal or state bankruptcy law or
other similar law, or any Borrower or Subsidiary shall consent to the
institution of proceedings thereunder or to the filing of any such petition or
to the appointment or taking of possession of a receiver, liquidator, assignee,
trustee, custodian, sequestrator or other similar official of any Borrower or
Subsidiary or of any substantial part of their respective properties, or any
Borrower or Subsidiary shall fail generally to pay its debts as they become due,
or any Borrower or Subsidiary shall take any action in furtherance of any such
action;
(i) A final judgment or judgments shall be entered by any court against any
Borrower or Subsidiary for the payment of money which exceeds $250,000 in the
aggregate, or a warrant of attachment or execution or similar process shall be
issued or levied against property of any Borrower or Subsidiary which, together
with all other such property of the Borrowers and the Subsidiaries subject to
other such process, exceeds in value $250,000 in the aggregate, and if such
judgment or award is not insured or, within 30 days after the entry, issue or
levy thereof, such judgment, warrant or process shall not have been paid or
discharged or stayed pending appeal, or if, after the expiration of any such
stay, such judgment, warrant or process shall not have been paid or discharged;
(j) With respect to any Plan of the Borrowers or any member of its
Controlled Group: (i) any Borrower, any such member, or any other
party-in-interest or disqualified person shall engage in transactions which in
the aggregate would reasonably result in a direct or indirect liability to the
Borrowers or any member of their Controlled Group in excess of $250,000 under
Section 409 or 502 of ERISA or Section 4975 of the Code; (ii) the Borrowers, any
one of them, or any member of their Controlled Group shall incur any accumulated
funding deficiency, as
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defined in Section 412 of the Code, in the aggregate in excess of $250,000, or
request a funding waiver from the Internal Revenue Service for contributions in
the aggregate in excess of $250,000; (iii) the Borrowers or any member of their
Controlled Group shall incur any withdrawal liability in the aggregate in excess
of $250,000 as a result of a complete or partial withdrawal within the meaning
of Section 4203 or 4205 of ERISA; (iv) the Borrowers or any member of their
Controlled Group shall fail to make a required contribution by the due date
under Section 412 of the Code or Section 302 of ERISA which would result in the
imposition of a lien under Section 412 of the Code or Section 302 of ERISA; (v)
the Borrowers, any member of their Controlled Group or any Plan sponsor shall
notify the PBGC of an intent to terminate, or the PBGC shall institute
proceedings to terminate, or the PBGC shall institute proceedings to terminate,
any Plan; (vi) a Reportable Event shall occur with respect to a Plan, and within
15 days after the reporting of such Reportable Event to the Administrative
Lender, the Administrative Lender shall have notified the Notification Agent in
writing that the Determining Lenders have made a determination that, on the
basis of such Reportable Event, there are reasonable grounds for the termination
of such Plan by the PBGC or for the appointment by the appropriate United States
District Court of a trustee to administer such Plan and as a result thereof an
Event of Default shall have occurred hereunder; (vii) a trustee shall be
appointed by a court of competent jurisdiction to administer any Plan or the
assets thereof; (viii) the benefits of any Plan shall be increased, or any
Borrower or any member of its Controlled Group shall begin to maintain, or begin
to contribute to, any Plan, without the prior written consent of the Determining
Lenders; or (ix) any ERISA Event with respect to a Plan shall have occurred, and
30 days thereafter (A) such ERISA Event, other than such event described in
clause (vi) of the definition of ERISA Event herein, (if correctable) shall not
have been corrected and (B) the then present value of such Plan's benefit
liabilities, as defined in Title IV of ERISA, shall exceed the then current
value of assets accumulated in such Plan; provided, however, that the events
listed in subsections (v) through (ix) shall constitute Events of Default only
if, as of the date thereof or any subsequent date, the maximum amount of
liability that the Borrowers or any member of their Controlled Group could incur
in the aggregate under Section 4062, 4063, 4064, 4219 or 4023 of ERISA or any
other provision of law with respect to all such Plans, computed by the actuary
of the Plan taking into account any applicable rules and regulations of the PBGC
at such time, and based on the actuarial assumptions used by the Plan,
resulting from or otherwise associated with such event exceeds $250,000;
(k) All or any material portion of the Collateral or the Loan Documents
shall be the subject of any proceeding instituted by any Person other than a
Lender (except in connection with any Lender's exercise of any remedies under
the Loan Documents), or there shall exist any litigation or threatened
litigation with respect to all or any material portion of the Collateral or the
Loan Documents, or any Borrower or Subsidiary shall challenge in any manner
whatsoever the validity or enforceability of all or any portion of the Loan
Documents or the Collateral; provided, however, that during any such time any
such circumstance shall be bonded or stayed in accordance with Applicable Law
and to the satisfaction of the Determining Lenders, such circumstance shall not
be an Event of Default;
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(1) Any Borrower or Subsidiary shall default in the payment of any
Indebtedness in an aggregate amount of $250,000 or more beyond any grace period
provided with respect thereto, or shall default in the performance of any
agreement or instrument under which such Indebtedness is created or evidenced
beyond any applicable grace period or any event shall occur under such agreement
or instrument, if the effect of such default or event is to permit or cause the
holder of such Indebtedness (or a trustee on behalf of any such holder) to cause
such Indebtedness to become due prior to its date of maturity;
(m) All of the issued and outstanding capital stock or partnership
interests of (i) the Subsidiaries shall not be owned, directly or indirectly, by
a Borrower, (ii) Metro shall not be owned directly by David Saperstein, (iii)
all of the limited partnership interests of MNLP shall not be owned by David
Saperstein and the Trusts, and (iv) all of the general partnership interest of
MNLP shall not be owned by Metro;
(n) Any material Necessary Authorization shall be revoked; or there shall
occur a material default under any material Necessary Authorization by any
Borrower or Subsidiary beyond any applicable grace period; or any proceedings
shall in any way be brought by any Person to challenge the validity or
enforceability of any material Necessary Authorization; or proceedings for the
renewal of any material Necessary Authorization shall not be commenced at least
90 days prior to the expiration thereof; or any material Necessary Authorization
shall expire due to termination, nonrenewal or for any other reason, or shall be
designated for a revocation heating;
(o) The Dividends permitted pursuant to Section 7.7(b) hereof shall not
have been used for the purpose of capitalizing MNLP within five days of the
payment of such Dividends; or
(p) Any material provision of any Loan Document shall for any reason cease
to be valid and binding on or enforceable against any party to it (other than
the Administrative Lender or any Lender) in all material respects, or any such
party shall so state in writing.
Section 8.2 Remedies. If an Event of Default shall have occurred and shall
be continuing:
(a) With the exception of an Event of Default specified in Section 8.l(g)
or (h) hereof, the Administrative Lender shall, upon the direction of the
Determining Lenders, terminate the Commitments and/or declare the principal of
and interest on the Advances and all Obligations and other amounts owed under
the Loan Documents to be forthwith due and payable without presentment, demand,
protest or notice of any kind, all of which are hereby expressly waived,
anything in the Loan Documents to the contrary notwithstanding.
(b) Upon the occurrence of an Event of Default specified in Section 8.l(g)
or (h) hereof, such principal, interest and other amounts shall thereupon and
concurrently therewith become due and payable and the Commitments shall
forthwith terminate, all without any action
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by the Administrative Lender, any Lender or any holders of the Notes and without
presentment, demand, protest or other notice of any kind, all of which are
expressly waived, anything in the Loan Documents to the contrary
notwithstanding.
(c) If any Letter of Credit shall be then outstanding, the Administrative
Lender may (or, upon the direction of the Determining Lenders, shall) demand
upon the Borrowers through the Notification Agent to, and forthwith upon such
demand, the Borrowers jointly and severally shall pay to the Administrative
Lender in same day funds at the office of the Administrative Lender on such
demand for deposit in the L/C Cash Collateral Account, an amount equal to the
maximum amount available to be drawn under the Letters of Credit then
outstanding.
(d) The Administrative Lender, and the Lenders may exercise all of the
post-default rights granted to them under the Loan Documents or under Applicable
Law.
(e) The rights and remedies of the Administrative Lender and the Lenders
hereunder shall be cumulative, and not exclusive.
ARTICLE 9
Changes in Circumstances
Section 9.1 LIBOR Basis Determination Inadequate. If with respect to any
proposed LIBOR Advance for any Interest Period, any Lender determines that (i)
deposits in dollars (in the applicable amount) are not being offered to that
Lender in the relevant market for such Interest Period or (ii) the LIBOR Basis
for such proposed LIBOR Advance does not adequately cover the cost to such
Lender of making and maintaining such proposed LIBOR Advance for such Interest
Period, such Lender shall forthwith give notice thereof to the Notification
Agent, whereupon until such Lender notifies the Notification Agent that the
circumstances giving rise to such situation no longer exist, the obligation of
such Lender to make LIBOR Advances shall be suspended.
Section 9.2 Illegality. If any applicable law, role or regulation, or any
change therein or adoption thereof, or interpretation or administration thereof
by any governmental authority, central bank or comparable agency charged with
the interpretation or administration thereof, or compliance by any Lender (or
its LIBOR Lending Office) with any request or directive (whether or not having
the force of law) of any such authority, central bank or comparable agency,
shall make it unlawful or impossible for such Lender (or its LIBOR Lending
Office) to make, maintain or fund its LIBOR Advances, such Lender shall so
notify the Administrative Lender and the Administrative Lender shall so notify
the Notification Agent. Before giving any notice to the Administrative Lender
pursuant to this Section, the notifying Lender shall designate a different LIBOR
Lending Office or other lending office if such designation will avoid the need
for giving such notice and will not, in the sole judgment of the Lender, be
materially disadvantageous to the Lender. Upon receipt of such notice by the
Notification Agent,
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notwithstanding anything contained in Article 2 hereof, the Borrowers jointly
and severally shall repay in full the then outstanding principal amount of each
LIBOR Advance owing to the notifying Lender, together with accrued interest
thereon, on either (a) the last day of the Interest Period applicable to such
Advance, if the Lender may lawfully continue to maintain and fund such Advance
to such day, or (b) immediately, if the Lender may not lawfully continue to fund
and maintain such Advance to such day. Concurrently with repaying each affected
LIBOR Advance owing to such Lender, notwithstanding anything contained in
Article 2 hereof, the Borrowers shall borrow a Prime Rate Advance from such
Lender, and such Lender shall make such Prime Rate Advance, in an amount such
that the outstanding principal amount of the Advances owing to such Lender shall
equal the outstanding principal amount of the Advances owing immediately prior
to such repayment.
Section 9.3 Increased Costs.
(a) If any applicable law, rule or regulation, or any change in or adoption
of any law, rule or regulation, or any interpretation or administration thereof
by any governmental authority, central bank or comparable agency charged with
the interpretation or administration thereof or compliance by any Lender (or
its LIBOR Lending Office) with any request or directive (whether or not having
the force of law) of any such authority, central bank or compatible agency:
(i) shall subject a Lender (or its LIBOR Lending Office) to any tax,
duty or other charge (net of any tax benefit engendered thereby) with
respect to its LIBOR Advances or its obligation to make such Advances, or
shall change the basis of taxation of payments to a Lender (or to its LIBOR
Lending Office) of the principal of or interest on its LIBOR Advances or in
respect of any other amounts due under this Agreement, as the case may be,
or its obligation to make such Advances (except for changes in the rate of
tax on the overall net income of the Lender or its LIBOR Lending Office and
franchise taxes imposed upon such Lender); or
(ii) shall impose, modify or deem applicable any reserve (including,
without limitation, any imposed by the Board of Governors of the Federal
Reserve System), special deposit or similar requirement against assets of,
deposits with or for the account of, or credit extended by, a Lender's
LIBOR Lending Office or shall impose on the Lender (or its LIBOR Lending
Office) or on the United States market for certificates of deposit or the
London interbank market any other condition affecting its LIBOR Advances
or its obligation to make such Advances;
and the result of any of the foregoing is to increase the cost to a Lender (or
its LIBOR Lending Office) of making or maintaining any LIBOR Advances, or to
reduce the amount of any sum received or receivable by a Lender (or its LIBOR
Lending Office) with respect thereto, by an amount deemed by a Lender to be
material, then, within 15 days after demand by a Lender to the Notification
Agent, the Borrowers jointly and severally agree to pay to such Lender such
additional amount as will compensate such Lender for such increased costs or
reduced amounts. The affected Lender will as soon as practicable notify the
Notification Agent of any event of
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which it has knowledge, occurring after the date hereof, which will entitle such
Lender to compensation pursuant to this Section and will designate a different
LIBOR Lending Office or other lending office if such designation will avoid the
need for, or reduce the amount of, such compensation and will not, in the sole
judgment of the affected Lender made in good faith, be disadvantageous to such
Lender,
(b) A certificate of any Lender claiming compensation under this Section
and setting forth the additional amounts to be paid to it hereunder and
calculations therefor shall be conclusive in the absence of manifest error. In
determining such amount, a Lender may use any reasonable averaging and
attribution methods. If a Lender demands compensation under this Section, the
Borrowers may at any time, upon at least five Business Days' prior notice to the
Lender by the Notification Agent, after reimbursement to the Lender by the
Borrowers in accordance with this Section of all costs incurred, prepay in full
the then outstanding LIBOR Advances of the Lender, together with accrued
interest thereon to the date of prepayment, along with any reimbursement
required under Section 2.9 hereof. Concurrently with prepaying such LIBOR
Advances, the Borrowers shall borrow a Prime Rate Advance from the Lender, and
the Lender shall make such Prime Rate Advance, in an amount such that the
outstanding principal amount of the Advances owing to such Lender shall equal
the outstanding principal amount of the Advances owing immediately prior to such
prepayment.
Section 9.4 Effect On Prime Rate Advances. If notice has been given
pursuant to Section 9.1, 9.2 or 9.3 hereof suspending the obligation of a Lender
to make LIBOR Advances, or requiring LIBOR Advances of a Lender to be repaid or
prepaid, then, unless and until the Lender notifies the Notification Agent that
the circumstances giving rise to such repayment no longer apply, all Advances
which would otherwise be made by such Lender as LIBOR Advances shall be made
instead as Prime Rate Advances.
Section 9.5 Capital Adequacy. If either (a) the introduction of or any
change in or in the interpretation of any law, rule or regulation or (b)
compliance by a Lender with any law, rule or regulation or any guideline or
request from any central bank or other governmental authority (whether or not
having the force of law) affects or would affect the amount of capital required
or expected to be maintained by a Lender or any corporation controlling such
Lender, and such Lender determines that the amount of such capital is increased
by or based upon the existence of such Lender's Commitment or Advances hereunder
and other commitments or advances of such Lender of this type, then, upon demand
by such Lender to the Notification Agent, subject to Section 11.9, the Borrowers
jointly and severally shall immediately pay to such Lender, from time to time as
specified by such Lender, additional amounts sufficient to compensate such
Lender with respect to such circumstances, to the extent that such Lender
reasonably determines in good faith such increase in capital to be allocable to
the existence of such Lender's Commitment hereunder. A certificate as to such
amounts submitted to the Notification Agent by a Lender hereunder, shall, in the
absence of demonstrable error, be conclusive and binding for all purposes.
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ARTICLE 10
AGREEMENT AMONG LENDERS
Section 10.1 Agreement Among Lenders. The Lenders agree among themselves that:
(a) Administrative Lender. Each Lender hereby appoints the
Administrative Lender as its nominee in its name and on its behalf, to receive
all documents and items to be furnished hereunder; to act as nominee for and on
behalf of all Lenders under the Loan Documents; to take such action as may be
requested by Determining Lenders, provided that, unless and until the
Administrative Lender shall have received such requests, the Administrative
Lender may take such administrative action, or refrain from taking such
administrative action, as it may deem advisable and in the best interests of the
Lenders; to arrange the means whereby the proceeds of the Advances of the
Lenders are to be made available to the Borrowers; to distribute promptly to
each Lender information, requests and documents received from the Borrowers and
the Notification Agent, and each payment (in like funds received) with respect
to any of such Lender's Advances, fee or other amount; and to deliver to the
Borrowers and the Notification Agent requests, demands, approvals and consents
received from the Lenders. Administrative Lender agrees to promptly distribute
to each Lender, at such Lender's address set forth below information, requests,
documents and payments received from the Borrowers and the Notification Agent.
(b) Replacement of Administrative Lender. Should the Administrative Lender
or any successor Administrative Lender ever cease to to be a Lender hereunder,
or should the Administrative Lender or any successor Administrative Lender ever
resign as Administrative Lender, or should the Administrative Lender or any
successor Administrative Lender ever be removed with cause by the Determining
Lenders, then the Lender appointed by the other Lenders shall forthwith become
the Administrative Lender, and the Borrowers and the Lenders shall execute such
documents as any Lender may reasonably request to reflect such change. Any
resignation or removal of the Administrative Lender or any successor
Administrative Lender shall become effective upon the appointment by the Lenders
of a successor Administrative Lender; provided, however, that if the Lenders
fail for any reason to appoint a successor within 60 days after such removal or
resignation, the Administrative Lender or any successor Administrative Lender
(as the case may be) shall thereafter have no obligation to act as
Administrative Lender hereunder.
(c) Expenses. Each Lender shall pay its pro rata share, based on its
Specified Percentage, of any expenses paid by the Administrative Lender directly
and solely in connection with any of the Loan Documents if Administrative Lender
does not receive reimbursement therefor from other sources within 60 days after
the date incurred, unless payment of such fees is being diligently disputed by
such Lender or the Borrowers in good faith. Any amount so paid by the Lenders to
the Administrative Lender shall be returned by the Administrative Lender pro
rata to each paying Lender to the extent later paid by the Borrowers or any
other Person on the Borrowers' behalf to the Administrative Lender.
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(d) Delegation of Duties. The Administrative Lender may execute any of its
duties hereunder by or through officers, directors, employees, attorneys or
agents, and shall be entitled to (and shall be protected in relying upon) advice
of counsel concerning all matters pertaining to its duties hereunder.
(e) Reliance by Administrative Lender. The Administrative Lender and its
officers, directors, employees, attorneys and agents shall be entitled to rely
and shall be fully protected in relying on any writing, resolution, notice,
consent, certificate, affidavit, letter, cablegram, telegram, telex or teletype
message, statement, order, or other document or conversation reasonably believed
by it or them in good faith to be genuine and correct and to have been signed or
made by the proper Person and, with respect to legal matters, upon opinions of
counsel selected the Administrative Lender. The Administrative Lender may, in
its reasonable judgment, deem and treat the payee of any Note as the owner
thereof for all purposes hereof.
(f) Limitation of Administrative Lender's Liability. Neither the
Administrative Lender nor any of its officers, directors, employees, attorneys
or agents shall be liable for any action taken or omitted to be taken by it or
them hereunder in good faith and believed by it or them to be within the
discretion or power conferred to it or them by the Loan Documents or be
responsible for the consequences of any error of judgment, except for its or
their own gross negligence or wilful misconduct. Except as aforesaid, the
Administrative Lender shall be under no duty to enforce any rights with respect
to any of the Advances, or any security therefor. The Administrative Lender
shall not be compelled to do any act hereunder or to take any action towards the
execution or enforcement of the powers hereby created or to prosecute or defend
any suit in respect hereof, unless indemnified to its satisfaction against loss,
cost, liability and expense. The Administrative Lender shall not be responsible
in any manner to any Lender for the effectiveness, enforceability, genuineness,
validity or due execution of any of the Loan Documents, or for any
representation, warranty, document, certificate, report or statement made herein
or furnished in connection with any Loan Documents, or be under any obligation
to any Lender to ascertain or to inquire as to the performance or observation of
any of the terms, covenants or conditions of any Loan Documents on the part of
the Borrowers. To the extent not reimbursed by the Borrowers, each Lender hereby
severally, but not jointly, indemnifies and holds harmless the Administrative
Lender, pro rata according to its Specified Percentage, from and against any and
all liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses and/or disbursements of any kind or nature whatsoever
which may be imposed on, asserted against, or incurred by the Administrative
Lender in any way With respect to any Loan Documents or any action taken or
omitted by the Administrative Lender under the Loan Documents (including any
negligent action of the Administrative Lender), except to the extent the same
result from gross negligence or wilful misconduct by the Administrative Lender.
(g) Liability Among Lenders. No Lender shall incur any liability (other
than the sharing of expenses and other matters specifically set forth herein and
in the other Loan Documents) to any other Lender, except for acts or omissions
in bad faith.
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(h) Rights as Lender. With respect to its commitment hereunder, the
Advances made by it and Note issued to it, the Administrative Lender shall have
the same rights as a Lender and may exercise the same as though it were not the
Administrative Lender, and the term "Lender" or "Lenders" shall, unless the
context otherwise indicates, include the Administrative Lender in its individual
capacity. The Administrative Lender or any Lender may accept deposits from, act
as trustee under indentures of, and generally engage in any kind of business
with, any Borrower and any of its Affiliates, and any Person who may do business
with or own securities of any Borrower or any of its Affiliates, all as if the
Administrative Lender were not the Administrative Lender hereunder and without
any duty to account therefor to the Lenders.
Section 10.2 Lender Credit Decision. Each Lender acknowledges that it has,
independently and without reliance upon the Administrative Lender or any other
Lender and based upon the financial statements referred to in Sections 4.1(j),
6.1 and 6.2 hereof, and such other documents and information as it has deemed
appropriate, made its own credit analysis and decision to enter into this
Agreement. Each Lender also acknowledges that it will, independently and without
reliance upon the Administrative Lender or any other Lender and based upon such
documents and information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking action under this
Agreement and the other Loan Documents.
Section 10.3 Benefits of Article. None of the provisions of this Article
shall inure to the benefit of any Person other than Lenders or the Borrowers, as
applicable; consequently, no Person other than Lenders or the Borrowers shall be
entitled to rely upon, or to raise as a defense, in any manner whatsoever, the
failure of the Administrative Lender or any Lender to comply with such
provisions.
ARTICLE 11
Miscellaneous
Section 11.1 Notices.
(a) All notices and other communications under this Agreement shall be in
writing and shall be deemed to have been given on the date personally delivered
or sent by telecopy (answerback received), or three days after deposit in the
mail, designated as certified mail, return receipt requested, postage-prepaid,
or one day after being entrusted to a reputable commercial overnight delivery
service, or one day after being delivered to the telegraph office or sent out by
telex addressed to the party to which such notice is directed at its address
determined as provided in this Section. All notices and other communications
under this Agreement shall be given to the parties hereto at the following
addresses:
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(i) If to the Borrowers or the Notification Agent, at:
Metro Traffic Control, Inc.
2700 Post Oak Boulevard, Suite 1400
Houston, Texas, 77056
Attn: Robert Greer, Chief Financial Officer
(ii) If to the Administrative Lender, at:
NationsBank of Texas, N.A.
901 Main Street, 671h Floor
Dallas, Texas 75202
Attn: Chad Coben, Assistant Vice President
(iii) If to a Lender, at its address shown below its name on the
signature pages hereof, or if applicable, set forth in its
Assignment Agreement.
(b) Any party hereto may change the address to which notices shall be
directed by giving 10 days' written notice of such change to the other parties.
Section 11.2 Expenses. The Borrowers jointly and severally shall promptly
pay:
(a) all reasonable out-of-pocket expenses of the Administrative Lender in
connection with the preparation, negotiation, execution and delivery of this
Agreement and the other Loan Documents, the transactions contemplated hereunder
and thereunder, and the making of Advances and the issuance of Letters of Credit
hereunder, including without limitation the reasonable fees and disbursements of
Special Counsel;
(b) all reasonable out-of-pocket expenses of the Administrative Lender in
connection with the administration of the transactions contemplated in this
Agreement and the other Loan Documents, the preparation, negotiation, execution
and delivery of any waiver, amendment or consent by the Lenders relating to this
Agreement or the other Loan Documents; and
(c) all reasonable costs, out-of-pocket expenses and attorneys' fees of the
Administrative Lender and each Lender incurred for enforcement, collection,
restructuring, refinancing and "work-out", or otherwise incurred in obtaining
performance under the Loan Documents, and all reasonable costs and out-of-pocket
expenses of collection if default is made in the payment of the Notes, which in
each case shall include without limitation reasonable fees and expenses of
consultants, counsel for the Administrative Lender and any Lender, and
administrative fees for the Administrative Lender.
Section 11.3 Waivers. The rights and remedies of the Lenders under this
Agreement and the other Loan Documents shall be cumulative and not exclusive of
any rights or remedies which they would otherwise have. No failure or delay by
the Administrative Lender or any
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Lender in exercising any right shall operate as a waiver of such right. The
Lenders expressly reserve the right to require strict compliance with the terms
of this Agreement in connection with any funding of a request for an Advance and
the Issuing Bank expressly reserves the right to require strict compliance with
the terms of this Agreement in connection with any issuance of a Letter of
Credit. In the event that any Lender decides to fund an Advance or the Issuing
Bank decides to issue a Letter of Credit at a time when the Borrowers are not in
strict compliance with the terms of this Agreement, such decision by such Lender
shall not be deemed to constitute an undertaking by the Lender to fund any
further requests for Advances or by the Issuing Bank to issue any additional
Letter of Credit or preclude the Lenders from exercising any rights available
under the Loan Documents or at law or equity. Any waiver or indulgence granted
by the Lenders shall not constitute a modification of this Agreement, except to
the extent expressly provided in such waiver or indulgence, or constitute a
course of dealing by the Lenders at variance with the terms of the Agreement
such as to require further notice by the Lenders of the Lenders' intent to
require strict adherence to the terms of the Agreement in the future. Any such
actions shall not in any way affect the ability of the Administrative Lender or
the Lenders, in their discretion, to exercise any rights available to them under
this Agreement or under any other agreement, whether or not the Administrative
Lender or any of the Lenders are a party thereto, relating to the Borrowers.
Section 11.4 Determination by the Lenders Conclusive and Binding. Any
material determination required or expressly permitted to be made by the
Administrative Lender or any Lender under this Agreement shall be made in its
reasonable judgment and in good faith, and shall when made, prima facie evidence
of the matters asserted.
Section 11.5 Set-Off. In addition to any fights now or hereafter granted
under Applicable Law and not by way of limitation of any such rights, upon the
occurrence of an Event of Default, each Lender and any subsequent holder of any
Note, and any assignee or participant in any Note is hereby authorized by the
Borrowers at any time or from time to time, without notice to the Borrowers or
any other Person, any such notice being hereby expressly waived, to set-off,
appropriate and apply any deposits (general or special (except trust and escrow
accounts), time or demand, including without limitation Indebtedness evidenced
by certificates of deposit) and any other Indebtedness at any time held or owing
by such Lender which is then due and payable or holder to or for the credit or
the account of the Borrowers, against and on account of the Obligations which
are then due and payable and other liabilities of the Borrowers to such Lender
or holder, irrespective of whether or not the Lender or holder shall have made
any demand hereunder. Any sums obtained by any Lender or by any assignee,
participant or subsequent holder of any Note shall be subject to pro rata
treatment of all Obligations and other liabilities hereunder.
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Section 11.6 Assignment.
(a) Except in connection with any merger or consolidation permitted
pursuant to Section 7.5(b) hereof, the Borrowers may not assign or transfer any
of their respective rights or obligations hereunder or under the other Loan
Documents without the prior written consent of the Lenders.
(b) No Lender shall be entitled to assign its interest in this Agreement,
its Notes or its Advances, except as hereinafter set forth.
(c) A Lender may at any time sell participations in all or any part of its
Advances (collectively, "Participations") to any banks or other financial
institutions ("Participants") provided that such Participation shall not confer
on any Person (other than the parties hereto) any right to vote on, approve or
sign amendments or waivers, or any other independent benefit or any legal or
equitable right, remedy or other claim under this Agreement or any other Loan
Documents, other than the right to vote on, approve, or sign amendments or
waivers or consents with respect to items that would result in (i) any increase
in the commitment of any Participant; or (ii) (A) the extension of the date of
maturity of, or (B) the extension of the due date for any payment of principal,
interest or fees respecting, or (C) the reduction of the amount of any
installment of principal or interest on or the change or reduction of any
mandatory reduction required hereunder, or (D) a reduction of the rate of
interest on the Advances, the Letters of Credit, or the Reimbursement
Obligations, or change in Applicable Margin; or (iii) the release of security
for the Obligations, including without limitation any guarantee or Pledged
Stock; or (iv) the reduction of any fees payable hereunder. Notwithstanding the
foregoing, the Borrowers agree that the Participants shall be entitled to the
benefits of Article 9 and Section 11.5 hereof as though they were Lenders and
the Lenders may provide copies of all financial information received from the
Borrowers to such Participants. To the fullest extent it may effectively do so
under Applicable Law, the Borrowers agree that any Participant may exercise any
and all rights of banker's lien, set-off and counterclaim with respect to this
Participation as fully as if such Participant were the holder of the Advances in
the amount of its Participation.
(d) Each Lender may assign to one or more financial institutions or funds
organized under the laws of the United States, or any state thereof, or under
the laws of any other country that is a member of the Organization for Economic
Cooperation and Development, or a political subdivision of any such country,
which is engaged in making, purchasing or otherwise investing in commercial
loans in the ordinary course of its business (each, an "Assignee") its rights
and obligations under this Agreement and the other Loan Documents; provided,
however, that (i) each such assignment shall be subject to the prior written
consent of the Administrative Lender and Borrowers, which approval shall not be
unreasonably withheld (provided that without the consent of the Borrowers or the
Administrative Lender, any Lender may make assignments to its Affiliates or
another Lender), (ii) each such assignment shall be of a constant, and not a
varying, percentage of the Lender' s rights and obligations under this
Agreement, (iii) the amount of the Commitment, Advances and Reimbursement
Obligations being assigned pursuant to each such assignment (determined as of
the date of the assignment with respect to such assignment)
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shall in no event be less than $5,000,000 and which is an integral multiple of
$1,000,000, (iv) the applicable Lender, Administrative Lender and applicable
Assignee shall execute and deliver to the Administrative Lender an Assignment
and Acceptance Agreement (an "Assignment Agreement") in substantially the form
of Exhibit H hereto, together with the Notes subject to such assignment, (v)
the Assignee or the Lender executing the Assignment as the case may be, shall
deliver to the Administrative Lender a processing fee of $2,500, and (vi) in no
event shall NationsBank of Texas, N.A., hold less than 51% of the aggregate
Specified Percentages outstanding at any time. Upon such execution, delivery and
acceptance from and after the effective date specified in each Assignment, which
effective date shall be at least three Business Days after the execution
thereof, (A) the Assignee thereunder shall be party hereto and, to the extent
that fights and obligations hereunder have been assigned to it pursuant to such
Assignment, have the rights and obligations of a Lender hereunder and (B) the
Administrative Lender shall, to the extent that fights and obligations hereunder
have been assigned by it pursuant to such Assignment, relinquish such rights and
be released from such obligations under this Agreement. The Borrowers shall not
be liable for any fees or expenses of the Administrative Lender, any Lender, or
any Assignee, incurred in connection with such an Assignment.
(e) Notwithstanding anything in clause (d) above to the contrary, any
Lender may assign and pledge all or any portion of its Advances and Note to any
Federal Reserve Bank as collateral security pursuant to Regulation A of F.R.S.
Board and any Operating Circular issued by such Federal Reserve Bank; provided,
however, that no such assignment under this clause (e) shall release the
assignor Lender from its obligations hereunder.
(f) Upon the Notification Agent's receipt of an Assignment Agreement
executed by a Lender and an Assignee, and any Note or Notes subject to such
assignment, each Borrower shall, within three Business Days after the
Notification Agent's receipt of such Assignment Agreement, at its own expense,
execute and deliver to the Administrative Lender in exchange for the surrendered
Notes new Notes to the order of such Assignee in an amount equal to the portion
of the Advances, Reimbursement Obligations and Commitment assigned to it
pursuant to such Assignment Agreement and new Notes to the order of the
Administrative Lender in an amount equal to the portion of the Advances and
Commitment retained by it hereunder. Such new Notes shall be in an aggregate
principal amount equal to the aggregate principal amount of such surrendered
Notes, shall be dated the effective date of such Assignment Agreement and shall
otherwise be in substantially the form of Exhibit H hereto.
(g) No Lender may, without the prior consent of the Notification Agent,
which shall not be unreasonably withheld, in connection with any assignment or
Participation or proposed assignment or Participation pursuant to this Section
11.6, disclose to the Assignee or Participant or proposed Assignee or
Participant, any information (which is not otherwise publicly available)
relating to the Borrowers furnished to such Lender by or on behalf of the
Borrowers. The Notification Agent may not prohibit any Participation by
withholding its consent pursuant to this Section 11.6(g).
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<PAGE>
(h) Except as specifically set forth in this Section 11.6, nothing in this
Agreement or any other Loan Documents, expressed or implied, is intended to
or shall confer on any Person other than the respective parties hereto and
thereto and their successors and assignees permitted hereunder and thereunder
any benefit or any legal or equitable right, remedy or other claim under this
Agreement or any other Loan Documents.
Section 11.7 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all such
separate counterparts shall together constitute but one and the same instrument.
Section 11.8 Severability. Any provision of this Agreement which is for any
reason prohibited or found or held invalid or unenforceable by any court or
governmental agency shall be ineffective to the extent of such prohibition or
invalidity or unenforceability without invalidating the remaining provisions
hereof in such jurisdiction or affecting the validity or enforceability of such
provision in any other jurisdiction.
Section 11.9 Interest and Charges. It is not the intention of any parties
to this Agreement to make an agreement in violation of the laws of any
applicable jurisdiction relating to usury. Regardless of any provision in any
Loan Documents, no Lender shall ever be entitled to receive, collect or apply,
as interest on the Obligations, any amount in excess of the Maximum Amount. If
any Lender or participant ever receives, collects or applies, as interest, any
such excess, such amount which would be excessive interest shall be deemed a
partial repayment of principal and treated hereunder as such; and ff principal
is paid in full, any remaining excess shall be paid to the Borrowers. In
determining whether or not the interest paid or payable, under any specific
contingency, exceeds the Maximum Amount, the Borrowers and the Lenders shall, to
the maximum extent permitted under Applicable Law, (a) characterize any
nonprincipal payment as an expense, fee or premium rather than as interest,
(b) exclude voluntary prepayments and the effect thereof, and (c) amortize,
prorate, allocate and spread in equal parts, the total amount of interest
throughout the entire contemplated term of the Obligations so that the interest
rate is uniform throughout the entire term of the Obligations; provided,
however, that if the Obligations are paid and performed in full prior to the end
of the full contemplated term thereof, and if the interest received for the
actual period of existence thereof exceeds the Maximum Amount, the Lenders shall
refund to the Borrowers the amount of such excess or credit the amount of such
excess against the total principal amount of the Obligations owing, and, in such
event, the Lenders shall not be subject to any penalties provided by any laws
for contracting for, charging or receiving interest in excess of the Maximum
Amount. This Section shall control every other provision of all agreements
pertaining to the transactions contemplated by or contained in the Loan
Documents.
Section 11.10 Headings. Headings used in this Agreement are for convenience
only and shall not be used in connection with the interpretation of any
provision hereof.
Section 11.11 Amendment and Waiver. The provisions of this Agreement may
not be amended, modified or waived except by the written agreement of the
Borrowers and the
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Determining Lenders; provided, however, that no such amendment, modification or
waiver shall be made (a) without the consent of all Lenders, if it would (i)
increase the Specified Percentage or commitment of any Lender, or (ii) extend
the date of payment or maturity of, extend the due date for any payment of
principal or interest on, reduce the amount of any installment of principal or
interest on, or reduce the rate of interest on, any Advance, the Reimbursement
Obligations, fees or other amounts owing under any Loan Documents, or (iii)
release any security for or guaranty of the Obligations (except pursuant to this
Agreement), or (iv) reduce the fees payable hereunder, or (v) revise this
Section 11.11, or (vi) waive the date for payment of any of the Obligations, or
(vii) amend the definition of Determining Lenders, (viii) revise Sections
2.5(b), (c) or (d) hereof or (ix) revise Sections 2.6(b) or (c) hereof; or (b)
without the consent of the Administrative Lender, if it would alter the rights,
duties or obligations of the Administrative Lender. Neither this Agreement nor
any term hereof may be amended orally, nor may any provision hereof be waived
orally but only by an instrument in writing signed by the Administrative Lender
and, in the case of an amendment, by the Borrowers.
Section 11.12 Exception to Covenants. Neither the Borrowers nor any
Subsidiary shall be deemed to be permitted to take any action or fail to take
any action which is permitted as an exception to any of the covenants contained
herein or which is within the permissible limits of any of the covenants
contained herein if such action or omission would result in the breach of any
other covenant contained herein.
Section 11.13 No Liability of Issuing Bank. The Borrowers assume all risks
of the acts or omissions of any beneficiary or transferee of any Letter of
Credit with respect to its use of such Letter of Credit. Neither the Issuing
Bank nor any Lender nor any of their respective officers or directors shall be
liable or responsible for: (a) the use that may be made of any Letter of Credit
or any acts or omissions of any beneficiary or transferee in connection
therewith; (b) the validity, sufficiency or genuineness of documents, or of any
endorsement thereon, even if such documents should prove to be in any or all
respects invalid, insufficient, fraudulent or forged; (c) payment by the Issuing
Bank against presentation of documents that do not comply with the terms of a
Letter of Credit, including failure of any documents to bear any reference or
adequate reference to the Letter of Credit, except for any payment made upon the
Issuing Bank's gross negligence or willful misconduct; or (d) any other
circumstances whatsoever in making or failing to make payment under any Letter
of Credit, except that the Borrowers shall have a claim against the Issuing
Bank, and the Issuing Bank shall be liable to the Borrowers, to the extent of
any direct, but not consequential, damages suffered by the Borrowers that the
Borrowers prove were caused by (i) the Issuing Bank's willful misconduct or
gross negligence in determining whether documents presented under any Letter of
Credit comply with the terms of the Letter of Credit or (ii) the Issuing Bank's
willful failure to make lawful payment under a Letter of Credit after the
presentation to it of a draft and certificates strictly complying with the terms
and conditions of the Letter of Credit. In furtherance and not in limitation of
the foregoing, the Issuing Bank may accept documents that appear on their face
to be in order, without responsibility for further investigation, regardless of
any notice or information to the contrary.
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Section 11.14 Credit Agreement Governs. In the event of any conflict
between the terms of this Agreement and any terms of any other Loan Document,
the terms of this Agreement shall control.
SECTION 11.15 GOVERNING LAW. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS
SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF
TEXAS; PROVIDED, HOWEVER, THAT PURSUANT TO ARTICLE 5069-15.10(b), TITLE 79,
REVISED CIVIL STATUTES OF TEXAS, 1925, AS AMENDED, IT IS AGREED THAT THE
PROVISIONS OF CHAPTER 15, TITLE 79, REVISED CIVIL STATUTES OF TEXAS, 1925, AS
AMENDED, SHALL NOT APPLY TO THE ADVANCES, THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS. WITHOUT EXCLUDING ANY OTHER JURISDICTION, THE BORROWERS AGREE THAT
THE STATE AND FEDERAL COURTS OF TEXAS LOCATED IN DALLAS, TEXAS SHALL HAVE
JURISDICTION OVER PROCEEDINGS IN CONNECTION WITH THIS AGREEMENT AND THE OTHER
LOAN DOCUMENTS.
SECTION 11.16 WAIVER OF JURY TRIAL. EACH OF THE BORROWERS, THE
ADMINISTRATIVE LENDER AND THE LENDERS HEREBY KNOWINGLY VOLUNTARILY, IRREVOCABLY
AND INTENTIONALLY WAIVE, TO THE MAXIMUM EXTENT PERMITTED BY LAW, ALL RIGHT TO
TRIAL BY JURY IN ANY ACTION, PROCEEDING OR CLAIM ARISING OUT OF OR RELATED TO
ANY OF THE LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY. THIS
PROVISION IS A MATERIAL INDUCEMENT TO EACH LENDER ENTERING INTO THIS AGREEMENT
AND MAKING ANY ADVANCES HEREUNDER.
SECTION 11.17 ENTIRE AGREEMENT. THIS WRITTEN AGREEMENT, TOGETHER WITH
THE OTHER LOAN DOCUMENTS, REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES
AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES HERETO. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES.
Section 11.18 Joint and Several Obligations of the Borrowers. Each Borrower
and the Lenders agree that the obligations and duties of the Borrowers
hereunder, and under each of the other Loan Documents, shall be joint and
several in all instances; provided, however, that anything contained in this
Agreement or in any other Loan Document to the contrary notwithstanding, the
obligations of each Borrower hereunder or in any other Loan Document shall be
limited to a maximum aggregate amount equal to the largest amount that would not
render its obligations hereunder or in any other Loan Document subject to
avoidance as a fraudulent transfer or conveyance under Section 548 of Title 11
of the United States Code or any applicable provisions of comparable state law
(collectively, the "Fraudulent Transfer Laws"), in each case after giving effect
to all other liabilities of such Borrower, contingent or otherwise, that are
relevant under the Fraudulent Transfer Laws (specifically excluding, however,
any liabilities of such Borrower in respect of intercompany indebtedness to
Affiliates of such
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Borrower to the extent that such indebtedness would be discharged in an amount
equal to the amount paid by such Borrower hereunder and after giving effect as
assets to the value (as determined under the applicable provisions of the
Fraudulent Transfer Laws) of any fights to subrogation or contribution of such
Borrower pursuant to (i) applicable law or (ii) any agreement providing for
an equitable allocation among such Borrower and Affiliates of such Borrower of
obligations arising hereunder or in any other Loan Document.
Section 11.19 Waiver of Subrogation. No Borrower shall assert, enforce, or
otherwise exercise (a) any right of subrogation to any of the rights or Liens of
Administrative Lender or any Lender or any other Person against any other
Borrower or any other obligor on all or any part of the Obligations or any
collateral or other security, or (b) any right of recourse, reimbursement,
contribution, indemnification, or similar right against any other Borrower or
any other obligor on all or any part of the Obligations or any collateral or any
security, and each Borrower hereby waives any and all of the foregoing rights
and the benefit of, and any right to participate in, any collateral or other
security given to Administrative Lender or any Lender or any other Person to
secure payment of the Obligations, however any such rights arise, whether
hereunder or any other Loan Document or by operation of law. The provisions of
this Section 11.19 shall survive the termination of this Agreement, and any
satisfaction and discharge of the Borrowers and each other Obligor by virtue of
any payment, court order, or law.
================================================================================
REMAINDER OF PAGE INTENTIONALLY BLANK
================================================================================
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<PAGE>
IN WITNESS WHEREOF, this Credit Agreement is executed as of the date first
set forth above.
BORROWERS: METRO TRAFFIC CONTROL, INC.
By: /s/ Robert Greer
------------------------
Robert Greer
Chief Financial Officer
ADMINISTRATIVE LENDER: NATIONSBANK OF TEXAS, N.A.,
as Administrative Lender
By: /s/ Chad Coben
------------------------
Chad Coben
Assistant Vice President
LENDERS: NATIONSBANK OF TEXAS, N.A.,
as a Lender
Specified Percentage:
100%
By: /s/ Chad Coben
------------------------
Chad Coben
Assistant Vice President
901 Main Street, 67th Floor
Dallas, Texas 75202
Attn: Chad Coben
Assistant Vice President
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<PAGE>
EXHIBIT 23.1
Boards of Directors and Partners
Metro Traffic Control, Inc.
Metro Reciprocal, Inc.
Metro Networks, Ltd.
Metro Video News, Inc.:
We consent to the use of our reports included herein and to the reference to
our firm under the heading "Experts" in the prospectus.
KPMG PEAT MARWICK LLP
Houston, Texas
August 30, 1996
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF OPERATIONS FOUND ON
PAGES F-3, F-4 AND F-5 OF THE COMPANY'S AMENDED FORM S-1 FOR THE YEAR TO DATE,
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 3,466
<SECURITIES> 0
<RECEIVABLES> 25,586
<ALLOWANCES> 256
<INVENTORY> 384
<CURRENT-ASSETS> 31,142
<PP&E> 10,434
<DEPRECIATION> 4,961
<TOTAL-ASSETS> 56,750
<CURRENT-LIABILITIES> 24,299
<BONDS> 31,148
0
0
<COMMON> 3
<OTHER-SE> 5,340
<TOTAL-LIABILITY-AND-EQUITY> 56,750
<SALES> 50,077
<TOTAL-REVENUES> 50,077
<CGS> 24,173
<TOTAL-COSTS> 41,561
<OTHER-EXPENSES> 868
<LOSS-PROVISION> 258
<INTEREST-EXPENSE> 934
<INCOME-PRETAX> 7,649
<INCOME-TAX> 573
<INCOME-CONTINUING> 7,076
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,076
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<PAGE>
EXHIBIT 99.1
CONSENT
I, James A. Arcara consent to the inclusion of my name and biography in the
registration statement relating to the initial public offer of Metro Networks,
Inc.
/s/ JAMES A. ARCARA
--------------------------------------
James A. Arcara
